As filed with the Securities and Exchange Commission on June 13, 1996.
Registration No. 333-4050
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
biosys, inc.
(Exact name of Registrant as specified in its charter)
Delaware 2879 94-2878645
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification)
organization)
10150 Old Columbia Road
Columbia, Maryland 21046
(410) 381-3800
(Address, including zip code, and telephone
number, including area code, of
Registrant's principal executive
offices)
EDWIN C. QUATTLEBAUM
Chief Executive Officer
biosys, inc.
10150 Old Columbia Road, Columbia, Maryland 21046
(410) 381-3800
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copy to:
BRUCE E. SCHAEFFER, ESQ.
Gray Cary Ware & Freidenrich
A Professional Corporation
400 Hamilton Avenue
Palo Alto, CA 94301
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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 such Section 8(a),
may determine.
<PAGE>
2,311,111 Shares
biosys, inc.
Common Stock
The 2,311,111 shares of Common Stock of biosys, inc. ("biosys" or the
"Company") offered by this Prospectus are shares of Common Stock issuable or
potentially issuable upon conversion of 780 shares of Series A Preferred Stock
of biosys (the "Preferred Shares") that may be sold from time to time by or on
behalf of certain stockholders (the "Selling Stockholders") of the Company
described in this Prospectus under "Selling Stockholders." The Selling
Stockholders acquired the Preferred Shares from the Company in a private
offering made in reliance upon Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"). The Company has agreed to initially register
under the Securities Act a number of shares of Common Stock equal to at least
two times the number of shares of Common Stock that would be issuable if all the
Preferred Shares were converted at the Fixed Conversion Price (as defined herein
under "Risk Factors -- Need for Additional Funds and No Assurance of Available
Financing") and to register an additional number of shares of Common Stock if
the number of shares of Common Stock initially registered is insufficient to
cover all of the Common Stock issued or issuable upon conversion of the
Preferred Shares in accordance with the terms thereof (the number of shares of
Common Stock initially registered and any additional shares of Common Stock
registered are hereinafter collectively referred to as the "Shares"). The
Company has also agreed to use its best efforts to cause the registration
statement(s) covering the Shares to be declared effective and to remain
effective for up to three (3) years following the initial closing of the sale of
the Preferred Shares on March 22, 1996. The Company will not receive any of the
proceeds from the sale of the Shares by the Selling Stockholders.
The Company has been advised by the Selling Stockholders that they
intend to sell all or a portion of the Shares from time to time in the Nasdaq
National Market, in negotiated transactions or otherwise, and on terms and at
prices then obtainable. The Selling Stockholders and any broker-dealers, agents
or underwriters that participate with the Selling Stockholders in the
distribution of any of the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commission received by them and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The Company and
the Selling Stockholders have agreed to certain indemnification arrangements.
See "Plan of Distribution."
The Company will bear all costs and expenses incident to the offering
and sale of the Shares to the public, including without limitation,
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the Selling Stockholders, but excluding any
underwriting discounts and commissions.
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES
LAWS OF ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR
DEALERS EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF
THE SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS
OCCUR, OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
The Company's Common Stock is listed on the Nasdaq National Market
under the symbol "BIOS". On May 31, 1996, the last sales price of the Company's
Common Stock as reported on the Nasdaq National Market was $5.75.
See "Risk Factors" beginning on page 3 for
information that should be considered by prospective
purchasers of the Shares offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _______, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the fees prescribed by the Commission. biosys' Common Stock is
traded on the Nasdaq National Market. Reports and other information concerning
biosys can also be inspected at the offices of the National Association of
Securities Dealers, Inc., Market Listing Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has also filed with the Commission a Registration Statement
on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement, copies of which may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
1. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed on January 29,
1992;
2. Form 10-K for the fiscal year ended December 31, 1995;
3. Form 10-K/A for the fiscal year ended December 31, 1995, filed June 5,
1996;
4. Form 8-K dated January 3, 1996;
5. Form 8-K dated March 15, 1996;
6. Form 10-C dated March 15, 1996;
7. Form 8-K dated March 22, 1996;
8. Form 10-Q for the three months ended March 31, 1996; and
9. Form 10-Q/A for the three months ended March 31, 1996, filed
May 24, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated by reference in this Prospectus (other than
any exhibits thereto). Requests for such documents should be directed to biosys,
inc. at 10150 Old Columbia Road, Columbia, Maryland 21046, Attn: Secretary.
<PAGE>
THE COMPANY
biosys develops and markets biological pesticide products based on
beneficial nematode, pheromone and baculovirus technologies for the control of a
wide range of insect pests. Using advanced science and technology, biosys
develops and manufactures environmentally safe and effective products for
detection, monitoring and control of insects in agricultural, professional and
consumer markets. biosys also has diversified its business into the contract
manufacturing for others of biological pesticides, and other industrial
fermentation products.
Effective March 15, 1996, biosys completed an acquisition (the
"Merger") of AgriDyne Technologies Inc. ("AgriDyne") whereby AgriDyne became a
wholly-owned subsidiary of the Company. The Merger will be treated as a purchase
for accounting and financial reporting purposes. Upon the effective time of the
Merger, the Company issued approximately 1.9 million shares of its Common Stock
for all of the outstanding shares of AgriDyne's Common Stock based on a
conversion ratio of 0.28664 of a share of biosys Common Stock for each share of
AgriDyne Common Stock, after giving effect to the one for two and one-half
reverse stock split of the Comon Stock of biosys effected immediately prior to
the Merger (the "Reverse Stock Split").
All share and per share amounts in this Prospectus have been adjusted
to give effect to the Reverse Stock Split.
The principal executive offices of biosys are currently located at
10150 Old Columbia Road, Columbia, Maryland 21046 and its telephone number is
(410) 381-3800.
RISK FACTORS
The following risk factors should be considered in conjunction with the
other information included and incorporated by reference in this Prospectus
before purchasing the Common Stock offered hereby. This Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results could differ materially from those projected in the forward-looking
statements as a result of the risk factors set forth below and elsewhere in this
Prospectus.
No Assurance biosys' and AgriDyne's Businesses Can Be Successfully
Combined. After the Merger, biosys is a more complex and diverse company than
either biosys or AgriDyne prior to the Merger, and its several distinct business
operations will present challenges for the Company's management. biosys will
need to successfully integrate and manage the companies' respective product
offerings, coordinate their sales and marketing and research and development
efforts and reduce expenses by eliminating duplicative facilities and
infrastructure, as well as prioritizing product development and by reducing
other expenses. The inability of management to complete the foregoing in a
manner which minimizes the disruption of ongoing operations and interruption of
revenue generating activities could have a material adverse effect on the
Company's business, financial condition and results of operations.
