<PAGE>
REGISTRATION NO. 333-
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1996.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ZONAGEN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0233274
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2408 TIMBERLOCH PLACE, B-4
THE WOODLANDS, TEXAS 77380
(281) 367-5892
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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JOSEPH S. PODOLSKI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ZONAGEN, INC.
2408 TIMBERLOCH PLACE, B-4
THE WOODLANDS, TEXAS 77380
(281) 367-5892
(Name, address and telephone number, including area code, of agent for service)
With copies to:
ANDREWS & KURTH L.L.P.
2170 BUCKTHORNE PLACE, SUITE 150
THE WOODLANDS, TEXAS 77381
(713) 220-4801
ATTN.: JEFFREY L. WADE
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please 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 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 is expected to be made pursuant
to Rule 434, please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF SHARES OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PRICE PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE (1)
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share...... 6,100,000/(2)/ $9.50 $57,950,000 $17,561
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</TABLE>
(1) Pursuant to Rule 457(c), the registration fee is calculated based upon the
average of the high and low sale prices for the Common Stock reported by
the Nasdaq Small Cap Market on November 8, 1996.
(2) Consists of (i) a maximum of 5,620,238 shares issuable upon conversion of
the Company's Series B Convertible Preferred Stock, (ii) 19,152 shares
issued in accordance with the Assignment Agreement between Gamogen, Inc.
and the Company and (iii) up to 460,610 shares issuable pursuant to the
Stock Exchange Agreement for Purchase of Fertility Technologies, Inc. dated
October 13, 1994.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PROSPECTUS
ZONAGEN, INC.
COMMON STOCK
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This Prospectus relates to the offering of shares of the common stock, par
value $.001 per share ("Common Stock"), of Zonagen, Inc. (the "Company") by the
holders of certain securities of the Company named herein (the "Selling
Securityholders"). The shares of Common Stock offered hereby (the "Shares")
include up to (i) 2,810,119 shares (subject to adjustment as described in
"Description of Capital Stock-Series B Preferred Stock-Conversion") of Common
Stock issuable upon the conversion of shares of the Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock"), (ii) 19,512 shares
of Common Stock issued in accordance with the Assignment Agreement between
Gamogen, Inc. and the Company dated April 13, 1994 (the "Gamogen Agreement") and
(iii) a number of shares of Common Stock with an aggregate value of $3.0 million
(determined by reference to the average closing price of the Common Stock during
the 30 day period ending January 15, 1997) issuable on January 31, 1997 as the
final payment under the Stock Exchange for Purchase of Fertility Technologies,
Inc. dated October 13, 1994 (the "FTI Agreement").
The Company's Common Stock is traded on The Nasdaq Small Cap Market under
the symbol "ZONA." On November 8, 1996, the last reported closing sale price of
the Common Stock on The Nasdaq Small Cap Market was $9.50 per share.
All or part of the Shares may be offered by the Selling Securityholders
from time to time for their own account in transactions on The Nasdaq Small Cap
Market, in negotiated transactions or otherwise at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Securityholders may effect such transactions by
selling the Shares to or through broker-dealers and such broker-dealers may
receive compensation in the form of discounts, concessions or commission from
the Selling Securityholders or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions).
None of the proceeds from the sale of the Shares by the Selling
Securityholders will be received by the Company. The Company has agreed to bear
certain expenses in connection with the registration and sale of the Shares
being offered by the Selling Securityholder. The Selling Securityholders and
any broker-dealers participating in the distribution of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any profit on the sale of Shares by the
Selling Securityholders and any commissions received by any such broker-dealers
may be deemed to be underwriting commissions under the Securities Act.
The Shares have not been registered for sale by the Selling Securityholders
under the securities laws of any state as of the date of this Prospectus.
Brokers or dealers effecting transactions in the Shares should confirm
registration thereof under the securities laws of the states in which such
transactions occur, or the existence of any exemption from registration.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" WHICH BEGINS ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is November 13, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities of the Commission at its principal offices at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
regional offices of the Commission: Seven World Trade Center, 13th Floor, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Shares offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement or other document
referred to hereafter are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the registration
statement, reference is made to the exhibit for a more complete description of
the matters involved. The Registration Statement and any amendments thereto,
including exhibits filed or incorporated by reference as a part thereof, are
available for inspection and copying at the Commission's offices as described
above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-K/A-1 (File No. 1-11824) for the
year ended December 31, 1995.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
4. The Company's Current Report on Form 8-K filed with the Commission on
October 15, 1996.
5. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering covered hereby will be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference modifies or replaces such
statement.
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The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference in this Prospectus,
other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates. In addition, a copy of the Company's most recent annual report to
stockholders will be promptly furnished, without charge, upon written or oral
request. All such requests should be directed to Zonagen, Inc., 2408 Timberloch
Place, B-4, The Woodlands, Texas 77380, Attention: Louis Ploth, telephone number
(281) 367-5892.
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THE COMPANY
Zonagen, Inc. ("Zonagen" or the "Company") is engaged in the development of
a variety of products associated with the human reproductive system, including
contraceptives, a product for the treatment of male impotency and technologies
targeting enhancement of fertility and prevention of sexually-transmitted
diseases. Zonagen commenced Phase III clinical trials of VASOMAX(TM), the
Company's "on-demand" oral therapeutic for male impotency, in November 1996 in
the United States. The Company's goal is to become a leader in the area of human
reproductive healthcare management by providing a full array of innovative
products and services. The Company's growth strategy is to develop products
based on its own research technology as well as in-licensing existing and late
stage development products and technologies focused in the area of reproductive
healthcare.
The Company's executive offices are located at 2408 Timberloch Place, B-4,
The Woodlands, Texas 77380 and its telephone number is (281) 367-5892.
RISK FACTORS
In evaluating the Company and its business, prospective investors should
carefully consider all of the information set forth in this Prospectus and
should give particular attention to the following risk factors.
DEVELOPMENT STAGE; QUALIFICATION OF AUDITORS' OPINION
The Company is a development stage company. Problems, delays, expenses and
difficulties are typically encountered by companies in the development stage,
many of which may be beyond the Company's control. These include, but are not
limited to, unanticipated problems and costs relating to the development,
testing, regulatory compliance, production, marketing and competition. There
can be no assurance that the Company will successfully complete the transition
from a development stage company to profitability. As reflected in Note 1 of
the Notes to the Company's consolidated financial statements as of December 31,
1995 and 1994, such ability to complete the transition is dependent upon, among
other things, the Company's ability to obtain additional working capital to
develop, manufacture and market its products and the success of future
operations. The Company's ability to continue as a going concern is affected by
its reliance on research institutions and corporate partners, the uncertainty of
healthcare reform and the competitive environment in which the Company operates.
The Company's independent accountants have included an emphasis of a matter
paragraph in their report on the Company's consolidated financial statements as
of December 31, 1995 and 1994 concerning the Company's need to obtain addition
financing in order to complete the research and development and other activities
necessary to commercialize its products.
LIMITED CASH RESOURCES; HISTORY OF OPERATING LOSSES; NO ASSURANCE OF ADDITIONAL
NECESSARY CAPITAL
The Company has incurred losses since its inception in 1987 and expects to
incur losses for the next several years. As of September 30, 1996, the Company
had accumulated losses of $22,383,000 and had cash reserves of $9,934,000. As
of October 31, 1996, the Company had cash and cash equivalents of approximately
$13.5 million. The Company's independent public accountants have included an
emphasis of a matter paragraph in their report on the Company's consolidated
financial statements as of December 31, 1995 and 1994, concerning the Company's
need to obtain additional financing in order to complete the research and
development and other activities necessary to commercialize its products. The
Company anticipates that its existing capital resources will be sufficient to
fund its research and development activities through the fourth quarter of 1997.
It is difficult to determine the development costs associated with the Phase III
clinical development of VASOMAX(TM) and the costs associated with a New Drug
Application ("NDA") submission upon the completion of such development, if
successful. Accordingly, there can be no assurance that additional capital will
not be necessary prior to the time anticipated. The Company's future capital
requirements will depend on many factors, including continued scientific
clinical assessment of products under development. Additional financing will be
required to complete the development, and
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to commence the manufacture and marketing, of the Company's proposed products.
