<PAGE> 1
As Filed With the Securities and Exchange Commission on December 9, 1996
Registration No. 33-66742
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549
____________________
POST-EFFECTIVE AMENDMENT NO. 2
ON
FORM S-3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
EPOCH PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1311592
(State or other jurisdiction of (I.R.S.
incorporation or organization) Employer Identification No.)
1725 220th Street, S.E., No. 104, Bothell, Washington 98021
(206) 485-8566
(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)
_________________________
Fred Craves, Ph.D., Chief Executive Officer
1725 220th Street, S.E., No. 104
Bothell, Washington 98021
(206) 485-8566
(Name, address, including zip code, and telephone number, including area code
of agent for service)
Copy to:
C. Craig Carlson, Esq.
Lawrence B. Cohn, Esq.
Stradling, Yocca, Carlson & Rauth, a Professional Corporation
660 Newport Center Drive, Suite 1600, Newport Beach, California 92660
Approximate date of commencement of proposed sale to public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
____________________
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
PROSPECTUS
EPOCH PHARMACEUTICALS, INC.
2,875,000 SHARES OF COMMON STOCK
This Prospectus relates to the sale of up to 2,875,000 shares (the
"Shares") of the common stock par value $.01 per share (the "Common Stock"), by
Epoch Pharmaceuticals, Inc. ("Epoch" or the "Company") to holders of warrants
issued by the Company in its initial public offering on September 29, 1993 (the
"Public Warrants"). Each Public Warrant entitles the holder to purchase one
share of Common Stock until September 29, 1998, at an exercise price equal to
$6.50 per share of Common Stock, subject to certain adjustments. The Public
Warrants are redeemable, in whole but not in part, for $.05 per Public Warrant,
at the option of the Company, upon 30 days' written notice at any time after
the market price of the Company's Common Stock has been at least 140% of the
then effective exercise price of the Public Warrants for 30 consecutive
business days ending within 15 days of the date of the notice of redemption.
The Company intends to offer to exchange one new warrant to purchase one share
of Common Stock until September 29, 2001, at an exercise price of $2.50 per
share of Common Stock (the "Exchange Warrants") for every two Public Warrants.
The Exchange Warrants will be redeemable, at $.05 per warrant, at the option of
the Company, upon 30 days' written notice at any time after 18 months from the
date that they are issued, provided that the market price of the Company's
Common Stock has been at least 140% of the then effective exercise price of
the Exchange Warrants for 20 consecutive business days ending within 15 days
of the notice of redemption. See "Description of Securities - Warrants."
The Common Stock and the Public Warrants of the Company trade on the
OTC Bulletin Board under the symbols EPPH and EPPHW, respectively. The Company
anticipates that the Exchange Warrants will trade on the OTC Bulletin Board.
On November 27, 1996, as reported by the OTC Bulletin Board, the closing bid
price of a share of Common Stock of the Company was $0.94 and, on December 4,
1996, the closing bid price of a Public Warrant was $.16.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS."
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.
<TABLE>
<CAPTION>
======================================================================================================
Price to Warrant Warrant Solicitation Proceeds to the
Holder Fee (1) Company (2)(3)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$6.50 $0.325 $6.175
Total (3) ----------------------------------------------------------------
$18,687,500 $934,375 $17,753,125
======================================================================================================
</TABLE>
(1) The Company has agreed to pay a fee of 5% at the exercise price to
NASD members who solicit the exercise of a Warrant. (See "Plan of
Distribution")
(2) Before deducting estimated expenses payable by the Company of
$55,000.
(3) To the extent Public Warrant holders exchange such warrants for
Exchange Warrants, the proceeds to the Company on exercise will be
lower. There is no assurance that any of the Warrants will be
exercised and that the Company will receive any proceeds.
The date of this Prospectus is December 9, 1996.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Determination of Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Limitation on Liability and Disclosure of Commission Position on Indemnification For
Securities Act Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus, in connection with the offering described herein, and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or any underwriters, brokers or agents.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, nor shall there be any sale of these securities by any person in
any jurisdiction in which it is unlawful for such person to make such offer,
solicitation or sale. Neither the delivery of this Prospectus nor any sale
made hereunder shall under any circumstances create an implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act of 1934 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 can
be inspected and copied at the public reference facilities maintained by
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 500 West Madison Street, Chicago,
Illinois 60606 and 7 World Trade Center, 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 its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a Web
site at http:www.sec.gov containing reports, proxy and information statements
and other information regarding registrants, such as the Company, that file
electronically with the Commission.
