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As filed with the Securities and Exchange Commission on June 26, 2000.
Registration No. 333-37676
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
Protein Polymer Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-0311631
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
10655 Sorrento Valley Road, San Diego, California 92121 (858) 558-6064
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
J. Thomas Parmeter Copies to:
Chairman & Chief Executive Officer Robert A. Miller, Jr., Esq.
Protein Polymer Technologies, Inc. Paul, Hastings, Janofsky & Walker LLP
10655 Sorrento Valley Road 555 South Flower Street
San Diego, California 92121 Los Angeles, California 90071-2371
(858) 558-6064 (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 the public: From time
to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legal facsimile thereof, pursuant to Item 11(a)(1) of
this Form, 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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered/(1)(2)/ Offering Price Per Unit/(3)/ Aggregate Offering Price/(3)/ Registration Fee/(3)(4)/
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 12,640,000 $0.875 $11,060,000 $2,919.84
per share
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</TABLE>
(1) Represents the following: (A) the maximum of 4,200,000 shares of common
stock issuable upon conversion of our Series G Convertible Preferred Stock; (B)
the maximum of 4,200,000 shares issued upon exercise of warrants issued in
connection with our Series G Convertible Preferred Stock; (C) the maximum of
4,200,000 shares issuable upon exercise of warrants issued in connection with
the exercise and exchange of warrants issued with our Series G Convertible
Preferred Stock; (D) the maximum of 15,000 shares issuable upon exercise of
warrants issued in connection with a $150,000 loan to us and (E) the maximum of
25,000 shares issuable upon exercise of warrants issued as compensation in
relation to our private placement of Series G Convertible 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 to prevent dilution resulting from stock
splits, stock dividends, or similar transactions pursuant to the terms of our
Series G Convertible Preferred Stock and warrants.
(3) Estimate based on average of the bid and asked prices of our common stock
as reported on the NASD Bulletin Board on May 22, 2000 pursuant to Rule 457(c)
promulgated under the Securities Act.
(4) Registration fee paid with original filing.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated June 26, 2000
PROSPECTUS
----------
Protein Polymer Technologies, Inc.
12,640,000 Shares of Common Stock
___________________
The Selling Securityholders are offering (i) up to 4,200,000 shares of our
common stock issuable upon conversion of 21,000 shares of our Series G
Convertible Preferred Stock, issued to a small group of accredited and
institutional investors in a private placement on September 15, 1999; (ii) up to
4,200,000 shares of our common stock issued upon exercise of common stock
warrants issued in connection with the Series G Convertible Preferred Stock;
(iii) up to 4,200,000 shares of our common stock issuable upon exercise of
common stock warrants issued in connection with the exercise and exchange of the
warrants issued with the Series G Convertible Preferred Stock; (iv) up to 15,000
shares of our common stock issuable upon exercise of common stock warrants
issued in connection with a $150,000 bridge loan to us; and (v) up to 25,000
shares of our common stock issuable upon exercise of common stock warrants
issued in connection with a consulting agreement.
We will not receive any proceeds from the sale of our common stock by the
Selling Securityholders except for funds received upon the exercise of the
warrants. We will bear all costs, expenses and fees incurred in connection with
the registration of our common stock, estimated to be approximately $32,920.00.
The Selling Securityholders will bear all selling and other expenses incurred by
them.
Our common stock 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. We are not representing that our common stock 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 our common stock by the Selling Securityholders.
Each Selling Securityholder reserves the right to accept or reject, in whole or
in part, any proposed purchase of shares of our common stock. 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 Selling Securityholders, and the brokers selling the shares of our
common stock offered by the Selling Securityholders, may be regarded as
"underwriters" within the meaning of Section 2(11) of the Securities Act. In
addition, any profits realized by the Selling Securityholders or the brokers on
the sale of the shares of our common stock offered by the Selling
Securityholders may be regarded as underwriting commissions.
Our common stock is traded "over the counter" on the NASD Bulletin Board
under the symbol "PPTI.OB."
_____________________
Copies of our Annual Report on Form 10-KSB for the year ended December 31,
1999 and our Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000 accompany this prospectus.
_____________________
Investing in our common stock involves a high degree of risk. Please
consider carefully the Risk Factors beginning on page 5.
_____________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
Prospectus dated ______, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Available Information........................................................ 2
Incorporation By Reference................................................... 2
Forward-Looking Statements................................................... 3
The Company.................................................................. 3
Risk Factors................................................................. 5
Plan of Distribution......................................................... 12
Use of Proceeds.............................................................. 13
Selling Securityholders...................................................... 13
Description Of Securities To Be Registered................................... 17
Legal Matters................................................................ 23
Experts...................................................................... 23
Indemnification Of Directors And Officers.................................... 23
</TABLE>
You should not rely on any unauthorized information. We have not
authorized any dealer, salesman or other person to give any information or
represent anything not contained in this prospectus or incorporated by
reference. We are offering to sell, and seeking offers to buy, the securities
only in jurisdictions where offers and sales are permitted. The information
contained in this prospectus is accurate as of the date on the cover. Delivery
of this prospectus or any sale of the securities does not indicate that there
has been no change in our affairs since the date of this prospectus.
AVAILABLE INFORMATION
We are a public company and file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission (SEC). Copies of the reports, proxy statements and other information
may be read and copied at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You can request copies of such documents by
writing to the SEC and paying a fee for the copying cost. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC 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 SEC.
This prospectus is part of a Registration Statement on Form S-2 that we
filed with the SEC. Certain information in the Registration Statement has been
omitted from this prospectus in accordance with the rules and regulations of the
SEC. We have also filed exhibits and schedules with the Registration Statement
that are excluded from this prospectus. For further information you may:
. read a copy of the Registration Statement, including the exhibits and
schedules, without charge at the SEC's Public Reference Room; or
. obtain a copy from the SEC upon payment of the fees prescribed by the
SEC.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" certain of our publicly
filed documents into this prospectus, which means that information included in
those documents is considered part of this prospectus. We incorporate by
reference in this prospectus:
. Our Annual Report on Form 10-KSB for the year ended December 31, 1999;
and
. Our Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000.
Upon your request, we will provide to you, a copy of any or all of the
documents incorporated by reference, other than exhibits to such documents
unless the exhibits are specifically incorporated by reference in those
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<PAGE>
documents. You should direct any requests for documents to Janis Neves,
Director, Finance, Protein Polymer Technologies, Inc., 10655 Sorrento Valley
Road, San Diego, California 92121, telephone (619) 558-6064.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks,
uncertainties and other factors, which may cause our actual results, performance
or achievements, to be materially different from any future results, performance
or achievements. You can identify forward-looking statements generally by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"intends," "plans," "should," "could," "seeks," "anticipates," "estimates,"
"continues," or other variations thereof (including their use in the negative),
or by discussions of strategies, opportunities, plans or intentions. These
forward-looking statements may be found under the captions "The Company," and
"Risk Factors," as well as captions elsewhere in this prospectus. A number of
factors could cause results to differ materially from those anticipated by such
forward-looking statements, including those discussed under "Risk Factors."
These forward-looking statements necessarily depend upon assumptions and
estimates that may prove to be incorrect. Although we believe that the
assumptions and estimates reflected in the forward-looking statements are
reasonable, we cannot guarantee that we will achieve our plans, intentions or
expectations. The forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to differ in
significant ways from any future results expressed or implied by the forward-
looking statements.
THE COMPANY
We are a development-stage biotechnology company engaged in the research,
development, production and clinical testing of medical products based on our
proprietary protein-based biomaterials technology. We were incorporated in
Delaware on July 6, 1988. Since 1992 we have focused primarily on developing
materials, technology and products to be used for:
. soft tissues augmentation products;
. surgical adhesives and sealants;
. wound healing matrices; and
. drug delivery devices.
We have also developed coating technology that can efficiently modify and
improve the surface properties of more traditional biomedical devices. Our
primary goal is to develop medical products with significantly improved patient
outcomes as compared to current products and practices.
In December 1999, we initiated human clinical testing of our urethral
bulking agent for the treatment of female stress urinary incontinence. The U.S.