The unavailability of such financing could delay or prevent the development and
marketing of some or all of the Company's proposed products or cause the Company
to cease operations. There can be no assurance that the Company will be
successful in obtaining additional capital in amounts sufficient to continue to
fund its operations and product development.
UNCERTAINTIES RELATED TO CLINICAL TRIAL RESULTS
The United States Food and Drug Administration (the "FDA") and other
regulatory authorities generally require that the safety and efficacy of a drug
be supported by results from adequate and well-controlled Phase III clinical
trials before approval for commercial sale. The Company has limited experience
in conducting and managing Phase III clinical trials. If the results of the
Company's clinical trials do not demonstrate the safety and efficacy of its
products in the treatment of patients suffering from the diseases for which such
products are being tested, the Company will not be able to submit a New Drug
Application (an "NDA") to the FDA. Even if the Company believes the Phase III
clinical trials demonstrate the safety and efficacy of a product in the
treatment of disease, the FDA and other regulatory authorities may not accept
the Company's assessment of the results. In either case, the Company may have
to conduct additional clinical trials in an effort to demonstrate the safety and
efficacy of the product. Without acceptable results and regulatory approval,
the Company will not be able to commercialize its products, which would have a
material adverse effect on the Company. There can be no assurance that the
results of any of the Company's clinical trials will be favorable or that its
products will obtain regulatory approval for commercialization.
The results of preclinical studies and initial clinical trials of the
Company's products are not necessarily predictive of the results from large-
scale clinical trials. The Company must demonstrate through preclinical studies
and clinical trials that its products are safe and effective before the Company
can obtain regulatory approvals for the commercial sale of those products.
These studies and trials are very costly and time-consuming. The speed with
which the Company is able to enroll patients in clinical trials is an important
factor in determining how quickly clinical trials may be completed. Many facts
affect patient enrollment, including the size of the patient population, the
proximity of patients to clinical sites, and the eligibility criteria for the
study. Delays in patient enrollment in the trials may result in increased
costs, program delays, or both, which could have a material adverse effect on
the Company. Even if the Company establishes the safety and efficacy of its
products and obtains FDA and other regulatory approvals for its products,
physicians may not prescribe the approved product.
The administration of any product the Company develops may produce
undesirable side effects in humans. The occurrence of side effects could
interrupt or delay clinical trials of products and could result in the FDA's or
other regulatory authorities' denying approval of the Company's products for any
or all targeted indications. The Company, the FDA or other regulatory
authorities may suspend or terminate clinical trials at any time. Even if the
Company receives FDA and other regulatory approvals, the Company's products may
later exhibit adverse effects that limit or prevent their widespread use or that
necessitate their withdrawal from the market. There can be no assurance that
any of the Company's products will be safe for human use.
There can be no assurance that the Phase III clinical trial for VASOMAX(TM)
will be completed within any specified time period, if at all, with respect to
any of the Company's current or future product candidates. The Company completed
a Phase II clinical trial with VASOMAX(TM) in Germany in February 1996.
Although there were no significant side effects reported, there can be no
assurance that continued clinical testing will not result in significant side
effects and that the Company will not be forced to discontinue VASOMAX(TM)
clinical development. In addition, while Phase II clinical trial provided the
Company with what is expected to be the optimum dose for future development, it
did not provide the Company with the necessary p-value required to prove
statistical significance. There can be no assurance that VASOMAX(TM) will prove
to be safe or effective at the current dose to be tested, or that VASOMAX(TM)
will be approved by the FDA for any indication.
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GOVERNMENT REGULATION: NO ASSURANCES OF REGULATORY APPROVAL
The Company's research and development activities, preclinical studies,
clinical trials, and the manufacturing and marketing of its products are subject
to extensive regulation by the FDA and other regulatory authorities in the
United States. These activities are also regulated in a similar manner in other
countries where the Company intends to test and market its products.
Before marketing, any drug developed by the Company must undergo an
extensive regulatory approval process. The regulatory process, which includes
preclinical studies and clinical trials of each compound to establish its safety
and efficacy, takes 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 FDA
regulatory approval. Although the FDA may have been consulted in developing
protocols for clinical trials, that consultation provides no assurance that the
FDA will accept the clinical trials as adequate or well-controlled or accept the
results of those trials. In addition, delays or rejections may be encountered
based upon changes in FDA policy for drug approval during the period of product
development and may be encountered based upon changes in FDA policy for drug
approval during the period of product development and FDA regulatory review of
each submitted NDA. Similar delays and rejections may also be encountered in
foreign countries. There can be no assurance that, even after such time and
expenditures, regulatory approval will be obtained for any drugs developed by
the Company. Moreover, if regulatory approval of a drug is granted, such
approval may entail limitations on the indicated uses for which it may be
marketed. Further, even if such regulatory approval is obtained, a marketed
drug, its manufacturer and its manufacturing facilities are subject to continual
review and periodic inspections, and later discovery of previously unknown
problems with a product, manufacturer or facility may result in restrictions on
the product or manufacturers, including a withdrawal of the product from the
market. Failure to comply with the applicable regulatory requirements can,
among other things, result in fines, suspensions of regulatory approvals,
product recalls, operating restrictions and criminal prosecution. Further,
additional government regulation may be established that could prevent or delay
regulatory approval of the Company's products.
The Company's business is also subject to regulation under state and
federal laws regarding environmental protection, hazardous substances control,
and exposure to blood-borne pathogens. These laws include the Occupational
Safety and Health Act, the Environment Protection Act, and the Toxic Substance
Control Act. Any violation of, and the cost of compliance with, these laws and
regulations could adversely affect the Company. There can be no assurance that
statutes or regulations applicable to the Company's business will not be adopted
that impose substantial additional costs or otherwise materially adversely
affect the Company's operations.
EARLY STAGE OF PRODUCT DEVELOPMENT
The Company has not completed the development of any proprietary product,
and all of the Company's revenues currently are derived from sales by FTI of
products developed or manufactured by others. The development or acquisition of
commercially viable products will require significant further investment,
research, development, pre-clinical and clinical testing and regulatory
approvals, both foreign and domestic. There can be no assurance that the
Company will be able to produce at reasonable cost, or market successfully, any
such product. Products, if any, resulting from the Company's research and
development programs are not expected to be commercially available for several
years. Moreover, although the Company has in the past and will continue to seek
opportunities for the licensing of existing product lines in the field of human
reproductive healthcare, there can be no assurance that the Company will be able
to successfully or profitably market its current or future products under
development.
SUBSTANTIAL DEPENDENCE ON ONE PRODUCT
Substantially all of the Company's efforts and expenditures over the next
few years will be devoted to VASOMAX(TM). Accordingly, the Company's future
prospects are substantially dependent on favorable results of the proposed Phase
III clinical trials, approval by the FDA and the successful commercialization of
VASOMAX(TM).
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RISKS ASSOCIATED WITH COLLABORATIVE ARRANGEMENTS
The Company's product development and commercialization strategy involves
the Company entering into various arrangements with corporate, government and
academic collaborators, licensers, licensees and others. As a consequence, the
Company's success may depend on the success of these other parties in performing
their responsibilities. There can be no assurance that the Company will be able
to establish collaborative arrangements or license agreements that are necessary
or desirable for the Company to develop and commercialize its products or that
such collaborative agreements or license agreements will be successful.
TECHNOLOGICAL CHANGE
The biomedical field is undergoing rapid and significant technological
change. The Company's success will depend on its ability to develop and apply
its technology and on its ability to establish and maintain a competitive
position in the marketplace with its products. The Company has many potential
competitors in the United States and other countries for its technology and
products including, among others, major pharmaceutical and chemical companies,
specialized biotechnology firms, universities and other research institutions.
Many of such competitors have substantially greater financial, technical,
manufacturing and marketing capabilities than the Company. The Company's
competitors may develop products or other technologies that are more effective
than any which have been or are being developed by the Company or may obtain FDA
approval or patent protection for products more rapidly than the Company. If
the Company commences commercial sales of certain products, it will compete in
the manufacturing and marketing of such products, areas in which the Company has
no significant experience.