This Prospectus does not contain all of the information set forth in
the Registration Statement of which this Prospectus is a part and which the
Company has filed with the Commission. For further information with respect to
the Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits filed as a part thereof, copies
of which can be inspected at, or obtained at prescribed rates from, the Public
Reference Section of the Commission at the address set forth above. Additional
updating information with respect to the Company may be provided in the future
by means of appendices or supplements to this Prospectus.
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THE COMPANY
The Company was incorporated in Delaware on August 14, 1985, under the
name MicroProbe Corporation and changed its name in December 1995 to Epoch
Pharmaceuticals, Inc. Its principal office is located at 1725 220th Street,
No. 104, Bothell, Washington 98021. Its telephone number is (206) 485-8566.
RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. An investment in
the Common Stock offered hereby is speculative in nature and involves a high
degree of risk. No investment in the Common Stock should be made by any person
who is not in a position to lose the entire amount of such investment.
The statements contained in this Prospectus that are not purely
historical are forward looking statements, including statements regarding the
Company's expectations or intentions regarding the future. Actual results
could differ materially from those discussed in the forward-looking statements.
Among the factors that could cause actual results to differ materially are
those discussed below.
LIMITED OPERATING HISTORY, EXPECTATION OF FUTURE LOSSES AND WORKING CAPITAL
DEFICIT
The Company was organized in 1985 and to date has generated limited
revenues from the sale of diagnostic products and from research and development
grants and has realized no revenues from sales of therapeutic products. The
Company has sold substantially all of its diagnostic products assets. From its
inception through September 30, 1996, the Company has incurred a cumulative
deficit of approximately $47.4 million. The Company expects to incur additional
losses as it expands its research and development efforts, and there can be no
assurance that the Company will ever achieve profitability. As of September 30,
1996, the Company had working capital of $4.5 million and will need additional
funding to continue its research and development activities. See "Future
Capital Needs and Uncertainty of Additional Funding." There also can be no
assurance that the Company will not encounter substantial delays and unexpected
expenses related to research, development, production and marketing or other
unforeseen difficulties.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company has expended, and will continue to expend in the future,
substantial funds to complete the research and development of its therapeutic
products, all of which are in the discovery or early development stage. Based
on its currently planned programs, the Company anticipates that its financial
resources should be adequate to satisfy its capital and operating requirements
for 15 months from September 30, 1996. The Company anticipates that it will
seek additional funding through public or private sales of its securities,
including equity securities, and through collaborative or other arrangements
with corporate partners. Adequate funds, whether through financial markets or
collaborative or other arrangements with corporate partners or from other
sources, may not be available when needed or on terms acceptable to the Company.
Insufficient funds may require the Company to delay, scale back or eliminate
certain or all of its research and development programs or to license third
parties to commercialize products or technologies that the Company would
otherwise seek to develop itself.
TECHNOLOGICAL UNCERTAINTY AND EARLY STAGE OF PRODUCT DEVELOPMENT
The science and technology of oligonucleotide-based products is
rapidly evolving. The Company's proposed therapeutic products are in the
discovery or early development stage. The proposed therapeutic products will
require significant further research, development, testing and regulatory
clearances and are subject to the risks of failure inherent in the development
of products based on
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innovative technologies. These risks include the possibility that any or all
of the proposed products are found to be ineffective or unsafe, or otherwise
fail to receive necessary regulatory clearances, that the proposed products,
although effective, are uneconomical to market, that third parties hold
proprietary rights that preclude the Company from marketing them, or that third
parties market a superior or equivalent product. Accordingly, the Company is
unable to predict whether its research and development activities will result
in any additional commercially viable products.
