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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
REGISTRATION STATEMENT NO. 333-[ ]
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AVANIR PHARMACEUTICALS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 33-0314804
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
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9393 TOWNE CENTRE DRIVE, SUITE 200
SAN DIEGO, CALIFORNIA 92121
(858) 558-0364
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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GERALD J. YAKATAN, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AVANIR PHARMACEUTICALS
9393 TOWNE CENTRE DRIVE, SUITE 200
SAN DIEGO, CALIFORNIA 92121
(858) 558-0364
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
CARLOS D. HEREDIA, ESQ.
KENJI L. FUNAHASHI, ESQ.
BAKER & MCKENZIE
101 WEST BROADWAY, SUITE 1200
SAN DIEGO, CA 92101
(619) 236-1441
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED(1) UNIT(2) PRICE REGISTRATION FEE
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Class A Common Stock, no par
value per share............. 1,138,724 $2.125 $2,419,789 $640
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933. Pursuant to Rule
457(c), the maximum offering price per share is $2.125, the average of the
closing bid and closing ask prices of a share of the Registrant's Class A
common stock as reported on The American Stock Exchange on April 26, 2000,
and the maximum aggregate offering price of $2,419,789 is the product of
$2.125 and the 1,138,724 shares of the Registrant's Class A common stock
being registered hereby.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 28, 2000
PROSPECTUS
AVANIR PHARMACEUTICALS
1,138,724 shares
Class A Common Stock, no par value
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We are registering for resale 1,138,724 shares of our Class A common stock,
no par value per share, on behalf of the selling shareholders listed on page 11.
We will not receive any proceeds from the selling shareholders' sale of
their shares of Class A common stock.
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Our Class A common stock trades on The American Stock Exchange under the
trading symbol "AVN". On April 26, 2000, the closing bid price of our Class A
common stock was $2.00 and the closing ask price of our Class A common stock was
$2.25.
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INVESTING IN OUR CLASS A COMMON STOCK INVOLVES SEVERAL RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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This prospectus is dated April [[ ]], 2000.
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AVANIR PHARMACEUTICALS
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
The Company................................................. 1
Forward Looking Statements.................................. 3
Risk Factors................................................ 3
Description of Securities................................... 9
Use of Proceeds............................................. 10
Selling Shareholders........................................ 11
Plan of Distribution........................................ 13
Legal Matters............................................... 14
Experts..................................................... 14
Available Information....................................... 15
Incorporation of Certain Information by Reference........... 15
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You should rely only on the information contained or incorporated by
reference in this prospectus and in any prospectus supplement. No one has been
authorized to provide you with different information.
The shares of our Class A common stock are not being offered in any
jurisdiction where the offer is not permitted.
You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date provided on
the front page of the documents.
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SUMMARY
On behalf of the selling shareholders identified later in this prospectus,
we are registering for resale 1,138,724 shares of Class A common stock, which
consists of:
- Up to 1,088,724 shares of Class A common stock that are issuable in
connection with the potential conversion of up to 100 shares of Series D
convertible preferred stock, no par value per share; and
- 50,000 shares of Class A common stock that are issuable upon the exercise
of related Class J stock purchase warrants that we have issued to the
selling shareholders.
The number of shares of Class A common stock that we will issue in
connection with the conversion of the shares of Series D convertible preferred
stock and the exercise of the Class J stock purchase warrants may vary from time
to time, depending on the prevailing market price of our Class A common stock.
You should read the following information about our company, together with
the more detailed information about the securities underlying this offering,
contained elsewhere in this prospectus. In particular, you should read the
section entitled "Risk Factors," which explains that your investment in shares
of our Class A common stock involves a high degree of risk. Our financial
statements and related notes are not included in this prospectus, but are
incorporated by reference in the exhibits located at the end of this prospectus.
THE COMPANY
We are a development stage company organized to discover, develop and
market novel therapeutic products to treat human diseases. Since our inception
in 1988, we have operated in one business segment -- pharmaceutical product
development.
Docosanol 10% Cream: Docosanol 10% cream, a topical treatment for
oral-facial herpes or more commonly known as cold sores or fever blisters, is
our lead therapeutic product that we have been developing for over eight years.
In November 1999, the U.S. Food and Drug Administration informed us that our
clinical data for docosanol 10% cream would be sufficient for approval as an
over-the-counter product, provided that the FDA finds no serious discrepancies
from a site audit conducted at one of our clinical study sites in The
Netherlands. We currently are waiting for the FDA's assessment of this site
audit. We also have submitted proposed OTC product labeling for docosanol 10%
cream, which also is being evaluated by the FDA. If our new drug application is
approved by the FDA, then docosanol 10% cream will be the first OTC product for
cold sore treatment that will have an FDA-approved new drug application to
support claims made about the product's performance.
On March 31, 2000, we signed a license agreement with SmithKline Beecham
(NYSE: SBH), that gives SmithKline Beecham rights to manufacture and market
docosanol 10% cream in the North American OTC market as a treatment for
recurrent oral-facial herpes. We will receive payments of up to $25 million plus
royalties on product sales as consideration for these marketing rights, subject
to our achievement of various milestones, including the FDA's approval of our
new drug application, product launch and sales performance. At this time, we can
provide no assurance, however, that we will:
- Obtain a successful site audit of docosanol 10% cream, as required by the
FDA; or
- Agree with the FDA in a timely manner on labeling of this product.
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SmithKline Beecham has the right to terminate this license agreement with
us in its entirety if, among other things, the FDA does not approve docosanol
10% cream as an OTC product. Furthermore, we can give no assurance that the
proceeds from this marketing partnership will be sufficient to continue our
other drug discovery and development programs currently underway.
Other Proposed Products: We also are engaged in much earlier stages of
research and/or development of several other potential therapeutic products,
including potential new drugs for the treatment of allergies, asthma and
inflammatory diseases. These additional products will not be available for sale
to the market for several years, if at all.
Our address is 9393 Towne Centre Drive, Suite 200, San Diego, California
92121, and our telephone number is (858) 558-0364. Our e-mail address is
[email protected], and our home page address is http://www.avanir.com.
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FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements concerning future
events or performance of our company. You should not rely excessively on these
forward-looking statements, because they are only predictions based on our
current expectations and assumptions. Forward-looking statements often contain
words like "estimate," "anticipate," "believe" or "expect." Many known and
unknown risks and uncertainties could cause our actual results to differ
materially from those indicated in these forward-looking statements. You should
review carefully the risks and uncertainties identified in this prospectus,
including those explained below and in our other SEC filings including our Form
10-K for the fiscal year ended September 30, 1999 and our Form 10-Q for the
fiscal quarter ended December 31, 1999. We have no obligation to update or
announce revisions to any forward-looking statements to reflect actual events or
developments.
