<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1998
REGISTRATION NO. 333-18725
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
POST EFFECTIVE AMENDMENT NO. 2
ON FORM S-3
TO FORM S-4*
UNDER
THE SECURITIES ACT OF 1933
----------
HOLLIS-EDEN PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
----------
Delaware 13-3697002
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
9333 Genesee Avenue, Suite 110
San Diego, California 92121
(619) 587-9333
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
----------
Richard B. Hollis
Chief Executive Officer and Chairman of the Board
HOLLIS-EDEN PHARMACEUTICALS, INC.
9333 Genesee Avenue, Suite 110
San Diego, California 92121
(619) 587-9333
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
----------
Copies to:
Eric J. Loumeau, Esq.
COOLEY GODWARD LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
(619) 550-6000
----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING
BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED
ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT
OF 1933, OTHER THAN SECURITIES OFFERED IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE
434, PLEASE CHECK THE FOLLOWING BOX. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 445,000 $10.19 $4,534,550 $1,337.69
=============================================================================================================
</TABLE>
<PAGE> 2
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457. The price per share and aggregate
offering price are based upon the average of the high and low sales price of
Registrant's Common Stock on December 20, 1996 as reported on the Nasdaq
SmallCap Market.
(2) Registration fee with respect to these shares previously paid in connection
with the filing of Registrant's Registration Statement on Form S-4 (File No.
333-18725). See Explanatory Note following this cover page.
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
EXPLANATORY NOTE
Hollis-Eden Pharmaceuticals, Inc. (the "Registrant") hereby amends its
Registration Statement on Form S-4 (File No. 333-18725) (the "Form S-4"), by
filing this Post-Effective Amendment No. 2 on Form S-3 to the Form S-4 (the
"Registration Statement") relating to 445,000 shares of Common Stock, $.01 par
value, of the Registrant (the "Common Stock") issuable upon the exercise of
certain warrants of the Registrant (the "Warrants").
On March 26, 1997, pursuant to an Agreement and Plan of Merger and
Reorganization, dated as of November 1, 1996 (the "Merger Agreement"),
Hollis-Eden, Inc. was merged with and into the Registrant (the "Merger"). As
provided in the Merger Agreement, each outstanding share of common stock of
Hollis-Eden, Inc. ("Hollis-Eden Common Stock") was converted into the right to
receive one share of the Registrant's Common Stock.
Pursuant to the Merger Agreement, Hollis-Eden, Inc. and the Registrant
have taken such actions as are necessary such that Hollis-Eden Common Stock is
no longer issuable under the Warrants.
<PAGE> 4
SUBJECT TO COMPLETION, DATED MAY 29, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
445,000 SHARES
HOLLIS-EDEN PHARMACEUTICALS, INC.
Common Stock
----------
This Prospectus relates to 445,000 shares (the "Shares") of Common
Stock, par value $.01 per share (the "Common Stock"), of Hollis-Eden
Pharmaceuticals, Inc. (the "Company" or "Hollis-Eden"). The Shares may be
offered by certain stockholders of the Company (the "Selling Stockholders") from
time to time in transactions on the Nasdaq SmallCap Market, in privately
negotiated transactions or a combination of such methods of sale, at fixed
prices that may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders 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). See "Selling
Stockholders" and "Plan of Distribution." None of the proceeds from the sale of
the Shares by the Selling Stockholders will be received by the Company.
The Common Stock of the Company is traded on the Nasdaq SmallCap Market
under the symbol "HEPH." The last reported sales price of the Company's Common
Stock on the Nasdaq SmallCap Market on May 28, 1998 was $16.25 per share.
----------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
----------
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 _______, 1998.
<PAGE> 5
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN 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, BY ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the Commission's following Regional Offices: Chicago Regional Office, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661; and New York Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Commission also maintains a site on the World Wide
Web that contains reports, proxy and information statements and other
information regarding the Company. The address for such site is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 as a post-effective amendment to Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain portions of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
thereto, which may be inspected without charge at, and copies thereof may be
obtained at prescribed rates from, the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1997, the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, the Company's Registration Statement on Form S-4, No. 333-18725, as
amended through the date hereof ("Form S-4"), which includes a description of
the Company's Common Stock, and the Company's proxy statement for the 1998
Annual Meeting of Stockholders filed pursuant to Rule 14a-6 of the Exchange Act,
are hereby incorporated by reference into this Registration Statement.