COMPETITION
Competition in the pharmaceutical and medical products industries is
intense and is characterized by extensive research efforts and rapid
technological progress. Certain treatments for erectile dysfunction exist, such
as needle injection therapy, vacuum constriction devices, penile implants and
oral medications, and the manufacturers of these products will continue to
improve these therapies. In July 1995, the FDA approved the use of alprostadil
in The Upjohn Company's ("Upjohn") needle injection therapy product for erectile
dysfunction. Previously, Upjohn had obtained approval in a number of European
countries. Another company, Vivus, Inc. ("Vivus"), submitted an NDA in March
1996 for intraurethral prostaglandin administration. Vivus received a product
approval letter from the FDA in early October 1996. Final market clearance is
subject to standard final labeling requirements and agreements that the Vivus
manufacturing facility, methods and controls comply with FDA requirements.
Additional competitive therapies under development include an oral medication,
Viagra, being developed by Pfizer, Inc. ("Pfizer"). Viagra is currently in
Phase III clinical trials and the Company believes that Pfizer may file an NDA
in the United States for Viagra by the end of 1997. Other large pharmaceutical
companies, such as Tap Pharmaceuticals, Inc. and others, are also actively
engaged in the development of therapies for the treatment of erectile
dysfunction. These companies have substantially greater research and
development capabilities as well as substantially greater marketing, financial
and human resources than the Company. In addition, these companies have
significantly greater experience than the Company in undertaking preclinical
testing, human clinical trials and other regulatory approval procedures. There
are also small companies, academic institutions, governmental agencies and other
research organizations that are conducting research in the area of erectile
dysfunction. For instance, Pentech Pharmaceutical, Inc. has oral medications
under development. These entities may also market commercial products either on
their own or through collaborative efforts. The Company's competitors may
develop technologies and products that are available for sale prior to the
Company's products or that are more effective than those being developed by the
Company. Such developments would render the Company's products less competitive
or possibly obsolete. If the Company is permitted to commence commercial sales
of products, it will also be competing with respect to marketing capabilities
and manufacturing efficiency, areas in which it has limited experience.
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<PAGE>
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY INFORMATION
The Company's ability to compete effectively with other companies is
materially dependent on the proprietary nature of the Company's patents and
technologies. The Company actively seeks patent protection for its proprietary
technology, both in the United States and abroad.
The patent positions of pharmaceutical firms generally are highly uncertain
and involve complex legal and factual questions. No consistent policy has
emerged regarding the breadth of claims covered in biotechnology patents. There
can be no assurance that the Company will obtain any key patents or other
protection or that the patents for which the Company has applied will be
granted. The invalidation of key patents or proprietary rights owned by or
licensed to the Company could have an adverse effect on the Company and on its
business prospects. Because of the differences in patent laws and laws
concerning proprietary rights, the extent of protection provided by United
States patents or proprietary rights owned by or licensed to the Company may
differ from those of foreign counterparts. No assurance can be given that
patents issued to or licensed by the Company will not be challenged, invalidated
or circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company.
The Company also relies on trade secrets, know-how and continuing
technological advancement to maintain its competitive position. The Company has
entered into confidentiality agreements relating to such information with it
employees and consultants. No assurance can be given that such obligations of
confidentiality will be honored or that the Company can effectively protect its
rights to its unpatented trade secrets. Moreover, no assurance can be given
that others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets.
The Company may be required to obtain licenses to patents or proprietary
rights from third parties. No assurance can be given that any licenses required
under any patents or proprietary rights would be made available on terms
acceptable to the Company, if at all. If the Company does not obtain required
licenses, it could encounter delays in product development, or it could find
that the development, manufacture or sale of products requiring such licenses
could be foreclosed.
In addition, the Company could incur substantial costs in defending any
patent infringement suits brought against the Company or in asserting the
Company's patent rights, including those granted by third parties, in a suit
against another party. The United States Patent and Trademark Office could
institute interference proceedings in connection with one or more of the
Company's patents or patent applications, and such proceedings could result in
an adverse decision as to priority of invention. The United States Patent and
Trademark Office also could institute reexamination proceedings in connection
with one or more of the Company's patents or patent applications and such
proceedings could result in an adverse decision as to the validity or scope of
the patents.
The Company has one granted patent and one pending United States patent
application with respect to its male impotency technology (VASOMAX(TM)). The
pending application was rejected in a non-final first office action. The
Company will have an opportunity to respond to the non-final rejections. Unless
further arguments are successful in securing withdrawal of the rejections,
however, an appeal to the Board of Patent Appeals and Interferences would have
to be successfully pursued to secure issuance of such claims. As with all
patent applications, there can be no assurance that a patent directed to that
aspect of the VASOMAX(TM) technology will ultimately issue.
Additionally, the Company has rights to one issued patent in the United
States, India, and Australia, with respect to which applications are pending in
several foreign countries. The Company's existing patent is based on products
and methods using specific recombinant rabbit zona pellucida peptides. The
Company has ten patent applications with respect to zona proteins the Company
believes will be useful in developing a human zona pellucida-based contraceptive
vaccine. The Company also has filed two patent application for an adjuvant for
use with vaccines, as well as a novel drug delivery system.
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LITIGATION
Cause No. 94-021991; Bonita S. Dunbar v. Baylor College of Medicine, et
al.; In the 270th Judicial District Court of Harris County, Texas. Briefly, on
May 16, 1994, Dr. Bonita Sue Dunbar ("Dunbar") filed suit in Harris County,
Texas, naming Baylor College of Medicine ("BCM"), BCM Technologies, Inc.
("BCMT"), Fulbright & Jaworski, The Woodlands Venture Capital Company
("Woodlands"), and Zonagen as defendants (collectively, the "Defendants").
Dunbar is a cellular and molecular biologist who has been employed by BCM as a
teacher and research scientist since 1981. During the course of her employment
at BCM, Dunbar developed technologies relating to the use of certain recombinant
zona pellucida peptides that were assigned to Zonagen. Dunbar claimed, among
other things, that her assignment of the patent rights was induced by statutory
and constructive fraud and a civil conspiracy on the part of the Defendants,
seeking damages and rescission of the assignment. Dunbar also included a
separate claim against Zonagen alleging that Zonagen had converted certain of
her endometriosis research, seeking unspecified damages in connection with this
conversion claim. All of Dunbar's claims have been dismissed except her
conversion claim. Dunbar has appealed such dismissals.
PRODUCT LIABILITY EXPOSURE
Product liability risk will be a major consideration in the testing,
manufacturing, marketing and sale of the Company's proposed products. Several
products relating to female contraception and other products related to the
female reproductive system have been the subject of class action lawsuits based
on product liability claims. The Company's potential product liability exposure
is heightened because the Company is currently conducting human clinical trials
on its proposed male impotency treatment. Although the Company believes that
the risks of harm to any participants in those trials is small because the drug
being used for the treatment has been approved by the FDA for the treatment of
other conditions, and because the Company employs stringent screening procedures
to assure that the subjects of its human clinical trials are not likely to have
adverse reactions to the drug, there can be no assurance that a participant in
the Company's human clinical trials might not be harmed. Product liability
insurance for the pharmaceutical and diagnostic industries, when available, is
expensive. The Company currently carries $10,000,000 of product liability
insurance for its male impotency clinical development. No assurance can be
given that this insurance coverage is adequate and that a product liability
claim would not have a material adverse effect on the business or financial
condition of the Company.
UNCERTAINTY OF MARKET ACCEPTANCE; ANTICIPATED DEPENDENCE ON THIRD PARTIES FOR
MARKETING; LIMITED MARKETING EXPERIENCE
Achieving market acceptance for the Company's proposed products will
require substantial marketing efforts and the expenditure of significant amounts
of funds to inform potential customers, including in some cases third-party
distributors, of the distinctive characteristics and benefits of such products.
There can be no assurance that the Company's proposed products will ultimately
be accepted. There can be no assurance that the Company will be able to obtain
satisfactory arrangements with third-party distributors for the marketing of its
products or that the Company will realize substantial revenues from sales by
third-party distributors. In as much as the Company had no experience in
marketing human or veterinary pharmaceuticals before its acquisition of FTI,
there can be no assurance that the Company will be able to market its products
successfully.