The integration of certain operations following the Merger will require
the dedication of management resources which may temporarily distract attention
from the day-to-day business of the Company. The inability of management to
successfully integrate the operations of the two companies could have an adverse
effect on the business and results of operations of the Company. There can be no
assurance that the Company will be able to reduce expenses, that there will not
be high costs associated with integration activities, that such reductions will
not result in a decrease in revenue or that there will not be other material
adverse effects of such activities.
All products under development will be reviewed to determine if the
likelihood of successful development and the market potential for the product
justify the expenses and personnel required to be devoted to the product.
Termination of programs could require substantial effort by senior management to
identify and negotiate possible out-licensing opportunities to preserve any
residual value for terminated programs.
While the management and Board of biosys believes that the combination
can be effected in a manner that will enhance the greater value expected from
combining the two companies, there can be no assurance that the process can be
effectively managed to achieve anticipated results.
Transaction and Merger Charges. biosys anticipates that it will
incur an aggregate of approximately $750,000 of direct transaction costs in
the Merger. The majority of these costs have been incurred as of March 31, 1996.
Need for Additional Funds and No Assurance of Available Financing.
biosys experienced negative cash flow from operations in 1995 and it is expected
that biosys will continue to experience negative operating cash flow through the
end of the second quarter of 1996 and potentially thereafter. Even with the cash
and cash equivalents of AgriDyne, the net proceeds from the Preferred Share
Financing (defined below) and projected improvements in cash flow from
operations, the funding of future operations may require further infusion of
capital. There can be no assurances that adequate revenue growth and reduction
of operating losses will be achieved, and even if they are, management of biosys
may choose to supplement the Company's cash position. Potential sources of
additional funding include private equity financing, mergers, collaborative
research arrangements or strategic marketing partnerships. Under the terms of
the Line of Credit Facility (defined below), CGI Credit Facility (defined below)
and Lease Financing (defined below), approval is required before biosys may
enter into any merger or acquisition or enter into a major debt agreement. Under
the terms of the Preferred Share Financing, approval is required before biosys
may enter into any preferred share financing and may be required under certain
circumstances before biosys may enter into any merger or acquisition. If
additional funds are raised by biosys through the issuance of equity securities
or securities convertible into or exercisable for equity securities, the
percentage ownership of the then current stockholders of biosys will be reduced.
biosys may issue an additional series of preferred stock with rights,
preferences or privileges senior to those of the biosys Common Stock. biosys
does not have any commitments or arrangements to obtain any funding and there
can be no assurance that any required financing of biosys will be available on
acceptable terms, if at all. The unavailability of any required financing, the
inability to renegotiate current debt financing arrangements required to be
renegotiated by the terms thereof as described below or the risks affecting
financial performance referenced herein could prevent or delay the continued
development and marketing of the Company's products, may require curtailment of
the Company's operations and could result in the bankruptcy or insolvency of
biosys.
On December 22, 1995, biosys sold an aggregate of 866,710 shares of
biosys Common Stock (the "Domestic Financing Shares") at $3.475 per share or an
aggregate purchase price of $3,012,000 to a group of investors led by Palo Alto
Investors (the "unaffiliated domestic investors") and a group of investors (the
"IVP investors") affiliated with Samuel D. Colella, Chairman of the Board of
Directors of biosys, (the "Domestic Equity Financing"). Approximately $1,500,000
of the aggregate purchase price was paid in the form of cash out cancellation of
indebtedness in the amount of approximately $750,000 to each of the unaffiliated
investors and the IVP investors. The Domestic Financing Shares were offered and
sold in reliance on the exemption from registration with the Securities Act set
forth in Regulation D under the Securities Act. In accordance with the stock
purchase agreement among biosys and the purchasers of the Domestic Financing
Shares, biosys will use its best efforts to effect a "shelf" registration of the
Domestic Financing Shares under the Securities Act and to keep such registration
statement effective for up to two years after the closing.
On March 26, 1996, biosys completed the sale of an aggregate
of 780 shares of biosys Series A Preferred Stock (the "Preferred Shares") at
$10,000 per share or an aggregate purchase price of $7.8 million, which resulted
in net proceeds of $7.25 million after the payment of placement fees of
approximately $550,000, to a group of institutional accredited investors in a
private placement (the "Preferred Share Financing"). The Preferred Shares were
offered and sold in reliance on the exemption from registration under the
Securities Act set forth in Regulation D under the Securities Act. In connection
with the issuance of the Preferred Shares, warrants to purchase up to 80,889
shares of biosys Common stock were issued to the placement agent and related
parties (the "Warrants"). The Warrants are exercisable over a five-year term and
have an exercise price of $6.75. In accordance with the registration rights
agreements between biosys and the purchasers of the Preferred Shares, biosys
will use its best efforts to effect a "shelf" registration of the Common Stock
issuable upon conversion of the Preferred Shares and exercise of the Warrants
and to keep such registration statement effective for up to three years after
the closing.
The Preferred Shares may be converted into biosys Common Stock at a
conversion price which is the lower of (i) $6.75 (the "Fixed Conversion Price"),
or (ii) 85% of the average closing bid price for the five trading days prior to
the date the investor gives notice of conversion. The Preferred Shares shall
automatically be converted into biosys Common Stock, if not previously
converted, on March 22, 1999. The Preferred Shares principal amount accretes at
an annual rate of 8%, payable in stock upon conversion to biosys Common Stock.
The Preferred Shares may be redeemed at the option of the Company at the time of
conversion at a price that would give the investor the same return as he would
have received had he converted on the day the redemption occurs and sold the
Common Stock issued upon conversion. biosys also may, at its option, redeem the
Preferred Shares commencing at any time after March 26, 1997 at a price per
share equal to a specified percentage, commencing at 130% and declining at 115%
in 1999, of the original purchase price plus all accrued and unpaid accretion.
No Assurance of Ability to Comply with Covenants of Loan Agreements or CGI
Loan Modification Agreement. biosys has a working capital line of credit with
Imperial Bank ("Imperial") entered into during 1995, as amended on July 21,
1995, September 13, 1995, November 14, 1995, December 20, 1995, February 9,
1996, March 12, 1996 and May 13, 1996 (the "Line of Credit Facility") that
allows for borrowings of up to $5,250,000. As of March 31, 1996, $4,000,000 was
outstanding under the Line of Credit Facility. Of the allowable borrowings, a
portion of borrowings under the Line of Credit Facility may not exceed the
lesser of $4,000,000 or the eligible borrowing base, calculated as the sum of
percentages of eligible accounts receivable and domestic inventory, net of
reserves. An overline portion of the Line of Credit Facility in the amount of
$1,250,000 was repaid on March 26, 1996 (the "overline portion"). The Company is
obligated to comply with certain financial covenants under the Line of Credit
Facility unless otherwise waived heretofore. Through March 31, 1996, biosys
breached certain covenants under the Line of Credit Facility. Such breaches have
been waived by Imperial. Although the $4,000,000 line of credit expired on June
5, 1996, and the Company and Imperial have not entered into a binding extension
of the Line of Credit Facility, the Company and Imperial currently are engaged
in negotiations for the extension of the Line of Credit Facility. In connection
with such negotiations, in the May 13, 1996 amendment of the Line of Credit
Facility, Imperial and the Company agreed to certain covenants for the period
covering April 1996 through May 1996. These covenants include a covenant that
requires biosys to maintain its tangible net worth at or above $4,000,000, a
covenant that mandates the maximum allowable ratio of total liabilities to
tangible net worth at 5.0 times, a covenant that biosys maintain a minimum quick
ratio of 0.5, and a covenant that mandates the maximum amount of operating
losses permissable of $4,000,000 for the period January 1, 1996 to May 31, 1996.
