As filed with the Securities and Exchange Commission on December 1, 1998
Registration No. 333-65125
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
ON FORM S-3
UNDER THE SECURITIES ACT OF 1933
TECHNICLONE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-3698422
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14282 FRANKLIN AVENUE,
TUSTIN, CALIFORNIA 92780-7017
(714) 508-6000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
WITH COPIES TO:
LARRY O. BYMASTER THOMAS J. CRANE, ESQ.
14282 FRANKLIN AVENUE, KENT M. CLAYTON, ESQ.
TUSTIN, CALIFORNIA 92780-7017 RUTAN & TUCKER, LLP
(714) 508-6000 611 ANTON BLVD. SUITE 1400
(Name, address, including zip code, and telephone COSTA MESA, CA 92626
number, including area code, of agent for service) (714) 641-5100
APPROXIMATE DATE 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, 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. |_|
Pursuant to Rule 429 under the Securities Act, this Registration Statement
also relates to and may be used in connection with the securities previously
registered under the Securities Act pursuant to Registration Statement No.
333-34209.
2
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM PROPOSED MAXIMUM
TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF REGIS-
REGISTERED REGISTERED(1) SHARE (2) PRICE (2) TRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value(4) 818,187 $ 1.25 $1,022,734 $ 302
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock, $.001 par
value, Issuable Upon Exercise of
Warrants to Purchase Common Stock(5) 204,551 $ 1.25 $ 255,689 $ 76
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value(6) 1,120,065 $ 1.25 $1,400,082 $ 414
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock, $.001 par
value, Issuable Upon Exercise of
Warrants to Purchase Common Stock(7) 280,015 $ 1.25 $ 350,019 $ 104
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock, $.001 par
value, Issuable Upon Exercise of
Warrants to Purchase Common Stock(8) 240,000 $ 1.25 $ 300,000 $ 89
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock, $.001 par
value, Issuable Upon Exercise of
Warrants to Purchase Common Stock(9) 95,000 $ 1.375 $ 130,625 $ 39
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value(10) 147,235 $ 1.25 $ 184,044 $ 55
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock, $.001 par
value, Issuable Upon Exercise of
Warrants to Purchase Common Stock(11) 500,000 $ 1.25 $ 625,000 $ 185
====================================================================================================================================
(1) The Registrant will not rely on Rule 416 under the Securities Act of 1933,
as amended (the "Securities Act"), if a change in the market price of the
Common Stock of the Registration results in having insufficient shares
registered pursuant hereto, but will instead file a new registration
statement registering additional shares of Common Stock of the
Registration, if necessary.
(2) In accordance with Rule 457(c), the aggregate offering price of shares of
Common Stock of the Registrant (sometimes referred to herein as the
"Company") is estimated solely for purposes of calculating the registration
fees payable pursuant hereto, as determined in accordance with Rule 457(c),
using the average of the high and low sales price reported by the Nasdaq
SmallCap Market for the Common Stock on September 24, 1998, which was $1.25
per share. In accordance with Rule 457(g), the aggregate offering price of
shares of Common Stock of the Company issuable upon exercise of warrants is
calculated solely for purposes of calculating the registration fees payable
pursuant hereto, as determined in accordance with Rule 457(g), using the
highest of (i) the exercise price of such warrants, (ii) the offering price
of securities of the same class included in this registration statement or
(iii) the price of securities of the same class, as determined in
accordance with Rule 457(c).
(3) Previously paid.
(4) Represents 150% of the number of shares of Common Stock issuable to the
holders of 325 shares ($325,000) of 5% Adjustable Convertible Class C
Preferred Stock of the Company ("Class C Stock") upon conversion of such
shares of Class C Stock at a conversion price of $0.5958 (the "Conversion
Cap"), as required to be registered pursuant to the terms of a Registration
Rights Agreement by and among the Company and the holders of the Class C
Stock (the "Class C Registration Rights Agreement").
(5) Represents 150% of the number of shares of Common Stock issuable to the
holders of 325 shares of Class C Stock upon exercise of warrants to be
issued to such holders upon conversion of such shares of Class C Stock at a
conversion price equal to the Conversion Cap, as required to be registered
pursuant to the terms of the Class C Registration Rights Agreement.
(6) Represents shares of Common Stock issued to 8 investors (the "April 1998
Private Placement Investors") in connection with a private placement by the
Company in April 1998 (the "April 1998 Private Placement").
(7) Represents shares of Common Stock issuable upon exercise of outstanding
warrants issued to the April 1998 Private Placement Investors in connection
with the April 1998 Private Placement.
(8) Represents shares of Common Stock issuable upon exercise of outstanding
warrants issued in connection with the extension of the repayment of
certain indebtedness of the Company to an unrelated entity.
(9) Represents shares of Common Stock issuable upon exercise of outstanding
warrants issued in connection with the extension of the repayment of
certain indebtedness of the Company to an unrelated entity.
(10) Represents shares of Common Stock issued in lieu of the repayment of
accrued and unpaid interest on the principal amount of certain indebtedness
of the Company to an unrelated entity.
(11) Represents shares of Common Stock issuable upon exercise of outstanding
warrants issued in connection with the establishment of a commitment for a
$2,000,000 bridge loan credit facility by the Company in March 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
3
SUBJECT TO COMPLETION DATED DECEMBER 1, 1998
PROSPECTUS
3,064,144 SHARES
[Techniclone TECHNICLONE
Logo CORPORATION
Here]
COMMON STOCK
This Prospectus may be used only in connection with the resale, from time
to time, of up to 3,064,144 shares (the "Shares") of common stock, par value
$.001 per share ("Common Stock"), of Techniclone Corporation, a Delaware
corporation ("Techniclone" or the "Company"), by the holders thereof named
herein (the "Registered Stockholders") for their own benefit in transactions in
the over-the-counter market, at prevailing market prices, at negotiated prices
or otherwise. This Prospectus has been prepared for the purposes of registering
the Shares under the Securities Act of 1933, as amended (the "Securities Act")
to allow for future sales by the Registered Stockholders to the public without
restriction. To the knowledge of the Company, the Registered Stockholders have
made no arrangement with any brokerage firm for the sale of the Shares. Many of
the Shares offered by the Registered Stockholders may be acquired by such
Registered Stockholders upon exercise of warrants to purchase Common Stock
issued by the Company to the Registered Stockholders (collectively, the
"Warrants"). Of the 3,064,144 Shares offered hereby, (i) up to 545,460 Shares
(representing less than 1% of the Company's outstanding shares of Common Stock)
are issuable upon conversion of 325 shares of 5% Adjustable Convertible Class C
Preferred Stock of the Company (the "Class C Stock") and up to 136,369 Shares
(representing less than 1% of the Company's outstanding shares of Common Stock)
are issuable upon exercise of warrants to be issued to the holders of the Class
C Stock upon conversion of such shares of Class C Stock (the "Class C
Warrants"), based on the conversion price with respect to the Class C Stock as
of November 27, 1998 (currently $0.5958 , which is the lower of (x) $0.5958 per
share (the "Conversion Cap") or (y) a conversion price equal to the average of
the lowest trading price of the Company's Common Stock for the five consecutive
trading days ending with the trading date prior to the date of conversion
reduced by 27%, as required pursuant to the Company's agreement with such
holders), (ii) 1,120,065 Shares were issued in April 1998 to certain of the
Registered Stockholders in connection with a private placement by the Company in
April 1998 (the "April 1998 Private Placement") and 280,015 Shares are issuable
upon exercise of outstanding warrants issued to such Registered Stockholders in
connection with the April 1998 Private Placement (the "April 1998 Private
Placement Warrants"), (iii) up to 335,000 Shares are issuable upon the exercise
of outstanding warrants issued in connection with the extension of the repayment
of certain indebtedness of the Company (the "Repayment Extension Warrants") and
147,235 Shares were issued in lieu of the repayment of accrued and unpaid
interest on the principal amount of such indebtedness, which indebtedness was
repaid in full on August 17, 1998, and (iv) up to 500,000 Shares are issuable
upon the exercise of outstanding warrants issued in connection with the
establishment of a commitment for a $2,000,000 bridge loan credit facility by
the Company in March 1998 (the "Bridge Loan Commitment Warrants"). See
"Description of Securities."
All or a portion of the Shares offered by this Prospectus may be offered
for sale, from time to time, by the Registered Stockholders, pursuant to this
Prospectus, in one or more private or negotiated transactions, in open market
transactions on The Nasdaq SmallCap Market ("Nasdaq SmallCap Market"), in
settlement of short sale transactions, in settlement of options transactions, or
otherwise, or by a combination of these methods, at fixed prices that may be
changed, at market prices prevailing at the time of the sale, at prices related
to such market prices, or at negotiated prices, or otherwise. The Registered
Stockholders may effect these transactions by selling the Shares (i) to or
through underwriters; (ii) to or through broker-dealers or agents (which may
include underwriters) including: (a) in a block trade in which the broker or
dealer so engaged will attempt to sell the shares of Common Stock as agent, but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) in purchases by a broker or dealer and resale by such broker or
dealer as a principal for its account pursuant to this Prospectus; (c) in
ordinary brokerage transactions and (d) in transactions in which the broker
solicits purchasers; or (iii) directly to one or more purchasers. The Registered
Stockholders and any underwriters, dealers, brokers, or agents executing selling
orders on behalf of the Registered Stockholders may be deemed to be
"underwriters" within the meaning of the Securities Act and any profits on the
sale of the Shares by them and any discounts, commissions or concessions
received by such underwriters, dealers, brokers or agents may be deemed to be
underwriting discounts and commissions under the Securities Act. The
compensation to a particular underwriter, broker-dealer or agent may be in
excess of customary commissions. The Registered Stockholders will pay all
commissions, transfer taxes and other expenses associated with the sales of the
Shares by them. The Company will pay the expenses of the preparation of this
prospectus. The Company has agreed to indemnify the Registered Stockholders
against certain liabilities, including liabilities arising under the Securities
Act. The Company will not receive any of the proceeds from the sale of the
Shares by the Registered Stockholders. Upon exercise of the Warrants, assuming
the full exercise thereof by each of the holders thereof and the payment by such
holders of the exercise price therefor in cash (instead of a cashless exercise,
as permitted by the express terms of the Warrants), the Company will receive the
proceeds thereof. If all of the holders of the Warrants exercise all of the
Warrants for cash, the Company will receive proceeds of $1,135,016. Concurrently
with sales under this Prospectus, the Registered Stockholders may effect other
sales of Common Stock or Shares under Rule 144 or other exempt resale
transactions. There can be no assurance that the Registered Stockholders, or any
of them, will sell any or all of the Shares offered hereby. See "Plan of
Distribution."
