<PAGE> 1
As filed with the Securities and Exchange Commission on April 24, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GERON CORPORATION
(Exact Name of Registrant as specified in its charter)
DELAWARE 75-2287752
(State of incorporation) (I.R.S. Employer Identification No.)
230 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 473-7700
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
RONALD W. EASTMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GERON CORPORATION
230 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 473-7700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
EDGAR B. CALE, III
VENTURE LAW GROUP
A PROFESSIONAL CORPORATION
2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(650) 854-4488
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 to be 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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------
Amount Proposed maximum Proposed maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered(1) per share(2) offering price(2) registration fee
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 1,993,355 $11.06 $22,046,506 $6,503.72
$0.001 par value shares
---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Shares of Common Stock which may be offered pursuant to this Registration
Statement consisting of an estimated 1,993,355 shares issuable upon
conversion of 15,000 shares of Series A Convertible Preferred Stock. For
purposes of estimating the number of shares of Common Stock to be included
in this Registration Statement, the Company calculated 150% of the number of
shares of Common Stock issuable in connection with the conversion of the
Company's Series A Convertible Preferred Stock (based on a conversion price
of $11.28 which is 105% of the average of the lowest five (5) consecutive
closing bid prices of the Common Stock reported on the Nasdaq National
Market for the twenty (20) trading days ending April 22, 1998). In addition
to the shares set forth in the table, the amount to be registered includes
an indeterminate number of shares issuable upon conversion of or in respect
of the Series A Convertible Preferred Stock, as such number may be adjusted
as a result of stock splits, stock dividends and antidilution provisions
(including floating rate conversion prices) in accordance with Rule 416.
(2) Estimated solely for the purpose of computing the amount of the registration
fee, based on the average of the high and low prices for the Company's
Common Stock as reported on The Nasdaq National Market on April 22, 1998 in
accordance with Rule 457 under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE> 2
PROSPECTUS Subject to Completion
April 24, 1998
1,993,355 SHARES
GERON CORPORATION
COMMON STOCK
-------------------
This Prospectus covers up to (i) 1,993,355 shares of Common Stock,
$0.001 par value (the "Common Stock" or the "Common Shares"), of Geron
Corporation ("Geron" or the "Company") and (ii) in accordance with Rule 416,
such indeterminate number of additional Common Shares issuable upon conversion
of or in respect of the Series A Preferred Shares (as defined below) as a
result of stock splits, stock dividends and antidilution provision (including
floating rate conversion prices) (collectively, the "Shares"), which may be
offered and sold from time to time by one or all of the selling stockholders
named herein (the "Selling Stockholders"). The Company will receive no part of
the proceeds of such sales.
The Shares were issued, or are issuable, to the Selling Stockholders
upon conversion of 15,000 shares of Series A Convertible Preferred Stock
("Series A Preferred Stock" or "Series A Preferred Shares") that were issued
pursuant to a private placement on March 27, 1998 (the "Private Placement"). For
additional information concerning the Private Placement, see "Issuance of Common
Stock to Selling Stockholders."
The Selling Stockholders or their respective pledgees, donees,
transferees or other successors in interest intend to sell the Common Shares
offered hereby from time to time in one or more transactions (which may involve
block transactions) effected on the Nasdaq Stock Market (or any national
securities exchange or U.S. inter-dealer quotation system of a registered
national securities association, on which the Shares are then listed), in sales
occurring in the public market off such exchange, in privately negotiated
transactions, through the writing of options on the Shares, short sales or in a
combination of such methods of sale. Such methods of sale may be conducted at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Stockholders may
effect such transactions directly, or indirectly, through broker-dealers,
underwriters or agents acting on their behalf, and in connection with such
sales, such broker-dealers or agents may receive compensation in the form of
commissions or discounts from the Selling Stockholders and/or the purchasers of
the Shares for whom they may act as agent or to whom they sell Shares as
principal or both (which commissions or discounts are not anticipated to exceed
those customary in the types of transactions involved). The Company will bear
all expenses with respect to the offering of the Common Stock, except any
underwriting discounts, selling commissions, stock transfer taxes, and fees and
disbursements of counsel for the Selling Stockholders. To the extent required,
the specific shares of Common Stock to be sold, the names of the Selling
Stockholders, the public offering price, the names of any agent dealer or
underwriter and any applicable commission or discount with respect to any
particular offer is set forth herein or will be set forth in an accompanying
Prospectus Supplement. See "Selling Stockholders" and "Plan of Distribution."
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "GERN." The last reported sales price of the Common Stock on The
Nasdaq National Market on April 22, 1998 was $11.00 per share.
-------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 4, FOR
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------
The Selling Stockholders and any broker executing selling orders on
behalf of the Selling Stockholders may be deemed to be an "underwriter" (within
the meaning of the Securities Act of
<PAGE> 3
1933, as amended (the "Securities Act"). Commissions received by any such broker
may be deemed to be underwriting commissions under the Securities Act. See "Plan
of Distribution" for information relating to indemnification of the Selling
Stockholders.
-------------------
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 COMMIS-
SION 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 APRIL __, 1998
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No person is authorized in connection with any offering made hereby to
give any information or to make any representation not contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company or the Selling
Stockholders. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the shares of Common
Stock offered hereby, nor does it constitute an offer to sell or a solicitation
of an offer to buy any of the shares offered hereby to any person in any
jurisdiction in which it is unlawful to make such an offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall under
any circumstances create any implication that the information contained herein
is correct as of any time subsequent to the date hereof.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") 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 with respect to the Company and the shares
of Common Stock offered hereby, reference is hereby made to the Registration
Statement. Statements contained herein concerning the provisions of any document
are not necessarily complete, and each such statement is qualified in its
entirety by reference to the copy of such document filed with the Commission.
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 and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, New York, New York 10048, and Chicago Regional
Office, Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, NW, Washington, D.C. 20549 upon payment of
the prescribed fees. The Common Stock of the Company is quoted on The Nasdaq
National Market. Reports, proxy and information statements and other information
concerning the Company may be inspected at The Nasdaq Stock Market at
1735 K Street, NW, Washington, D.C. 20006. In addition, the Commission maintains
a World Wide Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
hereby incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as filed on March 31, 1998;
(2) The Company's Current Report on Form 8-K, as filed on April 2,
1998;
(3) The Company's definitive Proxy Statement for the 1998 Annual
Meeting, as filed on April 6, 1998;
(4) The description of the Company's Common Stock set forth in the
Company's Registration Statement on Form 8-A, as filed on June 13,
1996, including any amendment thereto or report filed for the
purpose of updating such description.
All reports and other documents subsequently filed by the Company
pursuant to Section 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, to the extent required, and to be a part
hereof from the date of filing of such reports and documents. Any statement
incorporated 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 hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be submitted in writing
to David L. Greenwood, Chief Financial Officer, Geron Corporation,
230 Constitution Drive, Menlo Park, California 94025 or by telephone at (650)
473-7700.
THE COMPANY
Geron Corporation is a biopharmaceutical company focused on discovering
and developing therapeutic and diagnostic products based upon common biological
mechanisms underlying cancer and other age-related diseases. As the pioneer in
researching these mechanisms, the Company focuses on telomeres, which are
structures at the ends of chromosomes that the Company has shown to act as a
molecular "clock" of cellular aging, and telomerase, an enzyme which appears to
stop the "clock" and confers cellular immortality. The Company and its
collaborators have established that these mechanisms play a role in cancer and
many other age-related diseases and conditions, and thus the Company believes it
has a broadly applicable, proprietary platform for discovering and developing
novel small molecule therapeutics and diagnostics for such diseases. The most
advanced of the Company's three therapeutic programs is in the area of
telomerase inhibition for the treatment of cancer. Geron intends to build upon
its leadership position in the field of telomere biology and telomerase
regulation by selectively collaborating with pharmaceutical companies and
research institutions and intends to protect its leadership position by building
an extensive patent portfolio. The Company owns eight issued United States
patents and 53 United States patent applications and has licensed 18 issued
United States patents and 49 United States patent applications.
Geron Corporation was incorporated in 1990 under the laws of Delaware.
The Company's principal executive offices are located at 230 Constitution Drive,
Menlo Park, California, and its telephone number is (650) 473-7700. As used in
this Prospectus, the "Company" and "Geron" refer to Geron Corporation, a
Delaware corporation, and its subsidiaries.