All documents filed with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been or
may be incorporated by reference herein (other than exhibits to such documents
which are not specifically incorporated by reference into such documents). Such
requests should be directed to the Vice President-Controller at the Company's
principal executive offices at 9333 Genesee Avenue, Suite 110, San Diego,
California 92121, telephone number (619) 587-9333.
2.
<PAGE> 6
THE COMPANY
Except for the historical information contained or incorporated by
reference herein, this Prospectus (and the information incorporated herein by
reference) contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here or incorporated by reference. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the following section, in the section entitled "Risk Factors," in the
Company's most recent quarterly report on Form 10-Q and most recent annual
report on Form 10-K and in the section entitled "Risk Factors" and elsewhere in
the Form S-4, as well as those discussed elsewhere in this Prospectus and any
other documents incorporated herein by reference.
Hollis-Eden is a development stage pharmaceutical company engaged in the
discovery, development and commercialization of products for the treatment of a
number of targeted disease states caused by viral, bacterial, parasitic or
fungal infections, including HIV/AIDS, hepatitis B and C, and malaria. The
Company has three technology platforms, one based on cellular energy regulation,
the second on a unique immune system modulation technology, and the third on
biochemical synthesis regulators. The Company believes that certain of its drug
candidates may provide the first long-term treatment of HIV without the
development of viral strain resistance to the drugs' effectiveness, significant
toxicity or severe side effects.
Hollis-Eden's executive offices are located at 9333 Genesee Avenue,
Suite 110, San Diego, California 92121, telephone number (619) 587-9333.
RISK FACTORS
An investment in the shares being offered hereby involves a high degree
of risk. Prospective investors should carefully consider the following risk
factors, in addition to other information contained in this Prospectus, in the
Company's most recent quarterly report on Form 10-Q, in the most recent annual
report on Form 10-K, in the Form S-4, and in any other documents incorporated
herein by reference in evaluating an investment in the shares of Common Stock
offered hereby.
DEPENDENCE ON NEW PRODUCTS AND FDA APPROVAL
Hollis-Eden's principal development efforts are currently centered
around two drug candidates licensed by Hollis-Eden which Hollis-Eden management
believes show promise for the treatment and prevention of HIV/AIDS. Neither
INACTIVIN nor any of the other drug candidates have been approved for commercial
sale and no assurance can be given that approvals will be obtained. While
limited clinical trials of INACTIVIN have to date produced favorable results,
significant additional trials are required, and no assurance can be given that
the drug will ultimately be demonstrated to be safe or efficacious. Hollis-Eden
has never commercially introduced a product, and no assurance can be given that
commercialization of any of Hollis-Eden's drug candidates in any country in
which any of them may be approved will be financially successful.
EARLY STAGE OF PRODUCT DEVELOPMENT; SUBSTANTIAL OPERATING LOSSES
Hollis-Eden has not yet generated any operating revenues. Hollis-Eden
cannot predict when marketing approvals for any of its drug candidates will be
obtained, if ever. Even if such approvals are obtained, there can be no
assurance that Hollis-Eden's drug candidates will be successfully
commercialized. Hollis-Eden has experienced significant operating losses due to
substantial expenses incurred to acquire and fund development of Hollis-Eden's
drug candidates, and, as of March 31, 1998, had an accumulated deficit of $9.1
million. Hollis-Eden expects its operating expenses to increase over the next
several years as it funds development, clinical testing and other expenses of
seeking FDA approval. Hollis-Eden's ability to achieve a profitable level of
operations is dependent in large part on obtaining regulatory approvals for its
drug candidates, entering into agreements for product development and
commercialization, and expanding from development into successful marketing, all
of which will require significant amounts of capital. There can be no assurance
that Hollis-Eden will ever achieve a profitable level of operations.
3.
<PAGE> 7
PATENTS AND PROPRIETARY RIGHTS
Although certain of Hollis-Eden's drug candidates are patented, patents
are not a guarantee of protection from competitors, especially in an area
characterized by rapid advances, and enforcement of patents and proprietary
rights in many countries can be expected to be problematic or unpredictable.