The Company's Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is listed
on the Nasdaq SmallCap Market under the symbol "TCLN". On November 27, 1998, the
last reported sale price of the Company's Common Stock on the Nasdaq SmallCap
Market was $1.00 per share.
--------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7, FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
4
TABLE OF CONTENTS
------------------ PAGE
----
Available Information ................................................... 2
Incorporation of Certain Documents By Reference ......................... 3
Cautionary Statement Regarding Forward-Looking Statement ................ 4
The Company ............................................................. 5
Risk Factors ............................................................ 7
Use of Proceeds ........................................................18
Recent Developments ....................................................18
Registered Stockholders ................................................21
Plan of Distribution ...................................................25
Description of Securities ..............................................27
Legal Matters ...........................................................29
Experts .................................................................29
Indemnification of Directors and Officers ..............................30
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with the
offering described herein other than those contained or incorporated by
reference in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any of the Registered Stockholders. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, nor shall there be any sale
of these securities by any person in any jurisdiction in which such an offer,
solicitation or sale would be unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein is correct as of any
time subsequent to the date hereof.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act relating to the Shares being offered pursuant to this Prospectus.
For further information pertaining to the Common Stock and the Shares to which
this Prospectus relates, reference is made to such Registration Statement. This
Prospectus constitutes the prospectus of the Company filed as a part of the
Registration Statement and it does not contain all information set forth in the
Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. In addition, 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 Commission relating to its business, financial statements and other matters.
Reports and proxy and information statements filed pursuant to Section 14(a) and
14(c) of the Exchange Act and other information filed with the Commission as
well as copies of the Registration Statement can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Midwest Regional Offices at 500 West Madison Street, Chicago, Illinois 60606 and
Northeast Regional Office at 7 World Trade Center, New York, New York 10048.
Copies of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
obtained electronically by visiting the Commission's web site on the Internet at
http://www.sec.gov. The Common Stock of the Company is traded on the Nasdaq
SmallCap Market under the symbol "TCLN". Reports, proxy statements and other
information concerning the Company may be inspected at the National Association
of Securities Dealers, Inc., at 1735 K Street, N.W., Washington D.C. 20006.
2
5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated by this reference into this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1998, as filed with the Commission on July 29, 1998 pursuant to
Section 13(a) of the Exchange Act.
(2) The Company's Definitive Proxy Statement with respect to the Annual
Meeting of Stockholders held on October 13, 1998, as filed with the Commission
on August 27, 1998.
(3) The Company's Quarterly Report on Form 10-Q for the quarter ended
July 31, 1998, as filed with the Commission on September 14, 1998.
(4) The Company's Current Report on Form 8-K, as filed with the
Commission on June 29, 1998.
(5) The Company's Current Report on Form 8-K, as filed with the
Commission on March 9, 1998.
(6) The Company's Current Report on Form 8-K, as filed with the
Commission on November 24, 1997.
(7) The Company's Current Report on Form 8-K, as filed with the
Commission on May 12, 1997, as amended by Form 8-K/A Amendment No. 1 to such
Form 8-K as filed with the Commission on October 2, 1997, and as further amended
by Form 8-K/A Amendment No. 2 to such Form 8-K as filed with the Commission on
October 14, 1997.
(8) The Company's Definitive Proxy Statement with respect to the Annual
Meeting of Stockholders held on April 23, 1998, as filed with the Commission on
March 17, 1998.
(9) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A and Form 8-B (Registration of
Successor Issuers) filed under the Exchange Act, including any amendment or
report filed for the purpose of updating such description.
(10) All other reports filed by the Company pursuant to Section 13(a)
or 15(d) of the Exchange Act since the end of the Company's fiscal year ended
April 30, 1998.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the filing of a post-effective amendment which indicates
that all securities offered have been sold or which re-registers all securities
then remaining unsold, shall be deemed to be incorporated herein by this
reference and to be made a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the foregoing documents and information that has been or
3
6
may be incorporated by reference herein (other than exhibits to such documents).
Requests for such documents and information should be directed to Techniclone
Corporation, Attention: Steven C. Burke, Chief Financial Officer, 14282 Franklin
Avenue, Tustin, California 92780-7017, telephone number (714) 508-6000.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference from documents filed with the
Commission by the Company are or may constitute forward-looking statements. Such
statements include those contained herein or therein regarding the development
or possible assumed future results of operations of the Company's business, the
markets for the Company's products, anticipated capital expenditures, regulatory
developments, any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," or similar expression, and other
statements contained or incorporated by reference herein regarding matters that
are not historical facts. Because such statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. The risks and uncertainties that may
cause actual results to differ materially include, among others, risks and
uncertainties associated with completing pre-clinical and clinical trials of the
Company's technologies; obtaining additional financing to support the Company's
operations; obtaining regulatory approval for such technologies; complying with
other governmental regulations applicable to the Company's business; obtaining
the raw materials necessary in the development of such compounds; consummating
collaborative arrangements with corporate partners for product development;
achieving milestones under collaborative arrangements with corporate partners;
developing the capacity to manufacture, market and sell the Company's products,
either directly or indirectly with collaborative partners; developing market
demand for and acceptance of such products; competing effectively with other
pharmaceutical and biotechnological products; attracting and retaining key
personnel; protecting proprietary rights; accurately forecasting operating and
capital expenditures, other commitments, or clinical trial costs, general
economic conditions, pricing pressures and uncertainties of litigation.
Assumptions relating to budgeting, marketing, product development and other
management decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its capital
expenditure or other budgets, which may in turn affect the Company's business,
financial position and results of operations. As a result of these factors, the
Company's revenues and expenses could vary significantly from quarter to
quarter, and past financial performance should not be considered a reliable
indicator of future performance. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements set forth or
referred to above in this paragraph. Investors are cautioned not to place undue
reliance on such statements which speak only as of the date hereof. The Company
undertakes no obligation to release publicly any revision to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events, except as may be
required by the federal securities laws.
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7
THE COMPANY
GENERAL
Techniclone Corporation was incorporated in the State of Delaware on
September 25, 1996. On March 24, 1997, Techniclone International Corporation, a
California corporation (a predecessor company incorporated in June 1981), was
merged with and into Techniclone Corporation, a Delaware corporation
(collectively "Techniclone"). This merger was effected for the purpose of
effecting a change in the Company's state of incorporation from California to
Delaware and making certain changes in the Company's charter documents. The
"Company" refers to Techniclone Corporation, Techniclone International
Corporation, its former subsidiary, Cancer Biologics Incorporated ("CBI"), which
was merged into the Company on July 26, 1994 and its wholly-owned subsidiary
Peregrine Pharmaceuticals, Inc., a Delaware corporation ("Peregrine").
The Company is engaged in the research, development and commercialization
of novel cancer therapeutics in two principal areas: 1) direct tumor targeting
agents for the treatment of refractory malignant lymphoma and 2) collateral
targeting agents for the treatment of solid tumors.
Oncolym(R), the Company's most advanced direct tumor targeting agent
candidate, is an investigational murine monoclonal antibody radiolabeled with
I131 which is being studied in a Phase II/III trial for the treatment of
intermediate and high-grade relapsed or refractory B-cell non-Hodgkins lymphoma
("NHL"). The clinical trials are currently being held at participating medical
centers, including, M.D. Anderson Cancer Center, George Washington University
Medical Center, Iowa City VA Medical Center, Queen's Medical Center-Hawaii,
University of Illinois at Chicago Medical Center, The Medical University of
South Carolina and University of Miami Hospital. The Company currently
anticipates adding up to six additional clinical trial sites for Oncolym(R).
Following the completion of the clinical trials, the Company expects to file an
application with the United States Food and Drug Administration ("FDA") to
market Oncolym(R) in the United States.
Collateral tumor targeting may be described as the therapeutic strategy of
targeting peripheral structures and cell types, other than the viable cancer
cells directly, as a means to treat solid tumors. The Company's three leading
advanced collateral targeting agents for solid tumors are Tumor Necrosis Therapy
("TNT"), Vascular Targeting Agents ("VTAs"), and Vasopermeation Enhancement
Agents ("VEAs").
TNT is a universal tumor targeting therapy potentially capable of treating
a wide range of solid tumors. Radiolabeled TNT agents are believed to act by
binding to dead or dying cells at the core of the tumor and irradiating the
tumor from the inside out. TNT is potentially capable of carrying a wide variety
of therapeutic agents to the interior of solid tumors. The Company's first TNT
based product is an investigational, chimeric monoclonal antibody radiolabeled
with the I131 isotope. During March 1998, the Company began enrolling patients
into a Phase I study of TNT for the treatment of malignant glioma (brain
cancer). The Company has since filed a protocol with the FDA to begin a Phase II
study of TNT for the treatment of malignant glioma, which is currently expected
to commence in January 1999. The clinical trials are currently being conducted
at The Medical University of South Carolina with additional clinical sites
underway. The Company has also recently received an unrestricted grant to
conduct Phase I/II systemic trials of TNT for prostate, pancreatic and liver
cancers at a clinical site in Mexico City.