DEPENDENCE ON THIRD PARTIES FOR CLINICAL TESTING, MANUFACTURING AND MARKETING
The Company does not have the resources, and does not presently
intend, to conduct human clinical trials or manufacture any of its proposed
products. The Company is seeking corporate partners to conduct such activities
for its proposed products. There is no assurance that the Company will be able
to enter into any such arrangements on this or any other basis. In the event
the Company is unable to arrange third party clinical testing, manufacturing
and distribution for proposed products, it may not be able to commercialize it
products.
PATENT AND PROPRIETARY TECHNOLOGY DISPUTES
The patent position of a biomedical company may involve complex legal
and factual issues. As of September 30, 1996, the Company has three issued U.S.
patents, one allowed U.S. patent and ten pending U.S. patent applications.
There are international patent applications corresponding to many of the U.S.
patents and patent applications. The Company also has an exclusive worldwide
license from Yale University for one application owned jointly by the Company
and Yale University. The Company has an exclusive, worldwide license for one
issued U.S. patent owned by Virginia Mason Research Center ("VMRC"), Seattle
Washington. There can be no assurance that issued patents will provide
significant proprietary protection, that pending patents will be issued, or
that products incorporating the technology in issued patents or pending
applications will be free of challenge from competitors.
The biomedical industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. The Company was a
defendant in one such action which has been settled. Although patent and
intellectual property disputes in the biomedical area have often been settled
through licensing or similar arrangements, costs associated with such
arrangements may be substantial and there can be no assurance that necessary
licenses would be available to the Company on satisfactory terms or at all.
Accordingly, an adverse determination in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent the Company
from manufacturing and selling its products, which would have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION AND TECHNOLOGICAL CHANGE
Many companies are engaged in research and development on gene therapy
and oligonucleotide-based therapeutic products, including many which are
substantially more advanced in their development activities. Many of these
companies have substantially greater capital resources, larger research and
development and marketing staffs and facilities and greater experience in
developing products, conducting clinical trials and obtaining regulatory
approval than the Company. Furthermore, the field in which the Company
operates is subject to significant and rapid technological change.
Accordingly, even if the Company's products or proposed products can be
successfully introduced, there can be no assurance that the Company's
technologies will not be replaced by new technologies or that products or
proposed products of the Company will not be rendered obsolete or
non-competitive.
LIMITED MANUFACTURING AND MARKETING CAPABILITY
The Company has no experience in manufacturing and marketing
therapeutic products and expects that it will require one or more corporate
partners with significantly greater resources and experience to market such
therapeutic products. There is no assurance that the Company will be able to
enter into such arrangements on favorable terms or at all.
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UNCERTAIN MARKET ACCEPTANCE
The Company's therapeutics research program is in a very early stage
and is not expected to develop commercial products for many years, if at all.
There can be no assurance that the Company's therapeutic products will be
accepted by the market at that time.
GOVERNMENT REGULATION
The development, testing, manufacturing and marketing of the Company's
products in the United States are regulated by the U.S. Food and Drug
Administration ("FDA"), which generally requires governmental clearance of such
products before they are marketed. The process of obtaining FDA and other
required regulatory approvals is lengthy, expensive and uncertain. Moreover,
regulatory approval, if granted, may include significant limitations on the
indicated uses for which a product may be marketed. Failure to comply with
applicable regulatory requirements can result in, among other things, fines,
suspensions of approvals, product seizures, injunctions, recalls of products,
operating restrictions and criminal prosecutions. The Company's proposed
therapeutic products will be subject to a lengthy regulatory process, including
pre-clinical studies, clinical trials and extensive FDA review, which generally
takes many years and requires the expenditure of substantial resources. Delays
in receipt of or failure to receive clearances to commence clinical studies or
to market products, or loss of previously received clearances, would adversely
affect the marketing of the Company's proposed products and the results of
future operations. Commercial distribution in most foreign countries also is
subject to varying government regulations. In addition, federal, state and
international government regulations regarding the manufacture and sale of
health care products and are subject to future change, and additional
regulations may be adopted which may prevent the Company from obtaining, or
affect the timing of, future regulatory clearances and may adversely affect the
Company.
TERMINABLE LICENSE AND COLLABORATIVE AGREEMENTS
Certain of the Company's licenses are terminable if the Company does
not make certain minimum annual payments, meet certain milestones or diligently
seek to commercialize the underlying technology. In addition, the Company's
related collaborative and consulting agreements are generally terminable upon
30 to 60 days written notice.
