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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 19962, 1998
REGISTRATION NO. 333-15483
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- --------------------------------------------------------------------------------333-66269
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CYPRESS BIOSCIENCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)(Exact name of Registrant as specified in its charter)
DELAWARE 3845 22-2389839
DELAWARE 22-2389839
(STATE OR OTHER JURISDICTION
(State or other jurisdiction (Primary Standard Industrial (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)Employer
of incorporation or organization) Classification Code Number) Identification Number)
4350 EXECUTIVE DRIVE, SUITE 325
SAN DIEGO, CA 92121
(619) 452-2323
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------(Address, including zip code and telephone number, including area code,
of Registrant's principal executive offices)
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JAY D. KRANZLER, VICEM.D., PH.D.
CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
CYPRESS BIOSCIENCE, INC.
4350 EXECUTIVE DRIVE, SUITE 325
SAN DIEGO, CA 92121
(619) 452-2323
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------(Name, address, including zip code and telephone number, including
area code, of agent for service)
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COPIES TO:
FREDERICK T. MUTO, ESQ.
D. BRADLEY PECK, ESQ.
LAUREN D. BOYD, ESQ.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CA 92121
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
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If any of 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. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OFOFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATIONPRICE(1) FEE
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Common Stock, $.02 par value per share........ 5,510,798 $2.0625(1) $11,366,020.88(1) $3,444.25
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Warrants, each to purchase one share of Common
Stock....................................... 2,755,399 $2.00(2) $ 5,510,798.00(2) $1,669.94
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Common Stock, $.02 par value per share issuable upon exercise of the Warrants
included herein(3).......................... 2,755,399(3) $2.0625(1) $ 5,683,010.44(1) (4)
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Total Registration Fee................................................................................ $5,114.19(5)
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- ------------------------------------------------------------------------------------------------------------------------3,063,561 $2.89 8,853,604.59 2,461.33(2)
(1) Estimated in accordance with Rule 457(c) solely for the purpose of
computingcalculating the amount of the registration fee.
(2) Calculated pursuant to Rule 457(g) solely forfee based on the purpose of computing the
amountaverage of the registration fee.
(3) In addition to shares issuable upon exercisehigh
and low prices of warrants being registered
hereunder, includes pursuant to Rule 416(a), such indeterminate number of
shares of Common Stockthe Registrant's common stock as may be issuable pursuant toreported on the antidilution
provisions contained therein.
(4) No separate registration fee required pursuant to Rule 457(g).
(5) Registration fee was previouslyNasdaq
SmallCap Market on October 26, 1998.
(2) Previously paid upon the initial filing of this registration statement.Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS DATED NOVEMBER 12, 1996
SUBJECT TO COMPLETION - DATED NOVEMBER 2, 1998
PROSPECTUS
3,063,561 SHARES
CYPRESS BIOSCIENCE, INC.
5,510,798 SHARES OF COMMON STOCK
2,755,399 COMMON STOCK PURCHASE WARRANTS
2,755,399 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
COMMON STOCK PURCHASE WARRANTS
This Prospectus relatesIn September 1998, we sold shares of our Series A Convertible Preferred
Stock to certain individuals and entities. These shares of preferred stock are
convertible into 3,063,561 shares of our common stock. We have filed this
prospectus to register the shares of common stock underlying the Series A
Convertible Preferred Stock so that the stockholders may offer and sale by certain securityholders
(the "Selling Securityholders")sell shares
in the public market and otherwise. The selling stockholders and the number of Cypress Bioscience, Inc. (the "Company") of
up to 5,510,798
shares of Common Stockour common stock each selling stockholder may sell under this
prospectus are listed on pages 6-7 of the Company (the "Shares"), redeemable
warrants to purchase up to 2,755,399 shares of Common Stock of the Company at an
exercise price of $2.00 per share until October 1, 2001this prospectus.
The selling stockholders may offer their Cypress common stock through
public or if earlier, until
redemption of such warrants by the Company (the "Warrants"), and 2,755,399
shares of Common Stock of the Company issuable upon exercise of the Warrants
(the "Warrant Shares"). The Shares, Warrants and Warrant Shares are sometimes
referred to herein as the "Securities."
The Shares and Warrants were issued by the Company in the form of "Units"
(each Unit consisting of two Shares and one Warrant), in connection with the
Company's September 1996 private placement of Units (the "Private Placement")
and pursuant to the acquisition (the "Merger") by the Company of PRP, Inc., a
Delaware company ("PRP"), whereby the Company issued Units to certain holders of
indebtedness of PRP in cancellation of such indebtedness and to PRP's investment
advisor in satisfaction of amounts owed to such advisor for services rendered to
PRP in connection with the Merger. The offering price of the Units in the
Private Placement and the Merger was $4.00 per Unit. The price of the Units and
the exercise price of the Warrants were determined by the Company and do not
necessarily relate to the fair market value of the Company's Common Stock, book
value, net worth or any other established criteria of value. See "The Private
Placement," "The Warrants" and "The Merger."
The Shares, Warrants and Warrant Shares may be offered by the Selling
Securityholders from time to time in transactions, on or off the Nasdaq SmallCap Market, in privately negotiated transactions or a combination of such methods of sale,
at prices related to such
prevailing market prices, or at privately negotiated prices.
The
Selling Securityholders may effect such transactions by selling the Shares,
Warrants or Warrant Shares to or through broker-dealers, and such broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the Selling Securityholders or the purchasers of the Shares, Warrants or
Warrant Shares for whom such broker-dealers may act as agent or to whom they
sell as principal or both (which compensation to a particular broker-dealer
might be in excess of customary commissions). See "Selling Securityholders" and
"Plan of Distribution."
None of the proceeds from the sale of the Shares, Warrants or Warrant
Shares by the Selling Securityholders will be received by the Company. The
Company has agreed to bear certain expenses (other than fees and expenses, if
any, of counsel or other advisors to the Selling Securityholders) in connection
with the registration of the Shares, Warrants and Warrant Shares being offered
by the Selling Securityholders. Such expenses are estimated to be $35,000. The
Company has agreed also to indemnify the Selling Securityholders against certain
liabilities, including certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Plan of Distribution."
The Common Stock of the CompanyOur common stock is tradedlisted on the Nasdaq SmallCap Market under the
ticker symbol "CYPB." The Warrants will be tradedOn October 27, 1998, the closing price of one share of
Cypress common stock on the Nasdaq SmallCap Market under the symbol "CYPBZ." The last reported sales price of the Company's
Common Stock on the Nasdaq SmallCap Market on November 1, 1996 was $1.9375 per
share.
------------------------$2.69.
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THE SHARES OF CYPRESS COMMON STOCK OFFERED HEREBYOR SOLD UNDER THIS
PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCINGBEGINNING ON PAGE
7 FOR A DISCUSSION3.
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THE SHARES OF CERTAIN FACTORS THAT
SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIESCYPRESS COMMON STOCK OFFERED HEREBY.
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THESE SECURITIESOR SOLD UNDER THIS
PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSIONSEC OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE
SECURITIES AND EXCHANGE COMMISSIONHAVE THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR
ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED _______ __, 1998.
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THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT THAT WE FILED WITH
THE SEC. THE REGISTRATION STATEMENT INCLUDES EXHIBITS AND ADDITIONAL INFORMATION
NOT INCLUDED IN THE PROSPECTUS.
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE YOU ANY SUPPLEMENTAL
INFORMATION OR MAKE ANY REPRESENTATIONS FOR US. YOU SHOULD NOT RELY UPON ANY
INFORMATION ABOUT CYPRESS THAT IS NOT CONTAINED IN THIS PROSPECTUS OR IN ONE OF
CYPRESS'S PUBLIC REPORTS FILED WITH THE SEC AND INCORPORATED INTO THIS
PROSPECTUS. INFORMATION CONTAINED IN THIS PROSPECTUS OR IN CYPRESS'S PUBLIC
REPORTS MAY BECOME OUTDATED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS IS ACCURATE OR COMPLETE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THIS PROSPECTUS OR OTHER DATE TO WHICH SPECIFIC INFORMATION CONTAINED
HEREIN IS , 1996.
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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,QUALIFIED. WE ARE NOT MAKING AN OFFER OF SECURITIES IN ANY STATE WHERE
THE OFFER IS NOT PERMITTED.
THE COMPANY
At Cypress, we research, develop, manufacture and any information not contained or incorporated
herein must not be relied upon as having been authorized bymarket medical
devices and therapeutics for the Company. This
Prospectus does not constitute an offer to sell, or a solicitationtreatment of an offer
to buy, by any person in any jurisdiction in which it is unlawfulhuman immune system disorders, and
we develop novel therapeutic agents for such
person to make such offer or solicitation. Neither the deliverytreatment of this
Prospectus at any time nor any sale made hereunder shall, under any
circumstances, imply thatblood platelet
disorders. We currently market one product, the information herein is correct asProsorba(R) column, for only one
indication, the treatment of any date
subsequent to the date hereof.
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") that involve risks and uncertainties.
The Company's actual results could differ materially from those projected in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited, to those discussed in Risk Factors, as
well as those discussed elsewhere in this Prospectus. The information contained
in this Prospectus should be considered carefully before purchasing any of the
securities being offered hereby.
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"idiopathic thromboxylopene purpura ("ITP"). Such
reports, proxy statementsOur
goal is to continue to market the Prosorba column for the treatment of ITP and
to obtain regulatory approval to market the Prosorba column for the treatment of
rheumatoid arthritis. We also plan to attempt to discover other information can be inspected and copied atdisease
indications for which the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
Commission's following Regional Offices: Chicago Regional Office, Suite 1400,
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661; and
New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material also can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549. The Commission also makes electronic filings
publicly available on the Internet within 24 hours of acceptance. The
Commission's Internet address is http://www.sec.gov. The Commission Web site
also contains reports, proxy and information statements, and other information
regarding the registrant that has been filed electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act, with respect to the Shares, Warrants and Warrant
Shares being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
are omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the Shares, Warrants and
Warrant Shares reference is made to the Registration Statement and the exhibits
and schedules thereto, whichProsorba column may be inspected without chargeused as a treatment and to
market the Prosorba column in those areas. In addition, we intend to continue to
develop Cyplex(R) (Infusible Platelet Membranes), a platelet alternative, as an
alternative to traditional platelet transfusions.
Our principal executive offices are located at 4350 Executive Drive,
Suite 325, San Diego, California 92121, and copies
thereof may be obtained at prescribed rates from, the office of the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
PROSORBA(@)our telephone number is (619)
452-2323. We were incorporated in Delaware in 1981.
Prosorba column and IPMCyplex, platelet alternative, are registered
trademarks of the Company. All other brand names or trademarks appearing in this
Prospectus are the property of their respective holders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K/A for2.
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RISK FACTORS
Investment in Cypress shares involves a high degree of risk. You should
consider the fiscal year ended
December 31, 1995, the Company's Proxy Statement for the 1996 Annual Meetingfollowing discussion of Stockholders filed pursuant to Rule 14a-6 of the Exchange Act, the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, the
Company's Current Report on Form 8-K datedrisks as of March 8, 1996 and the Company's
Current Report on Form 8-K datedwell as of April 1, 1996 filed by the Company with
the Commission are hereby incorporated by referenceother information in this
Prospectus exceptprospectus before purchasing any Cypress shares.
Except for historical information, the information contained in this
prospectus and in our SEC reports are "forward looking" statements about our
expected future business and performance. Our actual operating results and
financial performance may prove to be very different from what we might have
predicted as superseded or modified herein. All documents filed by the Company 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
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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.prospectus. The Company will provide without charge to each person, including any
beneficial owner of shares of Common Stock of the Company, to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the documents that have been or may be incorporated by reference
herein (other than exhibits to such documents which are not specifically
incorporated by reference into such documents). Such requests should be directed
to the Director of Finance at the Company's executive offices at 4350 Executive
Drive, Suite 325, San Diego, California 92121 (telephone (619) 452-2323).
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THE COMPANY
GENERAL
Cypress Bioscience, Inc. was incorporated under the laws of the State of
Delaware in 1981 to research, develop, manufacture and market medical devices
for the treatment and diagnosis of select immune-mediated diseases,
transplantations and cancers. The Company's first product, the PROSORBA column,
a medical device, treats a patient's defective immune system so that it can more
effectively respond to certain diseases. The Company received marketing approval
from the U.S. Food and Drug Administration (the "FDA") in December 1987 to
distribute the PROSORBA column for treatment of idiopathic thrombocytopenic
purpura ("ITP"), an immune-mediated bleeding disorder. Since 1987, the Company
has had approximately $24,000,000 of sales of the PROSORBA column.
The Company is in the process of completing a substantial restructuring of
its operations. To date, the restructuring has included a streamlining of
operations and a relocation of all operations of the Company, except
manufacturing operations, to San Diego, California. In addition, the Company has
elected to establish its own internal sales force dedicated solely to selling
the PROSORBA column. In this regard, the Company has hired six salespersons to
date and is in the process of training such sales force. There can be no
assurance that the restructuring, once completed, will be successfully
implemented.