VTAs are believed to act by destroying the vasculature of solid tumors.
VTAs are multi-functional molecules that target the capillaries and blood
vessels of solid tumors. Once there, these agents block the flow of oxygen and
nutrients to the underlying tissue by creating a blood clot in the tumor. In
preclinical trials, VTAs have caused clots in animals and within hours of the
clot's formation, the tumor begins to die and necrotic regions are formed. Since
every tumor in excess of 2mm in size forms an expanding vascular network during
tumor growth, VTAs could be effective against all types of solid tumors.
5
8
Techniclone's scientists are doing preliminary studies on VTAs. The VTA
technology was acquired in April of 1997 through the Company's acquisition of
Peregrine Pharmaceuticals, Inc.
VEAs use vasoactive compounds (molecules that cause tissues to become more
permeable) linked to monoclonal antibodies, such as the TNT antibody, to
increase the vasoactive permeability at the tumor site and are believed to act
by increasing the concentration of killing agents at the core of the tumor. In
pre-clinical studies, the Company's scientists were able to increase the uptake
of drugs or isotopes within a tumor by between 150% and 420%, if a vasoactive
agent was given several hours prior to the therapeutic treatment. The
therapeutic drug can be a chemotherapy drug, a radioactive isotope or other
cancer fighting agent. This enhancement of toxic drug dosing is achieved by
altering the physiology and, in particular, the permeability of the blood
vessels and capillaries that serve the tumor. As the tumor vessels become more
permeable, the amount of therapeutic treatment reaching the tumor cells
increases.
The principal executive offices of the Company are located at 14282
Franklin Avenue, Tustin, California 92780-7017. The Company's telephone number
is (714) 508-6000.
6
9
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK BEING OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK. THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING THE COMPANY AND ITS BUSINESS BEFORE MAKING AN INVESTMENT IN THE
COMMON STOCK OFFERED HEREBY, TOGETHER WITH ALL OF THE OTHER INFORMATION SET
FORTH HEREIN OR INCORPORATED HEREIN BY REFERENCE IN THIS PROSPECTUS.
FLUCTUATION OF FUTURE OPERATING RESULTS. A number of factors could cause
actual results to differ materially from anticipated future operating results.
These factors include worldwide economic and political conditions and industry
specific factors. If the Company is to remain competitive and is to timely
develop and produce commercially viable products at competitive prices in a
timely manner, it must maintain access to external financing sources until it
can generate revenue from licensing transactions or sales of products. The
Company's ability to obtain financing and to manage its expenses and cash
depletion rate ("burn rate") is the key to the Company's continued development
of product candidates and the completion of ongoing clinical trials. The Company
expects that its burn rate will vary substantially from quarter to quarter as it
funds non-recurring items associated with clinical trials, product development,
antibody manufacturing and radiolabeling expansion and scale-up, patent legal
fees and various consulting fees. The Company has limited experience with
clinical trials and if the Company encounters unexpected difficulties with its
operations or clinical trials, it may have to expend additional funds, which
would increase its burn rate.
EARLY STAGE OF DEVELOPMENT. Since its inception, the Company has been
engaged in the development of drugs and related therapies for the treatment of
people with cancer. The Company's product candidates are generally in the early
stages of development, with two product candidates currently in clinical trials.
Revenues from product sales have been insignificant and throughout the Company's
history there have been minimal revenues from product royalties. If the initial
results from any of the clinical trials are poor, then management believes that
those results will adversely effect the Company's ability to raise additional
capital, which will affect the Company's ability to continue full-scale research
and development for its antibody technologies. Additionally, product candidates
resulting from the Company's research and development efforts, if any, are not
expected to be available commercially for at least the next year. No assurance
can be given that the Company's product development efforts, including clinical
trials, will be successful, that required regulatory approvals for the
indications being studied can be obtained, that its product candidates can be
manufactured and radiolabeled at an acceptable cost and with appropriate quality
or that any approved products can be successfully marketed.
NEED FOR ADDITIONAL CAPITAL. The Company has experienced negative cash
flows from operations since its inception and expects the negative cash flow
from operations to continue for the foreseeable future. The Company currently
has commitments to expend additional funds for facilities construction, clinical
trials, radiolabeling contracts, consulting, and for the repurchase of LYM-1
(hereinafter referred to as "Oncolym(R)") marketing rights from Alpha
Therapeutic Corporation ("Alpha") and Biotechnology Development, Ltd. ("BTD").
The Company expects operating expenditures related to clinical trials to
increase in the future as the Company's clinical trial activity increases and
scale-up for clinical trial production continues. As a result of increased
activities in connection with the Phase II/III clinical trials for Oncolym(R)
and Phase I and Phase II clinical trials for TNT and the development costs
associated with VEAs and VTAs, the Company expects that the monthly negative
cash flow will continue.
The Company has entered into an agreement for the sale and subsequent
leaseback of its facilities, which consists of two buildings located in Tustin,
California. The sale/leaseback transaction is with an unrelated entity and
provides for the leaseback of the Company's facilities for a ten-year period
with two five-year options to renew. While the sale/leaseback agreement is in
escrow, it is subject to completion of normal due diligence procedures by the
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buyer and there is no assurance that the transaction will be completed on a
timely basis or at all.
Without obtaining additional financing or completing the aforementioned
sale/leaseback transaction, the Company believes that it has sufficient cash on
hand to meet its obligations on a timely basis through December 31, 1998. Should
the Company complete the sale and subsequent leaseback of its facilities by
December 31, 1998, the Company believes it would have sufficient cash on hand
and available pursuant to such equity line financing facility to meet its
obligations on a timely basis through April 1999. The Company's ability to
access funds under such equity line financing facility is subject to the
satisfaction of certain conditions precedent and the failure to satisfy these
conditions may limit or preclude the Company's ability to access such funds,
which could adversely affect the Company's business, immediate liquidity,
financial position and results of operations unless additional financing sources
are available.
The Company must raise additional funds to sustain its research and
development efforts, provide for future clinical trials, expand its
manufacturing and radiolabeling capabilities, and continue its operations until
it is able to generate sufficient additional revenue from the sale and/or
licensing of its products. The Company will be required to obtain financing
through one or more methods, including the aforementioned sale and subsequent
leaseback of its facilities, obtaining additional equity or debt financing
and/or negotiating a licensing or collaboration agreement with another company.
There can be no assurance that the Company will be successful in raising these
funds on terms acceptable to it, or at all, or that sufficient additional
capital will be raised to complete the research, development, and clinical
testing of the Company's product candidates. The Company's future success is
dependent upon raising additional money to provide for the necessary operations
of the Company. If the Company is unable to obtain additional financing, the
Company's business, financial position and results of operations would be
adversely affected.
ANTICIPATED FUTURE LOSSES. The Company has experienced significant losses
since inception. As of July 31, 1998, the Company's accumulated deficit was
approximately $76,487,000. The Company expects to incur significant additional
operating losses in the future and expects cumulative losses to increase
substantially due to expanded research and development efforts, preclinical
studies and clinical trials, and scale-up of manufacturing and radiolabeling
capabilities. The Company expects losses to fluctuate substantially from quarter
to quarter. All of the Company's products are in development, preclinical
studies or clinical trials, and no significant revenues have been generated from
product sales. To achieve and sustain profitable operations, the Company, alone
or with others, must successfully develop, obtain regulatory approval for,
manufacture, introduce, market and sell its products. The time frame necessary
to achieve market success is long and uncertain. The Company does not expect to
generate significant product revenues for at least two years. There can be no
assurance that the Company will ever generate product revenues sufficient to
become profitable or to sustain profitability.
TECHNOLOGICAL UNCERTAINTY. The Company's future success depends
significantly upon its ability to develop and test workable products for which
the Company will seek FDA approval to market to certain defined groups. A
significant risk remains as to the technological performance and commercial
success of the Company's technology and products. The products currently under
development by the Company will require significant additional laboratory and
clinical testing and investment over the foreseeable future. The research,
development and testing activities, together with the resulting increases in
associated expenses, are expected to result in operating losses for the
foreseeable future. Although the Company is optimistic that it will be able to
complete development of one or more of its products, (i) the Company's research
and development activities may not be successful; (ii) proposed products may not
prove to be effective in clinical trials; (iii) patient enrollment in the
clinical trials may be delayed or prolonged significantly, delaying the trials;
(iv) the Company's product candidates may cause harmful side effects during
clinical trials; (v) the Company's product candidates may take longer to
progress through clinical trials than has been anticipated; (vi) the Company's
product candidates may prove impracticable to manufacture in commercial
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quantities at a reasonable cost and/or with acceptable quality; (vii) the
Company may not be able to obtain all necessary governmental clearances and
approvals to market its products; (viii) the Company's product candidates may
not prove to be commercially viable or successfully marketed; or (ix) the
Company may not ever achieve significant revenues or profitable operations. In
addition, the Company may encounter unanticipated problems, including
development, manufacturing, distribution, financing and marketing difficulties.
The failure to adequately address these difficulties could adversely affect the
Company's business, financial position and results of operations.