NO ASSURANCE OF ADEQUATE THIRD-PARTY REIMBURSEMENT
The Company's ability to commercialize its products successfully will
depend in part on the extent to which appropriate reimbursement levels for the
cost of the products and related treatment are obtained from government
authorities, private health insurers and other organizations, such as health
maintenance organizations ("HMOs"). Third-party payers are increasingly
challenging the prices charged for medical products and services. Accordingly,
if less costly drugs are available, third-party payers may not authorize
reimbursement for the Company's products even if they offer advantages in safety
or efficiency. Also, the trend toward managed healthcare and government
insurance programs significantly influence the purchase of healthcare services
and
-9-
<PAGE>
products, resulting in lower prices and reducing demand for the Company's
products. The cost containment measures that healthcare providers are
instituting and any healthcare reform could affect the Company's ability to sell
its products and may have a material adverse effect on the Company. There can
be no assurance that reimbursement in the United States or foreign countries
will be available for any of the Company's products, that any reimbursement
granted will be maintained, or that limits on reimbursement available from
third-party payers will not reduce the demand for, or negatively affect the
price of, the Company's products. The unavailability or inadequacy of third-
party reimbursement for the Company's products would have a material adverse
effect on the Company. The Company is unable to forecast what additional
legislation or regulation relating to the healthcare industry or third party
coverage and reimbursement may be enacted in the future, or what effect the
legislation or regulation would have on the Company's business.
RELIANCE ON THIRD PARTY MANUFACTURERS
The Company currently manufacturers limited amounts of proteins that are
required for its present research and development needs. However, the Company
does not own any manufacturing facilities and relies on third party
manufacturers to produce certain of its products for both research and
development, including Phentolamine, which is the pharmacological compound used
in VASOMAX(TM). Unless the Company is able to develop an in-house manufacturing
capability or is able to identify and qualify alternative contract
manufacturers, the Company may be entirely dependent upon a small number of
manufacturers for its supply of Phentolamine and other products. There can be
no assurance that the Company's reliance on these manufacturers will not result
in problems with product supply. Interruptions in the availability of
Phentolamine could delay or prevent the development and commercial marketing of
VASOMAX(TM), which would have a material adverse effect on the Company.
LIMITED PUBLIC MARKET FOR COMMON STOCK; VOLATILITY OF COMMON STOCK PRICES
Historically, the Common Stock has experienced low trading volumes. The
market price of the Common Stock also has been highly volatile and it is likely
to continue to be highly volatile. Factors such as announcements by the Company
or its competitors concerning technological innovations, results of clinical
trials, new commercial products or procedures, proposed government regulations
and developments or disputes relating to patents or proprietary rights may have
a significant effect on the market price of the Common Stock. In addition, the
market prices of equity securities of biotechnology companies generally have
been highly volatile. Such volatility often is unrelated to the individual
performance of such companies. Thus, the market price of the Common Stock may
be subject to volatility which bears no relation to the Company's actual
operations or financial results.
POSSIBLE DELISTING FROM NASDAQ AND MARKET ILLIQUIDITY
The Common Stock is quoted on the Nasdaq Small Cap Market. Continued
inclusion of such securities on the Nasdaq Small Cap Market will require that
(i) the Company maintain at least $2,000,000 in total assets, and $1,000,000 in
capital and surplus; (ii) the minimum bid price for the Common Stock be at least
$1.00 per share; (iii) the public float consist of at least 100,000 shares of
Common Stock, valued in the aggregate at more than $200,000; (iv) the Common
Stock have at least two active market makers; and (v) the Common Stock be held
by at least 300 holders. If the Company is unable to satisfy such maintenance
requirements, the Company's securities may be delisted from the Nasdaq Small Cap
Market. In such event, trading, if any, in the Common Stock would thereafter be
conducted in the over-the-counter market in the so-called "pink sheets" or the
Nasdaq's "Electronic Bulletin Board." Consequently, the liquidity of the
Company's securities could be impaired.
CONCENTRATION OF STOCK OWNERSHIP
As of September 30, 1996, the Company's officers, directors, and principal
stockholders beneficially own approximately 30% of the Company's Common Stock.
Including the voting rights of the Series A Preferred Stock and the Series B
Preferred Stock, the Company's officers, directors, and principal stockholders
beneficially own approximately 19%. As a result, such persons will have a
substantial influence over matters that come before a vote of the stockholders
of the Company.
-10-
<PAGE>
ADVERSE EFFECT OF SUBSTANTIAL SALES OF SHARES OF COMMON STOCK
Sales of a substantial number of shares of Common Stock in the public
market could adversely affect the market price of the Common Stock. Of the
5,130,446 shares of Common Stock issued and outstanding as of September 30,
1996, 5,040,446 shares are freely tradable or are otherwise eligible for resale
in the public market pursuant to an effective registration statement under the
Securities Act or (subject to certain volume of sale, manner of sale and notice
limitations) pursuant to Rule 144 under the Securities Act. The holder of
90,000 shares of Common Stock has agreed not to sell in excess of 15% of such
shares per quarter on a non-cumulative basis.
The Company has issued options to purchase an aggregate of 621,355 shares
of Common Stock. As of September 30, 1996, options exercisable for 328,803
shares of Common Stock were vested. The shares issuable upon exercise of
options have been registered under the Securities Act, and upon issuance, will
be subject to immediate resale into the public market without restriction.
As of September 30, 1996, the Company had outstanding 227,034 shares of its
Series A Convertible Preferred Stock ("Series A Preferred Stock") and warrants
to purchase an additional 57,172 shares of Series A Preferred Stock. As of such
date, an aggregate of 784,010 shares of Common Stock were issuable upon
conversion of such shares of Series A Preferred Stock (including the shares of
Series A Preferred Stock issuable upon the exercise of warrants). The Company
has registered the resale of such shares pursuant to an effective registration
statement under the Securities Act.
In September and October 1996, the Company issued an aggregate of 1,692,500
shares of Series B Preferred Stock and warrants to purchase an additional
169,250 shares of Series B Preferred Stock. As of the date of this Prospectus,
an aggregate of 2,810,119 shares of Common Stock were issuable upon conversion
of such shares of Series B Preferred Stock (including the shares of Series B
Preferred Stock issuable upon the exercise of warrants). The Company has
registered the resale of such shares pursuant to the registration statement of
which this Prospectus is a part.
As final payment for the Company's acquisition of FTI, the Company has
agreed to issue shares of Common Stock with an aggregate value of $3.0 million
(determined by reference to the average closing price of the Common Stock during
the 30 day period ending January 15, 1997) on January 31, 1997. The Company has
registered the resale of such shares pursuant to the registration statement of
which this Prospectus is a part. The resale of such shares is subject to a
contractual limitation that prohibits the sale of more than 15% of such shares
in any fiscal quarter on a non-cumulative basis.
USE OF PROCEEDS
The Company will not receive any proceeds from sales, if any, of Common
Stock by the Selling Securityholders to the public. Upon the exercise of
certain warrants to acquire up to 169,250 shares of Series B Preferred Stock
that is convertible into Shares registered hereunder, the Company will receive
the exercise price of $11.00 per share of Series B Preferred Stock acquired,
subject to the right of the holders of such warrants to exercise such warrants
by way of a "cashless exercise" by surrendering a portion of such warrant in
lieu of the payment of the cash exercise price thereof. The costs and expenses
incurred in connection with the registration under the Securities Act of the
offering described herein are estimated to be $32,000, and will be paid by the
Company. Each Selling Securityholder will pay all brokerage fees and
commissions, if any, incurred in connection with the sale of Shares by such
party.
-11-
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the name of each Selling Securityholder and
the number of shares of Common Stock being offered by each Selling
Securityholder. Common Stock ownership information is based solely upon reports
furnished to the Company by the respective stockholders pursuant to the rules of
the Commission.
