As filed with the Securities and Exchange Commission on January 9, 1997
Registration No. 333-______
================================================================================
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DYNAGEN, INC.
(Exact name of Registrant as specified in its charter)
-----------------------------
DELAWARE 2830
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
04-3029787
(I.R.S. Employer
Identification No.)
99 Erie Street
Cambridge, Massachusetts 02139
(617) 491-2527
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
DR. INDU A. MUNI, President
DynaGen, Inc.
99 Erie Street
Cambridge, Massachusetts 02139
(617) 491-2527
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
JOHN M. HESSION, ESQ.
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
(617) 248-7000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ___________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ___________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following. [ ]
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 Section 8(a), may
determine.
In accordance with Rule 416 under the Securities Act, this Registration
Statement also covers such indeterminate number of additional shares of the
Registrant's Common Stock, $.01 par value, as may become issuable upon
conversion of the Registrant's Convertible Note due February 7, 1998 (the
"Note") to prevent dilution resulting from stock splits, stock dividends or
similar transactions or by reason of changes in conversion price of the Note in
accordance with the terms thereof.
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================= ======================= ================= ========================= ====================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share Price Fee
- ----------------------------- ----------------------- ----------------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 1,000,000 shares $1.625(1) $1,625,000(1) $493
===================================================================================================================
(1) The price of $1.625 per share, which is the average of the bid and
asked prices reported on the Nasdaq SmallCap Market on January 6, 1997,
is set forth solely for purposes of calculating the filing fee pursuant
to Rule 457(c).
===================================================================================================================
</TABLE>
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PROSPECTUS
DYNAGEN, INC.
1,000,000 Shares of Common Stock
($.01 par value)
All of the shares of Common Stock, par value $.01 per share ("Common
Stock"), of DynaGen, Inc. (the "Company") offered hereby (the "Shares") will be
sold from time to time by GFL Performance Fund Limited (the "Selling
Stockholder"), a stockholder of the Company. The Shares consist of up to
1,000,000 shares of Common Stock issuable upon the conversion of a Convertible
Note due February 7, 1998 originally issued by the Company in the principal
amount of $2,000,000 (the "Note") to the Selling Stockholder or shares of Common
Stock that may be, at the option of the Company, issued by the Company in
payment of interest on the Note. The Company will not receive any of the
proceeds from the sale of the Shares offered hereby. All brokerage commissions
and other similar expenses incurred by the Selling Stockholder will be borne by
the Selling Stockholder. Other expenses of the offering, estimated at $25,000,
will be borne by the Company.
The sale of the Shares by the Selling Stockholder may be effected from
time to time in one or more transactions (which may involve block transactions)
on the Nasdaq SmallCap Market (the "Nasdaq") or in the over-the-counter market,
in negotiated transactions or by a combination of such methods of sale, at fixed
prices, at market prices prevailing at the time of the sale, at prices related
to the prevailing market prices or at negotiated prices. The Selling Stockholder
may effect such transactions with or through one or more broker-dealers, which
may act as agent or principal. The Selling Stockholder and/or any broker-dealer
effecting the sales may be deemed to be an "underwriter" within the meaning of
Section 2(11) of the Securities Act of 1933, as amended (the "Securities Act"),
and any commissions received by the broker-dealer and any profit on the resale
of shares as principal may be deemed to be underwriting discounts and
commissions under the Securities Act. The Selling Stockholder may transfer the
Shares or the Note to other persons who may, in turn, resell Shares in the
manner described above. Additionally, the Selling Stockholder may pledge or make
gifts of the Shares, and the Shares may also be sold by the pledgees or
transferees. The Selling Stockholder may also transfer the Shares pursuant to
Rule 144 under the Securities Act, whether or not the Registration Statement of
which this Prospectus forms a part is effective at the time of any such
transfer. The Company has agreed to indemnify the Selling Stockholder against
certain liabilities, including certain liabilities under the Securities Act, and
to the extent any indemnification by an indemnifying party is prohibited or
limited by law, the Company has agreed to make the maximum contribution with
respect to any amounts for which it would otherwise be liable under such
indemnification provision to the fullest extent permitted by law. See "Plan of
Distribution."
The Common Stock is currently traded on the Nasdaq under the symbol
"DYGN" and on the Boston Stock Exchange under the symbol "DYG." On January 6,
1997, the closing bid price of the Common Stock, as reported by the Nasdaq, was
$1.56 per share.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
SUBSTANTIAL DILUTION TO THE PUBLIC INVESTOR. SEE
"RISK FACTORS" AND "DILUTION."
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------
The date of this Prospectus is January 9, 1997
AVAILABLE INFORMATION
DynaGen, Inc., a Delaware corporation, is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports and other
information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Seven World Trade Center, Suite 1300, New
York, New York 10048; and 500 West Madison Avenue, Suite 1400, Chicago, Illinois
60661. Copies of such material may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Company's Common Stock is traded on the Nasdaq SmallCap
Market, and such reports and other information can be inspected at the offices
of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. The Company's
Common Stock is listed on the Boston Stock Exchange and such material is also
available for inspection at the offices of the Boston Stock Exchange, One Boston
Place, Boston, Massachusetts 02109.
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-3 under the Act with respect to the securities
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain information contained in the Registration
Statement. For further information with respect to the Company and the
securities offered hereby, reference is hereby made to the Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any documents filed with,
or incorporated by reference in, the Registration Statement as exhibits are not
necessarily complete, and each such statement is qualified in all respects by
reference to the copy of the applicable documents filed with the Commission. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part
thereof may be obtained from such office upon payment of the prescribed fees.