RISK FACTORS
We are a development stage company with a history of continuing losses and a
limited amount of capital reserves.
In the Independent Auditors' Report on our financial statements for the
fiscal year ended September 30, 1999, our auditors indicated that we would need
to raise additional capital to continue as a going concern. From our inception
through September 30, 1999, we have generated only limited revenues and have
incurred net losses totaling approximately $62.1 million. Further, we expect to
continue to incur operating losses related to research and development and
marketing activities, unless we obtain approval from the FDA of our new drug
application for docosanol 10% cream. Docosanol 10% cream still requires
regulatory approval before it can be sold in the marketplace. Even if the FDA
approves our new drug application for docosanol 10% cream, we cannot assure you
that the approval or product launch will occur in a timely manner. If we incur
any significant delays, then we would have to defer our development programs or
raise additional financing earlier than we currently contemplate. We also will
likely need to raise additional financing to support research and development
efforts that we believe are necessary to develop other new drugs.
If our amended new drug application for docosanol 10% cream does not receive FDA
approval, then our business will be materially and adversely affected.
We cannot assure you that the FDA will approve docosanol 10% cream as an
OTC product or that the FDA will approve our proposed OTC labeling. SmithKline
Beecham has the right to terminate this license agreement with us in its
entirety if, among other things, the FDA does not approve docosanol 10% cream as
an OTC product. Failure to receive FDA marketing approval could affect
materially and adversely our business operations and financial condition.
On October 29, 1999, the Center for Drug Evaluation and Research informed
us that the clinical data on the effectiveness of docosanol 10% cream in
treating recurrent oral-facial herpes would be sufficient for approval as an OTC
product, pending an acceptable audit of the data in one of the clinical studies
presented in our new drug application. The FDA asked that we submit proposed
product labeling for docosanol 10% cream as an OTC product, which we have
completed. We are currently awaiting FDA assessment of the site audit and
evaluation of our proposed product labeling.
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Neither we nor our licensees may successfully sell docosanol 10% cream as an OTC
product.
If we and/or our licensees pursue commercialization of docosanol 10% cream
as an OTC product for cold sores/fever blisters, then we will face the following
risks in our efforts to market this product:
- potential delays in achieving timely compliance with FDA regulations for
marketing an OTC product;
- development in a timely manner of a professional marketing staff and
sales communications program to launch the product;
- difficulty in building product awareness of a new OTC product among
customers or retail store decision makers;
- lack of consumer perception that docosanol 10% cream is superior to
existing and potentially new OTC products for oral herpes; and
- lack of widespread acceptance of docosanol 10% cream in the OTC consumer
market.
Docosanol 10% cream, if ultimately marketed, will face intense competition from
a number of existing and well-established products.
If successfully launched by SmithKline Beecham, docosanol 10% cream will
compete with several prescription products for oral-facial herpes currently on
the market in the U.S., as well as other products or potential products that are
or may be under development or undergoing the FDA regulatory approval process.
Most of our competitors, including Glaxo-Wellcome Inc., have greater financial
resources, research and development facilities and manufacturing and marketing
experience than we do. Docosanol 10% cream may not achieve commercial success in
this intense competitive environment, which would severely impact our revenues.
Foreign sales of docosanol 10% cream and other potential products are subject to
various foreign trade risks.
We are exposed to various foreign trade risks relating to the continued
development of docosanol 10% cream by foreign licensees. We also may arrange for
contracts in the future for the manufacture, marketing and distribution of
docosanol 10% cream overseas by foreign licensees, which will be substantially
out of our control. Our license agreement with SmithKline Beecham initially is
for the United States and Canada only, and we may not finalize any licensing or
distributorship arrangements for territories not covered by existing agreements
on favorable terms, if at all. Specific risks that could impact significantly
our ability to deliver products abroad include:
- changes in the regulatory and competitive environments in foreign
countries;
- changes in a specific country's or region's political or economic
conditions;
- difficulty in negotiating a license agreement with SmithKline Beecham for
foreign markets or in finding other foreign partners with sufficient
capital to effectively launch the product;
- shipping delays;
- difficulties in managing operations across disparate geographic areas;
- fluctuations in foreign currency exchange rates;
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- difficulties associated with enforcing agreements through foreign legal
systems; and
- trade protection measures, including customs duties and export quotas.
Our failure to comply with government regulations regarding the development,
production, testing, manufacturing and marketing of docosanol 10% cream and our
other products may affect adversely our operations.
Governmental authorities in the U.S., including the FDA, and other
countries regulate significantly the development, production, testing,
manufacturing and marketing of pharmaceutical products. The clinical testing and
regulatory approval process can take a number of years and require the
expenditure of substantial resources. Although we have completed the development
of docosanol 10% cream and are waiting for the FDA's approval, we may not obtain
regulatory approval for it or any of our other proposed products.
Failure to obtain, or delays in obtaining, these approvals will affect
adversely our business operations, including our ability to commence marketing
of any proposed products. We could use a significant portion of our financial
resources for research and development and the clinical trials necessary to
obtain these approvals for our proposed products. We will continue to incur
costs of development without any assurance that we will ever obtain regulatory
approvals. In addition, we cannot predict the extent to which adverse
governmental regulation might arise from future U.S. or foreign legislative or
administrative action. Moreover, we cannot predict with accuracy the effect of
unspecified, but possible, future changes in the regulatory approval process and
in the domestic health care system for which we develop our products. Future
changes could affect adversely the time frame required for regulatory review,
our financial resources, and the sale prices of our proposed products, if
approved for sale.
Unsuccessful research and development programs for proposed new products could
affect negatively our business.
We face substantial risks of failing to complete the development of our
early-stage research and development programs in allergy and asthma and other
areas. The effectiveness of our preclinical allergy and asthma research
performed in vitro or in animal models may not be relevant to the development
of, or indicate the efficacy of, a proposed product for human use. Unsuccessful
clinical trial results for our proposed products could affect materially and
adversely our business operations and financial condition. The development
process for medical products is lengthy and capital intensive. Our drug
development programs are exposed to all of the risks inherent in product
development based on innovative technologies, including unanticipated
development problems and the possible lack of funding that could result in the
abandonment or substantial change in the development of a specific product.
Difficulties in acquiring in-licensed technologies that we believe are necessary
to fill our product development pipeline may negatively affect our stock price
and restrict our growth.
We will face intense competition for these in-licensed products and
technologies. In addition, we might not locate suitable products and
technologies to fit our strengths or obtain them on acceptable terms, or have
the financial resources to develop products from the in-licensed technology. Our
inability to add these technologies and products to our product development
pipeline will hinder our growth and may affect negatively our business.
