<PAGE>
As filed with the Securities and Exchange Commission on September 2, 1998
Registration No. ___________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PROTEIN POLYMER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
33-0311631
(I.R.S. Employer Identification No.)
10655 SORRENTO VALLEY ROAD
SAN DIEGO, CALIFORNIA 92121
(619) 558-6064
(Address, including zip code, and telephone number, including area code, of
registrant's
principal executive offices)
J. THOMAS PARMETER COPY TO:
CHAIRMAN & CHIEF EXECUTIVE OFFICER ROBERT A. MILLER, JR., ESQ.
PROTEIN POLYMER TECHNOLOGIES, INC. PAUL, HASTINGS, JANOFSKY & WALKER LLP
10655 SORRENTO VALLEY ROAD 555 S. FLOWER STREET
SAN DIEGO, CALIFORNIA 92121 TWENTY-THIRD FLOOR
(619) 558-6064 LOS ANGELES, CALIFORNIA 90071
(213) 683-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
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 box. [_]
CALCULATION OF REGISTRATION FEE
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Proposed
Title of each class Proposed maximum maximum
of securities to be Amount to be offering aggregate offering Amount of
registered registered(2) price per unit (3) price (3) registration fee
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Common Stock, $.01 par value (1) 8,058,450 Shares $1.00 $8,058,450 $2,377.25
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</TABLE>
(1) Represents the following: (A) the maximum of 4,355,000 shares of common
stock issuable upon conversion of the Registrant's Series E Convertible
Preferred Stock ("Series E Preferred Stock") at a conversion price of $1.25; (B)
the maximum of 2,177,500 shares issuable upon exercise of eighteen month
warrants issued in relation to the Series E Preferred Stock ("First Warrants");
(C) the maximum of 1,088,750 shares issuable upon exercise of thirty-six month
warrants issued in relation to the Series E Preferred Stock ("Second Warrants");
(D) the maximum of 232,000 shares issuable upon exercise of eighteen month
warrants issued as compensation in relation to the Registrant's private
placement of Series E Preferred Stock; (E) the maximum of 116,000 shares of
common stock issuable upon exercise of thirty-six month warrants issued as
compensation in relation to the Registrant's private placement of Series E
Preferred Stock; (F) the maximum of 25,200 shares issuable upon exercise of five
year warrants issued as compensation in relation to the Registrant's private
placement of Series E Preferred Stock; and (G) 64,000 shares of common stock
issued under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), as compensation in relation to the Registrant's private
placement of Series E Preferred Stock.
(2) Pursuant to Rule 416 promulgated under the Securities Act, there are also
registered hereunder such indeterminate number of additional shares as may be
issued to the selling securityholders because of future stock distributions,
stock splits or similar capital adjustments and conversion or exercise price
adjustments pursuant to the terms of the Registrant's Series E Preferred Stock
or the First Warrants, Second Warrants or Compensation Warrants.
(3) Estimate based on sales price of the Registrant's Common Stock as
reported on NASDAQ on August 27, 1998 pursuant to Rule 457(c) promulgated under
the Securities Act of 1933, as amended.
___________________________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF ANY SUCH STATE.
Subject to Completion, Dated September 2, 1998
PROSPECTUS
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PROTEIN POLYMER TECHNOLOGIES, INC.
_______________
8,058,450 Shares of Common Stock
_______________
This Prospectus relates to the offering of up to 8,058,450 shares (the
"Shares") of the common stock, par value $.01 per share ("Common Stock"), of
Protein Polymer Technologies, Inc. (the "Company") which may be offered from
time to time by certain securityholders named herein under the caption "Selling
Securityholders" (collectively, the "Selling Securityholders") or by pledgees,
donees, transferees or other successors in interest of the Selling
Securityholders. The Shares represent the following: (i) a total of up to
4,355,000 shares of Common Stock issuable upon conversion of 54,437.5 shares
of the Company's Series E Preferred Stock, par value $.01 per share ("Series E
Preferred Stock") issued in a private placement on April 24, 1998 and May 15,
1998 (the "Private Placement") under Rule 506 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), to a group of accredited
investors for aggregate consideration of $5.4 million; (ii) a total of up to
2,177,500 shares of Common Stock issuable upon exercise of eighteen month
warrants ("First Warrants") issued in the Private Placement; (iii) a total of up
to 1,088,750 shares of Common Stock issuable upon exercise of thirty-six month
warrants ("Second Warrants") issued in the Private Placement; (iv) a total of up
to (a) 232,000 shares of Common Stock issuable upon exercise of eighteen month
warrants, (b) 116,000 shares of Common Stock issuable upon exercise of thirty-
six month warrants, and (c) 25,200 shares of Common Stock issuable upon exercise
of five year warrants, (collectively, the "Compensation Warrants") issued as
compensation to certain of the Selling Securityholders in relation to the
Private Placement; and (v) 64,000 shares of Common Stock issued under Section
4(2) of the Securities Act to one of the Selling Securityholders as compensation
in relation to the Private Placement. The First Warrants, Second Warrants and
Compensation Warrants are sometimes collectively referred to herein as the
"Warrants."
The Company will not receive any proceeds from the sale of the Shares by
the Selling Securityholders except for funds received upon the exercise of the
Warrants. See "Use of Proceeds." All costs, expenses and fees incurred in
connection with the registration of the Shares, estimated to be approximately
$32,377.25, are being borne by the Company, but all selling and other expenses
incurred by the Selling Securityholders will be borne by such Selling
Securityholders. See "Plan of Distribution."
The Shares may be offered from time to time by each Selling Securityholder
acting as principal for its own account or in brokerage transactions at
prevailing market prices or in transactions at negotiated prices. No
representation is made that any Shares will or will not be offered for sale. It
is not possible at the present time to determine the price to the public in any
sale of the Shares by the Selling Securityholders and each Selling
Securityholder reserves the right to accept or reject, in whole or in part, any
proposed purchase of Shares. Accordingly, the public offering price and the
amount of any applicable underwriting discounts and commissions will be
determined at the time of such sale by the Selling Securityholders. See "Plan of
Distribution."
The Selling Securityholders, and the brokers through whom sales of the
Shares are made, may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act. In addition, any profits realized by the
Selling Securityholders or such brokers on the sale of the Shares may be deemed
to be underwriting commissions.
The shares of Common Stock of the Company are traded on NASDAQ ("NASDAQ")
under the symbol "PPTI." The last reported sales price per share of the Common
Stock as reported by NASDAQ on August 27, 1998 was $1.00.
THE OFFERING INVOLVES A HIGH DEGREE OF RISK. FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
SHARES, SEE "RISK FACTORS."