The results of initial preclinical and clinical testing of the products
under development by the Company are not necessarily indicative of results that
will be obtained from subsequent or more extensive preclinical studies and
clinical testing. The Company's clinical data gathered to date with respect to
its Oncolym(R) antibody are primarily from a Phase II dose escalation trial
which was designed to develop and refine the therapeutic protocol to determine
the maximum tolerated dose of total body radiation and to assess the safety and
efficacy profile of treatment with a radiolabeled antibody. Further, the data
from this Phase II dose escalation trial were compiled from testing conducted at
a single site and with a relatively small number of patients. Substantial
additional development and clinical testing and investment will be required
prior to seeking any regulatory approval for commercialization of this potential
product. There can be no assurance that clinical trials of Oncolym(R), TNT or
other product candidates under development will demonstrate the safety and
efficacy of such products to the extent necessary to obtain regulatory approvals
for the indications being studied, or at all. Companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in advanced
clinical trials, even after obtaining promising results in earlier trials. The
failure to adequately demonstrate the safety and efficacy of Oncolym(R), TNT or
any other therapeutic product under development could delay or prevent
regulatory approval of the product and would adversely affect the Company's
business, financial condition and results of operations.
LENGTHY REGULATORY PROCESS; NO ASSURANCE OF REGULATORY APPROVALS. Testing,
manufacturing, radiolabeling, advertising, promotion, export and marketing,
among other things, of the Company's proposed products are subject to extensive
regulation by governmental authorities in the United States and other countries.
In the United States, pharmaceutical products are regulated by the FDA under the
Federal Food, Drug, and Cosmetic Act and other laws, including, in the case of
biologics, the Public Health Service Act. At the present time, the Company
believes that its products will be regulated by the FDA as biologics.
Manufacturers of biologics may also be subject to state regulation.
The steps required before a biologic may be approved for marketing in the
United States generally include (i) preclinical laboratory tests and animal
tests, (ii) the submission to the FDA of an Investigational New Drug ("IND")
application for human clinical testing, which must become effective before human
clinical trials may commence, (iii) adequate and well-controlled human clinical
trials to establish the safety and efficacy of the product, (iv) the submission
to the FDA of a Product License Application ("PLA") or a Biologics License
Application ("BLA"), (v) the submission to the FDA of an Establishment License
Application ("ELA"), (vi) FDA review of the ELA and the PLA or BLA, and (vii)
satisfactory completion of an FDA inspection of the manufacturing facility or
facilities at which the product is made to assess compliance with Current Good
Manufacturing Practices ("CGMP"). The testing and approval process requires
substantial time, effort and financial resources and there can be no assurance
that any approval will be granted on a timely basis, if at all. There can be no
assurance that Phase I, Phase II or Phase III testing will be completed
successfully within any specific time period, if at all, with respect to any of
the Company's product candidates. Furthermore, the FDA may suspend clinical
trials at any time on various grounds, including a finding that the subjects or
patients are being exposed to an unacceptable health risk.
The results of preclinical and clinical studies, together with detailed
information on the manufacture and composition of a product candidate, are
submitted to the FDA as a PLA or BLA requesting approval to market the product
candidate. Before approving a PLA or BLA, the FDA will inspect the facilities at
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which the product is manufactured, and will not approve the marketing of the
product candidate unless CGMP compliance is satisfactory. The FDA may deny a PLA
or BLA if applicable regulatory criteria are not satisfied, require additional
testing or information, and/or require post-marketing testing and surveillance
to monitor the safety or efficacy of a product. There can be no assurance that
FDA approval of any PLA or BLA submitted by the Company will be granted on a
timely basis or at all. Also, if regulatory approval of a product is granted,
such approval may entail limitations on the indicated uses for which it may be
marketed.
Both before and after approval is obtained, violations of regulatory
requirements, including the preclinical and clinical testing process, or the PLA
or BLA review process may result in various adverse consequences, including the
FDA's delay in approving or refusing to approve a product, withdrawal of an
approved product from the market, and/or the imposition of criminal penalties
against the manufacturer and/or license holder. For example, license holders are
required to report certain adverse reactions to the FDA, and to comply with
certain requirements concerning advertising and promotional labeling for their
products. Also, quality control and manufacturing procedures must continue to
conform to CGMP regulations after approval, and the FDA periodically inspects
manufacturing facilities to assess compliance with CGMP. Accordingly,
manufacturers must continue to expend time, monies and effort in the area of
production and quality control to maintain CGMP compliance. In addition,
discovery of problems may result in restrictions on a product, manufacturer,
including withdrawal of the product from the market. Also, new government
requirements may be established that could delay or prevent regulatory approval
of the Company's product candidates.
The Company will also be subject to a variety of foreign regulations
governing clinical trials and sales of its products. Whether or not FDA approval
has been obtained, approval of a product candidate by the comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of
marketing of the product in those countries. The approval process varies from
country to country and the time may be longer or shorter than that required for
FDA approval. At least initially, the Company intends, to the extent possible,
to rely on licensees to obtain regulatory approval for marketing its products in
foreign countries.
COMMERCIAL PRODUCTION. To conduct clinical trials on a timely basis, obtain
regulatory approval and be commercially successful, the Company must scale-up
its manufacturing and radiolabeling processes and ensure compliance with
regulatory requirements of its product candidates so that those product
candidates can be manufactured and radiolabeled in increased quantities. As the
Company's products currently in clinical trials, Oncolym(R) and TNT, move
towards FDA approval, the Company or contract manufacturers must scale-up the
production processes to enable production and radiolabeling in commercial
quantities. The Company has expended significant funds for the scale-up of its
antibody manufacturing capabilities for clinical trial requirements for its
Oncolym(R) and TNT products and for refinement of its radiolabeling processes.
If the Company were to commercially self-manufacture either of these products,
it will have to expend an estimated additional six to ten million dollars for
production facility expansion and an estimated additional five to eight million
dollars for radiolabeling facilities. However, the Company believes it can
successfully negotiate an agreement with contract antibody manufacturers to have
these products produced with approximately $1,000,000 to $2,000,000 in start up
costs and additional production costs on a "per run basis", thereby deferring or
reducing the significant expenditure (four to eight million dollars) estimated
to scale-up manufacturing. The Company believes that it can successfully
negotiate an agreement with contract radiolabeling companies to provide
radiolabeling services to meet commercial demands. Such a contract would,
however, require a substantial investment by the Company (estimated at five to
eight million dollars over the next two years) for equipment and related
production area enhancements required by these vendors, and for vendor services
associated with technology transfer assistance, scale-up and production
start-up, and for regulatory assistance. The Company anticipates that production
of its products in commercial quantities will create technical and financial
challenges for the Company. The Company has limited manufacturing experience,
and no assurance can be given as to the Company's ability to scale-up its
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manufacturing operations, the suitability of the Company's present facility for
clinical trial production or commercial production, the Company's ability to
make a successful transition to commercial production and radiolabeling or the
Company's ability to reach an acceptable agreement with contract manufacturers
to produce and radiolabel Oncolym(R), TNT, or the Company's other product
candidates, in clinical or commercial quantities. The failure of the Company to
scale-up its manufacturing and radiolabeling for clinical trial or commercial
production or to obtain contract manufacturers, could adversely affect the
Company's business, financial position and results of operations.
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION. The decline in the market price
of the Company's Common Stock has lead to substantial dilution to holders of
Common Stock. Under the terms of the Company's agreement with the holders of the
Class C Stock, the shares of the Class C Stock are convertible into shares of
the Company's Common Stock at the lower of a conversion cap of $0.5958 (the
"Conversion Cap") or a conversion price equal to the average of the lowest
trading price of the Company's Common Stock for the five consecutive trading
days ending with the trading date prior to the date of conversion reduced by 27
percent. The Company's agreement with the holders of the Class C Stock also
provides that upon conversion, the holders of the Class C Stock will also
receive warrants to purchase one-fourth of the number of shares of Common Stock
issued upon conversion of the Class C Stock at an exercise price of $0.6554 per
share (or 110% of the Conversion Cap), which warrants will expire in April 2002
(the "Class C Warrants"). Dividends on the Class C Stock are payable quarterly
in shares of Class C Stock or cash, at the option of the Company, at the rate of
$50.00 per share per annum.
From September 26, 1997 (the date the Class C Stock became convertible into
Common Stock) through November 24, 1998, 13,703 shares of Class C Stock,
including Class C dividend shares and additional shares of Class C Stock issued
during fiscal year 1998 (as described below), were converted into 24,719,415
shares of Common Stock, resulting in substantial dilution to the common
stockholders. In addition, in conjunction with the conversion of the Class C
Stock, the holders were granted warrants to purchase shares of Common Stock of
the Company. Class C Warrants to purchase 6,144,537 shares of common stock have
been exercised through November 24, 1998, at an exercise price of $.6554 per
share, in exchange for 5,831,980 shares of Common Stock and proceeds to the
Company of $3,599,901. As of November 24, 1998, Class C Warrants to purchase
35,244 shares of Common Stock were outstanding. During fiscal year 1998, the
registration statement required to be filed by the Company pursuant to the
Company's agreement with the holders of the Class C Stock was not declared
effective by the 180th day following the closing date of such offering, and
therefore, the Company was required to issue an additional 325 shares of Class C
Stock, calculated in accordance with the terms of such agreement. At November
24, 1998, 270 shares of Class C Stock remained outstanding and may be converted
into shares of Common Stock at the lower of a 27% discount from the average of
the lowest market trading price for the five consecutive trading days preceding
the date of conversion or the Conversion Cap. Assuming the conversion of all of
such remaining shares of Class C Stock at the Conversion Cap, the Company is
required to issue to the holders of the Class C Stock upon conversion thereof an
aggregate of approximately 453,000 shares of Common Stock and Class C Warrants
to purchase an aggregate of up to approximately113,000 shares of Common Stock at
an exercise price of $.6554 per share. Pursuant to the Company's agreement with
the holders of the Class C Stock, the Company is required to have registered up
to 150% of the number of shares of Common Stock that would otherwise be issuable
upon conversion of the Class C Stock and upon exercise of the Class C Warrants
(including up to 545,460 Shares to which this Prospectus relates issuable upon
conversion of 325 shares of Class C Stock and up to 136,369 Shares to which this
Prospectus relates issuable upon exercise of Class C Warrants).