Our business strategy is to in-license products and/or technologies at
various stages in the drug development pipeline. To achieve this objective, we
must have the financial resources to acquire
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and/or in-license new products and technologies and develop and market the
products, once approved. For example, we signed a letter of intent with IriSys
Research and Development, LLC in February 1999 to license world-wide rights to a
product intended for use in a condition associated with neurodegenerative
diseases and pain. However, due to limited financial resources in fiscal year
1999, we deferred negotiations of a final agreement with IriSys to in-license
the product. We can provide no assurance that we will in-license this or any
other product or technology.
Our failure to retain key management and scientific personnel could affect
negatively our business.
Our success depends on the performance of a small core staff of key
management and scientific employees with biotech experience. Given our early
stage of development, we depend substantially on our ability to hire, train,
retain and motivate high quality personnel, especially our scientists and
management team in this field. If we were to lose one or more of our key
scientists, then we would lose the history and knowledge that they have which
could substantially delay one or more of our development programs until adequate
replacement personnel could be hired and trained.
Our future success also depends on our continuing ability to identify,
hire, train and retain highly qualified, technical, sales, marketing and
customer service personnel. The employment and employee retention agreements
with several of our key employees are limited in scope and provide no real
assurance that any of these people will continue their employment with our
company. We do not have "key person" life insurance policies. The industry in
which we compete has a high level of employee mobility and aggressive recruiting
of skilled personnel, which creates intense competition for qualified personnel,
particularly in product research, development, sales and marketing.
Our patents may be challenged and our pending patents may be denied, which would
seriously jeopardize our ability to compete in the intended markets for our
proposed products.
We rely substantially on the protection of our intellectual property, with
19 worldwide docosanol patents and 24 additional docosanol-related patent
applications pending. We also have ten patents issued or pending on other
products and technologies. Because of the competitive nature of the bio-
pharmaceutical industry, we cannot assure you that:
- the claims in the pending patent applications will be allowed or that we
will even be issued patents;
- present and future competitors will not develop similar or superior
technologies independently, duplicate our technologies or design around
the patented aspects of our technologies;
- our proposed technologies will not infringe other patents or rights owned
by others, including licenses which may not be available to us;
- any issued patents will provide us with significant competitive
advantages; or
- challenges will not be instituted against the validity or enforceability
of any patent that we own or, if instituted, that these challenges will
not be successful.
Our inability to obtain or maintain patent protections for our products in
foreign markets may affect negatively our financial condition.
The process for the approval of patent applications in foreign countries
may differ significantly from the process in the U.S., which may delay our plans
to market and sell docosanol 10% cream in the international market place.
Approval in one country does not necessarily indicate that approval
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can be obtained in other countries. The patent authorities in each country
administer that country's laws and regulations relating to patents independently
of the laws and regulations of any other country and we must seek and obtain the
patents separately. Our inability to obtain or maintain patent protections for
docosanol 10% cream in foreign markets would hamper severely our ability to
generate international sales from our first proposed product.
If we do not protect our technical innovations, then our business may be
negatively affected.
We rely substantially on confidentiality agreements to protect our
innovations. We cannot assure you that secrecy obligations will be honored, or
that others will not develop independently similar or superior technology. In
addition, if our consultants, key employees or other third parties apply
technological information independently developed by them or by others to our
projects, then disputes may arise as to the proprietary rights to this
information in which we may not receive a favorable resolution.
Developing new pharmaceutical products for human use involves product liability
risks, for which we currently have limited insurance coverage.
The testing, marketing and sale of pharmaceutical products involve the risk
of product liability claims by consumers and other third parties. We have
maintained product liability insurance coverage for our clinical trials in the
amount of $2 million per incident and in the aggregate. However, product
liability claims can be high in the pharmaceutical industry and our insurance
may not cover sufficiently all possible liabilities. If a suit against our
business or proposed products is successful, then the lack or insufficiency of
insurance coverage could affect materially and adversely our business and
financial condition. Furthermore, various distributors of pharmaceutical
products require minimum product liability insurance coverage before their
purchase or acceptance of products for distribution. Failure to satisfy these
insurance requirements could impede our ability to achieve broad distribution of
our proposed products.
Our Class A common stock trades on The American Stock Exchange and could be
delisted if it fails to comply with the AMEX listing requirements.
We cannot assure you that our Class A common stock will continue to comply
with the listing requirements of The American Stock Exchange. For example, our
Class A common stock was delisted from trading on the Nasdaq National Market
System on September 17, 1999, and traded on the OTC Bulletin Board from
September 20, 1999 to April 5, 2000. Our Class A common stock started trading on
The American Stock Exchange on April 6, 2000. Delisting from The American Stock
Exchange could have a material adverse effect on our ability to raise additional
capital on favorable terms, if at all, as well as on stockholder liquidity.
We may issue additional shares of our Class A common stock that may dilute the
value of our Class A common stock to current shareholders and may affect
adversely the market price of our Class A common stock.
If we raise additional capital by issuing equity securities at a price or a
value per share less than the then current price per share of Class A common
stock, then the value of the shares of Class A common stock then outstanding
will be diluted or reduced. For example, we potentially may issue and register
up to 8,137,388 shares of our Class A common stock under a two-year, $13 million
equity line agreement with Promethean Investment Group, L.L.C. that could result
in dilution in your ownership position in the company. Depending on the price
per share of our Class A common stock
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during the next two years, we may need to register additional shares for resale
to access the full amount of financing available.
In addition, there will be a dilutive effect on the shares of our Class A
common stock currently issued and outstanding from the conversion or exercise of
stock purchase warrants and stock options currently outstanding. As of April 25,
2000, the following securities were exercisable or convertible into shares of
Class A common stock:
- stock options to purchase an aggregate of 6,074,015 shares of Class A
common stock at exercise prices ranging from $0.30 to $6.44 per share;
- Class G stock purchase warrant exercisable into 757,050 shares of Class A
common stock at an exercise price of $1.375 per share;
- Class H stock purchase warrant exercisable into 100,000 shares of Class A
common stock at an exercise price of $2.40 per share;
- Class I stock purchase warrant exercisable into 11,442 shares of Class A
common stock at an exercise price of $0.78125 per share;
- Class J stock purchase warrants exercisable into 50,000 shares of Class A
common stock at exercise price of $0.9144 per share and 50,000 shares of
Class A common stock at an exercise price of $2.715 per share;
- Class K stock purchase warrant exercisable into 375,000 shares of Class A
common stock at an exercise price of $1.125 per share;
- Class L stock purchase warrant exercisable into 55,000 shares of Class A
common stock at an exercise price of $1.1875 per share;
- Class M stock purchase warrants exercisable into 467,290 shares of Class
A common stock at an exercise price of $1.284 per share;
- Class N stock purchase warrants exercisable into 263,014 shares of Class
A common stock at an exercise price of $2.44 per share; and
- 65,000 shares of Class B common stock each convertible into one share of
Class A common stock.