LACK OF FULL-TIME CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER
Fred Craves currently serves as the Company's Chief Executive Officer,
and Sanford S. Zweifach currently serves as the Company's President and Chief
Financial Officer. Such officers, however, currently serve in their respective
positions on a part-time basis. Although they devote a substantial portion of
their time to the Company, they also devote substantial portions of their time
to their positions at other entities.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon its key management and technical
personnel and consultants, and its future success will depend partially upon
its ability to retain these persons and to recruit additional qualified
personnel. The Company must compete with other companies, universities,
research entities and other organizations in order to attract and retain highly
qualified personnel. Although the Company has entered into employment
agreements with its key executive officers, there can be no assurance that the
Company will be able to retain such highly qualified personnel or hire
additional qualified personnel. The Company currently does not maintain key
man insurance on any of its management or technical personnel.
NO EXCHANGE OR NASDAQ LISTING; PENNY STOCK RESTRICTIONS
The Company's Common Stock is not listed on any exchange or Nasdaq
System. The Company's Common Stock is reported on the OTC Bulletin Board.
Because the Company's shares are not listed on the Nasdaq System, they are
subject to the regulations regarding trading in penny stocks (i.e.
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those securities trading for less than $5.00 per share). The following is a
list of the restrictions on the sale of penny stocks.
1. Prior to the sale of a penny stock by a broker-dealer to a new
purchaser, the broker-dealer must make a determination as to
whether the purchaser is suitable to invest in penny stocks.
To make that determination, a broker-dealer must obtain, from
a prospective investor, information regarding the purchaser's
financial condition and investment experience and objectives.
Subsequently, the broker-dealer must furnish the purchaser
with a written statement setting forth the basis of the
suitability finding.
2. A broker-dealer must obtain from the purchaser a written
agreement to purchase the security. This agreement must be
obtained for every purchase until the purchaser becomes an
"established customer."
3. The Securities Exchange Act requires that prior to effecting
any transaction in any penny stock, a broker-dealer must
provide the purchaser with a "risk disclosure document" that
contains, among other things, a description of the penny stock
market and how it functions and the risks associated with such
investments. These disclosure rules are applicable to both
purchases and sales by investors.
4. A dealer that has sold a customer a penny stock security must
send that customer within ten days after the end of each
calendar month a written account statement including
prescribed information relating to the security.
As a result of the lack of listing of the Company's securities on an
exchange or the Nasdaq System and the rules regarding transactions in penny
stocks, the liquidity and salability of the Company's securities may be
substantially impaired. There is no assurance that the Company's current
market-makers will continue to make a market in the Company's securities, or
that any market for the Company's securities will continue.
FEDERAL AND STATE REGISTRATION REQUIREMENTS; POSSIBLE INABILITY TO EXERCISE
WARRANTS
Holders of Public Warrants will have the right to exercise the Public
Warrants only if a Registration Statement relating to the shares underlying the
Public Warrants is then in effect and only if such shares are qualified for sale
under applicable state securities laws of the states in which the various
holders of the Public Warrants reside. There can be no assurance that the
Company will be able to keep the Registration Statement of which this Prospectus
forms a part or any other registration statement covering such shares effective.
There can also be no assurance that such shares will be registered in the states
in which holders of the Public Warrants reside. See "Description of Securities
- - Warrants."
POSSIBLE REDEMPTION OF PUBLIC WARRANTS
The Public Warrants may be redeemed by the Company, in whole but not
in part, under certain circumstances upon 30 days' prior written notice at a
price of $.05 per warrant. Although the holders of Public Warrants have the
right to exercise their Public Warrants during the 30 days prior to the date of
redemption set by the Company, a holder may be unable (for financial or other
reasons) to exercise the Public Warrants at the time such holder received notice
of redemption. The Public Warrants will have no value except for the redemption
price upon the close of business on the date of redemption. See "Description of
Securities - Warrants."
NO DIVIDENDS AND NONE ANTICIPATED
The Company has not paid any dividends on its Common Stock since its
inception and does not contemplate or anticipate paying any dividends upon its
Common Stock in the foreseeable future. It is currently anticipated that
earnings, if any, will be used to finance the development and expansion of the
Company's business.