Sales, particularly short selling, of substantial amounts of shares of
Common Stock in the public market have adversely affected and may continue to
adversely affect the prevailing market price of the Common Stock and, depending
upon the then current market price of the Common Stock, increase the risks
associated with the possible conversion of the Class C Stock and the Class C
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Warrants. From September 26, 1997, the date on which the Class C Stock was first
convertible, through March 1998, the price of the Company's Common Stock
steadily declined while the average trading volume increased significantly.
Pursuant to the terms of a Regulation D Common Stock Equity Line
Subscription Agreement dated as of June 16, 1998 (the "Equity Line Agreement"),
between the Company and two institutional investors (the "Equity Line
Investors") (and assuming, solely for purposes of this Prospectus, a 10-day low
closing bid price per share of not less than $1.00, which allows the Company to
sell the maximum number of shares of Common Stock to the Equity Line Investors
for maximum proceeds of $16,500,000), the Company may, at its option, sell to
the Equity Line Investors up to 20,625,000 shares of Common Stock (the "Equity
Line Investor Shares") and issue warrants to the Equity Line Investors to
purchase up to an additional 2,062,500 shares of Common Stock (the "Equity Line
Investor Warrants"). The price at which the Equity Line Investor Shares will be
issued and sold by the Company to the Equity Line Investors will be equal to (i)
82.5% of the lowest closing bid price during the ten trading days (the "10 day
low closing bid price") immediately preceding the date on which such shares are
sold to the Institutional Investors, or (ii) if 82.5% of such 10 day low closing
bid price results in a discount of less than twenty cents ($0.20) per share from
such 10 day low closing bid price, such 10 day low closing bid price minus
twenty cents ($0.20). In addition, the Company may be obligated to issue to the
Equity Line Investors an additional 954,545 shares of Common Stock upon
adjustment of the purchase price of shares of Common Stock already issued to the
Institutional Investors on the three-month and six-month anniversary of the date
on which the registration statement with respect to such shares is declared
effective by the Commission (the "Adjustment Shares"). In addition, pursuant to
the terms of a Placement Agent Agreement dated as of June 16, 1998 entered into
by the Company in connection with the execution and delivery of the Equity Line
Agreement (the "Placement Agent Agreement"), the Company may also be obligated
to issue to the placement agent up to 1,726,364 shares of Common Stock (the
"Equity Line Placement Agent Shares") and warrants to purchase up to an
additional 165,000 shares of Common Stock (the "Equity Line Placement Agent
Warrants"). The Company will not receive any proceeds from the exercise of the
Equity Line Investor Warrants or the Equity Line Placement Agent Warrants, which
may only be exercised pursuant to a cashless exercise in accordance with the
express terms thereof.
In addition to the Class C Warrants and the Warrants, at November 24, 1998,
the Company had outstanding warrants and options to employees, directors,
consultants and other parties to issue approximately 8,591,000 shares of Common
Stock at an average price of $1.12 per share.
The sale and issuance of the Equity Line Investor Shares may result in
substantial dilution to the existing holders of Common Stock. The issuance of
the Equity Line Investor Shares, the Adjustments Shares and the Equity Line
Placement Agent Shares to the Registered Stockholders, and the issuance of
shares of Common Stock issuable upon conversion of the remaining Class C Stock
and upon exercise of the remaining Class C Warrants, the Equity Line Investor
Warrants, the Equity Line Placement Agent Warrants, the Warrants and such other
outstanding warrants and options, as well as subsequent sales of the Shares, the
Equity Line Investor Shares, the Adjustment Shares, the Equity Line Placement
Agent Shares and such shares of Common Stock in the open market, could adversely
affect the market price of the Company's Common Stock and impair the Company's
ability to raise additional capital.
STOCK PRICE FLUCTUATIONS AND LIMITED TRADING VOLUME. The market price of
the Company's Common Stock, and the market prices of securities of companies in
the biotechnology industry generally, have been highly volatile. Also, at times
there is a limited trading volume in the Company's Common Stock. Announcements
of technological innovations or new commercial products by the Company or its
competitors, developments or disputes concerning patent or proprietary rights,
publicity regarding actual or potential medical results relating to products
under development by the Company or its competitors, regulatory developments in
both the United States and foreign countries, public concern as to the safety of
biotechnology products and economic and other external factors, as well as
period-to-period fluctuations in financial results may have a significant impact
on the market price of the Company's Common Stock. The volatility in the stock
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price and the potential additional new shares of common stock that may be issued
on the exercise of warrants and options and the historical limited trading
volume are significant risks investors should consider.
MAINTENANCE CRITERIA FOR NASDAQ SMALLCAP MARKET, RISKS OF LOW-PRICED
SECURITIES. The Company's Common Stock is presently traded on the Nasdaq
SmallCap Market. To maintain inclusion on the Nasdaq SmallCap Market, the
Company's Common Stock must continue to be registered under Section 12(g) of the
Exchange Act, and the Company must continue to have either net tangible assets
of at least $2,000,000, market capitalization of at least $35,000,000, or net
income (in either its latest fiscal year or in two of its last three fiscal
years) of at least $500,000. In addition, the Company must meet other
requirements, including, but not limited to, having a public float of at least
500,000 shares and $1,000,000, a minimum closing bid price of $1.00 per share of
Common Stock (without falling below this minimum bid price for a period of 30
consecutive business days), at least two market makers and at least 300
stockholders, each holding at least 100 shares of Common Stock. For the period
of January 29, 1998 through May 4, 1998, the Company failed to maintain a $1.00
minimum closing bid price. From May 5, 1998, through September 2, 1998, the
Company met this requirement. However, at various times since September 2, 1998,
the Company has failed to maintain a $1.00 minimum closing bid price and
currently expects the closing bid price of the Common Stock to fall below the
$1.00 minimum bid requirement from time to time in the future. If the Company
fails to meet the minimum closing bid price of $1.00 for a period of 30
consecutive business days, it will be notified by the Nasdaq and will then have
a period of 90 calendar days from such notification to achieve compliance with
the applicable standard by meeting the minimum closing bid price requirement for
at least 10 consecutive business days during such 90 day period. There can be no
assurance that the Company will be able to maintain these requirements in the
future. If the Company fails to meet the Nasdaq SmallCap Market listing
requirements, the market value of the Common Stock could decline and holders of
the Company's Common Stock would likely find it more difficult to dispose of and
to obtain accurate quotations as to the market value of the Common Stock. In
addition, if the minimum closing bid price of the Common Stock is not at least
$1.00 per share for 10 consecutive business days before a call by the Company
under the Equity Line Agreement or if the Company's Common Stock ceases to be
included on the Nasdaq SmallCap Market, the Company would have limited or no
access to funds under the Equity Line Agreement.
If the Company's Common Stock ceases to be included on the Nasdaq SmallCap
Market, the Company's Common Stock could become subject to rules adopted by the
Commission regulating broker-dealer practices in connection with transactions in
"penny stocks." Penny stocks generally are equity securities with a price per
share of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on Nasdaq, provided that current price and volume
information with respect to transactions in these securities is provided). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document in a form prepared by the Commission which 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 current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its sales person in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from these
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. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for a stock that becomes subject to these penny stock rules. If the
Company's Common Stock becomes subject to the penny stock rules, investors may
be unable to readily sell their shares of Common Stock.
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INTENSE COMPETITION. The biotechnology industry is intensely competitive
and changing rapidly. Virtually all of the Company's existing competitors have
greater financial resources, larger technical staffs, and larger research
budgets than the Company and greater experience in developing products and
running clinical trials. Two of the Company's competitors, Idec Pharmaceuticals
Corporation ("Idec") and Coulter Pharmaceuticals, Inc. ("Coulter"), each has a
lymphoma antibody that may compete with the Company's Oncolym(R) product. Idec
is currently marketing its lymphoma product for low grade non-Hodgkins Lymphoma
and the Company believes that Coulter will be marketing its respective lymphoma
product prior to the time the Oncolym(R) product will be submitted to the FDA
for marketing approval. Coulter has also announced that it intends to seek to
conduct clinical trials of its antibody treatment for intermediate and/or high
grade non-Hodgkins lymphomas. There are several companies in preclinical studies
with angiogenesis technologies which may compete with the Company's VTA
technology. In addition, there may be other companies which are currently
developing competitive technologies and products or which may in the future
develop technologies and products which are comparable or superior to the
Company's technologies and products. Some or all of these companies may also
have greater financial and technical resources than the Company. Accordingly,
there can be no assurance that the Company will be able to compete successfully
or that competition will not adversely affect the Company's business, financial
position and results of operations. There can be no assurance that the Company's
existing and future competitors will not be able to raise substantial funds and
to employ these funds and their other resources to develop products which
compete with the Company's other product candidates.
UNCERTAINTIES ASSOCIATED WITH CLINICAL TRIALS. The Company has limited
experience in conducting clinical trials. The rate of completion of the
Company's clinical trials will depend on, among other factors, the rate of
patient enrollment. Patient enrollment is a function of many factors, including
the nature of the Company's clinical trial protocols, existence of competing
protocols, size of the patient population, proximity of patients to clinical
sites and eligibility criteria for the study. Delays in patient enrollment will
result in increased costs and delays, which could adversely effect the Company.
There is no assurance that patients enrolled in the Company's clinical trials
will respond to the Company's product candidates. Setbacks are to be expected in
conducting human clinical trials. Failure to comply with FDA regulations
applicable to this testing can result in delay, suspension or cancellation of
the testing, or refusal by the FDA to accept the results of the testing. In
addition, the FDA may suspend clinical trials at any time if it concludes that
the subjects or patients participating in such trials are being exposed to
unacceptable health risks. Further, there can be no assurance that human
clinical testing will show any current or future product candidate to be safe
and effective or that data derived from the testing will be suitable for
submission to the FDA. Any suspension or delay of any of the clinical trials
could adversely effect the Company's business, financial condition and results
of operations.