- 100 shares of Series D Convertible Preferred Stock.
Sales in the public market of shares of Class A common stock that underlie
stock options and warrants may affect adversely the prevailing market prices for
shares of Class A common stock. Negative price movements in the shares of Class
A common stock likely would affect adversely our ability to obtain additional
equity capital on favorable terms, if at all.
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DESCRIPTION OF SECURITIES
SERIES D CONVERTIBLE PREFERRED STOCK
On March 22, 1999, we entered into a securities purchase agreement with the
selling shareholders listed in this prospectus for the purchase of up to 500
shares of Series D convertible preferred stock and a corresponding number of
Class J stock purchase warrants. The total potential investment in Series D
convertible preferred stock was $5.0 million. On March 31, 1999, the selling
shareholders purchased 200 shares of Series D convertible preferred stock and
200 Class J stock purchase warrants for aggregate consideration of $2.0 million.
On February 18, 2000, the selling shareholders purchased an additional $1.0
million in our company consisting of 100 shares of Series D convertible
preferred stock and Class J stock purchase warrants to purchase up to 50,000
shares of Class A common stock.
The securities purchase agreement provides, among other things, that the
selling shareholders:
- purchase 200 shares of Series D convertible preferred stock and 200 Class
J stock purchase warrants, which purchase was completed on March 31,
1999;
- purchase 100 additional shares of Series D convertible preferred stock
and Class J stock purchase warrants to purchase up to 50,000 shares of
Class A common stock for additional proceeds to us of $1.0 million, which
purchase was completed on February 18, 2000; and
- have the right to purchase up to 200 additional shares of Series D
convertible preferred stock and 200 Class J stock purchase warrants for
additional proceeds to us of up to $2.0 million. This right terminated on
June 29, 1999.
The selling shareholders may convert any or all of the shares of Series D
convertible preferred stock that they acquire into shares of Class A common
stock at a conversion rate equal to $10,000 divided by a conversion price equal
to the lesser of:
- the Fixed Conversion Price -- an amount equal to $2.715 per share of
Class A common stock; or
- the Variable Conversion Price -- an amount equal to 86% of the market
price of our Class A common stock, defined as the lower of:
- the average of the five lowest trading prices per share of Class A
common stock on The American Stock Exchange during the 25 trading days
immediately preceding a given date of determination, where trading price
is determined as the average of the high and low trading prices of our
Class A common stock on a particular trading day; or
- the average of the high and low trading price per share of Class A
common stock on The American Stock Exchange on the date of
determination.
Each of the selling shareholders (and their respective affiliates) may not
convert, however, a number of shares of Series D convertible preferred stock
and/or the Class J stock purchase warrants that would result in beneficial
ownership exceeding 4.99% of the total outstanding shares of Class A common
stock following this conversion.
CLASS J STOCK PURCHASE WARRANTS
Each Class J stock purchase warrant expires five years from date of
issuance. The exercise price of the Class J stock purchase warrants is equal to
$2.715 per share of Class A common stock.
9
<PAGE> 13
REGISTRATION OF UNDERLYING SHARES OF CLASS A COMMON STOCK
Under the registration rights agreement, dated as of March 22, 1999, we
agreed to register shares of our Class A common stock for resale by the selling
shareholders from time to time in the market or in privately-negotiated
transactions. We will prepare and file such amendments and supplements to this
registration statement as may be necessary in accordance with the rules and
regulations of the Securities Act of 1933, to keep it effective until the
earlier of the date that the selling shareholders may sell such shares without
restriction pursuant to Rule 144(k) of the Securities Act of 1933, or the date
on which the selling shareholders have sold all of the shares covered by this
registration statement. We have agreed to bear certain expenses (other than
broker discounts and commissions) in connection with this registration
statement.
If the maximum number of shares under this prospectus do not cover all of
the shares of Class A common stock issued in connection with the conversion of
the Series D convertible preferred stock and the exercise of the Class J Stock
Purchase warrants, then we similarly will register the excess shares with the
SEC.
USE OF PROCEEDS
We will not receive any proceeds from the resale of any of the shares
registered under this prospectus. We will pay all fees, disbursements and
out-of-pocket expenses (other than broker discounts and commissions) in
connection with the registration of the shares of Class A common stock
registered under this prospectus. See "Selling Shareholders" for additional
information.
10
<PAGE> 14
SELLING SHAREHOLDERS
The table below lists the selling shareholders and other information
regarding the beneficial ownership of our Class A common stock by each of the
selling shareholders. Except as otherwise disclosed in this prospectus, the
selling shareholders neither have nor within the past three years had any
position, office or other material relationship with our company or any of its
predecessors or affiliates. Because the selling shareholders may offer all or a
portion of the shares of Class A common stock registered by this prospectus, we
cannot estimate the number of shares that will be held by the selling
shareholders after the sales. In addition, prior to the filing of this
prospectus, the selling shareholders may have sold, transferred or otherwise
disposed of a portion of the shares of Class A common stock registered under
this prospectus in transactions exempt from the registration requirements of the
Securities Act of 1933. With respect to the shares of Class A common stock
issuable upon conversion of the shares of Series D convertible preferred stock
and upon exercise of the Class J stock purchase warrants, the number of shares
included in this prospectus is subject to adjustment and could be materially
less or more than the estimated amounts listed in the following table due to
factors that we cannot predict on the date of this prospectus, including,
without limitation, the future price per share of our Class A common stock.
No selling shareholder can convert Series D convertible preferred stock or
exercise the Class J warrants if the conversion or exercise would cause its
beneficial ownership of Class A common stock (other than shares deemed
beneficially owned through the ownership of unconverted shares of the Series D
convertible preferred stock or unexercised Class J warrants) to exceed 4.99% of
the outstanding shares of Class A common stock. We obtained the information
provided in the table below from the selling shareholders. The selling
shareholders may sell all, some or none of their shares in this offering. See
"Plan of Distribution."
