As filed with the Securities and Exchange Commission on March 11, 1997
Registration No. ___________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THERMOGENESIS CORP.
(Exact name of the Company as specified in its charter)
DELAWARE 94-3018487
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Number)
3146 Gold Camp Drive
Rancho Cordova, California 95670
(916) 858-5100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Philip H. Coelho
President & C.E.O.
THERMOGENESIS CORP.
3146 Gold Camp Drive
Rancho Cordova, CA 95670
(916) 858-5100
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
David C. Adams, Esq.
General Counsel
THERMOGENESIS CORP.
3146 Gold Camp Drive
Rancho Cordova, California 95670
(916) 858-5110
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon as
practicable, after the 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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF OFFERING PRICE PER AGGREGATE OFFERING
SECURITIES TO BE AMOUNT TO BE SHARE PRICE AMOUNT OF
REGISTERED REGISTERED REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock Offered
by Selling
Stockholders 2,901,589 $3.9375{(1)} $11,425,006 $ 3,939.66
Common Stock
Underlying Placement
Agent Warrant
100,000{(2)} $3.885{(4)} $ 388,500.00 $ 133.97
Common Stock
Underlying Warrants 1,378,001{ (3)} $3.885{(4)} $ 5,353,533.80 $ 1,846.05
$ 5,919.68
</TABLE>
(1) Calculated in accordance with Rule 457(c) of the Securities Act of 1933,
as amended ("Securities Act"). Estimated for the sole purpose of
calculating the registration fee and based upon the average of the high
and low price per share of the common stock of the Company on March 7,
1997, as reported on the National Association of Securities Dealers
Automated Quotations System.
(2) Represents a warrant to purchase 100,000 shares of common stock at an
exercise price of $3.885 per share.
(3) Represents Warrants to purchase 1,378,001 shares at an exercise price of
$3.885 per share. Warrants were issued as part of the Units offered in
the Company's private placement.
(4) Calculated in accordance with Rule 457(g) of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
ii
<PAGE>
Subject to Completion March 11, 1997
PROSPECTUS
4,379,590 Shares
THERMOGENESIS CORP.
Common Stock
($.001 Par Value)
Of the 4,379,590 shares of Common Stock ("Common Stock") of THERMOGENESIS CORP.
("THERMOGENESIS" or the "Company") being offered (the "Offering"), 2,901,589
shares are being offered by certain stockholders of the Company (the "Selling
Stockholders"), and 1,478,001 shares are being offered by the Company upon the
exercise of outstanding Warrants. Of the shares being offered by selling
stockholders, 145,587 shares were issued pursuant to the Company's
manufacturing/license agreement with On-Time Manufacturing, Inc. and 2,756,002
shares were issued in connection with the Company's private placement completed
in November 1996. The 1,478,001 shares being offered by the Company upon the
exercise of Warrants were also issued in connection with that private
placement, and the Selling Stockholders may resell such shares pursuant to this
Prospectus. See "The Company - Recent Financing"; "Selling Stockholders".
The shares of Common Stock owned by the Selling Stockholders may be offered for
sale from time to time at market prices prevailing at such time or at
negotiated prices by the Selling Stockholders, and without payments of any
underwriting discounts or commission, except for usual and customary selling
commissions paid to brokers or dealers. THERMOGENESIS Common Stock is traded
and listed on the Nasdaq Stock Market, SmallCap Market, under the symbol
"KOOL". See "Description of Securities". On March 7, 1997, the average of the
high and low price for the Company's Common Stock was $3.9375, as reported on
the Nasdaq SmallCap Market. The Company will not receive any proceeds from the
sale of any Common Stock by the Selling Stockholders. See "SELLING
STOCKHOLDERS". Expenses of the Offering, estimated to be $22,000, will be paid
in full by the Company.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGE 4
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE TO WARRANT AND COMMISSIONS PROCEEDS TO THE COMPANY{(2)}
HOLDERS{(1)}
<S> <C> <C> <C>
Per share. . . . . . . . . $ 3.885 $ 0.00 $ 3.885
Total. . . . . . . . . . . $5,742,033.80 $ 0.00 $ 5,742,033.80
.
</TABLE>
(1) Represents exercise price to Warrant holders at $3.885 per share and
exercise price for placement agent Warrant at $3.885 per share for 100,000
shares of common stock.
(2) Represents proceeds to the Company assuming the exercise of Warrants to
purchase up to 1,378,001 shares of Common Stock at a price of $3.885 per
share, before other expenses of issuance and distribution estimated to be
$22,000. All expenses will be paid by the Company.
The date of this Prospectus is March __, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-3 under the Securities Act of
1933 (the "Securities Act"), with respect to the Common Stock offered hereby.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
periodic reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information concerning the Company may
be inspected and copies may be obtained (at prescribed rates) at the
Commission's Public Reference Section, 450 Fifth Street, NW, Washington, D.C.
20549, and at the Commission's Regional offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048. This Prospectus does not contain all
information set forth in the Registration Statement and Exhibits thereto which
the Company has filed with the Commission under the Securities Act and to which
reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Any statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein modifies or replaces such statement.
Any such statement shall not be deemed to constitute a part of this Prospectus,
except as so modified or replaced. There is incorporated herein by reference
the following documents previously filed with the Commission:
(1) The Company's Annual Report on Form 10-KSB for the year ended June 30,
1996, and amendment to Annual Report on Form 10-KSBA/1 filed October 28,
1996;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1996, and December 31, 1996;
(3) The Company's Current Reports on Form 8-K for the event date November 27,
1996; and
(4) The Company's Form 8-A for the registration of the Company's Common Stock
pursuant to Section 12(g) of the Exchange Act.
In addition, all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering of the Common Stock offered hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on written or oral
request of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference (other than exhibits to such documents).
Requests should be directed to: THERMOGENESIS CORP., 3146 Gold Camp Drive,
Rancho Cordova, California 95670, Attention: Secretary; telephone (916) 858-
5100.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed information
and financial statements appearing elsewhere or incorporated by reference in
this Prospectus. This Prospectus contains forward-looking statements that are
subject to risks and uncertainties, including, but not limited to, delays
beyond the Company's control with respect to regulatory approvals, market
acceptance of new technologies, and other risks detailed in the section
entitled Risk Factors and elsewhere in the Company's filings with the
Securities and Exchange Commission.
THE COMPANY
THERMOGENESIS CORP. (the "Company") is a bio-medical company that designs,
manufactures and distributes thermodynamic systems which utilize its
proprietary heat transfer technology for the storage, retrieval and processing
of blood products and biological tissues (THERMOGENESIS Proprietary
Technology). The Company, originally incorporated in Delaware on September 26,
1986, as Insta Cool Inc. of North America, changed its name to THERMOGENESIS
CORP. in January 1995 to better reflect the thermodynamic segment of the
biotechnology industry which it began servicing. Historically, the Company's
primary revenues have been from sales of blood plasma freezers to hospitals,
blood banks and blood transfusion centers for rapid freezing of blood plasma.
Currently, the Company is manufacturing several categories of thermodynamic
devices which are being sold to the blood plasma industry under permission from
the Food and Drug Administration ("FDA"). Other potential applications and
markets for the Company's THERMOGENESIS Proprietary Technology includes medical
and pharmaceutical applications, and industrial applications. During the
fiscal years 1988 through 1995, the Company focused its efforts on research and
development and on refining product design and application. The Company has
also continuously sought new applications for its technology, including the
design of a device used for harvesting of fibrinogen rich cryoprecipitate for
use as an intravenous treatment of clotting protein deficient patients, or as a
hemostatic agent or tissue sealant in certain surgical and medical procedures.
See "The Company and Recent Events - Current Products and Development Efforts".
To date, the Company's revenues have been principally derived from sales of
blood plasma freezers and thawers to hospitals and blood banks throughout the
world. With total revenues for the fiscal year ended June 30, 1996 of
approximately $4.1 million, the Company has attained a dominant share of the
small, but medically important market for plasma thawers and freezers.
Revenues increased for the three and six months ended December 31, 1996, by
approximately 219% and 159%, respectively, from the corresponding 1995 period.
The sales increase was due primarily to a key customer order totaling
approximately $3,900,000.
Pursuant to the terms of the private placement, the Company is registering the
Common Stock offered by the Selling Stockholders, and the Common Stock to be
issued upon the exercise of outstanding Warrants issued as part of the Units in
the private placement. To the extent required under the federal securities
laws, this Prospectus may be used for resale of Common Stock upon the exercise
of the Warrants by the holders of such Warrants.