Food and Drug Administration (FDA) approved our Investigational Device Exemption
in August 1999, which allows us to test the safety and effectiveness of the
incontinence product in women over the age of 40 who have become incontinent due
to the shifting of their bladder or the weakening of the muscle at its base that
controls the flow of urine, or both problems combined. We estimate that more
than 2.5 million women begin to experience stress urinary incontinence in the
United States each year. In most untreated cases, the problem becomes
progressively more pronounced. Due to limited efficacy or invasiveness of
current treatments, only a small proportion of the women experiencing stress
urinary incontinence are clinically treated, relying instead on pads and plugs
and the like that only address the symptoms. In contrast, our product is
injected, typically in an outpatient procedure, into urethral tissue at the base
of the bladder forming a solid implant that provides support to the muscles
which control the flow of urine. We believe that our product will prove easy
for the physician to use, offer enduring effectiveness, and avoid most of the
other limitations of urethral bulking products on the market or in
development.
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<PAGE>
In January 2000, we entered into an agreement with Femcare, Ltd. to
commercialize our incontinence product in Europe and Australia. Under the
agreement, Femcare is responsible for clinical testing, regulatory approval, and
product sales and marketing within Europe and Australia, and we are responsible
for product manufacturing. We expect the commercialization of the incontinence
product to begin in Europe at least one year before it is approved for marketing
in the United States. We are also in discussions with several companies to
establish strategic alliances for commercializing the incontinence product in
the United States and other markets outside Europe and Australia.
The tissue augmentation materials and technology underlying the
incontinence product have the potential to be effective and desirable in a
number of other clinical applications. We intend to submit an additional
Investigational Device Exemption to the U.S. Food and Drug Administration in
2000 for approval to begin human clinical testing of our dermal bulking agent to
be used in cosmetic and reconstructive surgery applications. In 1996, we began
studies to identify our most promising biomaterial formulations for use in the
soft tissue augmentation products. In 1997 and 1998, we committed increased
resources in the studies and, in 1999 and 2000, focused primarily on human
clinical testing of the incontinence product.
Our product technology is also advanced in the area of tissue adhesives and
sealants. We have demonstrated both the adhesive performance and the
biocompatibility of our product formulations in animal models. Currently our
research and development in this area is focused on the repair of spinal discs
for the treatment of lower back pain. We are committed to the commercial
development of our adhesive and sealant technology and continue to determine the
specific markets and products which would provide greater opportunities for the
technology. We are also seeking to establish new strategic alliances with
leaders in those markets.
We will continue to research the use of our protein polymers for other
tissue repair and medical device applications, if sufficient resources are
available.
Through 1999, we marketed specialty use products for in vitro cell culture
applications including SmartPlastic(R), ProNectin(R) F Cell Attachment Factor
and ProNectin(R) L Cell Attachment Factor. In 1998, we discontinued direct
sales of our cell culture products, and in February 2000, we sold all rights to
the use of the technology for in vitro cell culture applications, the product
trademarks, and remaining inventory to Sanyo Chemical Industries, Ltd.
Our current development efforts are focused primarily on products to
augment the body's soft tissues. Key markets include the treatment of female
stress urinary incontinence and the correction of facial contour deficiencies
due to aging and disease. We are also evaluating market opportunities for our
scaffold technology for wound healing and tissue engineering, and drug delivery
technology.
Our address is Protein Polymer Technologies, Inc., 10655 Sorrento Valley
Road, San Diego, California 92121, and our telephone number is (858) 558-6064.
4
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RISK FACTORS
You should read the following risk factors carefully before purchasing our
common stock. If any of the risks discussed below actually occur, our business,
financial condition, operating results or cash flows, could be seriously harmed.
As a result, the trading price of our common stock could decline, and you could
lose all or part of your investment.
Dependence on Strategic Partners
Our strategy is to enter into partnerships or licensing arrangements with
major medical or pharmaceutical companies with broad distribution capabilities
in appropriate markets to reduce the time and costs for developing and
commercializing our potential products. For example, in January 2000, we
entered into a license and development agreement with Prospectivepiercing
Limited, to be known as Femcare Urology Limited, for marketing and distribution
of our urethral bulking agent for stress urinary incontinence in Europe and
Australia. There can be no assurance that we will be able to establish
additional strategic partnerships or licensing arrangements, or, if available,
that they will be on terms and conditions favorable to our business.
Additionally, these arrangements generally may be terminated under various
circumstances, or solely at the discretion of the strategic partner without
prior notice. Termination of the arrangements would seriously harm our business
and financial condition. Furthermore, our strategy may lead to multiple
alliances regarding different product opportunities that are active at the same
time. There can be no assurance that we will be able to successfully manage
such multiple arrangements in various stages of development.
We are negotiating and, in some cases, have entered into materials
evaluation agreements with other entities to evaluate additional biomedical and
specialty use applications of our products and technology. There can be no
assurance that we will be able to successfully establish such agreements.
Our technological strategy of designing and producing unique biocompatible
products 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, ProNectin(R) L and SmartPlastic(R), we have
not completed the development of any product or generated any significant
revenues from product sales. In February 2000 we sold all rights to the use of
the technology for in vitro cell culture applications, the product trademarks
and the remaining inventory of ProNectin(R) F, ProNectin(R) L and
SmartPlastic(R) to Sanyo Chemical Industries, Ltd.
Our success will depend upon our ability to:
. identify products with the most commercial potential;
. allocate sufficient resources to develop such products;
. design and produce biocompatible materials with the chemical,
biological and functional properties required for the products;
. secure strategic alliances appropriate to a product's development,
marketing and distribution requirements; and
. manufacture our products in sufficient quantity at reasonable costs
under regulated conditions to meet product demand.
The products we are 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. 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;
5
<PAGE>
. 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.
There can be no assurance that our research and development activities will
be successful or that any of our future products will ultimately be commercially
successful.
History of Operating Losses; Continued Expectation of Losses; Funding Through
January of 2001; Future Capital Requirements
We have incurred operating losses since our inception in 1988, and will
continue to do so for at least several more years. As of March 31, 2000, our
accumulated deficit was approximately $37.7 million, and we have continued to
incur losses since that date. The losses have resulted principally from
expenses of research and development and to a lesser extent, from general and
administrative expenses. If these losses continue, they could cause the value
of our stock to decline, and you could lose a substantial portion of your
investment.
We believe that our current capital resources will be sufficient to fund
our operating losses through January of 2001. We will require substantial
additional capital resources to fund our continuing operating expenditures and
activities including:
. increasing expenditures related to our research and development
activities;
. establishment and scale-up of appropriate manufacturing capabilities;
. preclinical and clinical testing;
. regulatory compliance;
. business development activities; and
. patent prosecution.
We are actively pursuing several alternatives to meet the continuing
capital requirements of our operations, such as initiating and engaging in
preliminary negotiations with a number of potential collaborative partners.
There can be no assurance that we will be able to raise sufficient additional
capital funds, if at all, or that such financing will be available on acceptable
terms. If adequate funds are not available, we will be required to
significantly curtail our operations and relinquish rights to major portions of
our technology or products, including rights to the manufacture and sale of
protein polymers and rights with respect to our soft tissue augmentation and our
tissue repair technologies.
Intense Competition and Rapid Technological Change
Our business faces intense competition and involves rapid technological
changes. Our biomaterials are used primarily in the manufacture of end-use
products for medical applications which compete with other products that rely on
the use of alternative materials or components. As a result, we compete with
diverse, complex and numerous technologies.
There is intense competition in the biomedical and surgical repair markets.
Our 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 ours.
The primary competitive factors in the biomedical and surgical repair
products markets are:
. performance;
. cost;
. safety;
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. reliability;
. ease of use; and
. commercial production capabilities.
We believe that our ability to compete in this market will be enhanced by
our issued patent claims, the breadth of our other pending patent applications
and our experience in protein engineering. However, we currently do not have
the resources to compete commercially without the use of collaborative
agreements with third parties. Our product technology competes for corporate
development and marketing partnership opportunities with numerous other
biotechnology companies, research institutes, academic institutions and
established pharmaceutical companies.
We also face competition from academic institutions and other public and
private research organizations which are conducting research and seeking patent
protection, and may commercialize products on their own or through joint
ventures. Although most of our competitors depend on technology other than
protein engineering for developing products, we believe that DuPont and several
university laboratories are currently conducting research into similar protein
engineering technology. There can be no assurance that our competitors will not
succeed in developing products based on our technology or other technologies
that are more effective than any which are being developed by us, or which would
render our technology and products obsolete and non-competitive.