The shares of Common Stock offered hereby include up to (i) 2,810,119
shares (subject to adjustment as described in "Description of Capital Stock-
Series B Preferred Stock-Conversion") of Common Stock issuable upon the
conversion of the Company's Series B Convertible Preferred Stock, (ii) 19,512
shares of Common Stock issued in accordance with the Assignment Agreement
between Gamogen, Inc. and the Company dated April 13, 1994 (the "Gamogen
Agreement") and (iii) a number of shares of Common Stock with an aggregate value
of $3.0 million (determined by reference to the average closing price of the
Common Stock during the 30 day period ending January 15, 1997) issuable on
January 31, 1997 as the final payment under the Stock Exchange Agreement for
Purchase of Fertility Technologies, Inc. dated October 13, 1994 (the "FTI
Agreement").
In September and October 1996, the Company issued an aggregate of 1,692,500
shares of Series B Preferred Stock in a private placement to accredited
investors. In connection with the private placement, the Company issued
warrants to Paramount Capital, Inc. ("Paramount"), the placement agent for the
private placement, entitling Paramount to purchase an additional 169,250 shares
of Series B Preferred Stock at an exercise price of $11.00 per share. Of the
2,810,119 shares (subject to adjustment) of Common Stock offered hereby that are
issuable upon conversion of the Series B Preferred Stock, 2,554,648 shares are
issuable upon conversion of the 1,692,500 shares of Series B Preferred Stock
sold in the private placement and 255,471 shares are issuable upon conversion of
the shares of Series B Preferred Stock issuable upon exercise of the warrants
issued to Paramount.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES OFFERED
- ---- --------------
Shares of Common Stock issuable upon the conversion of shares
of the Company's Series B Convertible Preferred Stock (1)
<S> <C>
Leonard J. Adams........................................................ 15,094
Ross D Ain.............................................................. 2,264
My Seven Children, Inc.................................................. 7,547
Armen Partners L .P..................................................... 75,471
Ashton Investments Limited.............................................. 30,188
Mark Berg............................................................... 15,094
Rafael Gonzalez Calvillo................................................ 1,509
Theron T. Chapman for Trust T.T. Chapman Jr. Trustee.................... 15,094
Teddy Chasanoff......................................................... 3,773
Robert J. Conrads....................................................... 7,547
The Woodlands/Essex Venture Fund III, L.P............................... 301,886
Richard G. David........................................................ 15,094
Domaco Venture Capital Fund............................................. 7,547
Lion Tower Corporation.................................................. 30,188
Bios Equity Fund, L.P................................................... 37,735
Palmetto Partners, Ltd.................................................. 30,188
Edward Dworetsky........................................................ 7,547
Norma Dworetzky......................................................... 7,547
Nathan Eisen & Rose Eisen JTWROS........................................ 7,547
Mitchell Fishbach....................................................... 3,773
S. Edmond Farber "S".................................................... 3,773
</TABLE>
-12-
<PAGE>
<TABLE>
<S> <C>
Elliot L. Fatoullah..................................................... 1,886
Ronald Fatoullah........................................................ 1,886
Bridgewater Partners, L.P............................................... 15,094
Anthony Gerace.......................................................... 3,773
Metal Worldwide Corp.................................................... 7,547
Stephen A. Goldberg..................................................... 7,547
Barry L. Goldin......................................................... 3,773
Michael J. Gordon....................................................... 3,773
Robert P. Gordon........................................................ 15,094
John S. & Francine Gross, JTWROS........................................ 3,773
Norton F. Hight......................................................... 3,773
Randall W. Hight........................................................ 3,773
Holden Securities, Inc.................................................. 1,509
The 1992 Houston Partnership, L.P....................................... 7,547
Superius Securities Group, Money Purchase Plan, Inc..................... 15,094
Mary Jo Hughes.......................................................... 15,094
Caduceus Capital, L.P................................................... 30,188
Karpa Group, Inc........................................................ 75,471
Peter L. Jensen......................................................... 3,773
Jack Judge.............................................................. 3,773
Patrick M. Kane......................................................... 3,773
Amram Kass P.C. Defined Benefit Pension Plan............................ 7,547
Melvin L. Katten........................................................ 3,773
Ruth Peyser............................................................. 3,773
Jay Kestenbaum.......................................................... 7,547
Stevens Knox & Associates, Inc.......................................... 15,094
David Kolasky........................................................... 1,509
Gwen S. Korovin......................................................... 3,773
Andrew Laurence......................................................... 3,773
Ronald M. Lazar & Barbara A. Lazar, JTWROS.............................. 2,264
F & Co., Inc. Cust. for Ronald M Lazar IRA.............................. 2,264
Benjamin Lehrer......................................................... 3,773
Albert Lemer............................................................ 3,773
C.S.L. Associates, L.P.................................................. 15,094
Alfred Livas............................................................ 2,264
Harris R.L. Lydon....................................................... 3,773
Henry Maier............................................................. 1,886
Marjack Investments, Inc................................................ 15,094
Reuben Mark............................................................. 15,094
Matthew McCaffrey....................................................... 1,886
John P. McNiff.......................................................... 15,094
International Investment Fund........................................... 6,037
Michael C. Miles........................................................ 3,773
Albert Milstein......................................................... 7,547
Steven Montesi.......................................................... 7,547
Mova Investments, Ltd................................................... 15,094
Arthur J. Nagle......................................................... 3,773
Joseph A. Natiello...................................................... 15,094
Old Oly, JV............................................................. 7,547
John S. Osterweis, Trustee for the Osterweis Revocable Trust,
U/A dated 9/13/93...................................................... 7,547
Paul D. and Rebecca L. Ostrovsky........................................ 3,773
Steven Ostrovsky........................................................ 7,547
</TABLE>
-13-
<PAGE>
<TABLE>
<S> <C>
P.A.W. Offshore Fund, Ltd............................................... 22,641
William H. & Catherine D. Peterson, JTWRS............................... 3,773
Carlos Plancarte G.N., Leonor P. Demarvan JTWROS........................ 3,773
Delaware Charter Guarantee C/F Anthony G. Polak I.R.A................... 3,773
Anthony G. Polak "S".................................................... 3,773
Delaware Charter Guarantee FBO Jack Polak Profit Sharing Plan........... 3,773
Alexander Pomper........................................................ 30,188
Bruce Pomper............................................................ 90,566
EDJ Limited............................................................. 9,056
Porter Partners......................................................... 36,226
Tis Prager.............................................................. 7,547
Keys Foundation......................................................... 60,377
Delaware Charter Guarantee & Tr. Co. C/F Charles G. Re PSP.............. 5,283
June Reich.............................................................. 3,773
Arthur C. Reichstetter.................................................. 22,641
Michael H. Richmond..................................................... 7,547
Magnum Capital Growth Fund.............................................. 3,773
RHL Associates, L.P..................................................... 7,547
RL Capital Partners..................................................... 11,320
Marion Roffer........................................................... 7,547
Arterio, Inc............................................................ 7,547
Jonathan E. Rothschild.................................................. 7,547
Richard G. Rudolf....................................................... 3,773
David W. Ruttenberg..................................................... 3,773
Wayne Saker............................................................. 15,094
Roy & Marlena Schaeffer................................................. 7,547
Glenn Schlossberg....................................................... 3,773
Andrew W. Schonzeit..................................................... 7,547
Drs. H.L. & D.M. Shaw................................................... 7,547
J.F. Shea Co., Inc. as Nominee 1996-41.................................. 75,471
First Hawaiian Bank Trustee for Zippy's Inc. Profit Sharing Plan........ 15,094
C.W. Spelke............................................................. 7,547
Murray & Clare Stadtmauer............................................... 3,773
Joseph Strassman & Barbara Strassman Tenants in Common.................. 37,735
Michele Tarica.......................................................... 3,773
Herman Tauber........................................................... 22,641
Myron M. Teitelbaum, M.D................................................ 5,660
SBSF Biotechnology Partners, L.P........................................ 15,094
SBSF Biotechnology Fund, L.P............................................ 150,943
Alyce P. Twomey......................................................... 1,886
Jack Uram............................................................... 3,773
Mark and Sallie L. Walko................................................ 7,547
Saul Waring............................................................. 7,547