-2-
INFORMATION INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the
Commission (File No. 1-11352) pursuant to the Exchange Act are incorporated by
reference in this Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended June 30, 1996;
(2) Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996;
(3) The Company's Proxy Statement for its Annual Meeting of
Stockholders to be held on January 30, 1997;
(4) All other documents filed by the Company pursuant to Section 13(a)
or 15(d) of the Exchange Act since the end of the fiscal year covered by the
Annual Report referred to in (1) above; and
(5) The "Description of Securities" contained in the Company's
Registration Statement No. 33-71416 on Form S-1 and incorporating by reference
the information contained in the Company's Final Prospectus dated March 16,
1994, filed under Section 424(b) under the Securities Act of 1933.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of this Offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Copies of the documents incorporated herein by reference (excluding exhibits
unless such exhibits are specifically incorporated by reference into such
documents) may be obtained upon written or oral request without charge by
persons, including beneficial owners, to whom this Prospectus is delivered.
Request should be made to Mr. Dennis R. Bilodeau, Controller, DynaGen, Inc., 99
Erie Street, Cambridge Massachusetts 02139 (telephone: 617-491-2527).
-3-
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
THE COMPANY..............DynaGen, Inc. (the "Company") develops, manufactures
and markets proprietary and generic diagnostic and
therapeutic products for human health care.
RISK FACTORS.............The Offering involves substantial risk. See "Risk
Factors."
SECURITIES OFFERED.......1,000,000 shares of Company Common Stock, par value
$.01 per share.
OFFERING PRICE...........All or part of the Shares offered hereby may be sold
from time to time in amounts and on terms to be
determined by the Selling Stockholder at the time of
sale.
USE OF PROCEEDS..........The Company will receive no part of the proceeds from
the sale of any of the Shares by the Selling
Stockholder.
SELLING STOCKHOLDER......The Shares being offered hereby are being offered for
the account of the Selling Stockholder specified under
the caption "Selling Stockholder."
STOCK MARKET SYMBOLS: Nasdaq Boston Stock Exchange
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Common Stock DYGN DYG
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-4-
THE COMPANY
The Company, organized in November 1988, develops, manufactures and
markets proprietary and generic therapeutic and diagnostic products for the
human health care market. In August 1996, the Company acquired the tablet
business of Able Laboratories, Inc. ("Able"), a generic pharmaceutical products
subsidiary of ALPHARMA USPD INC.
In connection with the acquisition of Able, the Company acquired the
rights to several U.S. Food and Drug Administration ("FDA") approved Abbreviated
New Drug Application ("ANDA") products as well as other generic formulations.
The Company intends to increase sales of its current generic product portfolio
through expansion of its distribution network, by reintroducing certain products
that were previously discontinued by Able's prior owner, and by developing a
program to add new ANDA products. There can be no assurance that the Company
will be successful in implementing this strategy or receiving the necessary
regulatory approvals.
Prior to the Able acquisition, the Company's business consisted of
proprietary diagnostic products and proprietary therapeutic and diagnostic
product candidates. The Company's lead therapeutic product candidate,
NicErase(R)-SL, is intended as an aid in smoking cessation and to provide relief
from nicotine withdrawal symptoms. Unlike currently available smoking cessation
products, NicErase's active ingredient is lobeline, a non-nicotine therapeutic
compound. Results of human clinical trials conducted by the Company suggest that
NicErase is safe, reduces nicotine withdrawal symptoms and does not exhibit
potential for addiction. The Company is currently conducting a multi-center
pivotal Phase 3 clinical trial of NicErase-SL. Results from this first trial are
anticipated to be available in the first quarter of 1997. There can be no
assurance that the results of the Company's ongoing Phase 3 clinical trial of
NicErase-SL will be favorable for the Company.
The Company has entered into a licensing agreement with Nastech
Pharmaceutical Company Inc. ("Nastech") in which the Company granted Nastech a
worldwide, exclusive license to develop a lobeline sulfate nasal delivery
formulation of the Company's NicErase product candidate. Nastech is dedicated to
developing nasally delivered drugs for pharmaceuticals that are currently
available in an oral and/or injectable dosage forms. Under the terms of the
agreement, Nastech will be responsible for the development of nasal
formulations, preclinical animal studies and limited human studies and shall
bear all the development costs. The Company and Nastech will cooperate in
licensing the product to a third party and will share equally in licensing fees
and royalties.
The Company is also developing NicCheck(R), a colorometric test strip
that measures the urinary content of nicotine and its metabolites. The test
distinguishes between smokers and nonsmokers with 97% accuracy and is also able
to distinguish between high and low consumers of nicotine. NicCheck can be used
both as a companion product for NicErase-SL or independently for clinical
evaluation. In December 1996, the Company acquired, through a licensing
arrangement from BioLoc, Inc. ("BioLoc"), rights to a breast biopsy technology.
This technology, which is in a developmental stage, is intended to improve the
accuracy and efficiency and reduce the overall cost of breast surgical biopsy
procedures. Core needle biopsy, the most commonly used non-surgical procedure
for diagnosis of suspicious lesions in breasts, is limited in its efficacy due
to the difficulty in capturing the targeted tissue and the need for multiple
attempts to obtain accurate and sufficient samples, resulting in unnecessary
pain, scarring and anxiety. The BioLoc technology is intended to overcome the
shortcomings of the core needle biopsy procedure by accurately guiding the
surgical biopsy instruments directly to the suspected tissue lesion identified
during mammography examination.
-5-
The Company is also developing OrthoDyn(R), a bioresorbable bone cement
system for bone and joint repair, which is currently in the preclinical
development stage. In addition, the Company is conducting early stage research
on bacterial extract for the treatment of infectious diseases.