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RISK FACTORS
This Prospectus (including the documents incorporated by reference
herein) 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, including, without limitation, statements regarding the Company's
expectations, beliefs, intentions or future strategies. All forward-looking
statements included in this document are based on information available to the
Company on the date hereof, and the Company assumes no obligation to update any
such forward- looking statements. Actual results could differ materially from
those projected in the forward-looking statements as a result of the risk
factors set forth below and in the documents incorporated by reference herein.
In evaluating the Company's business, prospective investors should carefully
consider the following risk factors in addition to the other information set
forth herein or incorporated herein by reference.
TECHNOLOGICAL UNCERTAINTY
The study of the mechanisms of cellular aging and cellular immortality,
including telomere biology and telomerase, is a relatively new area of research,
and there can be no assurance that this research will lead to the discovery or
development of any therapeutic or diagnostic product. If and when potential lead
drug compounds or product candidates are identified through the Company's
research programs, they will require significant preclinical and clinical
testing prior to regulatory approval in the United States and elsewhere, and
there can be no assurance that any of these efforts will result in a product
that can be marketed. Because of the significant additional scientific,
regulatory and commercial milestones that must be reached for the Company's
research programs to be successful, there can be no assurance that any program
will not be abandoned after significant resources have been expended. The
abandonment of any research program could have a material adverse effect on the
Company.
As a result of its drug discovery efforts to date, the Company has identified
compounds in in vitro studies that demonstrate potential for inhibiting
telomerase in vivo. However, additional development efforts will be required
prior to the selection of a lead compound for preclinical development and
clinical trials as a telomerase inhibitor for cancer. If and when selected, a
lead compound may prove to have undesirable and unintended side effects or other
characteristics affecting its efficacy or safety that may prevent or limit its
commercial use. For example, telomerase is active in reproductive cells and
transiently expressed in certain hematopoietic (blood) and gastrointestinal
cells. There can be no assurance that any product based on the inhibition of
telomerase will not adversely affect such cells and result in unacceptable side
effects. In addition, it is expected that telomerase inhibition will have
delayed efficacy as telomeres resume normal shortening and, as a result, will in
most cases, be used in conjunction with other cancer therapies. There can be no
assurance that the delayed efficacy of a telomerase inhibitor will not have a
material adverse effect on the preclinical and clinical development, ability to
obtain regulatory approval or marketability of a telomerase inhibitor for the
treatment of cancer. The abandonment of the Telomerase Inhibition and Detection
program would have a material adverse effect on the Company.
With respect to the development and commercial application of the Company's
proprietary telomerase detection technology, there is, as yet, insufficient
clinical data to confirm its full utility to diagnose, prognose, monitor patient
status and screen for cancer. Although the Company's licensees, Oncor,
Boehringer Mannheim, Kyowa Medex and PharMingen have commenced the sale of kits
for research use, additional development work and regulatory consents will be
necessary prior to the introduction of tests for clinical use.
With respect to the Company's Genomics of Aging program, the Company has
identified certain genes that are expressed differentially in senescent cells
versus replicatively young cells. However, the Company has not identified any
lead compounds that have been demonstrated to modulate such gene expression, and
there can be no assurance that any such lead compound will be discovered or
developed. The part of the Company's Genomics of Aging program that is designed
to modulate telomere length is at an early stage of development. While telomere
length and replicative capacity have been extended in vitro, there can be no
assurance that the Company will discover a compound that will modulate telomere
length or increase replicative capacity effectively for clinical use. The
Company's Primordial Stem Cell program is also at an early stage. While primate
Primordial Stem ("PS") cells
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<PAGE> 7
have been isolated and allowed to expand and differentiate into numerous cell
types, there can be no assurance that the Company's efforts to isolate the human
primordial stem cell and develop products therefrom will result in any
commercial applications.
The Company may become aware of technology controlled by third parties that
is advantageous to the Company's programs. There can be no assurance that the
Company will be able to acquire or license such technology on reasonable terms,
if at all. In the event that the Company is unable to acquire such technology,
the Company may be required to expend significant time and resources to develop
similar technology, and there can be no assurance that it will be successful in
this regard. If the Company cannot acquire or develop necessary technology, it
may be prevented from pursuing certain business objectives. Moreover, a
competitor of the Company could acquire or license such technology. Any such
event could have a material adverse effect on the Company.
EARLY STAGE OF DEVELOPMENT
Geron is at an early stage in the development of therapeutic and diagnostic
products. The Company has not yet selected a lead compound for any of its drug
development programs. In order to identify and select such a compound, it must
have access to sufficient numbers of chemical compounds and resources, of which
there can be no assurance. Products that may result from the Company's research
and development programs are not expected to be commercially available for a
number of years, if at all. The Company's program to identify a telomerase
inhibitor is currently at the drug discovery stage, while the Company's other
programs are currently focused on research efforts prior to drug discovery or
preclinical development. It is difficult to predict when, if ever, the Company
will select a lead compound for drug development as a telomerase inhibitor. In
addition, there can be no assurance that the Company's other programs will move
beyond their current stage. Assuming the Company's research advances and the
Company is able to identify and select a lead compound for telomerase
inhibition, certain preclinical development efforts will be necessary to
determine whether the potential product has sufficient safety to enter clinical
trials. If such a potential product receives authorization from the United
States Food and Drug Administration (the "FDA") to enter clinical trials, then
it will most likely be subjected to a multiphase, multicenter clinical study to
determine its safety and efficacy. It is not possible to predict the length or
extent of clinical trials or the period of any required patient follow-up.
Assuming clinical trials of any potential product are successful and other data
are satisfactory, the Company will submit an application to the FDA and
appropriate regulatory bodies in other countries to seek permission to market
the product. The review process at the FDA is substantial and lengthy, and there
can be no assurance that the FDA will approve the Company's application or will
not require additional clinical trials or other data prior to approval.
Furthermore, even if such approval is ultimately obtained, delays in the
approval process could have a material adverse effect on the Company. In
addition, there can be no assurance that any potential product will be capable
of being produced in commercial quantities at a reasonable cost or that such
product will be successfully marketed. Based on the foregoing, the Company does
not anticipate being able to commence marketing of any therapeutic products for
a period of years, if at all. There can be no assurance that any of the
Company's product development efforts will be successfully completed, that
regulatory approvals will be obtained, or that the Company's products, if any,
will achieve market acceptance.
DEPENDENCE ON STRATEGIC AND RESEARCH COLLABORATIONS
The Company's strategy for the development, clinical testing and
commercialization of its products includes entering into collaborations with
corporate partners, licensors, licensees and others, and the Company is
dependent upon the subsequent success of these other parties in performing their
respective responsibilities. The success of any collaboration depends on the
continued cooperation of its partners, as to which there can be no assurance.
The amount and timing of resources to be devoted to activities by its
collaborators are not within the direct control of the Company. There can be no
assurance that such partners will perform their obligations as expected or that
the Company will derive any benefits from such arrangements. There can also be
no assurance that the Company's current collaborators or any future
collaborators will not pursue existing or alternative technologies in preference
to those being developed in collaboration with the Company.
The Company currently has no manufacturing infrastructure and no marketing or
sales organization, and intends to rely in substantial part on its current and
future strategic partners for the manufacture of any product and the principal
marketing and sales responsibilities for any such product. To the extent the
Company chooses not to or is
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<PAGE> 8
unable to establish such arrangements, the Company will require substantially
greater capital to undertake its own manufacturing, marketing and sales of any
product.
In April 1995, the Company entered into a License and Research Collaboration
Agreement with Kyowa Hakko (the "Kyowa Hakko Agreement") for the development and
commercialization in certain Asian countries of a telomerase inhibitor for the
treatment of cancer. Under the collaboration, Kyowa Hakko provides certain
funding for the Company's research and development activities and is responsible
for all clinical, regulatory, manufacturing, marketing and sales efforts and
expenses in the covered territory. The Kyowa Hakko Agreement provides that Kyowa
Hakko will not pursue research and development independent of its collaboration
with Geron with respect to telomerase inhibition for the treatment of cancer in
humans until April 7, 2000, at the earliest. The Kyowa Hakko Agreement also
provides in general that, while Geron exercises significant influence during the
research phase, Kyowa Hakko exercises significant influence during the
development and commercialization phases of the collaboration. In March 1997,
the Kyowa Hakko Agreement was amended to extend its term until April 2000 and to
make certain other changes in connection with the signing of the Pharmacia &
Upjohn Agreement (as defined below).