Buchanan Fund Limited................................................... 37,735
Buchanan Partners Limited............................................... 37,735
Robert J. Whetten....................................................... 7,547
Izaak Wilder............................................................ 3,773
David & Susan Wilstein, Trustees of the Century Trust dated 12/19/94.... 15,094
John W. Webster......................................................... 1,509
Robert B. Wolford....................................................... 3,773
Honolulu Academy of Arts-Anna Cooke Fund #91117722...................... 15,094
Bruce H. Yaffe.......................................................... 3,773
Jonathan & Lyudmila Young, JTWROS....................................... 7,547
</TABLE>
-14-
<PAGE>
<TABLE>
<S> <C>
Archibald Cox, Jr....................................................... 37,735
MDBC Capital Corp....................................................... 7,547
Shelly Garfinkel........................................................ 7,547
Robert S. Shapiro....................................................... 1,886
Douglas M. Bern......................................................... 2,264
Barry Birbrower......................................................... 7,547
Kevin E. Boyle.......................................................... 7,547
Thomas L. Cassidy IRA Rollover.......................................... 7,547
Gibralt Holdings Ltd.................................................... 15,094
The Gordon Fund, L.P.................................................... 7,547
Richard B. Gould........................................................ 3,773
Donald R. Kendall, Jr................................................... 3,018
Frederick J. Korniewicz................................................. 7,547
William G. McCahey and Lisa Krivacka JTWROS............................. 3,773
Alfred D. Morgan Trust.................................................. 1,509
Wolfe F. Model.......................................................... 1,886
Alfred Olonoff.......................................................... 7,547
Pequot Scout Fund, LP................................................... 60,377
Paul Schneider.......................................................... 7,547
Bernard Selz............................................................ 22,641
Bernard Selz IRA Rollover............................................... 22,641
Howard Sobel............................................................ 3,773
Hindy Taub.............................................................. 7,547
Valori Associates, Inc.................................................. 3,773
David & Susan Wilstein, Trustees of the Century Trust dated 12/19/94.... 15,094
Ronald S. Baruch........................................................ 4,528
JRK Financial Corporation............................................... 7,547
Calvert D. Crary........................................................ 15,094
Albert Fried & Co....................................................... 52,830
Kent M. Hamilton........................................................ 3,773
Golex Holding........................................................... 30,188
The Aries Trust......................................................... 105,660
Aries Domestic Fund, LP................................................. 45,283
Jeffrey S. Gutfreund.................................................... 15,094
Leonard Wilstein, TTEE, Joyce Wilson, TTEE of the Lovejoy Trust
U/A dated 4/6/95....................................................... 30,188
Paramount Capital, Inc.................................................. 255,471
---------
Subtotal.............................................................. 2,810,119
---------
Shares of Common Stock issued in accordance with the Gamogen Agreement
Timothy McInerney....................................................... 6,001
E. Justin Kelly......................................................... 4,000
S. Edmond Farber........................................................ 3,170
Anthony G. Polak........................................................ 3,170
Ronald M. and Barbara A. Lazar.......................................... 3,171
---------
Subtotal............................................................. 19,512
---------
</TABLE>
-15-
<PAGE>
<TABLE>
<S> <C>
Shares of Common Stock issuable to satisfy the final payment terms of the
FTI Agreement
J. Tyler Dean.......................................................... 315,789/(2)/
---------
TOTAL (1)(2).............................................. 3,145,420
=========
</TABLE>
_____________
(1) The number of shares issuable upon conversion of the Series B Preferred
Stock is subject to adjustment as described in "Description of Capital
Stock-Series B Preferred Stock-Conversion."
(2) The number of shares issuable as the final payment under the FTI Agreement
will be determined by reference to the average closing price of the Common
Stock during the 30 day period ending January 15, 1997. The number of
shares set forth in the table assumes that the average closing price during
each period is equal to the $9.50 per share closing price of the Common
Stock on November 8, 1996.
____________
After completion of this offering, based upon beneficial stock ownership as
of September 30, 1996 and assuming that all of the shares of Common Stock
covered by this Prospectus are sold, The Woodlands/Essex Venture Fund III, L.P.
and its affiliates will beneficially own 971,966 shares of Common Stock
accounting for approximately 11% of the Common Stock, J. Tyler Dean will
beneficially own 90,000 shares of Common Stock accounting for approximately 1.8%
of the Common Stock and no other Selling Securityholder will own more than 1% of
the Common Stock.
Except as set forth below, no Selling Securityholder has held any position
or office, or has had any material relationship with the Company or any of its
affiliates within the past three years. Martin P. Sutter is the Chairman of the
Board of Directors of the Company and Managing General Partner of The Woodlands
Venture Partners, L.P., a general partner of The Woodlands Venture Fund, L.P.,
and an affiliate of The Woodlands Venture Capital Company. Mr. Sutter is also
the Managing General Partner of The Woodlands/Essex Venture Fund III, L.P.
Paramount Capital, Inc. served as the placement agent for the private placement
of the Series B Preferred Stock.
PLAN OF DISTRIBUTION
The Selling Securityholders may offer the shares of Common Stock subject to
this Prospectus from time to time in one or more offerings through underwriters,
dealers or agents, or directly to one or more purchasers in fixed price
offerings, in negotiated transactions, at market prices prevailing at the time
of sale or at prices related to such market prices.
If underwriters are used in any offering of shares of Common Stock, the
underwriter or underwriters with respect to such offering will be named in a
Prospectus Supplement. Only underwriters named in a Prospectus Supplement will
be deemed to be underwriters in connection with the shares of Common Stock
offered thereby. Firms not so named will have no direct or indirect
participation in the underwriting of such Common Stock, although such a firm may
participate in the distribution of such Common Stock under circumstances
entitling it to a dealer's commission. Unless otherwise set forth in the
Prospectus Supplement relating to such offering, any underwriting agreement
pertaining to any offering of shares of Common Stock will (i) entitle the
underwriters to indemnification by the Company and the Selling Securityholders
against certain civil liabilities under the Securities Act; (ii) provide that
the obligations of the underwriters will be subject to certain conditions
precedent; and (iii) provide that the underwriters will be obligated to purchase
all shares of such Common Stock so offered if any shares are purchased. If
underwriters are used in any offering of Common Stock, the names of such
underwriters, the anticipated date of delivery and other material terms of the
transaction will be set forth in the Prospectus Supplement relating to such
offering.
If a dealer is used in any offering of Common Stock, the Selling
Securityholder will sell such Common Stock to the dealer as principal. The
dealer may then resell such Common Stock to the public at varying prices to
-16-
<PAGE>
be determined by such dealer at the time of resale. The name of the dealer and
the material terms of the transaction will be set forth in the Prospectus
Supplement relating to such offering.
Common Stock may be offered through agents designated by the Selling
Securityholders from time to time. Any such agent will be named, and the terms
of any such agency will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise set forth in such Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
Dealers or agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Common Stock
offered thereby. Unless otherwise set forth in the applicable Prospectus
Supplement, such dealers or agents may, under agreements with the Selling
Securityholders, be entitled to indemnification by the Company or the Selling
Securityholders against certain civil liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with or perform
services for the Company in the ordinary course of business.
Offers to purchase Common Stock may be solicited, and sales thereof may be
made, by the Selling Securityholders directly to one or more purchasers in fixed
price offerings, in negotiated transactions, at market prices prevailing at the
time of sale or at prices related to such market prices. Certain of such
purchasers may be deemed to be underwriters with respect to any resale by them
of Common Stock so acquired. This Prospectus may be delivered by any such
purchaser in connection with any such resales. Such resales may be through
underwriters, dealers or agents, or directly to one or more purchasers, all in
the manner described above.
DESCRIPTION OF CAPITAL STOCK
The Company's Restated Certificate of Incorporation provides for authorized
capital stock of 25,000,000 shares, consisting of 20,000,000 shares of common
stock, par value $.001 per share (the "Common Stock") and 5,000,000 shares of
preferred stock, par value $.001 per share.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters on which stockholders are entitled or
permitted to vote. Holders of Common Stock are not entitled to cumulative
voting rights. Therefore, holders of a majority of the shares voting for the
election of directors can elect all the directors. Subject to the terms of any
outstanding series of Preferred Stock, the holders of Common Stock are entitled
to dividends in such amounts and at such times as may be declared by the
Company's board of directors out of funds legally available therefor. Upon
liquidation or dissolution, holders of Common Stock are entitled to share
ratably in all net assets available for distribution to stockholders after
payment of any liquidation preferences to holders of preferred stock. Holders
of Common Stock have no redemption, conversion or preemptive rights.