UNCERTAINTY OF MARKET ACCEPTANCE. Even if the Company's products are
approved for marketing by the FDA and other regulatory authorities, there can be
no assurance that the Company's products will be commercially successful. If the
Company's two products in clinical trials, Oncolym(R) and TNT, are approved,
they would represent a departure from more commonly used methods for cancer
treatment. Accordingly, Oncolym(R) and TNT may experience under-utilization by
oncologists and hematologists who are unfamiliar with the application of
Oncolym(R) and TNT in the treatment of cancer. As with any new drug, doctors may
be inclined to continue to treat patients with conventional therapies, in most
cases chemotherapy, rather than new alternative therapies. The Company or its
marketing partner will be required to implement an aggressive education and
promotion plan with doctors in order to gain market recognition, understanding
and acceptance of the Company's products. Market acceptance also could be
affected by the availability of third party reimbursement. Failure of Oncolym(R)
and TNT to achieve market acceptance would adversely affect the Company's
business, financial condition and results of operations.
SOURCE OF RADIOLABELING SERVICES. The Company currently procures its
radiolabeling services pursuant to negotiated contracts with one domestic entity
and one European entity. There can be no assurance that these suppliers will be
able to qualify their facilities, label and supply antibody in a timely manner,
if at all, or that governmental clearances will be provided in a timely manner,
if at all, and that clinical trials will not be delayed or disrupted. Prior to
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commercial distribution, the Company will be required to identify and contract
with a commercial radiolabeling company for commercial services. The Company is
presently in discussions with a few companies to provide commercial
radiolabeling services. A commercial radiolabeling service agreement will
require the investment of substantial funds by the Company. See "Risk
Factors-Commercial Production." The Company expects to rely on its current
suppliers for all or a significant portion of its requirements for the
Oncolym(R) and TNT antibody products to be used in clinical trials for the
immediate future. Radiolabeled antibody cannot be stockpiled against future
shortages due to the eight-day half-life of the I131 radioisotope. Accordingly,
any change in the Company's existing or future contractual relationships with,
or an interruption in supply from, its third-party suppliers could adversely
affect the Company's ability to complete its ongoing clinical trials and to
market the Oncolym(R) and TNT antibodies, if approved. Any such change or
interruption would adversely affect the Company's business, financial condition
and results of operations.
HAZARDOUS AND RADIOACTIVE MATERIALS. The manufacturing and use of the
Company's Oncolym(R) and TNT require the handling and disposal of the
radioactive isotope I131. The Company is relying on its current contract
manufacturers to radiolabel its antibodies with I131 and to comply with various
local, state and or national and international regulations regarding the
handling and use of radioactive materials. Violation of these local, state,
national or international regulations by these radiolabeling companies or a
clinical trial site could significantly delay completion of the trials.
Violations of safety regulations could occur with these manufacturers, so there
is a risk of accidental contamination or injury. The Company could be held
liable for any damages that result from an accident, contamination or injury
caused by the handling and disposal of these materials, as well as for
unexpected remedial costs and penalties that may result from any violation of
applicable regulations, which could adversely effect the Company's business,
financial condition and results of operations. In addition, the Company may
incur substantial costs to comply with environmental regulations. In the event
of any noncompliance or accident, the supply of Oncolym(R) and TNT for use in
clinical trials or commercially could be interrupted, which could adversely
affect the Company's business, financial condition and results of operations.
DEPENDENCE ON THIRD PARTIES FOR COMMERCIALIZATION. The Company intends to
sell its products in the United States and internationally in collaboration with
marketing partners. At the present time, the Company does not have a sales force
to market Oncolym(R) or TNT. If and when the FDA approves Oncolym(R) or TNT, the
marketing of Oncolym(R) and TNT will be contingent upon the Company either
licensing or entering into a marketing agreement with a large company or rely
upon it recruiting, developing, training and deploying its own sales force. The
Company does not presently possess the resources or experience necessary to
market Oncolym(R), TNT or its other product candidates. Other than the agreement
with BTD, the Company presently has no agreements for the licensing or marketing
of its product candidates, and there can be no assurance that the Company will
be able to enter into any such agreements in a timely manner or on commercially
favorable terms, if at all. Development of an effective sales force requires
significant financial resources, time and expertise. There can be no assurance
that the Company will be able to obtain the financing necessary or to establish
such a sales force in a timely or cost effective manner, if at all, or that such
a sales force will be capable of generating demand for the Company's product
candidates.
PATENTS AND PROPRIETARY RIGHTS. The Company's success depends, in large
part, on its ability to obtain or maintain a proprietary position in its
products through patents, trade secrets and orphan drug designations. The
Company has several United States patents or United States patent applications
and numerous corresponding foreign patent applications, and has licenses to
patents or patent applications owned by other entities. No assurance can be
given, however, that the patent applications of the Company or the Company's
licensors will be issued or that any issued patents will provide competitive
advantages for the Company's products or will not be successfully challenged or
circumvented by its competitors. The patent position worldwide of biotechnology
companies in relation to proprietary products is highly uncertain and involves
complex legal and factual questions. Moreover, any patents issued to the Company
or the Company's licensors may be infringed by others or may not be enforceable
against others. In addition, there can be no assurance that the patents, if
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issued, would be held valid or enforceable by a court of competent jurisdiction.
Enforcement of the Company's patents may require substantial financial and human
resources. The Company may have to participate in interference proceedings if
declared by the United States Patent and Trademark Office to determine priority
of inventions, which typically take several years to resolve and could result in
substantial costs to the Company.
A substantial number of patents have already been issued to other
biotechnology and biopharmaceutical companies. Particularly in the monoclonal
antibody and angiogenesis fields, competitors may have filed applications for or
have been issued patents and may obtain additional patents and proprietary
rights relating to products or processes competitive with or similar to those of
the Company. To date, no consistent policy has emerged regarding the breadth of
claims allowed in biopharmaceutical patents. There can be no assurance that
patents do not exist in the United States or in foreign countries or that
patents will not be issued that would have an adverse effect on the Company's
ability to market any product which it develops. Accordingly, the Company
expects that commercializing monoclonal antibody-based products may require
licensing and/or cross-licensing of patents with other companies in this field.
There can be no assurance that the licenses, which might be required for the
Company's processes or products, would be available, if at all, on commercially
acceptable terms. The ability to license any such patents and the likelihood of
successfully contesting the scope or validity of such patents is uncertain and
the costs associated therewith may be significant. If the Company is required to
acquire rights to valid and enforceable patents but cannot do so at a reasonable
cost, the Company's ability to manufacture its products would be adversely
affected.
The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect, in part, by confidentiality agreements with its employees and
consultants. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
developed by competitors.
PRODUCT LIABILITY. The manufacture and sale of human therapeutic products
involve an inherent risk of product liability claims. The Company has only
limited product liability insurance. There can be no assurance that the Company
will be able to maintain existing insurance or obtain additional product
liability insurance on acceptable terms or with adequate coverage against
potential liabilities. Product liability insurance is expensive, difficult to
obtain and may not be available in the future on acceptable terms, if at all. An
inability to obtain sufficient insurance coverage on reasonable terms or to
otherwise protect against potential product liability claims brought against the
Company in excess of its insurance coverage, if any, or a product recall could
adversely affect the Company's business, financial condition and results of
operations.
HEALTH CARE REFORM AND THIRD-PARTY REIMBURSEMENT. Political, economic and
regulatory influences are subjecting the health care industry in the United
States to fundamental change. Recent initiatives to reduce the federal deficit
and to reform health care delivery are increasing cost-containment efforts. The
Company anticipates 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, the creation of large insurance purchasing
groups, price controls on pharmaceuticals and other fundamental changes to the
health care delivery system. Any such changes could affect the Company's
ultimate profitability. Legislative debate is expected to continue in the
future, and market forces are expected to drive reductions of health care costs.
The Company cannot predict what impact the adoption of any federal or state
health care reform measures or future private sector reforms may have on its
business.
The Company's ability to successfully commercialize its product candidates
will depend in part on the extent to which appropriate reimbursement codes and
authorized cost reimbursement levels of such products and related treatment are
obtained from governmental authorities, private health insurers and other
organizations, such as health maintenance organizations ("HMOs"). The Health
Care Financing Administration ("HCFA"), the agency responsible for administering
the Medicare program, sets requirements for coverage and reimbursement under the
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program, pursuant to the Medicare law. In addition, each state Medicaid program
has individual requirements that affect coverage and reimbursement decisions
under state Medicaid programs for certain health care providers and recipients.
Private insurance companies and state Medicaid programs are influenced, however,
by the HCFA requirements.
There can be no assurance that any of the Company's product candidates,
once available, will be included within the then current Medicare coverage
determination. In the absence of national Medicare coverage determination, local
contractors that administer the Medicare program, within certain guidelines, can
make their own coverage decisions. Favorable coverage determinations are made in
those situations where a procedure falls within allowable Medicare benefits and
a review concludes that the service is safe, effective and not experimental.
Under HCFA coverage requirements, FDA approval for marketing will not
necessarily lead to a favorable coverage decision. A determination will still
need to be made as to whether the product is reasonable and necessary for the
purpose used. In addition, HCFA has proposed adopting regulations that would add
cost-effectiveness as a criterion in determining Medicare coverage. Changes in
HCFA's coverage policy, including adoption of a cost-effective criterion, could
adversely affect the Company's business, financial condition and results of
operations.
Third-party payers are increasingly challenging the prices charged for
medical products and services. Also, the trend toward managed health care in the
United States and the concurrent growth of organizations such as HMOs, which
could control or significantly influence the purchase of health care services
and products, as well as legislative proposals to reform health care or reduce
government insurance programs, may all result in lower prices for the Company's
product candidates than it expects. The cost containment measures that health
care payers and providers are instituting and the effect of any health care
reform could adversely affect the Company's ability to operate profitably.