In November 1996, the Company completed the acquisition, pursuant to a
merger (the "Merger"), of PRP, Inc. a Delaware corporation ("PRP"), a
Boston-based biopharmaceutical company engaged in the development of products to
treat disorders of blood platelet functions. In consideration of the purchase of
PRP, the Company issued Units with a value of approximately $4,585,645 to
certain holders of indebtedness and a creditor of PRP and is obligated to make a
certain milestone payment and payments on net sales of products based upon the
technology of PRP that was acquired in the Merger to the former holders of
equity securities and a creditor of PRP. In connection with the acquisition, the
Company has agreed to allocate certain amounts of funding to commercialize PRP's
lead product, Infusible Platelet Membranes ("IPM"). See "The Merger."
The Company's executive offices are located at 4350 Executive Drive, Suite
325, San Diego, California 92121 and its telephone number is (619) 452-2323.
THE PRIVATE PLACEMENT
In General. In October 1996, the Company completed a private placement of
1,734,000 Units which were sold to certain "accredited investors" (as defined in
Rule 501 of the Securities Act) (the "Private Placement") at a per Unit sales
price of $4.00. Net proceeds to the Company from the Private Placement (after
deducting placement agent fees of approximately $506,880) were $6,429,120. The
Private Placement was made in reliance on exemptions from the registration and
qualification requirements of the Securities Act and applicable state securities
laws.
Use of Proceeds. The Company intends to use the net proceeds from the
Private Placement (i) to fund clinical and product development, manufacturing
and administrative services in support of IPM, (ii) to fund the transition and
integration of PRP with and into the operations of the Company and (iii) for
general corporate and working capital purposes. The Company intends to use a
minimum of $4,000,000 of the net proceeds to commercialize and advance IPM as a
principal product of the Company. In addition, the Company may userisks described below address
some of the proceeds of the Private Placement for the acquisition of businesses, products or
technologies complementary to the Company's current business. The Company has
not determined what other amounts it plans to expend on any of the foregoing
uses or the timing of such expenditures. The Company has made certain
assumptions with respect to how it intends to use the net proceeds from the
Private Placement. The amounts actually expended on any of the foregoing uses,
if any,factors that may vary significantly depending on a number of factors including, but
not limited to, theaffect our future operating results of Phase II clinical trials of IPM, the success of
the integration of PRP's operations into the Company and the amount of cash
generated by the Company's operations and other resources. The Company will not
receive any of the proceeds from the sale of the Shares, Warrants or Warrant
Shares being offered hereby.
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The Units. The Units sold in the Private Placement each consist of two
shares of Common Stock of the Company and one warrant to purchase one share of
Common Stock of the Company. The Shares and Warrants (including the Warrant
Shares) comprising the Units are separately transferable only upon the
effectiveness of a registration statement filed under the Securities Act
covering such securities.
THE WARRANTS
In General. The Warrants comprising the Units entitle the holder thereof to
purchase one share of Common Stock of the Company at a purchase price of $2.00
per share, subject to adjustment under certain circumstances. The Warrants are
evidenced by a warrant certificate (the "Warrant Certificate"). The terms of the
Warrants are set forth in the Warrant Certificate and in that certain Warrant
Agreement dated September 18, 1996 (the "Warrant Agreement") between the Company
and American Stock Transfer & Trust Company (the "Warrant Agent"). Reference is
made to the Warrant Agreement and Warrant Certificate filed as exhibits to the
registration statement of which this Prospectus is a part for a complete
description of the terms and conditions of the Warrants (the description
contained herein being qualified by reference thereto).
Term and Exercise of Warrants. The Warrants are exercisable immediately
upon issuance by the Company, but prior to redemption, until October 1, 2001
upon surrender of the Warrants to the Company (or the Company's Warrant Agent)
and receipt by the Company of payment of the exercise price for such Warrants
and any other documents reasonably requested by the Company. The Warrants may be
exercised in whole or in part with respect to the shares of Common Stock
underlying such Warrants. The exercise price of the Warrants may, at the option
of the Warrant holder, be paid by check or bank draft made payable to the order
of the Company. Certificates representing the Warrant Shares so purchased shall
be delivered to the holder of the Warrants within a reasonable time after
exercise.
Redemption. Warrants may be redeemed at the option of the Company, in whole
or in part, on either a selective or non-discriminatory basis, at a price equal
to $0.10 per Warrant (the "Redemption Price") at any time (i) commencing twelve
(12) months after September 18, 1996 if the First Average Closing Price
Requirement (as hereafter defined) is satisfied or (ii) after their initial
issuance by the Company if the Second Average Closing Price Requirement (as
hereafter defined) is satisfied (with any such date of redemption referred to
herein as the "Redemption Date"). The First Average Closing Price Requirement
will be satisfied if the average closing bid price of the Common Stock as
reported by the National Association of Securities Dealers, Inc. electronic
interdealer quotation system ("Nasdaq") (or average closing sales price, if the
Common Stock is quoted on the Nasdaq National Market System) equals or exceeds
$3.00 per share of Common Stock for any twenty (20) trading days within a period
of thirty (30) consecutive trading days ending on the fifth trading day prior to
the date of the notice of redemption. The Second Average Closing Price
Requirement will be satisfied if the average closing bid, or if applicable,
closing sales price as determined and for the periods specified in the preceding
sentence exceeds $4.00. On the Redemption Date, the holders of record of
redeemed Warrants shall be entitled to payment of the Redemption Price upon
surrender of such redeemed Warrants to the Company at the principal office of
the Warrant Agent in New York, New York.
Notice of redemption of Warrants must be given at least twenty (20) and not
more than forty-five (45) calendar days prior to the Redemption Date by mailing,
by registered or certified mail, return receipt requested, a copy of such notice
to all holders of record of Warrants to be redeemed at their respective
addresses appearing on the books or transfer records of the Company or such
other address designated in writing by the holder of record to the Warrant Agent
not less than sixty (60) calendar days prior to the Redemption Date and will be
effective upon receipt.
In addition, notice of such redemption will be published in The Wall Street
Journal not less than ten (10) nor more than twenty (20) calendar days prior to
the mailing of the notice of redemption. Any Warrant so called for redemption
may be exercised until the close of business on the fifth business day preceding
the Redemption Date specified in such notice of redemption. If less than all the
Warrants are to be redeemed, the Warrant Agent shall select the Warrants to be
redeemed by a method the Warrant Agent considers fair and appropriate.
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From and after the Redemption Date, all rights of the holders of Warrants
(except the right to receive the Redemption Price) shall terminate, but only if
(i) on or prior to the Redemption Date the Company shall have irrevocably
deposited with the Warrant Agent (or its successor as Warrant Agent) a
sufficient amount to pay on the Redemption Date the Redemption Price for all
Warrants called for redemption and (ii) the notice of redemption shall have
stated the name and address of the Warrant Agent and the intention of the
Company to deposit such amount with the Warrant Agent on or before the
Redemption Date.
If the Company fails to make a sufficient deposit with the Warrant Agent as
provided above, the holder of any Warrants called for redemption may at the
option of the holder (i) by notice to the Company declare the notice of
redemption a nullity, or (ii) maintain an action against the Company for the
Redemption Price. If the holder brings such an action, the Company will pay
reasonable attorneys' fees of the holder. If the holder fails to bring an action
against the Company for the redemption price within sixty (60) days after the
Redemption Date, the holder shall be deemed to have elected to declare the
notice of redemption to be a nullity and such notice shall be without any force
or effect.
There have been reserved, and the Company shall at all times keep reserved,
out of the authorized and unissued shares of Common Stock, a number of shares
sufficient to provide for the exercise of the Warrants.
Transfer or Assignment of Warrants; Registration. No Warrant will be
subject to division or combination with other Warrants or be exchangeable,
transferable or assignable apart from the Common Stock with which it was sold as
a Unit unless, at such time of division, combination, exchange, transfer or
assignment, the Company has on file with the Commission an effective
registration statement covering the Warrants, or earlier if so notified by the
Company (the "Separation Date"). Absent an effective registration statement, the
Warrant Agent will not record an exchange, assignment or transfer of a Warrant
without certification that the Warrant holder has transferred its Common Stock
to the assignee or transferee. The Company is obligated to use commercially
reasonable efforts to keep the registration statement covering the Warrants
effective for a period of three years after the date of issuance of the Warrants
or, if earlier, until all of the securities covered by the registration
statement have been sold pursuant thereto.
Adjustment. The exercise price and the number of shares issuable upon
exercise of the Warrants will be subject to adjustment from time to time upon
the occurrence of certain events, including but not limited to
recapitalizations, stock splits, certain mergers or consolidations of the
Company and the payment of stock dividends.
THE MERGER
In General. On November 1, 1996, the Company completed the acquisition of
PRP pursuant to that certain Agreement and Plan of Merger and Reorganization
dated as of October 10, 1996 by and among the Company, Cypress Acquisition Sub,
Inc., a Delaware corporation and wholly-owned subsidiary of the Company ("Merger
Sub") and PRP. Of the Shares and Warrants (including the Warrant Shares) being
offered hereby, 2,292,798 Shares and Warrants to purchase up to 1,146,399 shares
of Common Stock (including up to 1,146,399 Warrant Shares) are being offered by
certain Selling Securityholders whom acquired such securities in connection with
the Merger.
CONSIDERATION PAID OR PAYABLE IN CONNECTION WITH THE MERGER.
Debt Holders of PRP. In connection with the Merger, the Company issued to
the holders of certain indebtedness of PRP (the "Bridge Debtholders") in full
satisfaction and settlement of such debt a total of 1,118,438 Units (consisting
of 2,236,876 Shares and Warrants to purchase up to 1,118,438 Shares of Common
Stock of the Company), with a total value equal to $4,473,799.85 (based upon a
price of $4.00 per Unit).
Equity Holders of PRP. Pursuant to the terms of the Merger, the holders of
PRP equity securities (including holders of options and warrants of PRP) (the
"Equity Holders") will be entitled to receive certain payments (the "Earn-Out
Payments"), if any, on a pro rata basis, on net sales of products developed
using PRP's technology (the "Earn-Out Products"). The Company's obligation to
make Earn-Out Payments with respect to Earn-Out Products shall commence on the
date of first commercial sale to any third party of such
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8
Earn-Out Product by the Company, its affiliates or licensees and shall terminate
on a country-by-country basis upon the later of (i) the expiration or
invalidation of the last issued patent owned, licensed or otherwise controlled
by the Company in such country, or abandonment, disclaimer or rejection of the
last pending patent application owned, licensed or otherwise controlled by the
Company in such country, covering the manufacture, use or sale of such Earn-Out
Product, and (ii) fourteen years after the first commercial sale anywhere in the
world of the Earn-Out Product by the Company, its affiliates or sublicensees.
The amount of any Earn-Out Payment to be paid on Earn-Out Products sold in a
country in which, at the time of such sale, the Earn-Out Product is not covered
by and encompassed within the scope of one or more claims contained in an
unexpired patent or in a pending patent application included in the patents and
patent applications acquired by the Company pursuant to the Merger, shall be
reduced by 50%.
In addition to the Earn-Out Payments described above, the Company shall,
upon receipt by the Company of FDA approval of IPM for the treatment of
thrombocytopenia (the "FDA Approval"), make a single milestone payment of
$5,000,000 to the Equity Holders (the "Milestone Payment"). The Milestone
Payment may be made, at the option of the Company, in cash, shares of Common
Stock of the Company or a combination of cash and shares of Common Stock. In the
event the Company elects to make the Milestone Payment, in whole or in part, in
the form of Common Stock of the Company, the value of such Common Stock shall be
determined based upon the average closing sales prices, if the Company's Common
Stock is quoted on a stock exchange or the Nasdaq National Market System (or the
average of the bid and asked prices of the Company's Common Stock as reported by
the National Association of Securities Dealers, Inc. electronic interdealer
quotation system) for the 15 trading day period commencing on the 10 trading
days immediately prior to and including the day of receipt of the FDA Approval
and for the 5 trading days immediately after the day of receipt of the FDA
Approval. In the event the Company elects to make the Milestone Payment, in
whole or in part, in shares of Common Stock, the Company will be obligated, at
its own expense, to register such shares for resale under the Securities Act.
EGS Securities Corp. In consideration of certain investment banking
advisory services provided by EGS Securities Corp. ("EGS") to PRP in connection
with the transactions contemplated by the Merger, the Company issued to EGS
27,961 Units (consisting of 55,922 Shares and Warrants to purchase up to 27,961
Shares of Common Stock of the Company) with a total value equal to $118,845
(based upon a price of $4.00 per Unit). In addition, the Company is obligated,
upon the payment of the Milestone Payment, if any, and each time any Earn-Out
Payment is made to the Equity Holders, to pay to EGS, for services rendered to
PRP in connection with the Merger, from such Milestone Payment or Earn-Out
Payment, as the case may be, prior to any distribution to be made to the Equity
Holders, an amount in cash equal to two and one-half percent (2 1/2%) of the
Milestone Payment and each Earn-Out Payment.