PREFERRED STOCK
The board of directors has the authority to cause the Company to issue up
to the authorized number of shares of preferred stock in one or more series, to
designate the number of shares constituting any series, and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
voting rights, redemption and conversion rights and liquidation preferences of
such series, without further action by the stockholders. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of the Common Stock.
-17-
<PAGE>
SERIES A PREFERRED STOCK
The board of directors has authorized the issuance of up to 770,000 shares
of Series A Convertible Preferred Stock (the "Series A Preferred Stock"), the
rights, preferences and characteristics of which are as follows:
Dividends. The holders of Series A Preferred Stock will be entitled to
receive dividends as, when and if declared by the board of directors out of
funds legally available therefor. No dividend or distribution, as the case may
be, will be declared or paid on any junior stock unless the dividend also is
paid to holders of the Series A Preferred Stock. The Company does not intend to
pay cash dividends on the Series A Preferred Stock.
Conversion. Shares of Series A Preferred Stock are initially convertible
at the option of the holders thereof into shares of Common Stock at a conversion
price of $3.625 (the "Preferred Conversion Price") based on the $10.00 purchase
price for each share of Series A Preferred Stock. Thus, the initial conversion
ratio is 2.7586 shares of Common Stock for each share of Series A Preferred
Stock, subject to adjustments arising from changes in the Preferred Conversion
Price. The Preferred Conversion Price is subject to adjustment upon the
occurrence of a merger, reorganization, consolidation, reclassification, stock
dividend or stock split which will result in an increase or decrease in the
number of shares of Common Stock outstanding.
Mandatory Conversion. The Company has the right at any time after October
19, 1996 to cause the Series A Preferred Stock to be converted in whole at any
time, or in part from time to time, on a pro rata basis, into shares of Common
Stock if the closing price of the Common Stock exceeds 150% of the then
applicable Preferred Conversion Price for at least 20 trading days in any 30
consecutive trading day period. The Company exercised the right to cause the
mandatory conversion of the Series A Preferred Stock by delivering notice
thereof on November 1, 1996, as a result of which all outstanding shares of
Series A Preferred Stock that have not previously been converted into Common
Stock will be converted into Common Stock effective November 25, 1996.
Liquidation. Upon (i) a liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary or (ii) a sale or other disposition of
all or substantially all of the assets of the Company (the "Liquidation Event"),
after payment or provision for payment of the debts and other liabilities of the
Company, the holders of the Series A Preferred Stock then outstanding will first
be entitled to receive, pro rata (on the basis of the number of shares of the
Series A Preferred Stock then outstanding), and in preference to the holders of
the Common Stock and any other series of preferred stock, an amount per share
equal to $13.00. Second, the holders of shares of the Common Stock and any
other shares of participating preferred stock then outstanding will be entitled
to receive, pro rata, an amount per share equal to $13 paid to the holders of
the Series A Preferred Stock. Third, the holders of shares of the Series A
Preferred Stock, the Common Stock and any other shares of participating
preferred stock then outstanding will share any remaining assets of the Company
on a pari passu, as converted, basis.
Voting Rights. The holders of the Series A Preferred Stock have the right
at all meetings of stockholders to the number of votes equal to the number of
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
at the record date for determination of the stockholders entitled to vote. So
long as a majority of the shares of Preferred Stock remain outstanding, the
holders of 66.67% of the Series A Preferred Stock are entitled to approve (i)
the issuance of any securities of the Company senior to or on parity with the
Series A Preferred Stock, (ii) any alteration or change in the rights or
preferences or privileges of the Series A Preferred Stock or (iii) the
declaration or payment of any dividend on any junior stock or the repurchase of
any securities of the Company. Except as provided above or as required by
applicable law, the holders of the Series A Preferred Stock will be entitled to
vote together with the holders of the Common Stock and not as a separate class.
SERIES B PREFERRED STOCK
The board of directors has authorized the issuance of up to 2,000,000
shares of Series B Convertible Preferred Stock (the "Series B Preferred Stock"),
the rights, preferences and characteristics of which are as follows:
Dividends. The holders of Series B Preferred Stock will be entitled to
receive dividends as, when and if
-18-
<PAGE>
declared by the board of directors out of funds legally available therefor. No
dividend or distribution, as the case may be, will be declared or paid on any
junior stock unless the dividend also is paid to holders of the Series B
Preferred Stock. The Company does not intend to pay cash dividends on the Series
B Preferred Stock.
Conversion. Shares of Series B Preferred Stock are initially convertible
at the option of the holders thereof into shares of Common Stock at an initial
conversion price of $6.625 (the "Preferred Conversion Price") based on the
$10.00 purchase price for each share of Series B Preferred Stock. Thus, the
initial conversion ratio is 1.5094 shares of Common Stock for each share of
Series B Preferred Stock, subject to adjustments arising from changes in the
Preferred Conversion Price. The Preferred Conversion Price is subject to
adjustment upon the occurrence of a merger, reorganization, consolidation,
reclassification, stock dividend or stock split which will result in an increase
or decrease in the number of shares of Common Stock outstanding. In addition,
the Preferred Conversion Price is subject to adjustment on October 11, 1997 (the
"Reset Date") if the average daily trading price of the Common Stock for the
thirty days immediately preceding the Reset Date (the "Twelve Month Trading
Price") is less than 130% of the then applicable Preferred Conversion Price
("Reset Event"). Upon a Reset Event, the then applicable Preferred Conversion
Price will be reduced to equal to the greater the (i) Twelve Month Trading Price
divided by 1.3 and (ii) 50% of the then applicable Preferred Conversion Price.
Mandatory Conversion. The Company has the right at any time after the
Reset Date to cause the Series B Preferred Stock to be converted in whole at any
time, or in part from time to time, on a pro rata basis, into shares of Common
Stock if the closing price of the Common Stock exceeds 150% of the then
applicable Preferred Conversion Price for at least 20 trading days in any 30
consecutive trading day period.
Liquidation. Upon (i) a liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary or (ii) a sale or other disposition of
all or substantially all of the assets of the Company, or (iii) any
consolidation, merger, combination, reorganization or other transaction in which
the Company is not the surviving entity or the shares of Common Stock
constituting in excess of 50% of the voting power of the Corporation are
exchanged for or changed into other stock or securities and/or any other
property after payment or provision for payment of the debts and other
liabilities of the Company (a "Liquidation Event"), the holders of the Series B
Preferred Stock then outstanding will first be entitled to receive, pro rata (on
the basis of the number of shares of the Series B Preferred Stock then
outstanding), and in preference to the holders of the Common Stock and any other
series of preferred stock junior to the Series B Preferred Stock, an amount per
share equal to $13.00. Second, the holders of shares of the Common Stock and
any other shares of participating preferred stock then outstanding will be
entitled to receive such preference to which they are entitled according to
their terms. Third, the holders of Series B Preferred Stock, the Common Stock
and any other shares of participating preferred stock then outstanding will
share any remaining assets of the Company on a pari passu, as converted, basis.
Voting Rights. The holders of the Series B Preferred Stock have the right
at all meetings of stockholders to the number of votes equal to the number of
shares of Common Stock issuable upon conversion of the Series B Preferred Stock
at the record date for determination of the stockholders entitled to vote. So
long as a majority of the shares of Series B Preferred Stock remain outstanding,
the holders of 66 2/3% of the Preferred Stock are entitled to approve (i) the
issuance of any securities of the Company senior to or on parity with the Series
B Preferred Stock, (ii) any alteration or change in the rights or preferences or
privileges of the Series B Preferred Stock or (iii) the declaration or payment
of any dividend on any junior stock or the repurchase of any securities of the
Company. Except as provided above or as required by applicable law, the holders
of the Series B Preferred Stock will be entitled to vote together with the
holders of the Common Stock and not as a separate class.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby are being passed on for the Company by Andrews & Kurth, L.L.P.,
The Woodlands, Texas.