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MARKET VOLATILITY
The market price of the Company's Common Stock may be highly volatile.
The securities of biotechnology companies have experienced extreme price and
volume fluctuations, which have often been unrelated to the companies'
operating performance. Announcements of technological innovations for new
commercial products by the Company or its competitors, developments concerning
proprietary rights or governmental regulation or general conditions in the
biotechnology industry may have a significant effect on the Company's business
and on the market price of the Company's securities. Sales of a substantial
number of shares of Common Stock by existing security holders could also have
an adverse effect on the market price of the Company's securities.
SHARES AVAILABLE FOR RESALE; REGISTRATION RIGHTS; POSSIBLE DILUTIVE EFFECT OF
OUTSTANDING OPTIONS AND WARRANTS
Sales of substantial numbers of the Company's Common Stock in the
public market could adversely effect the market price of the Common Stock. As
of November 4, 1996, the Company had 14,723,856 shares of Common Stock
outstanding, 8,600,023 shares of stock issuable upon exercise of outstanding
warrants and an additional 1,305,139 shares of stock issuable upon exercise of
outstanding options. Of the outstanding shares and shares issuable upon
exercise of warrants and options, substantially all are freely tradable without
restriction under the Securities Act of 1933, as amended (the "Securities Act")
or registered for resale under a registration statement filed by the Company on
September 25, 1996. Such registration statement covered the resale of 5,000,000
shares sold by the Company in a private placement in June 1996 and an additional
2,500,000 shares issuable upon exercise of warrants sold in that private
placement. Upon effectiveness of such registration statement, those 7,500,000
shares shall also be freely tradable. In addition, holders of shares of
outstanding Common Stock and Warrants to purchase other shares of Common Stock
who are eligible have requested inclusion in such registration statement. Shares
issued upon the exercise of stock options under the Company's stock option plans
are also generally freely tradable without restriction. As a result,
substantially all of the Company's Common Stock outstanding and issuable upon
the exercise of warrants and options will be freely tradable by the holders
thereof. To the extent the Public Warrants are exchanged for Exchange Warrants,
fewer shares of Common Stock would be freely tradeable. If holders cause a
large number of shares to be sold in the public market, such sales may have a
material adverse effect on the market price of the Common Stock.
USE OF PROCEEDS
Holders of the Public Warrants are not obligated to exercise their
Public Warrants, and there can be no assurance that the Public Warrant holders
will choose to exercise all or any of the Public Warrants. In the event all of
the outstanding Public Warrants are exercised, the net proceeds to the Company
would be $17,753,125, after deducting the warrant solicitation fee and excluding
other expenses associated with the offering. To the extent that holders
exchange the Public Warrants for Exchange Warrants, and such Exchange Warrants
are exercised, the Company will receive approximately $3,500,000 in proceeds.
The Company anticipates any proceeds received upon exercise of the Public
Warrants or Exchange Warrants will be used to fund research and development
activities related to the Company's oligonucleotide therapeutic compounds.
DETERMINATION OF OFFERING PRICE
The exercise price of the Public Warrants was established by the
Company and its underwriters at the time of public offering of the Public
Warrants in September 1993. The exercise price of the Exchange Warrants was
established by the Company in order to make them equivalent with the warrants
that were issued in the June 1996 private offering of Units where the exercise
price is $2.50 per share.
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DESCRIPTION OF SECURITIES
GENERAL
The Company's authorized capital stock consists of 30,000,000 shares
of Common Stock, $.01 par value per share and 10,000,000 shares of Preferred
Stock with such rights as the Board may determine. As of November 4, 1996,
there were 14,723,856 shares of Common Stock outstanding held of record by 233
stockholders and 2,875,000 Public Warrants, held of record by 233 Public Warrant
holders.