On March 23, 1997 the Company signed a License and Research Collaboration
Agreement (the "Pharmacia & Upjohn Agreement") with Pharmacia & Upjohn, S.p.A.
to collaborate in the discovery, development and commercialization of a new
class of anticancer drugs that inhibit telomerase. Under the collaboration,
Pharmacia & Upjohn will provide certain funding of the Company's research and
development activities and will be primarily responsible for all clinical,
regulatory, manufacturing, marketing and sales efforts and expenses. Geron has
certain promotion rights with corresponding clinical expense obligations. As
with the Kyowa Hakko Agreement, the Company exercises significant influence
during the research phase of the collaboration while Pharmacia & Upjohn will
exercise significant influence during the development and commercialization
phases of the collaboration. Through the Pharmacia & Upjohn and Kyowa Hakko
Agreements, the Company has granted to Pharmacia & Upjohn and Kyowa Hakko
exclusive worldwide rights to its telomerase inhibition technology, with
exception to certain antisense, gene therapy and vaccine technologies outside
Asia, for the treatment of cancer in humans. If and when a telomerase inhibitor
is selected for development and commercialization under the Agreements, the
Company will be significantly dependent upon the activities of Pharmacia &
Upjohn and Kyowa Hakko for the successful commercialization of such product. Any
failure of Pharmacia & Upjohn and Kyowa Hakko to develop or commercialize a
telomerase inhibitor (if and when selected) will have a material adverse effect
on the Company.
In December 1997, the Company entered into a License, Product and Marketing
Agreement with Boehringer Mannheim to develop and market research and clinical
diagnostic products to study and diagnose cancer on an exclusive, worldwide
basis. Under the collaboration Boehringer Mannheim will provide reimbursement
for research previously conducted and will be primarily responsible for all
clinical, regulatory, manufacturing, marketing and sales efforts and expenses.
In addition, the Company is entitled to receive future payments upon achievement
of certain contractual milestones relating to level of product sales, as well as
royalties on product sales. Further, the Company has an option to exercise
certain co-promotion rights in the United States. If and when a telomerase-based
diagnostic kit is developed and commercialized under the agreement with
Boehringer Mannheim, the Company will be significantly dependent upon the
activities of Boehringer Mannheim for the successful manufacturing and
commercialization of such product.
The Company has also entered into licensing arrangements with several
diagnostic companies for the Company's telomerase detection technology. However,
because these licenses are limited to the research-use-only market, such
arrangements are not expected to generate significant commercial revenues.
There can be no assurance that the Company will be able to negotiate
additional strategic arrangements in the future on acceptable terms, if at all,
or that such strategic arrangements will be successful. In the absence of such
arrangements, the Company may encounter significant delays in introducing any
product or find that the research, development, manufacture, marketing or sale
of any product is adversely affected. In the event that the Company does not
enter into such arrangements, it may be materially adversely affected.
The Company has relationships with collaborators and scientific advisors at
academic and other institutions, some of whom conduct research at the Company's
request. These collaborators and scientific advisors are not employees of the
Company and may have commitments to, or consulting or advisory contracts with,
other entities
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<PAGE> 9
that may limit their availability to the Company. The Company has limited
control over the activities of these collaborators and advisors and, except as
otherwise required by its collaboration and consulting agreements, can expect
only limited amounts of their time to be dedicated to the Company's activities.
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DEPENDENCE ON PROPRIETARY TECHNOLOGY AND UNCERTAINTY OF PATENT PROTECTION
Protection of the Company's proprietary compounds and technology is important
to the Company's business. The Company owns eight issued United States patents
and over 53 United States patent applications and has licensed 18 issued United
States patents and over 49 United States patent applications, as well as
international filings under the Patent Cooperation Treaty and pending foreign
national patent applications corresponding to certain of these United States
applications. Geron's success will depend in part on its ability to obtain and
enforce its patents and maintain trade secrets, both in the United States and in
other countries. The patent positions of pharmaceutical and biopharmaceutical
companies, including the Company, are highly uncertain and involve complex legal
and technical questions for which legal principles are not firmly established.
There can be no assurance that the Company will continue to develop products or
processes that are patentable or that patents will issue from any of the pending
applications, including even allowed patent applications. There can also be no
assurance that the Company's current patents, or patents that issue on pending
applications, will not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide proprietary protection or competitive
advantages to the Company. Because (i) patent applications in the United States
are maintained in secrecy until patents issue, (ii) patent applications are not
generally published until many months or years after they are filed and (iii)
publication of technological developments in the scientific and patent
literature often occurs long after the date of such developments, the Company
cannot be certain that the inventors on its or its licensors' patents and patent
applications were the first to invent the inventions disclosed in the patent
applications or patents or that it or its licensors were the first to file
patent applications for such inventions. Patent prosecution to issue patents and
litigation to establish the validity of patents, to defend against patent
infringement claims of others and to assert infringement claims against others
can be expensive and time consuming even if the outcome is favorable to the
Company. If the outcome of patent prosecution or litigation is unfavorable to
the Company, the Company could be materially adversely affected.
Patent law relating to the scope and enforceability of claims in the fields
in which the Company operates is still evolving. The degree of future protection
for the Company's proprietary rights, therefore, is highly uncertain. In this
regard, there can be no assurance that independent patents will issue from each
of the United States patent applications referenced above, which include many
interrelated applications directed to common or related subject matter. The
Company is aware of certain patent applications and patents that have been filed
by others with respect to telomerase and telomere length technology. In
addition, there are a number of issued patents and pending applications owned by
others directed to differential display, stem cell and other technologies
relating to the Company's research, development and commercialization efforts.
There can be no assurance that the Company's technology can be developed and
commercialized without a license to such patents or that such patent
applications will not be granted priority over patent applications filed by the
Company or its licensors. Furthermore, there can be no assurance that others
will not independently develop similar or alternative technologies to those of
the Company, duplicate any of the Company's technologies or design around the
patented technologies developed by the Company or its licensors, any of which
may have a material adverse effect on the Company.
The commercial success of the Company depends significantly on its ability to
operate without infringing patents and proprietary rights of others. There can
be no assurance that the Company's technologies do not and will not infringe the
patents or proprietary rights of others. In the event of such infringement, the
Company may be enjoined from pursuing research, development or commercialization
of its potential products or may be required to obtain licenses to these patents
or other proprietary rights or to develop or obtain alternative technologies.
There can be no assurance that the Company will be able to obtain alternative
technologies or any required license on commercially favorable terms, if at all,
and if any such license is or alternative technologies are not obtained, the
Company may be delayed or prevented from pursuing the development of certain of
its potential products. The Company's breach of an existing license or failure
to obtain or delay in obtaining alternative technologies or a license to any
technology that it may require to develop or commercialize its products may have
a material adverse effect on the Company. Also, the Company may be subject to
claims or litigation as a result of entering into a license. In this regard, the
Company signed a licensing and sponsored research agreement relating to its
Primordial Stem Cell program with The Johns Hopkins University School of
Medicine ("JHU") on August 1, 1997, after having been informed by a third party
that the Company and JHU would violate the rights of that third party and
another academic institution with which that third party claimed to be
affiliated by way of contract (collectively "Third Party") in doing so. After a
review of the correspondence with the Third Party and JHU as well as related
documents, including an issued U.S. patent, the Company believes that the Third
Party's claims, if asserted, would
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<PAGE> 11
fall into three general categories: patent infringement, misuse of confidential
information and breach of contract. The Company believes that it and JHU have
substantial defenses to any claims that might be asserted by such Third Party
and has provided indemnification to JHU relating to such potential claims.
However, any litigation resulting from this matter may divert significant
resources, both financial and otherwise, from the Company's research programs
and there can be no assurance that the Company would be successful in any such
litigation. If the outcome of any such litigation is unfavorable to the Company,
the Company could be materially and adversely affected.