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 September __, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Copies of such reports, proxy and information
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the Commission's regional offices at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site at (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
The Company's Common Stock is listed on NASDAQ and reports, proxy and
information statements and other information concerning the Company may be
inspected at the offices of the National Association of Securities Dealers,
Inc., 9513 Key West Avenue, Rockville, Maryland 20850.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with any amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Shares offered hereby. This Prospectus is part of the
Registration Statement and does not contain all of the information set forth in
the Registration Statement, certain portions of which have been omitted pursuant
to the rules and regulations of the Commission. For further information with
respect to the Company and the offering, reference is made to such Registration
Statement, which may be inspected without charge at the Commission's office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of fees prescribed by the Commission.
TABLE OF CONTENTS
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Page
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Available Information....................... 2
Incorporation by Reference.................. 3
Forward-Looking Statements.................. 3
The Company................................. 4
Risk Factors................................ 4
Plan of Distribution........................ 11
Use of Proceeds............................. 12
Selling Securityholders..................... 12
Legal Matters............................... 14
Experts..................................... 14
Indemnification of Directors and Officers... 14
</TABLE>
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PROTEIN
OR ANY SELLING SECURITYHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PROTEIN SINCE THE DATE HEREOF.
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INCORPORATION BY REFERENCE
This Prospectus incorporates by reference certain documents which are not
presented herein or delivered herewith. These documents are available upon
request from Lisa Swann, Director, Investor Relations, Protein Polymer
Technologies, Inc., 10655 Sorrento Valley Road, San Diego, California 92121,
telephone (619) 558-6064.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of any such person, a copy of any
and all of the information that has been incorporated herein by reference, other
than exhibits to such information, unless such exhibits are specifically
incorporated herein by reference into the information that this Prospectus
incorporates. Requests for such documents should be directed to the person
indicated in the immediately preceding paragraph.
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are hereby incorporated by reference herein:
(a) Protein's Annual Report on Form 10-KSB for the year ended December 31,
1997 filed with the Commission on April 15, 1998;
(b) Protein's Current Report on Form 8-K, filed with the Commission on May
1, 1998;
(c) Protein's Quarterly Report on Form 10-QSB for the quarter ended March
31, 1998 filed with the Commission on May 15, 1998;
(c) Protein's Quarterly Report on Form 10-QSB for the quarter ended June
30, 1998 filed with the Commission on August 14, 1998; and
(d) The description of the Common Stock contained in Protein's
Registration Statement under the Exchange Act on Form 8-A, filed with the
Commission on December 11, 1991, as amended by Form 8 filed on January 17, 1992
and by Form 8-A, filed with the Commission on September 5, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the termination of
this offering shall be deemed to be incorporated herein by reference and to be a
part hereof from the date of filing of such documents. All information
appearing in this Prospectus or in any document incorporated herein by reference
is not necessarily complete and is qualified in its entirety by the information
and financial statements (including notes thereto) appearing in the documents
incorporated by reference herein and should be read together with such
information and documents. Any statement contained in a document incorporated
or deemed to be incorporated herein by reference shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that is deemed to
be incorporated herein by reference 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.
FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this
Prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, those set forth in this
Prospectus, including under the caption "Risk Factors." Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such statements or to publicly announce any updates or revisions to
any of the
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forward-looking statements contained herein to reflect any change in the
Company's expectation with regard thereto or any change in events, conditions,
circumstances or assumptions underlying such statements.
THE COMPANY
Protein Polymer Technologies, Inc., a Delaware corporation ("Protein" or
the "Company") is a development-stage biotechnology company engaged in the
research, development and production of proprietary protein-based biomaterial
with targeted applications in biomedical and specialty use markets. Since 1992,
the Company has focused on medical uses for its materials, primarily for
surgical repair markets, surgical adhesives and sealants, soft tissues
augmentation, wound healing and tissue engineering, surgical adhesion barriers
and drug delivery devices. The Company has also developed coating technology
that can efficiently modify and improve the surface properties of more
traditional implantable materials used in a variety of applications, including
cardiovascular products and contact lenses. The Company's current products
include SmartPlastic (R) and ProNectin (R) F Cell Attachment Factor for growing
human and animal cells.
The Company was incorporated in Delaware on July 6, 1988. The Company's
principal executive offices are located at 10655 Sorrento Valley Road, San
Diego, California 92121; its telephone number is (619) 558-6064.
RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk.
The following risk factors should be considered carefully in evaluating an
investment in the Shares offered hereby.
DEPENDENCE ON STRATEGIC PARTNERS
In order to reduce the time and costs for developing and commercializing
its potential products, the Company's strategy is to enter into arrangements
with major medical or pharmaceutical companies with broad distribution
capabilities in appropriate markets. There can be no assurance that the Company
will be able to establish such strategic partnerships or licensing arrangements
upon favorable terms and conditions, if at all. Additionally, these
arrangements generally may be subject to termination under various
circumstances, or solely at the discretion of the strategic partner without
prior notice. Termination of such arrangements would have a material adverse
effect on the Company's business and financial condition. Furthermore, this
strategy may lead to multiple alliances regarding different product
opportunities that are active at the same time. There can be no assurance that
the Company will be able to successfully manage such multiple arrangements in
various stages of development.
In September 1995, the Company entered into a licensing and development
agreement, and a supply agreement, with Ethicon, Inc. ("Ethicon"), an affiliate
of Johnson & Johnson Company, with respect to the Company's surgical adhesives
and sealants program. The Company expended the majority of its resources in
furtherance of its program with Ethicon. Pursuant to its rights under the
relevant agreements, Ethicon terminated its relationship with the Company as of
December 17, 1997, relative to the tissue adhesives and sealants program,
thereby terminating the Company's opportunity to receive further milestone
payments under the agreements. Although the Company retains the rights to all
its technology, the termination of the agreements with Ethicon has materially
adversely affected the Company, including the loss of an expected milestone
payment of $1 million and continued research and development reimbursements
during 1998.
In October 1991, the Company entered into a sublicense agreement with
Telios Pharmaceuticals, Inc. with respect to the Company's use of certain
patents. The Company is obligated to pay certain royalty payments in immaterial
amounts until the Company achieves net revenues derived from sales of products
formulated using such patents, at which time the royalty payments will be a
small percentage of such revenues. Between 1992 and 1997 the Company made
certain royalty payments in immaterial amounts to Stanford University, however,
as of 1997, the patents underlying a license agreement with Stanford University
for the Company's use of such patents expired and no further royalty payments
are due. The Company is not currently a party to any other alliances.
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The Company has entered into certain materials evaluation agreements and
preliminary negotiations with other entities regarding additional biomedical and
specialty use applications of its polymers and technology, including
applications in areas other than those identified as product candidates above.
These agreements provide, or are intended to provide, for the evaluation of
product feasibility. There can be no assurance that the Company will be able to
establish such arrangements at all, or do so in a timely manner and on
reasonable terms, or that such agreements will lead to joint product development
and commercialization agreements.