COMMON STOCK
The holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available therefor at such times and in
such amounts as the Board of Directors may, from time to time, determine. Each
stockholder is entitled to one vote for each share of Common Stock held and
there is no cumulative voting in the election of directors. The Common Stock
is not entitled to preemptive rights and is not subject to redemption or
conversion. Upon liquidation, dissolution or winding-up of the Company, the
assets legally available for distribution to stockholders are distributable
ratably among the holders of the Common Stock after payment of other claims of
creditors. All outstanding shares of Common Stock are, and the shares of
Common Stock to be issued pursuant to this offering will be, validly issued,
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors will have authority to issue up to 10,000,000
shares of Preferred Stock, $0.01 par value, and to fix the rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any future vote or action by the stockholders. The rights of the holders of the
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of the
Company, thereby delaying, deferring or preventing a change in control of the
Company. Furthermore, such Preferred Stock may have other rights, including
economic rights senior to the Common Stock, and, as a result, the issuance
thereof could have a material adverse effect on the market value of the Common
Stock. The Company has no present plans to issue shares of Preferred Stock.
PUBLIC WARRANTS
The Public Warrants were issued pursuant to an agreement, dated as of
September 29, 1993, and amended June 21, 1996 (the "Warrant Agreement"), between
the Company and American Stock Transfer & Trust Company, as warrant agent (the
"Warrant Agent"). The following discussion of the material terms and provisions
of the Public Warrants is qualified in its entirety by reference to the detailed
provisions of the Warrant Agreement, the form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each Public Warrant entitles the holder to purchase at any time until
September 29, 1998, one share of Common Stock at an exercise price of $6.50,
subject to certain adjustments. In June 1996, the Company announced that it
intends to exchange for every two Public Warrants, one Exchange Warrant. The
exercise price of the Public Warrants and the number of shares of Common Stock
underlying such Public Warrants are subject to adjustment for stock splits,
stock dividends and similar events. The Public Warrants do not contain
anti-dilution provisions relating to issuances or sales of
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Common Stock at prices below the exercise price or the then prevailing market
price of the Common Stock. The Public Warrants may be exercised in whole or
in part.
The Company may redeem the Public Warrants, in whole but not in part,
at the option of the Company upon not less than 30 days' nor more than 60 days'
notice at a price of $.05 per warrant, providing the market price of the
Company's Common Stock has been at least 140% of the then effective exercise
price of the Public Warrants for 30 consecutive business days ending within 15
days of the date of the notice of redemption. For purposes of redemption of the
Public Warrants, the market price of a share of Common Stock on any date is the
last sale price (or highest reported bid price if the stock is not traded on a
national securities exchange or the Nasdaq National Market) on such date.
The Company presently anticipates that the Exchange Warrants would be
redeemable, in whole but not in part, at the option of the Company upon not less
than 30 days' nor more than 60 days' notice at any time after 18 months from the
date that they are issued, at a price of $.05 per warrant, providing the market
price of the Company's Common Stock would have been at least 140% of the then
effective exercise price of the Exchange Warrants for 20 consecutive business
days ending within 15 days of the date of the notice of redemption. For
purposes of redemption of the Exchange Warrants, the market price of a share of
Common Stock on any date is the last sale price (or highest reported bid price
if the stock is not traded on a national securities exchange or the Nasdaq
National Market) on such date.
The Company presently anticipates that, in the event the Company
exercises its right to redeem the Exchange Warrants, such Exchange Warrants will
be exercisable until the close of business on the date fixed for redemption in
such notice. If any Exchange Warrant called for redemption is not exercised by
such time, it would cease to be exercisable and the holder thereof will be
entitled only to the redemption price.
For a holder to exercise the Public Warrants or the Exchange Warrants,
there must be a current registration statement in effect with the Commission and
qualification with or approval from various state securities agencies with
respect to the shares or other securities underlying the Public Warrants or the
Exchange Warrants, or an opinion of counsel for the Company that there is an
exemption from registration or qualification. As long as the Public Warrants or
the Exchange Warrants remain outstanding and exercisable, the Company is
required to maintain an effective registration statement with respect to the
shares issuable on exercise of such warrants. There can be no assurance,
however, that such registration statement can be kept current. If a
registration statement covering such shares of Common Stock is not kept current
for any reason, or if the shares underlying the warrants are not registered in
the state in which a holder resides, the warrants will not be exercisable and
the value thereof will be impaired.
OTHER WARRANTS
As of September 30, 1996, there were other warrants outstanding to
purchase an aggregate of 4,825,023 shares of Common Stock at exercise prices
ranging from $0.30 to $10.40 per share.
