AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 2003
REGISTRATION NO. 333-103114
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DOR BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1505029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
28101 BALLARD DRIVE, SUITE F, LAKE FOREST, IL, 60045, (847) 573-8990
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
WILLIAM D. MILLING
CONTROLLER, TREASURER AND CORPORATE SECRETARY
28101 BALLARD DRIVE, SUITE F, LAKE FOREST, IL 60045, (847) 573-8990
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
MARK D. WOOD, ESQ.
CRAIG C. BRADLEY, ESQ.
Katten Muchin Zavis Rosenman
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
(312) 902-5200
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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.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] __________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 27, 2003
PROSPECTUS
DOR BIOPHARMA, INC.
5,297,732 SHARES
COMMON STOCK
Our common stock is traded on the American Stock Exchange under the
symbol "DOR." The closing sale price of our common stock on May 22, 2003 was
$0.95 per share.
AN INVESTMENT IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 1
BEFORE YOU DECIDE WHETHER TO INVEST IN SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2003
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY................................................................................................1
RISK FACTORS......................................................................................................3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................................................10
USE OF PROCEEDS..................................................................................................10
SELLING STOCKHOLDERS.............................................................................................10
PLAN OF DISTRIBUTION.............................................................................................14
WHERE YOU CAN FIND MORE INFORMATION..............................................................................14
LEGAL MATTERS....................................................................................................15
EXPERTS..........................................................................................................15
You should rely only on the information contained or incorporated by reference
in this prospectus and in any prospectus supplement. We have not authorized
anyone else to provide you with different information, and if you receive any
unauthorized information you should not rely on it. We have not authorized the
selling stockholders to make an offer of these shares in any place where the
offer is not permitted. You should not assume that the information in this
prospectus, any supplement or any document incorporated by reference is accurate
as of any date other than the date of that document.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus and the documents incorporated by reference. This summary does not
contain all of the information that you should consider before investing in our
common stock. You should read the entire prospectus and the documents
incorporated by reference carefully, including the risk factors and the
financial statements and related notes.
OUR BUSINESS
We are a pharmaceutical company specializing in the development of oral
and nasal delivery of vaccines and drugs. Through collaborations, we are
developing a proprietary oral and nasal vaccine delivery technology called the
Microvax(TM) system, which we are applying to vaccines intended to protect
individuals against biological agents that may be used in war or acts of
terrorism, including nasal vaccines against ricin toxins and anthrax and an oral
delivered vaccine against botulinum toxin. In addition to our biodefense
vaccines, we are developing orBec(R), an oral therapeutic product, that is
currently in a pivotal Phase III clinical trial for the treatment of intestinal
graft-vs-host disease, a life threatening complication of bone marrow
transplantation. In addition, we are looking at other indications for which
patients may benefit from the unique characteristics of orBec(R). We are also
developing oral drug delivery systems, named the LPM(TM), PLP(TM) and LPE(TM)
systems, for the delivery of proteins and water insoluble drugs. We have
preclinical animal data demonstrating the oral delivery of the drug leuprolide,
a FDA approved injectable anticancer product. We also have preclinical animal
data demonstrating the oral delivery of the drug paclitaxel, a FDA approved
injectable anticancer product.
Our business strategy is to (1) identify, acquire and exploit rights to
new technologies and compounds relating to biodefense and orally delivered
compounds to treat gastrointestinal disorders; (2) enhance the value of those
technologies through collaberative research and development with leading
institutions; (3) market our therapeutics drugs through licensing agreements
with major pharmaceutical companies; and (4) market our biodefense vaccine
products directly to the U.S. and European governmental agencies.
We have assembled a management team with significant industry
experience that oversees the human clinical trials necessary to establish
preliminary evidence of effectiveness and seek partnerships with pharmaceutical
and biotechnology companies for late-stage development and marketing of our
product candidates. We also supplement our management team through a network of
consultants and contractors. By operating in this manner, we believe we can
efficiently utilize our capital resources to advance our drug and vaccine
products to market. We operate through various subsidiary companies: DOR
Vaccines, Inc., which is the successor in interest to Innovaccines Corporation,
our former joint venture, and formed the basis of our biodefense business
initiative; Enteron Pharmaceuticals, Inc., which holds the intellectual property
relating to orBec(R); and Oradel Systems, Inc., which formed the basis of our
biotherapeutics initiative and holds the intellectual property relating to the
LPM(TM) drug delivery system. We plan to continue to develop our later stage
product opportunities, while seeking to manage our earlier stage product
pipeline through collaborative licensing arrangements.
During 2002, our management and board of directors implemented a
restructuring plan in which we reduced our headcount and capital expenditures.
As part of this plan we acquired our joint venture Innovaccines Corporation from
Elan Pharmaceuticals, Plc., which had been developing the Microvax(TM) vaccine
delivery system since 1998. This acquisition provided us with a vaccine delivery
platform to enter the biodefense vaccine industry. In September 2002, we began
development of our first biodefense initiative to develop a vaccine against
ricin toxin, one of the agents that potentially could be used in biological
warfare. In further refocusing our development plan, we began an initiative to
acquire the
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rights to key vaccines, as well as additional delivery technologies. To date,
we have focused these efforts on negotiating licenses for the delivery
technology related to a nasal vaccine for anthrax and a novel vaccine for
botulinum toxin. In our restructuring plan, we have continued clinical
evaluation of orBec(R), our lead product, which is currently being evaluated in
a multi-center pivotal Phase III trial for the treatment of intestinal
graft-vs-host disease.
THE OFFERING
This prospectus relates to the offer and sale from to time of up to
5,297,732 shares of our common stock by the selling stockholders. Of the shares
registered for resale through this prospectus, 5,103,432 shares were issued or
are issuable in connection with our December 2002 private placement as follows:
(1) 3,093,569 shares were sold to investors in the private placement; (2)
1,546,789 shares are issuable upon exercise of warrants, exercisable until
December 31, 2007 at a price of $0.75 per share, sold to investors in the
private placement; (3) 310,787 shares are issuable upon exercise of warrants,
exercisable until December 31, 2007 at a price of $0.35 per share, issued as
consideration for placement services rendered in connection with the private
placement, and (4) 152,286 shares are issuable upon exercise of warrants,
exercisable until December 31, 2007 at a price of $0.75 per share, issued as
consideration for placement services rendered in connection with the private
placement. Of the remaining 194,300 shares registered for resale through this
prospectus, 160,000 shares are issuable upon exercise of warrants, exercisable
until December 14, 2007 at prices ranging from $0.35 to $0.55 per share, issued
to certain of our consultants, and 34,300 shares of common stock were issued to
a consultant, in each case as payment for consulting services rendered to us.