TECHNOLOGICAL AND COMMERCIAL UNCERTAINTIES
The Company's technological strategy of designing and producing unique
biocompatible materials based on genetically engineered proteins is commercially
unproven. The process of developing products and achieving regulatory approvals
is time consuming and prone to delays. Except for limited sales averaging less
than $100,000 per year of ProNectin(R) F and SmartPlastic (R), the Company has
not completed the development of any product or generated any significant
revenues from product sales. The Company terminated its promotional
expenditures for SmartPlastic (R) due to continuing disappointing market
interest and for ProNectin(R) F due to a reallocation of the Company's internal
resources. The Company's success will depend upon its ability to allocate
sufficient resources to products with the most commercial potential, and to
design and produce biocompatible materials with the intended chemical,
biological and functional properties needed for commercial acceptance.
The commercial viability of the Company's products will also depend on the
success of its research and development activities, its ability to secure
strategic alliances appropriate to a product's development, marketing and
distribution requirements, and its ability to manufacture its products in
sufficient quantity under regulated conditions to meet product demand. The
product candidates the Company is currently pursuing will require substantial
further development, testing and regulatory approvals; there can be no assurance
that these efforts will result in commercially acceptable products. Currently
none of the Company's product candidates are in human clinical testing.
Further, there can be no assurance that such products can be produced in
commercial quantities at reasonable costs, can be effectively marketed in a
timely fashion, will have significant benefits compared to competitive products
on the market at the time of product introduction, or will be accepted for use
by the target markets.
HISTORY OF OPERATING LOSSES; CONTINUED EXPECTATION OF LOSSES; FUNDING UNTIL THE
SECOND QUARTER OF 1999; FUTURE CAPITAL REQUIREMENTS; GOING CONCERN OPINION
The Company has incurred operating losses since its inception in 1988, and
will continue to do so for at least several more years. As of March 31, 1998,
the Company had an accumulated deficit of approximately $25,361,000, and has
continued to incur losses since that date. Any potential contract revenues
derived from collaborative agreements with possible strategic partners will,
alone, be insufficient for the Company to become profitable. Substantial
additional capital resources will be required to fund increasing expenditures
related to the Company's research and development activities, establishment and
scale-up of appropriate manufacturing capabilities, preclinical and clinical
testing, regulatory compliance, business development activities, patent
prosecution and other factors. Further, the timing of these expenses, and
possible offsetting contract revenues, is highly uncertain and may produce
financial results that fluctuate significantly from period to period.
Substantial additional capital resources will be required to fund
continuing operating expenditures related to the Company's research,
development, manufacturing and business development activities. In the report
of the Company's independent auditors for the year ended December 31, 1997, the
Company's independent auditors stated that without additional financing, there
is substantial doubt about the Company's ability to continue as a going concern.
Subsequent to the delivery of the audit for the year ended December 31, 1997, in
April and May of 1998 the Company closed on private placements with a small
group of institutional and accredited investors and the Company received
approximately $5.3 million, net of expenses. The Company believes that its
current capital resources will be sufficient to fund its operating losses
through the second quarter of 1999. The Company believes there are a number of
alternatives available to meet its continuing capital requirements and is
actively pursuing a number of potential approaches to meet the continuing
capital requirements of its operations, such as initiating and engaging in
preliminary negotiations with
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a number of potential collaborative partners and ongoing negotiations with
potential investors regarding private financings. There can be no assurance that
the Company will be able to raise sufficient additional capital funds before the
end of this period, if at all, or that such financing will be available on
acceptable terms. If adequate funds are not available, the Company will be
required to significantly curtail its operations and relinquish rights to major
portions of its technology or products, including rights to manufacture and sale
of protein polymers and rights with respect to the Company's tissue repair
technology.
INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE
The areas of business in which the Company engages and proposes to engage
are characterized by rapidly evolving technology and intense competition. The
anticipated commercial uses of the Company's biomaterials are primarily end-use
products for medical applications that require other components as part of a
system. End-use products using or incorporating the Company's biomaterials
would compete with other products that rely on the use of alternative materials
or components. Technologies which compete with those of the Company are,
therefore, diverse, complex and numerous.
Competition in the biomedical and surgical repair markets is particularly
significant. The Company's competitors in those markets include major
pharmaceutical, surgical product, chemical and specialized biopolymer companies,
many of which have financial, technical, research and development and marketing
resources significantly greater than those of the Company. Academic
institutions and other public and private research organizations are also
conducting research and seeking patent protection, and may commercialize
products on their own or through joint ventures. Most of the Company's
competitors depend on technology other than protein engineering for developing
products, for example Focal, Inc. and Closure Medical Corp. The Company
believes that research into similar protein engineering technology is currently
being conducted by DuPont and several university laboratories.
The primary competitive factors in the biomedical and surgical repair
products market are performance, cost, safety, reliability, ease of use and
commercial production capabilities. The Company believes that its ability to
compete in this market will be enhanced by its issued patent claims, the breadth
of its other pending patent applications and its experience in protein
engineering. However, the Company currently does not have the resources to
compete commercially without the use of collaborative agreements with third
parties. The Company's product technology competes for corporate development
and marketing partnership opportunities with numerous other biotechnology
companies, research institutes, academic institutions and established
pharmaceutical companies. There can be no assurance that the Company's
competitors will not succeed in developing products based on the Company's
technology or other technologies that are more effective than any which are
being developed by the Company, or which would render the Company's technology
and products obsolete and non-competitive.
MANUFACTURING UNCERTAINTIES
To date, the Company has manufactured limited amounts of its biomedical
products for internal testing and, in certain cases, evaluation and testing by
corporate partners and other third parties. The development and
commercialization of certain biomedical products will require the Company,
pursuant to applicable governmental regulations, to upgrade its manufacturing
facilities and to obtain manufacturing approvals from the United States Food and
Drug Administration (the "FDA"). The Company has recently upgraded its
production methods to achieve "Good Laboratory Practice" compliance necessary
for producing materials used to generate preclinical data that is reviewed by
the FDA.
The Company is currently considering alternative methods for increased
production of its biomedical and other product candidates for clinical
requirements under Good Manufacturing Practice ("GMP") conditions. For example,
the Company may upgrade and expand its existing facility; however, there can be
no assurance that, if desired, the Company could adequately develop, fund,
implement and manage such a manufacturing facility. Alternatively, the Company
may establish external contract manufacturing arrangements; however, there can
be no
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assurance that such arrangements, if desired, could be entered into or
maintained on acceptable terms, if at all, or would comply with applicable
governmental regulations.
The Company has not yet developed a process to manufacture its product
candidates on a commercial scale. There can be no assurance that a process can
be developed by the Company or any other party at a cost or in quantities
necessary to become commercially viable. Alternative methods may be needed for
producing commercial quantities of products, if any. The actual method, or
combination of methods, that the Company may ultimately pursue will depend on a
number of factors, including availability, needed quantities, cost and
governmental regulations. There is no assurance that the Company will
successfully assess the ability of such production methods or establish contract
manufacturing arrangements to meet its commercial objectives, or that such
methods and arrangements would not adversely affect the Company's margins or its
ability to compete in the marketplace.