Manufacturing Uncertainties
To date, we have manufactured only limited amounts of our biomedical
products for internal testing, initial human clinical 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 us, pursuant to applicable governmental regulations, to upgrade our
manufacturing facilities and to obtain manufacturing approvals from the FDA.
Currently, we are conducting our manufacturing operations under the FDA's "Good
Laboratory Practices" and portions of the FDA's Quality System Regulation
required for use of our products in preclinical and pilot clinical testing.
In May 1999, the FDA conditionally approved our Investigational Device
Exemption application requesting permission to begin human clinical feasibility
testing of our urethral bulking agent for the treatment of female stress urinary
incontinence. In August 1999, we obtained an unconditional approval and
initiated pilot human clinical testing in December 1999. There can be no
assurance that the human clinical trials will be successful.
We are currently considering alternative methods to increase production of
our products to meet clinical sample requirements under the FDA's applicable
Quality System Regulation and cognate international quality system requirements,
i.e., ISO 9001. For example, we may upgrade and expand our existing facility;
however, there can be no assurance that, if desired, we could adequately
develop, fund, implement and manage such a manufacturing facility.
Alternatively, we may establish external contract manufacturing arrangements;
however, there can be no 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.
We have not yet developed a process to manufacture our products on a
commercial scale. There can be no assurance that we, or another party on our
behalf, can develop a process at a cost or in quantities necessary to become
commercially viable. We may need to evaluate alternative methods to produce
commercial quantities of our products. The actual method, or combination of
methods, that we may ultimately pursue will depend on a number of factors,
including availability, facilities, needed quantities, cost and governmental
regulations. There is no assurance that we will successfully assess the ability
of such production methods or establish contract manufacturing arrangements to
meet our commercial objectives, or that such methods and arrangements would not
seriously harm our margins or our ability to compete in the marketplace.
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Uncertainty of Regulatory Compliance and Approvals
Regulation by governmental authorities in the United States and other
countries affects the success of products resulting from biotechnological
research. Our 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. Our activities are subject to regulation
primarily under the Occupational Safety and Health Act and the Food, Drug &
Cosmetic Act, as amended.
Pre-clinical, clinical testing and pre-market approval from the FDA is
required for new medical devices, drugs or vaccines, and is generally a costly
and time-consuming process. The FDA could require additional pre-clinical or
clinical testing in addition to those we have completed or planned, which would
result in increased costs and significant development delays. The failure to
demonstrate adequately to the FDA the safety and efficacy of a product under
development would prevent regulatory approval. Many companies have experienced
these types of setbacks during later stage clinical trials, despite promising
results in earlier trials. If we do not directly produce and sell medical
devices, drugs or vaccines, we may not be directly affected by FDA regulations.
However, our anticipated customers and strategic partners would be required to
comply with such regulations. Additionally, we may be required to file and
maintain with the FDA a "Master File" containing information regarding our
products. There can be no assurance that we or our customers and strategic
partners will be able to obtain or maintain the necessary approvals from the FDA
or corresponding international regulatory authorities, or that we will be able
to maintain a Master File in accordance with FDA regulations. In either case,
our anticipated business could be seriously harmed.
We have manufactured limited amounts of our biomedical materials and
products for internal testing, initial human clinical testing, and, in certain
cases, evaluation and testing by strategic partners and other third parties.
Pre-clinical 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 and other quality system regulations. We have
implemented polymer production and quality control procedures, have made certain
facilities renovations, and believe we are in compliance with applicable
requirements. Before pursuing expanded clinical testing and commercial
production, we will be required to conform our operations to additional FDA
Quality System Regulations. The Quality System Regulations requirements are
rigorous, and there can be no assurance that we could obtain an acceptable
Quality System Regulations status in a timely manner and without the expenditure
of substantial resources, if at all. We may also be required to register our
facility with the FDA as an establishment involved in the manufacture of medical
devices.
Our 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. Our future activities may be subject to regulation
under the Toxic Substances Control Act, which requires us to obtain pre-
manufacturing approval for any new "chemical material" we produce for commercial
use that does not fall within the FDA's regulatory jurisdiction.
We believe we are currently in substantial compliance with such laws and
regulations applicable to our current operations. Although we intend to use our
best efforts to comply with all laws and regulations in the future, there can be
no assurance that we will be able to fully comply with such laws and
regulations, or that full compliance will not result in substantial capital
expenditures. There can be no assurance that future approvals will be sought or
obtained. If we fail to obtain or maintain these approvals, or if there is
substantial delay in obtaining these approvals, our business operations would be
seriously harmed.
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Dependence on Key Employees
As of June 22, 2000, we had nineteen full-time employees and two part-time
employees of whom three hold Ph.D. degrees in the chemical or biological
sciences. Our success will depend largely upon the efforts of our scientists
and certain of our executive officers. The loss of the services of any one of
these individuals would seriously harm our business opportunities and prospects.
Our success also depends on the recruitment and retention of additional
qualified management and scientific personnel. There can be no assurance that
we 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. We do not maintain "key-man" or similar life insurance policies
with respect to such persons to compensate us in the event of their deaths,
which may harm our business.
Product Liability; Absence of Insurance
We may face product liability claims with respect to our technology or
products either directly or through our strategic partners. We may also be
exposed to potential product liability risks whenever human clinical testing is
performed or upon the use of any commercially marketed medical product. We
believe that our prior sales of SmartPlastic(R), ProNectin (R) F and
ProNectin(R) L products do not pose any material product liability risk. To our
knowledge no product liability claims have ever been made against us. Prior to
initiating human clinical testing of our urethral bulking agent, we procured
product liability insurance. There can be no assurance that we will be able to
maintain adequate levels of insurance coverage on acceptable terms, or that the
assertion of a product liability claim would not seriously harm our business or
financial condition.
Patents and Trade Secrets
Our success will depend, in part, on our ability to obtain patent
protection or maintain other protection for our products and technology. Other
protection includes maintenance of trade secrets and contractual agreements.
Our success will also depend in part on not violating the proprietary rights of
third parties, including the infringement of patents.
To date, we have been issued eighteen United States patents and six
additional United States 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 our pending patent applications or that, if patents do issue,
the claims allowed will be sufficiently broad to protect our technology and
products. In addition, there can be no assurance that any patents previously or
subsequently issued to us will not be challenged, invalidated or circumvented,
or that the rights granted under the patents will provide us with any
proprietary protection or competitive advantage.
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 ours. We do not know the scope and validity of such patents,
the extent to which we may be required to obtain licenses under these patents or
other proprietary rights, and the cost and availability of such licenses. There
can be no assurance that any licenses required under any patents or proprietary
rights will be made available to us on acceptable terms, if at all. Further, we
may enter into collaborative research and development arrangements with
strategic partners that may result in the development of new technologies or
products. There can be 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.
We have also applied for patent protection with respect to certain of our
patents in foreign countries, including Japan and Europe. We have not yet
marketed, sold or developed our products outside the United States, except for
limited amounts of ProNectin(R) F, ProNectin(R) L and SmartPlastic(R) cell
culture products. To date, we have been issued fifteen foreign patents and have
twenty-seven pending foreign patent applications. There can be no assurance
that additional patents will issue from any of our pending foreign patent
applications or that, if patents do issue, the claims allowed will be
sufficiently broad to protect our technology and products. In addition, there
can be no assurance that any foreign patents issued to us will not be
challenged, invalidated or circumvented, or that the rights granted under the
patents will provide us with any proprietary protection or competitive
advantage. Furthermore, certain foreign intellectual properties laws may not be
as protective as those of the United States.
9
<PAGE>
We also seek to protect our intellectual property in part by
confidentiality agreements with our employees and consultants. These agreements
may be breached or terminated. There can be no assurance that we will have an
adequate remedy for any breach, or that our trade secrets will not otherwise
become known or independently discovered by competitors.
Dividend Policy; No Payment of Dividends
We have never paid dividends on our common stock, and due to our continuing
losses, we do not anticipate paying any cash dividends on the common stock in
the foreseeable future. Additionally, the holders of our Series D Convertible
Preferred Stock and Series F Convertible Preferred Stock are entitled to receive
cumulative dividends prior to the payment of any cash dividends on our common
stock. Our Series E Convertible Preferred Stock and Series G Convertible
Preferred Stock do not have any preference with respect to cash dividends.