The selling stockholders may sell these shares in the over-the-counter
market or otherwise, at market prices prevailing at the time of sale, at prices
related to the prevailing market price, or at negotiated prices. We will not
receive any proceeds from the sale of shares by the selling stockholders.
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RISK FACTORS
You should carefully consider the risks, uncertainties and other factors
described below before you decide whether to buy shares of our common stock. Any
of the factors could materially affect our business, financial condition and/or
operating results and could negatively impact the value of your investment.
Also, you should be aware that the risks and uncertainties described below are
not the only ones facing us. Additional risks and uncertainties that we do not
yet know of, or that we currently think are immaterial, may also impair our
business operations. The trading price of the common stock offered in this
prospectus could decline, and you may lose all or part of your investment. You
should also refer to the other information contained in and incorporated by
reference into this prospectus including our financial statements and the
related notes.
RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY
WE HAVE HAD SIGNIFICANT LOSSES AND ANTICIPATE FUTURE LOSSES; IF ADDITIONAL
FUNDING CANNOT BE OBTAINED, WE MAY REDUCE OR DISCONTINUE OUR PRODUCT DEVELOPMENT
AND COMMERCIALIZATION EFFORTS AND WE MAY BE UNABLE TO CONTINUE OUR OPERATIONS.
We are a development stage company that has experienced significant losses since
inception and have a significant accumulated deficit. We expect to incur
additional operating losses in the future and expect our cumulative losses to
increase. All of our products are currently in development, preclinical studies
or clinical trials, and we have not generated any revenues from sales or
licensing of these products. Through March 31, 2003, we have expended
approximately $1.7 million developing our current product candidates and for our
clinical trials, and we currently have commitments to spend approximately $1.1
million over the next two years in connection with our current clinical trials.
Additional funds will need to be spent on development of our oral delivery
systems, biodefense vaccine products and licenses. Unless and until we are able
to generate licensing revenue from orBec(R), our leading product candidate, or
another one of our product candidates, we will require additional funding to
meet these commitments, sustain our research and development efforts, provide
for future clinical trials, and continue our operations. We may not be able to
obtain additional required funding on terms satisfactory to our requirements, if
at all. If we are unable to raise additional funds when necessary, we may have
to reduce or discontinue development, commercialization or clinical testing of
some or all of our product candidates or take other cost-cutting steps that
could adversely affect our ability to achieve our business objectives. If
additional funds are raised by our issuing equity securities, stockholders may
experience dilution of their ownership interests, and the newly issued
securities may have rights superior to those of the common stock. If additional
funds are raised by our issuing debt, we may be subject to limitations on our
operations.
IF WE ARE UNSUCCESSFUL IN DEVELOPING OUR PRODUCTS, OUR ABILITY TO GENERATE
REVENUES WILL BE SIGNIFICANTLY IMPAIRED.
To be profitable, our organization must, along with corporate partners and
collaborators, successfully research, develop and commercialize our technologies
or product candidates. Our current product candidates are in various stages of
clinical and pre-clinical development and will require significant further
funding, research, development, preclinical and/or clinical testing, regulatory
approval and commercialization testing, and are subject to the risks of failure
inherent in the development of products based on innovative or novel
technologies. Specifically, each of the following is possible with respect to
orBec(R) or any of our other product candidates:
o that we will not be able to maintain our current research and
development schedules;
o that we will encounter problems in clinical trials; or
o that the technology or product will be found to be ineffective or
unsafe.
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If any of the risks set forth above occurs, or if we are unable to obtain the
necessary regulatory approvals as discussed below, we may not be able to
successfully develop our technologies and product candidates and our business
will be seriously harmed. Furthermore, for reasons including those set forth
below, we may be unable to commercialize or receive royalties from the sale of
orBec(R) or any other technology we develop, even if it is shown to be
effective, if:
o it is uneconomical or the market for the product does not develop or
diminishes;
o we are not able to enter into arrangements or collaborations to
manufacture and/or market the product;
o the product is not eligible for third-party reimbursement from
government or private insurers;
o others hold proprietary rights that preclude us from commercializing
the product;
o others have brought to market similar or superior products; or
o the product has undesirable or unintended side effects that prevent or
limit its commercial use.
OUR BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION, WHICH CAN BE
COSTLY, TIME CONSUMING AND SUBJECT US TO UNANTICIPATED DELAYS.
All of our product offerings, as well as the processes and facilities by which
they are manufactured, are subject to very stringent United States, federal,
foreign, state and local government laws and regulations, including the Federal
Food, Drug and Cosmetic Act, the Environmental Protection Act, the Occupational
Safety and Health Act, and state and local counterparts to these acts. These
laws and regulations may be amended, additional laws and regulations may be
enacted, and the policies of the FDA and other regulatory agencies may change.
The regulatory process applicable to our products requires pre-clinical and
clinical testing of any product to establish its safety and efficacy. This
testing can take many years and require the expenditure of substantial capital
and other resources. For example, clinical trials of orBec(R) began in 2001 and
are expected to continue for at least one more year. We may be unable to obtain,
or we may experience difficulties and delays in obtaining, necessary domestic
and foreign governmental clearances and approvals to market a product. Also,
even if regulatory approval of a product is granted, that approval may entail
limitations on the indicated uses for which the product may be marketed. We do
not expect to complete clinical testing of any of our product candidates within
the next 6 months.
Following any regulatory approval, a marketed product and its manufacturer are
subject to continual regulatory review. Later discovery of problems with a
product or manufacturer may result in restrictions on such product or
manufacturer. These restrictions may include withdrawal of the marketing
approval for the product. Furthermore, the advertising, promotion and export of
a product are subject to extensive regulation by governmental authorities in the
United States and other countries. If we fail to comply with applicable
regulatory requirements, we may be subject to fines, suspension or withdrawal of
regulatory approvals, product recalls, seizure of products, operating
restrictions and/or criminal prosecution.
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WE WILL BE DEPENDENT ON GOVERNMENT FUNDING, WHICH IS INHERENTLY UNCERTAIN, FOR
THE SUCCESS OF OUR BIODEFENSE OPERATIONS.