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NUMBER OF SHARES BENEFICIALLY MAXIMUM NUMBER OF SHARES CLASS A
OWNED PRIOR TO OFFERING BEING OFFERED(1) COMMON
(CLASS A COMMON STOCK) (CLASS A COMMON STOCK) STOCK
--------------------------------- ----------------------------------- BENEFICIALLY
SERIES D SERIES D OWNED
PREFERRED CLASS J PREFERRED CLASS J AFTER
NAME OF SELLING SHAREHOLDER STOCK WARRANTS(2) TOTAL STOCK(3) WARRANTS(4) TOTAL OFFERING(5)
--------------------------- --------- ----------- ------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
HFTP Investment L.L.C.(6)....... 272,181 25,000 297,181 544,362 25,000 569,362 0
AG Super Fund International
Partners, L.P.(7)............. 13,609 3,750 17,359 27,218 1,250 28,468 2,500
GAM Arbitrage Investments,
Inc.(7)....................... 13,609 3,750 17,359 27,218 1,250 28,468 2,500
Leonardo, L.P.(7)............... 163,309 45,000 208,309 326,617 15,000 341,617 30,000
Raphael, L.P.(7)................ 27,218 7,500 34,718 54,437 2,500 56,937 5,000
Ramius Fund, Ltd.(8)............ 54,436 15,000 69,436 108,872 5,000 113,872 10,000
------- ------- ------- --------- ------ --------- ------
Total......................... 544,362 100,000 644,362 1,088,724 50,000 1,138,724 50,000
======= ======= ======= ========= ====== ========= ======
</TABLE>
- -------------------------
(1) The total number of shares issuable upon conversion of the shares of Series
D convertible preferred stock and/or the exercise of the Class J stock
purchase warrants by the selling shareholders is subject to adjustment and
may deviate materially from the estimated amounts listed in the table. See
"Description of Securities."
(2) This column represents the number of shares of Class A common stock issuable
within 60 days of April 26, 2000 upon exercise of the outstanding Class J
Warrants.
(3) Represents each selling shareholder's pro-rata portion of the 1,088,724
shares of Class A common stock registered under this prospectus, based on
its relative participation in the purchase
11
<PAGE> 15
of 100 shares of Series D convertible preferred stock pursuant to the
Securities Purchase Agreement. The number of shares registered under this
prospectus is based on 200% of the number of shares issuable at the
conversion price on April 27, 2000 of $1.854375 per share of Class A common
stock plus the accrual of dividends payable in the form of shares from the
date of issuance to April 27, 2000. The conversion price of the shares of
Series D convertible preferred stock may be lower than the fixed conversion
price based on the trading price of the shares of our Class A common stock
immediately preceding the conversion of shares of Series D convertible
preferred stock held by the selling shareholders. Accordingly, the number of
shares of Class A common stock that we will issue upon conversion of the
shares of Series D convertible preferred stock and/or the exercise of the
Class J stock purchase warrants by the selling shareholders is subject to
adjustment and may deviate materially from the estimated amounts listed in
the table.
(4) This column represents the selling shareholders' pro-rata portion of the
50,000 shares issuable upon the exercise of the Class J stock purchase
warrants.
(5) This column assumes the sale of all of the shares offered by each of the
selling shareholders.
(6) Promethean Investment Group, L.L.C. is the investment manager of HFTP
Investment L.L.C., and consequently has voting control and investment
discretion over securities held by HFTP. Promethean disclaims beneficial
ownership of the shares held by HFTP. Mr. James F. O'Brien, Jr. indirectly
controls Promethean. Mr. O'Brien disclaims beneficial ownership of the
shares beneficially owned by Promethean and HFTP.
(7) Angelo, Gordon & Co., L.P. is a general partner of AG Super Fund
International Partners, L.P., Leonardo, L.P. and Raphael, L.P., and is the
investment advisor of GAM Arbitrage Investment, Inc., and thus has voting
control and investment discretion over securities held by the Angelo Gordon
entities. The ownership for each of the Angelo Gordon entities does not
include the ownership information for the other Angelo Gordon entities.
Angelo Gordon and each of its related entities disclaim beneficial ownership
of the shares held by the other Angelo Gordon entities. Mr. John M. Angelo,
the Chief Executive Officer of Angelo Gordon, and Mr. Michael R. Gordon, the
Chief Operating Officer of Angelo Gordon, are the sole general partners of
A.G. Partners, L.P., the sole general partner of Angelo Gordon.
Consequently, Mr. Angelo and Mr. Gordon may be considered beneficial owners
of any shares deemed to be beneficially owned by Angelo Gordon.
(8) AG Ramius Partners, LLC is the investment advisor to Ramius Fund, Ltd., and
consequently has voting control and investment discretion over securities
held by Ramius Fund. AG Ramius Fund disclaims beneficial ownership of the
shares held by Ramius Fund. Mr. John M. Angelo and Mr. Michael Gordon are
sole general partners of AG Partners, L.P., the sole general partner of
Angelo Gordon (which is the investment managing member of AG Ramius).
Consequently, Mr. Angelo and Mr. Gordon may be considered beneficial owners
of any shares deemed to be beneficially owned by AG Ramius.
12
<PAGE> 16
PLAN OF DISTRIBUTION
The selling shareholders have advised us that they may offer the shares of
Class A common stock registered under this prospectus to purchasers from time to
time:
- in transactions on The American Stock Exchange, in negotiated
transactions, or by a combination of these methods;
- at fixed prices that may be changed; at market prices prevailing at the
time of the resale;
- at prices related to such market prices; or
- at negotiated prices.
At the date of this prospectus, the selling shareholders have not entered
into any underwriting arrangements. The selling shareholders may sell the shares
registered under this prospectus to or through:
- ordinary brokers' transactions;
- transactions involving cross or block trades or otherwise on The American
Stock Exchange;
- purchases by brokers, dealers or underwriters who may receive
compensation in the form of discounts or commissions from the selling
shareholders or the purchasers of these shares, for whom the
broker-dealers may act as agent or principal, or both;
- "at the market" to or through market makers or into an existing market
for our Class A common stock;
- in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected by agents;
- through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise);
- in privately negotiated transactions;
- to cover short sales; or
- any combination of the foregoing.
From time to time, one or more of the selling shareholders may pledge,
hypothecate or grant a security interest in some or all of the shares of Class A
common stock registered under this prospectus owned by them, and the pledgees,
secured parties or persons to whom such shares have been hypothecated shall,
upon foreclosure in the event of default, be deemed to be selling shareholders
under this prospectus. The number of shares of Class A common stock registered
under this prospectus and beneficially owned by those selling shareholders who
so transfer, pledge, donate or assign those shares will decrease as and when
they take such actions. The plan of distribution for shares sold under this
prospectus will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be selling shareholders under this
prospectus. In addition, a selling shareholder may, from time to time, sell
short shares of Class A common stock. In such instances, this prospectus may be
delivered in connection with such short sales and the shares of Class A common
stock offered hereby may be used to cover such short sales.
A selling shareholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of our Class A
common stock in the course of hedging the
13
<PAGE> 17
positions they assume with that selling shareholder, including, without
limitation, in connection with distributions of our Class A common stock by the
broker-dealers. A selling shareholder also may enter into option or other
transactions with broker-dealers that involve the delivery of the shares of
Class A common stock registered under this prospectus to the broker-dealers, who
then may resell or otherwise transfer these shares. A selling shareholder also
may loan or pledge the shares of Class A common stock registered under this
prospectus to a broker-dealer and the broker-dealer may sell the shares so
loaned or upon a default may sell or otherwise transfer the pledged shares.
