<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 1998
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- --------------------------------------------------------------------------------
REGISTRATION NO. 333-40665
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
-------------------
AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------
VYREX CORPORATION
(Exact Name of Registrant as specified in its charter)
NEVADA 88-0271109 88-0271109
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2159 AVENIDA DE LA PLAYA
LA JOLLA, CALIFORNIA 92037
TEL (619) 454-4446 / FAX (619) 459-9522
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------
CORPORATION TRUST COMPANY OF NEVADA
ONE EAST FIRST STREET, RENO, NEVADA 89501, (702) 688-3061
(Name, address and telephone number of agent for service)
-------------------
COPIES TO:
FISHER THURBER, LLP
DAVID A. FISHER
TIMOTHY J. FITZPATRICK
4225 EXECUTIVE SQUARE
LA JOLLA, CALIFORNIA 92037-1483
TEL (619) 535-9400 / FAX (619) 535-1616
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement has become
effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. / /
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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- ----------------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price per Aggregate Registration
Securities to be Registered Registered (1) Share Offering Price(2) Fee
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<S> <C> <C> <C> <C>
Common Stock Underlying
IPO Warrants(3) 1,057,097 $ 8.00 $8,456,776 $2,562.66
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Common Stock Underlying
Private Warrants(4) 82,604 $ 8.00 $ 660,832 $ 200.25
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Common Stock Underlying
Convertible Debentures(5) 282,329 $ 6.50 $1,835,836 $ 556.31
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock Underlying
Debenture Warrants(6) 17,000 $ 8.38 $142,460 $ 43.17
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Common Stock Underlying
Underwriter's Purchase Options(7) 100,000 $8.97 $897,000 $ 271.82
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock Underlying
Underwriter's Warrants(8) 100,000 $10.89 $1,089,000 $ 330.00
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Common Stock
Placement Agent Shares(9) 8,000 $6.50 $52,000 $ 15.76
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Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,979.97
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</TABLE>
(1) Pursuant to Rule 416 under the Securities Act of 1933 (the "Act"), this
Registration Statement covers such additional indeterminate number of
shares of Common Stock and Warrants as may be issued by reason of
adjustments in the number of shares of Common Stock and Warrants pursuant
to anti-dilution provisions contained in the Warrants and Debentures.
Because such additional shares of Common Stock and Warrants will, if
issued, be issued for no additional consideration, no additional
registration fee is required.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) Previously Registered Common Stock underlying previously registered and
outstanding warrants issued pursuant to the Registration Statement on Form
SB-2 (File No. 33-99880) filed by the registrant in connection with the
initial public offering of its securities.
(4) Common Stock underlying outstanding warrants issued in private placements
prior to or in connection with the registrant's initial public offering of
its securities.
(5) Common Stock underlying convertible debentures issued by the registrant on
November 6, 1997. The principal and interest due on the convertible
debentures may be converted to Common Stock at a discount to the market
price of the registrant's Common Stock on the date of conversion. The
discount is determined by the holding period of the converting debenture
holder. The amount to be registered is estimated to include the number of
shares required to fulfill such conversion rights based upon potential
fluctuations in such market prices. The proposed offering price of shares
issued upon conversion of debentures is calculated on the basis of the
closing price for the registrant's Common Stock as reported on The Nasdaq
SmallCap Market on November 17, 1997 of $6.50 which date is within five
business days prior to the date of filing of this Registration Statement.
(6) Common Stock underlying warrants issued to purchasers of convertible
debentures of the registrant. The debenture warrants are not registered
herein. The debenture warrants are exercisable over a three-year period
commencing on the date of issuance at the lesser of: (i) $8.38 (125% of the
market price of the registrant Common Stock on the date of issuance,) or
(ii) 125% of the market price of the registrant Common Stock on the
effective date of this Registration Statement. The proposed offering price
assumes debenture warrants are exercised at a price of $8.38 (125% trading
price of registrant's Common Stock on the date of issuance.
(7) Common Stock underlying non-transferable options issued to the underwriter
of the initial public offering of the registrant's securities and certain
of the underwriter's partners and employees. The underwriter's purchase
options entitle the holders to purchase 100,000 units at $8.97 per Unit.
The Common Stock and warrants included in the units underlying the
underwriter's purchase options may only be purchased together. The
underwriter's purchase options are exercisable over a four-year period
ending March 26, 2001.
(8) Common Stock underlying warrants included in the units underlying unit
purchase options issued to the underwriter of the initial public offering
of the registrant's securities and certain of the underwriter's partners
and employees. The underwriter's warrants are not registered herein. The
underwriter's warrants are substantially identical to the warrants
registered pursuant to the initial public offering of the registrant's
securities except they may be exercised for $10.89 per share.
(9) Common Stock issued to the placement agent of certain convertible
debentures issued by the registrant on November 6, 1997 in consideration of
services rendered. The placement agent shares are being registered for
resale by the holder. Proposed offering price of placement agent shares is
calculated using an assumed $6.50 market price for Company's Common Stock.
<PAGE>
Subject to completion dated January 14, 1998
PROSPECTUS
VYREX CORPORATION
1,057,097 Previously Registered Shares of Common Stock
589,933 Shares of Common Stock Offered by
Certain Selling Security Holders
This prospectus (the "Prospectus") relates to the public offering,
which is not being underwritten, of 1,057,097 previously registered
shares (the "IPO Warrant Shares") underlying outstanding warrants (the
"IPO Warrants") included in the units (the "Units") offered pursuant to
the initial public offering (the "Unit Offering") of the Common Stock,
par value $0.001 per share (the "Common Stock"), of Vyrex Corporation, a
Nevada corporation ("Vyrex" or the "Company"). This Prospectus also
relates to the public offering, which is not being underwritten, and the
resale by the holders of: (i) 100,000 shares of Common Stock included in
the units underlying unit purchase options ("UPOs") issued to the
underwriter of the Unit Offering and certain of its partners and
employees (the "Underwriter's Shares"), (ii) 100,000 shares of Common
Stock (the "Underwriter's Warrant Shares") underlying the warrants (the
"Underwriter's Warrants") included in the units underlying the UPOs, and
(iii) 82,604 shares of Common Stock (the "Private Warrant Shares")
underlying warrants issued prior to or in connection with the Unit
Offering, ("Private Warrants"). The IPO Warrants, the UPOs, the
Underwriter's Warrants and the Private Warrants are herein referred to as
the "Existing Warrants". This Prospectus also relates to the Public
Offering, which is not being underwritten, and the resale by the holders
of an aggregate of 307,329 shares of Common Stock (collectively, the "New
Shares"), consisting of (i) up to 282,329 shares of Common Stock (the
"Debenture Shares") issuable upon conversion of certain outstanding
debentures (the "Debentures"), (ii) up to 17,000 shares of Common Stock
(the "Debenture Warrant Shares") issuable upon exercise of outstanding
warrants to purchase Common Stock issued in connection with the issuance
of the Debentures (the "Debenture Warrants"), and (iii) 8,000 shares of
Common Stock (the "Placement Agent Shares") issued to the placement agent
for the Company in connection with the issuance of the Debentures (the
"Placement Agent"). The Company has the right to accelerate the
expiration of the IPO Warrants following at least 30 days' prior notice
provided the closing price of the Company's Common Stock on the Nasdaq
Stock Market equals or exceeds $10.00 per share for 10 consecutive
trading days ending within the 30 days prior to the date the notice of
acceleration is given, and at such time as there is a current effective
registration statement covering the IPO Warrant Shares. The Company has
the right to accelerate the expiration of certain of the Private Warrants
if the Common Stock of the Company publicly trades for $12.00 per share
for 20 out of 30 consecutive trading days after certain notice
requirements are met. The Existing Warrants and the Debenture Warrants
are herein referred to as the "Warrants." The Company has the right to
reduce the exercise price and/or extend the term of the Warrants. The
IPO Warrant Shares, the Underwriter's Shares, the Underwriter's Warrant
Shares, the Private Warrant Shares, the Debenture Shares, the Debenture
Warrant Shares, and the Placement Agent Shares are collectively referred
to as the "Securities."
CONTINUED ON FOLLOWING PAGE
THE SECURITIES OFFERED ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE
PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" STARTING ON PAGE ___.
-------------------
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
NOR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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Underwriting Proceeds to
Discounts and Proceeds to Selling
Price to Public (1) Commissions (2) Company(3)(4) Shareholders(4)
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<S> <C> <C> <C> <C>
Per Share $8.00 $0.00 $8.00 $8.00
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TOTAL 1,647,030 $0.00 $8,456,776 $4,663,464
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NOTES ON FOLLOWING PAGE
</TABLE>
The date of this prospectus is January 14, 1998
<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457 under the Securities Act, based upon
$6.50 per Share sale price of the Registrant's Common Stock as
reported by Nasdaq on November 17, 1997.
(2) Excludes the Placement Agent Shares and commissions previously paid
to the Placement Agent and underwriters upon issuance of the
Existing Warrants, and the Debentures. This Prospectus also relates
to the indeterminate number of shares of Common Stock which may be
issued upon conversion of the Debentures on a date when market
prices for the Common Stock may be lower than upon the date of this
Prospectus.
(3) Before deducting expenses of the offering payable by the Company,
estimated to be $35,000.
(4) Assumes (i) exercise of all IPO Warrants and sale by the Company of
1,057,097 underlying shares of Common Stock at an exercise price of
the IPO Warrants of $8.00 per share, and (ii) exercise of all other
outstanding warrants, and conversion of principal of $1,000,000 and
all interest on outstanding Debentures and subsequent sale by
Selling Security Holders of 582,933 received therefrom at average of
exercise and conversion prices therefore of approximately $8.00 per
share.
CONTINUED FROM COVER PAGE
The Placement Agent Shares and, upon issuance, the New Shares, will be
held by certain Debenture holders, warrant holders or stockholders of the
Company or by pledgees, donees, transferees or other successors in
interest that receive such shares as a gift, partnership distribution or
other non-sale related transfer (the "Selling Security Holders"). The
Private Warrants, and the Placement Agent Shares, were received by
certain Selling Security Holders in private placement transactions of the
Company, and were issued pursuant to certain exemptions from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 3(b) and 4(2) thereof. The
Securities are being registered by the Company pursuant to registration
covenants or registration rights agreements made to or existing with the
holders thereof. See "Description of Securities" and "Plan of
Distribution."
The Securities other than the Placement Agent Shares which have been
issued will be issued by the Company and are offered hereby to those
parties holding the Warrants and the Debentures. The Securities may be
offered for resale by the Selling Security Holders from time to time in
transactions on The Nasdaq SmallCap Market tier of the Nasdaq Stock
Market ("Nasdaq"), in privately negotiated transactions, or by 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 Securities
may be sold by the Selling Security Holders through one or more of the
following: (a) a block trade in which the broker or dealer so engaged
will attempt to sell the Securities as agent but may position and resell
a portion of the block as principal to facilitate the transaction, (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus, and (c) ordinary
brokerage transactions and transactions in which the broker solicits
purchases. The Selling Security Holders may effect such transactions by
selling the Securities to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Security Holders or the
purchasers of the Securities from 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).
In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 promulgated under
the Securities Act rather than pursuant to this Prospectus.
The Company will not receive any of the proceeds from the sale of
the New Shares or the Placement Agent Shares by the Selling Security
Holders, although the Company will receive proceeds from the exercise of
the Existing Warrants and the Debenture Warrants. The Company has agreed
to bear certain expenses in connection with the registration and sale of
the Securities being offered by certain of the Selling Security Holders
and to indemnify certain Selling Security Holders against certain
liabilities, including liabilities under the Securities Act. See "Plan
of Distribution."
ii
<PAGE>
The Common Stock and IPO Warrants of the Company are traded on
Nasdaq under the symbols "VYRX" and "VRYXW", respectively. On November
17, 1997, the last sale prices for the Common Stock and IPO Warrants as
quoted on Nasdaq were $6.50 and $1.75, respectively.
The Selling Security Holders and any broker-dealers or agents that
participate with the Selling Security Holders in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any commissions or discounts received by
them and any profits on the resale of the Selling Security Holders' shares,
may be deemed to be underwriting commissions or discounts under the
Securities Act. Under applicable rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), any person
engaged in a distribution of securities may not simultaneously bid for or
purchase securities of the same class for a period of two (2) business days
prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Security Holders' will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-2, 10b-5, and Regulation
M, in connection with transactions in the Securities during the effectiveness
of the Registration Statement of which this Prospectus forms a part. All of
the foregoing may affect the marketability of the Securities.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of 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 NW, Judiciary Plaza, Washington, DC
20549, and at the Commission's regional offices: Chicago Regional Office,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and New York
Regional Office, Suite 1300, 7 World Trade Center, New York, New York 10048.
Copies of such materials can also be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, NW, Judiciary
Plaza, Washington, DC 20549. The Commission maintains a Web Site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
Commission's Web Site is located at http://www.sec.gov. The Common Stock of
the Company is quoted on Nasdaq, and such material may also be inspected at
the offices of Nasdaq Operations, 1735 "K" Street, NW, Washington, DC 20006.
This Prospectus constitutes a part of a Registration Statement on
Form S-3 (the "Registration Statement") filed by the Company with the
Commission under the Securities Act. Vyrex filed with the Commission a
Registration Statement on Form SB-2 on December 1, 1995, as amended by
Amendment No. 1, and Amendment No. 2, as filed with the Commission on
February 20, 1996, and March 20, 1996, respectively (collectively, the
"IPO Registration Statement"), pursuant to the Securities Act with
respect to the Unit Offering. This Prospectus omits certain of the
information set forth in the Registration Statement and the IPO
Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Securities
offered hereby, reference is made to the Registration Statement and the
IPO Registration Statement and the exhibits and schedules filed as a part
thereof. Statements contained in this Prospectus concerning the contents
of any contract or any other document referred to are not necessarily
complete; reference is made in each instance to the copy of such contract
or document filed as an exhibit to the Registration Statement and the IPO
Registration Statement. Each such statement is qualified in all respects
by such reference to such exhibit. Each of the Registration Statement or
the IPO Registration Statement, including all exhibits and schedules
thereto, may be inspected without charge at the Commission's principal
office in Washington, D.C., and copies of all or any part thereof may be
obtained from such office after payment of fees prescribed by the
Commission.
Information contained herein is subject to completion or amendment.
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.