We are subject to risks specifically associated with operating in the biodefense
industry, which is a new and unproven business area. We do not anticipate that a
significant commercial market will develop for our biodefense products. Because
we anticipate that the principal potential purchasers of our products, as well
as potential sources of research and development funds, will be the U.S.
government and governmental agencies, the success of our biodefense division
will be dependent in large part upon government spending decisions. The funding
of government programs is dependent on budgetary limitations, congressional
appropriations and administrative allotment of funds, all of which are
inherently uncertain and may be affected by changes in U.S. government policies
resulting from various political and military developments.
OUR PRODUCTS, IF APPROVED, MAY NOT BE COMMERCIALLY VIABLE DUE TO HEALTH CARE
CHANGES AND THIRD PARTY REIMBURSEMENT LIMITATIONS.
Recent initiatives to reduce the federal deficit and to change health care
delivery are increasing cost-containment efforts. We anticipate that Congress,
state legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, price controls on pharmaceuticals, and other fundamental changes to
the health care delivery system. Any changes of this type could negatively
impact the commercial viability of our products, if approved. Our ability to
successfully commercialize our product candidates, if they are approved, will
depend in part on the extent to which appropriate reimbursement codes and
authorized cost reimbursement levels of these products and related treatment are
obtained from governmental authorities, private health insurers and other
organizations, such as health maintenance organizations. In the absence of
national Medicare coverage determination, local contractors that administer the
Medicare program may make their own coverage decisions. Any of our product
candidates, if approved and when commercially available, may not be included
within the then current Medicare coverage determination or the coverage
determination of state Medicaid programs, private insurance companies or other
health care providers. In addition, third-party payers are increasingly
challenging the necessity and prices charged for medical products, treatments
and services.
WE MAY NOT BE ABLE TO RETAIN RIGHTS LICENSED TO US BY THIRD PARTIES TO
COMMERCIALIZE KEY PRODUCTS OR TO DEVELOP THE THIRD PARTY RELATIONSHIPS WE, NEED
TO DEVELOP, MANUFACTURE AND MARKET OUR PRODUCTS.
We currently rely on license agreements from Southern Research Institute, the
University of Alabama Research Foundation, Thomas Jefferson University and
George B. McDonald for the rights to commercialize key product candidates. These
agreements require that we use our best efforts to commercialize at least two
products in the next 5 years. Our failure to meet the requirement would allow
the licensors to terminate the licenses, whereas our meeting this milestone
would trigger payment obligations on our part. We may not be able to retain the
rights granted under these agreements or negotiate additional agreements on
reasonable terms, or at all. We have also entered into letters of intent or
option agreements with the Ministry of Defense of the United Kingdom, the
University of Texas Southwestern Medical Center and the University of Texas
Medical Branch at Galveston, under which we plan to license issued patent and
pending patent applications for technologies relating to botulinum toxin,
intranasal anthrax and ricin vaccines. Although these letters of intent and
option agreements provide for defined business terms, we may not be able to come
to definitive agreements with the institutions and, as a result, may not obtain
critical intellectual property rights on which we expect to rely.
Furthermore, we currently have very limited product development capabilities and
no manufacturing, marketing or sales capabilities. For us to research, develop
and test our product candidates, we need to contract with outside researches, in
most cases with or through those parties that did the original research and from
whom we have licensed the technologies. If products are successfully developed
and approved
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for commercialization, then we will need to enter into collaboration and other
agreements with third parties to manufacture and market our products. We may not
be able to induce the third parties to enter into these agreements, and, even if
we are able to do so, the terms of these agreements may not be favorable to us.
Our inability to enter into these agreements could delay or preclude the
development, manufacture and/or marketing of some of our product candidates or
could significantly increase the costs of doing so. In the future, we may grant
to our development partners rights to license and commercialize pharmaceutical
and related products developed under the agreements with them, and these rights
might limit our flexibility in considering alternatives for the
commercialization of these products. Furthermore, third-party manufacturers or
suppliers may not be able to meet our needs with respect to timing, quantity and
quality for the products.
Additionally, if we do not enter into relationships with third parties for the
marketing of our products, if and when they are approved and ready for
commercialization, we would have to build our own sales force. Such a marketing
and sales force would be particularly relevant to our biotherapeutic products,
which we intend to market to a broad customer base. Development of an effective
sales force would require significant financial resources, time and expertise.
We may not be able to obtain the financing necessary to establish a sales force
in a timely or cost effective manner, if at all, and any sales force we are able
to establish may not be capable of generating demand for our product candidates,
if they are approved.
WE MAY SUFFER PRODUCT AND OTHER LIABILITY CLAIMS; WE MAINTAIN ONLY LIMITED
PRODUCT LIABILITY INSURANCE, WHICH MAY NOT BE SUFFICIENT.
The clinical testing, manufacture and sale of our products involves an inherent
risk that human subjects in clinical testing or consumers of our products may
suffer serious bodily injury or death due to side effects, allergic reactions or
other unintended negative reactions to our products. As a result, product and
other liability claims may be brought against us. We currently have clinical
trial and product liability insurance with limits of liability of $5 million,
which may not be sufficient to cover our potential liabilities. Because
liability insurance is expensive and difficult to obtain, we may not be able to
maintain existing insurance or obtain additional liability insurance on
acceptable terms or with adequate coverage against potential liabilities.
Furthermore, if any claims are brought against us, even if we are fully covered
by insurance, we may suffer harm such as adverse publicity.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH OUR COMPETITORS IN THE
BIOTECHNOLOGY INDUSTRY.
The biotechnology industry is intensely competitive, subject to rapid change and
sensitive to new product introductions or enhancements. Virtually all of our
existing competitors have greater financial resources, larger technical staffs,
and larger research budgets than we have, as well as greater experience in
developing products and conducting clinical trials. Our competition is
particularly intense in the gastroenterology and transplant areas and is also
intense in the therapeutic area of inflammatory bowel disease. We face intense
competition in the area of biodefense from various public and private companies
and universities, as well as governmental agencies, such as the U.S. Army, which
may have their own proprietary technologies that may directly compete with our
technologies. In addition, there may be other companies that are currently
developing competitive technologies and products or that may in the future
develop technologies and products that are comparable or superior to our
technologies and products. We may not be able to compete successfully with our
existing and future competitors.