Board Observation Rights. In connection with the Merger, the Company
granted to the Equity Holders the right to designate a representative to attend
meetings of the Board of Directors of the Company (the "Board") in a non-voting,
observer capacity (the "Observer"). The Observer is entitled to attend all
meetings of the Board and to receive all written materials and information
provided to members of the Board in their capacity as directors (the "Observer
Rights"). The Observer shall not be entitled to any compensation or
reimbursement for any expenses incurred in connection with attending Board
meetings or otherwise serving in an observer capacity, except as provided below
to the Equity Holders' Representatives. The Observer Rights shall terminate on
the earlier of (i) the date on which the Equity Holders no longer have a
material continuing financial
interest in the Company, and (ii) October 1, 2005.
Equity Holders' Representatives. Under the terms of the Merger, the former
stockholders of PRP are entitled to appoint certain representatives (the "Equity
Holders' Representatives") to act as attorneys-in-fact of said stockholders with
authority to make all decisions on behalf of said stockholders with respect to
any matters arising in regard to any Milestone Payment or Earn-Out Payments. The
Company is entitled to deal exclusively with the Equity Holders' Representatives
on matters relating to the Merger and shall be entitled to rely conclusively on
any document executed or purported to be executed and on any other action taken
or purported to be taken on behalf of any Equity Holder by the Equity Holders'
Representatives, as fully binding upon such Equity Holder. The Company is
obligated to pay to the Equity Holders' Representatives the sum of $12,000 per
year. Upon payment by the Company of the initial Milestone Payment or Earn-Out
Payment, the
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9
Company will be entitled to reimbursement of all amounts previously paid to the
Equity Holders' Representatives. Upon the initial distribution of the Milestone
Payment or Earn-Out Payments to the Equity Holders, as the case may be, the
Company shall pay to the Equity Holders' Representatives out of the Milestone
Payment or Earn-Out Payment the sum of $12,000 per year.
Indemnification. With certain limited exceptions, the representations and
warranties made by the Company and Merger Sub and the representations and
warranties made by PRP in connection with the Merger expire on November 1, 1997.
Each of the Company and Merger Sub, on the one hand and PRP, on the other hand,
are entitled to indemnification for damages suffered as a result of a breach of
a representation or warranty made by the other party. The sole recourse of the
Company for any damages suffered as a result of a breach of a representation or
warranty made by PRP prior to the consummation of the Merger shall be to offset
any such damages against any Earn-Out Payments, Milestone Payment or any other
payments otherwise due to the Equity Holders in an aggregate amount not to
exceed (i) $500,000 plus (ii) an additional amount equal to ten percent (10%) of
any Earn-Out Payments, Milestone Payment or any other payments paid or otherwise
payable to the Equity Holders. Similarly, the indemnification obligations of the
Company for a breach of a representation or warranty made by the Company or
Merger Sub is limited to (i) $500,000 plus (ii) an additional amount equal to
ten percent (10%) of any Earn-Out Payments, Milestone Payment or any other
payments otherwise paid or payable to the Equity Holders.
In addition to the foregoing indemnification obligations, the Company is
also obligated to indemnify, defend and hold harmless the former officers and
directors of PRP and any persons who acted as fiduciaries under any employee
benefit plan of PRP, and the heirs, executors and administrators of any such
person against any action, suit or proceeding, whether commenced before or after
the consummation of the Merger.
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RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act that
involve risks and uncertainties. The Company's actual results could differ
materially from those projected in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited, to
those discussed in this section, as well as those discussed elsewhere in this
Prospectus. The following risk factors should be considered carefully in
addition to the other information contained in this Prospectus before purchasing
any of the Securities being offered hereby.
INTEGRATION OF OPERATIONS. If the Company is to realize the anticipated
benefits of the Merger, the operations of PRP and the Company must be integrated
and combined efficiently. The process of rationalizing management and
administrative resources, facilities, management information systems and other
aspects of operations, while managing a larger and geographically expanded
entity, will present a significant challenge to the management of the combined
company. There can be no assurance that the integration process will be
successful or that the anticipated benefits of the business combination will be
fully realized. The dedication of management resources to such integration may
detract attention from the day-to-day business of the combined company. The
difficulties of integration may be increased by the necessity of coordinating
geographically separated organizations, integrating personnel with disparate
business backgrounds and combining different corporate cultures. There can be no
assurance that there will not be substantial costs associated with the
integration process, that such activities will not result in a decrease in
revenues or that there will not be other material adverse effects of these
integration efforts.performance.
OUR NEED FOR ADDITIONAL CAPITAL. The Company isCAPITAL
We are actively seeking opportunities to raise additional capital to be
used primarily to fund existing operations
related to the manufacture and saleproposed commercial launch of the PROSORBAProsorba column for
the rheumatoid arthritis indication, to develop new and complete existing
research, and development activities, and to fund clinical
trials related to the proposed use of the PROSORBA column for the treatment of
rheumatoid arthritis and certain platelet disorders. Except in very limited
circumstances, the Company is obligated to expend no less than $4,000,000 on the
development of IPM. In addition, the Company will require substantial additional
capital over a period of a number of years to further the development and marketing of IPM. ToCyplex, platelet
alternative. We may need to raise additional capital to complete the extentlaunch of
the Company decidesProsorba column for the rheumatoid arthritis indication, if approved. In
addition, if we decide to continue the development of products other products previously being developed by PRP, itthan the
Prosorba column and Cyplex, platelet alternative, we will be required to raise
additional capital. The amount of capital required by the Companywe will require is primarily
dependent upon the following factors: results of clinical trials, results of
current research and development efforts, the FDA regulatory process, potential
competitive and technological advances and levels of product sales. Because the
Company is unabledifficult to
predict, the outcome of the previously noted factors, some
of which are beyond the Company's control, the Company is unable to estimate,
with certainty, its mid- to long-term total capital needs. Although the Company
may seek to raise additional capital through a combination of additional equity
offerings, joint ventures, strategic alliances, borrowings and other available
sources, there can be no assurancewe cannot assure you that the Companywe will be able to raise any additional
capital through such sources or that funds raised thereby will allow
the Company to maintain its current and planned operations as provided herein.from any source. If the Company iswe are unable to obtain additional financing, itwe may
be requiredhave to delay or scale back the launch of the Prosorba column for the rheumatoid
arthritis indication, if approved, and delay, scale back or eliminate some or
all of itsour research and development activities, including those activities associated with the acquisition of PRP,activities. In addition, we may be required
to license to third parties technologies that the Companywe would otherwise seek to develop
itself,ourselves, to seek financing through the debt market at potentially higher costs to the Company and/us or to seek
additional methods of financing. These results may have a detrimental effect on
our financial condition and could prevent us from realizing our long-term goals.
OUR HISTORY OF OPERATING LOSSES. The Company has operatedLOSSES
We are operating at a loss and have been operating at a loss since itsour
formation in October 1981. As of SeptemberJune 30, 1996, the Company1998, we had an accumulated deficit of
approximately $49,000,000. The$73.5 million. Our ability of the Company to achieve profitabilitybecome profitable is dependent upon
among other things, successful
completion of anticipated clinical trialsour obtaining U.S. Food and obtaining FDADrug Administration (the "FDA") marketing approval
of the PROSORBAProsorba column in additionalrheumatoid arthritis and disease indications other
than ITP in a timely manner. The
Company wouldmanner, and successfully increasing the sales of the
Prosorba column. If we do not receive marketing approval from the FDA for the
Prosorba column for the treatment of rheumatoid arthritis, or for Cyplex,
platelet alternative, for the treatment of platelet disorders, we will have to
significantly scale back itsour plans, curtail clinical trials, and limit itsour
present operations in order to become profitable or operate on a break-even
basis if it does not receive marketing approval frombasis.
PENDING FDA DECISION ON OUR PRE-MARKET APPROVAL APPLICATION
Our only FDA-approved product is the Prosorba column, which the FDA
approved in 1987 for use by patients with ITP. However, sales of the PROSORBAProsorba
column for use by patients with ITP have declined over the last two years.
3.
5
We are currently focused on obtaining FDA approval to market the Prosorba column
for the treatment of diseasesrheumatoid arthritis. We filed a Pre-Market Approval
application with the FDA in additionJuly 1998 to ITP.
There canallow us to market the Prosorba column
for use in the treatment of rheumatoid arthritis (the "PMA Application"). The
Company appeared at a hearing before the FDA's Gastroenterology and Urology
Device Advisory Panel (the "FDA Panel") on October 29, 1998. The FDA Panel
recommended on that day to the FDA that the Prosorba column be no assuranceapproved for the
treatment of moderate to severe rheumatoid arthritis, subject to the
requirements that (i) we conduct a post-marketing trial to determine the safety
and efficacy of combination treatment with disease-modifying anti-rheumatic
drugs and to evaluate the safety and efficacy of treatment of rheumatoid
arthritis patients with the Prosorba column and (ii) final labeling of the
Prosorba column for the treatment of rheumatoid arthritis be negotiated by the
end of 1998. However, we cannot assure you that the FDA will follow the FDA
Panel's recommendation and if the PMA Application is not approved and the
Prosorba column is restricted to the treatment of ITP, the Company will successfully complete anybe
required to significantly scale back its plans and limit its present or future clinical trials, gainoperations
and may not otherwise be viable as an independent entity.
OUR SALES FORCE
We have a small domestic sales force that sells the Prosorba column
directly to customers for use in the treatment of ITP. To date, our sales force
has made commercial sales of the Prosorba column only for use in the treatment
of ITP. Our sales force has had no experience in marketing the Prosorba column
for use in the treatment of disease indications other than ITP. Accordingly, if
we receive FDA approval to beginuse the Prosorba column for the treatment of
rheumatoid arthritis or any new clinical
trials, meet applicable regulatory standards orother disease indications other than ITP, our sales
force may not be able to successfully market its productsthe Prosorba column for such uses.
Any failure by our sales force to generate sufficient revenues to rendersuccessfully market the Company profitable. See "-- Prior
Exclusive Agreement with Baxter; Necessity of Establishing a Sales Force."
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MANAGEMENT CHANGES; RESTRUCTURING PLAN; DEPENDENCE UPON KEY PERSONNEL. The
Company has recently undergone changes in senior management. In December 1995,
Martin D. Cleary resigned as Chief Executive Officer and a member of the Board
of Directors of the Company. Mr. Cleary's resignation was a result of the
Company's determination that itProsorba column for
rheumatoid arthritis, if approved, would best be served by having senior management
resident on the West Coast near the Company's principal executive offices and
other operations. Mr. Cleary, resident on the East Coast, was unable to relocate
and consequently agreed to resign as Chief Executive Officer and as a director.
Also in December 1995, Harvey J. Hoyt, M.D. resigned as Executive Vice President
and as a director as a result of the appointments of new members of senior
management and the restructuring of the Company, which restructuring eliminated
Dr. Hoyt's position. In March 1996, Frank R. Jones resigned as Chief Scientific
Officer and as Chairman of the Board and in May 1996, Alex P. de Soto resigned
as the Company's Vice President, Chief Financial Officer, Secretary and
Treasurer. Messrs. Jones' and de Soto's resignations were a result of the
restructuring of the Company and the Company's relocation of its executive
offices to San Diego, California. In December 1995, Jay D. Kranzler, M.D., Ph.D.
was appointed as Chief Executive Officer and Vice Chairman of the Board of
Directors and Debby Jo Blank, M.D. was appointed as President, Chief Operating
Officer and a member of the Board of Directors of the Company. In April 1996,
Susan E. Feiner was appointed as the Company's Director of Finance, Controller,
Secretary and Treasurer.
The Company is in the process of completing a substantial restructuring
plan. The restructuring plan is intended to reduce the Company's overhead and
recurring costs by reducing the Company's work force and consolidating its two
manufacturing facilities into one central manufacturing facility located in
Redmond, Washington. By eliminating approximately 20 positions, the Company
expects to realize an annual salary savings in excess of $1,000,000. However, to
date the Company has incurred approximately $700,000 in connection with the
consolidation of its manufacturing operations and estimates it will incur a
total of approximately $1,000,000 in capital expenditures associated with such
consolidation. In connection with the restructuring plan, the Company has
relocated all of its operations, except manufacturing, from Seattle, Washington
to San Diego, California. The restructuring is not yet completed and there can
be no assurance that such a restructuring will be completed as scheduled, if at
all. Even if such a restructuring is completed, there can be no assurance that
it will be successfully implemented.
The Company's success is dependent upon certain key management and
technical personnel, including the new members of senior management. The loss of
the services of any of these key employees could have a material adverse effect on the Company.our
overall financial performance.
COMPETITIVE ENVIRONMENT
The Company does not currently maintain any key employee
insurance coverage.
FDA APPROVAL AND REGULATIONS. The Company is currently conducting a
controlled clinical trial of the PROSORBA column for treatment of rheumatoid
arthritis. Although the FDA has approved the commercial sale of the PROSORBA
column for the treatment of ITP, there can be no assurance that current or
future clinical trials will produce data satisfactory to the FDA to establish
the effectiveness of the PROSORBA column for treatment of diseases other than
ITP, such as rheumatoid arthritis, transplantations and certain cancers, or that
the FDA will approve the PROSORBA column for treatment of such diseases in a
timely manner, if at all.