Litigation may also be necessary to enforce any patents issued or licensed to
the Company or to determine the scope and validity of the Company's or another's
proprietary rights. The Company could incur substantial costs if litigation is
required to defend itself in patent suits or other intellectual property
litigation brought by others or if Geron initiates such suits. There can be no
assurance that the Company's issued or licensed patents would be held valid or
infringed in a court of competent jurisdiction or that a patent held by another
will be held invalid or not infringed in such court. An adverse outcome in
litigation or an interference to determine priority or other proceeding in a
court or patent office could subject the Company to significant liabilities to
other parties, require disputed rights to be licensed from other parties or
require the Company to cease using such technology, any of which could have a
material adverse effect on the Company.
Geron also relies on trade secrets to protect its proprietary technology,
especially in circumstances in which patent protection is not believed to be
appropriate or obtainable. Geron attempts to protect its proprietary technology
in part by confidentiality agreements with its employees, consultants and
certain contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.
The Company is party to various license agreements which give it rights to
use certain technologies in its research, development and commercialization
activities. Disputes have arisen and may continue to arise as to the
inventorship and corresponding rights in know-how and inventions resulting from
the joint creation or use of intellectual property by the Company and its
licensors, research collaborators and consultants. There can be no assurance
that the Company will be able to continue to license such technologies on
commercially reasonable terms, if at all, or to maintain the exclusivity of its
exclusive licenses. The failure of the Company to maintain exclusive or other
rights to such technologies could have a material adverse effect on the Company.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial capital resources in order to conduct
its operations. The Company's future capital requirements will depend on many
factors, including, among others, continued scientific progress in its research
and development programs; the magnitude and scope of these activities; the
ability of the Company to maintain and establish strategic arrangements for
research, development, clinical testing, manufacturing and marketing; progress
with preclinical and clinical trials; the time and costs involved in obtaining
regulatory approvals; the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims; or the potential for new
technologies and products. The Company intends to seek such additional funding
through strategic collaborations, public or private equity financings and
capital lease transactions; however, there can be no assurance that additional
financing will be available on acceptable terms, if at all. Additional equity
financings could result in significant dilution to stockholders. Further, in the
event that additional funds are obtained through arrangements with collaborative
partners, such arrangements may require the Company to relinquish rights to
certain of its technologies, product candidates or products that the Company
would otherwise seek to develop or commercialize itself. If sufficient capital
is not available, the Company may be required to delay, reduce the scope of or
eliminate one or more of its research or development programs, each of which
could have a material adverse effect on the Company. Based on current
projections, the Company estimates that its existing capital resources including
the proceeds from the private placement completed in March 1998 and payments
under the Pharmacia & Upjohn and Kyowa Hakko Agreements, interest income, grant
funding and equipment financing will be sufficient to fund its current and
planned operations through 1999. There can be no assurance that the assumptions
underlying such estimates are correct or that such funds will be sufficient to
meet the capital needs of the Company during such period.
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<PAGE> 12
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT
Geron has incurred net operating losses in every year of operation since its
inception in 1990. Losses have resulted principally from costs incurred in
connection with the Company's research and development activities and from
general and administrative costs associated with the Company's operations. The
Company expects to incur additional operating losses over the next several years
as the Company's research and development efforts and preclinical testing are
expanded. Substantially all of the Company's revenues to date have been research
support payments under the collaborative agreements with Kyowa Hakko and
Pharmacia & Upjohn. Research support payments under the Kyowa Hakko Agreement
expire in April 1998. Research payments under the Pharmacia & Upjohn Agreement
expire in January 2000. The Company is unable to estimate at this time the level
of revenue to be received from the sale of diagnostic products, but does not
expect to receive significant revenues from the sale of research-use-only kits.
The Company's ability to achieve profitability is dependent on its ability,
alone or with others, to select therapeutic compounds for development, obtain
the required regulatory approvals and manufacture and market resulting products.
There can be no assurance when or if the Company will receive material revenues
from product sales or achieve profitability. Failure to generate significant
additional revenues and achieve profitability could impair the Company's ability
to sustain operations.
SUBSTANTIAL COMPETITION; RISK OF TECHNOLOGICAL OBSOLESCENCE
The pharmaceutical and biopharmaceutical industries are intensely
competitive. The Company believes that certain pharmaceutical and
biopharmaceutical companies as well as certain research organizations currently
engage in or have in the past engaged in efforts related to the biological
mechanisms of cell aging and cell immortality, including the study of telomeres,
telomerase and stem cell technologies. In addition, other products and therapies
that could compete directly with the products that the Company is seeking to
develop and market currently exist or are being developed by pharmaceutical and
biopharmaceutical companies, and by academic and other research organizations.
Many companies are also developing alternative therapies to treat cancer and, in
this regard, are competitive with the Company. The pharmaceutical companies
developing and marketing such competing products have significantly greater
financial resources and expertise in research and development, manufacturing,
preclinical and clinical testing, obtaining regulatory approvals and marketing
than the Company. Smaller companies may also prove to be significant
competitors, particularly through collaborative arrangements with large and
established companies. Academic institutions, government agencies and other
public and private research organizations may also conduct research, seek patent
protection and establish collaborative arrangements for research, clinical
development and marketing of products similar to those of the Company. These
companies and institutions compete with the Company in recruiting and retaining
qualified scientific and management personnel as well as in acquiring
technologies complementary to the Company's programs. There is also competition
for access to libraries of compounds to use for screening. Any inability of the
Company to secure and maintain access to sufficiently broad libraries of
compounds for screening potential targets would have a material adverse effect
on the Company. In addition to the above factors, Geron will face competition
with respect to product efficacy and safety, the timing and scope of regulatory
consents, availability of resources, reimbursement coverage, price and patent
position, including potentially dominant patent positions of others. There can
be no assurance that competitors will not develop more effective or more
affordable products, or achieve earlier patent protection or product
commercialization than the Company or that such products will not render the
Company's products obsolete.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the principal members of its scientific
and management staff, the loss of whose services might significantly delay or
prevent the achievement of research, development or business objectives. In
addition, the Company relies on consultants and advisors, including the members
of its Scientific Advisory Board, to assist the Company in formulating its
research and development strategy. Retaining and attracting qualified scientific
and management personnel, consultants and advisors is critical to the Company's
success. The Company faces competition for qualified individuals from numerous
pharmaceutical, biopharmaceutical and biotechnology companies, as well as
academic and other research institutions. There can be no assurance that the
Company will be able to attract and retain such individuals on acceptable terms
and the failure to do so would have a material adverse effect on the Company.
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<PAGE> 13
ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF PRIMORIDAL STEM CELL THERAPIES
The Company's Primordial Stem Cell program may involve the use of PS cells
that would be derived from human embryonic tissue, and therefore may raise
certain ethical, legal and social issues regarding the appropriate utilization
of this tissue. The use of embryonic tissue in scientific research is an issue
of national interest. Many research institutions, including certain of the
Company's scientific collaborators, have adopted policies regarding the ethical
use of these types of human tissue. These policies may have the effect of
limiting the scope of research conducted in this area, resulting in reduced
scientific progress. The Company has established an Ethics Advisory Board
comprised of independent and recognized medical ethicists to provide advice to
the Company. In addition, the United States government and its agencies
currently do not fund research which involves the use of such tissue and may in
the future regulate or otherwise restrict its use. The inability of the Company
to conduct research on these cells due to such factors as government regulation
or otherwise could have a material adverse effect on the program. In the event
the Company's research related to PS cell therapies becomes the subject of
adverse commentary or publicity, the Company's name and goodwill could be
adversely affected.