There can be no assurance that any patents issued or licensed to Hollis-Eden
will not be challenged, invalidated, infringed upon, or designed around by
others or that the claims contained in such patents will not infringe the patent
claims of others. Furthermore, there can be no assurance that others will not
independently develop similar products. Hollis-Eden's business may be adversely
affected by competitors who develop substantially equivalent technology. Patent
litigation can be extremely expensive, and Hollis-Eden may find that it is
unable to fund litigation necessary to defend its rights.
GOVERNMENT REGULATION AND PRODUCT APPROVALS
The research, preclinical development, clinical trial, manufacturing,
marketing and sale of pharmaceuticals are subject to extensive regulation by
governmental authorities. Products developed by Hollis-Eden cannot be marketed
commercially in any jurisdiction in which they have not been approved. The
process of obtaining regulatory approvals is lengthy and extremely expensive.
Approval by United States authorities does not guarantee, nor at times even
facilitate or expedite, approval in other countries. Further, government
regulations are subject to change and it is possible that additional criteria
may be established or imposed which could prevent or delay regulatory approval
of any of Hollis-Eden's drug candidates. Additionally, the facilities that
manufacture Hollis-Eden's drug candidates will need to adhere to regulatory
guidelines. There can be no assurance that Hollis-Eden will not be required to
incur significant costs to comply with laws and regulations in the future or
that laws and regulations will not have a material adverse effect on
Hollis-Eden's business, financial condition or results of operations.
SUBSTANTIAL CAPITAL NEEDS
Hollis-Eden's operations to date have consumed substantial capital
without generating any revenues, and Hollis-Eden will continue to require
substantial and increasing amounts of funds to conduct necessary research and
development and preclinical and clinical testing of its drug candidates, and to
market any drug candidates that receive regulatory approval. Hollis-Eden does
not expect to generate revenue from operations for the foreseeable future, and
Hollis-Eden's ability to meet its cash obligations as they become due and
payable is expected to depend for at least the next several years on its ability
to sell securities, borrow funds or some combination thereof. Based upon its
current plans, management believes that its existing cash resources, together
with interest thereon, will be sufficient to meet Hollis-Eden's operating
expenses and capital requirements through at least the end of 1999. There can be
no assurance, however, that changes in Hollis-Eden's research and development
plans or other events affecting Hollis-Eden's operating expenses will not result
in the expenditure of such cash before that time. No assurance can be given that
Hollis-Eden will be successful in raising necessary funds. Hollis-Eden's future
capital requirements will depend upon many factors, including progress with
preclinical testing and clinical trials, the number and breadth of Hollis-Eden's
programs, the time and costs involved in preparing, filing, prosecuting,
maintaining and enforcing patent claims and other proprietary rights, the time
and costs involved in obtaining regulatory approvals, competing technological
and market developments, the ability of Hollis-Eden to establish collaborative
arrangements and effective commercialization and marketing activities and other
arrangements. In any event, Hollis-Eden will continue to incur increasing
negative cash flows and net losses for the foreseeable future.
TECHNOLOGICAL CHANGE AND COMPETITION
The pharmaceutical industry is characterized by intense competition and
is subject to rapid and significant technological change. Rapid technological
development may cause Hollis-Eden's drug candidates to become obsolete before
Hollis-Eden recoups all or any portion of the related expenses. Hollis-Eden's
competitors include major pharmaceutical companies, biotechnology firms and
universities and other research institutions, both in the United States and
abroad, which are actively engaged in research and development of products in
the therapeutic areas being pursued by Hollis-Eden. Most of Hollis-Eden's
competitors have substantially greater financial, technical, manufacturing,
marketing, distribution and human resource capabilities than Hollis-Eden. In
addition, many of Hollis-Eden's competitors have significantly greater
experience in testing new or improved therapeutic
4.
<PAGE> 8
products and obtaining regulatory approvals of products. Accordingly,
Hollis-Eden's competitors may succeed in obtaining regulatory approval for
products more rapidly than Hollis-Eden. If Hollis-Eden commences significant
commercial sales of its products, it will also be competing with respect to
manufacturing efficiencies and marketing and distribution capabilities, areas in
which it has little experience.
NO SALES AND MARKETING EXPERIENCE
Hollis-Eden's efforts to date have focused on the development and
evaluation of its drug candidates. As Hollis-Eden continues clinical studies and
prepares for commercialization of its drug candidates, it must build a sales and
marketing infrastructure. Hollis-Eden has no experience in the sales and
marketing of its drug candidates. It is possible that Hollis-Eden will not be
able to attract and retain the skilled personnel necessary to develop the
infrastructure to effectively market its drug candidates.