Broker, dealers, underwriters or agents participating in the distribution
of the shares of Class A common stock registered under this prospectus as agents
may receive compensation in the form of commissions, discounts or concessions
from the selling shareholders and/or purchasers of our Class A common stock for
whom the broker-dealers may act as agent, or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be less than or
in excess of customary commissions). The selling shareholders and any
broker-dealers who act in connection with the sale of the shares of Class A
common stock under this prospectus may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, and any commissions they receive and
proceeds of any sale of the shares of Class A common stock may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. Neither
we nor any of the selling shareholders can presently estimate the amount of this
compensation. We know of no existing arrangements between any of the selling
shareholders, any other shareholder, broker, dealer, underwriter or agent
relating to the sale or distribution of the shares of Class A common stock
registered under this prospectus.
We will pay substantially all of the expenses relating to the registration,
offer and sale of the shares of Class A common stock registered under this
prospectus to the public other than commissions or discounts of underwriters,
broker-dealers or agents. We also have agreed to indemnify the selling
shareholders and related persons against any losses, claims, damages or
liabilities under the Securities Act of 1933 or otherwise that arise out of, or
are based upon, any untrue or alleged untrue statement of a material fact or the
omission or alleged omission instating a material fact under this registration
statement or prospectus.
To the extent that indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers and
controlling persons, we have been advised that, in the opinion of the SEC, this
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore, unenforceable.
LEGAL MATTERS
The validity of the securities offered hereby have been passed upon for our
company by Baker & McKenzie, San Diego, California.
EXPERTS
The financial statements incorporated in this prospectus by reference from
our Annual Report on Form 10-K for the year ended September 30, 1999 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference (which report expresses an
unqualified opinion and includes explanatory paragraphs relating to our status
as a development stage enterprise, our ability to continue as a going concern,
and our status as a defendant in certain lawsuits), and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
14
<PAGE> 18
AVAILABLE INFORMATION
We are required to follow the reporting requirements of the Securities
Exchange Act of 1934. To comply with these requirements, we file a number of
reports, including annual and quarterly reports, proxy statements, information
statements and other information with the SEC. You may inspect and copy any of
this information that we have filed with the SEC at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the SEC's regional offices located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, IL 60661-2511. You may obtain information
on the operation of the public reference room by calling the Commission at
1-800-SEC-0330. You also may obtain copies of such material at prescribed rates
from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. You also may inspect such reports, proxy
statements, information statements and other information concerning us at the
offices of The American Stock Exchange, 86 Trinity Place, New York, NY 10004.
You also may access the materials that we file electronically with the SEC at
the SEC's website (http://www.sec.gov), which contains the reports, proxy
statements, information statements and other information that we file
electronically with the SEC.
We have filed with the SEC a Registration Statement on Form S-3 under the
Securities Act of 1933, with respect to the shares covered by this prospectus.
This prospectus does not contain all of the information set forth in the
registration statement, because certain parts are omitted in accordance with the
rules and regulations of the SEC. Statements made in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete and, with respect to each such contract, agreement or other
document filed as an exhibit to the registration statement, we refer you to such
exhibit for a more complete description of the matter involved. Each such
statement is deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We incorporate by reference in this prospectus and encourage you to read
the following documents that we have filed with the SEC pursuant to the
requirements of the Securities Exchange Act of 1934:
1. Our Annual Report on Form 10-K for the fiscal year ended September
30, 1999 filed with the SEC on January 13, 2000;
2. Our Definitive Proxy Statement filed with the SEC on January 26,
2000;
3. Our Current Reports on Form 8-K filed with the SEC on October 4,
1999, December 3, 1999, February 4, 2000, February 23, 2000 and April 19,
2000;
4. Our Quarterly Report on Form 10-Q for the quarter ended December
31, 1999 filed with the SEC on February 14, 2000; and
5. The description of our Class A common stock contained in our
Registration Statement on Form 8-A filed with the SEC on April 5, 2000,
including any amendments or reports filed for the purpose of updating the
description.
We also incorporate by reference as part of this prospectus and encourage
you to read all reports and other documents that we have filed (or will file)
with the SEC under the Securities Exchange Act of 1934, that are after the date
of this prospectus and before the termination of the offering of the shares
registered under this prospectus. You should understand that, if any statement
contained in
15
<PAGE> 19
a report or document that is incorporated by reference in this prospectus is
modified or superseded, then the later filed report or document will modify or
supersede the statements contained in this prospectus.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon the written or oral
request of that person, a copy of any and all documents incorporated by
reference in this prospectus (not including, however, the exhibits to those
documents unless those exhibits are specifically incorporated by reference in
such documents). Requests should be sent to the attention of the secretary of
our company, at 9393 Towne Centre Drive, Suite 200, San Diego, California 92121
or you may call and ask for the Secretary of our company at (858) 558-0364.
16
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated cumulative expenses of this registration of shares of our
Class A common stock for resale by the selling shareholders, all of which are to
be paid by the registrant in connection with the issuance and distribution of
the shares being registered, are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 640
Accounting Fees and Expenses................................ 3,000
Legal Fees and Expenses..................................... 3,000
Blue Sky Fees and Expenses.................................. 500
Transfer Agent's Fees and Expenses.......................... 500
Miscellaneous Expenses...................................... 2,000
------
Total............................................. $9,640
======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We hereby incorporate by reference Sections 204(a)(10) and (11), 204.5 and
317 of the California General Corporation Law which covers the indemnification
of directors, officers, employees and agents of a corporation. We refer you to
Article 6 of our Restated Articles of Incorporation, and Section 3.15 of our
Amended and Restated Bylaws, which provide for indemnification by our company in
the manner and to the full extent permitted by California law.