The Company is currently in compliance with these covenants. Imperial has
notified the Company that they have commenced the credit review process
regarding an extension of the Line of Credit Facility and the Company currently
anticipates that the Line of Credit Facility will be extended and will contain
new covenants. If biosys is unable to obtain an extension of the Line of Credit
Facility, the $4,000,000 currently outstanding will be immediately due and
payable. If the Line of Credit Facility is extended and biosys is in default of
the new covenants, and such default is not waived, Imperial may accelerate
biosys' payment obligation. biosys is not currently able to pay in full the
$4,000,000 obligation. Consequently if an extension is not obtained or biosys is
in default of the covenants of an extended Line of Credit Facility, Imperial may
exercise its rights and remedies as a secured creditor, as granted under the
Line of Credit Facility and by law, including, but not limited to, foreclosure
on substantially all of biosys' assets which were pledged as security for the
Line of Credit Facility. The Line of Credit Facility, Lease Financing and CGI
Credit Facility also require the lenders consent before biosys may enter into
future merger, acquisition or debt agreements and restrict biosys' payment of
cash dividends and repurchase of common stock. Borrowings under the Line of
Credit Facility are secured by substantially all of the assets of biosys.
Interest on borrowings is charged at the lender's prime rate plus 3% (11.25% as
of March 31, 1996).
The Line of Credit Facility required a commitment fee of $40,000 and
issuance to the lender of a warrant to purchase 4,000 shares of biosys Common
Stock at an exercise price of $5.00 per share. The overline portion of the Line
of Credit Facility required an additional commitment fee of $10,000 and the
issuance to the lender of a warrant to purchase 33,333 shares of biosys Common
Stock at an exercise price of $7.50 per share. The November 14, 1995 amendment
to the Line of Credit Facility required a modification fee of $25,000 and a
warrant to purchase 3,810 shares of biosys Common Stock at an exercise price of
$6.5625 per share. The December 20, 1995 amendment to the Line of Credit
Facility required a modification fee of $25,000 and a warrant to purchase 4,849
shares of biosys Common Stock at an exercise price of $5.15625 per share. The
February 9, 1996 amendment required a modification fee of $25,000 and a warrant
to purchase 2,500 shares of biosys Common Stock at an exercise price of $10.00
per share.
biosys currently has a lease financing arrangement with Venture Lending and
Leasing, Inc. ("Venture"), as amended in writing on March 29, 1995, May 30,
1995, July 25, 1995, September 26, 1995, November 14, 1995, January 15, 1996,
February 29, 1996 and May 13, 1996 for existing equipment in the amount of up to
$2,500,000, under which biosys had approximately $1,604,000 outstanding as of
March 31, 1996 (the "Lease Financing"). Extensions of funds under the Lease
Financing are also subject to certain lending limit conditions and financial
covenants, which mandate (i) a maximum amount of operating losses permissible of
$1,500,000 and $0 respectively in successive fiscal quarters beginning with the
quarter ended March 31, 1996, (ii) a maximum ratio of total liabilities to
tangible net worth of 3.0, (iii) a minimum tangible net worth of $5,000,000, and
(iv) a minimum quick ratio of 0.5. Through March 31, 1996, biosys breached the
operating loss covenant under the Lease Financing. A waiver of such covenant
violation has been obtained from Venture. biosys has also obtained waiver of the
covenants under the Lease Financing through June 30, 1996. The Company and
Venture have agreed to renegotiate such covenants to reflect projected 1996
operations. There can be no assurance that the lending limit conditions and
other covenants of the Lease Financing will be met in the future by biosys. If
biosys is in default and such default is not waived, Venture would have remedies
available comparable to those available to Imperial upon a default under the
Line of Credit Facility described above.
CGI has a credit facility (the "CGI Credit Facility") pursuant to which it
received $3,400,000 in debt financing. At March 31, 1996, approximately
$2,601,000 was outstanding under this facility. Under the CGI Credit Facility,
CGI was required to maintain a tangible net worth of $3,000,000 and obtain the
prior approval of the First National Bank of Maryland (the "Bank") and the
Maryland Industrial Development Financing Authority ("MIDFA"), the guarantor of
the loan, prior to making any loans or advances to other persons, including
biosys. CGI breached these covenants concurrent with the merger of biosys and
CGI on March 31, 1995. Pursuant to an agreement dated May 26, 1995, as amended
on June 29, 1995, July 31, 1995 and August 29, 1995 (the "First Modification
Agreement"), the Bank and MIDFA permanently waived such defaults in return for
(i) reduction of the loan's principal balance by $565,000 through liquidation of
a certificate of deposit required to be held as collateral by the Bank pursuant
to terms of the loan, and (ii) biosys' guarantee of the CGI Credit Facility. A
second modification agreement dated October 2, 1995, as amended on December 5,
1995, January 31, 1996 and March 15, 1996 (the "Second Modification Agreement")
requires that (i) CGI maintain a positive stockholder's equity, (ii) by May 1,
1996, the Bank and biosys agree to the establishment of financial covenants
which will supersede the existing financial covenants, (iii) commencing December
1, 1995 and continuing until January 2, 1996, biosys would prepay loan principal
each month by approximately $50,500, plus all accrued and unpaid interest, (iv)
commencing on February 1, 1996 and continuing on the first day of each month
thereafter up to and including December 1, 1996, biosys prepay loan principal
each month by approximately $25,000, plus all accrued and unpaid interest, (v)
commencing on January 2, 1997 and continuing on the first day of each month
thereafter up to and including August 1, 1998, biosys prepay loan principal each
month by approximately $119,700, plus all accrued and unpaid interest and (vi)
on or before September 1, 1998, biosys pay all principal and interest that
remain outstanding under the CGI Credit Facility, plus all late charges,
expenses and attorneys' fees owned thereunder. On May 1, 1996, the Bank, MIDFA
and biosys executed a third modification agreement (the "Third Modification
Agreement") pursuant to which, (i) biosys and the Bank met the requirement under
the Second Modification Agreement to agree on the superseding of the existing
financial covenants by outlining an acceptable process by which biosys agrees to
disclose to the Bank and MIDFA the financial covenants or tests it agrees to
regarding its Line of Credit Facility and to automatically become bound to
comply substantially with those same financial covenants or tests for the
benefit of the Bank, (ii) the Bank and MIDFA approved the subleasing of 9,600
square feet of space in biosys' building and biosys assigned its interest in and
to the sublease to the Bank and MIDFA as further collateral under the CGI Credit
Facility, and (iii) the Bank and MIDFA authorized biosys to grant a conditional
right of first refusal to Zeneca Limited plc ("Zeneca") to purchase certain
specified equipment assets of the Company related to the production of viruses
pursuant to a joint development agreement between biosys and Zeneca and biosys
executed a Supplemental Security Agreement in favor of the Bank and MIDFA
regarding said assets. The Company is currently in compliance with the covenants
under the CGI Credit Facility. There can be no assurance that all of the
foregoing events will have occurred by the dates required. If all such events do
not occur in the time required, default would occur under the CGI Credit
Facility which may entitle the Bank and MIDFA to accelerate payment of all CGI
Credit Facility indebtedness and to exercise other rights and remedies under the
CGI Credit Facility and by law.