The Company has also developed proprietary diagnostic tests for certain
infectious diseases including tuberculosis. The Company is currently selling the
MycoDot(R) product, a test to detect antibodies against mycobacteria in blood or
serum, through distributors primarily in Southeast Asia, Pacific Rim countries,
China, India and Japan. The Company's MycoAKT(R) products, diagnostic tests that
identify three mycobacterial species in culture, are sold by a third party under
exclusive U.S. manufacturing and distribution rights and semi-exclusive
worldwide rights granted by the Company.
The Company maintains its principal executive offices and laboratory
facilities at 99 Erie Street, Cambridge, Massachusetts 02139, U.S.A., and its
telephone number is (617) 491-2527.
-6-
RISK FACTORS
The shares of Common Stock offered hereby involve a high degree of risk
and should not be purchased by persons who cannot afford the loss of their
entire investment. The following factors, in addition to the other information
discussed in this Prospectus, should be considered carefully in evaluating an
investment in the Company and its business.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES; ANTICIPATION OF FUTURE
LOSSES. The Company has incurred operating losses since its inception and has an
accumulated deficit of $21,787,097 as of September 30, 1996. The Company
incurred a net loss of $1,778,046 for the three months ended September 30, 1996,
compared with a net loss of $725,925 for the three months ended September 30,
1995. Such losses have resulted principally from expenses incurred in research
and development and from general and administrative costs associated with the
Company's development efforts. The continued development of the Company's
products will require the commitment of substantial resources to conduct further
development and preclinical and clinical trials, and to establish manufacturing,
sales, marketing, regulatory and administrative capabilities. In addition, the
Company's recently acquired subsidiary, Able, has incurred net operating losses
in the past. The Company expects to provide its Able subsidiary with working
capital during the foreseeable future until Able can become self-supporting. The
Company expects to incur substantial operating losses over the next several
years as its product programs expand, various clinical trials commence and
marketing efforts are launched. The amount of net losses and the time required
by the Company to reach sustained profitability are highly uncertain and to
achieve profitability, the Company must, among other things, successfully
complete development of its products, obtain regulatory approvals, and establish
manufacturing and marketing capabilities by itself or with third parties. There
is no assurance that the Company will ever generate substantial revenues or
achieve profitability.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. It is
anticipated that the Company will continue to expend significant amounts of
capital to fund its research and development, clinical trials and the operation
of Able. The Company's available working capital is inadequate for completion of
the Company's development programs, and additional financing will be necessary
for the continued support of the Company's proposed products and operations,
including the establishment of manufacturing, marketing and distribution
capabilities for its proposed products. There can be no assurance that the
Company will be able to secure additional financing or that such financing will
be available on favorable terms. If the Company is unable to obtain such
additional financing, the Company's ability to maintain its current level of
operations could be materially and adversely affected and the Company may be
required to reduce its overall expenditures including its research and
development activity with respect to certain proposed products.
UNCERTAINTIES RELATED TO NICERASE. Under applicable federal law, the
Company will not be permitted to sell any formulations of NicErase, and thus
generate any revenue from its development of NicErase, unless it obtains the
necessary regulatory approvals from the FDA for the commercial sale of that
product. To obtain such regulatory approvals, the Company must demonstrate to
the satisfaction of the FDA, through preclinical studies and clinical trials,
that NicErase is safe and effective. Although the results of the Company's pilot
Phase 3 clinical trials with respect to NicErase-SL were encouraging, they do
not necessarily indicate, and they do not guarantee, that the results of the
ongoing multi-center pivotal Phase 3 clinical trial will be favorable to the
Company. Nor do the results obtained in the small-scale pilot tests completed by
the Company to date necessarily indicate that the Company will ultimately
succeed in obtaining FDA approval for the commercial sale of NicErase-SL or any
other formulations of NicErase. The results from preclinical studies and early
clinical trials may not be predictive of results
-7-
that will be obtained in large-scale testing, and there can be no assurance that
the Company's clinical trials will demonstrate sufficient safety and efficacy to
obtain the requisite regulatory approvals or will result in marketable products.
A number of companies in the pharmaceutical industry have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier
trials. If NicErase is not shown to be safe and effective in either current
ongoing, or any future clinical trials, and if the Company is thus unable to
commercialize NicErase it would have a material adverse effect on the Company's
business, financial condition and results of operations.
INTEGRATION OF ABLE ACQUISITION. In August 1996, the Company acquired
certain of the assets of Able. There can be no assurance that the anticipated
benefits from this acquisition will be realized. Additionally, there can be no
assurance that the Company will be able to effectively market the existing Able
products, that it will obtain FDA approval to market additional generic drugs or
that it will be successful in managing the combined operations. The integration
of Able will require substantial attention from management, many of whom have
limited experience in integrating acquisitions. The diversion of management's
attention, the process of integrating the businesses and any difficulties
encountered in the transition process could cause an interruption of business,
and could have a material adverse effect on the Company's operations and
financial performance.
LIMITED COMMERCIALIZATION OF PRODUCTS. The Company has commercially
introduced and is currently marketing through distributors only two of its
proprietary products, yielding limited revenues from the sale of these products.
Historically, substantially all of the Company's revenues had been generated
from research and development contracts and license fees. The Company's ability
to achieve profitability will depend on its ability to develop and introduce
commercially viable products, obtain regulatory approvals for these products and
either successfully manufacture, market and distribute such products on its own
or enter into collaborative agreements for product manufacturing, marketing and
distribution. Many of the Company's proposed therapeutic and diagnostic products
will require substantial further development, preclinical and clinical testing,
and investment by the Company or third party licensees in manufacturing,
marketing and sales infrastructures prior to their commercialization. The BioLoc
technology is in an early stage of development and therefore is subject to the
risks of unsuccessful development, marketing and commercialization. This
proposed product will require substantial further development, and preclinical
and clinical testing and regulatory approval, at a substantial cost to the
Company. Additional investment by the Company in manufacturing, marketing and
sales infrastructures will also be required prior to commercialization of any of
its proposed products. No assurance can be given that the Company's development
efforts will be successfully completed, that regulatory approvals will be
obtained, or that these products, once introduced, will be successfully
marketed.