The Company plans to continue the Phase II clinical trials of IPM currently
underway. Clinical trials are vigorously regulated by the FDA and must meet
requirements for institutional review board oversight and informed consent as
well as FDA review and oversight and good clinical practice regulations. There
can be no assurance that the clinical trials being conducted for IPM will be
completed successfully within any specified period of time, if at all, or that
if successful the Company will be able to further develop IPM. Furthermore, the
Company or the FDA may delay or suspend clinical trials at any time if it is
determined that the subjects participating in such trials are being exposed to
unacceptable health risks. Any such delay or suspension could have a material
adverse effect on the Company's business.
The PROSORBA column is commercially distributed under a premarket approval
("PMA") application that was approved by the FDA in 1987. Changes to the product
and its manufacturing process, and certain types of labeling changes must be
approved by the FDA prior to implementation. The Company currently has one
supplement to the PMA pending with the FDA for a labeling change addressing the
use of ancillary
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equipment during the use of the PROSORBA column therapy. The FDA has indicated
to the Company that the PMA supplement would be approvable if certain additional
information is provided. There can be no assurance that the Company will receive
approval of its pending PMA supplement or any future PMA supplements will be
approved by the FDA.
Even if FDA approval is granted to market a product for the treatment of a
particular disease, subsequent discovery of previously unknown problems may
result in restrictions on the product's future use or withdrawal of the product
from the market. In addition, any other products developed in the future will
require clinical testing and FDA marketing approval before they can be
commercially exploited in the United States. Such approval process is typically
very lengthy and there is no assurance that FDA approvals will be obtained.
The manufacture and distribution of medical devices are subject to
continuing FDA regulation. In addition to the requirement that the device be
marketed only for its approved use, applicable law requires compliance with the
FDA's good manufacturing practices ("GMP") regulations. Failure to comply with
the GMP regulations or with other applicable legal requirements can lead to
federal seizure of non-complying products, injunctive actions brought by the
federal government, and potential criminal liability on the part of the Company
and of the officers and employees of the Company who are responsible for the
activities that lead to the violations.
To date, production of commercial quantities of the raw materials utilized
in production of the PROSORBA column has been performed at the Redmond facility.
Final assembly of the PROSORBA column has been performed at the Seattle
facility. In conjunction with the Company's restructuring plan and corresponding
reduction in facilities, the Seattle and Redmond, Washington facilities are
being consolidated into a single manufacturing facility in Redmond. The Company
has already subleased a major portion of its Seattle facility to a third party.
Under the terms of the Company's sub-lease of its Seattle facility, the Company
must vacate the remainder of the facility no later than December 31, 1996 or
else be subject to substantial financial penalties. The Redmond facility is
under renovation in order to enable both the production of raw materials, as
well as the final assembly of the PROSORBA column, to be performed in the
Redmond facility. The renovated Redmond facility, when complete, must comply
with the FDA's GMP regulations and must complete the GMP re-approval process.
There can be no assurance that the Company will complete the renovations in time
to sustain uninterrupted production of the PROSORBA column. In addition, there
can be no assurance that the renovated facility will receive GMP approval in a
timely manner, if at all.
Furthermore, PRP occupies a facility that includes a GMP-approved pilot
production plant where all phases of production of clinical-grade IPM occurs,
except for filling and lyophilization. There can be no assurance that the
Company will be able to maintain the facility's GMP-approved status or that, if
approval is not maintained, it will be able to find an alternate GMP-approved
production facility.
COMPETITIVE ENVIRONMENT; TECHNOLOGICAL CHANGE; EFFECTIVENESS OF
PRODUCTS. Thehealthcare field of medical devices in general and the particular areas in which the Company willwe
market itsour products are extremely competitive. In developing and marketing
medical devices to treat immune-mediated diseases, and
cancers, the Company competeswe compete with other
products, therapeutic techniques and treatments which are offered by national and
international healthcare and pharmaceutical companies, many of which have
greater marketing, human and financial resources than the Company.we do. In addition, we
expect to compete with new products and therapeutic techniques and treatments
that are in various stages of clinical development, some of which are expected
to ultimately receive FDA approval.
The immunological therapy market is characterized by rapid
technological change and potential introductions of new products or therapies.
To respond to these changes, the Companywe may be required to develop or purchase new
products to protect itsour technology from obsolescence. There can be no assurance that the
Company willWe may not be able to
develop or obtain such products,products. Even if we develop or if developed or
obtained, thatobtain new products, such
products willmay not be commercially viable. In addition, there can
be no assurancewe cannot assure you that
the Company's PROSORBAour Prosorba column will prove effective in the treatment of diseases other than ITPrheumatoid
arthritis or that IPM,Cyplex, platelet alternative, if approved for sale by the FDA,
will be an effective in treating thrombocytopenia or other bloodalternative to traditional platelet disorders.
DEPENDENCE ON THIRD PARTY ARRANGEMENTS. The Company's commercial sale of
its proposed products and its future product development may be dependent upon
entering into arrangements with corporate
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partners and other third parties fortherapy. If the
development, marketing, distribution
and/or manufacturing of products utilizing the Company's proprietary technology.
While the Company is currently seeking collaborative research and development
arrangements and joint venture opportunities with corporate sponsors and other
partners, there can be no assurance that the Company will be successful in
entering into such arrangements or joint ventures or that any such arrangements
will proveProsorba column fails to be successful.
PRIOR EXCLUSIVE AGREEMENT WITH BAXTER; NECESSITY OF ESTABLISHING A SALES
FORCE. In February 1994, the Company entered into a 10-year exclusive
distribution agreement with Baxter, granting to Baxter distribution rights to
its PROSORBA columneffective in the United States and Canada for the treatment of thrombocytopeniarheumatoid arthritis
or if Cyplex, platelet alternative, fails to be an effective alternative to
traditional platelet therapy, our entire business will be materially adversely
affected.
UNCERTAINTY OF OUR PATENT PROTECTION
As a policy, we seek to protect our proprietary technology and inventions
which are used in the first rightProsorba column and Cyplex, platelet alternative, through
patents, trade secret law and other legal protections. We may, however, incur
significant expense in protecting our intellectual property and defending or
assessing claims with respect to negotiate for new PROSORBAintellectual property owned by others.
4.
6
Any patent or other infringement litigation by or against us could result in
significant expense to us and diversion of our management resources, which in
turn could have an adverse effect on our financial performance. The process used
in manufacturing the Prosorba column indications. Baxter, at its own expense, wasis covered by one of various patents that
we hold; however, we cannot assure you that this patent will afford significant
protection of our proprietary technology. We also could be forced to provide sales and marketing
support formodify or
abandon the saleProsorba column or Cyplex, platelet alternative, based upon our
assessment of intellectual property risks or actual or threatened claims by
others. Since the Prosorba column is our only FDA-approved product, during the term of the agreement. Baxter
assumed the Company's sales and distribution responsibilities in April 1994.
In March 1996, the Company and Baxter terminated the exclusive distribution
agreement, whereby, effective May 1, 1996, the Company regained the right, among
other things,our entire
business will be materially adversely affected if we are unable to sell its PROSORBA column directly to customers who had
previously purchased PROSORBA columns through Baxter as well as to any other
potential customers who wish to purchase PROSORBA columns. As a result of the
termination of the distribution agreement, the Company is in the process of
establishing an internal domestic sales force dedicated solely to marketing and
selling its PROSORBA column. To date, the Company has hired six salespersons
whom are directed solely to selling and marketing the PROSORBA column. There can
be no assurance that
the Company will be successful in selling its PROSORBA
columns directly to any new customers or to any customers who previously
purchased PROSORBA columns through Baxter.
LIMITED INTERNATIONAL SALES AND MARKETING. The Company conducts limited
marketing of the PROSORBA column outside the United States through foreign
distributors. Sales to foreign distributors have not been material to the
Company's results from operations. There can be no assurance that foreign sales
arrangements will become material to the Company's results of operations.
UNCERTAINTY OF PATENT PROTECTION AND CLAIMS TO TECHNOLOGY. With the
acquisition of PRP, the Company now holds 13 United States and 8 foreign patents
relating to its technology and has also filed other U.S. and foreign patent
applications related to its technology. In addition, the Company has an
exclusive license for a U.S. patent for a genetic screening test to predict
which rheumatoid arthritis patients will develop severe disease. Neither the
protection afforded by these patents nor their enforceability can be assured.
Furthermore, there can be no assurance that additional patents will be obtained
either in the United States or in foreign jurisdictions or that, if issued, such
additional patents will provide sufficient protection to the Company's
technology or be of commercial benefit to the Company. Insofar as the Company
relies on trade secrets and unpatented proprietary know-how, there can be no
assurance that others will not independently develop similar technology or that
secrecy will not be breached. There can be no assurance that the Company will be
able to develop further technological innovations.product.
Others have filed applications for, or have been issued, patents and may obtain
additional patents and other proprietary rights relating tocompeting with our products or
processes competitive with those ofprocess. Although we do not presently know the Company. The scope and validity of all
suchthese
patents, is presently unknown. However, the holder of one such patent has
challenged the use by the Company of certain technology covered by such patent.
Based on the advice of patent counsel, the Company doe not believe it is
infringing this patent. The Company, however, is currently in the process of
attempting to obtain a license agreement with such holder. There can be no
assurances that the Company will be successful in obtaining such a license on
favorable terms, if at all. If this or other existing or future patents are challenged in litigation or interference proceedings, the Companyupheld as valid by courts, we may become
subject to significant liabilities to third parties or
be required to seekobtain licenses from third parties. There can be no assurance that such licenses would
be available or, if available, obtainable on acceptable terms.
In connection with the Merger, the Company acquired certain exclusive
rights with respect to the use manufacture and sale of products and/or
processes related to analogs of the compound diadenosine tetraphosphate
("AP4A"), which rights were granted to PRP in July 1992 pursuant to a license
agreement between PRP and a collaborator of PRP (the "Licensor"). Under the
terms of the license agreement, PRP was obligated to file an IND with respect to
the commercial application of such rights within four years of acquiring such
rights. Neither PRP nor the Company has filed such IND. Due to such failure,
Licensor has
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the right to cancel upon 30 days written notice the exclusive license or to
convert the exclusive license to a nonexclusive license. If Licensor elects to
cancel such license, there can be no assurance that the Company will be able to
acquire or license the similar rights on terms acceptable to the Company, if at
all.
Various scientific personnel of the Company were previously associated with
non-profit research or education institutions that typically require researchers
to execute agreements giving such institutions broad rights to inventions
created or developed during the period that the scientist is associated with
such institution. While no such institution has to date asserted rights to the
Company's technology such assertions may be made in the future, and if made,
there can be no assurances that the Company will be successful in any such
litigation.covered by these patents.
CONCENTRATION OF OWNERSHIP.OUR OWNERSHIP
As of November 1, 1996, Allen & Company
Incorporated and Mr. Richard M. Crooks, a directorOctober 16, 1998, Paramount Capital, Inc., through its
affiliates, beneficially owns 19.2% of the Company, beneficially
owned approximately 16% and 3.0%, respectively, of theour outstanding Common Stock
of the Company. Mr. Crooks is also a director and consultant to Allen & Company
Incorporated. Together, Mr. Crookscommon stock and Allen &
Company Incorporated own a
significant amountbeneficially owned approximately 13.6% of the totalour outstanding
Common Stock of thecommon stock. Individually or collectively, Paramount Capital, Inc. and Allen &
Company andIncorporated may be able to exert substantial influence over the outcome
of matters requiring stockholder approval.
RECOVERABILITY OF ENDING INVENTORIES. As of September 30, 1996, the
Company's ending inventory balances consisted of $335,856 of raw materials,
$686,392 of work in process and $261,720 of finished goods. In order to recover
such ending inventory balances, the Company would have to sell approximately 20%
more PROSORBA column units to customers than that amount sold to customers by
Baxter during 1995. Such increase represents approximately 60% of the total
sales made by the Company's sales force in fiscal year 1993 prior to entering
into the Baxter agreement. As a result of the termination of the distribution
agreement with Baxter, the Company is actively establishing a domestic sales
force to sell the PROSORBA column directly to customers who previously purchased
PROSORBA columns from Baxter and to other potential customers who wish to
purchase PROSORBA columns directly from the Company. To date, the Company has
hired 6 salespersons whom are dedicated solely to selling the PROSORBA column.
Although there can be no assurances that the Company's sales force will be
successful in selling the Company's product, the Company believes, based upon
historical sales figures, that it can generate sufficient sales to recover the
ending inventory balances described above with a sales force of between 5 and 7
salespersons dedicated solely to selling the Company's PROSORBA column. On May
1, 1996, the Company increased the sales price of the PROSORBA columns to be
sold directly to customers by approximately 9%. This is the first such price
increase implemented by the Company since January 1, 1994. The Company believes
that such price increase reflects a nominal price increase for a medical device
for the period covered by such increase. However, there can be no assurance that
the Company will be successful in selling the PROSORBA column at the increased
price, if at all. See "-- Prior Exclusive Agreement with Baxter; Necessity of
Establishing a Sales Force."