THE OFFERING
Common Stock Outstanding Before the Offering 15,834,005
Common Stock Offered to Warrant Holders 1,478,001
Common Stock Offered by Selling Stockholders 2,901,589
Common Stock Outstanding After the Offering
Assuming Exercise of the Outstanding Warrants 17,312,006
Nasdaq Symbol KOOL
<PAGE>
RISK FACTORS
An investment in the Common Stock described herein entails a number of very
significant risks. Because of these risks, funds should only be invested by
persons able to bear the risk of and withstand the loss of their entire
investment. Prospective investors should also consider the following before
making an investment decision.
LACK OF PROFITABILITY. Except for net income of $11,246 for the year ended
June 30, 1994 on net sales of $2,678,192, the Company has not been profitable
since inception. For the year ended June 30, 1996, the Company had a net loss
of $568,534 on net sales of $4,124,634 and an accumulated deficit at June 30,
1996, of $6,382,928. See "Annual Report on Form 10-KSB". For the six months
ended December 31, 1996, the Company had a net loss of $564,719 on sales of
$4,348,286.
DEPENDENCE UPON NEW PRODUCTS. Historically, substantially all of the Company's
revenue has been from the sales of product related to the freezing, thawing and
storing of blood plasma. Because the Company expects the blood plasma market
to have limited growth, the future success of the Company will be dependent
upon new applications of its technology, including application of products in
the biotechnology market. The Company intends to concentrate on developing
novel thermodynamic blood processing systems such as: (1) a cryoprecipitate
processing device with disposable containers ("CryoSeal<trademark> System");
(2) a long-term blood sample storage, inventory management and retrieval system
("JRC"); and (3) system for collecting, processing, controlled-rate freezing
and inventory management of thermolabile products ("N{2} BioArchive<trademark>
System"). See "The Company and Recent Events - Current Products and
Development Efforts." Although these three potential products use technology
related to the freezing, thawing and storage of blood plasma, development of
these products represents a departure from the Company's current core business.
Further, although the Company has had encouraging discussions with experts in
areas of application for these potential products, development of each product
is still in its development phase and the Company has no contracts for sales of
two of these three products. No assurance can be given that all of these
potential products can be successfully developed, and if developed, that a
market will develop for them.
POSSIBLE ADDITIONAL FINANCING. Based on current sales and projected
development costs for products currently in development, the Company believes
that it will have sufficient working capital for its operations for the 1997
fiscal year. In the event actual sales of the Company's products do not meet
the Company's expectations in any given period, or development and production
costs increase significantly, the Company may need to secure additional
financing to complete and fully implement its business objectives. There can
be no assurance that the Company will not need additional financing, and if
available, that it will be obtained on terms favorable to the Company.
Furthermore, delays in receipt of any required governmental approvals prior to
marketing products in development, or requirements for additional testing prior
to approval, may result in decreased revenues and increased development costs.
See "Risk Factors -- Government Regulation Associated with Products".
GOVERNMENT REGULATION ASSOCIATED WITH PRODUCTS. The majority of the Company's
products require clearance to market in the United States from the United
States Food and Drug Administration ("FDA"), which may limit or circumscribe
applications for U.S. markets for which the Company's products may be sold.
Further, if the Company cannot establish that its product is substantially
equivalent, or superior, in safety and efficacy to a previously approved
product, delays may result in final clearance from the FDA for marketing its
products. No assurance can be given that FDA clearance to market in the United
States will be obtained. The Company's products are also required to meet
certain other criteria or receive certain approvals from other foreign
governments for marketing and sales. See "The Company and Recent Events -
Government Regulation".
<PAGE>
LACK OF TESTING DATA. The Company has only initiated laboratory testing of its
CryoSeal<trademark> System and its N{2} BioArchive<trademark> System. There
can be no assurance that the testing can be successfully completed within the
Company's expected time frame and budget, or that the Company's products will
prove effective in the required clinical trials. If the Company is unable to
conclude successfully clinical trials of its products in development, the
Company's business, financial condition and results of operation could be
adversely affected.
NO ASSURANCE OF NEW PRODUCT ACCEPTANCE. The market acceptance of the Company's
new products in development will depend upon the medical community and third-
party payers accepting the products as clinically useful, reliable accurate and
cost effective compared to existing and future products or procedures. Market
acceptance will also depend on the Company's ability to adequately train
technicians on how to use the CryoSeal<trademark> System and the N{2}
BioArchive<trademark> System. Even if the Company's systems are clinically
adopted, the use may not be recommended by the medical profession or hospitals
unless acceptable reimbursement from health care and third-party payers is
available. Failure of either of these new systems to achieve significant
market share could have material adverse effects on the Company's long term
business, financial condition and results of operation. See "Annual Report on
Form 10-K".
UNCERTAIN AVAILABILITY OF THIRD-PARTY REIMBURSEMENT. In the United States,
hospitals, physicians and other health care providers that purchase medical
devices rely on third-party payers, principally Medicare, Medicaid, private
health insurance plans and other sources of reimbursement for costs of
procedures in which medical devices are used. With health care increasingly
relying on managed care systems through which to deliver their surgeries for a
fixed cost per person, which may be independent and different from the actual
costs for such care, substantial scrutiny may prevent the use of certain
procedures or medical devices based on the lack of reimbursement. Because the
Company's CryoSeal<trademark> System and N{2} BioArchive<trademark> System are
currently in final phases of development and have not yet received FDA
clearance or approval, there exists uncertainty regarding the availability of
third-party reimbursement. Failure to secure third-party reimbursement could
adversely affect the Company's revenues and market for the new products in
development. See "The Company and Recent Events -- Third-Party Reimbursement".
FOREIGN REIMBURSEMENT FOR MEDICAL DEVICES AND PROCEDURES. The Company's
products often require foreign regulatory registrations or approvals.
International market acceptance of the Company's new products in development
would also be dependent, in part, upon the availability of reimbursement within
prevailing health care payment systems in each country. Reimbursement and
health care payment systems in international markets vary significantly by
country, and include both government sponsored health care (e.g. Japan) as well
as private insurance. There can be no assurance that reimbursement approvals
will be obtained in any given foreign market in a timely manner which could
have a material adverse effect on market acceptance of the Company's new
products in international markets.
RISK OF SOFTWARE DEFECTS. The Company's CryoSeal<trademark> System and N{2}
BioArchive<trademark> System currently in final development rely on computer
software components that direct the harvesting process of the
CryoSeal<trademark> System, and the controlled-rate freezing, storage and
retrieval robotics of the N{2} BioArchive<trademark> System. The software in
these devices, including updated versions in the future, may contain undetected
errors or failures. There can be no assurance that, despite testing by the
Company and customers, errors will not be found in the software during
continuous use, resulting in loss or delay in market acceptance, which could
have a material effect on the Company's business, financial condition and
results of operations.
<PAGE>
ELECTROMAGNETIC INTERFERENCE (EMI). EMI is universally undesirable because it
potentially interfaces with the operation of electronic equipment. In the
United States, the Federal Communications Commission ("FCC") has mandated
certain EMI limits which cannot be exceeded by certain OEM equipment.
Similarly, the European Union ("EU") has issued an electromagnetic
compatibility ("EMC") directive that applies certain requirements to products
sold in Europe beginning January 1, 1996. The EU created the directives to
insure conformity with safety and quality standards and to assess product
compliance. One of those requirements is the Conformity European ("CE")
marking on products. See "Annual Report on Form 10-K".
RELIANCE ON PATENTS AND OTHER PROPRIETARY INFORMATION. The Company believes
that patent protection is important for products and potential segments of its
current and proposed business. The Company currently holds four (4) patents,
and has five (5) patents pending to protect the designs of an additional three
(3) products which the Company intends to market. See "Annual Report on Form
10-KSB". There can be no assurance, however, as to the breadth or degree of
protection afforded to the Company or the competitive advantage derived by the
Company from current patents and future patents, if any. Although the Company
believes that its patents and the Company's existing and proposed products do
not infringe upon patents of other parties, it is possible that the Company's
existing patent rights may be challenged and found invalid or found to violate
proprietary rights of others. In the event any of the Company's products are
challenged as infringing, the Company would be required to modify the design of
its product, obtain a license or litigate the issue. There is no assurance
that the Company would be able to finance costly patent litigation, or that it
would be able to obtain licenses or modify its products in a timely manner.
Failure to defend a patent infringement action or to obtain a license or
implementation of modifications would have a material adverse effect on the
Company's continued operations. See "Annual Report on Form 10-K".
TRADE SECRETS. The Company also relies in part on trade secrets and
proprietary know-how, and it employs various methods to protect its technology,
such as use of confidentiality agreements with employees, vendors, and
customers. However, such methods may not afford complete protection and there
can be no assurance that others will not obtain the Company's know-how, or
independently develop it.