FUTURE ACQUISITIONS. Management may from time to time consider other
acquisitions of assets, businesses or technologies that will enable the Company
to acquire complementary skills and capabilities, offer new products, expand its
customer base or obtain other competitive advantages. There can be no assurance
that the Company will be able to successfully identify suitable acquisition
candidates, obtain financing on satisfactory terms, complete acquisitions,
integrate acquired operations into its existing operations or expand into new
markets. Acquisitions may result in potentially dilutive issuances of equity
securities, the incurrence of debt and contingent liabilities, and amortization
expense related to intangible assets acquired, any of which could materially
adversely affect the Company's business and results of operations. Acquisitions,
including the Company's recent acquisition of Able, involve a number of
potential risks, including difficulties in the assimilation of the acquired
Company's operations and products, diversion of management's resources,
uncertainties associated with operating in new markets and working with new
employees and customers, and the potential loss of the acquired
-8-
company's key employees. There can also be no assurance that the Able
acquisition and future acquisitions, if any, will not have a material adverse
effect upon the Company's business and results of operations. Once integrated,
acquired operations may not achieve levels of revenues, profitability or
productivity comparable to those achieved by the Company's existing operations,
or otherwise perform as expected. The Company does not have any current
commitments or agreements relating to any acquisitions.
LIMITED MANUFACTURING CAPABILITY AND EXPERIENCE. The Company's MycoDot
and MycoAKT products are currently made by licensed manufacturers. The Company
intends to enter into licenses, joint venture and similar collaborative
arrangements with third parties for the manufacture of other proprietary
products and proposed products. There are no other such agreements and there can
be no assurance that the Company will be successful in securing manufacturing
agreements for its products or that such agreements will prove to be on terms
favorable to the Company. In addition, the Company's dependence upon third
parties for the manufacture of its products and proposed products could have an
adverse effect on the Company's profitability and its ability to deliver its
proposed products on a timely and competitive basis. To the extent that the
Company attempts to manufacture any of its products, there can be no assurance
that the Company will be able to attract and retain qualified manufacturing
personnel, or build or rent manufacturing facilities.
The Company's generic therapeutic products are manufactured at its Able
Laboratories facility in South Plainfield, New Jersey. In order to maintain
compliance with FDA Good Manufacturing Practices ("GMP") standards, the Company
may have to make significant investments in its infrastructure and plant
facility. There can be no assurance that such capital expenditures and overhead
costs will not have a material effect upon the Company's ability to achieve
profitability. There can be no assurance that the Company will retain the key
employees it acquired in the Able acquisition.
LACK OF MARKETING EXPERIENCE. The Company currently does not plan to
market its proprietary products directly and does not have adequate resources or
expertise to develop a substantial marketing organization and internal sales
force for these products. Since the Company does not have the financial or other
resources to undertake extensive direct marketing activities, the Company
intends to enter into marketing arrangements with third parties, including
possible joint venture, license or distribution arrangements. While the Company
intends to license its products for manufacture and sale to established health
care or pharmaceutical companies, it has had very limited success in its efforts
to enter into such agreements to date. There can be no assurance that the
Company will be able to locate collaborative partners or that these strategic
alliances, if consummated, will prove successful.
With respect to the Company's generic therapeutic products, there can
be no assurance that present and potential customers of Able will continue their
recent buying patterns without regard to the Able acquisition, and any
significant delay or reduction in orders could have an adverse effect on the
Company's near-term business and results of operations.
REGULATION BY GOVERNMENT AGENCIES. The Company's research, preclinical
development, clinical trials, manufacturing and marketing of its proposed
products are subject to extensive regulation by numerous governmental
authorities in the United States (including the FDA), and other equivalent
foreign regulatory authorities. The process of obtaining FDA and other required
regulatory approvals is lengthy and expensive. There can be no assurance that
the Company will be able to obtain the necessary approvals for clinical testing
or for the manufacturing or marketing of its proposed products. Further,
additional governmental regulation may be established which could prevent or
delay regulatory approval
-9-
of the Company's products. The regulatory process may delay for long periods,
and ultimately prevent, marketing of new products or impose costly procedures
that would have a material adverse effect on the Company's business. Failure to
comply with the applicable regulatory requirements can, among other things,
result in fines, suspensions of regulatory approvals, product recalls, operating
restrictions and criminal prosecution.
The Company's success in the generic drug market depends, in part, on
its ability to obtain FDA approval of ANDAs for its new products, as well as its
ability to procure a continuous supply of raw materials and to validate the
manufacturing processes used to produce consistent test batches for FDA
approval. Such raw materials are generally available from several sources;
however, this may not always be the case. Since the federal drug application
process requires specification of raw material suppliers, if raw materials from
a specified supplier were to become unavailable, the Company would be required
to file a supplement to its ANDA and revalidate the manufacturing process using
a new supplier's materials. This could cause a delay of several months in the
manufacture of the drug involved and the consequent loss of potential revenue
and market share. Additionally, there is often a time lag, sometimes
significant, between the receipt of ANDA approval and the actual marketing of
the approved product due to this validation process.
The Able Laboratories facility is subject to plant inspections by the
FDA to determine compliance with GMP standards. The Company could be subject to
fines and sanctions such as the suspension of manufacturing or the seizure of
drug products if it were found to be in non-compliance with GMP standards.
RAPID TECHNOLOGICAL ADVANCES AND COMPETITION. The therapeutic and
diagnostic markets in which the Company competes have undergone and can be
expected to continue to undergo rapid and significant technological advances.