INSURANCE REIMBURSEMENT.REIMBURSEMENT
Successful commercialization of a new medical product, such as the
PROSORBAProsorba column or IPMCyplex, platelet alternative, depends in part, on reimbursement by
public and private health insurers to health care providers for use of such
products. The availability of suchSuch reimbursement is subjectmay not be available due to a variety of factors,
many of which could affect the Companyus as it commercializeswe commercialize use of the PROSORBAProsorba column for
rheumatoid arthritis and continuescontinue the development and commercialization of
IPM. Although
the Company hasCyplex, platelet alternative. We have generally been generally successful in assisting
health care providers in arranging reimbursement for the use of the PROSORBAProsorba
column in the treatment of ITP, there can no assuranceITP. We cannot assure you, however, that public and
private insurers will continue to reimburse us for the use of the PROSORBA column.Prosorba
column in the treatment of ITP or in the treatment of any other disease
indications approved by the FDA. In addition, there can be no
assurance thatwe do not know whether health care
providers will reimburse us for the use of IPM, when and
if commercialized.
UNCERTAINTY OF HEALTH CARE REFORM. There are widespread efforts to control
health care costs in the U.S. and worldwide. Various federal and state
legislative initiatives regarding health care reform and similar issues continue
to be at the forefront of social and political discussion. These trends may lead
third-party payors to decline or limit reimbursement for the Company's product,
which could negatively impact the pricing and profitability of, or demand for,
the Company's product. The Company believes that government and private efforts
to contain or reduce health care costs are likely to continue. There can be no
assurance concerning the likelihood that any such legislative or regulatory
initiative will be enacted, or market reform
13
15
initiated, or that, if enacted such reform or initiative will not result in a
material adverse impact on the business, financial condition or results of
operations of the Company.Cyplex, platelet alternative.
PRODUCT LIABILITY.LIABILITY FOR OUR PRODUCTS
The use of the PROSORBAProsorba column and, when and, if approved for use by the FDA,
IPM, involveCyplex, platelet alternative, may result in adverse side effects to the possibility of adverse effects occurring to
end-users that could expose the Companyus to product liability claims. The Company
believes that itsWe currently hold
product liability insurance coverageof $15 million, which we believe is adequate in
light of the Company'sour business. However, althoughwe cannot predict all the Company currently maintains
product liability insurance coverage, there can be no assurancepossible harms or side
effects that such
coverage or any increasedmay result from treatment of patients with our products and
therefore, we cannot assure you that the amount of coverage we currently hold
will be adequate to protect the
Company and there can be no assuranceus. We also cannot assure you that the Companywe will have
sufficient resources to pay any liability resulting from such a claim.
EXERCISE PRICE OF WARRANTS;claim beyond our
insurance coverage.
POSSIBLE VOLATILITY OF OUR STOCK PRICE; ABSENCE OF
DIVIDENDS.PRICE
Like other smaller-capitalization technology companies, our stock price has
fluctuated significantly at times and is subject to a risk of ongoing
volatility. The exercise price of our shares may be adversely affected by our financial
performance or the Warrants was determined by the Company in
its sole discretion and is not necessarily related to the fair market valueperformance of the Company's Common Stock, the Company's book value, net worth or any other
established means of valuation.
There has been significant volatility inour competitors, the market prices of securities of
biomedical companies infor technology
company stocks, the market for small cap company stocks, general including the Company's securities. Factors
such as announcements by the Companyeconomic trends
or others of technological innovations,
results of clinical trials, new commercial products, regulatory approvalsother factors that we cannot predict or proprietary rights developments, coverage decisions by third-party payors for
therapies and public concerns regarding the safety and other implications of
biotechnology and biomedical products may have a significant impact on the
Company's business and market price of the Company's securities.control.
5.
7
In addition, in connection with the Merger, the Company is obligated toour acquisition of PRP, Inc. in November
1996, we must make a $5,000,000$5 million milestone payment to the former holders of
equity securities (including holders
of warrants and options) of PRP, upon theInc. when there is a public announcement of an FDA
approvableapproval letter relating to the use of IPMCyplex, platelet alternative, for the
treatment of thrombocytopenia. The Company hasWe have the option to make such milestonethat payment in the formcash
or shares of Common Stockour common stock. If we decide to make that payment in cash, a cash
payment of $5 million might have a material adverse effect on our financial
condition. If we decide to make that payment in common stock, the Company. The issuance of
Common Stockadditional shares of common stock with a value of $5,000,000 could$5 million might have a
significant impact on the market price of the
Company's securities.
No dividends have been paid on the Company's Common Stock to date, and the
Company does not anticipate paying dividends on its Common Stock in the
foreseeable future.
HAZARDOUS MATERIAL. The Company's research and development programs involve
the controlled use of biohazardous materials such as viruses, and may include
the use of the HIV virus that causes AIDS. Although the Company believes that
its safety procedures for handling such materials comply with the standards
prescribed by state and federal regulations, the risk of accidental
contamination or injuryour common stock.
USE OF PROCEEDS
All net proceeds 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.
LIMITATION OF NET OPERATING LOSS CARRYFORWARDS. The Company's sale of
Common Stock in November 1990 and September 1991 when taken together with prior
issuances, caused the limitation of Section 382 of the Internal Revenue Code of
1986, as amended, to be applicable. This limitation will allow the Company to
use only a portion of the net operating loss carryforwards to offset future
taxable income, if any, for federal income tax purposes. Based on the
limitations of Section 382 and before consideration of the effect of the sale of securities offered hereby, the Company may be allowedCypress shares which are covered
by this prospectus will go to the selling stockholders who offer and sell their
shares. Cypress will not receive any proceeds from sales of Cypress shares by
the selling stockholders.
SELLING STOCKHOLDERS
Under a Stockholder Rights Agreement dated as of September 15, 1998
among Cypress and certain selling stockholders, we agreed to register the shares
of common stock issued on conversion of the Series A Convertible Preferred Stock
and to use no more than
approximately $2,450,000 of such losses each year to reduce taxable income, if
any. To the extent not utilized by the Company, unused losses will carry forward
subject to the limitations to offset future taxable income, if any, until such
unused losses expire. All unused net operating losses will expire 15 years after
any year in which they were generated. The years in which such expiration will
take place range from 1998 to 2010.
14
16
SELLING SECURITYHOLDERS
The Selling Securityholders represented in their purchase agreements that
they were acquiring the Shares, Warrants and Warrant Shares for investment and
with no present intention of distributing the Shares, Warrants and Warrant
Shares. In recognition of the fact that the Selling Securityholders, even though
purchasing the Shares, Warrants and Warrant Shares without a view to distribute,
may wish to be legally permitted to sell the Shares, Warrants and Warrant Shares
when each deems appropriate, the Company has filed with the Commission a
Registration Statement on Form S-3, which this Prospectus forms a part, with
respect to, among other things, the resale of the Shares, Warrants and Warrant
Shares from time to time at prevailing prices in the over-the-counter market or
in privately-negotiated transactions and has agreed to prepare and file such
amendments and supplements to the Registration Statement as may be necessaryour best efforts to keep the Registration Statementregistration statement effective until
the earlier of:
- all Shares, Warrants and Warrant
Shares offered herebysecurities have been sold pursuant thereto or until such Shares,
Warrants and Warrant Shares are no longer, by reason of Rule 144 under the Securities Actregistration
statement; or
- all securities have been sold under Rule 144.
Our registration of these Cypress shares does not necessarily mean that
the selling stockholders will sell all or any other rule of similar effect, required to be registered
for the sale thereof by the Selling Securityholders.
The following table sets forth the (i) name of each Selling Securityholder,
(ii) number of shares of Common Stock (including Warrant Shares) and Warrants
beneficially owned by each Selling Securityholder as of November 1, 1996, (iii)
number of Shares (including Warrant Shares) and Warrants which may be offered
pursuant to this Prospectus and (iv) number of shares of Common Stock (including
Warrant Shares and Warrants beneficially owned by each Selling Securityholder
upon the completion of this offering). This information is based upon
information provided to the Company by the Selling Securityholders. Because the
Selling Securityholders may offer all, some or none of their Shares, Warrants or
Warrant Shares, no definitive estimate as to the number of shares thereof that
will be held by the Selling Securityholders after such offering can be provided.shares.
SHARES
WARRANTS BENEFICIALLY
SHARES BENEFICIALLY BENEFICIALLY NUMBER OF NUMBER OF OWNED
OWNED PRIOR TO OWNED PRIOR TO SHARES WARRANTS AFTER
OFFERING OFFERING BEING OFFERED BEING OFFERED OFFERING
NAME OF SELLING ---------------------- -------------------- ------------- ------------- ---------
SECURITYHOLDERS(1) NUMBER(2) PERCENT(3) NUMBER PERCENT(4) NUMBER(2) NUMBER NUMBER(5)Shares Shares
Beneficially Beneficially
Owned Prior to Shares Being Owned After
Offering(1) Percent(2) Offered Offering(1)(3)
----------- ------- ------- --------------
Name of Selling Stockholders Number Number Number
- ---------------------------------- --------- ---------- ------- ---------- ------------- ------------- ------------------------------------- ------ ------ ------
Allen, Susan...................... 1,005,119 2.9% 125,000 4.3% 375,000 125,000 630,119
Altorfer, John.................... 7,599Abbnuzzese, Anthony 95,666 * 2,53366,666 29,000
Adler, Larry D. 30,000 * 7,599 2,53330,000 0
Ambit & Co........................ 75,000Angell, Richard A. 66,667 * 25,000 * 75,000 25,000 0
Anthony, Garner................... 300,000 * 100,000 3.5% 300,000 100,00066,667 0
Aries Domestic Fund............... 1,009,166 2.9% 37,500 1.3% 112,500 37,500 896,666
Baradaran, Sharyar & Sharon....... 75,000Fund, L.P. (4) 3,018,700(5) 7.6 173,333 2,845,367
Braziel, Ronald W. 210,000 * 25,000100,000 110,000
Century Publishing Company 133,333 * 75,000 25,000133,333 0
Battle Fowler LLP................. 29,121Clearwater Fund I, L.P. 200,000 * 9,707200,000 0
Clearwater Offshore Fund Ltd. 973,900 2.5 400,000 573,900
Drobny, Irving 2,000 * 29,121 9,7072,000 0
Berger, Michael J................. 18,750 * 6,250 * 18,750 6,250 0
Bowles, Joanne.................... 9,045 * 3,015 * 9,045 3,015 0
Brady, Jane Wilde................. 18,750 * 6,250 * 18,750 6,250 0
Buono, Timothy.................... 1,356 * 452 * 1,356 452 0
Cato Holding Company.............. 224,412 * 74,804 2.6% 224,412 74,804 0
Chao, Johanna T................... 20,268 * 6,756 * 20,268 6,756 0
WARRANTS BENEFICIALLY
OWNED AFTER OFFERING
NAME OF SELLING ----------------------
SECURITYHOLDERS(1) PERCENT(3) NUMBER(6) PERCENT(5)
- ---------------------------------- ---------- --------- ----------
<
Allen, Susan...................... 1.8% 0 0%
Altorfer, John.................... 0% 0 0%
Ambit & Co........................ 0% 0 0%
Anthony, Garner................... 0% 0 0%
Aries Domestic Fund............... 2.6% 0 0%
Baradaran, Sharyar & Sharon....... 0% 0 0%
Battle Fowler LLP................. 0% 0 0%
Berger, Michael J................. 0% 0 0%
Bowles, Joanne.................... 0% 0 0%
Brady, Jane Wilde................. 0% 0 0%
Buono, Timothy.................... 0% 0 0%
Cato Holding Company.............. 0% 0 0%
Chao, Johanna T................... 0% 0 0%
Cless, Gerhard.................... 490,000 1.4% 50,000 1.7% 150,000 50,000 340,000
Cole, Lorelei..................... 21,000 * 7,000 * 21,000 7,000 0
Coolidge, Peter................... 9,000 * 3,000 * 9,000 3,000 0
Curran Partners LP................ 187,500 * 62,500 2.2% 187,500 62,500 0
D'Amato, Anthony.................. 18,750 * 6,250 * 18,750 6,250 0
David & Angella Nazarian Family
Trust............................ 37,500 * 12,500 * 37,500 12,500 0
Dickerson, Claire M............... 20,004 * 6,668 * 20,004 6,668 0
Dickerson, Thomas P............... 57,345 * 19,115 * 57,345 19,115 0
Doctor Thwack, Ltd................ 9,375 * 3,125 * 9,375 3,125 0
Douglas S. Winter, Inc. Profit
Sharing Plan..................... 9,375 * 3,125 * 9,375 3,125 0
Drobny/Fischer Partnership........ 421,500 1.2% 62,500 2.2% 187,500 62,500 234,000
Dynamics Technology, Inc.......... 825,174 2.4% 275,058 9.5% 825,174 275,058 0
EBC Investors, an Illinois general
partnership...................... 52,500 * 17,500 * 35,000 17,500 0
EGS Securities Corp............... 83,883 * 27,961 * 83,883 27,961 0
Emer, Randy....................... 9,375 * 3,125 * 9,375 3,125 0
Gelber, Howard.................... 30,000 * 5,000 * 15,000 5,000 15,000
Goby, Jeff........................ 38,000 * 6,000 * 18,000 6,000 20,000
Cless, Gerhard.................... 1.0% 0 0%
<
Cole, Lorelei..................... 0% 0 0%
Coolidge, Peter................... 0% 0 0%
Curran Partners LP................ 0% 0 0%
D'Amato, Anthony.................. 0% 0 0%
David & Angella Nazarian Family
Trust............................ 0% 0 0%
Dickerson, Claire M............... 0% 0 0%
Dickerson, Thomas P............... 0% 0 0%
Doctor Thwack, Ltd................ 0% 0 0%
Douglas S. Winter, Inc. Profit
Sharing Plan..................... 0% 0 0%
Drobny/Fischer Partnership........ * 0 0%
Dynamics Technology, Inc.......... 0% 0 0%
EBC Investors, an Illinois general
partnership...................... 0% 0 0%
EGS Securities Corp............... 0% 0 0%
Emer, Randy....................... 0% 0 0%
Gelber, Howard.................... * 0 0%
Goby, Jeff........................ * 0 0%
176.