GOVERNMENT REGULATION
The preclinical testing and clinical trials of any products developed by the
Company or its collaborative partners and the manufacturing, labeling, sale,
distribution, marketing, advertising and promotion of any new products resulting
therefrom are subject to regulation by federal, state and local governmental
authorities in the United States, the principal one of which is the FDA, and by
similar agencies in other countries in which products developed by the Company
or its collaborative partners may be tested and marketed (each of such federal,
state, local and other authorities and agencies is referred to herein as a
"Regulatory Agency"). Any product developed by the Company or its collaborative
partners must receive all relevant Regulatory Agency approvals or clearances, if
any, before it may be marketed in a particular country. The regulatory process,
which includes extensive preclinical testing and clinical trials of each product
in order to establish its safety and efficacy, is uncertain, can take many years
and requires the expenditure of substantial resources. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations
which could delay, limit or prevent Regulatory Agency approval or clearance. In
addition, delays or rejections may be encountered based upon changes in
Regulatory Agency policy during the period of product development and/ or the
period of review of any application for Regulatory Agency approval or clearance
for a product. Delays in obtaining Regulatory Agency approvals or clearances
could adversely affect the marketing of any products developed by the Company or
its collaborative partners, impose costly procedures upon the Company's and its
collaborative partners' activities, diminish any competitive advantages that the
Company or its collaborative partners may attain and adversely affect the
Company's ability to receive royalties and generate revenues and profits. There
can be no assurance that, even after such time and expenditures, any required
Regulatory Agency approvals or clearances will be obtained for any products
developed by or in collaboration with the Company. Moreover, if Regulatory
Agency approval or clearance for a new product is obtained, such approval or
clearance may entail limitations on the indicated uses for which it may be
marketed that could limit the potential market for any such product.
Furthermore, approved products and their manufacturers are subject to continual
review, and discovery of previously unknown problems with a product or its
manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market. In general, failure to
comply with FDA requirements can result in severe civil and criminal penalties,
including but not limited to recall or seizure of product, injunction against
manufacture, distribution, sales and marketing and criminal prosecution.
NO ASSURANCE OF MARKET ACCEPTANCE; UNCERTAINTY OF PHARMACEUTICAL PRICING; IMPACT
OF HEALTH CARE REFORM MEASURES
There can be no assurance that any products successfully developed by the
Company or its collaborative partners, if approved for marketing, will achieve
market acceptance. The products which the Company is attempting to develop will
compete with a number of traditional drugs and therapies manufactured and
marketed by major pharmaceutical companies, as well as new products currently
under development by such companies and others. The degree of market acceptance
of any products developed by the Company will depend on a number of factors,
including the establishment and demonstration in the medical community of the
clinical efficacy and safety of the Company's product candidates, their
potential advantage over alternative treatment methods and reimbursement
policies of government and third-party payors. There is no assurance that
physicians, patients or the
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<PAGE> 14
medical community in general will accept and utilize any products that may be
developed by the Company or its collaborative partners.
In both domestic and foreign markets, sales of the Company's products, if
any, will depend in part on the availability of reimbursement from third-party
payors such as government health administration authorities, private health
insurers, health maintenance organizations, pharmacy benefit management
companies and other organizations. Both federal and state governments in the
United States and foreign governments continue to propose and pass legislation
designed to contain or reduce the cost of health care through various means.
Legislation and regulations affecting the pricing of pharmaceuticals and other
medical products may change or be adopted before any of the Company's potential
products are approved for marketing. Cost control initiatives could decrease the
price that the Company receives for any product it may develop in the future and
have a material adverse effect on the Company. In addition, third-party payors
are increasingly challenging the price and cost-effectiveness of medical
products and services. Significant uncertainty exists as to the reimbursement
status of newly approved health care products, including pharmaceuticals. There
can be no assurance that the Company's potential products will be considered
cost effective or that adequate third-party reimbursement will be available to
enable Geron to maintain price levels sufficient to realize an appropriate
return on its investment in product development. In any such event, the Company
may be materially adversely affected.
REGULATIONS RELATING TO THE ENVIRONMENT AND HAZARDOUS MATERIALS
The Company's research and development activities involve the controlled use
of hazardous materials, chemicals and various radioactive compounds. As a
consequence, the Company is subject to numerous environmental and safety laws
and regulations. There can be no assurance that the Company will not be required
to incur significant costs to comply with current or future environmental laws
and regulations or that the Company will not be adversely affected by the cost
of compliance with such laws and regulations. Although the Company believes that
its safety procedures for using, handling, storing and disposing of such
materials comply with the standards prescribed by state and federal regulations,
the risk of accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, the Company's use of these
materials could be curtailed by state or federal authorities, the Company could
be held liable for any damages that result and any such liability could have a
material adverse effect on the Company.
POTENTIAL PRODUCT LIABILITY CLAIMS; ABSENCE OF INSURANCE
Although the Company believes it does not currently have any exposure to
product liability claims, the Company's future business will expose it to
potential product liability risks that are inherent in the testing,
manufacturing and marketing of human therapeutic and diagnostic products. The
Company currently has no clinical trial liability insurance and there can be no
assurance that it will be able to obtain and maintain such insurance for any of
its clinical trials. In addition, there can be no assurance that the Company
will be able to obtain or maintain product liability insurance in the future on
acceptable terms or with adequate coverage against potential liabilities.
CONTROL BY MANAGEMENT AND CURRENT STOCKHOLDERS
Executive officers and directors of the Company, together with entities
affiliated with them, own or control approximately 10% of the outstanding shares
of Common Stock and may be able to influence significantly the election of the
Company's Board of Directors and other corporate actions requiring stockholder
approval, as well as significantly influence the direction and policies of the
Company.
POTENTIAL ADVERSE MARKET IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Common Stock in the public market
could adversely affect the market price of the Common Stock. The Company had
outstanding approximately 11,142,670 shares of Common Stock and 15,000 shares of
Series A Convertible Preferred Stock (the "Series A Preferred Stock") as of
March 30, 1998. As of April 24, 1998, 3,071,018 shares of Common Stock were
reserved for issuance upon exercise of the Company's outstanding options and
warrants and an additional 1,993,355 shares of Common Stock were reserved for
issuance upon conversion of the Series A Preferred Stock. Pharmacia & UpJohn
S.p.A. has agreed not to sell the 696,787 shares (including the 255,102 shares
purchased in March 1998) held by it until April 2000, after which time such
shares will be freely transferable in accordance with Regulation S promulgated
under the Securities Act of 1933, as amended ("the Securities Act"). Except for
the shares of Common Stock issued to Pharmacia & UpJohn S.p.A., all of the
Company's outstanding shares of Common Stock are freely tradeable without
restriction under the Securities Act unless held by affiliates of the Company.
In addition, certain holders of Common Stock and securities convertible into or
exercisable for shares of Common Stock have certain registration rights under a
registration rights agreement among such holders and the Company.
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<PAGE> 15
POSSIBLE VOLATILITY OF STOCK PRICE
There has been a history of significant volatility in the market price for
shares of biopharmaceutical companies, and it is likely that the market price of
the Common Stock will be similarly volatile. Prices for the Common Stock may be
influenced by many factors, including the depth of the market for the Common
Stock, investor perception of the Company, fluctuations in the Company's
operating results and market conditions relating to the biopharmaceutical and
pharmaceutical industries. In addition, the market price of the Common Stock may
be influenced by announcements of technological innovations, new commercial
products or clinical progress or the lack thereof by the Company, its
collaborative partners or its competitors. In addition, announcements concerning
regulatory developments, developments with respect to proprietary rights and the
Company's collaborations as well as other factors could also have a significant
impact on the Company's business and the market price of the Common Stock.
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS; CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority to issue up to 3,000,000
shares of undesignated Preferred Stock and to determine the rights, preferences,
privileges and restrictions of such shares without further vote or action by the
Company's stockholders. In March 1998, the Board of Directors designated 15,000
shares as Series A Convertible Preferred Stock. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of the
Company. In addition, certain provisions of the Company's charter documents,
including the inability of stockholders to take actions by written consent and
the staggered election of the Company's Board of Directors, and certain
provisions of Delaware law could delay or make difficult a merger, tender offer
or proxy contest involving the Company.
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send checks, or engage in
similar normal business activities.
The Company has started an assessment and will have to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The total Year 2000
project cost is estimated at approximately $200,000 which includes $100,000 of
new software that will be capitalized and $100,000 that will be expensed as
incurred. As of December 31, 1997, the Company has not incurred any expenses for
the Year 2000 project.