There can be no assurance that the technological developments of others will not
render the Company's technology or products incorporating such technology either
uneconomical or obsolete. The Company competes with a number of specialized
biotechnology companies and major pharmaceutical companies. Most of these
companies have substantially greater financial, technical and human resources
and research and development staffs and facilities, as well as substantially
greater experience in conducting clinical trials, obtaining regulatory
approvals, and manufacturing and marketing products than does the Company. There
can be no assurance that the Company's products or proposed products will be
able to compete successfully.
In addition, with its newly acquired generic product line, the Company
is now competing in a new market. Generic products with limited competition are
generally sold at higher prices, resulting in relatively high gross margins. As
more competing products become available, selling prices and gross margins can
decline dramatically and impair overall profitability. The Company may
experience price erosion in its generic product line. There is also no assurance
that the Company will compete successfully in this new market.
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY. The Company owns
certain patents and has applied for other patents relating to its technology and
proposed products. No assurance can be given, however, whether pending patent
applications will be granted or whether any patents granted will be enforceable
or provide the Company with meaningful protection from competitors. Even if a
competitor were to infringe the Company's patents, the costs of enforcing its
patent rights may be substantial or even prohibitive. In addition, there can be
no assurance that the Company's proposed products will not infringe the patent
rights of others. The Company may be forced to expend substantial resources if
the Company is required to defend against any such infringement claims. The
Company also
-10-
may desire or be required to obtain licenses from others in order to further
develop, produce and market commercially viable products effectively. There can
be no assurance that such licenses will be obtainable on commercially reasonable
terms, if at all, that the patents underlying such licenses will be valid and
enforceable or that the proprietary nature of the unpatented technology
underlying such licenses will remain proprietary. The Company also relies on
unpatented proprietary know-how and trade secrets, and employs various methods
including confidentiality agreements with employees, consultants, manufacturing
and marketing partners to protect its trade secrets and know-how. However, such
methods may not afford complete protection and there can be no assurance that
others will not independently develop such trade secrets and know-how or obtain
access thereto.
The manufacture and sale of certain products developed by the Company
will involve the use of processes, products or information, the rights to
certain of which are owned by others. Although the Company has obtained licenses
with regard to the use of certain such processes, products and information,
there can be no assurance that such licenses will not be terminated or expire
during critical periods, that the Company will be able to obtain licenses for
other rights which may be important to it, or, if obtained, that such licenses
will be obtained on commercially reasonable terms. If the Company is unable to
obtain such licenses, the Company may have to develop alternatives to avoid
infringing patents of others, potentially causing increased costs and delays in
product development and introduction, or precluding the Company from developing,
manufacturing or selling its proposed products. Additionally, there can be no
assurance that the patents underlying any licenses will be valid and
enforceable. To the extent any products developed by the Company are based on
licensed technology, royalty payments on the licenses will reduce the Company's
gross profit from such product sales and may render the sales of such products
uneconomical.
VOLATILITY OF STOCK PRICE. The market for securities of biotechnology
companies, including those of the Company, has been highly volatile. The market
price of the Company's Common Stock has fluctuated between $7.00 and $.50 from
January 1, 1993 to December 31, 1996 and was $1.66 on January 6, 1997, and it is
likely that the price of the Common Stock will continue to fluctuate widely in
the future. Announcements of technical innovations, new commercial products,
results of clinical trials, regulatory approvals, patent or proprietary rights
or other developments by the Company or its competitors could have a significant
impact on the Company's business and the market price of the Common Stock.
DILUTION. At September 30, 1996, the net tangible book value of the
Company was $6,692,774, or approximately $.23 per share. Purchasers of the
Company's Common Stock offered hereby will experience immediate and substantial
dilution. See "Dilution."
LIMITED TRADING VOLUME OF COMMON STOCK. The development of a public
market having the desirable characteristics of liquidity and orderliness depends
upon the presence in the marketplace of a sufficient number of willing buyers
and sellers at any given time, over which neither the Company nor any market
maker has any control. Accordingly, there can be no assurance that a significant
trading market for the securities offered hereby will develop, that quotations
will be available on the Nasdaq as contemplated, or if a significant market
develops, that such market will continue. Although the trading volume for the
Common Stock, as reported by the Nasdaq, averaged 682,496 shares per week during
the 52-week period ended December 27, 1996 and 569,200 shares per week during
the four-week period ended December 27, 1996, there can be no assurance that
persons purchasing the securities offered hereby will be able to readily sell
the securities at the time or price desired.
-11-
ADVERSE CONSEQUENCES ASSOCIATED WITH RESERVATION OF SUBSTANTIAL SHARES
OF COMMON STOCK. The Company has reserved 2,128,588 shares of Common Stock for
issuance upon the exercise of its outstanding warrants and 2,702,800 shares for
issuance to employees, officers, directors and consultants. The price which the
Company may receive for the Common Stock issuable upon exercise of such options
and warrants will, in all likelihood, be less than the market price of the
Common Stock at the time of such exercise. Consequently, for the life of such
options and warrants the holders thereof may have been given, at nominal cost,
the opportunity to profit from a rise in the market price of the Common Stock.
The exercise of all of the aforementioned securities may also adversely
affect the terms under which the Company could obtain additional equity capital.
In all likelihood, the Company would be able to obtain additional equity capital
on terms more favorable to the Company at the time the holders of such
securities choose to exercise them. In addition, should a significant number of
these securities be exercised, the resulting increase in the amount of the
Common Stock in the public market may reduce the market price of the Common
Stock. Also, the Company has agreed that, under certain circumstances, it will
register under Federal and state securities laws certain securities issuable in
connection with warrants issued to the investment banker and placement agent of
the Company's Common Stock.