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WE MAY BE UNABLE TO COMMERCIALIZE OUR PRODUCTS IF WE ARE UNABLE TO PROTECT OUR
PROPRIETARY RIGHTS AND WE MAY BE LIABLE FOR SIGNIFICANT COSTS AND DAMAGES IF WE
FACE A CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY.
Our success depends in part on our ability to obtain and maintain patents,
protect trade secrets and operate without infringing upon the proprietary rights
of others. For example, we currently hold the rights to a patent for our
Microvax(TM) technology in the field of mucosally and orally administered
vaccines. In the absence of patent and trade secret protection, competitors may
adversely affect our business by independently developing and marketing
substantially equivalent or superior products and technology, possibly at lower
prices. We could also incur substantial costs in litigation and suffer diversion
of attention of technical and management personnel if we are required to defend
ourselves in intellectual property infringement suits brought by third parties,
with or without merit, or if we are required to initiate litigation against
others to protect or assert our intellectual property rights. Moreover, any such
litigation may not be resolved in our favor.
Although we have filed various patent applications covering the uses of our
product candidates, we may not be issued patents from the patent applications
already filed or from applications we may file in the future. Moreover, the
patent position of companies in the pharmaceutical industry generally involves
complex legal and factual questions, and recently has been the subject of much
litigation. Any patents we have obtained, or may obtain in the future, may be
challenged, invalidated or circumvented. To date, no consistent policy has been
developed in the United States Patent and Trademark Office regarding the breadth
of claims allowed in biotechnology patents.
In addition, because patent applications in the United States are maintained in
secrecy until patents issue, and because publication of discoveries in the
scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we and our licensors are the first creators of inventions
covered by any licensed patent applications or patents or that we or they are
the first to file. The Patent and Trademark Office may commence interference
proceedings involving patents or patent applications, in which the question of
first inventorship is contested. Accordingly, the patents owned or licensed to
us may not be valid or may not afford us protection against competitors with
similar technology, and the patent applications licensed to us may not result in
the issuance of patents.
It is also possible that our patented technologies may infringe on patents or
other rights owned by others, licenses to which may not be available to us. We
are aware of at least one issued U.S. patent assigned to the U.S. Government
relating to one component of one of our vaccine candidates that we may be
required to license in order to commercialize those vaccine candidates. We may
not be successful in our efforts to obtain a license under such patent on terms
favorable to us, if at all. We may have to alter our products or processes, pay
licensing fees or cease activities altogether because of patent rights of third
parties.
In addition to the products for which we have patents or have filed patent
applications, we rely upon unpatented proprietary technology and may not be able
to meaningfully protect our rights with regard to that unpatented proprietary
technology. Furthermore, to the extent that consultants, key employees or other
third parties apply technological information developed by them or by others to
any of our proposed projects, disputes may arise as to the proprietary rights to
this information, which may not be resolved in our favor.
OUR BUSINESS COULD BE HARMED IF WE FAIL TO RETAIN OUR CURRENT PERSONNEL OR IF
THEY ARE UNABLE TO EFFECTIVELY RUN OUR BUSINESS.
We have only five employees: Dr. Ralph Ellison, our Chief Executive Officer and
President; Steve Kanzer, our Vice Chairman; William Milling, our Controller,
Treasurer and Corporate Secretary; Robert Brey, our Vice President of Research
and Development; and Robin Simuncek, our Clinical Project Manager and an
Administrative Assistant. Mr. Ellison was hired in March 2003, following the
resignation of David M. Kent, our former Chief Executive Officer for personal
reasons; Mr. Kanzer became our Vice Chairman in January 2003; Mr. Milling was
hired in September 2002; and Mr. Brey was hired in
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December 2002. In addition, Alexander Haig, our non-employee Chairman of the
Board was appointed in January 2003. We depend upon the five employees to manage
the day-to-day activities of our business. Because we have such limited
personnel, the loss of any of them, even though they have very limited
experience in managing or operating our business, or our inability to attract
and retain other qualified employees in a timely manner, would likely have a
negative impact on our operations. Furthermore, because of their inexperience in
operating our business, there is significant uncertainty as to how our
management team will perform. Our management team may need to devote a
significant amount of time to learning about our business and its markets, which
could limit their effectiveness in managing our business for a period of time.
We will not be successful if this new management team cannot effectively manage
and operate our business.
WE HAVE RELATIONSHIPS THAT PRESENT CONFLICTS OF INTEREST.
Our Vice Chairman of the Board of Directors, Steve H. Kanzer, is Chairman and
Chief Executive Officer of Accredited Ventures, Inc., which in the regular
course of its business, identifies, evaluates and pursues investment
opportunities in biomedical and pharmaceutical products, technologies and
companies. However, Accredited is under no obligation to make any additional
products or technologies available to us. Therefore, we may lose to Accredited
opportunities of which Mr. Kanzer is aware that would be beneficial to our
business. In addition, our officers and directors and officers or directors
appointed in the future may from time to time serve as officers, directors or
consultants of other biopharmaceutical or biotechnology companies and those
companies may have interests that conflict with our interests. As a result of
our recent management changes, which highlighted some of the actual and
potential conflicts, we have not yet developed policies to address the conflicts
of interest, but we plan to do so in the near future.
RISKS RELATED TO THE OFFERING
OUR STOCK PRICE IS HIGHLY VOLATILE AND OUR STOCK IS THINLY TRADED
The market price of our common stock, like that of many other development stage
public pharmaceutical and biotechnology companies, has been highly volatile and
may continue to be so in the future due to a wide variety of factors, which
include, actual or anticipated fluctuations in our results of operations,
announcements of innovations by us or our competitors, additions or departures
of key personnel or general market conditions. For example, on January 7, 2003,
when ricin was discovered in an apartment in London and we announced that we had
retained Mr. Haig as our Chairman of the Board, our stock price went from $0.58
per share to $1.05 per share in one day and has fluctuated between $0.80 per
share and $1.57 per share from that date through May 22, 2003. From July 1,
2000 through May 22, 2003, the per share price of our common stock ranged from
a high of $9.44 per share to a low of $0.11 per share. The fluctuation in the
price of our common stock has sometimes been unrelated or disproportionate to
our operating performance.