DOCUMENTS INCORPORATED BY REFERENCE
The Company regularly files documents with the Securities and
Exchange Commission to comply with applicable government regulations,
including the Form 10-QSB and Form 10-KSB. Vyrex will provide without
charge to each
iii
<PAGE>
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 filed with the Securities
and Exchange Commission (other than exhibits to such documents which are
not specifically incorporated by reference into such documents). Such
requests should be directed to:
Vyrex Corporation
Attn: Steven J. Kemper
Chief Financial Officer
2159 Avenida de la Playa
La Jolla, California 92037
(619) 454-4446
The following documents previously filed with the Commission, except
as superseded or modified herein, are hereby incorporated by reference
into this Prospectus:
1. The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1996.
2. The Company's Amendment to its Annual Report on Form
10-K/A SB for the fiscal year ended December 31, 1996.
3. The Company's Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997.
4. The Company's definitive Form 14a (Proxy) dated May 9,
1997.
5. The Company's 1934 Act Registration Statement on Form 8-A.
6. Certain exhibits from the Company's 1933 Act Filings.
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.
No person is authorized in connection with any offering made hereby
to give any information or make any representation not contained or
incorporated by reference in this Prospectus, and any information 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.
-------------------------
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements. When included
in this Prospectus, the words "expects," "intends," "anticipates,"
"plans," "projects" and "estimates," and analogous or similar expressions
are intended to identify forward-looking statements. Such statements,
which include statements contained in "Prospectus Summary," "Risk
Factors" and elsewhere are inherently subject to a variety of risks and
uncertainties that could cause actual results to differ materially from
those reflected in such forward-looking statements. For a discussion of
certain of such risks, see "Risk Factors." These forward-looking
statements speak only as of the date of this Prospectus. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statement contained herein to
reflect any change in the Company's expectations with regard thereto or
any change in events, conditions or circumstances on which any such
statement is based.
iv
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO THE EXERCISE OF:
(i) THE EXISTING WARRANTS, (ii) ISSUANCE OF THE NEW SHARES, OR (iii)
EXERCISE OF OTHER OUTSTANDING WARRANTS AND OPTIONS.
THE COMPANY
Vyrex Corporation is a research and development stage company seeking to
discover and develop pharmaceuticals and nutraceuticals for the treatment and
prevention of various disorders. The Company's current research programs are
targeting respiratory, cardiovascular and neurodegenerative diseases, as
well as AIDS, cancer and aging related conditions. Currently the Company's
research is focused on antioxidant therapeutics, nutraceuticals and
genomes/proteomics utilizing the Company's patented CD-Tagging-TM-method.
The Company's pharmaceutical research focuses primarily on antioxidant
compounds. The Company's lead compounds are Vantox-Registered Trademark- and
Panavir-Registered Trademark-, and derivatives of Vantox-Registered
Trademark- and Panavir-Registered Trademark- which are currently under
development. Vantox-Registered Trademark- is an inhaled antioxidant. The
Company believes inhaled antioxidants may have application in the treatment
of asthma, acute respiratory distress syndrome, cystic fibrosis, smoke
inhalation, oxygen toxicity and other areas. The Company is developing
derivatives of Vantox-Registered Trademark- and Panavir-Registered Trademark-
in an effort to improve bioavailability, delivery and potency and to address
additional indications.
The Company has entered into an Agreement to provide four initial
nutritional supplement products to Retired Persons Services, Inc., which
administers the American Association of Retired Persons Pharmacy Service.
The Company has initiated pilot production of these formulations. The
formulations are designed to provide dietary support for the heart, prostate,
bones and joints, and to address vitality and immunity concerns. The Company
intends to formulate additional nutritional supplements, either internally or
by licensing their use from other companies and individuals. The Company is
also developing proprietary derivatives of various nutritional supplements
(ProNutrients-TM-) and is also working to develop proprietary nutritional
supplements which are incorporated into foods (Nutrafoods-TM-). The Company
is discussing licensing and joint development of these proposed products with
food and nutritional supplement companies, and exploring other potential
channels for distribution.
The Company's genomic and proteomic technology, CD-Tagging-TM-, is being
developed to assist in pharmaceutical drug discovery efforts. The Company is
currently working to optimize the various procedures used in CD-Tagging
technology in an effort to accelerate its drug and nutraceutical development
programs. The Company has entered into a collaboration agreement with The
Immune Response Corporation regarding the use of CD-Tagging-TM- for spinal
cord injury and other central nervous system trauma. The Company is also
seeking licensing opportunities for CD-Tagging-TM-.
VANTOX-Registered Trademark-, PANAVIR-Registered Trademark- and
CD-TAGGING-TM- are Vyrex trademarks. The Company was incorporated on January
2, 1991, in the State of Nevada. The Company's offices are located at 2159
Avenida de la Playa, La Jolla, California, 92037, and its telephone number is
(619) 454-4446.
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
SECURITIES OFFERED (1)(2) . . . . . . . . . . . . . . . . . 1,647,030 shares of Common Stock
COMMON STOCK OUTSTANDING PRIOR TO THIS OFFERING (3):. . . . 7,121,409
COMMON STOCK OUTSTANDING AFTER THIS OFFERING (4): . . . . . 8,768,439
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . The net proceeds of this offering will be used for research
and development, working capital, acquisitions and general
corporate purposes. The amount of proceeds to be received by
the Company could vary significantly based on market and
other factors. See "Use of Proceeds."
NASDAQ SYMBOLS
Common Stock . . . . . . . . . . . . . . . . . . . . . VYRX
Warrants . . . . . . . . . . . . . . . . . . . . . . . VYRXW
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . This offering involves a high degree of risk. See "Risk
Factors."
</TABLE>
-----------------------------
(1) For a description of the voting and other rights of the Common Stock
see "Description of Securities--Common Stock."
(2) Includes: (i) 1,057,097 shares of Common Stock issuable upon exercise
of the IPO Warrants; (ii) 200,000 shares of Common Stock issuable upon
exercise of the UPOs and the Underwriter's Warrants included therein;
(iii) 82,604 shares issuable upon exercise of the Private Warrants; (iv)
up to 17,000 shares of Common Stock issuable upon conversion of the
Debentures; (v) up to 282,329 shares of Common Stock issuable upon
exercise of the Debenture Warrants; and (vi) 8,000 Placement Agent
Shares.
(3) Does not include: (i) 2,875,000 shares of Common Stock reserved for
issuance under the Company's stock-based compensation plans of which
options to acquire 1,531,709 shares have been granted as of the date of
this Prospectus; (ii) 1,057,097 shares of Common Stock issuable upon
exercise of the IPO Warrants; (iii) 200,000 shares of Common Stock
issuable upon exercise of the UPOs and the Underwriter's Warrants
included therein; (iv) 82,604 shares issuable upon exercise of the
Private Warrants; (v) up to 282,329 shares of Common Stock issuable upon
conversion of the Debentures; and (vi) up to 17,000 shares of Common
Stock issuable upon exercise of the Debenture Warrants.
(4) Does not include 2,875,000 shares of Common Stock reserved for
issuance under the Company's stock-based compensation plans of which
options to acquire 1,531,709 shares have been granted as of the date of
this Prospectus, and any shares which may be issued upon conversion of
Additional Debentures as defined herein. See "Material Changes" and
"Description of Securities."
2
<PAGE>
SUMMARY FINANCIAL INFORMATION
The Summary Financial Information set forth below should be read in
conjunction with the financial statements included in the materials
incorporated by reference herein.
<TABLE>
<CAPTION>
CUMULATIVE
FROM
NINE MONTHS NINE MONTHS INCEPTION
ENDED ENDED THROUGH
SEPT. 30, 1997 SEPT. 30, 1996 YEAR ENDED DECEMBER 31, SEPT. 30, 1997
--------------- -------------- ----------------------------------------- -----------------
(unaudited) (unaudited) 1996 1995 1994 (unaudited)
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues . . . . . . . . . . . . . $ -- $ -- $ -- $ 10,000 $ -- $ 310,000
----------- ----------- ---------- ------------ ------------ ------------
Operating expenses:. . . . . . . .
Research and development 1,307,329 258,457 869,812 294,953 313,886 3,701,114
Marketing & selling 113,492 -- -- -- -- 113,492
General and administrative 931,353 645,044 1,127,270 221,649 154,611 2,928,901
----------- ----------- ---------- ------------ ------------ ------------
Total operating expenses 2,352,174 903,501 1,997,082 516,602 468,497 6,743,507
----------- ----------- ---------- ------------ ------------ ------------
Loss from operations . . . . . . . (2,352,174) (903,501) (1,997,082) (506,602) (468,497) (6,433,507)
----------- ----------- ---------- ------------ ------------ ------------
Other income (expense):
Interest income . . . . . . . 162,576 120,154 176,468 1,918 814 364,996
Charge from issuance of
stock options for arranging
bridge financing. . . . . . . -- -- -- (1,349,900) -- (1,349,900)
----------- ----------- ---------- ------------ ------------ ------------
Totals 162,576 120,154 176,468 (1,347,982) 814 (984,904)
----------- ----------- ---------- ------------ ------------ ------------
Net loss . . . . . . . . . . . . . $(2,189,598) $(783,347) $(1,820,614) $(1,854,584) $(467,683) $(7,418,411)
----------- ----------- ---------- ------------ ------------ ------------
----------- ----------- ---------- ------------ ------------ ------------
Net loss per common share. . . . . $(0.31) $(.14) $(.28) $(.30) $(.08) $(1.22)
----------- ----------- ---------- ------------ ------------ ------------
----------- ----------- ---------- ------------ ------------ ------------
Weighted average common
and common equivalent
shares outstanding . . . . . . . . 7,121,246 5,486,925 6,514,324 6,137,020 6,137,020 6,076,851
----------- ----------- ---------- ------------ ------------ ------------
----------- ----------- ---------- ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
ACTUAL PRO FORMA(1)
----------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short term investments . . . . . . . $2,912,797 $ 3,860,297
Working capital . . . . . . . . . . . . . . . . . . . . . . . . 2,681,692 3,629,192
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . 3,239,151 4,525,651
Outstanding convertible debentures. . . . . . . . . . . . . . . -- 1,000,000
Stockholders' equity. . . . . . . . . . . . . . . . . . . . . . 2,928,649 3,215,149
</TABLE>
(1) Pro forma reflects the issuance of $1,000,000 of Debentures, and Debenture
Warrants to purchase 17,000 shares of Common Stock on November 6, 1997,
and the Company's receipt of $947,500 in connection therewith. Excludes
any proceeds (if any) that would be received by the Company from the sale
of: (i) 1,057,097 shares of Common Stock upon the exercise of outstanding
IPO Warrants, (ii) 82,604 shares of Common Stock upon the exercise of
outstanding Private Warrants, (iii) 200,000 shares of Common Stock upon
exercise of the UPOs and the Underwriter's Warrants included therein, and
(iv) 17,000 shares of Common Stock upon exercise of outstanding Debenture
Warrants. Also excludes the effect of the issuance of up to 282,329
shares of Common Stock upon the conversion of principal and interest due
on outstanding Debentures.
3
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK BEING OFFERED HEREBY IS SPECULATIVE IN
NATURE, INVOLVES A HIGH DEGREE OF RISK AND SHOULD NOT BE MADE BY ANY INVESTOR
WHO CANNOT AFFORD THE LOSS OF HIS/HER ENTIRE INVESTMENT. ACCORDINGLY,
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS, IN
ADDITION TO ALL OF THE OTHER INFORMATION PRESENTED IN THIS PROSPECTUS BEFORE
PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS,
IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AS
WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
EARLY STAGE OF DEVELOPMENT; ABSENCE OF PRODUCTS. The Company is in the
development stage. It has not completed the development of any product and,
accordingly, has not begun to generate revenues from operations. Most of the
Company's proposed pharmaceutical products will require significant additional
research and development, including in the majority of cases extensive
preclinical and clinical testing, before the Company will be able to apply for
FDA approval. There can be no assurance the Company's research and development
efforts will be successful, that any of the Company's potential pharmaceutical
products under development will prove to be safe and effective in clinical
trials, that the Company will be able to obtain FDA approval for any of its
proposed pharmaceutical products, that any such proposed pharmaceutical
products can be manufactured at acceptable cost and with appropriate quality,
or that any such proposed products, if they do receive regulatory approval, can
be successfully marketed. The Company cannot predict when, if ever, it will
begin to market any proposed pharmaceutical products which may not occur for a
number of years. The Company is also developing nutraceutical products which
the Company believes may be sold before any of its proposed pharmaceutical
products will be sold. However, as of the date of this Prospectus no
nutraceutical products have completed testing or been sold. There can be no
assurance such products will complete testing, achieve consumer acceptance or
generate any revenue. There can be no assurance that the Company can
successfully complete the product development required to initiate its
strategies with regard to nutraceutical products or to successfully market any
nutraceutical product.
NO OPERATING REVENUES; ACCUMULATED DEFICIT; EXPECTATION OF FUTURE LOSSES.
The Company has experienced significant operating losses since its inception in
1991. As of September 30, 1997 the Company had a deficit accumulated in the
development stage of $7,418,411 (see the Summary Financial Information included
herein). The Company expects to incur substantial additional operating losses
over the next several years and expects cumulative losses to increase as the
Company's research and development efforts and clinical trials expand. The
Company has generated no revenues from operations. The development of the
Company's proposed pharmaceutical products will require the commitment of
substantial resources to prepare and submit applications to the FDA, and to
conduct research, preclinical and clinical trials, and for both its proposed
pharmaceutical and nutraceutical products the Company must either establish
commercial scale manufacturing processes and facilities or contract for such
manufacturing facilities, and to establish additional quality control,
regulatory, marketing, sales and administrative capabilities. There can be no
assurance the Company will be successful in these endeavors, especially in
light of the high failure rate of development stage pharmaceutical and
nutrition companies with limited resources. There can be no assurance the
Company will not incur substantial and continuing net losses beyond the next
several years or that the Company will ever reach profitability. Furthermore,
there can be no assurance the Company will apply for or obtain regulatory
approvals, enter into arrangements with third parties for product development
and commercialization, or successfully market or license any products. To
achieve profitable operations, the Company, alone or with others, must
successfully identify, develop, manufacture and market its proprietary products
or technologies. There can be no assurance the Company will be able to
accomplish these tasks. Significant delays in any of these matters could
materially adversely impact the Company.
FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING.