After payment of preferred dividends on our Series D Convertible Preferred Stock
and Series F Convertible Preferred Stock, the holders of our common stock,
Series D Convertible Preferred Stock, Series E Convertible Preferred Stock,
Series F Convertible Preferred Stock and Series G Preferred Stock are entitled
to receive any cash dividends declared on our common stock in proportion with
the shares owned by them.
Volatility of Trading Price
There has been significant volatility in market prices of securities of
biotechnology companies, and the trading price of the securities could be
subject to wide fluctuations. Factors that could have a significant adverse
impact on the market price of our common stock include:
. announcements of technological innovations by our competitors;
. announcements of new commercial products by our competitors;
. adverse results in our product testing;
. litigation;
. governmental regulation; or
. adverse patent or proprietary rights developments.
Investment Company Act Considerations
We believe that we are primarily engaged in business other than investing,
reinvesting, owning, holding or trading in securities. We invest our cash in
cash equivalents and short-term investments of high quality, following the
investment guidelines approved by our board of directors. However, there can be
no assurance that we may not be required to comply with the registration
requirements of the Investment Company Act of 1940. The registration
requirements would seriously harm our business.
Nasdaq Delisting; Potential Regulation as a Penny Stock
Our common stock was delisted from the Nasdaq SmallCap Market on September
20, 1999. Trading in our common stock after the delisting, 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 and
could also be subject to additional restrictions. As a consequence of the
delisting, we expect that our stockholders will find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, our
common stock. In addition, the delisting will make our 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, or as consideration in future capital raising
transactions.
After our common stock was delisted from the Nasdaq SmallCap Market, it may
have 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,
10
<PAGE>
subject to certain exceptions, including listing on the Nasdaq SmallCap Market.
If the common stock is delisted from the Nasdaq SmallCap Market and no other
exception applies, our 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, a risk disclosure document mandated by the SEC relating to the
penny stock market must be delivered to the purchaser prior to the transaction,
unless the transaction satisfies one of the exemptions under the rules. 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 our common stock and may affect the ability of holders to
sell our common stock in the secondary market and the price at which they 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. Such exempt transactions include those
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.
11
<PAGE>
PLAN OF DISTRIBUTION
We issued an aggregate of 21,000 shares of Series G Convertible Preferred
Stock to several institutional and accredited investors at a price of $100 per
share in a private placement on August 17, 1999 and September 15, 1999 under
Rule 506 promulgated under the Securities Act. Each share of Series G
Convertible Preferred Stock is convertible into shares of our common stock at a
conversion ratio equal to the quotient derived by dividing (A) the stated value
of $100 by (B) $0.50 (subject to certain antidilution adjustments for future
stock distributions, stock splits or similar capital adjustments). Each holder
of Series G Convertible Preferred Stock also received a common stock warrant,
exercisable for 12 months, that allowed the holder to acquire 200 shares of our
common stock at a price of $0.50 per share; all of such warrants were exercised
in February 2000. Each holder of the warrants issued in connection with our
Series G Convertible Preferred Stock received, in connection with the exercise
and exchange of such warrants, an additional common stock warrant, exercisable
for 12 months, that allows the holder to acquire 200 shares of our common stock
at a price of $1.50 per share. In addition under Section 4(2) of the Securities
Act we issued (i) common stock warrants, exercisable for 12 months, to purchase
up to 15,000 shares of our common stock at a price of $0.50, in connection with
a $150,000 bridge loan to us, and (ii) common stock warrants, exercisable for
five years, to purchase up to 25,000 shares of our common stock at a price of
$0.75, in connection with a consulting agreement. Shares underlying the Series
G Convertible Preferred Stock may only be offered by the Selling Securityholders
if such Series G Convertible 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
selling holders are the institutional and accredited investors, and any of their
pledgees, assignees, donees, other transferees and successors-in-interest,
pursuant to the aforementioned transactions and the securities being offered
under this prospectus are the shares of our common stock issued or issuable upon
conversion of the Series G Convertible Preferred Stock and exercise of the
warrants.
The shares offered hereby may be sold from time to time by the Selling
Securityholders. Such sales may be made in the over-the-counter market 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 June 22, 2000,
our common stock is trading only on the NASD Bulletin Board. Our common stock
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 offered
hereby against certain liabilities, including liabilities arising under the
Securities Act. We have agreed to indemnify the Selling Securityholder against
certain liabilities in connection with the offering of our common stock,
including liabilities arising under the Securities Act.
It is not possible at the present time to determine the price to the public
in any sale of our common stock 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 of our
common stock sold less all applicable commissions and underwriters' discounts,
if any. We will pay substantially all the expenses incident to the
registration, offering and sale of the shares of our common stock to the public
by Selling Securityholder, other than fees, discounts and commissions of
underwriters, dealers or agents, if any, and transfer taxes.
Our common stock has been removed from listing by the Nasdaq SmallCap
market and if no other exception applies, our common stock may become subject to
the SEC's Penny Stock Rules and broker-dealers may
12
<PAGE>
become subject to the requirements summarized above under the caption "Risk
Factors - Possible Nasdaq Delisting; Potential Regulation as a Penny Stock."
USE OF PROCEEDS
We 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
G Convertible Preferred Stock into our common stock. We will only receive
proceeds if the Selling Securityholders exercise the warrants. If all warrants
are exercised, we will receive aggregate proceeds of $8,426,250. All of the
warrants issued in connection with our Series G Convertible Preferred Stock were
exercised in February 2000 upon which we received aggregate proceeds of $2.1
million. There can be no assurance that any of the other warrants will be
exercised. If any of the warrants are exercised, we intend to use such proceeds
for working capital purposes. To the extent that the net proceeds are not
immediately required for such purposes, they may be invested principally in
either U.S. government securities, short-term certificates of deposit, money
market funds or other short-term interest bearing investments.
SELLING SECURITYHOLDERS
The following table sets forth as of June 22, 2000, and upon completion of
the offering described in this Prospectus, information with regard to the
beneficial ownership of our common stock by the Selling Securityholders. The
Selling Securityholders may not have a present intention of selling the shares
and may offer 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.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially Owned
Owned Before Offering/1/ Common Stock After Offering /1/,/3/
------------------------ ----------------------
Name Amount % Offered/2/ Amount %
---- ------ - ---------- --------- -
<S> <C> <C> <C> <C> <C>
Parmeter, J. Thomas/4/, /5/...................... 781,777 4.2% 90,000 691,777 3.7%
Lamon, Steven M./4/, /6/......................... 859,989 4.6% 600,000 259,989 1.4%
Davis, Philip J./4/, /7/......................... 834,345 4.5% 300,000 534,345 2.9%
Wang, Daniel I.C./4/, /8/........................ 330,000 1.8% 300,000 30,000 *
Stern, Russell T./4/, /9/........................ 1,083,223 5.8% 450,000 633,223 3.4%
Hurckes, Richard W./4/, /10/..................... 327,500 1.8% 180,000 147,500 *
Hurckes Children Trust /4/, /11/................. 165,000 * 120,000 45,000 *
Lyon, Anthony /4/................................ 179,200 1.0% 120,000 59,200 *
Smith, Allison /4/............................... 90,000 * 90,000 0 0
Smith, Lindsay /4/............................... 90,000 * 90,000 0 0
Smith, Tracy /4/................................. 90,000 * 90,000 0 0
Adelson, Trust fbo Claire/4/, /12/, /13/......... 1,600,572 8.3% 1,500,000 100,572 *
Adelson, Richard/4/, /12/, /14/.................. 499,600 2.7% 300,000 199,600 1.1%