UNCERTAINTY OF REGULATORY COMPLIANCE AND APPROVALS
Regulation by governmental authorities in the United States and other
countries is a significant factor affecting the success of products resulting
from biotechnological research. The Company's current operations and products
are, and anticipated products and operations will be, subject to substantial
regulation by a variety of local, state, federal and foreign agencies,
particularly those products and operations related to biomedical applications.
The Company's activities are subject to regulation primarily under the
Occupational Safety and Health Act, which requires the Company to provide a
"material data safety sheet" to its customers setting forth certain information
regarding the Company's products.
Pre-clinical and clinical testing and pre-market approval from the FDA is
required for new medical devices, drugs or vaccines, a generally costly and
time-consuming process. The failure to demonstrate adequately to the FDA the
safety and efficacy of a product under development could prevent regulatory
approval. Alternatively, the FDA may require additional preclinical or clinical
testing, which would result in increased costs and significant development
delays. Many companies have experienced these types of setbacks during later
stage clinical trials, despite promising results in earlier trials. If the
Company does not directly produce and sell medical devices, drugs or vaccines,
it may not be directly affected by these regulations. However, the Company's
anticipated customers and corporate partners would be required to obtain such
approvals. Additionally, the Company may be required to file and maintain with
the FDA a "Master File" containing information regarding the Company's products.
There can be no assurance that the Company or its customers and corporate
partners will be able to obtain or maintain the necessary approvals from the FDA
or that the Company will be able to maintain a Master File in accordance with
FDA regulations. In either case, the Company's anticipated business could be
adversely affected.
The Company has manufactured limited amounts of its biomedical materials
and products for internal testing, and, in certain cases, evaluation and testing
by corporate partners and other third parties. Preclinical and clinical testing
of potential medical device products, where the results will be submitted to the
FDA, requires compliance with the FDA's Good Laboratory Practices ("GLP"). The
Company has implemented polymer production and quality control procedures, has
made certain facilities renovations, and believes it is in compliance with GLP
requirements. In addition, because the Company intends for its biomaterials to
be used as medical devices that meet clinical and commercial requirements,
before pursuing clinical testing and commercial production, it may be required
to conform its operations to the FDA's GMP regulations. GMP regulatory
requirements are rigorous, and there can be no assurance that GMP status could
be obtained in a timely manner and without the expenditure of substantial
resources, if at all. The Company may also be required to register its facility
with the FDA as an establishment involved in the manufacture of medical devices.
The Company believes that its products SmartPlastic (R) and ProNectin (R) F
designed for use for in vitro cell culture are not used for internal testing and
are therefore not subject to FDA approvals.
The Company's research, development and production activities are, or may
be, subject to various federal and state laws and regulations relating to
environmental quality and the use, discharge, storage, transportation and
disposal of toxic and hazardous substances. The Company's future activities are
expected to be subject to regulation under the Toxic Substances Control Act,
which requires the Company to obtain pre-manufacturing approval for any
-7-
<PAGE>
new "chemical material" the Company produces for commercial use that does not
fall within the FDA's regulatory jurisdiction.
The Company believes it is currently in compliance with such laws and
regulations applicable to its current operations. Although the Company intends
to use its best efforts to comply with all laws and regulations in the future,
there can be no assurance that the Company will be able to fully comply with
such laws, or that full compliance will not require substantial capital
expenditures. There can be no assurance that future approvals will be sought or
obtained, and the failure to obtain or maintain these approvals, or any
substantial delay in obtaining these approvals, would likely have a material
adverse effect on the Company's operations.
DEPENDENCE ON KEY EMPLOYEES
As of June 8, 1998, the Company had thirty-two full-time employees and two
part-time employees, of whom six have employment contracts with the Company and
seven hold Ph.D. degrees in the chemical or biological sciences. The success of
the Company will depend largely upon the efforts of its scientists and certain
of its executive officers. The loss of services of any one of these individuals
would have a material adverse effect on the Company's business opportunities and
prospects. The recruitment and retention of additional qualified management and
scientific personnel is also critical to the Company's success. There can be no
assurance that the Company will be able to attract and retain required personnel
on acceptable terms, due to the competition for such experienced personnel from
other biotechnology, pharmaceutical and chemical companies, universities and
non-profit research institutions. The Company does not maintain "key-man" or
similar life insurance policies with respect to such persons to compensate the
Company in the event of their deaths.
PRODUCT LIABILITY; ABSENCE OF INSURANCE
Product liability claims may be asserted with respect to the Company's
technology or products either directly or through the Company's strategic
partners. The Company may be exposed to potential product liability risks
whenever human clinical testing is performed or medical device product sales
occur. The Company believes that its current preclinical testing, production
activities and sales of SmartPlastic (R) and ProNectin (R) F products do not
pose any material potential product liability risk. The Company therefore
currently has no product liability insurance. To the Company's knowledge no
product liability claims have ever been made against the Company. Although the
Company may seek insurance against the risk of product liability in the future,
there can be no assurance that acceptable levels of insurance coverage with
appropriate terms will be obtainable, or that the assertion of a product
liability claim would not materially adversely affect the business or financial
condition of the Company.
PATENTS AND TRADE SECRETS
The Company's success will depend, in part, on its ability to obtain patent
or other protection for its technology and product candidates. The Company
seeks to obtain such protection through patents, maintenance of trade secrets
and contractual agreements. The success of the Company will also depend in part
on the Company not infringing patents issued to competitors or other proprietary
rights of third parties.
To date, seven United States patents have been issued to the Company, three
additional patents have been allowed and eleven additional patent applications
are pending. The patent position of biotechnology companies is highly uncertain
and involves complex legal, scientific and factual questions. There can be no
assurance that patents will issue from any of the Company's pending patent
applications or that, if patents do issue, the claims allowed will be
sufficiently broad to protect the Company's technology and product candidates.
In addition, there can be no assurance that any patents previously or
subsequently issued to the Company will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide any proprietary
protection or competitive advantage to the Company.
-8-
<PAGE>
Competitors may have filed patent applications or may have obtained patents
and other proprietary rights relating to products or processes similar to and
competitive with those of the Company. The scope and validity of such patents,
the extent to which the Company may be required to obtain licenses under these
patents or other proprietary rights, and the cost and availability of such
licenses are presently unknown. No assurance can be made that any licenses
required under any patents or proprietary rights will be made available to the
Company on acceptable terms, if at all. Further, the Company may enter into
collaborative research and development arrangements with strategic partners
which may result in the development of new technologies or products. There is
no assurance that disputes will not arise in the future with respect to the
ownership of rights to any technology or products that may be so developed.
The Company has also applied for patent protection with respect to certain
of its patents in foreign countries, including Japan, Australia, Europe and
India. The Company has not yet marketed, sold or developed its products
outside the United States. There can be no assurance that patents will issue
from any of the Company's pending foreign patent applications or that, if
patents do issue, the claims allowed will be sufficiently broad to protect the
Company's technology and product candidates. In addition, there can be no
assurance that any foreign patents issued to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
any proprietary protection or competitive advantage to the Company.