POSSIBLE DILUTION FROM CONVERSION OF SERIES A PREFERRED STOCK
The number of shares of Common Stock issuable upon conversion of the
Series A Convertible Preferred Stock is not fixed and may result in substantial
dilution to current stockholders. The sales of the underlying shares of Common
Stock could adversely affect the market price of the Common Stock. As of April
24, 1998, 15,000 shares of the Company's Series A Convertible Preferred Stock
were issued and outstanding. Each share of the Series A Preferred Stock is
convertible into such number of shares of Common Stock as is determined by
dividing the stated value ($1,000) of the share of Series A Preferred Stock (as
such value is increased by a premium based on the number of days the Series A
Preferred Stock is held) by the then current Conversion Price
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<PAGE> 16
(which is determined by reference to the then current market price). If
converted on April 22, 1998, the Series A Preferred Stock would have been
convertible into approximately 1,328,904 shares of Common Stock, but this number
of shares could prove to be significantly greater in the event of a decrease in
the trading price of the Common Stock. Purchasers of Common Stock could
therefore experience substantial dilution of their investment upon conversion of
the Series A Preferred Stock. The shares of Series A Preferred Stock are not
registered and may be sold only if registered under the Securities Act or sold
in accordance with an applicable exemption from registration, such as Rule 144.
The shares of Common Stock into which the Series A Preferred Stock may be
converted are being registered pursuant to this Registration Statement. In the
event the Company is not able to register the underlying Common Stock or the
holders of the Preferred Stock are otherwise unable to sell the underlying
Common Stock, the Company could be subject to various penalties, including the
right of the holders of the Preferred Stock to cause redemption of the Preferred
Stock at a premium.
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<PAGE> 17
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Selling Stockholders as of April 22, 1998, as follows: (i) the name and
position or other relationship (if any) with the Company within the past three
years of each Selling Stockholder; (ii) the number of the Company's
outstanding shares of Common Stock beneficially owned by each Selling
Stockholder prior to the offering hereby; (iii) the number of shares of Common
Stock being offered hereby; and (iv) the number and percentage of the Company's
outstanding shares of Common Stock to be beneficially owned by each Selling
Stockholder after completion of the sale of Common Stock being offered hereby.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
OWNED AFTER THE
SHARES BENEFICIALLY SHARES OFFERING(2)
SELLING STOCKHOLDERS OWNED PRIOR TO THE OFFERING(1) OFFERED(2) SHARES PERCENT
- --------------------- ----------------------------- ----------- ------ -------
<S> <C> <C> <C> <C>
RGC International Investors, 1,594,684 1,594,684 0 0
LDC
CCG Investment Fund Ltd.(3) 15,947 15,947 0 0
CCG Capital Ltd.(3) 15,947 15,947 0 0
Fisher Capital Ltd.(3) 238,405 238,405 0 0
Wingate Capital Ltd.(3) 128,372 128,372 0 0
Total 1,993,355 1,993,355 0 0
</TABLE>
- ------------
(1) The number of shares Common Stock listed under this column as beneficially
owned by each Selling Stockholder has been estimated at 150% of the number
of shares of Common Stock issuable upon exercise of the Series A Preferred
Stock based upon a conversion price of $11.28, which conversion price was
calculated as described below, and is each Selling Stockholder's pro-rata
allocation of the number of shares of Common Stock the Company has agreed to
initially register. Pursuant to the terms of the Series A Preferred Stock,
if the Series A Preferred Stock had been actually converted on April 22,
1998, the conversion price would have been $11.28 (105% of the average of
the lowest five (5) consecutive closing bid prices of the Common Stock for
the twenty (20) trading days immediately preceding such date) at which price
the Series A Preferred Stock would have been converted into approximately
1,328,904 shares of Common Stock. In addition, pursuant to the terms of the
Series A Preferred Stock, the shares of Series A Preferred Stock are
convertible by any holder only to the extent that the number of shares of
Common Stock thereby issuable, together with the number of shares of Common
Stock owned by such holder and its affiliates (but not including shares of
Common Stock underlying unconverted shares of Series A Preferred Stock)
would not exceed 4.9% of the then outstanding Common Stock as determined in
accordance with Section 13(d) of the Exchange Act. Accordingly, the number
of shares of Common Stock set forth in the table for each Selling
Stockholder may (i) exceed the number of shares of Common Stock that each
Selling Stockholder could own beneficially at any given time through their
ownership of the Series A Preferred Stock and (ii) does not reflect actual
beneficial ownership of the shares of Common Stock prior to the offering. As
a result, beneficial ownership of this Selling Stockholder set forth in the
table is not determined in accordance with Rule 13d-3 under the Exchange
Act.
(2) Assumes that each Selling Stockholder will sell all of the Shares set forth
above under "Shares Offered." There can be no assurance that the Selling
Stockholders will sell all or any of the Shares offered hereunder. The
number of shares set forth in the table represents an estimate of the number
of shares of Common Stock to be offered by the Selling Stockholder. The
actual number of shares of Common Stock issuable upon conversion of Series A
Preferred Stock is indeterminate, is subject to adjustment and could be
materially less or more than such estimated number depending on factors
which cannot be predicted by the Company at this time, including, among
other factors, the future market price of the Common Stock. The actual
number of shares of Common Stock offered hereby, and included in the
Registration Statement of which this Prospectus is a part, includes such
additional number of shares of Common Stock as may be issued or issuable
upon conversion of the Series A Preferred Stock by reason of the floating
rate conversion price mechanism or other adjustment mechanisms described
therein, or by reason of any stock split, stock dividend or similar
transaction involving the Common Stock, in order to prevent dilution, in
accordance with Rule 416 under the Securities Act.
(3) Citadel Limited Partnership is the trading manager of CCG Investment Fund
Ltd., CCG Capital Ltd., Fisher Capital Ltd. and Wingate Capital Ltd.
(collectively, the "Citadel Entities") and consequently has voting control
and investment discretion over securities held by the Citadel Entities. The
ownership for each of the Citadel Entities does not include the ownership
information for the other Citadel Entities. Citadel Limited Partnership and
each of the Citadel Entities disclaims beneficial ownership of the Shares
held by the other Citadel Entities.
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<PAGE> 18
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
On March 27, 1998, the Company completed the private placement (the
"Private Placement") of 15,000 shares of Series A Preferred Stock. The Series A
Preferred Stock has a stated value of $1,000 per share, resulting in proceeds to
the Company of approximately $15 million. The Company relied on Rule 506 of
Regulation D under the Securities Act of 1933, as amended (the "Act"), which,
among other things, provides an exemption from the registration requirements of
the Act for sales to accredited investors (as defined by Rule 501(a) of
Regulation D under the Act). Each share of Series A Preferred Stock is
convertible into Common Stock in accordance with the terms of the Certificate of
Designations, Preferences and Rights for the Series A Preferred Stock. Under the
terms of the Private Placement, the Company agreed to file a Registration
Statement on Form S-3 following the closing of the transaction to cover the
shares of the Company's Common Stock issuable upon conversion of the Series A
Preferred Stock. See "Description of Capital Stock - Series A Convertible
Preferred Stock."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, $0.001 per share, and 3,000,000 shares of Preferred
Stock, $0.001 par value per share of the authorized Preferred Stock, 15,000
shares of which have been designated Series A Convertible Preferred Stock. As of
April 1, 1998, there were 11,144,086 shares of Common Stock outstanding held of
record by approximately 570 record holders of the Company Common Stock and
15,000 shares of Series A Preferred Stock held of record by five record holders.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior rights of Preferred Stock, if
any, then outstanding. The Common Stock has no preemptive or conversion rights
or other subscription rights. There are no redemption or sinking fund provisions
available to the Common Stock. All outstanding shares of Common Stock are fully
paid and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 3,000,000 shares
of undesignated Preferred Stock in one or more series and to fix the rights,
preferences and privileges thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, without any further vote or action by stockholders. The issuance
of Preferred Stock could adversely affect the voting power of holders of Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deterring or
preventing a change in control of the Company.