Cole, Bernard IRA/4/, /12/....................... 315,000 1.7% 300,000 15,000 *
DeSalvo-Cavelius, Patricia/4/, /12/.............. 222,453 1.2% 180,000 42,453 *
Arthur Kaplan Co. PS fbo A. Kaplan/4/, /12/...... 313,663 1.7% 180,000 133,663 *
McSorley, Edward/4/, /12/, /15/.................. 246,225 1.3% 150,000 96,225 *
Smith, Donald/4/,/ 12/........................... 356,235 1.9% 240,000 116,235 *
Ardmore Retirement/4/, /12/...................... 229,572 1.3% 180,000 49,572 *
Baigelman, Carly, Irrev. Trust fbo /4/, /12/..... 60,000 * 60,000 0 0
Baigelman, Robert, Irrev. Trust fbo /4/, /12/.... 60,000 * 60,000 0 0
Becker, Ellen & Stephen /4/, /12/................ 161,000 * 120,000 41,000 *
Bernstein, Stanley IRA /4/, /12/................. 90,000 * 90,000 0 0
Branitz, Marlon IRA /4/, /12/.................... 120,000 * 120,000 0 0
Brown, Douglas, Z.S. Fund fbo /4/, /12/.......... 180,000 1.0% 180,000 0 0
Edelstein Investment Partners /4/, /12/, /16/.... 371,700 2.0% 210,000 161,700 *
Farber, Alisa S. Trust /4/, /12/, /17/........... 1,104,086 5.8% 840,000 264,086 1.4%
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially Owned
Owned Before Offering/1/ Common Stock After Offering /1/,/3/
------------------------ ----------------------
Name Amount % Offered/2/ Amount %
---- ------ - ---------- --------- -
<S> <C> <C> <C> <C> <C>
Goodman, Arline IRA /4/, /12/................... 90,000 * 90,000 0 0
Gordon, Brian J. /4/, /12/....................... 90,000 * 90,000 0 0
Gordon, Elizabeth L. /4/, /12/................... 150,000 * 150,000 0 0
Gordon, Ronald & Claire /4/, /12/................ 240,000 1.3% 240,000 0 0
Greenblatt, William IRA /4/, /12/, /18/.......... 170,250 * 90,000 80,250 *
Grubard, Marc /4/, /12/.......................... 120,000 * 120,000 0 0
Holder, Andrew /4/, /12/......................... 185,000 1.0% 150,000 35,000 *
Holder, Andrew SEP IRA /4/, /12/................. 150,000 * 150,000 0 0
Intertrade Media Pens & PS /4/, /12/............. 170,000 * 150,000 20,000 *
Kalman, Tobie /4/, /12/, /19/.................... 252,500 1.4% 180,000 72,500 *
Kamens, Michael IRA /4/, /12/.................... 150,000 * 150,000 0 0
Kamens, Michael & Joan /4/, /12/................. 225,000 1.2% 150,000 75,000 *
Katz, Non-Marital Trust uwo Katz /4/, /12/....... 240,000 1.3% 240,000 0 0
Kaye Family Limited Partership /4/, /12/, /20/... 227,500 1.2% 150,000 77,500 *
Kertes, Ronald /4/, /12/......................... 180,000 1.0% 180,000 0 0
Kiernan, Kenneth J. IRA /4/, /12/................ 367,000 2.0% 240,000 127,000 *
Kipperman, Eric M. /4/, /12/..................... 90,000 * 90,000 0 0
Kipperman, Eric M. IRA /4/, /12/................. 90,000 * 90,000 0 0
Kipperman, Jerry IRA /4/, /12/................... 165,000 * 120,000 45,000 *
LaFauci, Joseph & Rosalie /4/, /12/.............. 120,000 * 120,000 0 0
Levinsohn, Ross /4/, /12/........................ 90,000 * 90,000 0 0
Levitt, Steven & Wendi /4/, /12/, /21/........... 261,658 1.4% 180,000 81,658 *
Mann, Michael /4/, /12/.......................... 180,000 1.0% 180,000 0 0
Mercadante, Carmin IRA /4/, /12/................. 139,786 * 90,000 49,786 *
McGloin John J. /4/, /12/........................ 90,000 * 90,000 0 0
Marvin Mittman Profit-Sharing /4/, /12/.......... 265,000 1.4% 240,000 25,000 *
Moss, Barbara S. /4/, /12/....................... 120,000 * 120,000 0 0
Moss, Nancy S. /4/, /12/......................... 120,000 * 120,000 0 0
Newman, Rose /4/, /12/........................... 272,500 1.5% 240,000 32,500 *
Omega /4/, /12/.................................. 305,000 1.7% 240,000 65,000 *
Pincus, D.A. & Co. Profit-Sharing /4/, /12/...... 60,000 * 60,000 0 0
Robinson, Douglas /4/, /12/, /22/................ 333,000 1.8% 150,000 183,000 1.0%
Rosenberg, Alison & Abraham /4/, /12/, /23/...... 252,500 1.4% 180,000 72,500 *
Snyder, David Pension /4/, /12/.................. 210,000 1.1% 210,000 0 0
Susser, Phyllis IRA /4/, /12/.................... 60,000 * 60,000 0 0
Sutton, Patrick /4/, /12/........................ 110,000 * 90,000 20,000 *
Szulik, Matthew & Kyle /4/, /12/, /24/........... 267,500 1.5% 180,000 87,500 *
Techvest Partners LLC /25/....................... 40,960 * 25,000 15,960 *
Taurus Advisory Group, Inc. /26/, /27/........... 15,000 * 15,000 0 0
TOTALS 17,426,294 62.5% 12,640,000 4,786,294 24.6%
========== ========== =========
</TABLE>
______________
* Amount represents less than 1% of the common stock outstanding. As of June
22, 2000, we had 18,311,882 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 within 60 days are deemed
outstanding for computing the percentage of the person holding such options
or warrants 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
14
<PAGE>
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 G Convertible Preferred Stock, shares of
common stock issued upon exercise of warrants issued in connection with the
Series G Convertible Preferred Stock and shares of common stock issuable
upon exercise of warrants issued upon the exercise or exchange of the
warrants issued in connection with the Series G Convertible Preferred
Stock.
(5) Shares beneficially owned also includes an additional 40,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days and 160,000 shares issuable upon the exercise of
options exercisable within 60 days. Mr. Parmeter is our Chairman of the
Board, President and Chief Executive Officer.
(6) Shares beneficially owned also includes an additional 40,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days and 30,000 shares issuable upon the exercise of
options exercisable within 60 days.
(7) Shares beneficially owned also includes an additional 80,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days and 44,000 shares issuable upon the exercise of
options exercisable within 60 days. Mr. Davis is one of our directors and
is our Secretary.
(8) Shares beneficially owned also includes an additional 30,000 shares
issuable upon the exercise of options exercisable within 60 days.
(9) Shares beneficially owned also includes an additional 80,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days and 20,000 shares issuable upon the exercise of
options exercisable within 60 days.
(10) Shares beneficially owned also includes an additional 32,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days.
(11) Shares beneficially owned also includes an additional 8,000 shares issuable
upon conversion of Series E Convertible Preferred Stock convertible within
60 days.
(12) This person is an investment advisory client of Taurus Advisory Group.
These shares are held by Sigler & Co. as custodian for the investment
advisory clients of Taurus. Taurus is a registered investment advisor that
has discretionary authority to vote or dispose of the shares held in its
client accounts and therefore may be deemed to be the beneficial owner of
these shares. Taurus expressly disclaims such beneficial ownership.
Patricia J. Cornell, a vice president and director of Taurus, is one of our
directors.
(13) Shares beneficially owned also includes an additional 20,000 shares
issuable upon exercise of warrants issued in connection with our Series E
Convertible Preferred Stock exercisable within 60 days.
(14) Shares beneficially owned also includes an additional 16,000 shares
issuable upon exercise of warrants issued in connection with our Series E
Convertible Preferred Stock exercisable within 60 days and 5,000 shares
issuable upon the exercise of options exercisable within 60 days. Mr.
Adelson is one of our directors.
(15) Shares beneficially owned also includes an additional 4,000 shares issuable
upon exercise of warrants issued in connection with our Series E
Convertible Preferred Stock exercisable within 60 days.
(16) Shares beneficially owned also includes an additional 50,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 12,500 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
15
<PAGE>
(17) Shares beneficially owned also includes an additional 156,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 55,000 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
(18) Shares beneficially owned also includes an additional 25,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 6,250 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
(19) Shares beneficially owned also includes an additional 30,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 7,500 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
(20) Shares beneficially owned also includes an additional 30,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 7,500 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
(21) Shares beneficially owned also includes an additional 20,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 5,000 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
(22) Shares beneficially owned also includes an additional 20,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 5,000 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
(23) Shares beneficially owned also includes an additional 30,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 7,500 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
(24) Shares beneficially owned also includes an additional 30,000 shares
issuable upon conversion of Series E Convertible Preferred Stock
convertible within 60 days, and an additional 7,500 shares issuable upon
exercise of warrants issued in connection with our Series E Convertible
Preferred Stock exercisable within 60 days.