DEPENDENCE ON KEY PERSONNEL AND OBTAINING ADDITIONAL ENGINEERING PERSONNEL.
The Company is dependent upon the experience and services of Philip H. Coelho,
President and Chief Executive Officer, and Charles de B. Griffiths, Vice
President, Marketing and Sales and Walter Ludt, Chief Operating Officer. The
loss of either person would adversely affect the Company's operations. The
Company has obtained key man life insurance covering Mr. Coelho in the amount
of $1,000,000 as some protection against this risk. Furthermore, to implement
its new product development, the Company will have to recruit and retain
additional experienced engineers. There is no assurance that the Company will
be able to find and retain engineers required to meet its self-imposed
deadlines for product development. See "The Company and Recent Events -
Employees".
PRODUCT LIABILITY AND UNINSURED RISKS. The Company maintains a general
liability policy which includes domestic and foreign product liability coverage
of $1,000,000 per occurrence and $2,000,000 per year in the aggregate.
Nevertheless, a partial or completely uninsured claim against the Company could
have a material adverse effect on the Company's financial condition and
operations.
NEGATIVE IMPACT ON TRADING VALUE OF COMMON STOCK. The Company has currently
more than 15,834,000 shares outstanding, including the shares registered hereby
on behalf of selling shareholders and excluding shares underlying warrants,
almost all of which are registered and trading. Because the trading market for
the Company's common stock is affected by numerous circumstances and events,
the Company can make no prediction on the effect the registration of the shares
of common stock hereby will have on that market. The number of shares being
registered by the Company hereby could have an adverse effect on the trading
value of its Common Stock in general. See "Description of Securities -
Registration Obligation".
LACK OF CASH DIVIDENDS. To date, the Company has not paid any cash dividends
on its Common Stock and does not expect to declare or pay any cash or other
dividends on its Common Stock in the foreseeable future.
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following information has been summarized from the Company's financial
statements included in its Annual Report on Form 10-KSB for the year ended June
30, 1996, and Quarterly Reports on Form 10-Q for the quarters ended September
30, 1996, and December 31, 1996, incorporated by reference herein, and should
be read in conjunction with those financial statements and the related notes
thereto:
<TABLE>
<CAPTION>
For the Six Months Ended December 31, For the Year Ended June 30,
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: 1996 1995 1996 1995
Revenues $4,348,286 $1,681,982 $4,124,634 $3,311,880
Operating expenses $4,954,809 $1,972,518 $4,778,015 $3,704,193
Net loss $(564,719) $(281,843) $(568,534) $(88,296)
Net loss per common share $(0.04) $(0.03) $(0.05) $(0.01)
Weighted average shares outstanding 13,755,000 10,547,000 11,491,000 10,170,000
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
<S> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA: 1996 1995 1996 1995
Working Capital $11,325,245 $3,013,228 $3,620,939 $1,413,156
Total Assets $13,434,218 $4,350,229 $5,937,140 $2,662,839
Long Term Obligations $ 258,249 $ 168,730 $ 286,284 $ 14,456
Total Liabilities $ 1,259,718 $ 725,246 $1,562,829 $ 662,256
Stockholders' Equity $12,174,500 $3,624,983 $4,374,311 $2,000,583
</TABLE>
<PAGE>
THE COMPANY AND RECENT EVENTS
The Company was incorporated in Delaware on September 26, 1986 as Insta Cool
Inc. of North America, and subsequently merged with Refrigeration Systems
International, Inc., a California corporation. In January of 1995, the Company
changed its name to THERMOGENESIS CORP. to better reflect the thermodynamic
blood processing segment of the biotechnology industry that it hopes to service
through development of new products. The Company designs and sells products
and devices which utilize its proprietary thermodynamic technology for the
processing of biological substances including the cryopreservation, thawing,
and harvesting of blood components, and to a lesser extent for the preservation
of perishable foods (THERMOGENESIS Proprietary Technology). Historically, the
Company's primary revenues have been from sales of blood plasma freezers and
thawers to hospitals, blood banks and blood transfusion centers. Currently,
the Company is manufacturing several categories of thermodynamic devices which
are being sold to the blood plasma industry under FDA permission to market in
the United States. Other potential applications and markets for the Company's
THERMOGENESIS Proprietary Technology include medical and pharmaceutical
applications, and industrial applications. During the fiscal years 1988
through 1995, the Company has focused its efforts on research and development
and on refining product design and application. The Company has also
continuously sought new applications for its products and technology, including
the design of a device used for the intraoperative harvesting of autologous
fibrinogen rich cryoprecipitate for use as a hemostatic agent or tissue sealant
in certain surgical and medical procedures. See "The Company and Recent Events
- - Current Products and Development Efforts".
HISTORICAL
The Company's strategy is to develop superior blood processing devices for the
niche blood processing markets where new products could quickly establish
credibility for the Company's proprietary thermodynamic technology. The
Company believed that by concentrating its products to serve the blood plasma
industry, many customers, such as the Red Cross or other blood transfusion
societies of various countries, would validate the Company's technology for
rapid freezing of biological substances, more specifically blood plasma. Early
products which were designed for blood banks and hospitals, have received rapid
510(k) permission to market and have achieved a significant market share in 32
countries. See "Annual Report on Form 10-KSB".
From 1988 to 1992 the Company's products were designed to transfer heat by
causing heat transfer liquids to directly contact plastic sealed containers
within which resided various blood components. Early product designs used
liquids containing chloro-flouro-carbons ("CFC") which the Company phased out
in the fall of 1992. Thereafter, the Company developed an alternative heat
transfer method which automatically interposed a thin flexible membrane between
the heat transfer liquid and biological substances which process allowed for
use of non-CFC based heat transfer liquids.
Principal products initially developed by the Company and marketed to
hospitals, blood banks, and blood transfusion centers consisted of freezers and
thawers for blood plasma. The Company continued to design and develop various
freezer models and thawers for expanded applications, and these products remain
the core products of the Company's current business. To expand its market and
product use, the Company changed the focus of its research and development to
the design of new products that would be applied to different applications
within the blood industry, including surgical, pharmaceutical and medical
procedures that utilize freezing and thawing technology as part of standard
procedures. See "The Company and Recent Events - Current Products and
Development Efforts".
<PAGE>
Having established a presence in markets where the need to freeze and thaw
blood tissues precisely and rapidly was valuable to the customer, the Company
began to focus its technology towards harvesting fibrinogen rich
cryoprecipitate from blood for use as a hemostatic agent and tissue adhesive
for medical and surgical use. Medical literature currently documents important
practical applications for fibrinogen rich cryoprecipitate in thirteen distinct
areas, including plastic surgery, thoracic surgery, cardiovascular surgery,
orthopaedic surgery, and ophthalmologic surgery. The Company's fibrinogen
collecting device with its disposable container sources the fibrinogen rich
cryoprecipitate from a patient's own blood ("autologous"), and is unique in
that aspect when compared to current sources of fibrinogen which generally rely
on homologous single donations or pooled plasma.
RECENT FINANCING
In November 1996, the Company completed a private placement raising a total of
$8,268,006, before direct expenses, the net funds of which funds are being used
for general corporate purposes that include, but are not limited to, payment of
existing accounts payable and short-term debt, testing of products, continued
research and development, preclinical trials, production costs and inventory,
advertising and promotional materials related to new products in development,
working capital, and increased payroll due to the addition of personnel
necessary to bring the new products in development to market.
Assuming the exercise of all Warrants issued as part of the Units in the
private placement at $3.885 per share, the Company would receive an additional
$5,353,534, which would be used to support general operations and continued
research and development for additional products and markets. The Company does
not, however, anticipate that the Warrants will be exercised immediately, based
on the current trading price of $3.9375 on March 7, 1997. See "Use of
Proceeds". The Company will not receive any proceeds from the sale of Common
Stock offered by the Selling Stockholders in this Offering. See "Summary of
the Offering"; "Selling Stockholders".
As part of the private placement of the Units, the Company granted purchasers a
limited price protection provision for the warrants issued as part of the Units
to mitigate the effect of any potential market decline in the trading price of
the Company's Common Stock should the Company subsequently seek additional
financing at a price below the exercise price of the warrants. All warrants
issued as part of the Units will expire on November 27, 2003, unless exercised
prior to that date.