Furthermore, certain foreign intellectual properties laws may not be as
protective as those of the United States.
The Company also seeks to protect its intellectual property in part by
confidentiality agreements with its employees and consultants. There can be no
assurance that these agreements will not be breached, that the Company will have
an adequate remedy for any breach, or that the Company's trade secrets will not
otherwise become known or independently discovered by competitors.
DIVIDEND POLICY; NO PAYMENT OF DIVIDENDS
The Company has never paid dividends on its common stock, and given its
continuing loss situation, does not anticipate paying any cash dividends on the
common stock in the foreseeable future. Additionally, the holders of the
Company's Series D Preferred stock and Series F Preferred stock have certain
preferences which entitle them to cumulative dividends prior to the payment of
any cash dividends on the Company's common stock. The Company's Series E
Preferred stock do not have any preference with respect to cash dividends and
share pari passu, after payment of preferred dividends on the Company's Series D
Preferred stock and Series F Preferred stock, with the holders of the Company's
common stock, Series D Preferred stock and Series F Preferred stock on any cash
dividends declared on the Company's common stock.
VOLATILITY OF TRADING PRICE
There has been significant volatility in market prices of securities of
biotechnology companies, and the trading price of the Shares could be subject to
wide fluctuations. Factors such as announcements of technological innovations
and new commercial products by the Company's competitors, adverse results in
product testing, litigation, governmental regulation or adverse patent or
proprietary rights developments could have a significant adverse impact on the
market price of the Company's common stock.
INVESTMENT COMPANY ACT CONSIDERATIONS
The Company believes that it is primarily engaged in business other than
investing, reinvesting, owning, holding or trading in securities. The Company
invests its cash in cash equivalents and short-term investments of high quality,
following the investment guidelines approved by the Board of Directors.
However, there can be no assurance that the Company may not be required to
comply with the registration requirements of the Investment Company Act of 1940.
Such registration requirements would have a material adverse effect upon the
Company.
-9-
<PAGE>
POSSIBLE NASDAQ DELISTING; POTENTIAL REGULATION AS A PENNY STOCK
The Common Stock is currently listed for trading on the Nasdaq SmallCap
Market. The continued trading of the Common Stock on the Nasdaq SmallCap Market
is conditioned upon the Company meeting certain quantitative and qualitative
requirements regarding assets, capital, earnings surplus, stock price and
corporate governance features. The National Association of Securities Dealers
revised the standards for continued listing effective February 23, 1998, which
standards include: (i) maintenance of any of (x) $2,000,000 of net tangible
assets, (y) $35,000,000 of market capitalization, or (z) $500,000 of net income
for two of the last three years; (ii) at least 500,000 shares in public float
valued at $1,000,000 or more; (iii) a minimum Common Stock bid price of $1.00;
(iv) at least two market makers; and (v) at least 300 holders of the Common
Stock.
The Company believes that it is currently in compliance with the new
requirements for continued listing. The Company expects that substantial
additional capital resources will be required to fund continuing operating
expenditures related to the Company's research, development, manufacturing and
business development activities, however, there can be no assurance that the
Company will be successful in obtaining such additional capital or of continuing
to meet the Nasdaq SmallCap Market maintenance criteria. To the extent the
Company is unable to satisfy the new maintenance criteria, the Common Stock will
be subject to being delisted, and trading in the Common Stock thereafter, if
any, will likely be conducted in the over-the-counter markets in the so-called
"pink sheets" or the National Association of Securities Dealers' Electronic
Bulletin Board. As a consequence of any such delisting, it is expected that the
stockholders of the Company would find it more difficult to dispose of, or to
obtain accurate quotations as to the market value of, the Common Stock. In
addition, any such delisting will make the Common Stock substantially less
attractive as collateral for margin and purpose loans, for investment by
financial institutions under their internal policies or state legal investment
laws, as consideration in future capital raising transactions.
In the event that the Common Stock is no longer approved for quotation on
the Nasdaq SmallCap Market, the Common Stock may become subject to regulation as
a "penny stock." The Securities and Exchange Commission has adopted regulations
which generally define "penny stock" to be any equity security that has a market
price or exercise price less than $5.00 per share, subject to certain
exceptions, including listing on the Nasdaq SmallCap Market. If the Common
Stock is removed from listing on the Nasdaq SmallCap Market and no other
exception applies, the Company's common stock may become subject to the SEC's
Penny Stock Rules, Rule 15g-1 through Rule 15g-9 under the Exchange Act. For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the SEC relating to the penny stock market. The broker-
dealer must also disclose the commission payable to both the broker-dealer and
the registered representative, current quotations for the securities and, if the
broker-dealer is the sole market maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Consequently, the penny stock rules may restrict the ability of broker-dealers
to sell the Company's securities and may affect the ability of holders to sell
the Company's securities in the secondary market and the price at which such
holders can sell any such securities. Rule 15g-9 under the Exchange Act imposes
additional sales practice requirements on broker-dealers who sell such
securities except in transactions exempted from such rule, including
transactions meeting the requirements of Rule 505 or 506 of Regulation D
promulgated under the Securities Act and transactions in which the purchaser is
an institutional accredited investor or an established customer of the broker-
dealer.
INFORMATION TECHNOLOGY AND YEAR 2000 ISSUES
The "Year 2000" issue concerns potential exposure related to the
interuption of its business practice and financial misinformation resulting from
the application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions. The
Company does not expect to incur costs in excess of $50,000, or anticipate any
significant problems or uncertainties associated with becoming Year 2000
-10-
<PAGE>
compliant. The Company is currently developing a plan to ensure that its
computer systems are modified to be compliant on or about June 1999. The
Company intends to contact its significant vendors and suppliers regarding Year
2000 issues and the status of their compliance. At this time the impact on the
Company of significant vendors and suppliers not being in full compliance cannot
be reasonably estimated. However, the Company will be developing a plan to
mitigate the impact of vendors and suppliers who are not in compliance with
issues related to the the Year 2000.
