<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
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 MAXIMUM PROPOSED MAXIMUM
TITLE OF CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 2,760,690 $16.5625 $45,723,928.00 $13,488.56
=====================================================================================================================
</TABLE>
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 of the Securities Act of 1933. 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 May 29, 1998
as reported on the Nasdaq SmallCap Market.
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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 5, 1998
PROSPECTUS
2,760,690 SHARES
HOLLIS-EDEN PHARMACEUTICALS, INC.
Common Stock
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This Prospectus relates to 2,760,690 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 Company has agreed to bear
certain expenses in connection with the registration and sale of the Shares
being offered by the Selling Stockholders. The Company has agreed to indemnify
the Selling Stockholders against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended (the "Securities Act").
See "Plan of Distribution."
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 June 4, 1998 was $16.50 per
share.
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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.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED 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 under 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 Current Report on Form 8-K dated May 7, 1998, the
Company's Registration Statement on Form S-4, No. 333-18725, as amended through
the date hereof, 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
2.
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President-Controller at the Company's principal executive offices at 9333
Genesee Avenue, Suite 110, San Diego, California 92121, telephone number (619)
587-9333.
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, 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.
RECENT DEVELOPMENTS
In May 1998, the Company raised approximately $21 million in gross
proceeds in a private placement of its securities. The securities issued and
sold by the Company in connection with such financing include 1,329,201 shares
of Common Stock, warrants to purchase an aggregate of 1,437,474 shares of Common
Stock, and 4,000 shares of 5% Series A Convertible Preferred Stock. These shares
and the shares underlying such securities have been registered for resale
pursuant to this Prospectus and pursuant to another Prospectus dated of even
date herewith.
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, 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
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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.
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.
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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 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
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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 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
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<PAGE> 9
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 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 33% of the outstanding shares of Common Stock (without giving
effect to the exercise of any warrants or options or the conversion of any
shares of preferred stock). 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 and the conversion of outstanding shares of
preferred stock (based on an estimated conversion price of $20.00), Mr. Hollis
would own approximately 21% of the then outstanding shares of Common Stock, and
Mr. Terren S. Peizer, President and a Director of Hollis-Eden, would own
approximately 15%.
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> 10
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 June
3, 1998 which may be offered pursuant to this Prospectus. This information is
based upon information provided by each Selling Stockholder. Because the Selling
Stockholders may offer all, some or none of their respective 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 (1)
<S> <C>
Strong River Investments, Inc. 639,659 (2)
Montrose Investments, L.P. 415,951 (2)
Knight Securities, L.P. 333,332
Westover Investments, L.P. 208,020 (2)
International Investor Relations Group, Inc. 152,776
Napier Limited 145,000
The Shemano Group 130,000
New Horizons Picture Corp. Profit Sharing Trust 83,332
Namemarks Limited 80,000 (3)
Strome, Susskind Hedgecap Fund L.P. 70,834
Broadside Limited 62,690 (3)
Ivan Lieberburg & Janice Kirsch, JTWROS 50,000
Sultan Entertainments (1995) Limited 50,000
Gary J. Shemano 33,332
Kieran Corrigan 27,000
Sonem Partners Ltd. 25,000
Stephen J. Posner 21,166
Strome Hedgecap Ltd. 12,498
Harvey Blitz 8,334
Kenneth McMoreland 6,000
Fergus and Bronach Crawford 5,000
David and Betty Stieber 5,000
Marcel Aronheim 4,166
Colm Darling 4,000
A.K. Loughney 3,500
Garvin O'Doherty 3,300
James Campbell 3,300
John Barry Martin 3,000
Jorn Jessen 3,000
Michael Pollack 2,500
Declan Gilroy 2,400
Cathal O'Donnell 1,200
Yvonne Scannell 1,200
Eugene Murray 700
Stephen J. Perrone 14,490
Carmine DePalma 10,350
Robert Codignotto 10,350
Thomas Moysak 6,210
Thomas Mann 3,500
Eric and Ulina Colosante 1,000
North Hampton Holdings Corp. III 37,634
Karl Brenza 13,440
Robert Setteducati 4,300
William Masucci 2,688
</TABLE>
8.