Beginning August 10, 1992, we have maintained directors' and officers'
liability insurance with policy limits of $7,500,000. The policy covers 100
percent of losses arising from, among other things, claims of breach of duty,
neglect, error, alleged misstatement, misleading statement or omission by the
directors and officers in their capacity as such. Payment for loss would be made
to or on our behalf where we are required or permitted to indemnify directors or
officers for covered losses pursuant to statutory or common law, our Restated
Articles of Incorporation or Amended and Restated Bylaws or by agreement. The
policy provides for retention of $5,000 per director or officer, subject to a
maximum of $10,000 for each loss, except in the case of payment for loss to or
on our behalf, in which case the retention is $100,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
1.1 Underwriting Agreement(1)
4.1 Class D Warrant Agreement (including form of Class D Warrant
Certificate)(2)
4.2 Warrant Agreement (including form of Class E Warrant
Certificate)(2)
4.3 Form of Unit Purchase Option issued to D.H. Blair & Co.,
Inc. and its designees regarding Series B Preferred Stock
and Class D Warrants(2)
4.4 Registration Rights Agreement(2)
4.5 Certificate of Determination with respect to Series D
Convertible Preferred Stock of the Registrant(3)
4.6 Certificate of Determination with respect to Series C Junior
Participating Preferred Stock of the Registrant(3)
4.7 Rights Agreement, dated as of March 5, 1999, with American
Stock Transfer & Trust Company(3)
</TABLE>
II-1
<PAGE> 21
<TABLE>
<C> <S>
4.8 Form of Rights Certificate with respect to the Rights
Agreement, dated as of March 5, 1999(3)
4.9 Form of Series D Convertible Preferred Stock Certificate(3)
4.10 Amended and Restated Class I Stock Purchase Warrant, dated
as of March 4, 1999(3)
4.11 Form of Class J Stock Purchase Warrant(3)
4.12 Class K Stock Purchase Warrant, dated as of April 1, 1999(3)
4.13 Registration Rights Agreement with Promethean Investment
Group, LLC(3)
4.14 Class A Common Stock Investment Agreement with Promethean
Investment Group, LLC(3)
4.15 Amendment to the Class A Common Stock Investment Agreement
with Promethean Investment Group, LLC(3)
4.16 Securities Purchase Agreement for Series D Convertible
Preferred Stock(3)
4.17 Registration Rights Agreement for Series D Convertible
Preferred Stock(3)
4.18 Forms of Class A and Class B Common Stock Certificates(4)
4.19 Convertible Note issued to GFL Advantage Fund Limited(5)
4.20 Registration Rights Agreement with GFL Advantage Fund
Limited(5)
4.21 Convertible Note issued to Capital Ventures International(6)
4.22 Registration Rights Agreement with Capital Ventures
International(6)
4.23 Convertible Note, dated February 26, 1997, issued to RGC
International Investors LLC(7)
4.24 Form of Class G Stock Purchase Warrant(7)
4.25 Registration Rights Agreement, dated February 26, 1997, with
RGC International Investors, LLC(7)
4.26 Class L Stock Purchase Warrant, dated as of June 8, 1999(8)
4.27 Loan Agreement, dated as of November 23, 1999, with AMRO
International, S.A. and Endeavour Capital Fund, S.A.(9)
4.28 Form of 11% Convertible Debenture(9)
4.29 Form of Stock Purchase Warrant(9)
4.30 Registration Rights Agreement, dated as of November 23,
1999, with AMRO International, S.A. and Endeavour Capital
Fund, S.A.(9)
4.31 Amendment No. 1 to Rights Agreement, dated as of November
30, 1999, with American Stock Transfer & Trust Company(9)
4.32 Common Stock Purchase Agreement, dated as of January 25,
2000, with Bayview LLC, Roseworth Group Ltd. and Endeavour
Capital Fund, S.A.(10)
4.33 Registration Rights Agreement, dated as of January 25, 2000,
with Bayview LLC, Roseworth Group Ltd. and Endeavour Capital
Fund, S.A.(10)
4.34 Form of Stock Purchase Warrant(10)
5.1 Opinion of Baker & McKenzie
23.1 Independent Auditors' Consent
</TABLE>
- -------------------------
(1) Incorporated by reference to the similarly described exhibits filed in
connection with the Registrant's Registration Statement on Form S-1, File
No. 33-37166, declared effective by the Securities and Exchange Commission
on November 9, 1990.
(2) Incorporated by reference to the similarly described exhibit included with
the Registrant's Registration Statement on Form S-1, File No. 33-49082,
declared effective by the Commission on October 26, 1992.
(3) Incorporated by reference to the similarly described exhibit included with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999, filed May 17, 1999.
II-2
<PAGE> 22
(4) Incorporated by reference to the similarly described exhibit included with
the Registrant's Registration Statement on Form S-1, File No. 33-32742,
declared effective by the Commission on May 8, 1990.
(5) Incorporated by reference to the similarly described exhibit included with
the Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, filed December 15, 1995.
(6) Incorporated by reference to the similarly described exhibit included with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, filed May 15, 1996.
(7) Incorporated by reference to the similarly described exhibit included with
the Registrant's Form 8-K, filed March 10, 1997.
(8) Incorporated by reference to the similarly described exhibit included with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999, filed August 16, 1999.
(9) Incorporated by reference to the similarly described exhibit included with
the Registrant's Form 8-K, filed December 3, 1999.
(10) Incorporated by reference to the similarly described exhibit included with
the Registrant's Form 8-K, filed February 4, 2000.
ITEM 17. UNDERTAKINGS.
We hereby undertake:
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 this 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; and
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.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities registered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions of its Restated Articles of Incorporation
and Amended and Restated By-laws of the registrant, the California General
Corporation Law or otherwise, the registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act of 1933,
II-3
<PAGE> 23
and is therefore unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the issuer 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, then
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 of 1933, and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, there unto duly
authorized, in the City of San Diego, State of California, on April 28, 2000.
AVANIR PHARMACEUTICALS
By: /s/ GERALD J. YAKATAN, PH.D.
------------------------------------
Gerald J. Yakatan, Ph.D.
President and Chief Executive
Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Gerald J. Yakatan, Ph.D. and
Gregory P. Hanson, and each of them acting individually, as his
attorney-in-fact, each with full power of substitution and resubstititution, for
him in any and all capacities, to sign any and all amendments to this
registration statement, and to file the same, with exhibits thereto and other
documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys-in-fact to any and all amendments to this
registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on April 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ GERALD J. YAKATAN, PH.D. President and Chief Executive Officer
- --------------------------------------- (Principal Executive Officer)
Gerald J. Yakatan, Ph.D.
/s/ GREGORY P. HANSON Vice President, Finance and Chief
- --------------------------------------- Financial Officer (Principal Financial
Gregory P. Hanson and
Accounting Officer)
/s/ GEORGE P. RUTLAND Chairman of the Board of Directors
- ---------------------------------------
George P. Rutland
/s/ DENNIS J. CARLO, PH.D. Director
- ---------------------------------------
Dennis J. Carlo, Ph.D.
/s/ MICHAEL W. GEORGE Director
- ---------------------------------------
Michael W. George
/s/ JAMES B. GLAVIN Director
- ---------------------------------------
James B. Glavin
</TABLE>
II-5
<PAGE> 25
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ EDWARD L. HENNESSY, JR. Director
- ---------------------------------------
Edward L. Hennessy, Jr.