178
SHARES
WARRANTS BENEFICIALLY
SHARES BENEFICIALLY BENEFICIALLY NUMBER OF NUMBER OF OWNED
OWNED PRIOR TO OWNED PRIOR TO SHARES WARRANTS AFTER
NAME OF SELLING OFFERING OFFERING BEING OFFERED BEING OFFERED OFFERING
SECURITYHOLDERS(1) NUMBER(2) PERCENT(3) NUMBER PERCENT(4) NUMBER(2) NUMBER NUMBER(5)Shares
Beneficially Shares
Owned Beneficially
Prior to Shares Being Owned After
Offering(1) Percent(2) Offered Offering(1)(3)
----------- ------- ------- --------------
Name of Selling Stockholders Number Number Number
- ---------------------------------- --------- ---------- ------- ---------- ------------- ------------- ------------------------------------- ------ ------ ------
WARRANTS BENEFICIALLY
NAME OF SELLING OWNED AFTER OFFERING
SECURITYHOLDERS(1) PERCENT(3) NUMBER(6) PERCENT(5)
- ---------------------------------- ---------- --------- ----------
<
Goldberg, David S................. 37,500Drueke, Paul Charles 61,000 * 12,50033,000 28,000
Finkelstein, Jerry 13,333 * 12,500 12,50013,333 0
Freedman, Rick M. 26,800 * 13,400 13,400
Goulding, M.D.,Dr. Richard E......... 47,450E. 60,291(6) * 6,250 * 18,750 6,250 28,70026,666 33,625
Goulding, Randall S............... 53,684S. 54,000(7) * 9,50024,000 30,000
Hennessy, Paul E. 16,666 * 28,500 9,500 25,184
Green, Richard.................... 23,37516,666 0
Higgins, James R., M.D. 91,666 * 3,125 * 9,375 3,125 14,000
Greenwald, Jonathan............... 18,750 * 6,250 * 18,750 6,250 0
Groh,66,666 25,000
Holland, James H., Sr................ 18,750 * 6,250 * 18,750 6,250 0
Gutman, Craig..................... 18,750 * 6,250 * 18,750 6,250 0
Heidenreich, Jenny................ 4,521 * 1,507 * 4,521 1,507 0
Horberg, Howard Todd.............. 75,000 * 25,000 * 75,000 25,000 0
Howard J. Bernstein Trustee under
Declaration of Trust dated April
28, 1987......................... 18,750 * 6,250 * 18,750 6,250 0
Incavo, Noel F.................... 85,000 * 25,000 * 75,000 25,000 10,000
Infinity Fund, L.P................ 300,000 * 100,000 3.5% 300,000 100,000 0
Jayhawk Institutional, L.P........ 45,000A. 20,000(8) * 15,000 5,000
Hyman Lezell Revocable Trust 39,000 * 45,000 15,000 0
Jayhawk Investments, L.P.......... 405,000 1.2% 135,000 4.7% 405,000 135,000 034,000 5,000
Jerome P. Seiden, Trustee
of the Jerome P. Seiden
Revocable Trust............................ 37,500Trust Agreement
dated 4/22/83 33,333 * 12,500 * 37,500 12,500 0
Jerome Schachter and Associates
Pension Plan and Trust........... 37,500 * 12,500 * 37,500 12,500 0
Kamensky, Marvin.................. 18,750 * 6,250 * 18,750 6,25033,333 0
Katzman, Howard L.................Marshall 31,750(9) * 13,000 18,750
* 6,250 * 18,750 6,250 0
Katzman, Marshall................. 18,750 * 6,250 * 18,750 6,250 0
Kushnir, Richard D................ 60,000Levine, Fred 10,000 * 10,000 0
Levitas, Doron 100,000 * 20,000 10,000 30,000
Kornreich, Joseph................. 9,000100,000 0
Lisenby, Sr., S. Alan 33,333 * 3,000 * 9,000 3,00033,333 0
Leonard Loventhal Trust Account
U/A/D 9/24/92, Leonard Loventhal
& Mark Litner Trustees........... 45,000 * 15,000 * 45,000 15,000 0
LeVine, Fred...................... 18,750 * 6,250 * 18,750 6,250 0
Levy, Steve....................... 117,500 * 12,500 * 37,500 12,500 80,000
Liss, Arthur...................... 25,000 * 5,000 * 15,000 5,000 10,000
Lydon, Harris R. L., Jr........... 18,750 * 6,250 * 18,750 6,250 0
Mateles, Richard I................ 9,375 * 3,125 * 9,375 3,125 0
McCallion, Gerald A............... 37,500 * 12,500 * 37,500 12,500 0
Melohn, Alfons....................Michael T. Jackson Trust- New
Technologies Fund, Michael T.
Jackson TTEE 150,000 * 50,000 1.7% 150,000 50,000 0
Michael Associates................ 37,500Morrongiello, John 82,666(10) * 12,50066,666 16,000
Nagler, Steven B. 15,500(11) * 37,500 12,500 0
Miller, Richard J................. 9,045 3,0152,000 13,500
Nordruk Partners Investment
Co. Limited Partners 100,000 * 9,045 3,015 0
Morgenstern, J.M.................. 22,00051,500 48,500
Paradigm Group, LLC 161,333 * 4,000 * 12,000 4,000 10,000
Mullins, Jerome J................. 150,000 * 50,000 1.7% 150,000 50,000 0
Nagorsky, Sy...................... 25,000 * 5,000 * 15,000 5,000 10,000
Neuscheler, Joan P................ 13,083 * 4,361 * 13,083 4,361 0
Olson, Arthur M................... 29,375 * 3,125 * 9,375 3,125 20,000
Olshansky, Melvin A............... 85,000 * 25,000 * 75,000 25,000 10,000
Pelts, James J.................... 15,000 * 5,000 * 15,000 5,000 0
Philip C. Goldstick Revocable
Trust............................ 71,500 * 12,500 * 37,500 12,500 34,000
Platelet Productions
International, Ltd............... 261,768 * 87,256 3.0% 261,768 87,256 0
Polinsky, Mark.................... 18,750 * 6,250 * 18,750 6,250 0
Priority Investments, Inc......... 93,000 * 31,000 * 93,000 31,000 0
Pritikin, Mark.................... 26,750 * 6,250 * 18,750 6,250 8,000
Rabinowitz, Beryl................. 9,375 * 3,125 * 9,375 3,125 0
Rabuck, Vivian.................... 18,750 * 6,250 * 18,750 6,250 0
Richard E. Goulding, M.D. Profit
Sharing Plan..................... 10,875 * 3,625 * 10,875 3,625 0
Richcourt $ Strategies, Inc....... 129,000 * 43,000 1.5% 129,000 43,000 0
Rosenberg, Reuben................. 22,500 * 7,500 * 22,500 7,500161,333 0
Rosin, Joseph A................... 46,700A. 163,333 * 10,000143,333 20,000
Samuel D. Anderson and
Mary Ann H. Anderson, Trustees
of the Samuel and Mary Ann
Anderson Trust Dated
March 22, 1979 100,000 * 30,000 10,000 16,700100,000 0
Savino, Joseph E. 26,666 * 26,666 0
Schachter, Jerome................. 57,500Jerome 73,333 * 12,50073,333 0
Schachter, Michael 4,000 * 37,500 12,500 20,0004,000 0
Schwartz, Sarah................... 18,750Sarah 38,650(12) * 6,25025,000 13,650
Sheldon B. Cohen & Samuel
Spiro, as tenants in common 66,667 * 18,750 6,25066,667 0
Seminer, Scott.................... 17,725 * 3,125 * 9,375 3,125 8,350
Shapland, George T................ 18,750 * 6,250 * 18,750 6,250 0
Sharon D. Gonsky DBA SDG
Associates....................... 59,500 * 6,500 * 19,500 6,500 40,000
Goldberg, David S................. 0% 0 0%
Goulding, M.D., Richard E......... * 0 0%
Goulding, Randall S............... * 0 0%
Green, Richard.................... * 0 0%
Greenwald, Jonathan............... 0% 0 0%
Groh, James H., Sr................ 0% 0 0%
Gutman, Craig..................... 0% 0 0%
Heidenreich, Jenny................ 0% 0 0%
Horberg, Howard Todd.............. 0% 0 0%
Howard J. Bernstein Trustee under
Declaration of Trust dated April
28, 1987......................... 0% 0 0%
Incavo, Noel F.................... * 0 0%
Infinity Fund, L.P................ 0% 0 0%
Jayhawk Institutional, L.P........ 0% 0 0%
Jayhawk Investments, L.P.......... 0% 0 0%
Jerome P. Seiden Revocable
Trust............................ 0% 0 0%
Jerome Schachter and Associates
Pension Plan and Trust........... 0% 0 0%
Kamensky, Marvin.................. 0% 0 0%
Katzman, Howard L................. 0% 0 0%
Katzman, Marshall................. 0% 0 0%
Kushnir, Richard D................ * 0 0%
Kornreich, Joseph................. 0% 0 0%
Leonard Loventhal Trust Account
U/A/D 9/24/92, Leonard Loventhal
& Mark Litner Trustees........... 0% 0 0%
LeVine, Fred...................... 0% 0 0%
Levy, Steve....................... * 0 0%
Liss, Arthur...................... * 0 0%
Lydon, Harris R. L., Jr........... 0% 0 0%
Mateles, Richard I................ 0% 0 0%
McCallion, Gerald A............... 0% 0 0%
Melohn, Alfons.................... 0% 0 0%
Michael Associates................ 0% 0 0%
Miller, Richard J................. 0% 0 0%
Morgenstern, J.M.................. * 0 0%
Mullins, Jerome J................. 0% 0 0%
Nagorsky, Sy...................... * 0 0%
Neuscheler, Joan P................ 0% 0 0%
Olson, Arthur M................... * 0 0%
Olshansky, Melvin A............... * 0 0%
Pelts, James J.................... 0% 0 0%
Philip C. Goldstick Revocable
Trust............................ * 0 0%
Platelet Productions
International, Ltd............... 0% 0 0%
Polinsky, Mark.................... 0% 0 0%
Priority Investments, Inc......... 0% 0 0%
Pritikin, Mark.................... * 0 0%
Rabinowitz, Beryl................. 0% 0 0%
Rabuck, Vivian.................... 0% 0 0%
Richard E. Goulding, M.D. Profit
Sharing Plan..................... 0% 0 0%
Richcourt $ Strategies, Inc....... 0% 0 0%
Rosenberg, Reuben................. 0% 0 0%
Rosin, Joseph A................... 0 0%
Schachter, Jerome................. 0 0%
Schwartz, Sarah................... 0% 0 0%
Seminer, Scott.................... 0 0%
Shapland, George T................ 0% 0 0%
Sharon D. Gonsky DBA SDG
Associates....................... * 0 0%
187.