RESEARCH AND DEVELOPMENT EFFORTS
As of February 1997, the Company had five unique Class II medical systems under
development, each of which features not only a thermodynamic platform to
process blood products in a closed system, but use of various sterile,
disposable plastic containers and applicators that come into direct contact
with the blood product. These disposables must be replaced after each use,
thereby transforming each sale of the system into a higher margin revenue
stream stretching into the future. The Company is on schedule to complete
development of the first two of these Class II systems - CryoSeal<trademark>
and N{2} BioArchive<trademark> - by July, 1997, and has formed strategic
business relationships with major medical companies to assist its manufacturing
and marketing efforts. The following is a brief summary of the current Class
II medical systems in development.
CRYOSEAL<trademark> SYSTEM. The CryoSeal<trademark> System is a small, floor-
standing thermodynamic device and special blood processing container which
harvests and concentrates adhesive and clotting proteins and growth factors
from a donor or a surgical patient's own blood for use as intravenous treatment
of clotting protein deficient patients, or to form a superior hemostatic agent
and tissue sealant which the surgeon can use to stop surface bleeding, bond
tissues and augment or replace sutures. This "autologous" biological adhesive
contains the adhesive and/or clotting proteins -- fibrinogen, fibronectin, von
Willebrand's Factor, factor VIII, and the clot stabilizing protein, factor XIII
- -- as well as platelet derived growth factors (PDGF). The Company believes
that the CryoSeal<trademark> System will be an effective, safe and less
expensive alternative to the current commercial tissue sealant known as "Fibrin
Glue" which, the Company estimates has annual sales of $400 million in Europe
and Japan, but which has never been licensed by the FDA for sale in the United
States.
<PAGE>
The medical literature documents important practical applications for Fibrin
Glue in thirteen distinct surgical areas, including plastic, thoracic,
cardiovascular, orthopaedic, and opthamalogic surgery. Commercially available
Fibrin Glue predominantly includes fibrinogen proteins which have been
harvested from plasma pooled from thousands of donors. Fibrin Glue is sold
outside the United States in kits which include a simple applicator and cost
the hospital $100 to $220 per milliliter, depending on the country. Although
Fibrin Glue sourced from pooled plasma has not yet been licensed by the FDA for
sale in the USA due to concerns over contamination by viruses such as HIV and
hepatitis, The Marketing Research Bureau's Report, "Market Assessment of the
Commercial Fibrin Sealant Market in the United States: 1996," estimates the
potential annual U.S. market for such a biological adhesive to be in excess of
$400 million. No assurances can be given that the Company will receive all
required approvals of its CryoSeal<trademark> System or that it will obtain
significant market share or revenues from the distribution of its system. See
"Risk Factors - Dependence on New Markets; Government Regulations Associated
with Products".
The Company believes that there is a significant need for a tissue sealant that
fulfills the surgeon's requirement for effectiveness and ease of use while
accommodating the patient's justifiable fear of infection from a pooled plasma
product. Each surgical use of the Company's CryoSeal<trademark> System, which
can produce 8 to 10 ml of harvested clotting proteins
("CryoSealant<trademark>"), requires the use of two or more of the following
disposables which are integral components to the System:
CP-1: A sterile, plastic bag set for harvesting the proteins and growth
factors from the patient's blood plasma.
SA-1: A small, sterile, hand-held spray applicator for precisely
depositing CryoSealant<trademark> on large bleeding wound sites.
DA-1: A small, sterile, hand-held plastic line or dot applicator for
precisely depositing CryoSealant<trademark> on small or narrow
bleeding wound sites.
Preclinical studies with the CryoSeal<trademark> System are now taking place in
the United States and Canada under the direction of Dr. Dean Toriumi, a leading
specialist in reconstructive surgery at the Medical School of the University of
Illinois at Chicago, and Dr. Gail Rock, a leading specialist in hematology and
coagulation at the Ottawa Civic Hospital. The Company applied to the FDA for
510(k) clearance to market its CryoSeal<trademark> System for the initial
indication as a product for the intravenous treatment of clotting protein
deficient patients. The second and more critical stage of the regulatory
process will be to submit additional clinical findings to support the use of
the CryoSeal<trademark> System as a topical hemostatic and bonding agent during
surgery. The Company is currently in the process of identifying the specific
surgical protocols which would be the basis for clinical studies to expand the
approved applications of the CryoSeal<trademark> System.
N{2} BIOARCHIVE<trademark> SYSTEM. This System is a highly evolved method for
collecting, controlled-rate freezing, processing, storing and retrieving
biological thermolabile substances such as stem and progenitor cells, corneas,
heart valves, sperm cells, virus samples, biopsy specimens, cell lines and
blood, tissue and saliva samples for DNA matching. It features a liquid
nitrogen dewar equipped with a robotic insertion and retrieval arm with remote
optical bar code reading, controlled rate freezing and a computerized inventory
management system with proprietary disposable containers tailored to the
specific biological item.
The need to accurately validate that the freezing rate and storage and
retrieval of these precious biological tissues is paramount. For example:
Both sperm banks and prospective mothers need to be sure that the
implanted sperm has been correctly frozen and stored and then correctly
identified and retrieved from the thousands of similar inventory items.
Both police departments and suspects need to be assured that DNA-typed
blood, tissue or saliva samples have been correctly frozen and stored and
then correctly identified for forensic purposes.
Both pathologists and patients need to be assured that biopsy samples have
been correctly frozen and stored and then correctly identified and
retrieved from the thousands of similar inventory items.
Both transplant surgeons and patients need to be assured that the
genetically-typed stem cells for transplantation have been correctly
frozen and stored and then correctly identified and retrieved from the
thousands of similar inventory items.
The first biological substance for which N{2} BioArchive<trademark> disposables
have been designed is stem and progenitor cells from placental blood drawn from
blood within the placenta and umbilical cord that is normally discarded after
every birth. Placental stem and progenitor cells have been identified by
researchers as a superior replacement alternative to bone marrow for the
reconstitution of the immune system. Recent articles in THE NEW ENGLAND
JOURNAL OF MEDICINE verify the improvements in patient mortality that result
from the intrinsic advantages of cord blood stem cells over bone marrow stem
cells. For example, cord blood stem cells can be easily collected, frozen and
stored in "banks" for immediate use and cord blood stem cells are more tolerant
of a mismatch resulting in lower levels of graft vs. host disease for the
patient.
For optimum therapeutic benefit, it will be necessary to harvest and inventory
many thousands of cryopreserved placental stem cell donations, all genetically
typed. In cooperation with a pioneer and leading expert in this field, Dr.
Pablo Rubinstein of the New York Blood Center (NYBC), the Company has developed
four disposable components that optimize the marriage of stem cell collection
with the N{2} BioArchive<trademark> System:
HR-1: A sterile plastic disposable for holding the placenta and umbilical
cord to facilitate the harvesting of the stem cell rich placental
blood.
SCP-1:A sterile plastic bag set for harvesting and cryopreserving the stem
cells in a closed system and transferring them to the detachable
freezing bag.
DI-1: A sterile, plastic disposable bag set for optimally preparing the
frozen stem cells for transfusion.
PC-1: A small disposable metal container to hold and protect the stem cell
freezing bag during storage in the N{2} BioArchive<trademark> System
and subsequent transport to the transplant site.
No assurances can be given that the Company's N{2} BioArchive<trademark>
System will be accepted by the market as new uses for the product are
implemented. See "Risk Factors - Dependence on New Markets; Government
Regulations Associated with Products".
<PAGE>
JRC BLOOD SAMPLE STORAGE AND RETRIEVAL SYSTEM. The JRC System is a prototype
long-term storage freezer, computer inventory system and blood sample container
for use by the Japanese Red Cross for storing samples of all blood donations
that occur in Japan each year. The blood sample storage program has been
mandated by the Japanese government in an effort to comply with new product
liability laws in Japan. It is estimated that 6,600,000 blood donations occur
annually. The Company shipped the prototype JRC System to Daido-Hoxan, the
Company's Japanese distributor, in November 1996 for tests and performance
review. In February 1997, Daido Hoxan placed an order for five (5) of the
systems for installation at the five (5) JRC collection centers in Hokkaido as
a pilot program. No assurance can be given that the Company's Blood Sample
Storage and Retrieval System will ultimately be purchased in quantity by the
Japanese Government. See "Risk Factors - Dependence on New Markets; Government
Regulations Associated with Products".
A brief description of the other three Class II products under varying levels
of development, all of which utilize the same thermodynamic technology already
refined for the CryoSeal<trademark> System, are listed as follows:
MICROSEAL<trademark> SYSTEM. MicroSeal<trademark> is a bench top system that
requires less than 50 ml of blood, drawn in a syringe to harvest up to 1 ml of
CryoSealant<trademark> for the hundreds of thousands of microsurgeries that
occur each year that could benefit from a safe, effective biological tissue
sealant or hemostatic agent, such as: closing macular holes in the eye,
minimizing scarring in fallopian tube surgery, sealing excised cataract wounds,
bonding skin flaps in minor cosmetic surgery, and repairing ruptured eardrums.