A default and subsequent acceleration of the agreements governing the
Line of Credit Facility, Lease Financing or CGI Credit Facility would result in
cross defaults under the agreements governing the other arrangements. The
exercise of rights and remedies under the Line of Credit Facility or Lease
Financing agreements or Modification Agreements could prevent or delay the
continued development and marketing of the Company's products, require
curtailment of the Company's operations and could result in the bankruptcy or
insolvency of the Company.
Continuing Operating Losses; Other Material and Unpredictable Factors.
Each of biosys and AgriDyne have incurred operating losses in each quarter since
its inception and biosys expects such losses to continue in the near-term as the
Company expands its development, manufacturing and marketing capabilities. At
March 31, 1996, biosys had an accumulated deficit of $136,542,000. The Company
expects that it will continue to incur operating losses until such time as
product sales generate sufficient revenues to fund its continuing operations.
The timing of achieving profitability is primarily dependent upon the continued
development and commercial acceptance of the Company's products, the successful
management of the combination of the businesses of biosys and AgriDyne and
management's ability to strategically focus the Company. There can be no
assurance as to whether or when achievement of profitable operations will occur.
Numerous factors may materially and unpredictably affect operating
results of the Company including the uncertainties of new product introduction
and sales growth; technology acquisitions or transfers; actions by corporate
partners; and the ability to obtain, and the timing and cost of, regulatory
approval of products. Accordingly, the Company's operating results are expected
to fluctuate from period to period.
Receipt by biosys of a Going Concern Opinion From its Independent
Accountants. The report dated March 29, 1996 of Price Waterhouse LLP on biosys'
1995 consolidated financial statements contains an explanatory paragraph
regarding biosys' ability to continue as a going concern.
Listing of biosys Common Stock on Nasdaq National Market. During 1995,
the Company received notice from Nasdaq indicating that as a result of biosys'
failure to maintain $4 million of net tangible assets, as required by the NASD
bylaws governing continuance on the Nasdaq National Market, biosys' Common Stock
would be delisted if the required net tangible assets condition were not
satisfied. As a consequence of the Merger and the infusion of net equity of
approximately $7,250,000 from the Preferred Stock Financing, both of which
occurred in March 1996, the Company satisfied the Nasdaq net tangible assets
requirement as of March 22, 1996. It is possible that 1996 losses, if incurred,
could cause biosys to again fall below the Nasdaq net tangible asset
requirement. Were such condition to occur and if (a) no temporary exception was
granted by Nasdaq, and (b) further equity financing or other means of increasing
net tangible assets was not available, biosys' Common Stock would be delisted
from the Nasdaq National Market. In addition, in April 1996 the Company received
an oral inquiry from a Nasdaq representative requesting that the Company provide
assurance to Nasdaq that the issuance of Common Stock upon conversion of the
Preferred Shares sold in the Preferred Share Financing would comply with the
requirement in the NASD bylaws governing continuance on the Nasdaq National
Market that stockholder approval be obtained prior to the issuance of common
stock at a price less than the greater of book or market value which equals 20%
or more of a company's outstanding common stock (the "Nasdaq 20% Rule"). The
Company has submitted a written response to Nasdaq indicating that, in the event
the cumulative number of shares of Common Stock issued or issuable pursuant to
notices of conversion delivered by holders of the Preferred Shares during the
three-year period ending on May 22, 1999 (the date upon which the Preferred
Shares are automatically converted) would exceed 20% of biosys' Common Stock
outstanding immediately prior to the Preferred Share Financing, it will
undertake to redeem the excess Preferred Shares in accordance with the terms of
the Preferred Share Financing. Nasdaq has orally indicated that such course of
action would be sufficient to assure compliance with the Nasdaq 20% Rule.
However, if such redemption becomes necessary in order to comply with the Nasdaq
20% Rule, there can be no assurance that biosys will have sufficient cash
resources to redeem the excess Preferred Shares in accordance with the terms of
the Preferred Share Financing. In addition, the provisions of the Delaware
General Corporation Law prohibit redemption of the Company's stock if the
capital of biosys is impaired or if such redemption would cause any impairment
of the Company's capital. If biosys was unable to redeem the excess Preferred
Shares in order to assure compliance with the Nasdaq 20% Rule and (a) if biosys
was unable to raise additional funds with which to effect the redemption or
increase the Company's assets or (b) if an alternative was not approved by
Nasdaq, biosys' Common Stock would be delisted from the Nasdaq National Market.
A delisting of biosys from Nasdaq could adversely affect the value and liquidity
of the shares of biosys Common Stock and restrict the Company's future ability
to raise equity capital.
Uncertainty of Market Acceptance. Further sales growth by the Company
is contingent upon the rate at which consumers and growers adopt new pest
control practices. The predominant insect control products in use today are
chemical insecticides. As a result, the market is generally unaware of the
efficacy and economic viability of the Company's products and biosys expects
that potential customers for its products will require significant education
concerning their efficacy, cost-effectiveness, safety and methods of use. In
addition, the rate of adoption of the Company's products in the U.S. will be
substantially affected by ongoing Environmental Protection Agency ("EPA") review
of the use of currently available chemical insecticides and the extent to which
the EPA restricts or bans their use. There can be no assurance that the
Company's existing or future products will be commercially accepted other than
as demonstrated by the Company's sales growth to date. If market acceptance of
these products is slower than anticipated, the Company's product sales and
results of operations would be adversely affected, which may result in
continuing losses. In addition, a slower rate of product commercialization is
likely to result in an increased need for additional outside funding of the
Company's operations.