189
SHARES
WARRANTS BENEFICIALLY
SHARES BENEFICIALLY BENEFICIALLY NUMBER OF NUMBER OF OWNED
OWNED PRIOR TO OWNED PRIOR TO SHARES WARRANTS AFTER
OFFERING OFFERING BEING OFFERED BEING OFFERED OFFERING
NAME OF SELLING ---------------------- -------------------- ------------- ------------- ---------
SECURITYHOLDERS(1) NUMBER(2) PERCENT(3) NUMBER PERCENT(4) NUMBER(2) NUMBER NUMBER(5)Shares Shares
Beneficially Beneficially
Owned Prior to Shares Being Owned After
Offering(1) Percent(2) Offered Offering(1)(3)
----------- ------- ------- --------------
Name of Selling Stockholders Number Number Number
- ---------------------------------- --------- ---------- ------- ---------- ------------- ------------- ------------------------------------- ------ ------ ------
WARRANTS BENEFICIALLY
OWNED AFTER OFFERING
NAME OF SELLING ----------------------
SECURITYHOLDERS(1) PERCENT(3) NUMBER(6) PERCENT(5)
- ---------------------------------- ---------- --------- ----------
<
Shepco............................ 18,750 * 6,250 * 18,750 6,250 0
Shepco Enterprises IncorporateD... 37,500 * 12,500 * 37,500 12,500 0
Sheppard, Neil.................... 18,750 * 6,250 * 18,750 6,250 0
Sherman, Lawrence A............... 25,000 * 5,000 * 15,000 5,000 10,000
Shiman, Stewart A.................A. 258,333(13) * 33,333 225,000 * 25,000 * 75,000 25,000 150,000
Simons, Aric and Corey............ 75,000 * 25,000 * 75,000 25,000 0
Sirazi, Semir..................... 57,500 * 12,500 * 37,500 12,500 20,000
Sutker, Allen..................... 18,750 * 6,250 * 18,750 6,250 0
Swager, Eugene.................... 9,045 * 3,015 * 9,045 3,015 0
Swager, Harriet................... 4,521 * 1,507 * 4,521 1,507 0
The Alfred J. Anzalone Family
Limited Partnership.............. 75,000 * 25,000 * 75,000 25,000 0
The Aries Trust................... 1,156,666 3.3% 87,500 3.0% 262,500 87,500 894,166
Tullis-Dickerson Capital Focus,
L.P.............................. 1,414,836 4.0% 471,612 16.4% 1,414,836 471,612Trust 5,269,535(14) 13.3 493,334 4,776,201
Vulcano, Michael 18,000 * 18,000 0
Tullis, James L.L................. 105,042Wierenga, Peter Douglas 135,000 * 35,014 1.2% 105,042 35,014 0
Tullis, Linda A................... 4,52134,000 101,000
Zerfass, Robb 10,000 * 1,507 * 4,521 1,50710,000 0
Urban & Co........................ 9,375 * 3,125 * 9,375 3,125 0
Vance, Carol...................... 9,045 * 3,015 * 9,045 3,015 0
Weber, Merrill.................... 22,500 * 7,500 * 22,500 7,500 0
Wholegainer Company Limited....... 150,048 * 50,016 1.7% 150,048 50,016 0
Wienckoski, Thomas J.............. 35,450 * 6,250 * 18,750 6,250 16,700
Wm. Smith & Co.................... 37,500 * 12,500 * 25,000 12,500 0
Wu, Johnny I-Mon.................. 175,515 * 58,505 2.0% 175,515 58,505 0
Yahav, Yigal...................... 52,750 * 6,250 * 18,750 6,250 34,000
Zipper, Lance..................... 9,000 * 3,000 * 9,000 3,000 0
Shepco............................ 0% 0 0%
Shepco Enterprises IncorporateD... 0% 0 0%
Sheppard, Neil.................... 0% 0 0%
Sherman, Lawrence A............... * 0 0%
Shiman, Stewart A................. 0 0%
Simons, Aric and Corey............ 0% 0 0%
Sirazi, Semir..................... 0 0%
Sutker, Allen..................... 0% 0 0%
Swager, Eugene.................... 0% 0 0%
Swager, Harriet................... 0% 0 0%
The Alfred J. Anzalone Family
Limited Partnership.............. 0% 0 0%
The Aries Trust................... 2.6% 0 0%
Tullis-Dickerson Capital Focus,
L.P.............................. 0% 0 0%
Tullis, James L.L................. 0% 0 0%
Tullis, Linda A................... 0% 0 0%
Urban & Co........................ 0% 0 0%
Vance, Carol...................... 0% 0 0%
Weber, Merrill.................... 0% 0 0%
Wholegainer Company Limited....... 0% 0 0%
Wienckoski, Thomas J.............. * 0 0%
Wm. Smith & Co.................... 0% 0 0%
Wu, Johnny I-Mon.................. 0% 0 0%
Yahav, Yigal...................... * 0 0%
Zipper, Lance..................... 0% 0 0%
- ---------------
* Less than 1%
(1) Unless otherwise indicated below, the persons named in the foregoing table have
sole voting and investment power with respect to all shares
beneficially owned by them, subject to community property laws where
applicable.
(2) Includes Warrant Shares issuable to each respective Selling Securityholder
upon exercise of Warrants held by such Selling Securityholders as of the
date hereof.
(3) Applicable percentage of ownership is based on 34,551,41039,447,397 shares of
Common
Stock of the Companycommon stock outstanding on November 1, 1996, adjusted as required
by rules promulgated by the Commission.
(4) Applicable percentage of ownership is based on 2,880,399 Warrants of the
Company outstanding on November 1, 1996.
(5)October 27, 1998.
(3) Assumes the sale of all Sharesshares offered hereby.
(4) Paramount Capital Asset Management, Inc. ("PCAM") is the investment
manager of the Aries Fund, a Cayman Island Trust (the "Trust") and the
general partner of Aries Domestic Fund, L.P. (the "Partnership" and
collectively with the Trust, the "Aries Funds"). Lindsay A. Rosenwald,
M.D. is the President and sole shareholder of PCAM. Dr. Rosenwald and
PCAM share voting and dispositive power with respect to the shares held
by the Aries Funds. Dr. Rosenwald and PCAM disclaim beneficial
ownership of the shares held by the Aries Funds except to the extent of
their pecuniary interest therein, if any.
(5) Includes warrants to purchase 37,500 shares of our common stock.
(6) Assumes the saleIncludes warrants to purchase 3,625 shares of all Warrants offered hereby.
17our common stock.
(7) Includes warrants to purchase 30,000 shares of our common stock.
(8) Mr. Holland's brother-in-law is Samuel D. Anderson, a member of our
board of directors.
(9) Includes warrants to purchase 6,250 shares of our common stock.
(10) Includes warrants to purchase 5,000 shares of our common stock.
(11) Includes warrants to purchase 6,250 shares of our common stock.
(12) Includes warrants to purchase 6,250 shares of our common stock.
(13) Includes warrants to purchase 75,000 shares of our common stock.
(14) Includes warrants to purchase 87,500 shares of our common stock.
8.
1910
PLAN OF DISTRIBUTION
The Company has been advised thatselling stockholders may offer their Cypress shares at various
times in one or more of the Selling Securityholders or pledgees,
donees, tranferees of or other successors in interest to the Selling
Securityholders may sell Shares, Warrants and Warrant Shares from time to time
in transactionsfollowing transactions:
- on the Nasdaq SmallCap Market,Market;
- in privatelythe over-the-counter market;
- in negotiated transactions other than the Nasdaq SmallCap
Market or the over-the-counter market;
- in connection with short sales of the Cypress shares;
- by pledge to secure debts and other obligations;
- in connection with the writing of call options, in hedge
transactions and in settlement of other transactions in
standardized or over-the-counter options; or
- in a combination of such methodsany of sale, at fixed prices whichthe above transactions.
The selling stockholders may be changed,sell their shares at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
or at negotiatedfixed prices.
The Selling
Securityholdersselling stockholders may effect such transactionsuse broker-dealers to sell their shares.
If this happens, broker-dealers will either receive discounts or commissions
from the selling stockholders, or they will receive commissions from purchasers
for whom they acted as agents.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy the documents we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's website at http://www.sec.gov.
The SEC allows us to "incorporate by sellingreference" the Shares, Warrantsinformation we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and Warrant Sharesinformation that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities and Exchange Act of 1934:
1. Annual report on Form 10-K for the fiscal year ended December
31, 1997;
2. Quarterly report on Form 10-Q for the quarter ended March 31,
1998;
3. Quarterly report on Form 10-Q for the quarter ended June 30,
1998; and
4. Current report on Form 8-K/A dated April 16, 1998.
9.
11
You may request a copy of these filings, at no cost, by writing the
Company at the following address:
Cypress Bioscience, Inc.
Attn: Investor Relations
4350 Executive Drive, Suite 325
San Diego, CA 92121
10.
12
DESCRIPTION OF CAPITAL STOCK
GENERAL
As of the date of this prospectus, our Certificate of Incorporation
authorizes us to issue 60,000,000 shares of common stock and 15,000,000 shares
of preferred stock, including 3,333,333 shares of Series A Convertible Preferred
Stock. As of October 27, 1998, 39,447,397 shares of common stock and 3,063,561
shares of Series A Convertible were outstanding. The Board of Directors may
issue shares of the preferred stock at any time, in one or through broker-dealers,more series without
stockholder approval. The Board of Directors determines the designation,
relative rights, preferences and such broker-dealers maylimitations of each series of preferred stock.
COMMON STOCK AND PREFERRED STOCK
Each share of Series A Convertible Preferred has a liquidation
preference of $1.50 per share plus unpaid dividends. Each share of Series A
Convertible Preferred is entitled to any dividends that are declared on the
common stock. Our common stockholders and our preferred stockholders have the
right to receive compensationdividends that our Board of Directors declares in the form of
discounts, concessioncash, securities or commissions fromproperty.
The Series A Convertible Preferred Stock is not redeemable. The
holders may convert each share of Series A Convertible Preferred Stock into one
share of common stock (subject to anti-dilution adjustments). In addition, if
the Selling Securityholders orprice per share in the purchasersCompany's next equity financing in which the Company
receives aggregate proceeds of at least $7,500,000 (the "Qualified Subsequent
Financing") is less than the applicable conversion price of the Shares, WarrantsSeries A
Convertible Preferred Stock, the conversion price will be adjusted to equal the
per share price paid in the Qualified Subsequent Financing.
Common stockholders have the right to vote one vote per share on all
matters that require their vote. This could change if we amend our charter
documents. Holders of Series A Convertible Preferred Stock are entitled to one
vote for each share of preferred and Warrant
Shares for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation to a particular broker-dealer might be in
excess of customary commission).
At any time a particular offer of Shares, Warrants or Warrant Shares is
made,vote together with common stock on all
matters submitted to the extent required, a supplemental Prospectus will be distributed
which will set forthcommon stockholders.
WARRANTS
As of October 27, 1998 there were warrants outstanding to purchase up
to 2,724,149 shares of our common stock at an exercise price of $2.00 per
share, the number of Shares, Warrants or Warrant Shares offered
and the terms of the offering including the names or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for the Shares,
Warrants or Warrant Shares purchased from the Selling Securityholders, any
discounts, commission and other items constituting compensation from the Selling
Securityholders and any discounts, concessions or commissions allowed or
reallowed or paid to dealers.
The Selling Securityholders and any broker-dealers who act in connection
with the sale of Shares, Warrants or Warrant Shares hereunder may be deemed to
be "underwriters" as that term is defined in the Securities Act, and any
commissions received by them and profit on any resale of the Shares, Warrants or
Warrant Shares as principal might be deemed to be underwriting discounts and
commissionswarrants were registered under the Securities Act. AnyThe warrants were
issued in October and November 1996 as a part of a "Unit," which was two shares
of our common stock and one warrant to purchase one share of our common stock.
The warrants were issued in registered form under a Warrant Agreement, dated as
of September 18, 1996 between the Company and American Stock Transfer and Trust
Company, who agreed to serve as the warrant agent for the warrants.
Under certain circumstances, all or allany portion of the saleswarrants are
redeemable, in whole or other transactions involvingin part, at our option at a redemption price of $0.10
per warrant. If we attempt to redeem any warrants, the Shares,
Warrants or Warrant Shares described above, whether effected by the Selling
Securityholders, any broker-dealer or others,warrant may be made pursuantexercised
until the close of business on the fifth business day preceding the day on which
we call for the redemption, the day on which we call for the redemption will be
specified in a notice of redemption.
The warrants are fully exercisable as of the date of this Prospectus
and will generally expire on October 1, 2001, unless exercised earlier.
COMPENSATION WARRANTS
As of October 27, 1998, there were warrants outstanding to purchase
154,000 shares of our common stock at an exercise price of $1.875 per share. We
originally issued these warrants to our directors, officers, employees and
consultants as compensation for their services (the
11.
13
"Compensation Warrants"). The Compensation Warrants are fully exercisable as of
the date of this Prospectus. In addition,Prospectus and will generally expire in June 2001, unless they
are exercised earlier.
We are obligated to register the shares of common stock underlying the
Compensation Warrants. We will try to keep any Shares, Warrants or Warrant Shares that qualify for
sale pursuant to Rule 144 under the Act may be sold under rule 144 rather than
pursuant to this Prospectus.
In order to complysuch registration statement and
prospectus filed with the securities laws of certain states, if
applicable,SEC to register the Shares,Compensation Warrants and Warrant Shares may be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain stateseffective
for the Shares, Warrants and Warrant Shares may not be
sold unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distributionlife of the Shares, Warrants or Warrant Shares may not
simultaneously engage in market making activities with respectCompensation Warrants. We agreed to pay all the Company's
Common Stock or Warrants for a periodexpenses of
two business days prior to the
commencement of such distribution. In addition and without limiting the
foregoing, the Selling Securityholders will be subject to applicable provisionsregistration of the Exchange Act andshares underlying the rules and regulations thereunder, including without
limitation, Rules 10b-6 and 10b-7, which provisions may limit the timingCompensation Warrants.