(25) Shares to be offered represents shares of common stock issuable upon
exercise of warrants issued in connection with a consulting agreement with
us. Shares beneficially owned also includes 15,960 shares of common stock
issuable upon exercise of warrants issued in connection with our Series E
Convertible Preferred Stock exercisable within 60 days.
(26) Shares to be offered represents shares of common stock issuable upon
exercise of warrants issued in connection with a loan to us.
(27) Shares beneficially owned excludes shares beneficially owned by investment
advisory clients of Taurus Advisory Group. Taurus is a registered
investment advisor that has discretionary authority to vote or dispose of
the shares held in its client accounts and therefore may be deemed to be
the beneficial owner of these shares. Taurus expressly disclaims such
beneficial ownership. Patricia J. Cornell, a vice president and director
of Taurus, is one of our directors.
16
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED
Common Stock
. Outstanding Shares. As of June 22, 2000, there were 18,311,882
outstanding shares of our common stock held by approximately 162 holders of
record, including 4,200,000 shares issued upon exercise of the warrants issued
in conjunction with the Series G Convertible Preferred Stock. After giving
effect to conversion of the outstanding Series G Convertible Preferred Stock and
the other warrants, there will be 26,751,882 shares of our common stock
outstanding. The outstanding shares of our common stock are, and the shares of
our common stock being offered by the Selling Securityholders will be, when
issued, fully paid and nonassessable.
. Dividends. The holders of our common stock are entitled to receive
such lawful dividends, as may be declared by our board of directors, subject to
any preferential dividend rights of the holders of our preferred stock.
. Liquidation. Upon our liquidation, dissolution or winding up, the
holders of our common stock are entitled to share in all of our assets that are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of our preferred
stock then outstanding.
. Preemption, Conversion and Redemption. The holders of our common stock
have no preemptive, subscription, redemption or conversion rights.
. Voting Rights. The holders of our common stock are entitled to one
vote per share on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Accordingly, the holders of a majority of the
common stock entitled to vote in any election of directors, together with the
Series G Convertible Preferred Stock voting with the common stock as a single
class, may elect all of the directors standing for election.
. Subordination to Preferred Stock. The rights, preferences and
privileges of holders of our common stock will be subject to the rights of the
holders of shares of our Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock and Series G
Convertible Preferred Stock and any other series of our preferred stock that we
may issue in the future.
Preferred Stock
Our preferred stock may be issued from time to time in one or more series
and our board of directors, without further approval of the holders of our
common stock (but subject to the rights of the holders of our outstanding
preferred stock), is authorized to fix the dividend rights and terms, conversion
rights, voting rights, redemption rights and terms, liquidation preferences,
sinking funds and any other rights, preferences, privileges and restrictions
applicable to each such series of our preferred stock. The purpose of
authorizing our board of directors to determine such rights and preferences is
to eliminate delays associated with a stockholder vote on specific issuances.
The issuance of our preferred stock provides flexibility in connection with
possible financings, acquisitions and other corporate purposes. However, it
could also, among other things, adversely affect the voting power of the holders
of our common stock and, under certain circumstances, make it more difficult for
a third party to gain control of us.
Series D Convertible Preferred Stock
------------------------------------
. Authorized Shares. We have authorized 71,600 shares of our Series D
Convertible Preferred Stock, of which 1,344.01 shares remain issued and
outstanding.
. Dividends. The holders of our Series D Convertible Preferred Stock are
entitled to receive cumulative dividends when and as declared by our board of
directors at a rate of $10.00 per share.
. Liquidation. Upon our liquidation, dissolution or winding-up, whether
voluntary or involuntary, the holders of shares of our Series D Convertible
Preferred Stock are entitled to receive, prior and in preference to any
distribution of any of our assets to the holders of our common stock, an amount
per share of $100.00, plus an
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amount equal to all accrued and unpaid dividends on our Series D Convertible
Preferred Stock, if any. As of June 22, 2000, no dividends had been declared on
the Series D Convertible Preferred Stock.
. Conversion Rights. Each share of our Series D Convertible Preferred
Stock is convertible at any time at the option of the holder thereof into our
common stock at conversion ratio equal to the quotient derived by dividing (A)
the stated value of $100 by (B) the lesser of (1) $3.75 (subject to certain
antidilution adjustments for future stock distributions, stock splits or similar
capital adjustments) or (2) the market price of the common stock at the time of
conversion. The conversion ratio is subject to further adjustments in the event
of specific dilutive financings. Each share of Series D Convertible Preferred
Stock is automatically converted into shares of our common stock at the
applicable conversion ratio upon the closing of a firmly committed public
offering of our common stock at an aggregate price to the public equal to or
exceeding $2.50 per share, or upon a vote in favor of such conversion by the
holders of a majority of the then outstanding shares of Series D Convertible
Preferred Stock, or upon written notice by us at any time after the average
common stock value over a twenty-day period equals or exceeds $5.00. The shares
of our common stock offered hereby will not result in automatic conversion of
the Series D Convertible Preferred Stock.
. Redemption. We may redeem the Series D Convertible Preferred Stock, in
whole or in part, after September 13, 1999, out of funds legally available
therefor. The redemption price is $100.00 per share, plus all accrued and unpaid
dividends, if any, to the date of redemption.
. Voting Rights. Generally, each share of Series D Convertible Preferred
Stock has no voting rights. However, so long as any Series D Convertible
Preferred Stock is outstanding, without the consent of the holders of at least a
majority of the outstanding Series D Convertible Preferred Stock, we may not
create or issue any security with rights, preferences or privileges equal or
senior to the Series D Convertible Preferred Stock; increase the authorized
number of shares of Series D Convertible Preferred Stock or adversely alter or
change the rights, preferences or privileges of the Series D Convertible
Preferred Stock. The need to obtain the consent of a majority of the outstanding
Series D Convertible Preferred Stock may seriously harm our ability to effect
these transactions in a manner deemed advisable by our management.
Series E Convertible Preferred Stock
------------------------------------
. Authorized Shares. We have authorized 55,000 shares of our Series E
Convertible Preferred Stock, of which 35,312.50 shares remain issued and
outstanding.
. Dividends. The holders of the Series E Convertible Preferred Stock are
entitled to receive noncumulative dividends when and as declared by our board of
directors, if at all; provided, however, that no dividend may be paid on the
Series E Convertible Preferred Stock until the preferential cumulative dividends
on the Series D Convertible Preferred Stock and the Series F Convertible
Preferred Stock have been first fully paid or declared and set aside.
. Liquidation. Upon our liquidation, dissolution or winding-up, whether
voluntary or involuntary, the holders of shares of Series E Convertible
Preferred Stock, together with the holders of our Series F Convertible Preferred
Stock, are entitled to receive, prior and in preference to any distribution of
any of our assets to the holders of our common stock, but only after the
preference is paid or set apart for the Series D Convertible Preferred Stock, an
amount per share of $100.00, plus an amount equal to declared and unpaid
dividends on the Series E Convertible Preferred Stock, if any. As of June 22,
2000, no dividends had been declared on the Series E Convertible Preferred
Stock.
. Conversion Rights. Each share of Series E Convertible Preferred Stock
is convertible at any time at the option of the holder thereof into our common
stock at conversion ratio 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).
The conversion ratio is subject to further adjustments in the event of specific
dilutive financings. Each share of Series E Convertible Preferred Stock is
automatically converted into shares of our common stock at the applicable
conversion ratio upon the closing of a firmly committed public offering of our
common stock at an aggregate price to the public equal to or exceeding $7.50 per
share, where the minimum offering is for at least $15 million or upon a vote in
favor of such conversion by the holders of 75% of
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the then outstanding shares of Series E Convertible Preferred Stock electing to
unconditionally convert such shares of Series E Preferred. The shares of our
common stock offered hereby will not result in automatic conversion of the
Series E Convertible Preferred Stock.
. Redemption. We may redeem the Series E Convertible Preferred Stock, in
whole or in part, at any time, out of funds legally available therefor. The
redemption price is $400.00 per share.