-12-
DILUTION
"Dilution" represents the difference between the assumed price to
public per share of Common Stock and the net tangible book value per share
immediately after the completion of this offering. "Net tangible book value per
share" represents the amount of total tangible assets less total liabilities,
divided by the number of shares of Common Stock outstanding.
As of September 30, 1996, the net tangible book value of the Company's
Common Stock was $6,692,774 or $.23 per share of Common Stock. Assuming a price
to the public of $1.66 per share (based upon the last reported sales price of
the Common Stock on Nasdaq at January 6, 1997), there will be an immediate
dilution per share of $1.43 to new investors purchasing the Shares offered
hereby.
The following table illustrates the dilution per share described above:
Assumed price to public per share...................... $1.66
Net tangible book value per share at September 30, 1996,
as defined above.................................... .23
------
Dilution to new investors.............................. $1.43
In February 1996, the Company issued the Note to the Selling
Stockholder as part of a private placement transaction. The Note is convertible
into shares of Common Stock at any time at the option of the investor, subject
to certain limitations, at a rate of 67% of the average of the closing bid price
per share of the Company's Common Stock for the five (5) consecutive trading
days ending one trading day prior to the date the notice of conversion is
received by the Company.
The pro forma net tangible book value of the Company's Common Stock at
September 30, 1996, assuming full conversion of the Note (based upon a price of
$1.66 for the Common Stock on Nasdaq at January 6, 1997), resulting in the
issuance of approximately 1,798,237 shares, would be $8,692,774 or $.29 per
share. Assuming a price to the public of $1.66 per share (as described above),
there would be an immediate dilution per share of $1.37 to new investors.
At January 6, 1997, the Company had outstanding options to purchase
2,465,900 shares of Common Stock, at exercise prices ranging between $0.01 and
$6.25 per share. At January 6, 1997, the Company also had outstanding warrants
which have exercise prices ranging between $1.44 and $4.37, which if exercised
would result in the issuance of 2,128,588 shares of Common Stock. To the extent
such options and warrants are exercised below the net tangible book value per
share, there will be further dilution to the purchasers of the Shares offered
hereby from the assumed public offering price.
USE OF PROCEEDS
The Company will receive no part of the proceeds from the sale of any
of the Shares by any of the Selling Stockholder. The Company has, however,
received proceeds from the sale of the Shares and the Note to the Selling
Stockholder, which proceeds were applied to working capital. In the event and to
the extent that the Selling Stockholder elect to convert the Note, the Company
will have no obligation to repay the Note.
-13-
SELLING STOCKHOLDER
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock by the Selling Stockholder as of the date of
this Prospectus and the number of such shares included for sale in this
Prospectus assuming the sale of all such Shares being offered by this
Prospectus. To the best of the Company's knowledge, except as noted by footnote,
the Selling Stockholder has not held any office or maintained any material
relationship with the Company or any of its predecessors or affiliates over the
past three years. The Selling Stockholder may reduce the number of shares
offered for sale or otherwise decline to sell any or all of the Shares
registered hereunder.
<TABLE>
<CAPTION>
Number of Shares of Common Number of Shares Common Stock
Stock Owned Prior to the to be Acquired to
Name Offering Pursuant to Note be Sold
<S> <C> <C> <C>
GFL Performance Fund 150,000(1) (2) 1,000,000(3)
Limited
- --------------------
</TABLE>
(1) Does not include shares of Common Stock issuable upon conversion of the
Note.
(2) The Selling Stockholder can receive shares of Common Stock through
conversion of the Note or through payment by the Company of interest on
the Note in shares of Common Stock, valued at the average market price
for the Common Stock for the five consecutive trading days ending on
the third trading day before the interest payment, at the Company's
option. Upon notice to the holders of the Note, the Company may also
require that the Note be converted into shares of Common Stock at any
time. The principal amount of the Note as of the date of this
Prospectus is $1,600,000, and the annual interest rate is 8%. The
conversion price is 67% of the average market price for the Common
Stock for the five consecutive trading days ending one trading day
prior to the date that the conversion notice is received by the
Company. The Selling Stockholder has agreed with the Company that the
Selling Stockholder and any person associated with it and any person
serving as an advisor to it may not beneficially own, in the aggregate,
more than 4.9% of the Company's outstanding Common Stock.
(3) Consists of up to 1,000,000 shares of Common Stock issuable upon
conversion of the Note and through payment of interest on the Note and
included in this offering. Does not include 150,000 shares of Common
Stock owned prior to this offering or the remaining shares of Common
Stock issuable upon conversion of the Note or through payment of
interest on the Note, all of which have been registered and may be sold
pursuant to a Registration Statement on Form S-3 (Registration No.
333-1748) declared effective on March 29, 1996.
-14-
PLAN OF DISTRIBUTION
The distribution by the Selling Stockholder of the Shares may be
effected in one or more transactions that may take place in the over-the-counter
market, or such other market on which the Company's securities may from time to
time be trading, including ordinary broker's transactions or through sales to
one or more dealers for resale of the Shares as principals, in privately
negotiated transactions, through the writing of options on the Shares (whether
such options are listed on an options exchange or otherwise) or by a combination
of such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. If the Selling Stockholder effects such
transactions by selling the Shares through underwriters, dealers or agents, such
underwriters, dealers or agents may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholder
and/or the purchasers of the Shares for whom they may act as agent. The Selling
Stockholder and any such underwriters, dealers or agents that participate in the
distribution of the Shares may be deemed to be underwriters, and any profit on
the sale of the Shares by them and any discounts, commissions or concessions
received by them may be deemed to be underwriting discounts and commissions
under the Securities Act. The Selling Stockholder may also sell the Shares
pursuant to Rule 144 under the Securities Act. Brokers or dealers acting in
connection with the sale of the Shares may receive fees or commissions in
connection therewith. The Company will not receive any of the proceeds from the
sale of the Shares by the Selling Stockholder.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of shares of Common Stock may not
simultaneously engage in market making activities with respect to such shares of
Common Stock for a period of nine business days prior to the commencement of
such distribution, subject to certain exceptions. In addition and without
limiting the foregoing, the Selling Stockholder and any other person
participating in the distribution of the Shares 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, which provisions may limit
the time of purchases and sales of any Shares by the Selling Stockholder or any
other such person. All of the foregoing may affect the marketability of the
Shares.