Reliance on Corporate Relationships. From time to time, the Company has
established corporate relationships and intends to enter into future corporate
relationships to test, distribute and market its products. Continued
participation by corporate partners under marketing, distribution and supply
agreements with the Company will depend not only on the timely achievement of
development and marketing objectives by the Company, which cannot be assured,
but also on each corporate partner's own financial, competitive, marketing and
strategic considerations. The Company's agreements with strategic marketing,
distribution and supply partners are generally terminable by their corporate
partners on short notice and the Company has on prior occasions received such
termination notices. Suspension or termination of agreements with certain
corporate partners could have a material adverse effect on the Company.
On September 15, 1995, biosys entered into an agreement with Zeneca
Limited ("Zeneca") to develop and market insecticide products based on the
patented strain of the celery looper virus developed by biosys. Under the
agreement, biosys will receive financial and technical support from Zeneca for
biosys' research and development efforts in 1996 and 1997, subject to biosys
achieving certain milestones with respect to production, formulation,
bioefficiency and registration of products based on the celery looper virus.
Zeneca will be responsible for field efficacy trials, for seeking registration
outside the U.S. and for worldwide marketing of the products that result from
the development effort. Under the agreement, biosys retains exclusive production
rights to the celery looper virus, as well as the right to continue to
commercialize its other existing baculovirus-based products, including Spod-X
and GemStar, in the rest of the world (except for GemStar containing the
heliothis virus in Australia and New Zealand and the territories thereof). This
agreement is terminable by Zeneca under certain circumstances, and there can be
no assurance that the Company will receive the financial and technical support
provided for therein.
Reliance on Third Party Manufacturers. In December 1991, biosys entered
into a long-term manufacturing agreement with Archer Daniels Midland Company
("ADM"), a U.S. producer of grain-based products with significant biochemical
fermentation experience and capacity. Effective January 1994, the prior
manufacturing agreement was terminated and biosys and ADM entered into a new,
non-cancelable agreement. ADM is providing the facilities for the production of
nematodes at its facility in Decatur, Illinois. biosys also uses the facility
for contract manufacturing and plans to use the facility for the production of
baculoviruses. On April 16, 1996, the terms of this manufacturing agreement were
modified to reduce biosys payment obligations to the amounts reflected below.
This amendment is further described in the section "Recent Developments-ADM
Manufacturing Agreement."
biosys has access to five (5) 20,000 gallon fermenters for a
twelve-year term ending December 31, 2005 and may use the fermentation
facilities for biosys' third party contract fermentation clients. biosys is
required to pay annual overhead fees ranging from $2.8 million in 1996 and
increasing to a maximum of $5.0 million in 2005 regardless of the level of
utilization of the facility by biosys. biosys currently has no other
fermentation facility available to it for production of nematodes or for
contract manufacturing, and there can be no assurance that other manufacturing
sources would be available in a timely or cost effective manner in the event of
any disruption in the availability of the ADM facility. Further, there can be no
assurance that biosys will generate sufficient volume for its product line to
justify the monetary requirements of the ADM agreement.
For the pheromone business of biosys, the availability in adequate
quantities of the pheromone Active Ingredients ("A.I.") on a reliable,
cost-effective basis is a key factor affecting the viability of the business.
biosys is currently developing and implementing its strategy for an integrated
supply of its pheromone needs. As part of that strategy, biosys entered into a
multi-year supply and marketing agreement with International Specialty Products
("ISP") on November 7, 1995. Under the terms of the agreement, ISP will
manufacture and supply biosys with various types of pheromones, including
pheromone A.I., using a combination of patented production technologies
developed independently by ISP and biosys. biosys has also established a third
party manufacturing relationship with Grant Chemical Division of Ferro
Corporation for the production of certain important intermediate products. This
toll arrangement, established September 20, 1994, enables the exploitation of
the patented metathesis process acquired as part of the AgriSense technology. To
the extent that either of these arrangements do not result in the production of
sufficient quantities of pheromones, biosys' ability to provide pheromone-based
products to the market and generate revenue and profits from the pheromone
business would be adversely affected.
Highly Competitive Markets and Technological Change. The markets in
which the Company operates are highly competitive. Competitors include other
bioinsecticide companies and large chemical companies, many of which have
considerably greater financial, technical and marketing resources than the
Company. The pesticide industry is undergoing, and is expected to continue to
undergo, rapid and significant technological change. biosys management expects
competition to intensify as technical advances in the field are made and become
more widely known. There can be no assurance that developments by others will
not render the Company's products or technology obsolete or noncompetitive.
biosys' Stage of Product Development. biosys' nematode, pheromone and
baculovirus biopesticide products are at various stages of development and
commercialization. biosys cannot accurately predict whether its products under
development can be produced and marketed profitably.
AgriDyne's Stage of Product Development. AgriDyne's products are at
various stages of development. AgriDyne is developing a second generation
azadirachtin product based on hydrogenation technology ("HAZA") which was
licensed from Rohm and Haas Company. AgriDyne is also working on new
formulations of azadirachtin. The ability of the Company to sell AgriDyne
products in large commercial markets will be dependent upon continued product
development to allow increased efficiency and reduced costs in production and
increased margins on sales. There can be no assurance that increased efficiency
and reduced costs of production can be achieved. AgriDyne cannot accurately
predict whether any of its products under development can be produced and
marketed profitably.
Government Regulation; Need for Regulatory Approval. Certain of the
Company's products will require regulatory approval by the EPA, the United
States Department of Agriculture ("USDA") and state and local agencies. Such
regulation applies to all stages of field testing and to the manufacture, sale
and use of AgriDyne's HAZA and potential bio-pyrethrum products and biosys'
InStar, InCide and X-tend products. Prior to the manufacture, sale and use of
such products, the Company will be required to conduct toxicology and
environmental testing to demonstrate product safety in order to obtain federal
and state registration of such products. Some of the Company's products will
also be subject to regulation by agencies of foreign countries in which the
products are tested, used or sold. While EPA regulations generally applicable to
insecticides currently exempt the nematodes used in biosys' products from EPA
testing and registration requirements, there can be no assurance that this will
continue or that the EPA will not regulate such bioinsecticides as their use
becomes more widespread. biosys' products are currently subject to USDA
regulations that govern the transport of living organisms in interstate
commerce. There can be no assurance that the Company will continue to be able to
comply with changes in EPA or USDA regulations. The regulatory process or
private litigation contesting products of the Company may be costly and
time-consuming and may delay research, development, production and/or marketing
of such products and require costly and time-consuming procedures, all of which
may furnish an advantage to competitors. There can be no assurance that
requisite regulatory approvals and/or registration of any or all of the
Company's products which are not yet approved will be granted on a timely basis,
if at all. The Company's activities may become subject to additional government
regulation. There can be no assurance that the Company will have sufficient
funds to comply with, or to continue to comply with, regulatory procedures.