SERIES A CONVERTIBLE PREFERRED STOCK
The Board has classified 15,000 shares of the undesignated Preferred
Stock as Series A Convertible Preferred Stock with the rights, preferences,
privileges and terms set forth in the Certificate of Designations filed pursuant
thereto. Of the 15,000 shares of Series A Preferred Stock authorized by the
Board, all 15,000 shares are currently issued and outstanding. The stated value
per share of the Series A Preferred Stock is $1,000.00. With respect to rights
upon liquidation, winding up or dissolution and redemption rights, the Series A
Preferred Stock will rank (i) with the consent of the holders of the Series A
Preferred Stock obtained in accordance with the Certificate of Designation,
junior to any other series of capital stock duly established by the Board of
Directors of the Company, the terms of which shall specifically provide that
such series shall rank prior to the Series A Preferred Stock, whether now
existing or hereafter created (the "Senior Securities"), (ii) with the consent
-17-
<PAGE> 19
of the holders of the Series A Preferred Stock obtained in accordance with the
Certificate of Designation (unless the average closing bid price of the Common
Stock for the ten trading days prior to the date the Board of Directors
authorizes the issuance of such class or series of stock is above $12.50), on a
parity with any other series of capital stock duly established by the Board of
Directors of the Company, the terms of which shall specifically provide that
such series shall rank on a parity with the Series A Preferred Stock, whether
now existing or hereafter created (the "Parity Securities"), and (iii) prior to
any other class or series of capital stock of the Company, including, without
limitation, all classes of Common Stock, whether now existing or hereafter
created (the "Common Stock"; all of such classes or series of capital stock of
the Company to which the Series A Preferred Stock ranks prior, including without
limitation the Common Stock, and including, without limitation, junior
securities convertible into or exchangeable for other junior securities or
phantom stock representing junior securities, are collectively referred to
herein as "Junior Securities").
Dividends. Holders of the Series A Preferred Stock are not entitled to
receive dividends. So long as the Series A Preferred Stock is outstanding,
however, no dividends may be declared or paid on, nor shall any distribution be
made on, any Junior Securities, the Company may not redeem or repurchase any
Junior Securities, nor may any moneys be paid to or made available for a sinking
fund for the benefit of any Junior Securities, without the written consent of
the holders of a majority of the outstanding shares of Series A Preferred Stock.
Liquidation. In the event of any dissolution, liquidation or winding up
of the Company, whether voluntary or involuntary, or any bankruptcy, insolvency
or similar proceedings, whether voluntary or involuntary, shall be commenced
with respect to the Company (a "Liquidation"), the holders of shares of Series A
Preferred Stock shall be entitled to receive out of the assets of the Company
legally available for distribution to stockholders (whether representing capital
or surplus), before any payment or distribution shall be made on the Common
Stock or any other Junior Securities (but after distribution of such assets
among, or payment thereof over to, creditors of the Company and to holders of
any stock of the Company with liquidation rights senior to the Series A
Preferred Stock), the stated value per share ($1,000) plus an amount equal to 6%
per annum for the period beginning March 27, 1998 and ending on the date of
final distribution to the holder thereof (pro rated for any portion of such
period) (the "Preferred Stock Liquidation Distribution"). After the Preferred
Stock Liquidation Distribution has been made, the holders of shares of Series A
Preferred Stock shall not be entitled to any further participation in any
distribution of assets of the Company. If the assets distributable upon such
dissolution, liquidation or winding up (as provided above) shall be insufficient
to pay cash in an amount equal to the amount of the Preferred Stock Liquidation
Distribution to the holders of shares of Series A Preferred Stock, then such
assets or the proceeds thereof shall be distributed among the holders of the
Series A Preferred Stock ratably in proportion to the respective amounts of the
Preferred Stock Liquidation Distribution to which they otherwise would be
entitled. The merger or consolidation of the Company into or with another
corporation, a merger or consolidation of any other corporation with or into the
Company upon the completion of which the stockholders of the Company prior to
the merger or consolidation no longer holds a majority of the outstanding equity
securities of the Company or the sale, conveyance, exchange or transfer of all
or substantially all of the property or assets of the Company (any such event, a
"Reorganization Event") shall, at the option of the holders of at least 50% of
the Series A Preferred Stock, be deemed to be a Liquidation of the Company
pursuant to which the Company shall be required to distribute to the holders of
Series A Preferred Stock 115% of the Preferred Stock Liquidation Distribution.
Voting Rights. The holders of the Series A Preferred Stock shall be
entitled to notice of all stockholders meetings in accordance with the Company's
bylaws. Except as otherwise provided by the Delaware General Corporation Law
(the "DGCL"), the holders of the Series A Preferred Stock have no voting power
whatsoever. The Series A Preferred Stock terms include what are customarily
called protective provisions. Under these provisions, a vote of the holders of
at least a majority of the outstanding shares of Series A Preferred Stock is
required before the Company can: (i) alter or change the rights, preferences or
privileges of the Series A Preferred Stock or any Senior Preferred Stock so as
to adversely affect the Series A Preferred Stock; (ii) create any new class or
series of stock having any preference over the Series A Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up of the
Company; (iii) create any new class or series of stock ranking pari passu with
the Series A Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Company, unless the average closing bid and
price for Common Stock for the ten trading days prior to the date the Board of
Directors authorizes the issuance of such class or series is above $12.50; (iv)
increase the number of shares of Series A Preferred Stock or (v) do any act or
thing which would result in taxation to the holders of the Series A Preferred
Stock under Section 305 of the Internal Revenue Code of 1986, as amended.
-18-
<PAGE> 20
Conversion. Each share of Series A Preferred Stock is convertible into
the number of shares of the Company's Common Stock, equal to (i) the stated
value ($1,000) plus a premium of 6% per annum of the stated value from the date
of issuance of the Series A Preferred Stock (the "Issue Date"), divided by (ii)
the Conversion Price. The Conversion Price is equal to the lesser of (i) 95% of
the average closing bid prices of the Common Stock for any five consecutive
trading days during the twenty consecutive trading day period ending on the day
prior to the date of conversion (the "Market Price") and (ii) $16.88. However,
for conversions taking place prior to December 27, 1998, if any, the Conversion
Price is equal to the lesser of (i) (a) 100% of the Market Price, if the Market
Price is greater than $12.50 or (b) 105% of the Market Price, if the Market
Price is less than $12.50 and (ii) $16.88.
Subject to certain limited exceptions, the holders of the Series A
Preferred Stock are subject to limits on the number of shares they can convert
at any one time. Unless the price at which the Common Stock trades on the Nasdaq
National Market ("Nasdaq") on the date of conversion is greater than or equal to
either (1) 120% of the Market Price or (ii) $15.00, the following limits apply:
Prior to 270 days from the Issue Date, the Series A Preferred Stock may not be
converted; beginning 271 days from the Issue Date, each holder of the Series A
Preferred Stock may only convert up to 33.3% of its initial holding of the
Series A Preferred Stock; beginning 301 days from the Issue Date, each holder of
the Series A Preferred Stock may only convert up to 66.6% of its initial holding
of the Series A Preferred Stock and beginning 331 days from the Issue Date, all
of the Series A Preferred Stock may be converted. The Series A Preferred Stock
is subject to redemption at the Company's option if the market price of the
Common Stock exceeds $30.38 or falls below $7.13, or on or after the
consummation of a merger or other business combination in which the Company is
not the survivor. The Company has agreed to register the underlying Common Stock
for resale.
The issuance of the Series A Preferred Stock is subject to Nasdaq's
MarketPlace Rule 4460(i) and the holders of the Series A Preferred Stock have
agreed that the Company will not issue more than 19.99% of the Common Stock upon
conversion of the Series A Preferred Stock in the absence of (i) the approval of
such issuance by the Company's stockholders, (ii) a waiver by Nasdaq of the
provisions of Rule 4460(i), or (iii) the provisions of Rule 4460(i) no longer
being applicable to the Company.
REGISTRATION RIGHTS OF CERTAIN OTHER HOLDERS
Excluding the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, certain other holders of the Company's Common Stock
(the "Registrable Securities") or their transferees are entitled to certain
rights with respect to the registration of such shares under the Securities Act.
These rights are provided under the terms of agreements between the Company and
the holders of Registrable Securities. If at any time, the Company registers any
of its Common Stock, the holders of Registrable Securities are entitled to
include their shares of Common Stock in the registration. A holder's right to
include shares in an underwritten registration is subject to the ability of the
underwriters to limit the number of shares included in the offering. In
addition, such holders may require the Company to use its best efforts to file a
registration statement under the Securities Act at the Company's expense with
respect to their shares of Common Stock, subject to certain limitations.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
Law. In general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale or other transaction resulting in a financial benefit to the
stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's outstanding voting stock. This provision may have the
effect of delaying, deferring or preventing a change in control of the Company
without further action by the stockholders. In addition, upon completion of the
Offering, certain provisions of the Company's charter documents, including a
provision eliminating the ability of stockholders to take actions by written
consent, may have the effect of delaying or preventing changes in control or
management of the Company, which could have an adverse effect on the market
price of the Company's Common Stock. The Company's stock option and purchase
plans generally provide for assumption of such plans or substitution of an
equivalent option of a successor corporation, or, alternatively, at the
discretion of the Board of Directors, exercise of some or all of the options
stock, including nonvested shares, or acceleration of vesting of shares issued
pursuant to stock grants, upon a change of control or similar event.