Substantial expenditures will be required to enable the Company to conduct
existing and planned product research and development, continue the FDA
application process, including conducting preclinical studies and clinical
trials, and to manufacture and market its proposed products including its
proposed nutraceutical products. The Company will need to raise substantial
additional funds to support its long-term proposed product development and
commercialization programs including its
4
<PAGE>
nutraceutical product development programs. The Company has no established
bank financing arrangements and it is not anticipated the Company will secure
any bank financing in the foreseeable future. Therefore, it is likely the
Company will need to seek additional financing through subsequent future public
or private sales of its securities, including equity and debt securities. The
Company may also seek funding for the development and marketing of its proposed
products through strategic alliances and other arrangements with corporate
partners. There can be no assurance such collaborative arrangements or
additional funds will be available when needed, or on terms acceptable to the
Company, if at all. Any such additional financing may result in significant
dilution to existing stockholders. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate one or more of its
potential product development and drug and nutraceutical discovery programs,
halt operations, or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, potential product candidates or potential products the
Company would not otherwise relinquish. The Company's future cash requirements
will be affected by results of research and development, preclinical studies
and clinical trials, nutraceuticals product development and marketing costs,
relationships with corporate partners, changes in the focus and direction of
the Company's research and development programs, competitive and technological
advances, the regulatory approval process and other factors.
INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE. The Company is
engaged in rapidly evolving and highly competitive fields and competition is
expected to increase. There are many companies, including large
pharmaceutical, chemical, and vitamin and nutrition supplement companies,
engaged in developing, manufacturing and marketing products similar to those
proposed to be developed by the Company, many of which have established a
significant presence in the markets which the Company's proposed products are
designed to address. Virtually all of these companies have substantially
greater capital resources, research and development staffs, facilities and
experience in obtaining regulatory approvals, as well as in the manufacturing,
marketing and distribution of products, than the Company. There can be no
assurance the Company's competitors will not succeed in developing technologies
and products that are more effective and less costly than any potential
products under research and development by the Company or which could render
the Company's proposed products or technology obsolete.
DEPENDENCE UPON KEY PERSONNEL. The Company's success in developing
marketable products and achieving a competitive position will depend, in large
part, on its ability to attract and retain qualified scientific and management
personnel and in particular, to retain Dr. Sheldon S. Hendler. The proprietary
technology which has been transferred to the Company was primarily developed by
Dr. Hendler. The Company does not currently maintain life insurance on this
individual. Dr. Hendler is the largest stockholder in the Company. The loss
of Dr. Hendler or other scientists and management personnel would likely have a
material adverse impact on the business and operations of the Company. The
Company will also need to hire additional management, administrative and
scientific personnel in the future to meet its plans. Competition for such
personnel is intense, and no assurance can be given that the Company will be
able to hire and/or retain satisfactory personnel. The Company's anticipated
growth and expansion into areas and activities requiring additional expertise,
such as clinical trials, government approvals, nutraceutical product
development, manufacturing and marketing are expected to place increased
demands on the Company's resources. These demands are expected to require the
addition of new management personnel and the development of additional
expertise by existing management personnel. The failure to acquire such
services or to develop such expertise could have a material adverse effect on
the Company's prospects for success. In addition, the Company relies on
consultants and advisors to assist the Company from time to time in reviewing
its research and development strategy. All of the Company's consultants and
advisors are employed by employers other than the Company, and may have
commitments to or consulting or advisory contracts with other entities that may
affect their ability to contribute to the Company.
RELIANCE ON COLLABORATIVE PARTNERS. The Company has relied in the past on
certain established companies interested in its technology to fund a portion of
its research and development expenses. In March of 1997 the Company entered
into a collaboration with The Immune Response Corporation to utilize the
Company's CD-Tagging-TM- technology, along with other technologies, to discover
small molecules to develop therapies for spinal cord and other central nervous
system traumas. The Company is utilizing laboratory facilities and services at
The Immune Response Corporation. The Company has entered into a License
Agreement with Pollufil, S.A. for testing, development and commercialization of
certain uses of the Company's potential Vantox-Registered Trademark- product.
The Company has also entered into license agreements with Dr. Jarvik regarding
the Company's CD-Tagging-TM- technology and with American Qualex
5
<PAGE>
International Inc. for manufacture and marketing of certain research supplies.
The Company anticipates that it may need to enter into collaborative
arrangements with certain parties to further its development of nutraceutical
products. To date the Company has not entered into any collaborative
agreements with regard to the development of its proposed nutraceuticals,
although it has entered into an agreement regarding the marketing of four
nutritional supplement products.
There can be no assurance the Company will be able to negotiate acceptable
collaborative arrangements in the future, or that any collaborative
arrangements will be successful. In addition, there can be no assurance the
Company's collaborative partners will not pursue alternative technologies or
develop alternative compounds either on their own or in collaboration with
others, including the Company's competitors, as a means of developing
treatments for the diseases targeted by the collaborative programs.
PATENTS AND PROPRIETARY RIGHTS. The Company's success will depend in
large part on its ability to obtain patent protection for its proposed
products, both in the United States and other countries. The patent position
of biotechnology and pharmaceutical companies is highly uncertain and involves
complex legal and factual questions. There is no consistent policy regarding
the breadth of claims allowed in biotechnology and pharmaceutical patents. The
Company currently has nine (includes CD-Tagging-TM-) patents issued, and one
patent allowed in the United States, and six patent applications pending in the
United States. There have been foreign counterparts of certain of these
applications filed in other countries on behalf of the Company. The Company
intends to file additional applications as appropriate for patents covering
both its proposed products and processes. There can be no assurance patents
will issue from any of the pending applications, or for patents that have
issued or may be issued, the claims allowed will be sufficiently broad to
protect the Company's technology. In addition, there can be no assurance any
patents issued to the Company will not be challenged, invalidated or
circumvented, or the rights granted thereunder will provide proprietary
protection to the Company. In addition, any patents obtained by the Company
will be of limited duration. All United States patents issuing from patent
applications applied for June 8, 1995 or thereafter will have a term of 20
years from the date of filing. All United States patents in force before June
8, 1995 will have a term of the longer of: (1) 17 years from the date of
issuance; or (2) 20 years from the date of filing. All United States patents
issuing from patent applications applied for before June 8, 1995 will have a
term of the longer of (1) 17 years from the date of issuance; or (2) 20 years
from the date of filing. The commercial success of the Company will also
depend in part on the Company's neither infringing patents issued to
competitors nor breaching the technology licenses upon which the Company's
proposed products might be based.
It may become necessary for the Company to obtain licenses of potential
products or other proprietary rights or trade secrets of other parties.
Failure by the Company to obtain such licenses may have a material adverse
impact on the Company. Litigation, which could result in substantial costs to
the Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of others' proprietary rights. In
addition, the Company may have to participate in interference proceedings
declared by the U.S. Patent and Trademark Office to determine the priority of
inventions which could result in substantial costs to the Company.
The Company also attempts to protect its proprietary technology and
processes by seeking to obtain confidentiality agreements with its contractors,
consultants, employees, potential collaborative partners, licensees, licensors
and others. There can be no assurance these agreements will adequately protect
the Company, that these agreements will not be breached, or the Company will
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently discovered by competitors. In
addition the Company does not generally require its principal scientific
advisors to enter into confidentiality agreements, and to the extent there is
collaboration between any of the scientific advisors and the Company, the
aspects of such collaboration will not necessarily remain the trade secrets of
the Company. This approach could increase the risk to the Company that it may
not be able to protect its proprietary information.
There can be no assurance others will not independently develop similar or
more advanced technologies or design around aspects of the Company's technology
which may be patented, or duplicate the Company's trade secrets. In some
cases, the Company may rely on trade secrets to protect its innovations. There
can be no assurance trade secrets will be established, or secrecy obligations
will be honored, or that others will not independently develop similar or
superior
6
<PAGE>
technology. To the extent consultants, key employees or other third parties
apply technological information independently developed by them or by others to
Company projects, disputes may arise as to the proprietary rights to such
information which may not be resolved in favor of the Company.
GOVERNMENTAL REGULATION AND UNCERTAINTY OF PRODUCT APPROVALS. The
production and marketing of the Company's proposed products are subject to
strict regulation by federal and state governmental authorities in the United
States and in foreign countries where such potential products may be produced
and marketed. In the United States, the FDA regulates, where applicable,
development, testing, labeling, manufacturing, registration, notification,
clearance or approval, marketing, distribution, record keeping and reporting
requirements for human and animal drugs, medical devices, biologies, cosmetics
and food additives. Most, if not all, of the Company's proposed products,
including its proposed Panavir-Registered Trademark-, Vantox-Registered
Trademark-, and other products may require FDA clearance prior to marketing.
The Federal Environmental Protection Agency ("EPA") has regulations covering
certain areas for some of the Company's proposed products. Comparable state
and local agencies may have similar regulations. The FDA and EPA regulatory
approval processes may take a number of years and both FDA and EPA regulatory
approval may require the expenditure of substantial resources. The processing,
formulation, packaging, labeling and advertising of the Company's proposed
nutraceutical products is subject to regulation by one or more federal
agencies, including the FDA, the Federal Trade Commission (the "FTC"), the
Consumer Product Safety Commission, the United States Department of Agriculture
and the Environmental Protection Agency. These activities are also regulated
by various agencies of the state and localities in which the Company's
nutraceutical products may be sold, including without limitation the California
Department of Health and Human Services, Food and Drug branch. The Nutrition
Labeling and Education Act and the Dietary Supplement Act provide regulations
which require that vitamin, mineral and dietary supplements labels have to
provide the same basic nutritional information found on the labels on most
conventional foods. The regulations also require that health claims made for
vitamins, minerals and dietary supplements be scientifically valid, and mandate
nutrition information found on the label to state the nutrition content per
serving. Compliance with these regulations could adversely affect the
Company's operations and its financial condition. There can be no assurance
the production and marketing of the Company's proposed products or other
potential products which may be developed by the Company in the future, if any,
will satisfy then current requirements of the FDA, EPA, FTC, or comparable
state, local and foreign authorities. Delays in receiving or failure to
receive governmental approvals may have a material adverse impact on the
Company. In addition, there can be no assurance that government regulations
applicable to the Company or its proposed products or the interpretation
thereof will not change and thereby prevent the Company from marketing some or
all of its potential products for a period of time or permanently, or otherwise
materially and adversely affect the Company. Moreover, if regulatory approval
of a drug is granted, such approval may entail limitations on the indicated
uses for which the drug may be marketed. Even if such regulatory approval is
obtained, a marketed drug, its manufacturer and the facilities in which the
drug is manufactured are subject to continual review and periodic inspections.
Later discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on such product or manufacturer, including
withdrawal of the potential product from the market, product seizures, a halt
in operation and other materially adverse consequences. The Company is unable
to predict the extent of adverse governmental regulation which might arise from
future federal, state or foreign legislative or administrative action, or the
extent of the impact of such legislative changes on the business of the
Company.
DEBT SERVICE AND PENALTIES. The Company has $1,000,000 of Debentures
outstanding and is contractually committed to issue additional Debentures or
other debt instruments. Such instruments generally require the payment of
interest as long as the Debentures are outstanding and the payment of principal
upon maturity of the Debentures, or under certain conditions, upon demand. At
maturity the payment of principal and interest on the Debentures may be made in
Common Stock of the Company, provided certain conditions are met. The
Debentures are convertible only under certain conditions and if such conditions
are not met the Company could be required to repay the principal and all
interest due on the Debentures in cash. If cash to repay the Debentures was
not available the holders of the Debentures could force the Company into
bankruptcy or take other measures which could materially adversely impact the
Company. In order to convert the Debentures into Common Stock: (i) there must
be an effective registration statement covering the Debenture Shares and
Debenture Warrant Shares, (ii) the Company must currently be listed on the
Nasdaq SmallCap or other exchange, (iii) the Company must not have certain
legal action pending against it, and (iv) must meet other conditions.
Additionally, the Company cannot convert the Debentures into Common Stock if
such conversion would result in the issuance of 20% or more of the then
outstanding Common Stock of the Company.
7
<PAGE>
The purchasers of the Debentures have agreed to purchase an additional
$3,000,000 of Debentures in multiple tranches during the 21 months following
the effective date of the Registration Statement. The Company is subject to
monetary penalties in the event it does not issue such additional Debentures.
The Debentures contain penalties which could be detrimental to the Company
if required to be paid could materially adversely affect the Company and its
financial condition. The Company is subject to a penalty of $100 per day per
$10,000 of outstanding Debentures if the Registration Statement is not
effective by January 20, 1998.
DILUTIVE AND OTHER ADVERSE EFFECTS OF OUTSTANDING OPTIONS AND WARRANTS.
Under the terms of the Existing Warrants, options issued under the Company's
stock option plan and other outstanding options and warrants, the holders
thereof are given an opportunity to profit from a rise in the market price of
the Common Stock with a resulting dilution in the interests of the other
stockholders. The terms on which the Company may obtain additional financing
may be adversely affected by the existence of such options and warrants. The
holders of the warrants may exercise them at a time when the Company might be
able to obtain additional capital through a new offering of securities on terms
more favorable than those provided by the warrants. In addition, holders of
certain Common Stock of the Company have registration rights, and the exercise
of such rights may involve substantial expense to the Company.
POSSIBLE DEPRESSIVE EFFECT ON PRICE OF SECURITIES OF FUTURE SALES OF
COMMON STOCK. Actual sales or the prospect of sales of Common Stock under Rule
144 or otherwise in the future may depress the prices of the Company's
securities or any market that may develop, and also make it difficult to sell
the Company's securities purchased by investors herein. There are options
outstanding both pursuant to the Company's Stock Option Plan and options not
pursuant to any plan which are exercisable for up to 1,531,709 shares of Common
Stock. The vast majority of all of these options and warrants are currently
exercisable. Exercise of any of these warrants or options would result in
additional dilution to the purchaser of the shares offered herein, and exercise
of any significant amount of these options or warrants will result in
substantial additional dilution. Resale of shares acquired upon the exercise
of these options may depress the prices of the Company's securities or make
them more difficult to sell by the investors herein. The sale or availability
for sale of substantial amounts of Common Stock in the public market after
this offering could adversely affect the prevailing market prices of the
Company's securities and could impair the Company's ability to raise additional
capital through the sale of its equity securities.
POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK.
The Company's Board of Directors is authorized to issue up to 10,000,000 shares
of preferred stock. The Board of Directors has the power to establish the
dividend rates, liquidation preferences, voting rights, redemption and
conversion terms and privileges with respect to any series of preferred stock.