OTHER WARRANTS
As of purchases and salesOctober 27, 1998, there were warrants outstanding to purchase
300,000 shares of Shares, Warrants or Warrant Shares by the Selling
Securityholders.
Notwithstanding the foregoing, broker-dealers who are qualifying registered
market makers on the National Association of Securities Dealers Automated
Quotation System (the "Nasdaq") may engage in passive market making transactions
in the Common Stock of the Company on the Nasdaq Stock Market in accordance with
Rule 10b-6A under the Exchange Act, during the two business day period before
commencement of sales in this offering. The passive market making transactions
must comply with applicable price and volume limits and be identified as such.
In general, a passive market maker may display its bidour common stock at a price not in excess
of the highest independent bid for the security. If all independent bids are
lowered below the passive market maker's bid, however, such bid must then be
lowered when certain purchase limits are exceeded. Net purchases by a passive
market maker on each day are generally limited to a specified percentage of the
passive market maker's average daily trading volume in the Common Stock of the
Company
20
20
during a prior period and must be discontinued when such limit is reached.
Passive market making may stabilize the marketan exercise price of the Common Stock of the$2.875 per share,
which we originally issued in April 1994 to Allen & Company atIncorporated as a
level above that which might otherwise prevail and, if commenced,
may be discontinued at any time.
All costs and expenses associated with registering the Shares, Warrants and
Warrant Shares being offered hereunder with the Securities and Exchange
Commission will be paid by the Company. Such costs and expenses are estimated to
be $35,000.
The Company and the Selling Securityholders may agree to indemnify certain
persons including broker-dealers or others, against certain liabilitiesplacement agent fee in connection with any offeringa private placement of 7% Convertible
Debentures. Such warrants are fully exercisable as of the Shares, Warrantsdate of this
prospectus and Warrant Shares,
including liabilities underwill expire in April 1999 unless they are exercised earlier. In
addition, as of October 27, 1998, Allen & Company Incorporated held an
additional warrant to purchase 125,000 shares of our common stock at an exercise
price of $2.00 per share. These warrants, which were acquired by Allen & Company
Incorporated in connection with our October 1996 private placement of Units,
are fully exercisable as of the Securities Act.date of this prospectus and generally expire
October 2001, unless exercised earlier.
As of October 27, 1998, there were outstanding warrants to purchase
150,000 shares of our common stock at a weighted average price of $2.27 per
share. The warrants were issued in November 1996 to certain or our consultants
in exchange for consulting services. Such warrants are exercisable as of the
date of this prospectus and expire November 2001, unless exercised earlier.
LEGAL MATTERS
The validityFor purposes of the issuance of the Shares, Warrants and Warrant Shares
will be passed upon for the Company bythis offering, Cooley Godward LLP, San Diego,
California.California, is giving its opinion on the validity of the shares.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997 incorporated herein by reference from the Company's Annual Report
(Form 10-K/A) for the years ended
December 31, 1995 and 1994,10-K) have been audited by Ernst & Young LLP, independent auditors, and for the year ended December 31, 1993 by Coopers & Lybrand L.L.P.,
independent accountants, as set
forth in their respective reportsreport thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such reportsreport given upon the authority of such firmsfirm as
experts in accounting and auditing.
1912.
2114
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant
in connection with the sale of the Securities being registered. All the amounts
shown are estimates except for the SEC registration fee and the Nasdaq SmallCap
Market Listinglisting fee.
SEC Registration fee............................................... fee...........................................$ 5,1142,461
Nasdaq SmallCap Market Listing fee................................. 8,500listing fee............................. 7,500
Legal fees and expenses............................................expenses........................................ 10,000
Blue sky qualification fees and expenses........................... 2,500expenses ...................... 1,000
Accounting fees and expenses....................................... 5,000expenses................................... 3,000
Printing and engraving expenses....................................expenses................................ 1,000
Miscellaneous...................................................... 2,886
-------
Total.............................................................. $35,000
=======Miscellaneous 539
------
Total......................................................$ 25,500
======
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law of the State of Delaware
(the "DGCL""Delaware Law"), the
Registrant has broad powers empowers a Delaware corporation to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act").
The Registrant's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the DGCL and (ii) require the Registrant to indemnify its
directors and officers to the fullest extent permitted by applicable law,
including circumstances in which indemnification is otherwise discretionary.
Pursuant to Section 145 of the DGCL, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which theypersons
who are, or are threatened to be made, a partyparties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of theirthe fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement of such positions so long as theyaction, suit or proceeding, provided that
such officer or director acted in good faith and in a manner theyhe or she
reasonably believed to be in or not opposed to the corporation's best interests of the corporationinterest,
and, with respect to anyfor criminal action, theyproceedings, had no reasonable cause to believe theirhis or her
conduct was unlawful. The Registrant believes that these provisions are
necessary to attractillegal. A Delaware corporation may indemnify officers and retain qualified persons as directors
and officers.
These provisions do not eliminateagainst expenses (including attorney's fees) in connection with the directors'defense or
officers' dutysettlement of care, and,an action by or in appropriate circumstances, equitable remedies such as injunctive or other
formsthe right of non-monetary relief will remain availablethe corporation under the DGCL. In addition,
eachsame
conditions, except that no indemnification is permitted without judicial
approval if the officer or director will continueis adjudged to be subjectliable to liability pursuantthe corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to Section 174above, the corporation must indemnify him or
her against the expenses which such officer or director actually and reasonably
incurred.
The Registrant's Bylaws contain a provision to limit the personal
liability of the DGCL,directors of the Registrant for violations of their fiduciary
duty, except to the extent such limitation of liability is prohibited by the
Delaware Law. This provision eliminates each director's liability to the
Registrant or its stockholders for monetary damages except (i) for any breach of
the director's
II-1
15
duty of loyalty to the Registrant or its stockholders, (ii) for acts or
omissions not in good faith or involvingwhich involve intentional misconduct foror a knowing
violationsviolation of law, for acts or omissions that the director believes to
be contrary to the best interests(iii) under Section 174 of the RegistrantDelaware Law providing for
liability of directors for unlawful payment of dividends or its stockholders,unlawful stock
purchases or redemptions, or (iv) for any transaction from which thea director
derived an improper personal benefit,benefit. The Registrant's Bylaws provide that the
Registrant shall indemnify directors and officers to the fullest extent
permitted by law. The effect of these provisions is to eliminate the personal
liability of directors for acts or omissionsmonetary damages for actions involving a reckless disregard forbreach of
their fiduciary duty of care, including any such actions involving gross
negligence.
In addition, Registrant has entered into indemnity agreements with its
executive officers and directors whereby Registrant obligates itself to
indemnify such officers and directors from any amounts which the director's dutyofficer or
director becomes obligated to the
Registrantpay because of any claim made against him or its stockholders when the director was aware or should have been
awareher
arising out of a risk of serious injury to the Registrant or its stockholders, for
actsany act or omission committed while he or she is acting in his or
her capacity as a director and/or officer of Registrant.
Registrant maintains directors and officers liability insurance
coverage that constitute an unexcused patterninsures its officers and directors against certain losses that may
arise out of inattention that
amounts to an abdication of the director's duty to the Registrant or its
stockholders, for improper transactions between the director andtheir positions with the Registrant and for improper loans to directors and officers. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities law or state or federal environmental laws.
II-1
22
The Registrant has an insurance policy covering the directors and officers
ofinsures the Registrant with respectfor
liabilities it may incur to certain liabilities, including liabilities
arising under the Securities Act or otherwise.indemnify its officers and directors.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------------------------------------------------------------------------
3.1 Certificate of Designations of Series A Convertible Preferred
Stock
* 5.1 Opinion of Cooley Godward LLP
*10.1 WarrantForm of Stock Purchase Agreement dated September 18, 1996 between the Registrant and American Stock
Transfer & Trust Company
*10.2 Form of Warrant Certificate
*10.3 Form of Units PurchaseStockholder Rights Agreement
**10.4 Agreement and Plan of Merger and Reorganization dated as of September 18, 1996 by and
among Registrant, Cypress Acquisition Sub, Inc. and PRP, Inc.
*10.5 Form of Exchange of Bridge Debt and Warrant Termination Agreement
*10.6 Modified Fee Agreement dated October 10, 1996 by and among Registrant, PRP, Inc. and EGS
Securities Corp.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Coopers & Lybrand LLP, Independent Auditors
*23.3*23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1
*24.1 Power of Attorney. Reference is made to page II-6II-4.
- ---------------
(*)-------------
* Previously filed.
(**) Confidential treatment has been requested for portions of the exhibit.Filed
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors officers and controlling personsexecutive officers of the Registrant
pursuant to provisions described in Item 15 or otherwise, the Registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director or executive officer or controlling person of
II-2
16
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director officer or controlling personexecutive officer in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To deliver or cause to be delivered with the Prospectus, to each
person to whom the Prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the Prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Exchange Act; and where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the Prospectus, to
deliver or caused II-2
23
to be delivered to each person to whom the Prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the Prospectus to provide such interim financial information.
(4) That, for the purposes of determining liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) 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.
(6) That, for purposes of determining any liability under the
Securities Act, 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)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration
II-3
17
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3II-4.
2418
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Diego, State of California, on
November 7, 1996.2, 1998.
CYPRESS BIOSCIENCE, INC.
By: /s/ Susan E. Feiner
------------------------------------
Susan E. Feiner
Director of Finance, Controller and
SecretaryJay D. Kranzler
---------------------------------
Jay D. Kranzler, M.D., Ph.D
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATESignature Title Date
- --------------------------------------------- ---------------------------- -------------------------- ----- ----
*/s//s/ Jay D. Kranzler, ViceM.D., Ph.D. Chief Executive Officer, November 2, 1998
- --------------------------------- Chief Scientific Officer,
Jay D. Kranzler, M.D., Ph.D. Chief Financial Officer
and Chairman of the Board
November 7, 1996
- --------------------------------------------- of Directors and Chief
Jay D. Kranzler, M.D. Ph.D.(Principal Executive Officer
(Principal Executive
Officer)
/s/ Susan E. Feiner Director of Finance, November 7, 1996
- --------------------------------------------- Controller and Secretary
Susan E. Feiner (PrincipalPrincipal Financial
and Accounting Officer)
*/s/ Debby Jo Blank, Director,M.D. President, and November 7, 1996
- --------------------------------------------- Chief Operating November 2, 1998
- --------------------------------- Officer and Director
Debby Jo Blank, M.D.
*/s/ Richard M. Crooks, Jr. Chairman of the BoardDirector November 7, 19962, 1998
- ------------------------------------------------------------------------------
Richard M. Crooks, Jr.
*/s/ Philip J. O'Reilly Director November 7, 19962, 1998
- ------------------------------------------------------------------------------
Philip J. O'Reilly
II-5
19
Signature Title Date
- --------- ----- ----
*/s/ Jack H. Vaughn Director November 7, 19962, 1998
- ----------------------------------------------------------------------------------
Jack H. Vaughn
*/s/ Samuel D. Anderson Director November 2, 1998
- -------------------------------------
Samuel D. Anderson
*/s/ David Golde Director November 2, 1998
- -------------------------------------
David Golde
*By: /s/ Jay D. Kranzler Director November 2, 1998
- -------------------------------------
Jay D. Kranzler, M.D., Ph.D.
Attorney-in-fact
*By: /s/ Susan E. Feiner
-------------------------------
Susan E. Feiner
Attorney-in-Fact
II-4II-6
2520
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT
PAGE
- ------ ------------------------------------------------------------------------ -----------------------------------
*5.13.1 Certificate of Designations of Series A Conversion Preferred Stock
* 5.1 Opinion of Cooley Godward LLP...........................................LLP
*10.1 WarrantForm of Stock Purchase Agreement dated September 18, 1996 between the Registrant and
American Stock Transfer & Trust Company.................................
*10.2 Form of Warrant Certificate.............................................
*10.3 Form of Units Purchase Agreement........................................
**10.4Stockholder Rights Agreement and Plan of Merger and Reorganization dated as of September
18, 1996 by and among Registrant, Cypress Acquisition Sub, Inc. and PRP,
Inc.....................................................................
*10.5 Form of Exchange of Bridge Debt and Warrant Termination Agreement.......
*10.6 Modified Fee Agreement dated October 10, 1996 by and among Registrant,
PRP, Inc. and EGS Securities Corp.......................................
23.1 Consent of Ernst & Young LLP, Independent Auditors......................
23.2 Consent of Coopers & Lybrand LLP, Independent Auditors..................
*23.3Auditors
*23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.........5.1
*24.1 Power of Attorney. Reference is made to page II-6.......................II-5.
* Previously Filed
- ---------------
(*) Previously filed.
(**) Confidential treatment has been requested for portions of the exhibit.