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL. The Company is dependent
upon a limited number of key management and technical personnel. The loss of the
services of one or more of these key employees could adversely affect the
Company's business, financial condition and results of operations. In addition,
the Company's success is dependent upon its ability to attract and retain
additional highly qualified management and technical personnel. The Company
faces intense competition in its recruiting activities, and there can be no
assurance that the Company will be able to attract and/or retain qualified
personnel.
IMPACT OF THE YEAR 2000. The Company has identified substantially all of
its major hardware and software platforms in use and is continually modifying
and upgrading its software and information technology ("IT") and non-IT systems.
The Company has modified its current financial software to be Year 2000 ("Y2K")
compliant. The Company does not believe that, with upgrades of existing software
and/or conversion to new software, the Y2K issue will pose significant
operational problems for its internal computer systems. The Company expects all
systems to be Y2K compliant by April 30, 1999 through the use of internal and
external resources. The Company has incurred insignificant costs to date
associated with Y2K compliance and the Company presently believes estimated
future costs will not be material. However, the systems of other companies on
which the Company may rely also may not be timely converted, and failure to
convert by another company could have an adverse effect on the Company's
systems. The Company presently believes the Y2K problem will not pose
significant operational problems and is not anticipated to have a material
effect on its financial position or results of operations in any given year.
However, actual results could differ materially from the Company's expectations
due to unanticipated technological difficulties or project delays by the Company
or its suppliers. If the Company and third parties upon which it relies are
unable to address the issue in a timely manner, it could result in a material
financial risk to the Company. In order to assure that this does not occur, the
Company is in the process of developing a contingency plan and plans to devote
all resources required to attempt to resolve any significant Y2K issues in a
timely manner.
EARTHQUAKE RISKS. The Company's corporate and research facilities, where
the majority of its research and development activities are conducted, are
located near major earthquake faults which have experienced earthquakes in the
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20
past. The Company does not carry earthquake insurance on its facility due to its
prohibitive cost and limited available coverage. In the event of a major
earthquake or other disaster affecting the Company's facilities, the operations
and operating results of the Company could be adversely affected.
FORWARD LOOKING STATEMENTS. Based on current expectations, this Prospectus,
the Company's Annual Report on Form 10-K and its quarterly and periodic reports
contain certain forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. In light of the
important factors that can materially affect results, including those set forth
above, the inclusion of forward-looking information should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved. The Company may encounter competitive,
technological, financial and business challenges making it more difficult than
expected to continue to develop, market and manufacture its products;
competitive conditions within the industry may change adversely; upon
development of the Company's products, demand for the Company's products may
weaken; the market may not accept the Company's products; the Company may be
unable to retain existing key management personnel; the Company's forecasts may
not accurately anticipate market demand; and there may be other material adverse
changes in the Company's operations or business. Certain important factors
affecting the forward-looking statements made herein include, but are not
limited to accurately forecasting capital expenditures and obtaining new sources
of external financing prior to the expiration of existing support arrangements
or capital. Assumptions relating to budgeting, marketing, product development
and other management decisions are subjective in many respects and thus
susceptible to interpretations and periodic revisions based on actual experience
and business developments, the impact of which may cause the Company to alter
its capital expenditure or other budgets, which may in turn affect the Company's
business, financial position and results of operations.
USE OF PROCEEDS
The proceeds from the sale of the Shares will be received directly by the
Registered Stockholders. The Company will not receive any proceeds from the sale
of the Shares offered hereby.
However, the Company will receive the proceeds, if any, from the exercise
of the Warrants. Holders of Warrants are not obligated to exercise their
Warrants and there can be no assurance that the holders of the Warrants will
choose to exercise all or any of their Warrants or, if some or all of such
holders do choose to exercise all or any of their Warrants, that such holders
will exercise such Warrants for cash (instead of a cashless exercise, as
permitted by the express terms of the Warrants). If all of the holders of the
Warrants exercise all of the Warrants for cash, the Company will receive
proceeds of approximately $1,135,016. Any proceeds received by the Company from
the exercise of Warrants will be used for general working capital purposes.
RECENT DEVELOPMENTS
On July 17, 1998, the Company notified the holders of the Class C Stock of
its intent to redeem the Class C Warrants issued in conjunction with the Class C
Stock offering in April 1997, if such Class C Warrants were not exercised on or
before August 6, 1998. As a result, the holders of the Class C Warrants elected
to exercise 4,076,157 of the Class C Warrants on a combined cash and cashless
basis and the Company issued to such holders an aggregate of 3,763,600 shares of
its Common Stock for which it received an aggregate of $2,244,264. At November
24, 1998, 270 shares of Class C Stock remained outstanding and, assuming the
conversion of all of such remaining shares of Class C Stock at the Conversion
Cap, the Company is required to issue to the holders of the Class C Stock upon
conversion thereof an aggregate of approximately 453,000 shares of Common Stock
and Class C Warrants to purchase an aggregate of up to approximately 113,000
shares of Common Stock at a purchase price of $.6554 per share.
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21
In July 1998, the Company renegotiated its short-term note payable for
$2,385,000 with a construction contractor to provide for an extension of time
until July 29, 1998, to repay such note, and issued to the contractor a warrant,
expiring on March 31, 2001, to purchase up to 240,000 shares of Common Stock at
an exercise price of $.5625 per share. On July 29, 1998, the Company repaid
$500,000 of the note to the contractor and renegotiated the payment terms of the
note to provide for an extension of time until August 17, 1998 to repay the
remaining balance of the note. In connection with this subsequent extension
agreement, the Company issued to the contractor a warrant, expiring in July
2001, to purchase up to 95,000 shares of the Company's common stock at an
exercise price of $1.375 per share and also issued an aggregate of 147,235
shares of Common Stock in lieu of repayment of accrued and unpaid interest on
such note. On August 17, 1998, the Company utilized funds received from the
exercise of Class C Warrants during July 1998 and August 1998 to repay the
remaining balance of $1,885,000 of such note in full, plus related legal fees in
the amount of $5,000.
The Company has entered into an agreement for the sale and subsequent
leaseback of its facilities, which consists of two buildings located in Tustin,
California. The sale/leaseback transaction is with an unrelated entity and
provides for the leaseback of the Company's facilities for a ten-year period
with two five-year options to renew. While the sale/leaseback agreement is in
escrow, it is subject to completion of normal due diligence procedures by the
buyer and there is no assurance that the transaction will be completed on a
timely basis or at all.
On February 29, 1996, the Company entered into a Distribution Agreement
with BTD. Under the terms of the agreement, BTD was granted the right to market
and distribute LYM products in Europe and other designated foreign countries in
exchange for a nonrefundable fee of $3,000,000 and the performance of certain
duties by BTD as outlined in the agreement. The agreement also provides that the
Company will retain all manufacturing rights to the LYM antibodies and will
supply the LYM antibodies to BTD at preset prices. In conjunction with the
agreement, the Company was granted an option to repurchase the marketing rights
to the LYM antibodies through August 29, 1998, at its sole discretion. Although
the Company did not exercise its rights under the repurchase option as of such
date, BTD subsequently agreed to extend the repurchase option through August 30,
1999 (effective as of October 23, 1998) in consideration of cash payments to BTD
aggregating $431,250 (with $93,750 payable immediately and $112,500 payable each
quarter thereafter, beginning December 1, 1998) and the issuance by the Company
to BTD of options to purchase 125,000 shares of Common Stock at an exercise
price of $3 per share with a three-year term. The repurchase option may be
canceled by the Company upon 90 days' notice to BTD. The repurchase price under
the repurchase option, if exercised by the Company, would include a cash payment
of $4,500,000, the issuance of an option to purchase 1,000,000 shares of Common
Stock at an exercise price of $5 per share with a five-year term and royalties
equal to 5% of gross sales of LYM products in designated geographic areas.
Alternatively, if the repurchase option is not exercised by the Company and BTD
elects to market LYM products itself and requests clinical data from the
Company, BTD will make a cash payment of $1,000,000 to the Company and will pay
royalties to the Company equal to 5% of gross sales on LYM products in
designated geographic areas.
On September 8, 1998, Edward J. Legere II resigned from the Board of
Directors and the remaining directors appointed Mr. William C. Shepherd to fill
the vacancy on the Board of Directors caused by Mr. Legere's resignation. Mr.
Legere's resignation was not due to any disagreement with the Company on any
matter relating to the Company's operations, policies or practices.
On October 4, 1998, William Moding resigned from his position as Vice
President, Operations and Administration to pursue other personal and business
interests. In connection with Mr. Moding's resignation, the Company entered into
a revised severance agreement with Mr. Moding pursuant to which Mr. Moding will
provide consulting services to the Company as an independent consultant for a
fixed and non-cancelable period of sixteen months continuing until January 31,
2000, in consideration of the payment to Mr. Moding of a monthly consulting fee
of $12,500 and the issuance of an aggregate of 320,000 shares of Common Stock
19
22
during such period for the exercise of outstanding stock options, without the
requirement of any payment by Mr. Moding of the exercise price ($.60 per share)
therefor. In addition, the Company has agreed to make tax payments totalling
$65,280 to federal and state taxing authorities on behalf of Mr. Moding to
offset the income to Mr. Moding resulting from the non-payment of the exercise
price for such options and to pay Mr. Moding all accrued and unused vacation pay
and accrued back pay relating to salary deferral for the period from March 21,
1998 through October 3, 1998. Pursuant to the revised agreement, Mr. Moding will
be required to repay the Company the entire outstanding principal balance and
accrued interest thereon under two stock option exercise notes (with a current
combined principal amount of $179,379.77) by no later than January 31, 2000 and
to execute a standard form security agreement relating to the stock option
exercise notes to pledge Mr. Moding's interest in the stock options and his
personal assets as backup collateral to secure his obligations under the two
stock option exercise notes.