DEPENDENCE ON LICENSE AGREEMENTS
Hollis-Eden licenses its drug candidates from Dr. Patrick T. Prendergast
and from Edenland, Inc. and Colthurst Limited, two organizations Dr. Prendergast
controls. Hollis-Eden is obligated to make license payments and provide certain
funding, including funding for the development and testing of Hollis-Eden's drug
candidates, at specified times. There can be no assurance that Hollis-Eden will
be able to meet future payment or funding obligations, in which event
Hollis-Eden could lose all rights to one or more of its drug candidates, which
would have a material adverse effect on Hollis-Eden.
DEPENDENCE ON OFFICERS AND FUTURE EMPLOYEES
Hollis-Eden is (and will be) highly dependent upon its Chief Executive
Officer, Richard B. Hollis, the loss of whose services could adversely affect
Hollis-Eden and impede the achievement of Hollis-Eden's research and development
objectives. Recruiting and retaining additional management personnel, as well as
qualified scientific personnel to perform research and development work in the
future, will also be critical to Hollis-Eden's success. Because competition for
experienced scientific personnel among numerous pharmaceutical and biotechnology
companies and research and academic institutions is intense, there can be no
assurance that Hollis-Eden will be able to attract and retain such personnel.
TECHNOLOGICAL UNCERTAINTIES
All of Hollis-Eden's product development efforts are based upon
technologies and therapeutic approaches that have not been widely used in humans
for therapeutic purposes. There is, therefore, significant risk that these
approaches will not prove to be successful. While Hollis-Eden believes that the
positive results obtained to date in preclinical and limited clinical human
studies support further research and development, such positive results are not
necessarily indicative of results that will be obtained in further human
clinical testing.
PHARMACEUTICAL PRICING; PENDING HEALTH CARE REFORMS
Government health administration authorities, together with private
health insurers, increasingly are attempting to contain health care costs by
limiting the price or reimbursement levels for medical products and services. In
certain foreign markets, pricing or profitability of prescriptive
pharmaceuticals is subject to government control. In the United States, there
have been a number of federal and state proposals to implement similar
government controls or otherwise significantly reform the existing health care
system. Due to uncertainties as to the ultimate features of this or any other
reform initiatives that may be enacted, Hollis-Eden cannot predict which, if
any, of such reform proposals will be adopted, when they may be adopted, or what
impact they may have on Hollis-Eden. It is possible that any legislation that is
enacted will include provisions resulting in price limits, utilization controls
or other consequences that may adversely affect Hollis-Eden.
MANUFACTURING LIMITATIONS AND UNCERTAINTIES
Hollis-Eden currently relies on outside manufacturers for the production
of its drug candidates to supply
5.
<PAGE> 9
sufficient quantities of compounds to conduct clinical trials on its drug
candidates. If Hollis-Eden is unable to contract on acceptable terms or to
obtain a sufficient supply of its drug candidates or such supplies are delayed
or contaminated, Hollis-Eden could experience significant delays in bringing its
drug candidates to market as well as delays in human clinical testing schedules
and delays in submissions of its drug candidates for regulatory approval and
initiation of further development progress, any of which could have a material
adverse effect on Hollis-Eden's business and results of operations. If
Hollis-Eden should encounter delays or difficulties in establishing
relationships with manufacturers to produce, package and distribute its finished
pharmaceutical products, market introduction and subsequent sales of such
products would be adversely affected. Moreover, contract manufacturers that
Hollis-Eden may use must adhere to current Good Manufacturing Practices ("GMP")
regulations enforced by the FDA through its facilities inspection program. These
facilities must pass a pre-approval plant inspection before the FDA will issue a
pre-market approval of Hollis-Eden's drug candidates. If Hollis-Eden is unable
to obtain or retain third party manufacturing on commercially acceptable terms,
it may not be able to commercialize pharmaceutical products as planned.
Hollis-Eden's dependence upon third parties for the manufacture of
pharmaceutical products may adversely affect Hollis-Eden's profit margins and
its ability to develop and deliver pharmaceutical products on a timely and
competitive basis.
Even if Hollis-Eden is successful in raising the substantial amounts of
capital it requires (as to which there can be no assurance), Hollis-Eden does
not intend to manufacture any pharmaceutical products itself, although it may
choose to do so in the future. Hollis-Eden has no experience in manufacturing
pharmaceutical products in clinical quantities or for commercial purposes.