<PAGE> 11
<TABLE>
<S> <C>
Michael Bresner 2,688
Thomas Parigian 2,150
James Witzel 1,612
Michael Vanechanos 1,344
Joseph Galligan 1,344
Goldis Financial Group, Inc. 50,400
---------
Total 2,760,690
</TABLE>
- ----------
(1) Includes (i) 1,422,142 shares of Common Stock issuable upon exercise of
certain warrants (and upon the further exercise of units and warrants underlying
certain of such warrants) and (ii) 339,902 shares of Common Stock issuable upon
conversion of shares of preferred stock.
(2) Includes shares of Common Stock, shares of Common Stock issuable upon
exercise of warrants, and shares of Common Stock issuable upon conversion of
shares of preferred stock. On May 7, 1998, these entities purchased an aggregate
of 4,000 shares of 5% Series A Convertible Preferred Stock. The conversion ratio
is not fixed. The initial conversion ratio is fixed at $20.30 per share for a
period of seven months from the closing of such financing. Thereafter, the
conversion ratio is variable based on the market price of the Company's Common
Stock. In addition, to a lesser extent, the conversion ratio is currently
further adjustable (after calculating the above conversion ratio) based on the
market price of the Company's Common Stock (the "Further Adjustment"). The
foregoing summary of the conversion provisions of the 5% Series A Convertible
Preferred Stock is qualified by reference to the Company's Certificate of
Designation as filed on May 7, 1998 with the Delaware Secretary of State, a copy
of which is filed as an exhibit to the Company's Current Report on Form 8-K
dated May 7, 1998 which is incorporated herein by reference. In accordance with
the Securities Purchase Agreement and Registration Rights Agreement entered into
among the Company and these entities on May 7, 1998, as amended, the Company is
registering herein the following securities beneficially owned by these
entities: (i) the shares of Common Stock; (ii) the shares of Common Stock
issuable upon exercise of warrants; and (iii) 150% of the shares currently
issuable upon conversion of the 5% Series A Convertible Preferred Stock (not
giving effect to the Further Adjustment), including dividends thereon assuming
all dividends for the term of the preferred stock are paid in shares of Common
Stock. In the event that the conversion ratio on a future date would result in
more than this number of shares being beneficially owned by such entities, or
permitted transferees of such entities, the Company may at such time be
obligated to file an additional registration statement to cover the additional
shares.
(3) Dr. Patrick T. Prendergast, a founder and former officer and director of the
Company, has a controlling interest in these entities.
Except as set forth above, 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.
9.
<PAGE> 12
PLAN OF DISTRIBUTION
The Shares may be sold by the Selling Stockholders by one or more of
the following methods, without limitation: (i) block trades in which a broker or
dealer will attempt to sell the Shares as agent, but may position and resell a
portion of the block as principal to facilitate the transaction; (ii) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (iii) an exchange distribution in
accordance with the rules of such exchange; (iv) ordinary brokerage transactions
and transactions in which a broker may solicit purchasers; (v) privately
negotiated transactions; (vi) short sales; and (vii) a combination of any such
methods of sale. In effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders (or, if any such broker-dealer acts as
agent for the purchaser of such Shares, from such purchaser) in amounts to be
negotiated which may be less than, or in excess of, those customary in the types
of transactions involved.
Any or all of the sales or other transactions involving the Common
Stock described above, whether effected by a Selling Stockholder, any
broker-dealer or others, may be made pursuant to this Prospectus. In addition,
any shares of Common Stock that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
The Company and certain of the Selling Stockholders have agreed to
indemnify each other and their respective officers and directors and certain
other persons against liabilities in connection with any offering of the Shares,
including liabilities arising under the Securities Act.