The Company has agreed with the Selling Stockholder to file the
Registration Statement of which this Prospectus is a part with the Commission,
and has agreed with the Selling Stockholder to keep the Registration Statement
effective until such date that is three years after the date that the
Registration Statement is first ordered effective by the Commission or such
earlier time as all of the Shares have been sold. The Company will pay all of
the expenses incident to the registration of the Shares and certain other
expenses related to the offering. The Company has agreed to indemnify the
Selling Stockholder against certain liabilities they may incur in connection
with the issuance and sale of the Shares, including liabilities under the
Securities Act. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the Company has agreed to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under such indemnification provision to the fullest extent permitted by law.
In order to comply with certain states' securities laws, if applicable,
the Shares may be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states, the Shares may not be sold unless the
Shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
-15-
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for the Company by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The balance sheets as of June 30, 1996 and 1995 and the related
statements of loss, changes in stockholders' equity and cash flows for each of
the years in the three year period ended June 30, 1996 incorporated by reference
in this Prospectus, have been audited by Wolf & Company, P.C., independent
auditors, and are incorporated in reliance on the report of such firm, given on
their authority as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
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 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.
-16-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an estimate of the expenses expected to
be incurred in connection with the issuance and distribution of the securities
being registered, other than underwriting compensation:
Registration Fee -- Securities and Exchange Commission................. $ 493
Nasdaq SmallCap Market additional listing fee.......................... 7,500
Blue Sky Fees and Expenses............................................. 1,000
Accounting Fees and Expenses........................................... 1,000
Legal Fees and Expenses................................................ 10,000
Transfer Agent Fees and Expenses....................................... 1,000
Miscellaneous.......................................................... 4,007
-------
TOTAL......................................................... $25,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(A) THE REGISTRANT IS A DELAWARE CORPORATION. SECTION 145 OF THE
DELAWARE GENERAL CORPORATION LAW, AS AMENDED, PROVIDES IN REGARD TO
INDEMNIFICATION OF DIRECTORS AND OFFICERS AS FOLLOWS:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the
II-1
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (included attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including attorneys'
fees) incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had
II-2
power and authority to indemnify its director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation"; as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person."
(B) ARTICLE 9 OF THE REGISTRANT'S CERTIFICATE OF INCORPORATION
CONTAINS THE FOLLOWING PROVISION RELATING TO THE INDEMNIFICATION OF DIRECTORS
AND OFFICERS:
"To the maximum extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware, a director of this 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) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit."
(C) ARTICLE VII OF THE BY-LAWS OF THE REGISTRANT CONTAINS THE
FOLLOWING PROVISIONS RELATING TO INDEMNIFICATION OF OFFICERS AND DIRECTORS:
"Reference is made to Section 145 and any other relevant provisions of the
General Corporation Law of the State of Delaware. Particular reference is made
to the class of persons, hereinafter called "Indemnitees," who may be
indemnified by a Delaware corporation pursuant to the provisions of such Section
145, namely, any person or the heirs, executors, or administrators of such
person, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that such
person is or was a director, officer, employee, or agent of such corporation or
is or was serving at the request of such corporation as a director, officer,
employee, or agent of such corporation or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise. The
Corporation shall, and is hereby obligated to, indemnify the Indemnitees, and
each of them in each and every situation where the Corporation is obligated to
make such indemnification pursuant to the aforesaid statutory provisions. The
Corporation shall indemnify the Indemnitees, and each of them, in each and every
situation where, under the
II-3
aforesaid statutory provisions, the Corporation is not obligated, but is
nevertheless permitted or empowered, to make such indemnification, it being
understood that, before making such indemnification with respect to any
situation covered under this sentence, (i) the Corporation shall promptly make
or cause to be made, by any of the methods referred to in Subsection (d) of such
Section 145, a determination as to whether each Indemnitee acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, in the case of any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful,
and (ii) that no such indemnification shall be made unless it is determined that
such Indemnitee acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Corporation, and, in the case
of any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful."
ITEM 16..EXHIBITS.
The following exhibits, required by Item 601 of Regulation S-K, are
filed as a part of this Registration Statement. Exhibit numbers, where
applicable, in the left column correspond to those of Item 601 of Regulation
S-K.
Exhibit No. Item and Reference
- ----------- ------------------
4a -- Specimen Common Stock Certificate (filed as Exhibit 4a to
Registrant's Registration Statement on Form S-18, No.
33-31836-B, and incorporated by reference).
4b -- Subscription Agreement between the Registrant and GFL
Performance Fund Limited, dated January 31, 1996 (filed as
Exhibit 4b to Registrant's Registration Statement on Form
S-3, No. 333-1748).
4c -- Note Purchase Agreement between the Registrant and GFL
Performance Fund Limited, dated January 31, 1996 (filed as
Exhibit 4c to Registrant's Registration Statement on Form
S-3, No. 333-1748).
4d -- Convertible Note issued by the Registrant to GFL Performance
Fund Limited, dated February 7, 1996 (filed as Exhibit 4d to
Registrant's Registration Statement on Form S-3, No.
333-1748).
4e -- Registration Rights Agreement between the Registrant and GFL
Performance Fund Limited, dated February 7, 1996 (filed as
Exhibit 4e to Registrant's Registration Statement on Form
S-3, No. 333-1748).