REGISTRATION RIGHTS
The Company is obligated to keep the Registration Statement, of which
this Prospectus is a part, effective during the period of the exercisability of
the Public Warrants, or until September 29, 1998. The Company is also obligated
to file and maintain the effectiveness of a Registration Statement on Form SB-2
covering an aggregate of 10,428,365 shares of Common Stock, including shares
issuable upon exercise of warrants until September 21, 1999 or the date on which
all shares may be sold without volume limitations under Rule 144.
9
<PAGE> 11
These registration rights could result in substantial future expense
to the Company and could adversely affect any future equity or debt financing.
Furthermore, the registration and sale of Common Stock of the Company held by
or issuable to the holders of registration rights, or even the potential of
such sales, could have an adverse effect on the market price of the securities
offered hereby.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The stock transfer agent, registrar and warrant agent for the Common
Stock and the Company's Public Warrants is American Stock Transfer & Trust
Company.
PLAN OF DISTRIBUTION
The Common Stock offered hereby will be issued to the holders of the
Public Warrants and/or the Exchange Warrants upon exercise of the Warrants at
the option of the holders thereof, in accordance with the terms of such
warrants. See "Description of Securities."
Upon the exercise of any warrant, to the extent not inconsistent with
the guidelines of the NASD and the rules and regulations of the Commission, the
Company has agreed to pay to any NASD member who solicits the exercise of any
of the warrants a fee of 5% of the exercise price of such warrant if (i) the
market price of the Company's Common Stock is greater than the exercise price
of such warrant on the date of exercise; (ii) such warrant is not held in a
discretionary account; and (iii) the solicitation of such warrant was not in
violation of Rule 10b-6 promulgated under the Securities Exchange Act of 1934,
as amended.
EXPERTS
The financial statements of Epoch Pharmaceuticals, Inc. as of
December 31, 1995 and for each of the years in the two-year period ended
December 31, 1995 have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP refers to a change in the method
of accounting for marketable debt and equity securities effective January 1,
1994.
The report of KPMG Peat Marwick LLP dated February 29, 1996 contains
an explanatory paragraph that states that the Company has suffered recurring
losses from continuing operations which raises substantial doubt about its
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of that uncertainty.
LIMITATION ON LIABILITY AND DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The by-laws of the Company provide for indemnification of the
Company's directors and officers to the fullest extent permitted by law.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of the Company pursuant
to the Company's Certificate of Incorporation, as amended, by-laws and the
Delaware General Corporation Law (the "DGCL"), the Company has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in such Act and is therefore unenforceable.
10
<PAGE> 12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Exchange Act and are incorporated by reference herein:
a. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995, filed with the Commission on April
11, 1996.
b. The Company's Quarterly Reports on Form 10-QSB for the quarter
ended March 31, 1996, filed with the Commission on May 10,
1996, for the quarter ended June 30, 1996, filed with the
Commission on August 13, 1996 and for the quarter ended
September 30, 1996, filed with the Commission on November 14,
1996.
c. The Company's Current Reports on Form 8-K filed July 5, 1996.
d. The Company's Proxy Statement and Supplement to Proxy
Statement for its Annual Meeting filed August 30, 1996, and
September 16, 1996, respectively.
e. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed under the
Exchange Act, including any amendment or report filed for the
purpose of updating such description.
f. All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since the end of the
Company's fiscal year ended December 31, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing such documents.
Any statement contained in a 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 that also is or is deemed
to be incorporated by reference herein, modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a
copy of this Prospectus is delivered, upon written or oral request of such
person, a copy of any and all of the information that has been or may be
incorporated by reference herein (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Such requests should be directed to Epoch Pharmaceuticals, Inc., Attention:
Sanford S. Zweifach, 1725 220th Street, S.E., No. 104, Bothell, Washington
98021, telephone number (206) 485-8566.
The Company is not required to deliver an annual report to its
stockholders; however, prior to the Company's 1996 annual meeting of
stockholders, the Company distributed its Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, including audited financial statements,
to its stockholders.
11
<PAGE> 13
================================================================================
2,875,000 SHARES
EPOCH PHARMACEUTICALS, INC.