By agreement with the Selling Stockholders, the Company will pay all
of the expenses incurred in connection with the registration of the Shares,
other than underwriting commissions, discounts, and counsel fees and expenses.
From time to time the Selling Stockholders may engage in short sales,
puts and calls and other transactions in securities of the Company or
derivatives thereof, and may sell and deliver shares of Common Stock in
connection therewith or in settlement of securities loans. If the Selling
Stockholders engage in such transactions, the conversion price with respect to
the Company's preferred stock may be affected. From time to time the Selling
Stockholders may pledge their shares of Common Stock pursuant to the margin
provisions of its customer agreements with its brokers. Upon a default by the
Selling Stockholders, the broker may offer and sell the pledged shares of Common
Stock from time to time.
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, 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.
Certain of the Selling Stockholders, who beneficially own an
aggregate of 333,332 shares of Common Stock, have agreed not to sell any shares
held by them until at least 60 days after the date of this Prospectus.
10.
<PAGE> 13
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.
11.
<PAGE> 14
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 ........... $ 13,488.56
Legal fees and expenses .... 2,000.00
Accounting fees and expenses 2,000.00
-------------
Total ........... $ 17,488.56
=============
</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.
Exhibit No. Description
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.
II-1.
<PAGE> 15
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> 16
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 June 3, 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 June 3, 1998
- ------------------------------------- the Board and Director (Principal Executive
Richard B. Hollis Officer)
/s/ TERREN S. PEIZER President, Vice Chairman and Director June 3, 1998
- -------------------------------------
Terren S. Peizer
/s/ ROBERT W. WEBER Vice President-Controller (Principal June 3, 1998
- ------------------------------------- Financial and Accounting Officer)
Robert W. Weber
/s/ THOMAS CHARLES MERIGAN, JR., M.D. Medical Director, Infectious Diseases June 3, 1998
- ------------------------------------- and Director
Thomas Charles Merigan, Jr., M.D.
/s/ J. PAUL BAGLEY III Director June 3, 1998
- -------------------------------------
J. Paul Bagley III
/s/ SALVATORE J. ZIZZA Director June 3, 1998
- -------------------------------------
Salvatore J. Zizza
/s/ BRENDAN R. MCDONNELL Director June 3, 1998
- -------------------------------------
Brendan R. McDonnell
/s/ LEONARD MAKOWKA, M.D. Director June 3, 1998
- -------------------------------------
Leonard Makowka, M.D.
</TABLE>
II-3.
<PAGE> 17
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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.
- ----------
<PAGE> 1
EXHIBIT 5.1
June 3, 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 Form
S-3 Registration Statement (the "Registration Statement"), including a related
prospectus filed with the Registration Statement (the "Prospectus"), covering
the registration of an aggregate of 2,760,690 shares of the Company's Common
Stock, $.01 par value, by certain selling stockholders, including 998,646 shares
of Common Stock (the "Shares"), 1,422,142 shares of Common Stock (the "Warrant
Shares") issuable upon the exercise of certain warrants (the "Warrants") (and in
certain cases upon the exercise of underlying units and warrants) and 339,902
shares of Common Stock (the "Conversion Shares") issuable upon conversion of the
Company's outstanding 5% Series A Convertible Preferred Stock (the "Preferred
Stock").
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Amended and Restated Certificate of Incorporation and
Bylaws, the Certificate of Designation of the 5% Series A Convertible Preferred
Stock (the "Certificate of Designation"), the Warrants and related agreements
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
(i) that the Shares are validly issued, fully paid and nonassessable, (ii) that
the Warrant Shares, when issued and sold in accordance with the terms of the
Warrants (and in accordance with the terms of the underlying units and warrants
and related agreements, where applicable,) will be validly issued, fully paid
and nonassessable and (iii) that the Conversion Shares, when issued upon
conversion of the Preferred Stock as provided for in the Certificate of
Designation, 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
/S/ M. WAINWRIGHT FISHBURN, JR.
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 Registration Statement on Form S-3 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
June 3, 1998