Hollis-Eden believes that its strategy of outsourcing manufacturing is cost
effective since it avoids the high fixed costs of plant, equipment and large
manufacturing staff and thereby enables Hollis-Eden to conserve its resources.
Should Hollis-Eden determine to manufacture products itself, Hollis-Eden would
be subject to the regulatory requirements described above, would be subject to
similar risks regarding delays or difficulties encountered in manufacturing any
such pharmaceutical products and would require substantial additional capital.
In addition, there can be no assurance that Hollis-Eden would be able to
manufacture any such products successfully and in a cost-effective manner.
MANAGEMENT OF GROWTH
The management of Hollis-Eden's growth, if any, will require it to
continue to improve and expand its management, operational and financial systems
and controls. If Hollis-Eden's management is unable to manage growth
effectively, Hollis-Eden's business and results of operations will be adversely
affected.
PRODUCT LIABILITY; LACK OF INSURANCE
Hollis-Eden's business will expose it to potential product liability
risks which are inherent in the testing, manufacturing, marketing and sale of
pharmaceutical products, and product liability claims, may be asserted against
Hollis-Eden. Product liability insurance for the pharmaceutical industry
generally is expensive to the extent that it is available at all. Hollis-Eden
currently does not have product liability insurance. There can be no assurance
that adequate insurance coverage will be available at acceptable costs, if at
all, or that a product liability claim would not adversely affect the business
or financial condition of Hollis-Eden.
AUTHORIZED PREFERRED STOCK
The Company currently has preferred stock issued and outstanding which
entitles the holders thereof to rights not available to holders of Common Stock.
Furthermore, Hollis-Eden's Board of Directors are authorized, without further
action required on the part of stockholders, to issue additional shares of
preferred stock and to designate the rights, preferences and privileges of such
preferred stock, including voting, dividend and liquidation rights which may be
superior to those of the holders of Common Stock. The issuance of one or more
classes of preferred stock could materially adversely affect the rights of
holders of Common Stock.
INDEMNIFICATION AND LIMITED MONETARY DAMAGES
Hollis-Eden's Certificate of Incorporation provides that Hollis-Eden's
directors shall not be liable for monetary damages to Hollis-Eden's stockholders
except as required by law. In addition, Hollis-Eden's Bylaws
6.
<PAGE> 10
provide indemnification of Hollis-Eden's officers and directors to the fullest
extent permitted by the Delaware law. To the extent that stockholders are unable
to prevail in actions for monetary damages against Hollis-Eden's directors, such
stockholders' rights in this regard are limited in comparison to rights of
stockholders of a corporation that has not adopted such provisions. In addition,
to the extent that Hollis-Eden's officers and directors may obtain
indemnification from Hollis-Eden, Hollis-Eden may incur substantial financial
losses.
DIVIDENDS UNLIKELY
Hollis-Eden has never paid dividends on its shares of Common Stock. The
payment of dividends in the future, if any, will be contingent upon
Hollis-Eden's revenues and earnings, if any, capital requirements and general
financial condition. The payment of any dividends in the future will be within
the discretion of Hollis-Eden's Board of Directors. Hollis-Eden intends to
retain all earnings, if any, for use in Hollis-Eden's business operations and,
accordingly, the Board of Directors does not anticipate declaring any dividends
in the foreseeable future.
CONCENTRATION OF OWNERSHIP
Richard B. Hollis, Hollis-Eden's Chief Executive Officer, owns
approximately 35% of the outstanding shares of Common Stock (without giving
effect to the exercise of any warrants or options). Accordingly, Mr. Hollis will
control the business, policies and affairs of Hollis-Eden, including the
election of members of Hollis-Eden's Board of Directors. Assuming the exercise
of Hollis-Eden's outstanding warrants and options, Mr. Hollis would own
approximately 22% of the then outstanding shares of Common Stock, and Mr. Terren
S. Peizer, President and a Director of Hollis-Eden, would own approximately 16%.
CLASSIFIED BOARD OF DIRECTORS
Hollis-Eden's Board of Directors is a "classified board," with
approximately one-third of its directors coming up for election each year. This
provision is applicable to every election of directors. As a result of having a
classified board, two annual meetings will be necessary to change a majority of
the directors. The existence of a classified board may, in certain
circumstances, deter or delay mergers, tender offers, other possible takeover
attempts or changes in management of the Board of Directors which may be favored
by some or a majority of Hollis-Eden's stockholders.