The issuance of any series of preferred stock having rights superior to those
of the Common Stock may result in a decrease in the value or market price of
the Common Stock and could further be used by the Board as a device to prevent
a change in control favorable to the Company. Holders of preferred stock to be
issued in the future may have the right to receive dividends and certain
preferences in liquidation and conversion rights. The issuance of such
preferred stock could make the possible takeover of the Company or the removal
of management of the Company more difficult, discourage hostile bids for
control of the Company in which stockholders may receive premiums for their
Common Stock or IPO Warrants and adversely affect the voting and other rights
of the holder of the Common Stock, or depress the market price of the Common
Stock or IPO Warrants.
POSSIBLE VOLATILITY OF STOCK PRICE. The market prices for securities of
emerging and development stage companies such as Vyrex have historically been
highly volatile. Future announcements concerning the Company or its
competitors, including the results of testing, technological innovations or new
commercial products, government regulations, developments concerning
proprietary rights, litigation or public concern as to safety of potential
products developed by the Company or others, may have a significant impact on
the market price of the Company's securities.
CONTROL BY PRESENT STOCKHOLDERS; POSSIBLE DEPRESSIVE EFFECT ON THE
COMPANY'S SECURITIES. The current officers and directors of the Company will
be able to elect all of the Company's directors and otherwise control the
Company's operations. This concentration of ownership by the Company's
officers and directors may discourage potential purchasers from seeking control
of the Company through the purchase of Common Stock, and this possibility could
have a depressive effect on the price of the Company's securities.
8
<PAGE>
In addition, Dr. Sheldon S. Hendler, Chairman of the Board and Chief
Executive Officer of the Company owns approximately 43% of the outstanding
Common Stock of the Company. As a result thereof, Dr. Hendler alone may
control or exert overwhelming influence over the Company's operations.
ANTI-TAKEOVER PROVISIONS - LIMITATION ON VOTING RIGHTS. The Company's
Articles of Incorporation and Bylaws contain provisions that may make it more
difficult to acquire control of the Company by means of tender offer,
over-the-counter purchases, a proxy fight, or otherwise. The Articles of
Incorporation also include provisions restricting stockholder voting rights.
The Company's Articles of Incorporation include a provision that requires that
any action required by the stockholders may not be affected by a written
consent, and that special meetings of the stockholders may only be called by
the Board of Directors. This provision makes it difficult for stockholders to
pass any resolution not supported by the Board of Directors except at a
regularly called meeting. The Company's Articles of Incorporation provide for
a staggered term of the Board of Directors, thus eliminating the ability to
elect all of the directors in any one year. This provision may make the
implementation of a change in management a process requiring more than one year
even if supported by a majority of the stockholders. The Company's Articles of
Incorporation provide directors may only be removed for cause and a vote of 70%
of the shareholders. Certain provisions of the Articles of Incorporation may
only be amended by a vote of 70% of the stockholders. As a result of the
number of shares currently owned by management, this provision may for some
time have the effect of indirectly eliminating any possibility stockholders
could pass a resolution unless approved by management, in connection with any
question submitted or required to be submitted to a vote of the stockholders.
The Company's Articles of Incorporation also require that stockholders give
advance notice to the Company of any directorship nominations or other business
to be brought by the stockholders at any stockholder's meeting. This provision
makes it more difficult for stockholders to nominate candidates for the Board
of Directors who are not supported by management. In addition, the Articles of
Incorporation require advance notice for stockholder proposals to be brought
before the annual meeting. The requirements include that the notice must
specify certain information regarding the stockholder and the meeting. This
provision to implement stockholder proposals makes it more difficult even if a
majority of stockholders are in support thereof. The Company is also subject
to certain provisions of California law if more than 50% of its outstanding
securities are held of record by persons with addresses in California, and if
more than 50% of its property, payroll and sales are from California. These
provisions of California law will control the operations of the Company with
respect to certain of the anti-takeover provisions discussed herein, until such
time as either (i) the Company is listed on the New York or American Stock
Exchange or the National Market System of Nasdaq, and it has 800 stockholders;
or (ii) the Company no longer has either more than 50% of its outstanding
securities held by persons with addresses in California, or less than 50% of
its property, payroll and sales are in California. Each of these provisions
may also have the effect of deterring hostile take-overs or delaying changes in
control or management of the Company. In addition, the indemnification
provisions of the Company's Bylaws and Articles of Incorporation may represent
a conflict of interest with the stockholders since officers and directors may
be indemnified prior to any judicial determinations as to their conduct.
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS.
Holders of the IPO Warrants will only be able to exercise the IPO Warrants if:
(i) a current prospectus under the Securities Act relating to the securities
underlying the IPO Warrants is then in effect and (ii) such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the states in which the various holders of the IPO Warrants reside.
Although the Company has undertaken to use its best efforts to maintain the
effectiveness of a current prospectus covering the securities underlying the
IPO Warrants, there can be no assurance the Company will be able to do so. The
IPO Warrants may have no value if a current prospectus, covering the securities
issuable upon the exercise of the IPO Warrants, is not kept effective or if
such securities are not qualified, or exempt from qualification, in the states
in which the holders of the IPO Warrants reside.
POSSIBLE ACCELERATION OF EXERCISE PERIOD OF IPO WARRANTS. The Company
may, at its option, accelerate the expiration period of the IPO Warrants upon
not less than 30 days' prior notice (the "Acceleration Notice") to the
registered holder of the IPO Warrants, in the event that (i) there exists a
current prospectus relating to the Common Stock issuable upon exercise of the
IPO Warrants under an effective registration statement filed with the
Commission, and qualified for sale or exempt from qualification under
applicable state securities laws and (ii) the shares of Common Stock of the
Company have had a closing "bid" price of not less than $10.00 per share for a
period of ten consecutive trading days ending not more than ten calendar days
immediately prior to the date of the Acceleration Notice.
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Accordingly, an investor may be confronted with an investment decision to
exercise, sell or lose his or her IPO Warrants at a time when the investor may
not have the financial resources to exercise the IPO Warrants. See "Description
of Securities."
POSSIBLE DELISTING OF SECURITIES FROM THE NASDAQ STOCK MARKET AND POSSIBLE
ILLIQUIDITY. While the Company's Common Stock and IPO Warrants are currently
listed on the Nasdaq SmallCap Market, there can be no assurance the Company
will meet the criteria for continued listing of its securities on the Nasdaq
SmallCap Market. The continued listing criteria for the Nasdaq SmallCap Market
generally include a minimum of $2,000,000 in net tangible assets, a market
capitalization of $35 million or net income of $500,000 in less than two years,
a minimum bid price for Common Stock of $1.00 per share, and 500,000 shares in
the public float. In addition, the Common Stock must have at least two
registered and active market makers, must be held by at least 300 holders and
the market value of its public float must be at least $200,000. If an issuer
does not meet the $1.00 minimum bid price requirement, it may, however, remain
on the Nasdaq SmallCap Market if the market value of its public float is at
least $1,000,000, and the issuer has net tangible assets of at least
$2,000,000. If the Company is unable to meet the continued listing criteria of
the Nasdaq SmallCap Market and is delisted therefrom, trading, if any, in the
Common Stock and the IPO Warrants would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
the "OTC Bulletin Board Service." As a result, an investor would likely find it
more difficult to dispose of, or to obtain accurate quotations as to the value
of, the Company's securities.
Disclosures Relating to Low Priced stocks; Possible Restrictions on
Resale of Low Price Stocks and on Broker-Dealer Sale; Possible Adverse
Effect of "Penny Stock" Rules on Liquidity for the Company's Securities
If the Company's securities were delisted from the NASDAQ SmallCap
Market (see "Possible Delisting of Securities from the NASDAQ Stock Market
and Possible Market Illiquidity" above), at a time when the Company had net
tangible assets of $2,000,000 or less, further transactions in the Company's
securities would become subject to Rule 15g-9 under the Exchange Act, which
imposes additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and "accredited
investors" (generally, individuals with a net worth in excess of $1,000,000
or annual incomes exceeding $200,000 or $300,000 together with their
spouses). For transactions covered by this Rule, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to the sale.
Consequently, this Rule may affect the ability of broker-dealers to sell the
Company's securities, and may affect the ability of purchasers in this
offering to sell any of the securities acquired hereby in the secondary
market.
The Commission has adopted regulations which generally define a "penny
stock" to be any non-NASDAQ equity security of a small company that has a
market price (as therein defined) less than $5.00 per share, or with an
exercise price of less than $5.00 per share subject to certain exceptions,
and which is not traded on any exchange or quoted on NASDAQ. For any
transaction by broker-dealers involving a penny stock (unless exempt), the
rules require delivery, prior to a transaction in a penny stock, of a risk
disclosure document relating to the penny stock market. Disclosure is also
required to be made about compensation payable to both the broker-dealer and
the registered representative and current quotations for the securities.
Finally, monthly statements are required to be sent disclosing recent price
information for the penny stock held in an account and information on the
limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on NASDAQ and have certain
price and volume information provided on a current and continuing basis, or
if the Company meets certain minimum net tangible asset requirements, or
average revenue criteria. There can be no assurance the Company's securities
will continue to qualify for exemption from these restrictions. If the
Company's securities were subject to the rules on penny stocks, the market
liquidity for the Company's securities could be severely adversely affected.
LACK OF MARKETING EXPERIENCE; DEPENDENCE ON OUTSIDE PARTIES FOR MARKETING
AND DISTRIBUTION; UNCERTAINTY OF MARKET ACCEPTANCE OF PROPOSED PRODUCTS. If
successfully developed and approved by applicable regulatory agencies, the
Company intends to market its proposed products currently under development
through contractual arrangements with others such as joint venture, licensing
or similar collaborative agreements or distribution agreements. This may
result in a lack of control by the Company over some or all of the marketing
and distribution of such potential products. There can be no assurance the
Company will be able to enter into any marketing arrangements on terms
acceptable to the Company or that any marketing efforts undertaken on behalf of
the Company will be successful. The Company may, in the future, determine to
directly market certain of its proposed products. The Company has limited
marketing experience and significant additional capital expenditures and
management resources would be required to develop a direct sales force. In the
event the Company elects to engage in direct marketing activities, there can be
no assurance the Company would be able to obtain the requisite funds or attract
and retain the human resources necessary to successfully market any of its
potential products.
The Company's future growth and profitability will depend, in large part,
on the success of its personnel and others conducting marketing efforts on
behalf of the Company in fostering acceptance among the various markets of the
use of the Company's potential products as an alternative to other available
products or otherwise. The Company's success in marketing its potential
products will be substantially dependent on educating its targeted markets as
to the distinctive characteristics and perceived benefits of the Company's
potential products. There can be no assurance that the Company's efforts or
the efforts of others will be successful or that any of the Company's proposed
products will be favorably accepted among the targeted markets.
LACK OF MANUFACTURING CAPABILITY; DEPENDENCE ON OUTSIDE PARTIES FOR
MANUFACTURING OF PROPOSED PRODUCTS. The Company has no manufacturing
facilities or expertise, and does not intend to manufacture any potential
product or products. The Company initially intends to enter into arrangements
with others to manufacture all of its proposed products and has done so with
respect to its nutraceutical products. The Company does not have any contracts
or agreements obligating any party to manufacture any quantity of
nutraceuticals for any price. Failure to secure such contracts or agreements
could have a material adverse impact on the business and operations of the
Company. There can be no assurance the Company will be able to enter into
satisfactory arrangements for the manufacture of its proposed products with
manufacturers whose facilities and procedures comply with FDA or other
regulatory requirements, that the manufacturers will continue to comply with
such standards, or that such manufacturers will be able to adequately supply
the Company with its product needs. The Company's dependence on third parties
for manufacturing may adversely affect the Company's ability to develop and
deliver products on a timely and competitive basis. The Company may in the
future undertake to manufacture some or all of its proposed products directly.
The Company has no experience with the manufacture of any of its proposed
products under development. In the event the Company were
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to undertake to manufacture any of its proposed products, the Company would be
required to finance considerable additional capital expenditures, attract and
retain experienced personnel, develop a manufacturing capability, and comply
with extensive government regulations with respect to its facilities, including
among others, FDA manufacturing requirements. The Company would not be able to
develop any reasonable manufacturing capability without obtaining significant
capital in excess of the funds anticipated from this offering. There can be no
assurance the Company would be able to successfully establish manufacturing
operations.
DEPENDENCE ON SUPPLIERS. The materials used in the Company's potential
products are currently available only from a limited number of suppliers. The
Company anticipates there will continue to be a limited number of suppliers for
its proposed products. In the event the Company could not obtain adequate
quantities of necessary materials from its existing suppliers, there can be no
assurance the Company would be able to access alternative sources of supply
within a reasonable period of time or at commercially reasonable rates.
Regulatory requirements applicable to pharmaceutical products tend to make the
substitution of suppliers costly and time-consuming. The Company does not have
any contracts or agreements with any of its raw material suppliers for its
proposed nutraceutical products to provide quantities of raw materials at
specific prices. The Company believes there are numerous suppliers of its raw
materials for its proposed nutraceutical products. There can be no assurance
adequate suppliers will be available or that the lack of such contracts or
agreements will not have a material adverse impact on the business and
operations of the Company. The unavailability of adequate commercial
quantities, the inability to develop alternative sources, a reduction or
interruption in supply or a significant increase in the price of materials
could have a material adverse effect on the Company's ability to manufacture
and market its proposed products.
PRODUCT LIABILITY; AVAILABILITY OF INSURANCE. The design, development and
manufacture of the Company's proposed products involve an inherent risk of
product liability claims and associated adverse publicity. The Company
obtained clinical trial product liability insurance for its Panavir-Registered
Trademark- Phase I human clinical trial and intends to obtain insurance for
future clinical trials of Panavir-Registered Trademark-, Vantox-Registered
Trademark-, and other potential products under development, and for potential
product liability associated with the commercial sale of the Company's proposed
products. There can be no assurance the Company will be able to obtain or
maintain insurance for any of its clinical trials or proposed commercial
products. Although the Company currently maintains liability insurance in
connection with its Panavir-Registered Trademark- trials, there can be no
assurance the coverage limits of the Company's insurance policies will be
adequate. Such insurance is expensive, difficult to obtain and may not be
available in the future on acceptable terms or at all. The Company will also
be exposed to product liability claims in the event that, among other things,
the use of its proposed nutraceutical products result in injury. The Company
is required by the Retired Person's Services, Inc. agreement to have at least
$1.0 million in insurance coverage for product liability on its proposed
nutrition products. The Company intends to require the manufacturers of its
nutraceutical products to add the Company as a named insured to their existing
issuance policies. The Company has not yet received endorsements as named
insured for any insurance policies. The Company also plans to seek additional
coverage of its own. There can be no assurance the Company will be able to
procure additional coverage or that existing or future coverage will be
sufficient to cover potential liabilities. A successful claim brought against
the Company in excess of the Company's insurance coverage would have a material
adverse effect upon the Company.