CRYOFACTOR<trademark> SYSTEM. The CryoFactor<trademark> System is intended to
harvest a full array of autologous PDGF immersed in a solution of adhesive
proteins from a patient's own blood donation for the treatment of chronic
wounds such as diabetic and venous insufficiency ulcers and for the healing and
joining of severed nerves.
CRYOPLATELET<trademark> SYSTEM. The CryoPlatelet<trademark> System is intended
to cryopreserve blood platelets which retain their viability when thawed
utilizing novel freezing rates, proprietary disposable containers and
transfusable, biodegradable cryoprotectants. Currently, platelets cannot
successfully be frozen and remain viable, and, unfrozen, have a shelf life of
only five (5) days. As a result, 400,000 bags (10% of total bags produced in
the United States) are discarded annually due to outdating.
GOVERNMENT REGULATION
All medical devices marketed after May 28, 1976, the date of the Medical Device
Amendments to the Food, Drug and Cosmetic Act ("FDCA"), must receive clearance
or approval from the FDA, unless exempt by regulation, prior to the marketing
or sale of such products or distribution in interstate commerce. Most of the
Company's products require FDA clearance through a premarket notification
process ("510(k) submission"). This regulatory process requires that the
Company demonstrate substantial equivalence to a product which was on the
market prior to May 28, 1976, or which has been found substantially equivalent
after that date. Today, the process of obtaining FDA clearance can be lengthy,
expensive, and generally requires submission of extensive preclinical data and,
in certain cases, in-use or clinical data, to support a finding of substantial
equivalence.
<PAGE>
Under FDA regulations, medical devices are classified in one of three
categories: Class I, Class II or Class III devices, based on the health risk
posed by such device. Each class of device must comply with certain regulatory
requirements established by the FDA in order to ensure the safe and effective
use of the devices. Class I devices are subject to General Controls, which
includes a good manufacturing practices ("GMP") quality system, labeling, and
in some instance 510(k) submissions. Class II devices are also subject to the
General Controls, and in addition must comply with Special Controls established
at the discretion of the FDA. Special Controls may include application of
performance and safety standards, product type standards, clinical or in-use
studies, post-market surveillance and reporting, and other FDA guidelines
established at the time of product submission review. Class III devices are
higher risk devices that are generally associated with invasive procedures and
must receive FDA pre-market application ("PMA") approval prior to distribution.
The product development, preclinical and clinical testing, manufacturing,
labeling, distribution, sales, marketing, advertising and promotion of the
Company's research, investigational, and medical devices are subject to
extensive government regulation in the United States, and also in other
countries. Products manufactured in the United States which have not been
cleared by the FDA through a 510(k) submission, or which have not been approved
through the PMA process, must comply with the requirements of Section 801 of
the FDCA prior to export. Class I and Class II devices which are capable of
being cleared by the FDA under a 510(k) submission do not require FDA approval
for export; however, the Company's products must still comply with certain
safety and quality system requirements in foreign countries where the products
are proposed to be sold.
Non-compliance with applicable FDA requirements can result in fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, distribution, sales and marketing, or refusal of the
FDA to grant approval of a PMA or clearance of a 510(k). Actions by the FDA
might also include withdrawal of marketing approvals and criminal prosecution.
Such actions could have a material adverse effect on the Company's business,
financial condition, and results of operation.
THIRD-PARTY REIMBURSEMENT
In the United States, the Company's current core product lines of plasma
thawers and freezers, are purchased by community blood banks, the American Red
Cross and hospitals. The new products in development, however, will be
marketed to medical institutions, including hospitals and surgi-centers, and
used in surgical procedures, the costs for which the institutions will then
seek to have reimbursed by various third-party payors, such as Medicaid, other
government programs and private insurance plans. Third-party payors may deny
reimbursement if they determine that the device or procedure used in a
treatment is unnecessary, inappropriate, experimental or investigational, used
for a non-approved indication, or not cost-effective in light of other
procedures available. Accordingly, determination of clinical benefits by
physicians is an important factor in the Company's efforts to bring the new
products to market. Assuming regulatory approval, the Company's perceived
market for its new products in development could be materially adversely
affected by the failure of third-party payors to adopt policies of
reimbursement. In both the United States and other countries, governments and
third-party payors are increasingly challenging prices charged for medical
procedures. There can be no assurance that reimbursement for medical
procedures using the Company's new products in development will be available
or, if available, that the reimbursement rate will continue to be available.
FACILITIES
The Company leases an approximately 17,000 square foot facility in Rancho
Cordova, California, under a lease that terminates in December 2002, subject
to the Company's right to renew for an additional five year term. The Company
also leases an approximately 11,200 square foot facility in Rancho Cordova,
California for manufacturing and production under a lease that terminates in
November 1999. The Company believes that its current facilities are adequate
to meet its requirements for the next few years.
For a more complete discussion of the Company and its business and other
properties, refer to the Company's Annual Report on Form 10-KSB, which is
incorporated herein by reference.
<PAGE>
OFFICERS AND DIRECTORS
The following is a list of the executive officers, directors, and key employees
of the Company at March 1, 1997:
NAME AGE POSITION HELD
Philip H. Coelho 53 Chairman of the Board, President and CEO
Walter J. Ludt, III 53 Vice-President, Chief Operating Officer and
Chief Financial Officer
Charles de B. Griffiths 47 Vice-President Marketing and Sales, Secretary
David C. Adams 39 Vice-President Business Development and
General Counsel
Michael Zmuda, PhD, RAC 59 Vice-President Regulatory Affairs and
Quality Assurance
Sid V. Engler(1) 55 Director
Noel K. Atkinson(1) 76 Director
KEY EMPLOYEES
Roger Kane 49 Director of Research and Development
Liddel Kam 46 Director of Quality Control and Documentation
__________________________________
(1) Member of Audit Committee and Member of Compensation Committee
The following is the business background for the previous five years for the
officers and directors of Thermogenesis Corp. (the "Company"):
PHILIP H. COELHO. A Director since 1986, Mr. Coelho was named President of
the Company on September 1, 1989, and later became the Chief Executive Officer.
Prior to becoming President he was Vice President and Director of Research,
Development and Manufacturing since October 1, 1986. Mr. Coelho was President
of Castleton, Inc. from October, 1983 until December 31, 1986. Castleton
developed and previously licensed the Insta Cool Technology to the Company.
Mr. Coelho also serves as a member of the board of directors of Patient Media,
Inc. Mr. Coelho has a Bachelor of Science degree in Mechanical Engineering
from the University of California, Davis, and is either the inventor or co-
inventor on all issued and pending patents assigned to the Company.
<PAGE>
WALTER J. LUDT, III. A Director since 1996, Mr. Ludt rejoined the Company as
its Chief Operating Officer and Vice- President in February 1995, and was
appointed Chief Financial Officer in 1996. From March 1994 until February
1995, Mr. Ludt was a consultant (acting Chief Financial Officer) to the
Omohundro Company, a manufacturer of state of the art carbon fiber spars for
sail boats, where he was instrumental in raising $5,000,000 in capital and
restructuring $2,500,000 in bank debt. From June 1992 to February 1994, Mr.
Ludt was Vice President and Chief Financial Officer of Protel Technology, a
developer and marketer of sophisticated EDA software. Prior to June 1992, Mr.
Ludt was a Director, Chief Financial Officer, and Secretary of the Company.
Mr. Ludt holds a Bachelor of Science Degree in Business/Accounting from
California State University at Long Beach, and is a California Certified Public
Accountant.
CHARLES DE B. GRIFFITHS. A Director since 1989, Mr. Griffiths became the
Company's Director of International Sales in January 1990, and was appointed
Vice-president Marketing and Sales in 1993. He is a Chartered Accountant and
holds a degree in Economics from the University of Manchester, UK. From
January 1980 until December 1987 he had been the Managing Director of a number
of successful overseas manufacturing subsidiaries of the Cloride Group,
including a $25,000,000 joint venture with the government of Egypt which he
steered to profitability in its first year of operation. In his last
appointment with Cloride he was in charge of the Scandinavian manufacturing
operations based in Denmark and was concurrently responsible for all European
automotive marketing activities. Mr. Griffiths is an internationally oriented
businessman with appropriate experience in industrial marketing and
manufacturing enhanced by studies at Harvard and Cranfield Business Schools.
He conducted a consulting practice in the United Kingdom from January 1988
until December 1989.