PLAN OF DISTRIBUTION
An aggregate of 54,437.5 shares of Series E Preferred Stock were originally
issued to and purchased by certain of the Selling Securityholders at a price of
$100 per share in the Private Placement on April 24, 1998 and May 15, 1998 under
Rule 506 promulgated under the Securities Act. Each share of Series E Preferred
Stock is convertible into shares of Common Stock at a conversion ration equal to
the quotient derived by dividing (A) the stated value of $100 by (B) $1.25
(subject to certain antidilution adjustments for future stock distributions,
stock splits or similar capital adjustments). Each share of Series E Preferred
Stock also received one First Warrant exerciseable at any time for 40 shares of
Common Stock at an exercise price of $2.50 per share and expiring approximately
eighteen months after the close of the Private Placement and one Second Warrant
exerciseable at any time for 20 shares of Common Stock at an exercise price of
$5.00 per share and expiring approximately thirty-six months after the close of
the Private Placement. In addition, the Company issued eighteen month warrants
representing a total of up to 232,000 shares of Common Stock at an exercise
price of $2.50 per share, thiry-six month warrants representing a total of up to
116,000 shares of Common Stock at an exercise price of $5.00 per share, and five
year warrants representing a total of up to 25,200 shares of Common Stock at an
exercise price of $2.50 per share (collectively, the "Compensation Warrants") to
certain of the Selling Securityholders as compensation for services as finders
in relation to the Private Placement. In addition, the Company issued 64,000
shares of Common Stock under Section 4(2) of the Securities Act to one of the
Selling Securityholders as compensation for services as a finder in relation to
the Private Placement. The registration statement of which this prospectus is a
part is being filed by, and at the expense of, the Company pursuant to its
obligation in connection with the Private Placement to file a registration
statement covering the Shares with the Securities and Exchange Commission within
90 to 120 days after the closing of the Private Placement. Shares underlying the
Series E Preferred Stock may only be offered by the Selling Securityholders if
such Series E Preferred Stock is converted prior to such offering. Shares
underlying the Warrants may only be offered by the Selling Securityholders if
such Warrants are exercised prior to such offering.
The Shares offered hereby may be sold from time to time by the Selling
Securityholders. Such sales may be made on one or more exchanges or in the
over-the-counter market (including NASDAQ) or otherwise, at prices and at terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. As of August 21, 1998, the Company's common stock was
listed for trading only on the Nasdaq SmallCap Market. The Shares may be sold
by each of the Selling Securityholders acting as principal for its own account
or in ordinary brokerage transactions and transactions in which the broker
solicits purchasers. In effecting sales, broker-dealers engaged by the Selling
Securityholders may arrange for other broker-dealers to participate in the
resales.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Securityholders in amounts to
be negotiated in connection with the sale. Such broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales, and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any Shares covered by this
Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this Prospectus.
The Selling Securityholders may agree to indemnify any broker-dealer or
agent that participates in transactions involving sales of the Shares against
certain liabilities, including liabilities arising under the Securities Act.
The Company has agreed to indemnify the Selling Securityholder against certain
liabilities in connection with the offering of the Shares, including liabilities
arising under the Securities Act.
-11-
<PAGE>
It is not possible at the present time to determine the price to the public
in any sale of the Shares by the Selling Securityholders. Accordingly, the
public offering price and the amount of any applicable underwriting discounts
and commissions will be determined at the time of such sale by the Selling
Securityholders. The aggregate proceeds to the Selling Securityholders from the
sale of the Shares will be the purchase price of the Shares sold less all
applicable commissions and underwriters' discounts, if any. The Company will
pay substantially all the expenses incident to the registration, offering and
sale of the Shares to the public by Selling Securityholder, other than fees,
discounts and commissions of underwriters, dealers or agents, if any, and
transfer taxes.
In the event the Common Stock is removed from listing by the Nasdaq
SmallCap market and no other exception applies, the Company's common stock may
become subject to the SEC's Penny Stock Rules and broker-dealers may become
subject to the requirements summarized above under the caption "Risk Factors -
Possible Nasdaq Delisting; Potential Regulation as a Penny Stock."
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Securityholders and will not receive any proceeds upon conversion of
the Series E Preferred Stock into Common Stock. The Company will only receive
proceeds if the Selling Securityholders exercise the Warrants. If all Warrants
are exercised, the Company will receive aggregate proceeds of $12,110,500.
There can be no assurance that any of the Warrants will be exercised. If any of
the Warrants are exercised, the Company intends to use such proceeds for working
capital purposes.
SELLING SECURITYHOLDERS
The following table sets forth as of August 27, 1998, and upon completion
of the offering described in this Prospectus, information with regard to the
beneficial ownership of the Common Stock by the Selling Securityholders. The
Selling Securityholders may not have a present intention of selling the Shares
and may offer no Shares for sale or less than the number of Shares indicated, or
may sell the Shares by a means other than this offering. All Selling
Securityholders have represented to the Company that they are "accredited
investors" as that term is defined in Regulation D promulgated under the
Securities Act.
-12-
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Shares to Shares Beneficially
Owned Before Offering/1/ be Offered/2/ Owned After Offering/3/
------------------------ ------------- ------------------------
Name Number Percentage Number Percentage
- ---- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
J. Thomas Parmeter /4/ /5/ 611,777 5.7% 70,000 541,777 5.1%
Vertical Fund Associates, L.P. /4/ 285,000 2.7% 140,000 145,000 1.4%
Sigler & Co. /4/ /6/ 4,202,018 32.3% 2,108,750 2,093,268 16.1%
GBA Capital, LLC /4/ /7/ 1,700,000 13.9% 1,700,000 -0- 0%
Protein Fund /4/ 1,400,000 11.7% 1,400,000 -0- 0%
Philip J. Davis /4/ 8/ 518,345 4.8% 140,000 378,345 3.5%
Russell T. Stern /4/ 9/ 454,805 4.2% 140,000 314,805 2.9%
Steven M. Lamon /4/ 250,967 2.4% 70,000 180,967 1.7%
J&L Sherblom Family, LLC /4/ 140,000 1.3% 140,000 -0- 0%
Richard W. Hurckes /4/ 171,500 1.6% 56,000 115,500 1.1%
Richard W. Hurckes, Trustee
U/A Hurckes Children Trust /4/ 21,000 * 14,000 7,000 *
CPR (USA) Inc. /4/ 910,000 7.9% 910,000 -0- 0%
Liberty View Plus Fund /4/ 350,000 3.2% 350,000 -0- 0%
Liberty View Fund, LLC /4/ 87,500 * 87,500 -0- 0%
Hereford Holdings, LLC /4/ 140,000 1.3% 140,000 -0- 0%
Kubera Partners II, L.P. /4/ 140,000 1.3% 140,000 -0- 0%
Bridle Path Partners, LP /4/ 140,000 1.3% 140,000 -0- 0%
Raphael Z. Grossman, Trustee
Grossman Family Trust /4/ 70,000 * 70,000 -0- 0%
Michael Galbreath /4/ /10/ 97,923 * 70,000 27,923 *
Ronald B. Foster /4/ 35,000 * 35,000 -0- 0%
Techvest, LLC /11/ 15,960 * 15,960 -0- 0%
Oxbridge, Inc. /12/ 9,240 * 9,240 -0- 0%
Richard Adelson /13/ 112,000 1.1% 112,000 -0- 0%
</TABLE>
__________________________________
* Amount represents less than 1% of the Common Stock. As of August 27, 1998,
the Company had 10,575,811 shares of Common Stock outstanding.
1/ Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and includes, generally, voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options or warrants exercisable or securities convertible within
60 days are deemed outstanding for computing the percentage of the person
holding such options or warrants or convertible securities but are not
deemed outstanding for computing the percentage of any other person. Except
as indicated by footnote, and subject to joint ownership with spouses and
community property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them. Information with respect
to beneficial ownership is based upon the Company's stock records and data
supplied to the Company by the Selling Securityholders.