HAZARDOUS MATERIAL; ENVIRONMENTAL MATTERS. The Company, at present,
contracts with outside vendors for manufacture of its proposed products.
However, the Company's research and development processes at times involve the
controlled use of hazardous materials, chemicals, viruses and various
radioactive compounds. In addition, various of such materials, chemicals,
viruses and compounds may be used by the Company in the future to the extent
Vyrex undertakes to perform its own manufacturing. To the extent certain such
materials, chemicals, viruses and compounds are or will be used by the Company,
Vyrex will be subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of certain
materials and waste products. Although the Company believes its safety
procedures for handling and disposing of materials would comply with the
standards prescribed by such laws and regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident, the Company could be held liable for any
damages that result, and any such liability could exceed the resources of the
Company. There can be no assurance the Company will not be required to incur
significant costs to comply with environmental laws and regulations in the
future, or that the operations, business
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or assets of the Company will not be affected adversely or materially by
current or future environmental laws or regulations.
HEALTH CARE REFORM. Political, economic and regulatory influences are
subjecting the health care industry in the United States to fundamental
changes. Reforms under consideration may include mandated basic health care
benefits, controls on health care spending through limitations on the growth of
private health insurance premiums and Medicare and Medicaid spending, the
creation of large insurance purchasing groups and fundamental changes to the
health care delivery system. The Company anticipates Congress and certain
state legislatures will continue to review and assess alternative health care
delivery systems and payment methods and public debate of these issues will
likely continue in the future. Due to uncertainties regarding the ultimate
features of reform initiatives and their enactment and implementation, the
Company cannot predict which, if any, of such reform proposals will be adopted,
when they may be adopted or what impact they may have on the Company.
UNCERTAINTY OF HEALTH CARE REIMBURSEMENT. Vyrex's ability to
commercialize its proposed products successfully may depend in part on the
extent to which reimbursement for the cost of such proposed products and
related treatment will be available from government health administration
authorities, private health insurers and other organizations. Third-party
payers are increasingly challenging the price of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products, and there can be no assurance adequate third-party
coverage will be available to enable Vyrex to maintain price levels sufficient
to realize an appropriate return on its investment in product development.
FORWARD-LOOKING STATEMENTS. Prospective investors are cautioned that the
statements in this Prospectus that are not descriptions of historical facts may
be forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to
a number of factors, including those identified under "Risk Factors" and
elsewhere in this Prospectus or documents incorporated by reference herein.
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USE OF PROCEEDS
The net proceeds of this offering will be used to fund research and
development, working capital and general corporate purposes including
acquisitions. As of the date of this Prospectus, the Company has not targeted,
and it is not in negotiations to complete any acquisition. The proceeds of
this offering are subject to great variability due to market conditions. None
of the shares underlying the Existing Warrants have an exercise price per share
which is less than the market price per share of the Common Stock as of the
date of this Prospectus. The current exercise prices range from $8.38
estimated for the Debenture Warrants to $10.89 for the UPO Warrants. The
conversion price of a Debenture and the exercise price of the UPOs, and the
Debenture Warrants may fluctuate based on the market price of the Common Stock.
If the price of the Common Stock does not trade above the exercise price of a
Warrant, there is no anticipated incentive for a Warrant holder to exercise.
Even if the price of the Common Stock is above the exercise price of a Warrant,
there is no event which can compel the holder to exercise the Warrant and
purchase Common Stock. There can be no assurance any Warrant will be exercised
and the Company will receive any proceeds therefrom.
The shares underlying any Additional Debentures (as defined herein) and
any proceeds therefrom are subject to the Company completing the sale of
Debentures which is subject to several conditions, and may not occur. There
can be no assurance any Additional Debentures will be issued and the Company
will receive any proceeds therefrom. See "Material Changes" and "Description
of Securities-Debentures."
The Company's expenditures are anticipated to exceed the proceeds it
receives from the sale of the Securities, and the Company will likely require
additional capital from the sale of additional debt or equity securities in
order to continue its research and development activities.
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this offering. This estimate is based on certain
assumptions, including, but not limited to, the exercise of all Warrants and
the Company's receipt of the exercise price therefrom, and the conversion of
all Debentures, and the reduction of indebtedness resulting therefrom. There
can be no assurance either of these events will occur or the Company will
receive any proceeds to allocate, or if there are such proceeds, will be
allocated as set forth herein. Future events, including the problems, delays,
expenses, difficulties and complications frequently encountered by development
stage companies as well as changes in economic, regulatory or competitive
conditions or the Company's planned business and the success or lack thereof or
of the Company's research, development and testing activities or marketing and
distribution efforts or inability to obtain regulatory approvals as
anticipated, may make shifts in the allocation of funds and curtailment of
certain planned expenditures necessary or desirable. Any such shifts will be
at the discretion of the Company. There is no assurance the Company's
estimates will prove to be accurate, that new technologies will not be
undertaken which will require considerable additional expenditures, that
unforeseen expense will not occur or the Company will successfully develop and
commercialize any of its technologies or that additional funds can be obtained.
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MATERIAL CHANGES
On November 6, 1997, the Company entered into two securities purchase
agreements (the "Debenture Agreements") with two investors (the "Debenture
Holders") and pursuant thereto, the Company issued each Debenture Holder a
Debenture in the amount of $500,000 (the "Initial Debenture"). Each Initial
Debenture is a 6% interest accruing and deferred convertible debenture due
November 15, 2000. The Initial Debentures are convertible at the election of
the holder at any time commencing upon the earlier to occur of (i) the
effective date of this Registration Statement, or (ii) 60 days following the
date of issuance, at a conversion price equal to the lesser of:
(i) 130% of the average closing bid price of the Common Stock on the
five consecutive trading days preceding the initial issuance date of
the Debenture ("Market Price"); or
(ii) (a) beginning on the 60th day after the issuance date and ending
on the 90th day after the issuance date the conversion rate
shall be 84% of the Market Price;
(b) beginning on the 91st day after the issuance date and ending
on the 120th day after the issuance date the conversion rate
shall be 82% of the Market Price;
(c) beginning on the 121st day after the issuance date and ending
on the maturity date the conversion rate shall be 80% of the
Market Price.
No more than 33% of the principal amount of the Initial Debentures may be
convertible during any thirty (30) calendar day period. The entire unpaid
balance and all accrued interest outstanding on the maturity date automatically
converts into Common Stock in accordance with the foregoing Conversion Rate.
In connection with the issuance of the Initial Debentures, the Company
issued Debenture Warrants to the Debenture Holders, each exercisable for 8,500
shares of Common Stock. The Debenture Warrants have a term of three years and
an exercise price per share of the lesser of: (i) $8.38 (125% of the per share
Market Price on the date of issuance) or (ii) 125% of the per share Market
Price on the effective date of the Registration Statement.
Pursuant to the Debenture Agreements, the Debenture Holders have each
agreed to purchase an additional $1,500,000 of Debentures ("Additional
Debentures") in multiple tranches during the 21 months following the effective
date of the Registration Statement.
Each tranche will be between $100,000 and $225,000. Each tranche may be
completed at the election of the Company subject to the existence of certain
conditions. Each Additional Debenture shall be substantially similar to the
Initial Debentures but shall have a term of 18 months and be convertible into
Common Stock at 86% of the Market Price on the date of issuance.
In connection with each Additional Debenture, the Company shall issue the
purchaser a Debenture Warrant to purchase Common Stock at a rate of one warrant
to purchase 1,700 shares of Common Stock for each $100,000 of Additional
Debentures purchased.
The Debenture Holders were also granted a five-day right of first refusal
to purchase any additional debt or equity securities which the Company proposes
to issue in any private placement transaction during the 18 months following
the date of the Initial Debentures.
In connection with the execution of the Debenture Agreements and the
issuance of the Initial Debentures the Company issued the Placement Agent 8,000
Placement Agent Shares and paid the Placement Agent a cash commission equal to
five percent of the amount of the Initial Debentures. In addition, the Company
agreed to pay the Placement Agent five percent of the amount of all Additional
Debentures issued.
The Company provided the Debenture Holders and the Placement Agent with
certain registration rights, for the shares underlying the Initial Debentures,
the Debenture Warrants, the Placement Agent Shares, and the shares underlying
any Additional Debentures. Pursuant to the Debenture Agreements the Company
must elect to require the Debenture Holders to purchase an aggregate of no less
than $1,325,000 in Additional Debentures or the Company must provide each of
the Debenture Holders a warrant to purchase an additional 10,000 shares of
Common Stock.
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DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock and 10,000,000 shares of Preferred Stock.
COMMON STOCK. As of September 30, 1997, the Company had 7,121,409 shares
of Common Stock issued and outstanding. The holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to
a vote of the stockholders. Except as set forth below under the heading of
"Application of Pseudo-Foreign Corporation Statute of California," the holders
of Common Stock are not entitled to cumulative voting rights with respect to
the election of directors, and as a consequence, minority stockholders will not
be able to elect directors on the basis of their votes alone. Subject to
preferences that may be applicable to any then outstanding shares of Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any then outstanding Preferred Stock. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are, and all shares
of Common Stock to be outstanding upon completion of this offering will be,
fully paid and nonassessable. See "Plan of Distribution."
PREFERRED STOCK. The preferred Stock may be issued in series, and shares
of each series will have such rights and preferences as are fixed by the Board
in resolutions authorizing the issuance of that particular series. In
designating any series of Preferred Stock, the Board may, without further
action by the holders of Common Stock, fix the number of shares constituting
that series and fix the dividend rights, dividend rate, conversion rights,
voting rights (which may be greater or lesser than the voting rights of the
Common Stock), rights and terms of redemption (including any sinking fund
provisions), and the liquidation preferences of the series of Preferred Stock.
It is to be expected that the holders of any series of Preferred Stock, when
and if issued, will have priority claims to dividends and to any distributions
upon liquidation of the Company, and that they may have other preferences over
the holders of the Common stock.
The Board may issue series of Preferred Stock without action of the
stockholders of the Company. Accordingly, the issuance of Preferred Stock may
adversely affect the rights of the holder of the Common Stock. In addition,
the issuance of Preferred Stock may be used as an "anti-takeover" device
without further action on the part of the stockholders. Issuance of Preferred
Stock may dilute the voting power of holder of Common Stock (such as by issuing
Preferred Stock with super-voting rights) and may render more difficult the
removal of current management, even if such removal may be in the stockholders
best interest. The Company has no current plans to issue any of the Preferred
Stock.
IPO WARRANTS. The Company issued 1,057,097 IPO Warrants as part of the
Units issued in the Unit Offering. The IPO Warrants are traded on Nasdaq under
the symbol "VYRXW". Each IPO Warrant entitles the holder, upon payment of the
exercise price of $8.00, to purchase one share of Common Stock. The IPO
Warrants are exercisable at any time, through March 21, 1998, subject to
certain terms and conditions.
The Company may, at its option, accelerate the expiration period of the
IPO Warrants upon not less than 30 days prior notice to the registered holders
of the IPO Warrants, in the event that: (i) there exists a current prospectus
relating to the IPO Warrant Shares under an effective registration statement
filed with the Securities and Exchange Commission and the issuance of the IPO
Warrant Shares have been qualified for sale or exempt from qualification under
applicable state securities laws; and (ii) the shares of Common Stock of the
Company have had a closing bid price of not less then $10.00 for a period of
ten consecutive trading days ending not more than ten calendar days immediately
prior to the date of the notice. Holders of IPO Warrants will automatically
forfeit their rights to purchase the IPO Warrant Shares unless the IPO Warrants
are exercised before the close of business on the business day immediately
prior to the final date set for exercise. All of the outstanding IPO Warrants
may be affected. A notice of any acceleration of the final exercise
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date is required to be mailed to each of the registered holders of the IPO
Warrants by first class mail, postage prepaid, 30 days before the date fixed
for acceleration of the final exercise date, and is required to be published in
the Wall Street Journal and at least one other newspaper of general circulation
in San Diego and New York City. The notice of acceleration of the final
exercise date is required to specify the date fixed for exercise, the place
where the IPO Warrant certificates shall be delivered and that the right to
exercise the IPO Warrants shall terminate at 5:00 p.m. (Los Angeles time) on
the final exercise date.
The IPO Warrants may be exercised upon surrender of the certificate(s)
therefor on or prior to the final exercise date (as explained above) at the
offices of the Company's warrant agent, ChaseMellon Shareholder Services (the
"Warrant Agent"), with the "Subscription Form" on the reverse side of the
certificate(s) completed and executed as indicated and accompanied by payment
(in the form of certified or cashier's check payable to the order of the
Company) of the full exercise price for the number of IPO Warrants being
exercised.
The holders of the IPO Warrants will not have any of the rights or
privileges of stockholders of the Company (except to the extent they own
Company Stock of the Company) prior to the exercise of the IPO Warrants. The
exercise price of the IPO Warrants and the number of IPO Warrant Shares are
subject to adjustment upon the occurrence of certain events such as stock
splits, stock dividends or the like, as set forth in the IPO Warrant Agreement.
In the event of a capital reorganization of the Company, reclassification
of the Common Stock or a consolidation or merger of the Company with or into,
or a disposition of substantially all of the Company's properties and assets
to, any other corporation, the IPO Warrants then outstanding will thereafter be
exercisable into the kind and amount of shares of stock or other securities or
property (including cash) to which the holders thereof would have been entitled
if they had exercised such IPO Warrants and received IPO Warrant Shares
immediately prior to such reorganization, reclassification, consolidation,
merger or disposition, consistent with the requirements for exercise set forth
in the IPO Warrant Agreement.