/s/ KENNETH E. OLSON Director
- ---------------------------------------
Kenneth E. Olson
/s/ JOSEPH E. SMITH Director
- ---------------------------------------
Joseph E. Smith
</TABLE>
II-6
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Underwriting Agreement(1)
4.1 Class D Warrant Agreement (including form of Class D Warrant
Certificate)(2)
4.2 Warrant Agreement (including form of Class E Warrant
Certificate)(2)
4.3 Form of Unit Purchase Option issued to D.H. Blair & Co.,
Inc. and its designees regarding Series B Preferred Stock
and Class D Warrants(2)
4.4 Registration Rights Agreement(2)
4.5 Certificate of Determination with respect to Series D
Convertible Preferred Stock of the Registrant(3)
4.6 Certificate of Determination with respect to Series C Junior
Participating Preferred Stock of the Registrant(3)
4.7 Rights Agreement, dated as of March 5, 1999, with American
Stock Transfer & Trust Company(3)
4.8 Form of Rights Certificate with respect to the Rights
Agreement, dated as of March 5, 1999(3)
4.9 Form of Series D Convertible Preferred Stock Certificate(3)
4.10 Amended and Restated Class I Stock Purchase Warrant, dated
as of March 4, 1999(3)
4.11 Form of Class J Stock Purchase Warrant(3)
4.12 Class K Stock Purchase Warrant, dated as of April 1, 1999(3)
4.13 Registration Rights Agreement with Promethean Investment
Group, LLC(3)
4.14 Class A Common Stock Investment Agreement with Promethean
Investment Group, LLC(3)
4.15 Amendment to the Class A Common Stock Investment Agreement
with Promethean Investment Group, LLC(3)
4.16 Securities Purchase Agreement for Series D Convertible
Preferred Stock(3)
4.17 Registration Rights Agreement for Series D Convertible
Preferred Stock(3)
4.18 Forms of Class A and Class B Common Stock Certificates(4)
4.19 Convertible Note issued to GFL Advantage Fund Limited(5)
4.20 Registration Rights Agreement with GFL Advantage Fund
Limited(5)
4.21 Convertible Note issued to Capital Ventures International(6)
4.22 Registration Rights Agreement with Capital Ventures
International(6)
4.23 Convertible Note, dated February 26, 1997, issued to RGC
International Investors LLC(7)
4.24 Form of Class G Stock Purchase Warrant(7)
4.25 Registration Rights Agreement, dated February 26, 1997, with
RGC International Investors, LLC(7)
4.26 Class L Stock Purchase Warrant, dated as of June 8, 1999(8)
4.27 Loan Agreement, dated as of November 23, 1999, with AMRO
International, S.A. and Endeavour Capital Fund, S.A.(9)
4.28 Form of 11% Convertible Debenture(9)
4.29 Form of Stock Purchase Warrant(9)
4.30 Registration Rights Agreement, dated as of November 23,
1999, with AMRO International, S.A. and Endeavour Capital
Fund, S.A.(9)
4.31 Amendment No. 1 to Rights Agreement, dated November 30,
1999, with American Stock Transfer & Trust Company(9)
4.32 Common Stock Purchase Agreement, dated as of January 25,
2000, with Bayview LLC, Roseworth Group Ltd. and Endeavour
Capital Fund, S.A.(10)
</TABLE>
II-7
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4.33 Registration Rights Agreement, dated as of January 25, 2000,
with Bayview LLC, Roseworth Group Ltd. and Endeavour Capital
Fund, S.A.(10)
4.34 Form of Stock Purchase Warrant(10)
5.1 Opinion of Baker & McKenzie
23.1 Independent Auditors' Consent
</TABLE>
- -------------------------
(1) Incorporated by reference to the similarly described exhibits filed in
connection with the Registrant's Registration Statement on Form S-1, File
No. 33-37166, declared effective by the Securities and Exchange Commission
on November 9, 1990.
(2) Incorporated by reference to the similarly described exhibit included with
the Registrant's Registration Statement on Form S-1, File No. 33-49082,
declared effective by the Commission on October 26, 1992.
(3) Incorporated by reference to the similarly described exhibit included with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999, filed May 17, 1999.
(4) Incorporated by reference to the similarly described exhibit included with
the Registrant's Registration Statement on Form S-1, File No. 33-32742,
declared effective by the Commission on May 8, 1990.
(5) Incorporated by reference to the similarly described exhibit included with
the Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, filed December 15, 1995.
(6) Incorporated by reference to the similarly described exhibit included with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, filed May 15, 1996.
(7) Incorporated by reference to the similarly described exhibit included with
the Registrant's Form 8-K, filed March 10, 1997.
(8) Incorporated by reference to the similarly described exhibit included with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999, filed August 16, 1999.
(9) Incorporated by reference to the similarly described exhibit included with
the Registrant's Form 8-K, filed December 3, 1999.
(10) Incorporated by reference to the similarly described exhibit included with
the Registrant's Form 8-K, filed February 4, 2000.
II-8
<PAGE> 1
EXHIBIT 5.1
Opinion of Baker & McKenzie
April 28, 2000
AVANIR Pharmaceuticals
9393 Towne Centre Drive, Suite 200
San Diego, California 92121
Ladies and Gentlemen:
We have acted as counsel to AVANIR Pharmaceuticals, a California
corporation (the "Company"), in connection with its filing with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), of a Registration Statement on Form S-3, filed with the SEC
on April 28, 2000, including exhibits thereto (the "Registration Statement"),
covering 800,000 shares (the "Shares") of the Company's Class A Common Stock, no
par value per share.
We have examined the originals, or photostatic or certified copies, of
such records of the Company, certificates of officers of the Company and of
public officials, and such other documents as we have deemed relevant and
necessary as the basis of the opinion set forth below. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as photostatic or certified copies and the
authenticity of the originals of such copies.
Based upon our examination, we are of the opinion that the Shares have
been validly authorized and are legally issued, fully paid and non-assessable.
We express no opinion as to the applicability of, compliance with, or
effect of federal law or the law of any jurisdiction other than the General
Corporation Law of the State of California.
We hereby consent to the use of our opinion as herein set forth as an
exhibit to the Registration Statement and to the use of our name under the
caption "Legal Matters" in the prospectus forming a part of the Registration
Statement. This consent is not to be construed as an admission that we are a
person whose consent is required to be filed with the Registration Statement
under the provisions of the Securities Act.
Very truly yours,
BAKER & MCKENZIE
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
AVANIR Pharmaceuticals:
We consent to the incorporation by reference in this Registration Statement of
AVANIR Pharmaceuticals, formerly LIDAK Pharmaceuticals (a development stage
enterprise) (the "Company") on Form S-3, of our report dated December 21, 1999
(which expresses an unqualified opinion and includes explanatory paragraphs
relating to the status of the Company as a development stage enterprise, the
Company's ability to continue as a going concern, and the Company as a defendant
in certain lawsuits), appearing in the Annual Report on Form 10-K of AVANIR
Pharmaceuticals for the year ended September 30, 1999, and to the reference to
us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
San Diego, California
April 28, 2000