Since it commenced trading on the American Stock Exchange on August 6, 1998, our
common stock has been thinly traded. The average trading volume for our common
stock averaged approximately 36,907 shares per day from January 1, 2001 to April
30, 2003. The relatively illiquid market for our shares may have an adverse
effect on the market price for our shares and on stockholders' ability to sell
our common stock at the prevailing market price. A more active trading market
for our common stock may not develop.
8
OUR STOCK MAY NOT REMAIN LISTED ON THE AMERICAN STOCK EXCHANGE.
Because we continue to incur losses from continuing operations in fiscal 2003,
the stockholders' equity standard applicable to us of AMEX's continued listing
requirements will increase from $4 million to $6 million for fiscal years ending
2003 and beyond. Moreover, our net equity of $3.3 million as of March 31, 2003
does not satisfy the $4 million minimum stockholders' equity requirement
applicable to calendar quarters ending during 2003. If, for this reason or for
any other reason, our stock were to be delisted from the American Stock
Exchange, we may not be able to list our common stock on another national
exchange or market. If our common stock is not listed on a national exchange or
market, the trading market for our common stock may be even more illiquid than
it is already. Upon any such delisting, our common stock would become subject to
the penny stock rules of the SEC, which generally are applicable to equity
securities with a price of less than $5.00 per share, other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system. The penny
stock rules require a broker-dealer, before a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also
must provide the customer with bid and ask quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that, before
a transaction in a penny stock that is not otherwise exempt from such rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. As a result of these requirements, if our common
stock were to become subject to the penny stock rules, it is likely that the
price of our common stock would decline and that our stockholders would find it
more difficult to sell their shares.
INVESTORS MAY SUFFER SUBSTANTIAL DILUTION.
We have a number of agreements or obligations that may result in dilution to
investors. These include:
o warrants to purchase a total of approximate 5.2 million shares of our
common stock at a current weighted average exercise price of
approximately $2.50.
o conversion rights and dividend rights of preferred stock, consisting
of 119,428 shares of Series B preferred stock ($8.0 million original
liquidation value) bearing an 8% cumulative payment-in-kind dividend
and convertible at the liquidation value into common stock at $7.38
per share;
o anti-dilution rights under the above warrants and preferred stock,
which can permit purchase of additional shares and/or lower exercise
or conversion prices under certain circumstances; and
o options to purchase approximately 6,078,000 shares of common stock at
a current weighted average exercise price of approximately $0.95.
To the extent that anti-dilution rights are triggered, or warrants, options or
conversion rights are exercised, our stockholders will experience substantial
dilution and our stock price may decrease.
9
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference in it
contains, or will contain, various "forward-looking statements" that are based
on management's beliefs, as well as assumptions made by, and information
currently available to, management, including statements regarding future
economic performance, financial condition, liquidity and capital resources,
acceptance of our products and services by the market and management's
objectives. Where possible, we have tried, and will try, to identify the
forward-looking statements by using words such as "anticipates," "expects,"
"believes," "estimates," "plans," "intends" and similar expressions. These
statements are subject to various risks, uncertainties and other factors that
could cause our actual results, performance and achievements to differ
materially from those expressed in, or implied by, these statements. These
risks, uncertainties and other factors include the risk factors discussed above,
in any prospectus supplement and in any document incorporated by reference into
this prospectus. You should not place any undue reliance on any forward-looking
statements. Except as expressly required by the federal securities laws, we
undertake no obligation to update any forward-looking statements to reflect new
information, future events or developments or changes of circumstances or for
any other reason.
USE OF PROCEEDS
Any net proceeds from any sale of shares of our common stock covered by
this prospectus will be received by the selling stockholders. We will not
receive any proceeds from the sale of shares by the selling stockholders.
SELLING STOCKHOLDERS
Of the 5,297,732 shares of our common stock registered for resale
through this prospectus and listed under the column "Shares Available for Sale
Under This Prospectus" on the table set forth below, 5,103,432 shares were
issued or are issuable in connection with our December 2002 private placement as
follows: (1) 3,093,569 shares were sold to investors in the private placement;
(2) 1,546,789 shares are issuable upon exercise of warrants, exercisable until
December 31, 2007 at a price of $0.75 per share, sold to investors in the
private placement; (3) 310,787 shares are issuable upon exercise of warrants,
exercisable until December 31, 2007 at a price of $0.35 per share, issued as
consideration for placement services rendered in connection with the private
placement, and (4) 152,286 shares are issuable upon exercise of warrants,
exercisable until December 31, 2007 at a price of $0.75 per share, issued as
consideration for placement services rendered in connection with the private
placement. These shares of our common stock are included in this prospectus
pursuant to registration rights we granted in connection with the December 2002
private placement.
Of the remaining 194,300 shares of our common stock registered for
resale through this prospectus and listed under the column "Shares Available for
Sale Under This Prospectus" on the table set forth below, 160,000 shares are
issuable upon exercise of warrants, exercisable until December 14, 2007 at
prices ranging from $0.35 to $0.58 per share, issued to certain of our
consultants and 34,300 shares were issued to those consultants, in each case as
payment for consulting services. These shares of our common stock are included
in this prospectus pursuant to the registration rights we granted in connection
with the engagement of these consultants.
The following table sets forth, to our knowledge, the number of shares
beneficially owned by each of the selling stockholders as of the date of this
prospectus. We are not able to estimate the amount of shares that will be held
by each selling stockholder after the completion of this offering because (1)
the selling stockholders may sell less than all of the shares registered under
this prospectus, (2) the selling stockholders may exercise less than all of
their warrants, and (3) to our knowledge, the selling
10
stockholders currently have no agreements, arrangements or understandings with
respect to the sale of any of their shares. The following table assumes that all
of the currently outstanding warrants will be exercised into common stock and
all of the shares being registered pursuant to this prospectus will be sold. The
selling stockholders are not making any representation that any shares covered
by this prospectus will be offered for sale. Except as otherwise indicated,
based on information provided to us by each selling stockholder, the selling
stockholders have sole voting and investment power with respect to their shares
of common stock.