-19-
<PAGE>
EXPERTS
The financial statements incorporated by reference in this Prospectus from
the Company's Annual Report on Form 10-K/A-1 for the year ended
December 31, 1995 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated herein by reference in reliance upon the authority of such firm as
experts in giving such report.
The financial statements of the Company incorporated by reference in this
Prospectus from the Company's Annual Report on Form 10-K/A-1 for the year ended
December 31, 1995, to the extent and for the period indicated in their report,
have been audited by Ernst & Young LLP, independent auditors, and are
incorporated herein by reference in reliance upon their report given upon the
authority of such firm as experts in accounting and auditing.
-20-
<PAGE>
===============================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN, OR INCORPORATED BY REFERENCE
IN, THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. 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, OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information............................. 2
Incorporation of Certain Documents by Reference... 2
The Company....................................... 4
Risk Factors...................................... 4
Selling Securityholders........................... 12
Plan of Distribution.............................. 16
Description of Capital Stock...................... 17
Legal Matters..................................... 19
Experts........................................... 20
</TABLE>
================================================================================
================================================================================
ZONAGEN, INC.
COMMON STOCK
-----------
PROSPECTUS
-----------
NOVEMBER 13, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The extimated expenses payable by the Company in connection with the
offering of the shares of Common Stock to be registered and offer hereby are as
follows:
<TABLE>
<S> <C>
SEC registration fee............................... $17,561
Legal fees and expenses............................ 6,000
Blue Sky fees and expenses (including legal
expenses)........................................ --
Accounting fees and expenses....................... 6,000
Miscellaneous...................................... 2,439
-------
Total........................................... $32,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action.
In an action brought to obtain a judgment in the corporation's favor,
whether by the corporation itself or derivatively by a stockholder, the
corporation may only indemnify for expenses, including attorney's fees, actually
and reasonably incurred in connection with the defense or settlement of such
action, and the corporation may not indemnify for amounts paid in satisfaction
of a judgment or in settlement of the claim. In any such action, no
indemnification may be paid in respect of any claim, issue or matters as to
which such person shall have been adjudged liable to the corporation, except as
otherwise approved by the Delaware Court of Chancery or the court in which the
claim was brought. In any other type of proceeding, the indemnification may
extend to judgments, fines and amounts paid in settlement, actually and
reasonably incurred in connection with such other proceeding, as well as to
expenses.
The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation and, in the case of
criminal actions or proceedings, the person had no reasonable cause to believe
his conduct was unlawful. There are additional limitations applicable to
criminal actions and to actions brought by or in the name of the corporation.
The determination as to whether a person seeking indemnification has met the
required standard of conduct is to be made (1) by a majority vote of a quorum of
disinterested members of the board of directors, or (2) by independent legal
counsel in a written opinion, if such a quorum does not exist or if the
disinterested directors so direct, or (3) by the stockholders.
II-1
<PAGE>
The Company's Restated Certificate of Incorporation and Restated Bylaws
require the Company to indemnify the Company's directors to the fullest extent
permitted under Delaware law or any other applicable law in effect, but if such
statute or law is amended, the Company may change the standard of
indemnification only to the extent that such amended statute or law permits the
Company to provide broader indemnification rights to the Company's directors.
Pursuant to employment agreements entered into by the Company with its executive
officers and certain other key employees, the Company must indemnify such
officers and employees in the same manner and to the same extent that the
Company is required to indemnify its directors under its Restated Certificate of
Incorporation and Restated Bylaws. The Company's Restated Certificate of
Incorporation limits the personal liability of a director to the Company or its
stockholders to damages for breach of the director's fiduciary duty.
ITEM 16. EXHIBITS.
The following is a list of all the exhibits filed as part of the
Registration Statement.
<TABLE>
<CAPTION>
EXHIBITS
Number
- -------------
<S> <C>
5.1 -- Form of Opinion of Andrews & Kurth L.L.P., as to the
validity of the Common Stock.
23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1).
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney (included as part of the signature page
of this Registration Statement).
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 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 Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the Company 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>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Houston,
State of Texas on November 12, 1996.
ZONAGEN, INC.
By: /s/ Joseph S. Podolski
----------------------------------------
Joseph S. Podolski
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Joseph S. Podolski and Louis Ploth, Jr.,
and each or either of them, his true and lawful attorneys-in-fact and agent,
with full power of substitution and resubstitution for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done 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 indicated on November 12, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Martin P. Sutter
- --------------------------- Chairman of the Board of Directors
Martin P. Sutter
/s/ Joseph S. Podolski Director, President and Chief Executive Officer
- --------------------------- (Principal Executive Officer)
Joseph S. Podolski
/s/ Louis Ploth Vice President -- Business Development and Chief
- --------------------------- Financial Officer (Principal Accounting Officer
Louis Ploth and Principal Financial Officer)
/s/ David B. McWilliams
- --------------------------- Director
David B. McWilliams
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Steven Blasnik
- --------------------------- Director
Steven Blasnik
/s/ David W. Ortlieb
- ---------------------------- Director
David W. Ortlieb
/s/ Allan D. Rudzik
- ----------------------------- Director
Allan D. Rudzik
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
5.1 Form of Opinion of Andrews & Kurth L.L.P as
to the validity of the Common Stock
23.1 Consent of Andrews & Kurth L.L.P. (included in
Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Ernst & Young LLP
24.1 Power of Attorney (included as part of the
signature page of this Registration Statement).
</TABLE>
<PAGE>
Exhibit 5.1
FORM OF OPINION OF ANDREWS & KURTH L.L.P.
November ___, 1996
Board of Directors
Zonagen, Inc.
2408 Timberloch Place, B-4
The Woodlands, Texas 77380
Gentlemen:
We have acted as counsel to Zonagen, Inc. (the "Company") in
connection with the Company's Registration Statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities Act
of 1993, as amended (the "Securities Act"), of the offer and sale by the Selling
Securityholders identified in the Registration Statement of up to:
(i) 5,620,238 shares (the "Conversion Shares") of the Company's Common
Stock, par value $0.001 per share ("Common Stock"), issuable upon conversion of
the Company's Series B Convertible Preferred Stock, par value $0.001 per share
("Series B Preferred Stock") (consisting of 1,692,500 shares of Series B
Preferred Stock issued and outstanding on the date hereof and 169,250 shares of
Series B Preferred Stock issuable upon the exercise of outstanding warrants);
(ii) 19,152 shares (the "Gamogen Shares") of Common Stock issued in
accordance with the Assignment Agreement between Gamogen, Inc. and the Company;
and
(iii) up to 460,610 shares of Common Stock (the "FTI Shares") issuable
pursuant to the Stock Exchange Agreement for Purchase of Fertility Technologies,
Inc. dated October 13, 1994.
As the basis for the opinions hereinafter expressed, we have examined
such statutes, regulations, corporate records and documents, certificates of
corporate and public officials, and other instruments as we have deemed
necessary or advisable. In such examination we have assumed the authenticity of
all documents submitted to us as originals and the conformity with the original
documents of all documents submitted to us as copies.
Based on the foregoing and on such legal considerations as we deem
relevant, we are of the opinion that (i) the Conversion Shares, the Gamogen
Shares and the FTI Shares have been duly authorized by the Company and that (ii)
the Gamogen shares are and, when issued in accordance with the terms of the
Company's Restated Certificate of Incorporation, as amended, and Bylaws and the
terms of the agreements referred to herein, the Conversion Shares and FTI Shares
will be validly issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and reference to our firm under the caption "Legal
Matters" in the Prospectus included herein.
Very truly yours,
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 26, 1996
included in the Annual Report on Form 10-K/A-1 of Zonagen, Inc. and Subsidiary
for the year ended December 31, 1995 and to all references to our Firm included
in this registration statement.
ARTHUR ANDERSEN LLP
November 12, 1996
Houston, Texas
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Registration Statement on Form S-3 and related Prospectus of Zonagen Inc. for
the registration of up to 6,100,000 shares of its common stock and to the
incorporation by reference therein of our report dated February 11, 1994, with
respect to the financial statements of Zonagen, Inc. included in its Annual
Report (Form 10-K/A-1) for the year ended December 31, 1995 filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
November 13, 1996
Houston, Texas