For the life of the IPO Warrants, the IPO Warrant holders have the
opportunity to profit from a rise in the market price of the Common Stock
without assuming the risk of ownership of the IPO Warrant Shares, with a
resulting dilution in the interest of the Company's stockholders by reason of
exercise of IPO Warrants at a time when the exercise price is less than the
market price for the Common Stock. Further, the terms on which the Company
could obtain additional capital during the life of the IPO Warrants may be
adversely affected as a result of the IPO Warrants being outstanding. The IPO
Warrant holders may be expected to exercise their IPO Warrants at a time when
the Company would, in all likelihood, be able to obtain any needed capital by
an offering of Common Stock on terms more favorable than those provided for by
the IPO Warrants.
For a holder to exercise the IPO Warrants there must be a current
registration statement in effect with the Securities and Exchange Commission
and registration or qualification with, or approval from, various state
securities agencies with respect IPO Warrant Shares. The Company has agreed to
use its best efforts to cause a registration statement with respect to such
securities under the Securities Act to continue to be effective during the term
of the IPO Warrants and to take such other actions under the laws of various
states as may be required to cause the sale of IPO Warrant Shares to be lawful.
However, the Company will not be required to honor the exercise of IPO Warrants
if, in the opinion of the Company's Board of Directors upon advice of counsel,
the sale of securities upon exercise would be unlawful.
The Company is not required to issue fractional shares of Common Stock,
and in lieu thereof will make a cash payment based upon the current market
value of such fractional shares. A holder of the IPO Warrants will not possess
any voting or any other rights as a stockholder of the Company unless he or she
exercises the IPO Warrants.
The IPO Warrant exercise price was arbitrarily determined by negotiation
between the Company and the underwriter of the Unit Offering. The Company may
reduce the exercise price of the IPO Warrants or extend the warrant expiration
date upon notice to IPO Warrant holders. The foregoing is merely a summary of
the rights and
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privileges of the holders of IPO Warrants, and is qualified in its entirety by
reference to the IPO Warrant Agreement between the Company and the Warrant
Agent which is incorporated herein by reference.
PRIVATE WARRANTS. As of the date of this prospectus, the Company has
Private Warrants outstanding to purchase 82,604 shares of Common Stock issued
in conjunction with previous financing transactions and for services rendered.
The Private Warrants are exercisable for three years from the date of
issuance, and the last one to expire will expire on May 6, 1998. The exercise
price of the Private Warrants is $ 8.00 per share, subject to adjustment in the
event of stock splits, stock dividends and similar events. If at any time the
Common Stock of the Company trades on Nasdaq for $12 per share for 20 out of 30
consecutive trading days, the Company has the right to accelerate the three
year exercise period for these warrants by providing ten days prior written
notice to the Private Warrant holder, granting the Private Warrant holder 45
days after the last day of the 30 day trading period to exercise the Private
Warrant. The Company must have an effective registration statement covering
all of the Private Warrant Shares before it can provide notice to shorten the
exercise period. The Company must also use its best efforts to keep the
registration statement effective for a minimum period of six months after the
termination of the shortened exercise period. The holders of the Private
Warrants are entitled to certain "piggy back" registration rights with respect
to the Private Warrant Shares. See "Registration Rights."
UNDERWRITER'S PURCHASE OPTIONS--UNDERWRITER'S SHARES AND UNDERWRITER'S
WARRANTS. As of the date of this prospectus, the Company has outstanding UPOs
to purchase 100,000 units composed of one Underwriter Share and one
Underwriter's Warrant which the UPOs were issued in conjunction with the Unit
Offering on March 21, 1996 may be at an exercise price of $8.97. The UPOs
expire on March 26, 2001. Each unit issuable upon exercise of the UPOs
consists of one share of Common Stock and an Underwriter's Warrant. The
Underwriter's Warrants are exercisable at any time until March 21, 1998. The
holder of the UPOs has the right, for a period ending March 21, 2002, to
include the securities issuable upon exercise of the UPOs as part of certain
other registered offerings of securities commenced by the Company, and for a
period lasting until March 21, 2001 to request the Company register the
underlying securities. Upon receipt of such a request, the Company must use
its best efforts to file a registration statement registering the securities
underlying the UPOs. The number of units covered by the UPOs and the exercise
price were adjusted on the date of issuance of the Debentures and are subject
to further adjustment upon the subdivision, combination or reclassification of
the Common Stock, or certain mergers and consolidations.
It may be expected the UPOs will be exercised only if it is advantageous
to the holders thereof. Therefore, for the life of the UPOs, the holder is
given, at a nominal cost, the opportunity to profit from a rise in the market
price for the Common Stock, which may adversely affect the terms upon which the
Company will obtain additional capital during that to obtain any needed capital
on terms more favorable than those provided for by the UPO.
DEBENTURES. The Company has issued $1,000,000 Initial Debentures due
November 15, 2000 and pursuant to the Debenture Agreements may issue $3,000,000
of Additional Debentures. The Initial Debentures are convertible into Common
Stock of the Company upon the earlier to occur of: (i) January 5, 1998 (60 days
from the date of Issuance); or (ii) the effective date of the Registration
Statement. The Initial Debentures are convertible into Common Stock at a
conversion price for each share of Common Stock equal to the lesser of
subsections (i) or (ii) below:
(i) 130% of the average closing bid price of the Common Stock on the
five consecutive trading days preceding the initial issuance date of
the Debenture; or
(ii) (a) beginning on the 60th day after the issuance date and ending
on the 90th day after the issuance date the conversion rate
shall be 84% of the Market Price;
(b) beginning on the 91st day after the issuance date and ending
on the 120th day after the issuance date the conversion rate
shall be 82% of the Market Price;
(c) beginning on the 121st day after the issuance date and ending
on the maturity date the conversion rate shall be 80% of the
Market Price.
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Notwithstanding the foregoing, no more than 33% of the principal amount of
the Initial Debentures may be converted into Common Stock during any thirty
(30) calendar day period. The entire unpaid balance and accrued interest
outstanding on the maturity date shall automatically convert into Common Stock
in accordance with the this conversion rate. The $3,000,000 balance of
Additional Debentures, if issued, will be convertible into Common Stock at a
conversion price for each share of Common Stock equal to 86% of the Market
Price on the date of conversion. Principal and interest on Additional
Debentures may be converted into Common Stock at the election of the holder
without limitation, and shall be converted into Common Stock on the maturity
date.
DEBENTURE WARRANTS. As of the date of this prospectus, the Company has
issued Debenture Warrants to purchase 17,000 shares of Common Stock, the
Debenture Warrants were issued in conjunction with the issuance of the Initial
Debentures. Debenture Agreements call for Debenture Warrants to be issued to
purchase 17,000 shares of Common Stock for each $1,000,000 of Additional
Debentures issued. The Debenture Warrants are exercisable for a period of
three years from the date of issuance and are exercisable at a price equal to
the lessor of: (i) $8.38 (125% of the Market Price of the Company'' Common
Stock on the date of issuance), or (ii) 125% of the Market Price of the Common
Stock on the Effective Date.
REGISTRATION RIGHTS. The holders of the Private Warrants are entitled to
certain rights with respect to the registration of Shares under the Securities
Act, pursuant to agreements among such holders and the Company (the "Private
Warrant Registration Rights Agreements"). Under the terms of the Private
Warrant Registration Rights Agreements, and subject to certain limitations
therein, if the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of other security
holders exercising registration rights, the holders of the Private Warrants are
entitled to notice of such registration and are entitled to include the Private
Warrant Shares therein. These rights are subject to certain conditions and
limitations, including in certain circumstances the right of the underwriters
of an offering and/or the Company to limit the number of shares included in
such registration or exclude all shares.
The holders of the UPOs also have the right for a period ending March 21,
2002, to include the securities issuable upon exercise of the UPOs as part of
certain other registered offerings of securities commenced by the Company, or
for a period of ending March 21, 2001, to request the Company register the
securities underlying the UPOs. Upon receipt of such a request, the Company
has agreed to use its best efforts to file a registration statement registering
the Underwriter's Shares and the Underwriter's Warrant Shares underlying the
UPOs.
In connection with the issuance of the Debentures, the Company is required
to file a registration statement covering the Debenture Shares, the Debenture
Warrant Shares, and the Placement Agent Shares with the Securities and Exchange
Commission by December 6, 1997. The Company is further required to use its
best efforts to have the Registration Statement declared effective by January
20, 1998. Failure to file the Registration Statement by December 6, 1997, or
to have it declared effective by January 20, 1998, will result in the Company
having to pay significant monetary damages computed on a daily basis until the
Registration Statement is filed and effective. The Company is required to keep
the registration statement effective, until the earlier of: (i) the date which
is two years after the closing date, (ii) the date when all of the investors
therein may sell all of their registrable securities under Rule 144, or (iii)
the date when the Debenture Holders no longer hold any registrable securities.
The Company has also agreed to file a Registration Statement to enable the
holders to exercise the IPO Warrants issued in connection therewith. The
Company has agreed to use its best efforts to keep the Registration Statement
effective while the IPO Warrants are exercisable, and to qualify the underlying
shares of Common Stock in the states in which the holders of the IPO Warrants
reside.
NEVADA TAKEOVER LEGISLATION
Sections 78.411-78.444 of the General Corporation law of Nevada ("Business
Combination Statute"), is applicable to the Company since it has 200 or more
stockholders. These provisions may make it more difficult to effect certain
transactions between a corporation and a person or group who owns 10% or more
of the corporation's
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outstanding voting stock, including rights to acquire stock, or a person who is
an affiliate or associate of the corporation and who was the owner of 10% or
more of such voting stock at any time within three years immediately prior to
the date in question ("Interested Stockholder"). The Business Combination
Statute prevents the following transactions between the corporation and the
Interested Stockholder for three years following the date the stockholder
became a 10% or more holder of the corporation's voting stock, unless certain
conditions are met: (i) any merger or consolidation; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of the corporation's
assets having a total market value equal to 10% or more of the total market
value of all the assets of the corporation; or 5% or more of the total market
value of all outstanding shares of the corporation or representing 10% or more
of the earning power of the corporation; (iii) the issuance or transfer by the
corporation of any shares of the corporation that have an aggregate market
value equal to 5% or more of the aggregate market value of all the outstanding
shares of the corporation to stockholders except under the exercise of warrants
or rights to purchase shares offered, or a dividend or distribution paid or
made, pro rata to all stockholders of the corporation; (iv) the adoption of any
plan or proposal for the liquidation or dissolution of the corporation proposed
by, or under any agreement or arrangement or understanding, whether or not in
writing, with, the Interested Stockholder; (v) any reclassification of
securities, recapitalization, merger or consolidation or other transaction
which has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares owned by the Interested Stockholder, and (vi)
any receipt by the Interested Stockholder of the benefit, except proportionally
as a stockholder of the corporation, of any loan or other financial assistance
or any tax credit or other tax advantage provided by or through the
corporation.
The three year ban does not apply if either the proposed transaction or
the transaction by which the Interested Stockholder became an Interested
Stockholder is approved by the Board of Directors of the corporation prior to
the date the stockholder became an Interested Stockholder.
APPLICATION OF PSEUDO-FOREIGN CORPORATION STATUE OF CALIFORNIA
The Company is a Nevada corporation which is authorized to do business as
foreign corporation in California. Under Section 2115 of the California General
Corporation Law, certain foreign corporations (i.e., corporations not organized
under California law) are placed in a special category (referred to in this
discussion as pseudo-foreign corporation) if they have characteristics of
ownership and operation which indicates they have significant contacts in
California. So long as the Company is in this special category and does not
qualify for one of the statutory exemptions, it is subject to a number of key
provisions of the California General Corporations Law applicable to
corporations incorporated in California.
The Company is a pseudo-foreign corporation since more than 50% of the
Company's shares are held by California residents, substantially all of its
operations are in California, and no exemptions from this statute are currently
applicable to the Company. Therefore, certain provisions of the California
General Corporations Law, pursuant to Section 2115 thereof, will be applicable
to the Company. Among the more important provisions are those relating to the
election and removal of directors, cumulative voting, classified boards of
directors, standard of liability of directors, distributions, dividends and
repurchases of shares, stockholder meetings, approval of certain corporate
transactions, appraisal rights, and inspection of corporate records.
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CERTAIN ARTICLES OF INCORPORATION AND BYLAW PROVISIONS WITH
POSSIBLE ANTI-TAKEOVER EFFECTS
The Company's Articles of Incorporation contain several provisions that
may make the acquisition of control of the Company by means of tender offer,
open market purchases, a proxy fight or otherwise more difficult. These
provisions may also discourage transactions in which the stockholders might
otherwise receive a premium for their shares over the current market prices,
and may limit the ability of the stockholders to approve transactions that they
may deem to be in their best interests. The Company is subject to certain
provisions of California law as summarized above under "Application of
Pseudo-Foreign Corporation Statute of California" until such time as either (i)
it is listed on the New York or American Stock Exchange or on the National
Market System of Nasdaq and has 800 stockholders, or (ii) it is no longer a
pseudo-foreign corporation pursuant to California law. To the extent the
provisions discussed below are inconsistent with California law, California law
may control until it is no longer classified as a pseudo-foreign corporation.
Set forth below is a description of certain provisions of the Company's
Articles of Incorporation.
CLASSIFIED BOARD OF DIRECTORS
The Articles of Incorporation divide the Board of Directors into three
classes, with each class having a term of three years. Each such class is as
nearly equal in number as possible. At each annual meeting of stockholders,
commencing with the next annual meeting of stockholders, directors in Class I
will be elected to succeed those directors of that class whose terms have
expired, and each newly elected director will serve for a three-year term. At
each subsequent regularly scheduled meeting of stockholders held to elect
directors, the directors of the next succeeding Class shall be elected to a
three year term. Currently Directors Gregory F. Gilbert and Carl M. Lewis are
in Class I, Joyce M. Hendler and Nolan E. Penn are in Class II, and Sheldon S.
Hendler and Dennis J. Carlo are in Class III.
The Company believes a classified Board of Directors will help to assure
the continuity and stability of the Company's Board of Directors and its
business strategies and policies. The classified board provision could
increase the likelihood that, in the event of a takeover of the Company,
incumbent directors will retain their positions. In addition, the classified
board provision will help ensure the Company's Board of Directors, if
confronted with an unsolicited proposal from a third party who has acquired a
block of the voting stock of the Company, will have sufficient time to review
the proposal and appropriate alternatives, to seek the best available result
for the Corporation.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The Company's Articles of Incorporation provide that no action shall be
taken by stockholders except at an annual or special meeting of stockholders.