DAVID C. ADAMS. Mr. Adams joined the Company at the end of November 1996 as
General Counsel, and filled the newly created position of Vice-President of
Business Development. Prior to joining the Company, Mr. Adams was in private
practice representing public and private corporations in the areas of
intellectual property, corporate finance, mergers and acquisitions, and
regulatory matters. Mr. Adams received his Bachelor of Arts Degree in
Psychology, with High Distinction, from the University of Colorado, Colorado
Springs in 1984, and his Juris Doctorate, with Distinction, from the University
of the Pacific, McGeorge School of Law in 1988.
MICHAEL ZMUDA. Dr. Zmuda joined the Company in February 1996 as Vice-President
of Regulatory Affairs and Quality Systems. After serving as Assistant
Professor of Pharmacology at Southern Illinois University School of Medicine
for five years, Dr. Zmuda worked at Baxter Travenol Laboratories, CD Medical,
Inc., and American Sterilizer Company ("AMSCO"). Prior to joining the Company,
Dr. Zmuda held the position of Director of Regulatory Affairs at AMSCO from
1989 through 1996 when AMSCO merged with Steris Corp. Dr. Zmuda received his
Bachelor of Arts degree in Psychology in 1969, and his Physical Doctorate in
Pharmacology in 1975, both from the University of Minnesota.
SID V. ENGLER. A Director since 1992, Mr. Engler was formerly the Senior Vice
President of Marketing of Liquid Carbonic, Inc. Canada, a subsidiary of CBI,
the world's largest supplier of commercial carbon dioxide, a position he held
since 1983. Mr. Engler joined Liquid Carbonic in May 1961 and has worked in
the areas of engineering, sales and marketing and management positions. When
Liquid Carbonic, Inc. was acquired in 1996, Mr. Engler became a consultant.
Mr. Engler's experience is primarily in the area of food chilling and freezing
and he holds several patents and has several patents pending in this area. He
graduated with a Bachelor of Science Degree in Mechanical Engineering from
Queens University in Kingston, Ontario, Canada.
<PAGE>
NOEL K. ATKINSON. Director since 1989, has been engaged successfully in
general real estate brokerage and development since 1946. After retiring in
1979, Mr. Atkinson accepted selected consulting engagements until 1985 when he
founded a venture capital firm. His venture capital firm was a founding
investor in the Company and Ovutec, Inc. Mr. Atkinson also was a founder and
investor in the media with KCHH radio station in Northern California. Mr.
Atkinson completed five years of university level upper and lower division
courses in the field of structural engineering and architecture at the
University of Washington.
ROGER KANE. Prior to joining the Company in December 1996, Mr. Kane worked as
the Director of Product Development and Manufacturing for Integrated Surgical
Systems, a position he had held since 1994. From 1993 through 1994, Mr. Kane
was a private consultant to a start up business that had designed a proprietary
anesthesia delivery system, and from 1986 through 1993, Mr. Kane served as Vice
President of Engineering for Bear Medical Systems in Southern California. Mr.
Kane received his Bachelor of Science Degree in Electrical Engineering from
Ohio State University in 1970, and his Masters Degree in Business
Administration from the University of Wisconsin in 1984.
LIDDELL KAM. Prior to joining the Company, Mr. Kam served as the Director of
Quality Assurance and Regulatory Compliance for Hayes Medical, Inc.. For the
six year period prior to that, Mr. Kam served as the Regulatory Compliance
Specialist for Intermedics Orthopedics, Inc., as the Manager of Quality
Assurance and Regulatory Affairs for MicroAire Surgical Instruments, Inc..
Before that, Mr. Kam performed routine and special investigations of medical
device manufacturers for the U.S. Food and Drug Administration's Los Angeles
and San Francisco District Offices from 1977 through 1990. Mr. Kam received
his Bachelor of Science Degree in Physiology in 1972, and his Master of Science
Degree in Physiology in 1975, both from the University of California, Davis.
EMPLOYEES
At fiscal year ended June 30, 1996, the Company employed fifty-four (54)
regular full time employees. In order to complete research and design, to
build, market and service the new products in development, the Company hired
additional engineers, production personnel, sales managers, and customer
support, and administrative employees. At March 1, 1997, the Company employed
sixty-nine (69) full time employees in the following categories:
CATEGORY NUMBER
Research & Design Engineering..........................................16
Production & Manufacturing.............................................27
Regulatory Affairs & Quality Assurance .................................4
Sales & Marketing......................................................12
Finance, Accounting & Administration...................................10
The Company considers current staffing levels adequate at this time, but may
need to add additional personnel to meet shortened production times or to
handle increases in business. Similarly, any downturn in product markets or
sales might result in decreases in the number of full time employees.
SUMMARY OF THE OFFERING
The Company is registering 2,901,589 shares of Common Stock on behalf of the
Selling Stockholders, and offering 1,478,001 shares of Common Stock upon the
exercise of outstanding Warrants including the placement agent warrants.
2,756,002 shares of Common Stock and the Warrants were issued in connection
with a November 1996 private placement by the Company of 1,378,001 Units at $6
per Unit, and the additional 145,587 shares offered were issued pursuant to the
On-Time Manufacturing agreement. Each Unit consisted of two shares of Common
Stock and a Warrant to purchase an additional share of Common Stock at $3.885
per share. To the extent required under the federal securities laws, this
Prospectus may be used for resale of Common Stock upon the exercise of the
Warrants by the holders of such Warrants. See "The Company and Recent Events -
Recent Financing"; "Selling Stockholders".
<PAGE>
The Company will receive no proceeds from the sale of the 2,901,589 shares of
Common Stock that may be offered and sold from time to time or by the Selling
Shareholders.
USE OF PROCEEDS
Assuming Warrants are exercised for the purchase of all 1,378,001 shares of
common stock underlying the Warrants issued as part of the Units, the Company
expects to receive $5,353,534 before deducting expenses of approximately
$22,000 associated with this Offering. In addition, if the placement agent
Warrants to acquire the additional 100,000 shares of Common Stock at $3.885 are
also exercised, the Company will receive an additional $388,500. The Company
intends to use any amounts received from the exercise of these Warrants for
continued research and development projects and for general corporate purposes.
As of March 7, 1997, the closing bid price for one share of Common Stock was
$3.9375. In light of the current market price for one share of Common Stock,
and the exercise price of the Warrants, it is unlikely that a holder of a
Warrant would exercise the Warrant in the immediate future.
SELLING STOCKHOLDERS
The following table identifies the Selling Stockholders, as of March 5, 1997,
and indicates (i) the nature of any material relationship that such Selling
Stockholders have had with the Company for the past three years, (ii) the
number of shares of Common Stock held by the Selling Stockholders, (iii) the
amount to be offered for the Selling Stockholders' account, and (iv) the number
of shares and percentage of outstanding shares of Common Stock to be owned by
the Selling Stockholders after the sale of the Common Stock offered by the
Selling Stockholders pursuant to this Offering. To the extent required under
the federal securities laws, this Prospectus may be used for resale of Common
Stock upon the exercise of the Warrants by the holders of such Warrants. The
Selling Stockholders are not obligated to sell their Common Stock offered in
this Prospectus and may choose not to sell any of their shares or only a part
of their shares.
The shares of Common Stock offered by the Selling Stockholders may be offered
for sale from time to time at market prices prevailing at the time of sale or
at negotiated prices, and without payment of any underwriting discounts or
commissions except for usual and customary selling commissions paid to brokers
or dealers. The Company will not receive any proceeds from the sale of the
Common Stock by the Selling Stockholders.
Under the Exchange Act, any person engaged in a distribution of the shares of
Common Stock of the Company offered by this Prospectus may not simultaneously
engage in market making activities with respect to the Common Stock of the
Company during the applicable "cooling off" periods prior to the commencement
of such distribution. In addition, and without limiting the foregoing, each
Selling Stockholder will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder including, without limitation,
Rules 10b-6 and 10b-7, and Regulation M, which provisions may limit the timing
of purchases and sales of Common Stock by the Selling Stockholders.
With regard to the shares offered by the Selling Stockholders such shares may
be sold on the Nasdaq Stock Market or in private transactions at prices to be
determined at the time of sale. Such shares may be offered through broker-
dealers, acting on the Selling Stockholders' behalf, who may offer the shares
at then current market prices. Any sales may be by block trade. The Selling
Stockholders and any brokers, dealers or others who participate with the
Selling Stockholders in the distribution of such shares of Common Stock may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions or fees received by such persons and any profit on the resale of
such shares purchased by such persons may be deemed to be underwriting
commissions or discounts under the Securities Act. Sales may be made by all
Selling Stockholders pursuant to the Registration Statement of which this
Prospectus is a part.