5 -- Legal Opinion of Testa, Hurwitz & Thibeault, LLP (filed
herewith).
23a -- Consent of Wolf & Company, P.C. dated January 9, 1997 (filed
herewith).
23b -- Consent of Testa, Hurwitz & Thibeault, LLP (see Exhibit 5).
24 -- Power of Attorney empowering Dhananjay G. Wadekar and Indu A.
Muni and each of them to execute this Registration Statement
(see page II-6).
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a)(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.
II-4
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The Company hereby undertakes that 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.
(d) The Company hereby undertakes that for the purpose of determining
any liability under the Securities Act, as amended, 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-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Cambridge, Commonwealth of Massachusetts on
January 8, 1997.
DYNAGEN, INC.
By: /s/ Dr. Indu A. Muni
-----------------------------
Dr. Indu A. Muni
President, Chief Executive
Officer and Treasurer
Power of Attorney
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints Dr. Indu A. Muni and Dhananjay G.
Wadekar and each of them, with full power to act without the other, 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 (until revoked in writing) to sign any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
on Form S-3 of DynaGen, Inc., and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary fully to all intents and purposes as he might or could
do in person thereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
II-6
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Capacity Date
/s/ Dhananjay G. Wadekar Chairman of the Board, Executive January 8, 1997
- ----------------------------------------- Vice President and Director
Dhananjay G. Wadekar
/s/ Dr. Indu A. Muni President, Chief Executive Officer, January 8, 1997
- ----------------------------------------- Treasurer, (Principal Executive,
Dr. Indu A. Muni Financial and Accounting Officer)
and Director
/s/ Dr. F. Howard Schneider Senior Vice President -- January 8, 1997
- ----------------------------------------- Technology and Director
Dr. F. Howard Schneider
Director
- -----------------------------------------
Dr. Ian R. Ferrier
/s/ Steven Georgiev Director January 8, 1997
- -----------------------------------------
Steven Georgiev
/s/ Dr. Michael Sorell Director January 8, 1997
- -----------------------------------------
Dr. Michael Sorell
</TABLE>
II-7
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
4a Specimen Common Stock Certificate (filed as Exhibit 4a to
Registrant's Registration Statement on Form S-18, No. 33-31836-B,
and incorporated by reference).
4b Subscription Agreement between the Registrant and GFL Performance
Fund Limited, dated January 31, 1996 (filed as Exhibit 4b to
Registrant's Registration Statement on Form S-3, No. 333-1748).
4c Note Purchase Agreement between the Registrant and GFL Performance
Fund Limited, dated January 31, 1996 (filed as Exhibit 4c to
Registrant's Registration Statement on Form S-3, No. 333-1748).
4d Convertible Note issued by the Registrant to GFL Performance Fund
Limited, dated February 7, 1996 (filed as Exhibit 4d to
Registrant's Registration Statement on Form S-3, No.
333-1748).
4e Registration Rights Agreement between the Registrant and GFL
Performance Fund Limited, dated February 7, 1996 (filed as Exhibit
4e to Registrant's Registration Statement on Form S-3, No.
333-1748).
5 Legal Opinion of Testa, Hurwitz & Thibeault, LLP (filed herewith).
23a Consent of Wolf & Company, P.C. dated January 9, 1997 (filed
herewith).
23b Consent of Testa, Hurwitz & Thibeault, LLP (see Exhibit 5).
24 Power of Attorney empowering Dhananjay G. Wadekar and Indu A. Muni
and each of them to execute this Registration Statement (see page
II-6).
[Letterhead of Testa, Hurwitz & Thibeault]
January 9, 1997
DynaGen, Inc.
99 Erie Street
Cambridge, MA 02139
RE: Form S-3 Registration Statement
-------------------------------
Ladies and Gentlemen:
We are counsel to DynaGen, Inc., a Delaware corporation (the
"Company"), and have represented the Company in connection with the preparation
and filing of the Company's Registration Statement on Form S-3 (the
"Registration Statement"), relating to the proposed resale from time to time of
up to 1,000,000 shares of the Company's Common Stock, par value $.01 per share
(the "Shares"), which are issuable upon conversion of the Company's Convertible
Note due February 7, 1998 (the "Note") issued in a private placement to the
stockholder listed under the heading "Selling Stockholder" in the Registration
Statement.
We have reviewed the corporate proceedings taken by the Company with
respect to the authorization of the issuance of the Note and the Shares. We have
also examined and relied upon originals or copies, certified or otherwise
authenticated to our satisfaction, of all corporate records, documents,
agreements or other instruments of the Company and the Selling Stockholder and
have made all investigations of law and have discussed with the Company's and
Selling Stockholder's representatives all questions of fact that we have deemed
necessary or appropriate.
Based upon and subject to the foregoing, we are of the opinion that the
Shares issuable upon future conversion of the Note, when issued in accordance
with the terms of the Note, will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our firm in the Prospectus
contained in the Registration Statement under the caption "Legal Matters."
Very truly yours,
/s/ TESTA, HURWITZ & THIBEAULT, LLP
-----------------------------------
TESTA, HURWITZ & THIBEAULT, LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of DynaGen, Inc. on Form S-3 of our report dated July 24, 1996, except
for Note 12 as to which the date is August 19, 1996, appearing in the Annual
Report on Form 10-K of DynaGen, Inc. for the fiscal year ended June 30, 1996 and
to the incorporation by reference of our report dated July 21, 1993, appearing
in the Final Prospectus of DynaGen, Inc. dated March 16, 1994. We also consent
to the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement and to the reference to us under the heading
"Experts" in the Final Prospectus of DynaGen, Inc. dated March 16, 1994.
WOLF & COMPANY, P.C.
Boston, Massachusetts
January 9, 1997