POSSIBLE VOLATILITY IN STOCK PRICE
There is no assurance that a market for securities of Hollis-Eden will
continue to exist. The prices at which Common Stock trades will depend on many
factors, including prevailing interest rates, markets for similar securities,
industry conditions, and the performance of, and investor expectations for,
Hollis-Eden's prospects.
7.
<PAGE> 11
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders and
the number of shares of Common Stock owned beneficially by them as of May 21,
1998 which may be offered pursuant to this Prospectus. Because the Selling
Stockholders may offer all, some or none of their respective warrants or shares
of Common Stock, no definitive estimate as to the number of shares thereof that
will be held by the Selling Stockholders after such offering can be provided.
The term "Selling Stockholder" includes the holders listed below and their
transferees, pledgees, donees or other successors.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME SHARES BEING OFFERED
- --------------------------------------------------------------------------------
<S> <C>
James D. Bowyer 145,200
LHIP Acquisition Company 128,700
Christopher A. Marlett 130,680
Dyana Marlett 14,520
Aaron A. Grunfeld 10,000
Jane Flood 5,400
Jeffrey Sun 2,500
Peter Alpert 1,000
Sheldon Berger 1,000
David Gitman 1,000
Lee Polster 1,000
Nicholas Ramniceanu 1,000
Ronald Resch 1,000
Martin Castle 1,000
MacDonald Bowyer 500
Ben Lupu 500
-------
Total 445,000
- --------------------------------------------------------------------------------
</TABLE>
None of the Selling Stockholders has, or within the past three years has
had, any position, office or other material relationship with the Company or any
of its predecessors or affiliates.
8.
<PAGE> 12
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Stockholders may sell
Shares from time to time in transactions on the Nasdaq SmallCap Market, in
privately negotiated transactions or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Stockholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders 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 commission).
The Selling Stockholders and any broker-dealers who act in connection
with the sale of Shares hereunder may be deemed to be "underwriters" as that
term is defined in the Securities Act of 1933, as amended (the "Securities
Act"), and any commissions received by them and profit on any resale of the
Shares as principal might be deemed to be underwriting discounts and commissions
under the Securities Act.
Notwithstanding the foregoing, broker-dealers who are qualifying
registered market makers on the National Association of Securities Dealers
Automated Quotation System (the "Nasdaq") may engage in passive market making
transactions in the Common Stock of the Company on the Nasdaq SmallCap Market in
accordance with Regulation M under the Exchange Act, during the two business day
period before commencement of sales in this offering. The passive market making
transactions must comply with applicable price and volume limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security. If all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded. Net
purchases by a passive market maker on each day are generally limited to a
specified percentage of the passive market maker's average daily trading volume
in the Common Stock of the Company during a prior period and must be
discontinued when such limit is reached. Passive market making may stabilize the
market price of the Common Stock of the Company at a level above that which
might otherwise prevail and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby has been
passed upon for the Company by Cooley Godward LLP, San Diego, California.
EXPERTS
The financial statements of the Registrant as of December 31, 1997 and
1996 and for each of the years ended December 31, 1997, 1996 and 1995 and for
the period August 15, 1994 (inception) to December 31, 1997 have been audited by
BDO Seidman, LLP, as set forth in its report thereon included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of said firm as
experts in accounting and auditing.
9.
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates except
for the registration fee.
<TABLE>
<S> <C>
Registration Fee ...................... $ 1,337.69
Legal fees and expenses ............... 2,000.00
Accounting fees and expenses .......... 3,000.00
----------
Total ......................... $ 6,337.69
==========
</TABLE>
ITEM 15 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the
Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act").
The Registrant's Bylaws provide that the Registrant shall indemnify its
directors and executive officers and may indemnify its other officers, employees
and other agents to the fullest extent permitted by Delaware law. The Registrant
is also empowered under its Bylaws to enter into indemnification contracts with
its directors and officers and to purchase insurance on behalf of any person
whom it is required or permitted to indemnify. In addition, the Registrant is
required, subject to certain exceptions, to advance all expenses incurred by any
director or executive officer in connection with a completed, pending or
threatened action, suit or proceeding upon receipt of an undertaking by such
director or executive officer to repay all amounts advanced by the Registrant on
such person's behalf if it is ultimately determined that such person is not
entitled to be indemnified under the Bylaws or otherwise.