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR TO SHARES TO BE SOLD SHARES BENEFICIALLY OWNED AFTER
OFFERING OFFERING
<S> <C> <C> <C> <C> <C>
Number Percentage Number Number Percentage
Bruce Allen{(1)} 249,999 ~1.62% 249,999 0 *
B.D. & G. Investment 8,001 * 8,001 0 *
Partnership I{(1)}
Howard R. Berlin{(1)} 51,000 * 51,000 0 *
Herbert L. Camp{(1)} 37,500 * 37,500 0 *
Vincent T. Cavallo{(1)} 51,000 * 51,000 0 *
Cook & Cie, S.A.{(1)} 525,000 ~3.21% 525,000 0 *
Mary Cullen{(1)} 50,001 * 50,001 0 *
Michael N. Emmerman{(1)} 51,000 * 51,000 0 *
Mallory Factor{(1)} 120,000 * 120,000 0 *
Foundation Danonia{(1)} 180,000 ~1.15% 180,000 0 *
Foundation Zemara{(1)} 54,000 * 54,000 0 *
HAGC Partners, L.P.{(1)} 50,001 * 50,001 0 *
Norton Herrick{(1)} 125,001 * 125,001 0 *
John Hurford{(1)} 60,000 * 60,000 0 *
Erica Jesselson, Michael 100,000 * 100,000 0 *
G. Jesselson & Lucy
Lang, Executors for the
Estate of Ludwig
Jesselson
Benjamin Jesselson{(2)} 25,000 * 25,000 0 *
Michael Jesselson{(2)} 25,000 * 25,000 0 *
Donald R. Keough{(1)} 87,750 * 87,750 0 *
Michael L. Keough{(1)} 9,750 * 9,750 0 *
Mahmood Khan{(1)} 30,000 * 30,000 0 *
R. Richard Leinhardt 12,501 * 12,501 0 *
M.D. P.C. Pension
Trust{(1)}
<PAGE>
Dan W. Lufkin{(1)} 60,000 * 60,000 0 *
Robert Marston{(1)} 60,000 * 60,000 0 *
Eugene Melnyk{(1)} 225,000 ~1.5% 225,000 0 *
Martin E. Messinger{(1)} 105,000 * 105,000 0 *
MH Capital Partners{(1)} 51,000 * 51,000 0 *
Robert C. Miller{(1)} 7,500 * 7,500 0 *
Harold J. Newman{(1)} 90,000 * 90,000 0 *
On-Time Manufacturing, 145,587 * 145,587 0 *
Inc.
Daniel P. Paduano{(1)} 51,000 * 51,000 0 *
Parallax Partners{(1)} 51,000 * 51,000 0 *
P.A.W. Offshore Fund, 225,000 ~1.5% 225,000 0 *
Ltd.{(1)}
Joseph E. Sheehan III - 75,000 * 75,000 0 *
Trust{(1)}
Zita M. Sheehan 75,000 * 75,000 0 *
- - Trust{(1)}
John Simon{(1)} 24,999 * 24,999 0 *
VanKan, Inc.{(1)} 126,000 * 126,000 0 *
Vernon International, 750,000 ~4.8% 750,000 0 *
Ltd.{(1)}
Windsor Partners, 255,000 ~1.5% 255,000 0 *
L.P.{(1)}
Allen & Co. Inc.{(3)} 100,000 * 100,000 0 *
</TABLE>
FOOTNOTES TO TABLE
* Less than one percent.
(1) Includes shares underlying Warrants, immediately exercisable, to purchase
one third of the listed shares.
(2) Includes 25,000 shares underlying warrants issued as part of the placement
of Units to the estate of Jesselson.
(3) Includes 100,000 shares underlying the placement agent warrants.
<PAGE>
DESCRIPTION OF SECURITIES
Pursuant to its Amended and Restated Certificate of Incorporation, the Company
is authorized to issue two classes of capital stock, designated as Common Stock
and Preferred Stock. The authorized Common Stock consists of 50,000,000
shares, $.001 par value, and the authorized Preferred Stock consists of
2,000,000 shares, $.001 par value.
As of February 26, 1997, the number of shares of Common Stock outstanding was
15,834,005. There are no shares of Preferred Stock outstanding.
COMMON STOCK
Holders of shares of the Common Stock have full voting rights, one vote for
each share held of record. Subject to preferential rights of holders of any
series of Preferred Stock, holders of shares of Common Stock are entitled to
receive such dividends as may be declared by the Board of Directors out of
funds legally available therefor, and share pro rata in any distributions to
stockholders upon liquidation. The holders of shares of Common Stock have no
conversion, preemptive or other subscription rights. All of the outstanding
shares of Common Stock are, and the shares offered hereby will be, validly
issued, fully paid and nonassessable.
PREFERRED STOCK
The Company's Board of Directors is authorized to establish, upon
authorization, a series or designation of Preferred Stock with rights,
preferences, privileges, and restrictions on such stock as the Board of
Directors may determine. The Company currently has no Preferred Stock
outstanding, and the Board of Directors has not established any rights,
preferences, privileges or restrictions on such stock.
OPTIONS
As of June 30, 1996, the Company had outstanding options to acquire 1,164,333
shares of Common Stock at exercise prices ranging from $1.64 to $4.25 per
share. Some of these options are subject to vesting, and in general, have a
five year exercise period.
WARRANTS
The Company issued warrants to purchase an aggregate of 42,500 shares of Common
Stock (post stock split) in connection with the private placement that
concluded in February 1993, of which approximately 17,500 warrants remain
unexercised. The remaining 17,500 warrants may be exercised any time before
February 5, 1998, at an exercise price of $1.20 per share. The exercise price
may be adjusted from time to time in the event the Company subdivides or
combines its outstanding Common Stock. The Company was obligated to register,
and did register the underlying Common Stock of the Warrants under the
Securities Act, upon the one-time request of holders of fifty percent (50%) of
those warrants.
As part of the placement agent's compensation in the 1995 private placement of
Units, additional Warrants to purchase 8.8 Units at an exercise price of
$30,000 per Unit were also issued, each Unit consisting of fifty thousand
(50,000) shares of Common Stock.
The Company issued Warrants (including the placement agent warrant) to purchase
an aggregate of 1,478,001 shares of Common Stock in connection with the private
placement of Units that was concluded in November 1996. The Warrants may be
exercised in whole or in part anytime before November 27, 2003. The 1,478,001
shares are issuable at an exercise price of $3.885 per share. The exercise
price may be adjusted from time to time in the event the Company subdivides or
combines its outstanding Common Stock. The Company is contractually obligated
to register the shares of Common Stock underlying the Warrants with the
Commission pursuant to the provisions of the Securities Act. See "The Company
and Recent Events - Recent Financing".
INVESTOR LOCK-UP
On-Time Manufacturing, Inc. was required to enter into an agreement not to
sell, directly or indirectly, the Common Stock included in the Offering for a
period of 180 days following the effective date of a registration statement
registering its shares for resale.
REGISTRATION OBLIGATION
As part of the private placement of the Units, the Company agreed to register
the shares of Common Stock and shares of Common Stock underlying the Warrants
issued as part of the Units for resale under the Securities Act by filing with
the Commission a registration statement on Form S-3, and similarly was
obligated under the contract with On-Time Manufacturing, Inc. to register its
shares of common stock (the "Registration Obligation"). The Company complied
with its obligation to file the registration statement. The Company paid all
expenses necessary to prepare and file the registration statement. See "The
Company and Recent Events - Recent Financing".
VOTING RIGHTS; DIVIDENDS
The holders of Common Stock will be entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders. Further, the
holders of Common Stock will be entitled to receive ratable dividends when and
as declared by the Board of Directors from funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock will be entitled to share ratably in all assets
remaining after payment to holders of any series of preferred stock or of any
other senior securities outstanding at such time. It is anticipated that the
Company will not be declaring dividends in the near future.
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Amended and Restated Certificate of Incorporation provides for
the indemnification of directors and officers for certain acts to the fullest
extent permitted by Delaware Law. Further, the Company's bylaws provide
authority for the Company to maintain a liability insurance policy which
insures directors or officers against any liability incurred by them in their
capacity as such.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
TRANSFER AGENT
American Securities Transfer & Trust, Inc., 938 Quail Street, Suite 101,
Lakewood, Colorado 80215-5513, is the transfer agent for the Company's Common
Stock.
<PAGE>
EXPERTS
The financial statements of THERMOGENESIS CORP. appearing in THERMOGENESIS
CORP.'s Annual Report (Form 10-KSB) for the year ended June 30, 1996, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
The legality of the shares of Common Stock offered by the Company and the
selling stockholders by this Prospectus will be passed upon for the Company by
its General Counsel.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable by the Company in
connection with the issuance and distribution of the securities being
registered hereunder. No expenses shall be borne by the Selling Stockholders.