2/ The Selling Securityholders may offer less than the amount of Shares
indicated. No representation is made that any Shares will or will not be
offered for sale.
3/ This assumes that all Shares owned by the Selling Securityholders which
are offered hereby are sold. The Selling Securityholders reserve the right
to accept or reject, in whole or in part, any proposed purchase of Shares.
4/ Shares to be Offered represents shares of Common Stock issuable upon
conversion of shares of Series E Preferred and exercise of First Warrants
and Second Warrants. Shares Beneficially Owned Before Offering includes
shares of Common Stock issuable upon exercise of First Warrants and Second
Warrants and upon conversion Series E Preferred.
5/ The shares of Series E Preferred were issued in the name of Delaware Charter
Guarantee & Trust Co. FBO John T. Parmeter. Shares Beneficially Owned Before
Offering includes an additional 80,000 shares subject to options exercisable
within 60 days. Mr. Parmeter the Chairman of the Board, President and Chief
Executive Officer of the Company.
6/ These shares are held by Sigler & Co. as custodian for the investment
advisory clients of Taurus Advisory Group. Taurus Advisory Group is a
registered investment advisor that has discretionary authority to vote or
dispose of the Company's shares held in its client accounts and therefore
may be deemed to be the beneficial owner of these shares. Taurus Advisory
Group expressly disclaims such beneficial ownership. Shares Beneficially
Owned Before Offering includes an additional 334,500 shares subject to
warrants exerciseable within 60 days (which warrants were issued in
connection with the Company's initial public offering of its Common Stock
and are exerciseable at a price of $8.00 per share). Patricia Cornell, a
vice president and director of Taurus Advisory Group, is a Director of the
Company.
7/ Shares to be Offered also represents shares of Common Stock issuable upon
exercise of 200,000 eighteen month warrants at an exercise price of $2.50
and 100,000 thirty-six month warrants at an exercise price of $5.00 issued
to GBA Capital, LLC as compensation for services as a finder in relation to
the Private Placement. Patrick Gerschel, a principal of GBA Capital, LLC, is
a Director of the Company.
8/ Shares Beneficially Owned Before Offering includes an additional 28,000
shares subject to options exercisable within 60 days. Mr. Davis is the
Secretary and a Director of the Company.
9/ Mr. Stern was a Director of the Company until April 25, 1997.
10/ The shares of Series E Preferred were issued in the name of Merrill Lynch
Pierce Fenner & Smith Custodian, FBO Michael Galbreath IRA Account 13-
3180817.
11/ Shares to be Offered represents shares of Common Stock issuable upon
exercise of 15,960 five year warrants at an exercise price of $2.50 issued
to Techvest, LLC in addition to cash as compensation for services as a
finder in relation to the Private Placement.
12/ Shares to be Offered represents shares of Common Stock issuable upon
exercise of 9,240 five year warrants at an exercise price of $2.50 issued
to Oxbridge, Inc. in addition to cash as compensation for services as a
finder in relation to the Private Placement.
13/ Shares to be Offered represents shares of Common Stock issuable upon
exercise of 32,000 eighteen month warrants at an exercise price of $2.50
and 16,000 thirty-six month warrants at an exercise price of $5.00 as well
as 64,000 shares of Common Stock issued to Richard Adelson as compensation
for services as a finder in relation to the Private Placement.
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<PAGE>
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon by Paul,
Hastings, Janofsky & Walker LLP, Los Angeles, California.
EXPERTS
The financial statements of Protein Polymer Technologies, Inc. appearing in
Protein Polymer Technologies, Inc.'s Annual Report (Form 10-KSB) for the year
ended December 31, 1997 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph describing conditions that raise substantial doubt about the Company's
ability to continue as a going concern as described in Note 1 to the financial
statements) 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 firms as experts in accounting and
auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company provide generally for indemnification of officers,
directors, agents and employees of the Company to the extent authorized by the
Delaware General Corporation Law. Pursuant to Section 145 of the Delaware
General Corporation Law, a corporation generally has the power to indemnify its
present and former directors, officers, employees and agents against expenses
incurred by them in connection with any suit to which they are, or are
threatened to be made, a party by reason of their serving in such positions so
long as they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation, and with respect
to any criminal action, they had no reasonable cause to believe their conduct
was unlawful. With respect to suits by or in the right of a corporation,
however, indemnification is not available if such person is adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless the court determines that indemnification is appropriate. In
addition, a corporation has the power to purchase and maintain insurance for
such persons. The Company currently maintains such directors' and officers'
insurance. The statute also expressly provides that the power to indemnify
authorized thereby is not exclusive of any rights granted under any bylaw,
agreement, vote of stockholders or disinterested directors, or otherwise.
As permitted by Section 102 of the Delaware General Corporation Law, the
Company's stockholders have approved and incorporated provisions into the
Company's Certificate of Incorporation eliminating a director's personal
liability for monetary damages to the Company and its stockholders arising from
a breach of a director's fiduciary duty, except for liability under Section 174
of the Delaware General Corporation Law or liability for any breach of the
director's duty of loyalty to the Company or its stockholders, for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law or for any transaction in which the director derived an
improper personal benefit.
The Company has entered into indemnification agreements with each of its
directors and executive officers. These agreements contractually obligate the
Company to indemnify its directors and executive officers to the fullest extent
permitted by applicable law, including mandatory indemnification unless
prohibited by statute, mandatory advancement of expenses, accelerated procedures
for the authorization of indemnification and litigation "appeal" rights of an
indemnitee in the event of an unfavorable determination or where the board fails
or refuses to act. The indemnification agreements are not intended to deny or
otherwise limit third-party or derivative suits against the Company or its
directors or officers, but to the extent a director or officer were entitled to
indemnity or contribution under the indemnification agreement, the financial
burden of a third-party suit would be borne by the Company, and the Company
would not benefit from derivative recoveries against the director or officer.
Such recoveries would accrue to the benefit of the Company but would be offset
by the Company's obligations to the director or officer under the
indemnification agreement.
The above discussion of the Company's Bylaws, Certificate of Incorporation and
indemnification agreements and of Section 145 of the Delaware General
Corporation Law is not intended to be exhaustive and is qualified in its
entirety by such Bylaws, Certificate of Incorporation, indemnification
agreements and statute.
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 Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
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<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
- --------
The fees and expenses payable by the Company in connection with the sale of
the shares of Common Stock being registered are estimated as follows:
<TABLE>
<CAPTION>
Amount
------
<S> <C>
SEC Filing Fee................................ $ 2,377.25
Legal Fees and Expenses....................... 15,000.00*
Accounting Fees............................... 7,000.00*
Consulting Fees............................... 0
Printing Expenses............................. 5,000.00*
Miscellaneous................................. 3,000.00*
Total............................... $32,377.25
----------
</TABLE>
_________
* Estimated
Item 15. Indemnification of Directors and Officers.