-19-
<PAGE> 21
The Company's Bylaws provide for a classified Board of Directors divided
into three classes, with staggered three-year terms. As a result, only one class
of directors will be elected at each annual meeting of stockholders of the
Company, with the other classes continuing for the remainder of their respective
three-year terms. The classification of the Board of Directors may make it more
difficult for the Company's existing stockholders to replace the Board of
Directors as well as for another party to obtain control of the Company by
replacing the Board of Directors. Since the Board of Directors has the power to
retain and discharge officers of the Company, these provisions could also make
it more difficult for existing stockholders or another party to effect a change
in management.
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Stockholders or their respective
pledgees, donees, transferees or other successors in interest, will be sold in
one or more transactions (which may involve block transactions) on the Nasdaq
National Market or on such other market on which the Common Stock may from time
to time be trading, in privately negotiated transactions, through the writing of
options on the Shares, short sales or any combination thereof. The sale price to
the public may be the market price prevailing at the time of sale, a price
related to such prevailing market price or such other price as the Selling
Stockholders determine from time to time. The Shares may also be sold pursuant
to Rule 144. The Selling Stockholders shall have the sole and absolute
discretion not to accept any purchase offer or make any sale of Shares if they
deem the purchase price to be unsatisfactory at any particular time.
The Selling Stockholders or their respective pledgees, donees,
transferees or other successors in interest, may also sell the Shares directly
to market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the Selling
Stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that a Selling
Stockholder will attempt to sell shares of Common Stock in block transactions to
market makers or other purchasers at a price per share which may be below the
then market price. There can be no assurance that all or, any of the Shares
offered hereby will be issued to, or sold by, the Selling Stockholders. The
Selling Stockholders and any brokers, dealers or agents, upon effecting the sale
of any of the Shares
-20-
<PAGE> 22
offered hereby, may be deemed "underwriters" as that term is defined under the
Securities Act or the Exchange Act, or the rules and regulations thereunder.
The Selling Stockholders and any other persons participating in the sale
or distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Stockholders or any other such person. The foregoing may affect the
marketability of the Shares.
The Company has agreed to indemnify the Selling Stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act, or to contribute to payment the Selling Stockholders
or their respective pledgees, donees, transferees or other successors in
interest, may be required to make in respect thereof.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
Common Stock may not be sold unless such shares have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is U.S. Stock
Transfer Corporation of Glendale, California.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon by Venture Law Group, A Professional Corporation, Menlo Park, California,
counsel to the Company.
EXPERTS
The financial statements of the Company appearing in the Company's
Annual Report (Form 10-K) for the year ended December 31, 1997, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon, included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
-21-
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant will bear no expenses in connection with any sale or
other distribution by the Selling Stockholders of the shares being registered
other than the expenses of preparation and distribution of this Registration
Statement and the Prospectus included in this Registration Statement. Such
expenses are set forth in the following table. All of the amounts shown are
estimates except the Securities and Exchange Commission ("SEC") registration
fee.
<TABLE>
<S> <C>
SEC registration fee $ 6,504
Legal fees and expenses 15,000
Accounting fees and expenses 3,000
Miscellaneous expenses 5,496
-------
Total $30,000
=======
</TABLE>
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law allows 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 for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Certificate of Incorporation and Bylaws provide for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the Delaware General Corporation Law. The
Registrant has also entered into agreements with its directors and officers that
will require the Registrant, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors to the fullest extent not prohibited by law. In addition, the
Registrant carries director and officer liability insurance.
In connection with this offering, the Selling Stockholders have agreed
to indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the Selling Stockholders and contained
herein.
Item 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibits.
---------
<S> <C>
3.3* Certificate of Designations, Preferences, and Rights of Series A
Preferred Stock
5.1 Opinion of Venture Law Group, A Professional Corporation
10.38* Securities Purchase Agreement dated as of March 27, 1998 between
Registrant and Certain Investors
10.39* Registration Rights Agreement dated as of March 27, 1998 between
Registrant and Certain Investors.
23.1 Consent of Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-5)
</TABLE>
II-1
<PAGE> 24
<TABLE>
<S> <C>
</TABLE>
- ----------
* Incorporated by reference to identically numbered exhibit filed with
Registrant's current report on Form 8-K, as filed on April 2, 1998.
II-2
<PAGE> 25
Item 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement
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.
(2) That, for the purpose of determining any liability under the
Securities Act, each 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 this offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in 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.
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 SEC 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.
II-3
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Geron Corporation certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Menlo Park, State of California, on April 24, 1998.
GERON CORPORATION
By: /s/ DAVID L. GREENWOOD
-------------------------
David L. Greenwood
Chief Financial Officer
II-4
<PAGE> 27
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Ronald W. Eastman and David L.
Greenwood, jointly and severally, his or her true and lawful attorneys-in-fact,
each with full power of substitution, for him or her in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to sign any registration statement for the same
offering covered by this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and
all post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or any of them, or his or their substitute or substitutes, may
lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ RONALD W. EASTMAN President, Chief Executive April 24, 1998
- ----------------------------- Officer and Director
Ronald W. Eastman
/s/ DAVID L. GREENWOOD Vice President of Corporate April 24, 1998
- ----------------------------- Development and Chief
David L. Greenwood Financial Officer (Principal
Financial and Accounting
Officer)
/s/ ALEXANDER E. BARKAS Director April 24, 1998
- -----------------------------
Alexander E. Barkas
/s/ CHARLES M. HARTMAN Director April 24, 1998
- -----------------------------
Charles M. Hartman
/s/ THOMAS D. KILEY Director April 24, 1998
- -----------------------------
Thomas D. Kiley
/s/ ROBERT B. STEIN Director April 24, 1998
- -----------------------------
Robert B. Stein
/s/ JOHN P. WALKER Director April 24, 1998
- -----------------------------
John P. Walker
</TABLE>
II-5
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
3.3* Certificate of Designations, Preferences, and
Rights of Series A Preferred Stock
5.1 Opinion of Venture Law Group, A Professional
Corporation
10.38* Securities Purchase Agreement dated as of March 27,
1998 between Registrant and Certain Investors
10.39* Registration Rights Agreement dated as of March 27,
1998 between Registrant and Certain Investors.
23.1 Consent of Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-5)
</TABLE>
- ----------
* Incorporated by reference to identically numbered exhibit filed with
Registrant's current report on Form 8-K, as filed on April 2, 1998.
II-6
<PAGE> 1
EXHIBIT 5.1
April 24, 1998
Geron Corporation
230 Constitution Drive
Menlo Park, CA 94025
Registration Statement on Form S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (the "Registration
Statement") filed by you with the Securities and Exchange Commission (the
"Commission") on April 24, 1998 in connection with the registration under the
Securities Act of 1933, as amended, of a total of 1,993,355 shares of your
Common Stock (collectively, the "Shares") issuable upon conversion of an
aggregate of 15,000 shares of Series A Convertible Preferred Stock that were
issued pursuant to the Private Placement (as defined in the Registration
Statement). As your counsel in connection with this filing, we have examined the
proceedings taken and are familiar with the proceedings proposed to be taken by
you in connection with the sale and issuance of the Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued and sold in the
manner described in the Registration Statement will be legally and validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and in any amendment thereto.
Very truly yours,
VENTURE LAW GROUP
A Professional Corporation
/s/ VENTURE LAW GROUP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Form S-3 and related Prospectus of Geron
Corporation for the registration of 1,933,355 shares of its Common Stock and to
the incorporation by reference therein of our report dated February 13, 1998,
with respect to the financial statements of Geron Corporation included in its
Annual Report on Form 10-K for the year ended December 31, 1997 filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Palo Alto, California
April 24, 1998