The Company's Articles of Incorporation also provide that special meetings of
stockholders can only be held pursuant to a resolution approved by the Board of
Directors, and not by the stockholders and only to consider such business as
shall be provided in such resolution, or in the notice to stockholders of the
special meeting.
STOCKHOLDER NOMINATION OF DIRECTORS
The Company's Articles of Incorporation establish an advance notice
procedure with regard to the nomination (other than by or at the direction of
the Board of Directors or a committee thereof), of candidates for election as
directors (the "Nomination Procedure"). Only persons who are nominated by the
Board of Directors, a committee appointed by the Board of Directors or by a
stockholder who has given timely prior written notice to the Secretary of the
Company prior to the meeting at which directors are to be elected, shall be
eligible for election as directors of the Company. Except in limited
circumstances, such written notice must be received at the Company's principal
executive office not less than 60 days prior to the scheduled meeting, and must
contain specified information as to the nominee and the stockholder making the
nomination. The presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the Nomination Procedure.
Stockholders may be given relatively limited advance notice of the date of a
stockholders meeting held to elect directors. In order to nominate a director
at such a meeting the stockholder must promptly comply with the prior notice
provisions, resulting in only a short period to
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prepare and submit a nomination. This is likely to result in it being more
difficult for stockholders to nominate candidates to the Board of Directors who
are not selected by management.
Although the Company's Articles of Incorporation do not give the Board of
Directors any power to approve or disapprove stockholder nominations for the
election of the directors or any other business properly bought by the Company
stockholders before an annual or special meeting, this provision may have the
effect of precluding a nomination for the election of directors or precluding
the conducting of business at a particular meeting if the proper procedures are
not followed, or may discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of the Company.
STOCKHOLDER PROPOSALS AT STOCKHOLDER MEETINGS
The Company's Articles of Incorporation establish an advance notice
procedure for stockholder proposals brought before a regularly scheduled
stockholders meeting. Except in very limited circumstances, to be timely, a
stockholder's notice must be received at the Company's principal executive
offices not less than 60 days prior to the scheduled meeting. The
stockholder's notice must set forth in writing each matter the stockholder
proposes to bring before the meeting, including a brief description and the
reasons for conducting such business at the meeting, the names and addresses as
they appear on the Company's books of the stockholder making the proposal, and
any other stockholder known by the proponent to be supporting the proposal, the
class and number of shares beneficially owned by the stockholder making the
proposal and any other stockholder known to be supporting the proposal. This
provision will preclude conducting business at a particular meeting if the
proper notice procedures are not followed.
CERTAIN VOTING REQUIREMENTS
The Company's Articles of Incorporation require the affirmative vote of
70% of the outstanding voting stock to approve or authorize an amendment to
certain of the Articles of Incorporation. The Articles of Incorporation also
provide that no director of the Company may be removed except for cause, and
requires a vote of 70% of the outstanding shares to remove a director. The 70%
voting requirement may have the effect of delaying, deferring or preventing a
change of control of the Company.
TRANSFER AGENT AND WARRANT AGENT
ChaseMellon Shareholder Services is the transfer agent for the Common
Stock and warrant agent with respect to the Warrants.
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SELLING SECURITY HOLDERS
The following table sets forth certain information, as of the date hereof,
with respect to the beneficial ownership of the Company's Private Warrant
Shares, Underwriter's Shares, Underwriter's Warrant Shares, Debenture Shares,
Debenture Warrant Shares, and Placement Agent Shares (collectively the "Resale
Securities") registered herein by each Selling Security Holder named below.
The shares of Common Stock are being registered to permit public secondary
trading of the Resale Securities, and the Selling Security Holders may offer
the Resale Securities for resale from time to time. Except as described below,
none of the Selling Security Holders has had any position, office or other
material relationship with the Company within the past three years. The
following table assumes each Selling Security Holder sells all of the Resale
Securities held by such Selling Security Holder in this offering. The Company
is unable to determine the exact number of Resale Securities that will actually
be sold.
NAME NUMBER NUMBER
BENEFICIALLY OWNED OFFERED HEREBY
Dr. Ghanshyam Patel(1) . . . . . . . . . . 5,000 5,000
Sean Pickett(1). . . . . . . . . . . . . . 2,500 2,500
Richard & Robin Alman(1) . . . . . . . . . 5,000 5,000
William Chester(1) . . . . . . . . . . . . 2,500 2,500
Allan Margolis(1). . . . . . . . . . . . . 10,000 10,000
Allan & Ruth Zelcer(1) . . . . . . . . . . 5,000 5,000
Eric & Florence Stein(1) . . . . . . . . . 2,500 2,500
Samuel & Susan Smith(1). . . . . . . . . . 2,500 2,500
Mark Block(1). . . . . . . . . . . . . . . 5,000 5,000
Knight Family Holdings, Inc.(1). . . . . . 5,000 5,000
Harry Smith(1) . . . . . . . . . . . . . . 2,500 2,500
Mark McCarty(1). . . . . . . . . . . . . . 2,500 2,500
Steven & Kimberly Silvers(1) . . . . . . . 2,500 2,500
David Fisher(1)(2) . . . . . . . . . . . . 5,812 5,812
Charter Financial Holdings LLC(1)(2) . . . 18,792 18,792
Nancy Mauriello(1)(2). . . . . . . . . . . 1,500 1,500
Merrill Cannon(1)(2) . . . . . . . . . . . 1,000 1,000
Rachel Newhall(1)(2) . . . . . . . . . . . 500 500
Karl Bishopric(3). . . . . . . . . . . . . 1,960 1,960
Jesus Oguendo(3) . . . . . . . . . . . . . 600 600
George Fisher(3) . . . . . . . . . . . . . 360 360
Peter Howard(3). . . . . . . . . . . . . . 12,180 12,180
Richard Davis(3) . . . . . . . . . . . . . 4,460 4,460
James Grant(3) . . . . . . . . . . . . . . 24,460 24,460
Joseph Smith(3). . . . . . . . . . . . . . 2,420 2,420
Ray Martinez(3). . . . . . . . . . . . . . 2,000 2,000
Ronald Stein (3) . . . . . . . . . . . . . 1,560 1,560
William Fusselmann(3). . . . . . . . . . . 50,000 50,000
First Equity Corporation of Florida(3) . . 100,000 100,000
Endeavour Capital Fund SA(4) . . . . . . . 149,665 149,665
Mabcrown, Inc.(4). . . . . . . . . . . . . 149,664 149,664
Jesup & Lamont Securities Corporation(5) . 8,000 8,000
------- -------
Total. . . . . . . . . . . . . . . . . . . 542,433 542,433
- --------------------------
(1) Represents the Private Warrant Shares issuable from time to time upon
exercise of Private Warrants.
(2) Beneficially owned by a Partner, Associate or employee of Fisher Thurber
LLP (securities counsel to the Company).
(3) Represents Underwriter's Shares and Underwriter's Warrant Shares issuable
upon exercise of the UPOs and the Underwriter's Warrants included therein.
(4) Represents Debenture Shares which may be acquired upon conversion of
outstanding Debentures and Debenture Warrant Shares issuable upon exercise
of Debenture Warrants. Includes approximately 150% of the Debenture
Shares which would be issued upon a conversion of all Debentures at a time
market prices for Common Stock are the same as on the date of this
Prospectus. The number of Debenture Shares owned and offered may vary
based upon fluctuations in the market price of the Common Stock, stock
dividends, stock splits and other similar circumstances. See "Description
of Securities - Debentures and Debenture Warrants."
(5) Represents Placement Agent Shares.
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PLAN OF DISTRIBUTION
The Warrants may be exercised by surrendering properly endorsed
certificates to the Company's Transfer Agent accompanied by payment in
full of the exercise price for each share of Common Stock as to which the
Warrants are being exercised and any applicable transfer or other taxes.
Payment of the exercise price for the Warrants may be made by tendering cash or
a cashier's check.
The Debentures may be converted into Common Stock of the Company at the
election of the holder by providing proper notice thereof and the Debenture to
be converted in whole or in part to the Company's Transfer Agent.
The Company must have on file a current registration statement with the
Securities and Exchange Commission pertaining to the IPO Warrants in order for
a holder to exercise them. The IPO Warrant Shares must also be registered or
exempt for sale under the securities laws of the state in which the holder
resides. The Company intends to use its best efforts to keep the Registration
Statement incorporating this Prospectus current, but there can be no assurance
such Registration Statement (or any other registration statement filed by the
Company covering the Securities) can be kept current. In the event a
Registration Statement including the IPO Warrant Shares is not kept current, or
if the IPO Warrant Shares are not registered or exempt for sale in the state in
which a holder resides, the IPO Warrants may be deprived of some or all of their
value.
The Company will not be required to pay a fee to any selling agent with
respect to any exercise of the Warrants.
The Common Stock offered by the Selling Security Holders are not being
underwritten. The Selling Security Holders will act independently of the
Company in making decisions with respect to the timing, manner and size of each
sale. The Common Stock offered hereby may be sold by the Selling Security
Holders from time to time in transactions (which may include block
transactions) in the over-the-counter market, in 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, or at negotiated prices. The
Selling Security Holders may effect such transactions by selling the Common
Stock directly to purchasers or through broker-dealers that may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Security Holders and/or
the purchasers of the Securities for whom such broker-dealers may act as agents
or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The Selling Security Holders and any broker-dealers that act in connection
with the sale of the Common Stock as principals may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and
any commission received by them and any profit on the resale of such Common
Stock as principals might be deemed to be underwriting discounts and
commissions under the Securities Act. The Selling Security Holders may agree
to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the Common Stock against certain liabilities,
including liabilities arising under the Securities Act. The Company will not
receive any proceeds from the sales by the Selling Security Holders, although
the Company will receive proceeds from the exercise of the Warrants, and will
benefit indirectly by the reduction in Company debt resulting from the
conversion of any Debentures. Sales of the Securities by the Selling Security
Holders, or even the potential of such sales, could have an adverse effect on
the market price of the Company's outstanding Common Stock and IPO Warrants.
At the time a particular offer of Common Stock is made, except as herein
contemplated, by or on behalf of a Selling Security Holder or the Company
including following exercise of Warrants, to the extent required, a prospectus
will be distributed which will set forth the number of shares of Common Stock
being offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, if any, the purchase price paid by any
underwriter for Common Stock purchased from the Selling Security Holder and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may
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not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Common Stock may not simultaneously engage
in market making activities with respect to the securities of the Company for a
period of at least one, and possibly five business days prior to the
commencement of such distribution. In addition and without limiting the
foregoing, each Selling Security Holder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Regulation M, Rule 101, 102 and 107, which
provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Security Holders.
The Private Warrants, Debentures, Debenture Warrants, and the Placement
Agent Shares were originally issued to certain Selling Security Holders
pursuant to an exemption from the registration requirements of the Securities
Act provided by Section 3(b) thereof including Rules 504 and 505 of
Regulation D and Section 4(2) thereof including without limitation Rule 506
pursuant to Regulation D thereunder. The Company agreed to register the
Private Warrant Shares, Debenture Shares, Debenture Warrant Shares and
Placement Agent Shares under the Securities Act and to indemnify and hold
such Selling Security Holders harmless against certain liabilities under the
Securities Act that could arise in connection with the sale by such Selling
Security Holders of such Common Stock. In connection therewith the Company
has agreed to pay all reasonable fees and expenses except for fees and
expenses for counsel to the Selling Security Holders and any underwriting
discounts and commissions.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fisher Thurber LLP, 4225 Executive
Square, Suite 1600, La Jolla, California 92037-1483. Partners, associates and
employees of Fisher Thurber LLP hold various amounts of the Securities and
other Securities of the Company. See "Selling Security Holders."
EXPERTS
The financial statements of the Company appearing in the Company's annual
report (Form 10-K/A SB) for the year ended December 31, 1996, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements referred to above are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of the Company as of December 31, 1995, and for
the year then ended, incorporated by reference in this Prospectus, have been
audited by J.H. Cohn LLP, independent public accountants, as set forth in their
report thereon which is also incorporated by reference in this Prospectus, and
have been so included in reliance upon the report of such firm given the
authority of such firm as experts in accounting and auditing.
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No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus. If given or made, such information or representations must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any of the
securities other than the securities other than the securities to which it
relates, or an offer or solicitation of an offer to buy any of the securities to
which it relates, or an offer or solicitation to any person in any jurisdiction
where such an offer or solicitation would be unlawful. Neither the delivery of
this Prospectus nor any sale make hereunder shall under any circumstances create
an implication that information contained herein is correct as of any time
subsequent to the date hereof.
------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . . .15
Certain Articles of Incorporation and Bylaw
Provisions with Possible Anti-Takeover Effects . . . . . . . . . . . . . . .20
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . .22
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
------------------
UNTIL _____ ___, _____, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[ VYREX LOGO ]
1,647,000
SHARES OF COMMON STOCK
-----------
PROSPECTUS
-----------
January __, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered. All of the amounts
shown are estimates except the Securities and Exchange Commission ("SEC")
registration fee and the National Association of Securities Dealers Automated
Quotation Service (Nasdaq) fee.
SEC Filing Fee . . . . . . . . . . . . . . . . . . . $ 3,979.97
----------
Nasdaq Fee . . . . . . . . . . . . . . . . . . . . . $ 4,899.33
----------
Blue Sky Fees and Expenses . . . . . . . . . . . . . $ 4,888.66
----------
Printing and Engraving Expenses. . . . . . . . . . . $ 5,000.00
----------
Accounting Fees and Expenses . . . . . . . . . . . . $ 5,000.00
----------
Legal Fees and Expenses. . . . . . . . . . . . . . . $ 10,000.00
----------
Miscellaneous. . . . . . . . . . . . . . . . . . . . $ 1,232.04
----------
Total (Estimated) . . . . . . . . . . . . . . $ 35,000.00
----------
* To be filed by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The statutes, charter provisions, Bylaws, Indemnification Agreements, or
other arrangements under which any controlling person, director or officer of
the Registrant is insured or indemnified in any manner against any liability
which he may incur in his capacity as such, are as follows:
(a) Section 78.751 of the Nevada Corporation law provides for the
indemnification of officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions and
subject to certain limitations.
(b) Article VII of the Bylaws of the Company provides that the Company
shall have power to indemnify any person who was or is a party or is threatened
to be made a party to any proceeding by reason of the fact that such person is
or was an agent of the Company, against expenses, judgments, fines, settlements
and other amounts, actually and reasonably incurred in connection with such
proceeding if the person acted in good faith, reasonably believing the acts to
be in the best interest of the Company, and acted having no reason to believe
the conduct unlawful. The Company shall advance the expenses reasonably expected
to be incurred by such agent in defending any such proceeding upon receipt of
the undertaking required by Nevada Corporation Code Section 78.751(5).