. Voting Rights. Generally, each share of Series E Convertible Preferred
Stock has no voting rights. However, so long as any Series E Convertible
Preferred Stock is outstanding, without the consent of the holders of at least
75% of the Series E Convertible Preferred Stock, we may not create or issue any
security with rights, preferences or privileges equal or senior to the Series E
Convertible Preferred Stock; increase the authorized number of shares of Series
E Convertible Preferred Stock or adversely alter or change the rights,
preferences or privileges of the Series E Convertible Preferred Stock. The need
to obtain the consent of the 75% of the Series E Convertible Preferred Stock may
seriously harm our ability to effect these transactions in a manner deemed
advisable by our management.
Series F Convertible Preferred Stock
------------------------------------
. Authorized Shares. We have authorized 27,317 shares of our Series F
Convertible Preferred Stock, all of which shares remain issued and
outstanding.
. Dividends. The holders of the Series F Convertible Preferred Stock are
entitled to receive cumulative dividends when and as declared by our board of
directors at a rate of $10.00 per share.
. Liquidation. Upon our liquidation, dissolution or winding-up, whether
voluntary or involuntary, the holders of shares of Series F Convertible
Preferred Stock, together with the holders of our Series E Convertible Preferred
Stock, are entitled to receive, prior and in preference to any distribution of
any of our assets to the holders of our common stock, but only after the
preference is paid or set apart for the Series D Convertible Preferred Stock, an
amount per share of $100.00, plus an amount equal to all accrued and unpaid
dividends on the Series F Convertible Preferred Stock, if any. As of June 22,
2000, no dividends had been declared on the Series F Convertible Preferred
Stock.
. Conversion Rights. Each share of Series F Convertible Preferred Stock
is convertible at any time at the option of the holder thereof into our common
stock at conversion ratio equal to the quotient derived by dividing (A) the
stated value of $100 by (B) the lesser of (1) $3.75 (subject to certain
antidilution adjustments for future stock distributions, stock splits or similar
capital adjustments) or (2) the market price of the common stock at the time of
conversion. The conversion ratio is subject to further adjustments in the event
of specific dilutive financings. Each share of Series F Convertible Preferred
Stock is automatically converted into shares of our common stock at the
applicable conversion ratio upon the closing of a firmly committed public
offering of our common stock at an aggregate price to the public equal to or
exceeding $2.50 per share, or upon a vote in favor of such conversion by the
holders of a majority of the then outstanding shares of Series F Convertible
Preferred Stock, or upon written notice by us at any time after the average
common stock value over a twenty-day period equals or exceeds $5.00. The shares
of our common stock offered hereby will not result in automatic conversion of
the Series F Convertible Preferred Stock.
. Redemption. We may redeem the Series F Convertible Preferred Stock, in
whole or in part, after September 13, 1999, out of funds legally available
therefor. The redemption price is $100.00 per share, plus all accrued and unpaid
dividends, if any, to the date of redemption.
. Voting Rights. Generally, each share of Series F Convertible Preferred
Stock has no voting rights. However, so long as any Series F Convertible
Preferred Stock is outstanding, without the consent of the holders of at least a
majority of the outstanding Series F Convertible Preferred Stock, we may not
create or issue any security with rights, preferences or privileges equal or
senior to the Series F Convertible Preferred Stock; increase the authorized
number of shares of Series F Convertible Preferred Stock or adversely alter or
change the rights, preferences or privileges of the Series F Convertible
Preferred Stock. The need to obtain the consent of a majority of the outstanding
Series F Convertible Preferred Stock may seriously harm our ability to effect
these transactions in a manner deemed advisable by our management.
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Series G Convertible Preferred Stock
------------------------------------
. Authorized Shares. We have authorized 35,000 shares of our Series G
Convertible Preferred Stock, of which 21,000 shares remain issued and
outstanding.
. Dividends. The holders of the Series G Convertible Preferred Stock are
entitled to receive non-cumulative dividends when and as declared by our board
of directors, if at all; provided, however, that no dividend may be paid on the
Series E Convertible Preferred Stock until the preferential cumulative dividends
on the Series D Convertible Preferred Stock and the Series F Convertible
Preferred Stock have been first fully paid or declared and set aside.
. Liquidation. Upon our liquidation, dissolution or winding-up, whether
voluntary or involuntary, the holders of shares of Series G Convertible
Preferred Stock are entitled to receive, prior and in preference to any
distribution of any of our assets to the holders of our common stock, but only
after the preference is paid or set apart for the Series D Convertible Preferred
Stock, Series E Convertible Preferred Stock and Series F Convertible Preferred
Stock, an amount per share of $100.00, plus an amount equal to all declared and
unpaid dividends on the Series G Convertible Preferred Stock, if any. As of
June 22, 2000, no dividends had been declared on the Series G Convertible
Preferred Stock.
. Conversion Rights. Each share of Series G Convertible Preferred Stock
is convertible at any time at the option of the holder thereof into our common
stock at conversion ratio equal to the quotient derived by dividing (A) the
stated value of $100 by (B) $0.50 (subject to certain antidilution adjustments
for future stock distributions, stock splits or similar capital adjustments).
The conversion ratio is subject to further adjustments in the event of specific
dilutive financings. Each share of Series G Convertible Preferred Stock is
automatically converted into shares of our common stock at the applicable
conversion ratio upon the closing of a firmly committed public offering of our
common stock at an aggregate price to the public equal to or exceeding $2.50 per
share, where the minimum offering is for at least $10 million or upon a vote in
favor of such conversion by the holders of a majority of the then outstanding
shares of Series G Convertible Preferred Stock. The shares of our common stock
offered hereby will not result in automatic conversion of the Series G
Convertible Preferred Stock.
. Redemption. We may redeem the Series G Convertible Preferred Stock, in
whole or in part, at any time, out of funds legally available therefor. The
redemption price is $100.00 per share, plus all accrued and unpaid dividends, if
any, to the date of redemption.
. Voting Rights. Generally, each share of Series G Convertible Preferred
Stock has voting rights and votes on an as converted basis together with the
common stock voting as a single class. In addition, so long as any Series G
Convertible Preferred Stock is outstanding, without the consent of the holders
of at least a majority of the outstanding Series G Convertible Preferred Stock,
we may not create or issue any security with rights, preferences or privileges
equal or senior to the Series G Convertible Preferred Stock; increase the
authorized number of shares of Series G Convertible Preferred Stock or adversely
alter or change the rights, preferences or privileges of the Series G
Convertible Preferred Stock. The need to obtain the consent of a majority of the
outstanding Series G Convertible Preferred Stock may seriously harm our ability
to effect these transactions in a manner deemed advisable by our
management.
Rights Agreement
On August 22, 1997, our board of directors declared a dividend distribution
of one right to purchase a certain number of units for each outstanding share of
our common stock at an exercise price of $8.00, subject to adjustment. Each
unit is equal to one one-hundredth of a share of our Series X Junior
Participating Preferred Stock. The distribution was payable to stockholders of
record as of the close of business on September 10, 1997. Our board of
directors also declared that one right be distributed with each share of common
stock issued after the record date but prior to the separation or the earlier
expiration, exchange, redemption or termination of the rights.
Separation of Rights. Initially, the rights attached to the common stock
then outstanding and no separate certificates evidencing the rights were issued.
The rights will separate from the common stock, rights certificates will be
issued and the rights will become exercisable after 10 business days (or such
later date as may be determined
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by action of our board of directors prior to the separation of the rights)
following the earlier to occur of (i) a public announcement or resolution of our
board of directors recognizing that a person or group of affiliated or
associated persons has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of our common stock (subject
to certain exceptions that may be made by board of directors prior to separation
of the rights), or (ii) the commencement or announcement of an intention to make
a tender or exchange offer for our common stock the consummation of which would
result in the beneficial ownership by a person or group of affiliated or
associated persons of 15% or more of such outstanding common stock. However, a
person or group of affiliated or associated persons who acquires the beneficial
ownership of 15% or more of our common stock then outstanding either (i) by
reason of share purchases by us reducing the number of common stock outstanding,
or (ii) inadvertently, if such person or group notifies our board of directors
of such inadvertent purchase within five business days and within two business
days after such notice divests itself of enough common stock so that they no
longer have beneficial ownership of 15% or more of our outstanding common stock,
will not trigger a separation of the rights.