COMMON STOCK
__________________
PROSPECTUS
__________________
December 9, 1996
================================================================================
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
- -----------------------------------------------------
The following sets forth the costs and expenses, all of which shall be
borne by the Company, in connection with the offering of the shares of Common
Stock pursuant to this Registration Statement:
<TABLE>
<S> <C>
Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,187.50(1)
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . $ 15,000(2)
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000(2)
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,812.50(2)
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,000
</TABLE>
(1) Previously paid
(2) Estimated
Item 15. Indemnification of Directors and Officers.
- ----------------------------------------------------
The by-laws of the Company provide for indemnification of the
Company's directors and officers to the fullest extent permitted by law.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of the Company pursuant
to the Company's Certificate of Incorporation, as amended, by-laws and the
Delaware General Corporation Law (the "DGCL"), the Company has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in such Act and is therefore unenforceable.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may include a provision which eliminates or limits the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL, relating to prohibited dividends or distributions or the
repurchase or redemption of stock or (iv) for any transaction from which the
director derives an improper personal benefit. The Company's Certificate of
Incorporation includes such a provision. As a result of this provision, the
Company and its stockholders may be unable to obtain monetary damages from a
director for breach of his or her duty of care.
Item 16. Exhibits.
- -------------------
4. Warrant Agreement between the Company and American Stock
Transfer and Trust Company dated September 29, 1993.
(Incorporated by reference to Exhibit 4.1 of Amendment No. 3
to Registration Statement on Form SB-2 filed September 28,
1993)
5. Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation.*
23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation (included in Exhibit 5).*
II-1
<PAGE> 15
23.2 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on the signature page to the
Registration Statement - see page II-3). *
* Previously filed
Item 17. Undertakings.
- -----------------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or
sells securities, a post-effective amendment to this
registration statement to:
(iii) Include any additional or changed information
on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be deemed the initial bona fide
offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the
end of the offering.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer 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 small business issuer 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 Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 16
SIGNATURES
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
amendment to registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bothell, State of
Washington, on the 9th day of December, 1996.
EPOCH PHARMACEUTICALS, INC.
By: /s/ SANFORD S. ZWEIFACH
-------------------------------------
Sanford S. Zweifach
President and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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/ FRED CRAVES Chairman of the Board of Directors December 9, 1996
- ----------------------------- and Chief Executive Officer
Fred Craves
/s/ SANFORD S. ZWEIFACH President, Chief Financial December 9, 1996
- ----------------------------- Officer (Chief Accounting Officer)
Sanford Zweifach and Director
* /s/ KENNETH L. MELMON, M.D. Director December 9, 1996
- -----------------------------
Kenneth L. Melmon, M.D.
* /s/ GREGORY SESSLER Director December 9, 1996
- -----------------------------
Gregory Sessler
* By: Sanford S. Zweifach
------------------------
As Attorney-In-Fact
</TABLE>
II-3
<PAGE> 17
<TABLE>
<S> <C> <C>
/s/ ROY PAGE, PH.D., D.D.S. Director December 9, 1996
- ---------------------------
Roy Page, Ph.D., D.D.S.
/s/ GREGORY SESSLER Director December 9, 1996
- --------------------------
Gregory Sessler
</TABLE>
II-4
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
------ ----------- -----------
<S> <C> <C>
4. Warrant Agreement between the Company and American Stock Transfer and
Trust Company dated September 29, 1993. (Incorporated by reference to
Exhibit 4.1 of Amendment No. 3 to Registration Statement on Form SB-2
filed September 28, 1993.)
5. Opinion of Stradling, Yocca, Carlson & Rauth, a Professional Corporation.*
Consent of Stradling, Yocca, Carlson & Rauth, a Professional Corporation
23.1 (Included in Exhibit 5).*
23.2 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney.*
</TABLE>
* Previously filed
II-5
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
The Board of Directors
Epoch Pharmaceuticals, Inc.:
We consent to the use of our report incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.
Our report refers to a change in the method of accounting for marketable debt
and equity securities effective January 1, 1994.
Our report dated February 29, 1996 contains an explanatory paragraph that
states that the Company has suffered recurring losses from continuing
operations which raises substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of that uncertainty.
KPMG Peat Marwick LLP
Seattle, Washington
December 9, 1996