PERCENT OF
NUMBER OF COMMON
SHARES OF STOCK TO
NUMBER OF SHARES COMMON STOCK BE OWNED
SHARES OF PERCENT OF AVAILABLE FOR TO BE OWNED AFTER
COMMON STOCK COMMON STOCK SALE UNDER AFTER COMPLETION
OWNED BEFORE OWNED BEFORE THIS COMPLETION OF OF THE
NAME OF SELLING STOCKHOLDER THE OFFERING (1) THE OFFERING PROSPECTUS (1) THE OFFERING OFFERING
--------------------------- ---------------- ------------ -------------- ------------- ----------
Concordia Capital 1,002,637 3.5% 985,714 16,923 *
Steve H. Kanzer (2) 747,713 2.6% 80,193 666,800 2.8%
Pharmainvestors, LLC (3) 831,666 2.1% 429,291 402,375 1.7%
Harris Kanzer (4) 642,857 2.2% 642,857 -- --
Odisseas Myrianthopoulos (5) 225,000 * 225,000 -- --
David M. Kent (6) 214,286 * 214,286 -- --
Alberto Guiterez 214,286 * 214,286 -- --
Ralph M. Ellison (7) 214,286 * 214,286 -- --
Martin Draper 128,571 * 128,571 -- --
William Kanzer (8) 214,286 * 214,286 -- --
Catherine Makary 150,000 * 150,000 -- --
Mitchell Littman
and Sima Littman JTWROS 107,143 * 107,143 -- --
Ivy Scheinholz 90,000 * 90,000 -- --
Ed O'Donnell 107,143 * 107,143 -- --
Daniel Kessel, M.D. (9) 64,286 * 64,286 -- --
Lawrence and Shirley Kessel (10) 214,286 * 64,286 161,920 *
Charles Griffith 64,286 * 64,286 -- --
Gilbert Goldstein 51,429 * 51,429 -- --
Nicholas Stergis (11) 563,528 2.0% 80,913 439,758 1.9%
Nicholas and
Jennifer Stergis JTWROS 42,857 * 42,857 -- --
Guilhem Canstagne 42,857 * 42,857 -- --
Ken Alberstadt 42,857 * 42,857 -- --
Dewey Tran 22,500 * 22,500 -- --
Giuseppe Cavalieri 42,857 * 42,857 -- --
Eva Weinberg (12) 15,000 * 15,000 -- --
Peter Salomon (13) 165,000 * 15,000 150,000 *
John and Tiffany Ofenloch 6,429 * 6,429 -- --
Louis Bianco 214,286 * 214,286 -- --
James Bianco, M.D. 214,286 * 214,286 -- --
Nicole Scheinholz 15,000 * 15,000 -- --
Atlas Capital Services, LLC (14) 195,669 * 195,669 -- --
Steven Pollan (15) 35,619 * 35,619 -- --
Dan Myers (16) 4,505 * 4,505 -- --
Redington, Inc. (17) 164,300 * 164,300 -- --
Ibis Consulting Group, Inc. (18) 30,000 * 30,000 -- --
Evan Myrianthopoulos (19) 215,454 * 65,454 150,000 *
* Less than 1%.
--------------
11
(1) Includes shares of common stock issuable upon the exercise of warrants and
options as follows: Concordia Capital 328,571 shares; Steve Kanzer 80,913
shares; Pharmainvestors, L.L.C. 142,857 shares; Harris Kanzer 214,286
shares; Odisseas Myrianthopoulos 75,000 shares; David Kent 71,429 shares;
Alberto Guiterez 71,429 shares; Ralph M. Ellison 71,429 shares; William
Kanzer 71,429 shares; Catherine Makary 50,000 shares; Martin Draper 42,857
shares; Mitchell Littman and Sima Littman JTWROS 35,714 shares; Ivy
Scheinholz 30,000 shares; Ed O'Donnell 35,714 shares; Daniel Kessel 21,429
shares; Lawrence and Shirley Kessel 171,249 shares; Charles Griffith 21,429
shares; Gilbert Goldstein 17,143 shares; Nicholas and Jennifer Stergis
JTWROS 80,611 shares; Guilhem Canstagne 14,286 shares; Ken Alberstadt
14,286 shares; Dewey Tran 7,500 shares; Giuseppe Cavalieri 14,286 shares;
Eva Weinberg 5,000 shares; Peter Salomon 5,000 shares; John and Tiffany
Ofenloch 2,143 shares; Louis Bianco 71,429; James Bianco 71,429 shares;
Nicole Scheinholz 5,000 shares; Evan Myrianthopoulos 65,454 shares;
Reddington, Inc. 130,000 shares; and IBTS Consulting Group, Inc. 30,000
shares.
(2) Steve H. Kanzer is our Vice Chairman of the Board of Directors, and from
June 2002 until January 2003 was our Chairman of the Board and Interim
President. He has been a member of our Board of Directors since 1996. Mr.
Kanzer is also Chairman, Chief Executive Officer and sole stockholder of
Accredited Equities, Inc. and Accredited Ventures, Inc., which are merchant
banking and venture capital firms specializing in biotechnology companies
and, which provided placement services in connection with our December 2002
private placement. As consideration for these placement services, we issued
to Mr. Kanzer warrants to purchase 54,304 shares of our common stock,
exercisable until December 31, 2007 at a price of $0.35 per share, and
warrants to purchase 26,609 shares, exercisable until December 31, 2007 at
a price of $0.75 per share. The shares subject to these warrants are
registered for resale in this prospectus (see footnote (1)). The number of
shares beneficially owned by Mr. Kanzer includes 616,800 shares immediately
issuable upon exercise of options. The number of shares beneficially owned
by Mr. Kanzer does not include 688,809 shares of common stock and 142,857
shares of common stock issuable upon the exercise of warrants held by
Pharmainvestors, LLC (see footnote (3)).
(3) Pharmainvestors, LLC, is a limited liability company incorporated under the
laws of Nevis, West Indies, the sole member of which is an irrevocable
trust of which Steve H. Kanzer is a beneficiary, but over which he has no
control. Henry Schwartz is the sole trustee of the irrevocable trust. The
shares beneficially owned by Pharmainvestors, LLC consist of 688,809 shares
of common stock and 142,857 shares of common stock issuable upon the
exercise of warrants. The shares subject to these warrants are registered
for resale in this prospectus (see footnote (1)). Mr. Kanzer disclaims
beneficial ownership of such shares.
(4) Harris Kanzer is the father of our Vice Chairman of the Board, Steve H.
Kanzer. They do not reside in the same household.
(5) Odisseas Myrianthopoulos is the adult cousin of Evan Myrianthopoulos, one
of the members of our board of directors. They do not reside in the same
household.
(6) David M. Kent was our Chief Executive Officer and President from January
2003 to February 2003.