- --------
The Bylaws of the Company provide generally for indemnification of
officers, directors, agents and employees of the Company to the extent
authorized by the Delaware General Corporation Law. Pursuant to Section 145 of
the Delaware General Corporation Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are,
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. With respect to suits by or in the right of a
corporation, however, indemnification is not available if such person is
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless the court determines that indemnification is
appropriate. In addition, a corporation has the power to purchase and maintain
insurance for such persons. The statute also expressly provides that the power
to indemnify authorized thereby is not exclusive of any rights granted under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
As permitted by Section 102 of the Delaware General Corporation Law, the
Company's stockholders have approved and incorporated provisions into the
Company's Certificate of Incorporation eliminating a director's personal
liability for monetary damages to the Company and its stockholders arising from
a breach of a director's fiduciary duty, except for liability under Section 174
of the Delaware General Corporation Law or liability for any breach of the
director's duty of loyalty to the Company or its stockholders, for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law or for any transaction in which the director derived an
improper personal benefit.
The Company has entered into indemnification agreements with each of its
directors and executive officers. These agreements contractually obligate the
Company to indemnify its directors and executive officers to the fullest extent
permitted by applicable law, including mandatory indemnification unless
prohibited by statute, mandatory advancement of expenses, accelerated procedures
for the authorization of indemnification and litigation "appeal" rights of an
indemnitee in the event of an unfavorable determination or where the board fails
or refuses to act. The indemnification agreements are not intended to deny or
otherwise limit third-party or derivative suits against the Company or its
directors or officers, but to the extent a director or officer were entitled to
indemnity or contribution under the indemnification agreement, the financial
burden of a third-party suit would be borne by the Company, and the Company
would not benefit from derivative recoveries against the director or officer.
Such recoveries would accrue to the benefit of the Company but would be offset
by the Company's obligations to the director or officer under the
indemnification agreement.
The above discussion of the Company's Bylaws, Certificate of Incorporation
and indemnification agreements and of Section 145 of the Delaware General
Corporation Law is not intended to be exhaustive and is qualified in its
entirety by such Bylaws, Certificate of Incorporation, indemnification
agreements and statute.
Item 16. Exhibits.
- --------
5 Opinion of counsel as to legality of securities being registered.
II-1
<PAGE>
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of counsel (included in Exhibit 5).
24.1 Power of Attorney (included herein on the signature page).
Item 17. Undertakings.
- --------
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this registration
statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
-------- -------
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this 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; and
(3) To remove from registration by means of post-effective amendment
any of the securities which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in this 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.
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 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
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) 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.
(2) 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-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on August 28,
1998.
PROTEIN POLYMER TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ J. THOMAS PARMETER
-------------------------------------------
J. Thomas Parmeter, Chairman of the Board,
President & Chief Executive Officer
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints J. Thomas Parmeter and Aron P. Stern, and
each of them, his true and lawful attorney-in-fact and agent, each acting alone,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign this Registration Statement
and any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same with all exhibits thereto, and all
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
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney-in-
fact and agent or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------- -------------------------------------- ---------------
<S> <C> <C>
/s/ J. THOMAS PARMETER Chairman of the Board, President and August 28, 1998
- ------------------------- Chief Executive Officer
J. Thomas Parmeter (Principal Executive Officer)
/s/ ARON P. STERN Vice President-Finance and Chief August 28, 1998
- ------------------------- Financial Officer (Principal
Aron P. Stern Financial and Accounting Officer)
/s/ EDWARD E. DAVID Director August 28, 1998
- -------------------------
Edward E. David
/s/ GEORGE R. WALKER Director August 28, 1998
- -------------------------
George R. Walker
/s/ BRENT R. NICKLAS Director August 28, 1998
- -----------------------
Brent R. Nicklas
/s/ PATRICIA J. CORNELL Director August 25, 1998
- --------------------------
Patricia J. Cornell
/s/ J. PAUL JONES Director August 27, 1998
- --------------------------
J. Paul Jones
/s/ PHILIP J. DAVIS Director August 28, 1998
- --------------------------
Philip J. Davis
/s/ EDWARD J. HARTNETT Director August 30, 1998
- --------------------------
Edward J. Hartnett
/s/ PATRICK GERSCHEL Director August 28, 1998
- --------------------------
Patrick Gerschel
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
5 Opinion of counsel as to legality of securities
being registered.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of counsel (included in Exhibit 5).
24.1 Power of Attorney (included herein on
the signature page).
<PAGE>
Exhibit 5
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 South Flower Street
Los Angeles, California 90071-2372
Telephone (213) 683-6000
Facsimile (213) 627-0705
August 28, 1998
16151.74007
Protein Polymer Technologies, Inc.
10655 Sorrento Valley Road
San Diego, California 92121
Ladies and Gentlemen:
We are furnishing this opinion of counsel to Protein Polymer
Technologies, Inc., a Delaware corporation (the "Company"), for filing as
-------
Exhibit 5 to the Registration Statement on Form S-3 (the "Registration
------------
Statement") to be filed by the Company with the Securities and Exchange
- ---------
Commission under the Securities Act of 1933, as amended, relating to the resale
of up to 8,058,450 shares of the Company's Common Stock, $.01 par value (the
"Shares").
------
We have examined the Certificate of Incorporation and Bylaws, each as
amended to date, of the Company, and the originals, or copies certified or
otherwise identified, of records of corporate action of the Company as furnished
to us by the Company, certificates of public officials and of representatives of
the Company, and such other instruments and documents as we deemed necessary, as
a basis for the opinions hereinafter expressed. In such examination we have
assumed the genuineness of all signatures, the authenticity of all corporate
records and other documents submitted to us and the conformity to original
documents submitted to us as certified or photostatic copies.
Based upon our examination as aforesaid, and in reliance upon our
examination of such questions of law as we deem relevant under the
circumstances, we are of the opinion that the Shares, when purchased as
described in the Registration Statement, will be validly issued, fully paid and
nonassessable.
<PAGE>
Protein Polymer Technologies, Inc.
August 28, 1998
Page 2
We express no opinion with respect to the applicability or effect of
the laws of any jurisdiction other than the Delaware General Corporation Law as
in effect on the date hereof.
We hereby consent to the filing of this opinion of counsel as Exhibit
5 to the Registration Statement.
Very truly yours,
/s/ PAUL, HASTINGS, JANOFSKY & WALKER LLP
<PAGE>
Exhibit 23.1
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 Protein Polymer
Technologies, Inc. for the registration of 8,058,450 shares of its common stock
and to the incorporation by reference therein of our report dated January 30,
1998, except for Note 9, as to which the date is April 13, 1998, with respect to
the financial statements of Protein Polymer Technologies, Inc. included in its
Annual Report (Form 10-KSB) for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
San Diego, California
August 26, 1998