Seasonality of Product Sales and Perishability of Products. biosys and
its corporate partners currently market their products predominantly for use in
the northern hemisphere, where the growing season generally runs from March to
October. Seasonality of demand for the Company's products pose several risks.
biosys' nematode products are living organisms and are perishable. Also, the
seasonal nature of agriculture will cause the Company's product sales to be
concentrated in the period from March through October and will result in
substantial variations in quarter-to-quarter financial results.
Product Liability. The Company faces an inherent business risk of
exposure to product liability claims in the event that the use of its current
products or prospective products lack efficacy or result in adverse effects.
There can be no assurance that the scope of the Company's insurance coverage is
sufficient, that it can obtain additional coverage or that the Company will have
sufficient resources to satisfy any product liability claims.
Dependence Upon Key Personnel. The Company's success will depend to a
significant extent upon its key technical and management employees. While
biosys' employees are required to sign standard agreements concerning
confidentiality and ownership of inventions, the employees are generally not
otherwise subject to employment agreements and biosys' employees are generally
not subject to noncompetition covenants. The loss of the services of a small
number of biosys' key employees could have a material adverse effect on the
Company's business, financial condition or results of operations. biosys does
not maintain life insurance policies on its key employees.
No Assurance of Ability to Attract and Retain Key Personnel. The
Company's ability to maintain its competitive technological position will
depend, in part, upon its ability to attract and retain highly qualified
scientific, managerial and manufacturing personnel. Competition for such
personnel is intense. The loss of a significant group of key employees would
adversely affect the Company's product development effort.
Volatility of Stock Price. The market prices for securities of
biotechnology and agribiotechnology companies, including the securities of
biosys, have been volatile. Announcements of technological innovations or new
commercial products by the Company or its competitors, a change in status of a
corporate partner, developments concerning proprietary rights, including patents
and litigation matters, publicity regarding actual or potential results of
products under development by the Company, regulatory developments in both the
United States and foreign countries and public concern as to the safety of
biopesticides, as well as period-to-period fluctuations in revenues and
financial results, may have a significant impact on the market price of biosys'
Common Stock.
Testing. Commercial introduction of additional products and the
expansion of label claims for current products to include additional insects are
both contingent upon, among other factors, completion of field testing. Unusual
weather conditions during field tests prior to the growing season or other
factors may delay completion of such field tests, or require additional field
tests in subsequent growing seasons, with a resulting delay in product
development and commercialization. Such delays could result in additional losses
due to increased operating expenses in the intervening period without
significant offsetting revenues.
Dependence on Proprietary Technology and Limited Product Protection. The
Company's success will depend in part upon its ability to protect its
proprietary products and technologies under U.S. and foreign patent laws and
other intellectual property laws. biosys is incurring, and expects to continue
to incur, substantial costs in connection with the protection of its
intellectual property rights. biosys has filed, and expects to continue to file,
applications as appropriate for patents relating to its product uses and
processes. biosys has been issued 32 U.S. and foreign patents relating to its
technology and AgriDyne has been issued 5 U.S. and foreign patents relating to
its technology and has one application for a U.S. patent pending before the U.S.
Patent and trademark office.
In addition, biosys has acquired a set of issued patents covering
certain formulation technology. There can be no assurance that additional
patents will be obtained either in the United States or in foreign jurisdictions
or that issued patents will provide sufficient protection or be of commercial
benefit to the Company. The laws of some foreign countries do not protect the
proprietary rights of biosys to the same extent as do the laws of the United
States. If the Company is unable to maintain the proprietary nature of its
technologies, the Company's financial condition and results of operations may be
adversely affected. There can be no assurance that others will not independently
develop substantially equivalent technology or otherwise gain access to the
Company's trade secrets and proprietary information. In addition, AgriDyne has
entered into license agreements with third parties for the use of their patents
and proprietary technology. In September, 1994, AgriDyne entered into an
agreement with Rohm and Haas Company whereby AgriDyne obtained a license to make
use or sell certain of Rohm and Haas Company's technology and products related
to hydrogenated azadirachtin derivatives. In April, 1995, AgriDyne entered into
an agreement with W.R. Grace & Co. ("Grace") under which AgriDyne was granted a
non-exclusive license to practice under two of Grace's patents which relate to
storage stable azadirachtin-containing liquid formulation. There can be no
assurance that others will not independently develop technologies substantially
equivalent to the licensed technologies or obtain access to or utilize the
licensed technologies.
Control by Officers and Directors. biosys' current officers and its
directors and their affiliates have voting control of approximately 21.5% of
biosys Common Stock (assuming exercise of outstanding options to purchase
biosys' Common Stock, including options to purchase AgriDyne Common Stock
assumed by biosys pursuant to the Merger) and therefore are able to exercise
significant influence over biosys' affairs. Certain charter provisions relating
to authorized but unissued Preferred Stock could have the effect of delaying,
deferring or preventing a change in control of biosys. In addition, biosys'
charter eliminates the personal monetary liability of its directors for breach
of their duty of care and provides for a classified board of directors. biosys'
Certificate of Incorporation and Bylaws may also have the effect of delaying,
deferring or preventing a change of control as they provide that (i) only the
Board of Directors, the Chief Executive Officer or the President is entitled to
call a special stockholders' meeting and only the Board of Directors can call an
annual stockholders' meeting, (ii) any action required or permitted to be taken
by the stockholders must be effected at a duly called annual or special meeting
of the stockholders and may not be effected by a written consent of such
stockholders, and (iii) proposals by stockholders that are to be voted on at an
annual or special stockholders' meeting (including the nomination of directors)
must be received by biosys within certain time periods and may only pertain to
certain subject matter. biosys has entered into agreements with its officers and
directors indemnifying them against losses they may incur in legal proceedings
resulting from their service to biosys.
RECENT DEVELOPMENTS
The following items are material recent developments of the Company
since the filing of the Company's Annual Report on Form 10-K:
ADM Manufacturing Agreement. On April 16, 1996, biosys and ADM amended
their manufacturing agreement. The amendment reduces biosys required overhead
fees to a range from $2.8 million in 1996 increasing to a maximum of $5.0
million in 2005. In addition, the terms of the amended agreement provide biosys
with initial access to five (5) 20,000 gallon fermenters, and the right to
utilize up to ten (10) 20,000 gallon fermenters. The previous terms of the
agreement required annual overhead payments ranging from $4.1 million in 1996 to
a maximum of $7.3 million in 2005 and required biosys to utilize ten (10) 20,000
gallon fermenters.