The Registrant's Certificate of Incorporation provides that to the
fullest extent permitted under Delaware law, the Registrant's directors will not
be personally liable to the Registrant and its stockholders for monetary damages
for any breach of a director's fiduciary duty. The Certificate of Incorporation
does not, however, eliminate the duty of care, and in appropriate circumstances,
equitable remedies such as an injunction or other forms of non-monetary relief
would remain available under Delaware law. Each director is subject to liability
for breach of the director's duty of loyalty to the Registrant, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for any transaction from which the director derived an
improper personal benefit and for improper distributions to stockholders and
loans to directors and officers. This provision does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
The Registrant maintains directors' and officers' liability insurance.
ITEM 16. EXHIBITS.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-3.
</TABLE>
II-1.
<PAGE> 14
ITEM 17. UNDERTAKINGS.
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 provisions described in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided however, that clauses (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by these clauses 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; (2) that, for the purpose of determining any liability
under the Securities Act, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and (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 undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of the registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective; (2) for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and (3) for the purposes of determining
any liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2.
<PAGE> 15
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on May 21, 1998.
HOLLIS-EDEN PHARMACEUTICALS, INC.
By /s/ RICHARD B. HOLLIS
----------------------------------------
Richard B. Hollis
Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard B. Hollis, Terren S. Peizer and
Robert W. Weber and each of them, his true and lawful attorney-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 attorney-in-fact and
agent, or any of them, 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 and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ RICHARD B. HOLLIS Chief Executive Officer, Chairman of May 21, 1998
- ------------------------------------- the Board and Director (Principal Executive
Richard B. Hollis Officer)
/s/ TERREN S. PEIZER President, Vice Chairman and Director May 21, 1998
- -------------------------------------
Terren S. Peizer
/s/ ROBERT W. WEBER Vice President-Controller (Principal May 21, 1998
- ------------------------------------- Financial and Accounting Officer)
Robert W. Weber
/s/ THOMAS CHARLES MERIGAN, JR., M.D. Chairman of the Scientific Advisory May 21, 1998
- ------------------------------------- Board and Director
Thomas Charles Merigan, Jr., M.D.
/s/ J. PAUL BAGLEY III Director May 21, 1998
- -------------------------------------
J. Paul Bagley III
/s/ SALVATORE J. ZIZZA Director May 21, 1998
- -------------------------------------
Salvatore J. Zizza
/s/ BRENDAN R. MCDONNELL Director May 21, 1998
- -------------------------------------
Brendan R. McDonnell
</TABLE>
II-3.
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to Page II-3.
</TABLE>
- -----------------
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
May 21, 1998
HOLLIS-EDEN PHARMACEUTICALS, INC.
9333 Genesee Avenue, Suite 110
San Diego, CA 92121
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by HOLLIS-EDEN PHARMACEUTICALS, INC. (the "Company") of a
Post-Effective Amendment No. 2 on Form S-3 to the Form S-4 Registration
Statement (File No. 333-18725) (the "Registration Statement"), including a
related prospectus filed with the Registration Statement (the "Prospectus"),
covering the registration of up to 445,000 shares of the Company's Common Stock,
$.01 par value, by certain selling stockholders (the "Shares"), including shares
of Common Stock issuable upon exercise of certain warrants held by such selling
stockholders (the "Warrants").
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Amended and Restated Certificate of Incorporation and
Bylaws, and such other documents, records, certificates, memoranda and other
instruments as we deem necessary as a basis for this opinion. We have assumed
the genuineness and authenticity of all documents submitted to us as originals,
the conformity to originals of all documents submitted to us as copies thereof
and the due execution and delivery of all documents where due execution and
delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares to be sold by the selling stockholders, when issued upon
exercise of the Warrants and sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
Cooley Godward LLP
M. Wainwright Fishburn, Jr.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Hollis-Eden Pharmaceuticals, Inc.
San Diego, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Post Effective Amendment No. 2 on Form S-3 to Form
S-4 of our report dated March 6, 1998, relating to the financial statements of
Hollis-Eden Pharmaceuticals, Inc. appearing in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
BDO Seidman, LLP
New York, New York
May 22, 1998