(7) Ralph M. Ellison has been our Chief Executive Officer and President since
March 2003.
(8) William Kanzer is the adult brother of our Vice Chairman of the Board,
Steve H. Kanzer. They do not reside in the same household.
(9) Dr. Daniel Kessel is the adult brother of Dr. Larry Kessel, one of the
members of our board of directors. They do not reside in the same
household.
(10) Lawrence Kessel has been a member of our Board of Directors since June
2002. The shares beneficially owned by him include 150,000 shares of common
stock immediately issuable upon exercise of options.
(11) Nicholas Stergis is employed by Accredited Equities, Inc., which served as
a selected dealer to our placement agent for the December 2002 private
placement. As consideration for these placement services, we issued to Mr.
Stergis warrants to purchase 54,304 shares of our common stock, exercisable
until December 31, 2007 at a price of $0.35 per share, and warrants to
purchase 26,609 shares, exercisable until December 31, 2007 at a price of
$0.75 per share. The shares subject to these
12
warrants are registered for resale in this prospectus (see footnote (1)).
The number of shares beneficially owned by Mr. Stergis includes 129,552
shares of common stock issuable upon exercise of options. The number of
shares beneficially owned by Mr. Stergis does not include 42,857 shares of
common stock owned by Nicholas and Jennifer Stergis as joint tenants with
right of survivorship.
(12) Eva Weinberg is the adult sister of Dr. Peter Salomon, one of the members
of our board of directors. They do not reside in the same household.
(13) Dr. Peter Salomon has been a member of our Board of Directors since June
2002. The shares beneficially owned by him include 150,000 shares of common
stock immediately issuable upon exercise of options.
(14) Atlas Capital Services, LLC provided placement services in connection with
our December 2002 private placement. As consideration for the placement
services provided by Atlas, we issued to Atlas warrants to purchase 131,321
shares, exercisable until December 31, 2007 at a price of $0.35 per share,
and warrants to purchase 64,348 shares, exercisable until December 31, 2007
at a price of $0.75 per share. The shares subject to these warrants are
registered for resale in this prospectus (see footnote (1)).
(15) Steve Pollan is an employee of Atlas Capital Services, LLC. As
consideration for the placement services provided by Atlas, we issued to
Mr. Pollan warrants to purchase 23,905 shares, exercisable until December
31, 2007 at a price of $0.35 per share, and warrants to purchase 11,714
shares, exercisable until December 31, 2007 at a price of $0.75 per share.
The shares subject to these warrants are registered for resale in this
prospectus (see footnote (1)).
(16) Dan Myers is an employee of Atlas Capital Services, LLC. As consideration
for the placement services provided by Atlas, we issued to Mr. Myers
warrants to purchase 3,024 shares, exercisable until December 31, 2007 at a
price of $0.35 per share, and warrants to purchase 1,481 shares,
exercisable until December 31, 2007 at a price of $0.75 per share. The
shares subject to these warrants are registered for resale in this
prospectus (see footnote (1)).
(17) Redington, Inc. serves as a consultant to the Company. We issued to
Redington warrants to purchase 130,000 shares, exercisable until December
14, 2007 at prices ranging from $0.35 to $0.58 per share, as payment for
consulting services. These warrants vest upon the Company's common stock
attaining certain price levels, and the shares subject to these warrants
are registered for resale in this prospectus. (see footnote (1)).
(18) Ibis Consulting Group, Inc. serves as a consultant to the Company. We
issued to Ibis warrants to purchase 30,000 shares, exercisable until
December 14, 2004 at prices ranging from $0.35 to $0.58 per share, as
payment for consulting services. The shares subject to these warrants are
registered for resale in this prospectus (see footnote (1)).
(19) Evan Myrianthopoulos has been a member of our Board of Directors since June
2002. Mr. Myrianthopoulos provided placement services in connection with
our December 2002 private placement. As consideration for these services,
we issued to Mr. Myrianthopoulos warrants to purchase 43,929 shares,
exercisable until December 31, 2007 at a price of $0.35 per share, and
warrants to purchase 21,525 shares, exercisable until December 31, 2007 at
a price of $0.75 per share. The shares subject to these warrants are
registered for resale in this prospectus (see footnote (1)). The number of
shares beneficially owned by Mr. Myrianthopoulos includes 150,000 shares
immediately issuable upon exercise of options.
13
PLAN OF DISTRIBUTION
We are registering the shares of our common stock covered by this
prospectus for the selling stockholders. As used in this prospectus, "selling
stockholders" include any pledgees or donees who may later hold the shares,
provided they are named in a prospectus supplement. We will pay the costs and
fees of registering the shares of our common stock, but each selling stockholder
will pay any brokerage commissions, discounts or other expenses relating to the
sale of the shares.
Each selling stockholder may sell the shares of our common stock in the
over-the-counter market or otherwise, at market prices prevailing at the time of
sale, at prices related to the prevailing market prices, or at negotiated
prices. In addition, each selling stockholder may sell some or all of its common
shares through:
o a block trade in which a broker-dealer may resell a portion
of the block, as principal, in order to facilitate the
transaction;
o purchases by a broker-dealer, as principal, and resale by
the broker-dealer for its account; or
o ordinary brokerage transactions and transactions in which a
broker solicits purchasers.
Each selling stockholder may negotiate and pay broker-dealers
commissions, discounts or concessions for their services. Broker-dealers engaged
by each selling stockholder may allow other broker-dealers to participate in
resales. However, the selling stockholders and any broker-dealers involved in
the sale or resale of the common shares may qualify as "underwriters" within the
meaning of the Section 2(a)(11) of the Securities Act of 1933. In addition, the
broker-dealers' commissions, discounts or concessions may qualify as
underwriters' compensation under the Securities Act. If a selling stockholder
qualifies as an "underwriter," it will be subject to the prospectus delivery
requirements of Section 5(b)(2) of the Securities Act. We have informed each
selling stockholder that the anti-manipulative provisions of Regulation M under
the Securities Exchange Act of 1934 may apply to its sales in the market.
Furthermore, each selling stockholder may:
o agree to indemnify any broker-dealer or agent against
certain liabilities related to the selling of the shares,
including liabilities arising under the Securities Act;
o sell its shares in other ways not involving market makers or
established trading markets; or
o sell its shares under Rule 144 under the Securities Act
rather than under this prospectus, if the transaction meets
the requirements of Rule 144.