Sub-Lease of Facility. Effective May 2, 1996, biosys subleased 9,600
square feet in its Maryland facility to Gene Logic, Inc., a biotechnology
company engaged in the field of genetics and genetic treatment of disease. Since
biosys relocated from its headquarters in California into the Maryland facility
occupied by Crop Genetics International Corporation ("CGI") prior to CGI's
acquisition by biosys in a reverse triangular merger, the Company has been
seeking to lease surplus space in the facility as a further step in realizing
merger synergies.
Board of Directors. Effective May 3, 1996, Thomas Parton was appointed
Chairman of the Board of Directors. Mr. Parton has been a Director of biosys
since 1991 and serves as Chairman of the Board of AgriSense-BCS, Limited, the
Company's U.K. subsidiary. Mr. Parton succeeds Samuel J. Colella who resigned as
a director of the Company to pursue incremental responsibilities within
Institutional Venture Partners, the venture capital funds of which he is a
principal. Mr. Colella served as Chairman of biosys' Board for approximately
nine years.
<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders acquired the Preferred Shares from the Company in
a private offering made in reliance on Regulation D under the Securities Act.
The sale was consummated on March 26, 1996. See "Risk Factors -- Need for
Additional Funds and No Assurance of Available Financing."
The following table lists the Selling Stockholders, the number of
shares of the Company's Common Stock which each owned or had the right to
acquire upon the conversion of the Preferred Shares purchased by each, the
number of Shares expected to be sold by each, assuming the conversion of all
Preferred Shares, and the number and the percentage of the shares of the
Company's Common Stock which each will own or have the right to acquire after
the offering pursuant to the Registration Statement, assuming the sale of all
the Shares expected to be sold.
All share amounts have been adjusted to reflect the Reverse Stock Split.
Selling Stockholder(1) ................. Shares Shares Shares Percentage
Owned To Owned Owned
Before Be After
Offering Offered Offering
Legong Investments N.V .................... 296,296 296,296 0 --
Wood Gundy London, Ltd. ................... 148,148 148,148 0 --
Capital Ventures International ............ 148,148 148,148 0 --
Kessler Asher Group Limited Partnership ... 118,519 118,519 0 --
Chaim Gross ............................... 118,519 118,519 0 --
Halifax Fund Ltd. ......................... 118,519 118,519 0 --
Ramius Fund Ltd. .......................... 103,703 103,703 0 --
Raphael, L.P. ............................. 88,889 88,889 0 --
Nutmeg Partners, L.P. ..................... 88,889 88,889 0 --
AG Super Fund L.P. ........................ 88,889 88,889 0 --
Angelo Gordon & Co., L.P. ................. 88,889 88,889 0 --
GAM Arbitrage Investments, Inc. ........... 88,889 88,889 0 --
Nelson Partners ........................... 88,889 88,889 0 --
Richcourt $ Strategies, Inc. .............. 74,074 74,074 0 --
Societe Generale .......................... 74,074 74,074 0 --
The OTATO Partnership, Ltd. ............... 74,074 74,074 0 --
Gershon Partners, L.P. .................... 74,074 74,074 0 --
Leonardo, L.P. ............................ 59,259 59,259 0 --
AG Arb Partners, L.P. ..................... 59,259 59,259 0 --
AG Super Fund International Partners, L.P. 59,259 59,259 0 --
Reg-S Investment Fund Ltd. ................ 59,259 59,259 0 --
Olympus Securities, Ltd. .................. 59,259 59,259 0 --
Banque Scandinave En Suisse ............... 44,444 44,444 0 --
Michael Angelo, L.P. ...................... 29,630 29,630 0 --
KA Trading L.P. ........................... 29,630 29,630 0 --
IFM Pension Plan Limited .................. 29,630 29,630 0 --
1 The persons named in the table have sole voting and investment power
with respect to all shares of biosys Common Stock shown as beneficially
owned by them, subject to community property laws, where applicable. No
selling stockholder, or any natural person who is a control person of a
selling stockholder or any other affiliate of any selling stockholder,
is an affiliate of the Company or any of its predecessors or any of its
affiliates. No such person has held any position or office or had any
material relationship with the Company or any of its predecessors or
affiliates.
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that they, or
their respective pledgees, donees, transferees or successors in interest, intend
to sell all or a portion of the Shares from time to time on the Nasdaq National
Market at prices and at terms prevailing at the time of sale or at prices
related to the then current market price, or in negotiated transactions. The
Shares may be sold by one or more of the following methods: (a) a block trade in
which the broker or dealer so engaged will attempt to sell the Shares as agent,
but may position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its own account pursuant to this Prospectus; (c) an
over-the-counter distribution in accordance with the rules of the Nasdaq
National Market; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) in privately negotiated transactions.
There is no assurance that any of the Selling Stockholders will sell
any or all of the Shares offered by them. Pursuant to the terms of the stock
purchase agreements executed by the Company and the Selling Stockholders in
connection with the Preferred Share Financing, no Preferred Shares are
convertible into Common Stock prior to the 75th day after the last closing of
the Preferred Stock Financing on March 26, 1996 (the "Last Closing") and
thereafter each Selling Stockholder is entitled to convert up to one-third of
the Preferred Shares purchased by such Selling Stockholder beginning 75 days
after the Last Closing, an additional one third of the Preferred Shares
purchased by such Selling Stockholder beginning 105 days following the Last
Closing and any remaining Preferred Shares beginning 135 days after the Last
Closing. In addition, the Preferred Shares are convertible into shares of Common
Stock at a conversion rate which, after the 75th day following the Last Closing
may vary with the market price of the Company's Common Stock. See "Risk Factors
- -- Need for Additional Funds and No Assurance of Available Financing."
Therefore, the number of shares of Common Stock into which the Preferred Shares
are convertible and which may be sold by the Selling Stockholders at a
particular time will vary in accordance with the above described contractual
provisions of the Preferred Share Financing and the conversion rate of the
Preferred Shares.
In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from the Selling Stockholders in
amounts to be negotiated prior to the sale. Such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales. The Company
will pay all expenses incident to the offering and sale of the Shares to the
public other than any underwriting commissions or similar charges and legal fees
and disbursements of counsel for the Selling Stockholders.
The Company has agreed to indemnify in certain circumstances the
Selling Stockholders and any underwriter and certain control and other persons
related to the foregoing persons against certain liabilities, including
liabilities under the Securities Act. The Selling Stockholders have agreed to
indemnify in certain circumstances the Company and certain related persons
against certain liabilities, including liabilities under the Securities Act.
The Company has agreed with the Selling Stockholders to keep the
Registration Statement of which this Prospectus constitutes a part effective for
up to three (3) years following the initial closing of the Preferred Share
Financing on March 22, 1996. The Company intends to de-register any of the
Shares not sold by the Selling Stockholders at the end of such three (3) year
period; however, at such time, any unsold shares may be freely tradeable subject
to compliance with Rule 144 of the Securities Act.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholders.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, A Professional Corporation, Palo Alto, California.