(c) Article Twelve of the Company's Articles of Incorporation provides
that the liability of the directors of the Company for monetary damages shall be
eliminated to the fullest extent permissible under Nevada law. Accordingly, a
director will not be liable for monetary damages for breach of duty to the
Company or its shareholders in any action brought by or in the right of the
Company. However, a director remains liable to the extent required by law (i)
for acts or omission that involve intentional misconduct or a knowing and
culpable violation of law, and (ii) for the payment of distributions in
violation of Nevada law. The effect of the provisions in the Articles of
Incorporation is to eliminate the rights of the Company and its shareholder
(through shareholders' derivative suits on behalf of the Company) to
II-1
<PAGE>
recover monetary damages against a director for breach of duty as a director,
including breaches resulting from negligent behavior in the context of
transactions involving a change of control of the Company or otherwise, except
in the situations described in clauses (i) and (ii) above. These provisions will
not alter the liability of directors under federal securities laws.
(d) Pursuant to Authorization provided under the Articles of
Incorporation, the Company has entered into indemnification agreements with each
of its directors and officers. Generally, the indemnification agreements attempt
to provide the maximum protection permitted by Nevada law as it may be amended
from time to time. Moreover, the indemnification agreements provide for certain
additional indemnification. Under such additional indemnification provisions,
however, an individual will not receive indemnification for judgments,
settlements or expenses if he or she is found liable to the Company (except to
the extent the court determines he or she is fairly and reasonably entitles to
indemnity for expenses), for settlements not approved by the Company or for
settlements and expenses if the settlement is not approved by the court. The
indemnification agreements provide for the Company to advance to the individual
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding. In order to
receive an advance of expenses, the individual must submit to the Company copies
of invoices presented to him or her for such expenses. Also, the individual must
repay such advances upon a final judicial decision that he or she is not
entitled to indemnification. The Company's Bylaws contain a provision of similar
effect relating to advancement or expenses to a director or officer, subject to
an undertaking to repay if it is ultimately determined that indemnification is
unavailable.
(e) The Registrant currently maintains a director and officer insurance
policy with policy limits of $5,000,000.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.1 Restated Articles of Incorporation.(1)
4.2 Registrants' Bylaws as amended to date.(1)
4.3 Form of Registration Rights Agreement between the Registrant and
holders of the Debentures.(2)
4.4 Form of certificate for shares of Common Stock of the
Registrant.(1)
4.5 Form of Underwriters Unit Purchase Option.(1)
4.6 Form of Warrant Agreement between the Registrant and ChaseMellon
Shareholder Services, Inc.(1)
4.7 Form of Common Stock Purchase Warrant (Debenture Warrant) issued
to holders of the Debentures.(2)
4.8 Form of Common Stock Purchase Warrant issued in 1994 and 1995
between the Registrant and the parties listed on the attached
schedule.(1)
4.9 Form of 6% Convertible Debenture (Debentures).(2)
4.10 Form of Warrant certificate (IPO Warrants).(1)
4.11 Form of Securities Purchase Agreement dated November 6, 1997
between the Registrant and holders of the Debentures.(2)
II-2
<PAGE>
5.1 Opinion of Fisher Thurber LLP regarding the legality of the
securities being registered.(3)
10.1 License Agreement with American Qualex International, Inc., dated
October 1, 1995(1)
10.2 License Agreement with Pollufil Trading S.A., dated as of
October 1, 1995(1)
10.3 License Agreement with Dr. Jonathan W. Jarvik effective
November 1, 1995(1)
10.4 The Company's 1993 Stock Option Plan(1)
10.5 Agreement with Retired Persons Services, Inc.(3)
23.1 Consent of Ernst & Young LLP, independent public accountants.(3)
23.2 Consent of J.H. Cohn LLP, independent public accountants.(3)
23.3 Consent of Fisher Thurber LLP (included in Exhibit 5.1).
24.1 Power of attorney.(2)
- --------------------------
(1) Incorporated by reference to the Company's Registration Statement in Form
SB-2 Registration No. 33-99880 filed on December 1, 1995, and as
subsequently amended.
(2) Filed previously.
(3) Filed herewith.
ITEM 17. UNDERTAKINGS
The 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 which,
individually or together, represent a fundamental change 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 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(iii) To include any additional or changed material information on
the plan of distribution.
(2) That, 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 the initial bona
fide offering.
(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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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
II-3
<PAGE>
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.
The Registrant hereby undertakes:
(1) For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(l) or (4) or 497(h)
under the Securities Act as part of this Registration Statement as of the time
the Commission declared it effective.
(2) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration Statement,
and the offering of the securities at that time as the initial bona fide
offering thereof.
II-4
<PAGE>
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 of filing on Form S-3 and has authorized this Amendment No. 1 to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of La Jolla, State of California, on
January 14, 1998.
Vyrex Corporation
By: /s/ SHELDON S. HENDLER
-------------------------------------------
Sheldon S. Hendler, Chief Executive Officer
In accordance with 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 stated.
SIGNATURES
/s/ SHELDON S. HENDLER /s/ DENNIS J. CARLO
- ------------------------------------ ------------------------------------
Sheldon S. Hendler Dennis J. Carlo
Chief Executive Officer and Director By: Sheldon S. Hendler
January 14, 1998 Attorney-in-Fact
January 14, 1998
/s/ CARL M. LEWIS /s/ NOLAN E. PENN
- ------------------------------------ ------------------------------------
Carl M. Lewis Nolan E. Penn
Executive Vice President, Secretary, By: Sheldon S. Hendler
General Counsel and Director Attorney-in-Fact
January 14, 1998 January 14, 1998
/s/ JOYCE M. HENDLER /s/ GREGORY F. GILBERT
- ------------------------------------ ------------------------------------
Joyce M. Hendler Gregory F. Gilbert
By: Sheldon S. Hendler By: Sheldon S. Hendler
Attorney-in-Fact Attorney-in-Fact
January 14, 1998 January 14, 1998
/s/ STEVEN J. KEMPER
- ------------------------------------
Steven J. Kemper
Chief Financial Officer
January 14, 1998
II-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
EXHIBITS
TO
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------
VOLUME I
VYREX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
VOLUME I
INDEX TO EXHIBITS TO AMENDMENT NO. 1 TO FORM S-3
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.1 Restated Articles of Incorporation.(1)
4.2 Registrants' Bylaws as amended to date.(1)
4.3 Form of Registration Rights Agreement between the Registrant
and holders of the Debentures.(2)
4.4 Form of certificate for shares of Common Stock of the
Registrant.(1)
4.5 Form of Underwriters Unit Purchase Option.(1)
4.6 Form of Warrant Agreement between the Registrant and
ChaseMellon Shareholder Services, Inc.(1)
4.7 Form of Common Stock Purchase Warrant (Debenture Warrant)
issued to holders of the Debentures.(2)
4.8 Form of Common Stock Purchase Warrant issued in 1994 and 1995
between the Registrant and the parties listed on the attached
schedule.(1)
4.9 Form of 6% Convertible Debenture (Debentures).(2)
4.10 Form of Warrant certificate (IPO Warrants).(1)
4.11 Form of Securities Purchase Agreement dated November 6, 1997
between the Registrant and holders of the Debentures.(2)
5.1 Opinion Fisher Thurber LLP regarding the legality of the
securities being registered.(3)
10.1 License Agreement with American Qualex International, Inc.,
dated October 1, 1995(1)
10.2 License Agreement with Pollufil Trading S.A., dated as of
October 1, 1995(1)
10.3 License Agreement with Dr. Jonathan W. Jarvik effective
November 1, 1995(1)
10.4 The Company's 1993 Stock Option Plan(1)
10.5 Agreement with Retired Persons Services, Inc.(3)
23.1 Consent of Ernst & Young LLP, independent public
accountants.(3)
23.2 Consent of J.H. Cohn LLP, independent public accountants.(3)
23.3 Consent of Fisher Thurber LLP (included in Exhibit 5.1).
24.1 Power of attorney.(2)
- ---------------------------
(1) Incorporated by reference to the Company's Registration Statement in Form
SB-2 Registration No. 33-99880 filed on December 1, 1995, and as
subsequently amended.
(2) Filed previously.
(3) Filed herewith.
<PAGE>
Exhibit 5.1
LAW OFFICES OF
FISHER THURBER LLP
A LIMITED LIABILITY PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
4225 Executive Square, Suite 1600
La Jolla, California 92037-1483
619-535-9400
Fax 619-535-1616
January 14, 1998
Board of Directors
Vyrex Corporation
2159 Avenida de la Playa
La Jolla, CA 92037
Re: Form S-3 Registration Statement
Ladies and Gentlemen:
We have acted as special counsel for Vyrex Corporation (the "Company")
in connection with the preparation and filing of a Registration Statement on
Form S-3, Registration No. 333-40665 (the "Registration Statement"), and the
Prospectus to be included therein (the "Prospectus") pursuant to which it is
proposed to offer up to 1,647,030 shares of Common Stock, par value $.001 per
share, as stated on the facing page of the Registration Statement.
Capitalized terms used herein have the meanings ascribed to them in the
Registration Statement unless otherwise noted.
We are familiar with the proceedings by which the Common Stock has been
authorized, and we have reviewed and are familiar with the Articles of
Incorporation, as amended, and the By-Laws of the Company and such other
corporate records and documents as we have deemed necessary to express the
opinion herein stated. We have assumed the genuineness of all signatures and
the authenticity of all documents submitted to us as originals, the
conformity to original documents and all documents submitted to us as
certified or photostatic copies, and the authenticity of the originals of such
latter documents.
Based upon the foregoing, we are of the opinion that the Common Stock to
be sold and delivered as contemplated by the Registration Statement will be
legally issued, fully paid and nonassessable.
We hereby consent to all references to this firm in the Registration
Statement and all amendments to the Registration Statement. We further
consent to the use of this opinion as an exhibit to the Registration
Statement.
Sincerely,
FISHER THURBER LLP
By: /s/ David A. Fisher
---------------------------------
David A. Fisher
<PAGE>
EXHIBIT 10.5
AGREEMENT WITH RETIRED PERSONS SERVICES, INC.
<PAGE>
[LETTERHEAD]
October 7, 1997
Vyrex Corporation
2159 Avenida de la Playa
La Jolla, CA 92037-3215
Attention: Sheldon Saul Hendler, Ph.D., M.D.
Re: MEMORANDUM OF UNDERSTANDING
Dear Shelly:
As consideration for the terms and conditions set forth below, Retired
Persons Services, Inc. (hereinafter "RPS") is prepared to advance to Vyrex
Corporation (hereinafter "Vyrex") the sum of one hundred thousand dollars
($100,000.00) within sixty (60) days of the date of execution of this
Memorandum of Understanding ("Memorandum"):
1. Within 120 days after completion of a fully approved production
batch, but in no event later than 12 months thereafter, Vyrex (or any
subsidiary thereof) shall deliver to RPS $100,000.00 worth of the
following Vyrex nonprescription dietary supplement products: Heart
Health/Cholesterol Complex, and Vitality Complex, Bone/joint Health
Complex, Prostate Health Complex, and Vitality Complex. Pricing of said
products shall be mutually agreed upon within 120 days hereof or as
this time may be extended by RPS in its discretion.
2. RPS shall have category distribution rights for the formulas set
forth above for a period of five years from the date hereof. For
purposes of this Memorandum, "category distribution rights" shall
mean the exclusive right to market the designated formulas within the
United States. Vyrex shall not directly sell or grant any third party
the right to sell any of the formulas designated above in the United
States for five years.
3. RPS shall have a first right of refusal to acquire category
distribution rights to new nonprescription nutritional supplement
product formulations, excluding for example foods, as they are
developed by Vyrex, or any subsidiaries thereof.
<PAGE>
Vyrex Corporation
Memorandum of Understanding
Page 2
4. Vyrex will execute RPS' standard form Indemnity and Continuing
Guaranty copies of which are attached hereto.
5. Vyrex may not use or cause to be used the RPS name or acronym or the
name AARP Pharmacy Service or the name or acronym of AARP or disclose
the existence of this Memorandum without the express advance written
approval of RPS.
6. RPS, in its discretion, may file notices of lien or financing
statements demonstrating its rights to the inventory referenced in
Paragraph 1 above, and Vyrex will cooperate with RPS in effectuating
such filings.
Vyrex will return the $100,000.00 sum set forth above within thirty (30) days
upon request from RPS if: (i) the terms of Paragraph 1 above are not
satisfied within the time frame set forth therein or (ii) prior to the
delivery of the products, as set forth in Paragraph 1 above, Dr. Hendler is
no longer active in Vyrex business. Upon return of these funds, RPS will
cancel any notice of lien and/or financing statement it may have filed and
the parties shall no longer be bound by any term contained herein.
The confidentiality agreement executed by the parties continues in effect in
accordance with its terms.
Agreed and Accepted: Agreed and Accepted:
VYREX CORPORATION RETIRED PERSONS SERVICES, INC.
By: /s/ Sheldon S. Hendler By: /s/ Brian S. Frid
------------------------------------ -------------------------------
Sheldon S. Hendler, Ph.D., M.D. Brian S. Frid
Chairman and Chief Executive Officer President
Date: 10/24/97 Date:
---------------------------------- -----------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3) and related
Prospectus of Vyrex Corporation for the registration of 1,647,030 shares of
its common stock and to the incorporation by reference therein of our report
dated March 3, 1997, with respect to the financial statements of Vyrex
Corporation included in its Annual Report (Form 10-KSB) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
-------------------------------
Ernst & Young LLP
San Diego, California
January 13, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF J.H. COHN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
EXHIBIT 23.2
CONSENT OF J. H. COHN LLP
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement on Form S-3 being filed by Vyrex Corporation (the
"Company") of our report dated February 9, 1996, which appears in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1996 (the
"Form 10-KSB"), on the financial statements of the Company as of December 31,
1995 and for the year then ended, which are also included in the Form 10-KSB
and incorporated by reference in this Registration Statement. We also consent
to the reference to our firm under the caption "Experts" in the Registration
Statement.
/s/ J. H. Cohn LLP
--------------------
J. H. Cohn LLP
San Diego, California
January 13, 1998