Until the separation of the rights:
. the rights will be evidenced only by, and transferred with, the
certificates evidencing, the common stock;
. new common stock certificates issued after the record date will
contain a notation incorporating the right by reference; and
. the surrender for transfer, conversion or exchange of any
certificates for common stock outstanding on or after the record
date, even without such notation, will also constitute the
transfer of the rights associated with the common stock
represented by such certificates.
As soon as practicable following the separation of the rights, separate
rights certificates will be mailed to holders of record of the common stock as
of the close of business on the date of the separation of the rights, and such
separate rights certificates alone will evidence the rights.
Expiration. The rights are not exercisable until the date of the
separation of the rights. The rights will expire at the close of business on
September 9, 2007, unless earlier redeemed, exchanged or terminated.
Post-Separation. Following the separation of the rights, holders of the
rights (other than rights beneficially owned by an acquiring person that
triggered the separation of the rights or its affiliates or associates, which
will thereafter be void) will be entitled to receive upon exercise and payment
of the exercise price that number of units of the Series X Preferred Stock which
equals the result obtained by dividing the exercise price by 50% of the market
price per share of common stock. The exercise price payable, and the number of
shares of Series X Preferred Stock or other securities or property issuable,
upon exercise of the rights are subject to adjustment from time to time to
prevent dilution.
Change of Control. After the separation of the rights, if we consolidate
or merge with another entity or sell or otherwise transfer 50% or more of our
consolidated assets or earning power, proper provision will be made so that each
rights holder (other than rights beneficially owned by an acquiring person that
triggered the separation of the rights or affiliates or associates thereof) will
thereafter have the right to receive, upon exercise, either that number of
shares of our common stock, if we are the surviving corporation of the merger or
consolidation, or of common stock in the surviving acquiring company (or, in the
event there is more than one acquiring company, the acquiring company receiving
the greatest portion of the assets or earning power transferred), which at the
time of such transaction would have a market value of two times the exercise
price of the right.
Fractional Shares. We may elect not to issue fractional shares of Series X
Preferred Stock upon exercise of a right and in lieu thereof may evidence such
fractional shares by depositary receipts or may make an adjustment in cash based
on the market price of the Series X Preferred Stock on the last trading date
prior to the date of exercise of the right.
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Redemption. At any time prior to the earlier to occur of: (i) the
separation of the rights or (ii) the expiration date, we may redeem the rights
in whole, but not in part, at a price of $.01 per right. Immediately upon the
action of our board of directors ordering redemption of the rights, the right to
exercise the rights will terminate and the only right of rights holders will be
to receive the redemption price.
Subject to applicable law, our board of directors, at its option, may, at
any time after a person or group becomes an acquiring person that triggers the
separation of the rights, exchange all or part of the then outstanding rights
(other than rights beneficially owned by such person or affiliates or associates
thereof) for our common stock at an exchange ratio equal to the exercise price
divided by the market price of one share of common stock per right, subject to
adjustment.
Relationship with Other Capital Stock. The Series X Preferred Stock
purchasable upon exercise of the rights will not be redeemable and will be, in
ranking as to dividends, on a parity with, and as to liquidation preferences,
senior to, our common stock but junior to any other series of our preferred
stock that we may issue or have issued (unless otherwise provided in the terms
of such preferred stock). Each Series X Preferred Stock will have a dividend in
an amount equal to 100 times any cash dividend declared on each share of common
stock. In the event of liquidation, the holders of Series X Preferred Stock
will be entitled to a preferred liquidation payment equal to the greater of
$100.00 or 100 times the payment made per each share of common stock. Each
share of Series X Preferred Stock will have 100 votes, voting together with the
common stock. In the event of any merger, consolidation or other transaction in
which shares of common stock are exchanged, each share of Series X Preferred
Stock will be entitled to receive 100 times the amount and type of consideration
received per share of common stock. The rights of the Series X Preferred Stock
as to dividends, liquidation and voting are protected by customary antidilution
provisions. Furthermore, until a right is exercised, the holder thereof, as
such, will have no rights as a stockholder, including, without limitation, the
right to vote or to receive dividends.
Amendments. The terms of the rights may be amended at any time by our
board of directors without the consent of rights holders in order to cure any
ambiguity or to correct or supplement any defective or inconsistent provision
and may, prior to the separation of the rights, be amended to change or
supplement any other provision in any manner that our board of directors may
deem necessary or desirable. After the separation of the rights, the terms of
the rights may be amended (other than to cure ambiguities or to correct or
supplement defective or inconsistent provisions) only so long as the amendment
does not adversely affect the interests of rights holders (other than the
acquiring person that triggers the separation of the rights).
Anti-Takeover Protection. The rights have certain anti-takeover effects.
The rights will cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired. The rights should not interfere with any merger or other
business combination approved by our board of directors because the board of
directors may, at its option, at any time prior to the separation of the rights,
redeem all but not less than all the then outstanding rights at a price of $.01
per right.
Delaware Takeover Statute
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, which prohibits a publicly-held Delaware corporation from
engaging in any "business combination" with an "interested stockholder" for
three years following the date that such stockholder became an interested
stockholder, unless:
. prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding, for purposes of determining the
number of shares outstanding, those shares owned (a) by persons who are
directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
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. on or subsequent to such date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock not owned by the interested
stockholder.
Generally, a "business combination" includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to the stockholders.
An "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior did own) 15% or more of the
corporation's voting stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Continental Stock
Transfer & Trust Company.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed
upon by Paul, Hastings, Janofsky & Walker LLP, Los Angeles, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-KSB for the year ended
December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our bylaws provide generally for indemnification of our officers,
directors, agents and employees 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. We currently maintain 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, our
stockholders have approved and incorporated provisions into our certificate of
incorporation eliminating a director's personal liability for monetary damages
to us and our 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 us or our
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.
We have entered into indemnification agreements with each of our directors
and executive officers. These agreements contractually obligate us to indemnify
our 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 us or
23
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our 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 us, and we would not benefit from
derivative recoveries against the director or officer. Such recoveries would
accrue to our benefit but would be offset by our obligations to the director or
officer under the indemnification agreement.
The above discussion of our 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 our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have 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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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:
Amount
------
SEC Filing Fee....................................... $ 2,919.84
Legal Fees and Expenses*............................. $ 15,000.00
Accounting Fees*..................................... $ 10,000.00
Printing and Miscellaneous Expenses*................. $ 5,000.16
-----------
Total*.......................................... $ 32,920.00
===========
___________________
*Indicates estimate
Item 15. Indemnification of Directors and Officers.
The Bylaws 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.
II-1
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Item 16. Exhibits.
Exhibit No. Description
----------- -----------
5.1* Opinion of Paul, Hastings, Janofsky & Walker LLP as to legality
of securities being registered.
13.1* Annual Report on Form 10-KSB for the year ended December 31,
1999.
13.2* Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2* Consent of counsel (included in Exhibit 5.1).
24.1* Power of Attorney (included in signature page).
______________
*Previously filed
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
II-2
<PAGE>
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-3
<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-2 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
June 22, 2000.
PROTEIN POLYMER TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ J. THOMAS PARMETER
-------------------------------------------
J. Thomas Parmeter, Chairman of the Board,
President & Chief Executive Officer
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<PAGE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to 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 Chief June 22, 2000
---------------------- Executive Officer
J. Thomas Parmeter (Principal Executive Officer)
* Director of Finance and Assistant Secretary June 22, 2000
--------------------------- (Principal Financial and Accounting Officer)
Janis Neves
* Director June 22, 2000
---------------------------
Richard Adelson
* Director June 22, 2000
---------------------------
Patricia J. Cornell
* Director June 22, 2000
---------------------------
Edward E. David
* Director June 22, 2000
---------------------------
Philip J. Davis
* Director June 22, 2000
---------------------------
Edward J. Hartnett
* Director June 22, 2000
---------------------------
J. Paul Jones
* Director June 22, 2000
---------------------------
Kerry L. Kuhn
* Director June 22, 2000
---------------------------
George R. Walker
</TABLE>
*By: /s/ J. THOMAS PARMETER
----------------------
J. Thomas Parmeter
Attorney-in-Fact
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
5.1* Opinion of Paul, Hastings, Janofsky & Walker LLP as to legality
of securities being registered.
13.1* Annual Report on Form 10-KSB for the year ended December 31,
1999.
13.2* Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2* Consent of counsel (included in Exhibit 5.1).
24.1* Power of Attorney (included in signature page).
______________
Previously filed
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