EXPERTS
The financial statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 included in this
Prospectus have been so included in reliance on the report (which contains an
explanatory paragraph relating to the Company's ability to continue as a going
concern as described in Note 13 to the financial statements) of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
<PAGE>
No dealer, salesman or other person has been
authorized to give any information or to make
any representations other than those contained
or incorporated by reference in this Prospectus
in connection with the offering described herein,
and, if given or made, such information or
representation must not be relied upon as having
been authorized by the Company or by any
Underwriter. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer
to buy, any securities other than the registered
securities to which it relates, or an offer to sell,
or a solicitation of an offer to buy, in any
jurisdiction in which it is unlawful to make such
offer or solicitation. Neither the delivery
of this Prospectus nor any sale made hereunder
shall, under any circumstances, create an
implication that there has been no change in the
affairs of the Company since the date hereof
or that the information contained herein is
correct as of any time subsequent to the date hereof.
2,311,111 Shares
biosys, inc.
COMMON STOCK
PROSPECTUS
TABLE OF CONTENTS
Page
Available Information......................... 2
Incorporation of Certain
Documents by Reference..................... 2
The Company................................... 3
Risk Factors.................................. 3
Recent Developments...........................12
Selling Stockholders..........................13
Plan of Distribution..........................14
Use of Proceeds...............................15
Legal Matters.................................15
Experts.......................................15
June ___, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses in connection
with the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
To be Paid
By The
Registrant
SEC Registration Fee ........................................ $ 4,333
Nasdaq filing fee ........................................... 17,500
Accounting fees and expenses ................................ 3,500
Printing .................................................... 0
Transfer agent and registrar fees and expenses .............. 0
Blue Sky fees and expenses (including counsel fees) ......... 0
Legal fees and expenses ..................................... 10,000
Miscellaneous expenses ...................................... 0
-------
Total ............................................... $35,333
=======
The Company will pay all expenses of registration, issuance and
distribution of the shares being sold by the Selling Stockholders, excluding
underwriting discounts and commissions and legal fees and disbursements of more
than one counsel for the Selling Stockholders.
Item 15. Indemnification of Directors and Officers.
In 1986, Delaware enacted legislation which authorizes corporations to
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach or alleged breach of directors'
fiduciary "duty of care." Prior to this legislation, directors were accountable
to corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Numerous
complaints alleging breach of directors' duty of care have been filed in
connection with corporate mergers and acquisitions, and although the statute
does not change directors' duty of care, it enables corporations to limit
available relief to equitable remedies such as injunction or rescission. The
legislation has no effect on directors' (1) duty of loyalty, (2) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, (3) illegal payment of dividends or (4) approval of any
transaction from which a director derives an improper personal benefit. The
validity and scope of the new statute has not been interpreted to any
significant extent by Delaware courts. The statute has no effect on claims
arising under the federal securities laws.
biosys' Certificate of Incorporation includes the provision authorized
by the statute to eliminate the personal liability of its directors for monetary
damages for breach or alleged breach of their duty of care. biosys' Bylaws
provide that biosys shall indemnify its directors, officers, employees, and
agents to the full extent permitted by the Delaware General Corporation Law,
including in circumstances in which indemnification is otherwise discretionary
under such law. In addition, with the approval of the Board of Directors and the
stockholders, biosys has entered into separate indemnification agreements with
its directors, officers and certain employees which require biosys, among other
things, to indemnify them against certain liabilities which may arise by reason
of their status or service (other than liabilities arising from willful
misconduct of a culpable nature) and to obtain directors' and officers'
insurance, if available on reasonable terms.
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933.
Item 16. Exhibits.
The following exhibits are filed with this Registration Statement:
Exhibit
Number Exhibit Title
------ -------------
4.1* Certificate of Designation of Preferences and Rights of Series A
Preferred Stock of biosys, inc.
4.2* Form of Regulation D Subscription Agreements between biosys, inc. and
the investors executing such Agreements (the "Investors").
4.3* Registration Rights Agreement, dated as of March 22, 1996, among
biosys, inc., Swartz Investments, LLC and the Investors.
5.1** Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.
23.1** Consent of Price Waterhouse LLP, independent accountants.
23.2** Consent of KPMG Peat Marwick LLP.
23.3** Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1).
24.1** Power of Attorney (included in the Signature Page contained in Part
II of the Registration Statement).
*Filed as an exhibit to the Company's Annual Report on 10-K for the fiscal year
ended December 31, 1995 and incorporated herein by reference.
**Previously filed.
Item 17. Undertakings.
A. 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 (the "Securities
Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the 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 the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(iii)To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(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 Securities
Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
B. 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
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
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.
E. The undersigned Registrant hereby undertakes that:
(1) For the 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 the
registration statement as of the time it was declared effective.
(2) For the purposes 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Amendment No. 2 to Registration Statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Columbia, State of Maryland on the 13th day of June 1996.
biosys, inc.
By: /s/ Edwin C. Quattlebaum
----------------------------
Dr. Edwin C. Quattlebaum
President and Chief Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed below on June 13, 1996 by the
following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Edwin C. Quattlebaum ............. President, Chief Executive Officer and
Dr. Edwin C. Quattlebaum ............. Director (Principal Executive Officer)
/s/ Michael R. N. Thomas* ............ Vice President; Chief Financial Officer;
Michael R. N. Thomas ................. Secretary and Treasurer(Principal
Financial and Accounting Officer)
/s/ Thomas W. Parton* ................ Chairman of the Board of Directors
Thomas W. Parton
/s/ William J. Donwen* ............... Vice Chairman of the Board of Directors
William J. Donwen
/s/ Alan Hayes* ...................... Director
Dr. Alan Hayes
/s/ Venkatrao S. Sohoni* ............. Director
Dr. Venkatrao S. Sohoni
/s/ Peter Stalker III* ............... Director
Peter Stalker III
*By /s/ Edwin C. Quattlebaum
Dr. Edwin C. Quattlebaum
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Page No.
4.1* Certificate of Designation of Preferences and Rights of Series A
Preferred Stock of biosys, inc.
4.2* Form of Regulation D Subscription Agreements between biosys, inc. and
the investors executing such Agreements (the "Investors").
4.3* Registration Rights Agreement, dated as of March 22, 1996, among
biosys, inc., Swartz Investments, LLC and the Investors.
5.1** Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.
23.1** Consent of Price Waterhouse LLP, independent accountants.
23.2** Consent of KPMG Peat Marwick LLP.
23.3** Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1).
24.1** Power of Attorney (included in the Signature Page contained in Part II
of the Registration Statement).
*Filed as an exhibit to the Company's Annual Report on 10-K for the fiscal year
ended December 31, 1995 and incorporated herein by reference.
**Previously filed.