All of the amounts shown are estimates, except for the SEC Registration fee.
SEC registration fee $ 5,574.70
Printing and engraving expenses *$ 1,425.30
Accounting fees and expenses *$ 15,000.00
Legal fees and expenses *$ -0-
Transfer agent and registrar fees *$ -0-
Fees and expenses for qualification
under state securities laws $ -0-
Miscellaneous *$ -0-
TOTAL $ 22,000.00
* estimated
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law permits indemnification of
directors, officers and employees of corporations under certain conditions and
subject to certain limitations. Article Eighth of the Company's Amended and
Restated Certificate of Incorporation contain provisions for the
indemnification of its directors and officers to the fullest extent permitted
by law.
Under such law, the Company is empowered to indemnify any person who was or is
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company to procure a judgment in its favor) by
reason of the fact that such person is or was an officer, director, employee or
other agent of the Company or its subsidiaries, against expenses, judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with such proceeding, if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of the
Company and, in the case of a criminal proceeding, has no reasonable cause to
believe the conduct of such person was unlawful. In addition, the Company may
indemnify, subject to certain exceptions, any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action by or in the right of the Company to procure a judgment in its favor by
reason of the fact that such person is or was an officer, director, employee or
other agent of the Company or its subsidiaries, against expenses actually and
reasonably incurred by such person in connection with the defense or settlement
of such action if such person acted in good faith and in a manner such person
believed to be in the best interest of the Company and its shareholders. The
Company may advance expenses incurred in defending any proceeding prior to
final disposition upon receipt of an undertaking by the agent to repay that
amount it shall be determined that the agent is not entitled to indemnification
as authorized.
In addition, although the Company does not have director's and officer's
insurance, the Company's bylaws provide the Company authority to maintain a
liability insurance policy which insures directors or officers against any
liability incurred by them in their capacity as such, or arising out of their
status as such. The Company intends to seek such insurance in the future.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
EXHIBIT DESCRIPTION
1.01 Unit Placement Agreement (9)
3.1 (a) Amended and Restated Certificate of Incorporation (5)
(b) Revised Bylaws (5)
5.1 Opinion of David C. Adams, General Counsel to the **
registrant
10.1 (a) Letter of Agreement between Liquid Carbonic, Inc.
Canada and THERMOGENESIS, CORP. (2)
(b) Letter of Agreement between Fujitetsumo USA and
THERMOGENESIS, CORP. (2)
(c) Letter of Agreement between Fujitetsumo Japan
and THERMOGENESIS, CORP. (2)
(d) Letter of Agreement between THERMOGENESIS, CORP.
and Liquid Carbonic, Inc. Sale of Convertible Debenture (3)
(e) License Agreement between Stryker Corp. and
THERMOGENESIS, CORP. (7)
(f) Lease of Office and Mfg. Space (5)
(g) Executive Development and Distribution Agreement
between THERMOGENESIS and Daido Hoxan Inc. (4)
(h) Administrative Office Lease (8)
(i) Employment Agreement for Philip H. Coelho (5)
(j) Employment Agreement for Charles de B. Griffiths (5)
23.1 Consent of General Counsel is contained in exhibit 5.1.
23.2 Consent of Ernst & Young LLP, independent auditors, is
contained in Part II, page II-4 of the registration statement
24.1 Power of Attorney contained on Signature Page, Part II, page II-5
27.1 Financial Data Schedule
FOOTNOTES TO INDEX
(1) Incorporated by reference to Registration Stmt No. 33-12210-A of
THERMOGENESIS, CORP. filed on June 4, 1987.
(2) Incorporated by reference to Registration Statement No. 33-37242 of
THERMOGENESIS, CORP. filed on Feb. 7, 1991.
(3) Incorporated by reference to Form 8-K for July 19, 1993
(4) Incorporated by reference to Form 8-K for June 9, 1995.
II-2
<PAGE>
(5) Incorporated by reference to Form 10-KSB for the year ended
June 30, 1994
(6) Incorporated by reference to Form 10-KSB for the year ended
June 30, 1995
(7) Incorporated by reference to Form 8-K for September 27, 1995
(8) Incorporated by reference to Form 10-QSB for the quarter ended
December 31, 1995
(9) Incorporated by reference to Form 8-K for November 27, 1997.
** Filed herewith.
Item 17. Undertakings
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement 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;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of THERMOGENESIS CORP.
for the registration of 4,379,590 shares of its common stock and to the
incorporation by reference therein of our report dated September 17, 1996, with
respect to the financial statements of THERMOGENESIS CORP. included in its
Annual Report (Form 10-KSB) for the year ended June 30, 1996, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Sacramento, California
March 10, 1997
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Rancho Cordova, County of Sacramento, State of California,
on March 10, 1997.
THERMOGENESIS CORP.
Philip H. Coelho, C.E.O. and
President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip H. Coelho as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
registration statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents or any of them, or of his
or her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated:
Dated: March 10, 1997
Philip H. Coelho, C.E.O., President,
and Chairman of the Board
(Principal Executive Officer)
Dated: March 10, 1997
Charles de B. Griffiths, V.P.,
Secretary, and Director
Dated: March 10, 1997
Walter J. Ludt, V.P. and Chief
Operating Officer
(Principal Accounting Officer
and Principal Financial Officer)
Dated: March 10, 1997
Sid V. Engler, Director
Dated: March 4, 1997
Noel K. Atkinson, Director
II-5
March 11, 1997 EXHIBIT 5.1.
Board of Directors
THERMOGENESIS CORP.
3146 Gold Camp Drive
Rancho Cordova, California 95670
RE: Common Stock of THERMOGENESIS CORP.
Dear Gentlemen:
I have acted as general counsel to THERMOGENESIS CORP., a Delaware
corporation (the "Company"), in connection with the registration of
4,379,590 shares of the Company's common stock (the "Shares") under the
Securities Act of 1933, as amended (the "Securities Act"), which will be
offered to holders of the Company's warrants, and will be sold by certain
selling stockholders of the Company as further described in the Company's
registration statement on Form S-3 filed under the Securities Act (the
"Registration Statement").
For the purpose of rendering this opinion, I examined originals or copies
of such documents as deemed to be relevant. In conducting my examination,
I assumed, without investigation, the genuineness of all signatures, the
correctness of all certificates, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted as certified or photostatic copies, and the
authenticity of the originals of such copies, and the accuracy and
completeness of all records made available to me by the Company. In
addition, in rendering this opinion, I assumed that the Shares will be
offered in the manner and on the terms identified or referred to in the
Registration Statement, including all amendments thereto.
My opinion is limited solely to matters set forth herein. I am admitted to
practice in the State of California and I express no opinion as to the law
of any other jurisdiction other than the laws of the State of Delaware and
the laws of the United States.
Based upon and subject to the foregoing, after giving due regard to such
issues of law as I deemed relevant, and assuming that (i) the Registration
Statement becomes and remains effective, and the Prospectus which is a part
of the Registration Statement (the "Prospectus"), and the Prospectus
delivery requirements with respect thereto, fulfill all of the requirements
of the Securities Act, throughout all periods relevant to the opinion, (ii)
all offers and sales of the Shares will be made in compliance with the
securities laws of the states having jurisdiction thereof, and (iii) the
Company receives, to the extent applicable, the consideration set forth in
the Prospectus, I am of the opinion that the Shares issued are, and the
Shares to be issued will be, legally issued, fully paid and nonassessable.
I hereby consent in writing to the use of my opinion as an exhibit to the
Registration Statement and any amendment thereto. By giving such consent,
I do not thereby admit that I come within the category of persons where
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Securities and Exchange Commission.
Sincerely,
David C. Adams
General Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FROM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 6,732,114
<SECURITIES> 0
<RECEIVABLES> 3,019,941
<ALLOWANCES> 97,913
<INVENTORY> 3,012,028
<CURRENT-ASSETS> 12,326,714
<PP&E> 1,231,830
<DEPRECIATION> 422,581
<TOTAL-ASSETS> 13,434,218
<CURRENT-LIABILITIES> 1,001,469
<BONDS> 0
0
0
<COMMON> 15,834
<OTHER-SE> 12,158,666
<TOTAL-LIABILITY-AND-EQUITY> 13,434,218
<SALES> 4,348,286
<TOTAL-REVENUES> 4,390,090
<CGS> 2,487,921
<TOTAL-COSTS> 2,487,921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,447
<INCOME-PRETAX> (564,719)
<INCOME-TAX> 0
<INCOME-CONTINUING> (564,719)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (564,719)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