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 any document we file at
the SEC's public reference rooms at Judiciary Plaza Building, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, as well as at the SEC's regional
offices at 175 West Jackson Street, Suite 900, Chicago, Illinois 60661 and 223
Broadway, New York, New York 10279. Copies of these materials may also be
obtained from the SEC at prescribed rates by writing to the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
14
You may obtain information about the operation of the SEC public reference room
in Washington, D.C. by calling the SEC at 1-800-SEC-0330. Our filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov."
This prospectus is part of a registration statement we have filed with
the SEC. The SEC allows us to incorporate documents by reference. This means
that we can disclose important information by referring you to another document
we file separately with the SEC. The information incorporated by reference is
considered to be part of this prospectus, except for any information superseded
by information in this prospectus. The information we file later with the SEC
will automatically update and supersede the information contained in this
prospectus or incorporated by reference from earlier filings. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until all of the securities covered by this prospectus have been sold or we have
deregistered all of the securities then remaining unsold:
o Our annual report on Form 10-KSB for the fiscal year ended
December 31, 2002;
o Our quarterly report on Form 10-QSB for the fiscal quarter
ended March 31, 2003; and
o The description of our common stock contained in the
Registration Statement on Form 8-A dated August 4 1998 filed
under the Securities Exchange Act of 1934, and all
amendments and reports filed by us to update the
description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at our principal executive offices at the following address and
phone number:
Corporate Secretary
DOR Biopharma, Inc.
28101 Ballard Drive
Suite F
Lake Forest, Illinois 60045
(847) 573-8990
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon for
us by Katten Muchin Zavis Rosenman, Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-KSB at December
31, 2002 and 2001, and the years then ended, and the cumulative period from
February 15, 1985 (inception) to December 31, 2002, as set forth in their
report, which is incorporated by reference in this prospectus and elsewhere in
the registration statement. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses of the
Registrant in connection with the offering described in the Registration
Statement.
Securities and Exchange Commission registration fee.................. $ 761
Legal fees and expenses.............................................. 43,000
Accounting fees and expenses......................................... 16,000
Printing and engraving expenses...................................... 6,000
Miscellaneous expenses............................................... 4,239
-------
Total expenses....................................................... $70,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law grants the
Registrant the power to limit the personal liability of its directors to the
Registrant or its stockholders for monetary damages for breach of a fiduciary
duty. Article XI of the Registrant's Certificate of Incorporation, as amended,
provides for the limitation of personal liability of the directors of the
Registrant as follows:
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for monetary damages for breach of his fiduciary
duty as a director; provided, however, this Article shall not eliminate or limit
the liability of a director (i) for any breach of the Director's duty of loyalty
to the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for the unlawful payment of dividends or unlawful stock repurchases under
Section 174 of the General Corporation Law of the State of Delaware; or (iv) for
any transaction from which the Director derived an improper personal benefit. If
the General Corporation Law is amended after approval by the stockholders of
this Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
Section 145 of the Delaware General Corporation Law grants to the
Registrant the power to indemnify its directors, officers, employees and agents
against liability arising out of their respective capacities as directors,
officers, employees or agents. Article VII of the Registrant's Bylaws provides
that the Registrant shall indemnify any person who is serving as a director,
officer, employee or agent of the Registrant, or of another entity at the
request of the Registrant, against judgments, fines, settlements and other
expenses incurred in such capacity if such person acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
the Registrant and, with respect to any criminal action, had no reasonable cause
to believe his conduct was unlawful. In the event of an action or suit by or in
the right of the Registrant, no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Registrant unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court shall
deem proper.
The Registrant has entered into indemnification agreements with its
directors that would require the Registrant, subject to any limitations on the
maximum permissible indemnification that may exist at law, to indemnify a
director for claims that arise because of his capacity as a director.
The Registrant has a directors' and officers' liability insurance
policy.
The above discussion is qualified in its entirety by reference to the
Registrant's Certificate of Incorporation and Bylaws.
II-1
ITEM 16. EXHIBITS
Exhibit
Number Exhibit
------- --------------------------------------------------------
4.1 Amended and Restated Certificate of Incorporation,
incorporated by reference from Exhibit 3.1 to our
quarterly Report on Form 10-QSB for the fiscal quarter
ended June 30, 2001.
4.2 Amended and Restated Bylaws of the Company, incorporated
by reference from Exhibit 1-3(c) to our Firm S-1 filed
April 15, 1987.
5.1* Opinion of Katten Muchin Zavis Rosenman as to the
validity of the common stock.
23.1** Consent of Ernst & Young, independent public
accountants.
23.2* Consent of Katten Muchin Zavis Rosenman (contained in
its opinion filed as Exhibit 5.1 hereto).
24.1* Powers of Attorney.
----------
* Previously filed as part of this Registration Statement
** Filed herewith
ITEM 17. UNDERTAKINGS
A. The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement to include any additional or changed material
information on the plan of distribution.
(2) To, for determining liability under the Securities Act of
1933, treat each post-effective amendment as a new
registration statement relating to the securities offered
therein, and the offering of the securities at that time to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lake Forest, State of Illinois, on the
27th day of May, 2003.
DOR BIOPHARMA, INC.
By: /s/ Ralph M. Ellison
Ralph M. Ellison
President and Chief Executive Officer
Pursuant to the requirements of the 1933 Act, this amendment to the
registration statement has been signed below on May 27, 2003 by the following
persons in the capacities indicated.
/s/ Ralph M. Ellison President and Chief Executive Officer
--------------------------------------- (principal executive officer)
Ralph M. Ellison
* Controller, Treasurer and Corporate Secretary
--------------------------------------- (principal financial and accounting officer)
William D. Milling
* Chairman of the Board
---------------------------------------
Alexander M. Haig Jr.
* Vice Chairman of the Board
---------------------------------------
Steve H. Kanzer
* Director
---------------------------------------
Paul D. Rubin
* Director
---------------------------------------
Peter Salomon
* Director
---------------------------------------
Lawrence Kessel
* Director
---------------------------------------
Evan Myrianthopoulos
* Director
---------------------------------------
Arthur Asher Kornbluth
* By: /s/ William D. Milling
-------------------------------
William D. Milling
Attorney-in-Fact
II-3
INDEX TO EXHIBITS
Exhibit
Number Exhibit
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23.1 Consent of Ernst & Young LLP, independent public accountants.