On October 13, 1998, at the Annual Meeting of Stockholders, the
stockholders of the Company approved the issuance of shares of Common Stock
which could be acquired by the Registered Stockholders pursuant to the Equity
Line Agreement in excess of 20% of the issued and outstanding shares of Common
Stock (as required pursuant to the Rules of the National Association of
Securities Dealers, Inc.), which approval was a condition to the Company's
ability to put shares of its Common Stock to the Institutional Investors and to
the Institutional Investors' obligations to purchase the Shares.
On November 2, 1998, Elizabeth Gorbett-Frost resigned from her position as
Chief Financial Officer of the Company to pursue other personal and business
interests. However, Ms. Gorbett-Frost agreed to remain in her position as
Corporate Secretary of the Company until November 30, 1998. In connection with
Ms. Gorbett-Frost's resignation, the Company entered into a severance agreement
with Ms. Gorbett-Frost pursuant to which she will remain as a non-officer
employee of the Company through April 30, 1999 in consideration of the payment
to Ms. Gorbett-Frost of a bi-weekly salary in the amount of $6,731, with the
first such payment to be made on December 11, 1998 and a final payment of $5,609
to be made on April 30, 1999. Ms. Gorbett-Frost will also be entitled to
exercise the outstanding options she presently holds to acquire up to 113,334
shares of Common Stock pursuant to the Company's 1996 Stock Incentive Plan until
90 days after April 30, 1999, at the stated exercise price of $.60 per share. In
addition, Ms. Gorbett-Frost will be eligible to receive up to an aggregate of
50,000 unrestricted shares of Common Stock upon the accomplishment of certain
specified tasks to be substantially completed by November 30, 1998 (including
5,000 shares of Common Stock upon obtaining the effectiveness of the
registration statement of which this Prospectus constitutes a part).
On November 2, 1998, Steven C. Burke was appointed to the position of Chief
Financial Officer by the Board of Directors of the Company.
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REGISTERED STOCKHOLDERS
The following table sets forth certain information as of October 31, 1998,
with respect to each Registered Stockholder for whom the Company is registering
securities for resale to the public. The Company will not receive any of the
proceeds from the sale of the Shares by the Registered Stockholders.
SHARES BENEFICIALLY MAXIMUM NUMBER SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING(1) OF SHARES TO BE SOLD OWNED AFTER OFFERING(3)
NAME OF -------------------------- PURSUANT TO -----------------------
REGISTERED STOCKHOLDER NUMBER PERCENT THIS PROSPECTUS(2) NUMBER PERCENT
- -------------------------- ------ ------- -------------------- ------ -------
Laredo Capital
Partners(4)............. 10,490 * 10,490 - 0 - 0.0%
Pelain Partners(5) ....... 4,197 * 4,197 - 0 - 0.0%
Capital Ventures
International(6)......... 86,056 * 86,015 41 *
CC Investments,
LDC(7).................. 510,014 * 289,512 220,502 *
Arbco Associates,
L.P.(8) ................ 27,274 * 27,274 - 0 - 0.0%
Kayne Anderson Non-
Traditional Invest-
ments, Inc.(9)........... 56,644 * 56,644 - 0 - 0.0%
Offence Group,
L.P.(10)................ 56,644 * 56,644 - 0 - 0.0%
Fortune Fund LTD
Seeker III(11) ......... 115,385 * 115,385 - 0 - 0.0%
Linda Cappello(12)........ 4,197 * 4,197 - 0 - 0.0%
Gerard Cappello(13)....... 4,197 * 4,197 - 0 - 0.0%
Proprietary Convertible
Investments Group,
Inc.(14)................ 27,276 * 27,274 2 *
Jack R. Light, as Trustee
of The Light Family
Trust(15)............... 185,042 * 105,042 80,000 *
Sugarman Family
Partners(16) ........... 610,008 * 339,674 270,334 *
Eugene S.
Scarcello(17)........... 420,168 * 420,168 - 0 - 0.0%
Peter E. Horner(18)....... 59,521 * 52,521 7,000 *
Mark Brownstein(19)....... 52,521 * 52,521 - 0 - 0.0%
Donaldson Lufkin
Jenrette Securities
Corporation, as
Custodian F/B/O
James S. Dailey IRA,
Custodian Rollover
Account(20) ............ 220,070 * 220,070 - 0 - 0.0%
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24
Carl C. Chen, M.D., Inc.
Profit Sharing Plan
U/A/D 8-1-89(21)........ 105,042 * 105,042 - 0 - 0.0%
Elizabeth A. Gorbett-
Frost(22)............... 225,576 * 105,042 120,534 *
Rudolph & Sletten,
Inc.(23) ............... 417,235 * 417,235 - 0 - 0.0%
John H. Rudolph........... 15,000 * 15,000 - 0 - 0.0%
Dennis R. Giles........... 10,000 * 10,000 - 0 - 0.0%
Allen A. Rudolph.......... 10,000 * 10,000 - 0 - 0.0%
Gary L. Walz.............. 16,000 * 10,000 6,000 *
Martin P. Eckert, Jr...... 10,000 * 10,000 - 0 - 0.0%
Karen M. Rudolph.......... 10,000 * 10,000 - 0 - 0.0%
Edward J.
Legere II(24)........... 3,632,920 5.4 % 500,000 3,132,920 4.7%
- --------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them. Based on the conversion price with respect to the Class C Stock as
of November 27, 1998 (currently $0.5958 , which is the lower of (x)
$0.5958 per share or (y) a conversion price equal to the average of the
lowest trading price of the Company's Common Stock for the five
consecutive trading days ending with the trading date prior to the date
of conversion reduced by 27%, as required pursuant to the Company's
agreement with such holders) and on an aggregate of 66,699,971 shares of
Common Stock issued and outstanding as of October 31, 1998.
(2) Based on the conversion price with respect to the Class C Stock as of
November 27, 1998 (currently $0.5958 , which is the lower of (x) $0.5958
per share or (y) a conversion price equal to the average of the lowest
trading price of the Company's Common Stock for the five consecutive
trading days ending with the trading date prior to the date of conversion
reduced by 27%, as required pursuant to the Company's agreement with such
holders).
(3) Assumes that all of the Shares are sold pursuant to this Prospectus.
(4) Includes up to 8,392 Shares issuable upon conversion of 5 shares of Class
C Stock and up to 2,098 Shares issuable upon exercise of Warrants to be
issued to such Registered Stockholder upon conversion of such shares of
Class C Stock. See "Description of Securities." The natural persons
controlling Laredo Capital Partners are Lawrence Fleischman and Edmond
O'Donnell.
(5) Includes up to 3,357 Shares issuable upon conversion of 2 shares of Class
C Stock and up to 840 Shares issuable upon exercise of Warrants to be
issued to such Registered Stockholder upon conversion of such shares of
Class C Stock. See "Description of Securities." The natural persons
controlling Pelain Partners are Lawrence Fleischman, Peter Fleischman and
Inge Fleischman.
(6) Includes up to 68,812 Shares issuable upon conversion of 41 shares of
Class C Stock and up to 17,203 Shares issuable upon exercise of Warrants
to be issued to such Registered Stockholder upon conversion of such
shares of Class C Stock. See "Description of Securities." Heights Capital
Management, a Delaware corporation, the investment manager for Capital
Ventures International, has voting control and investment discretion over
transactions by Capital Ventures International.
(7) Includes up to 231,609 Shares issuable upon conversion of 138 shares of
Class C Stock and up to 57,903 Shares issuable upon exercise of Warrants
to be issued to such Registered Stockholder upon conversion of such
shares of Class C Stock. See "Description of Securities." Castle Creek
Partners, LLC, is the investment advisor to CC Investments, LDC and, as
such, has voting control and investment discretion over securities of the
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Company beneficially owned by CC Investments, LDC. The national persons
controlling Castle Creek Partners, LLC are Daniel Asher and John
Ziegelman. The Company has been advised by Castle Creek Partners, LLC
that Mr. Asher and Mr. Ziegelman disclaim any beneficial ownership of
securities of the Company beneficially owned by CC Investments, LDC.
(8) Includes up to 21,819 Shares issued or issuable to such Registered
Stockholder upon conversion of 13 shares of Class C Stock and up to 5,455
Shares issuable to such Registered Stockholder upon exercise of Warrants
issued to such Registered Stockholder upon conversion of shares of Class
C Stock, which Warrants are currently exercisable. See "Description of
Securities." The natural person controlling Arbco Associates, L.P. is
Richard Kayne.
(9) Includes up to 45,315 Shares issued or issuable to such Registered
Stockholder upon conversion of 27 shares of Class C Stock and up to
11,329 Shares issuable to such Registered Stockholder upon exercise of
Warrants issued to such Registered Stockholder upon conversion of shares
of Class C Stock, which Warrants are currently exercisable. See
"Description of Securities." The natural person controlling Kayne
Anderson Non-Traditional Investments, Inc. is Richard Kayne.
(10) Includes up to 45,315 Shares issued or issuable to such Registered
Stockholder upon conversion of 27 shares of Class C Stock and up to
11,329 Shares issuable to such Registered Stockholder upon exercise of
Warrants issued to such Registered Stockholder upon conversion of shares
of Class C Stock, which Warrants are currently exercisable. See
"Description of Securities." The natural person controlling Offence
Group, L.P. is Richard Kayne.
(11) Includes up to 92,308 shares of Common Stock issuable upon conversion of
55 shares of Class C Stock and up to 23,077 shares of Common Stock
issuable upon exercise of warrants to be issued to such Registered
Stockholder upon conversion of such shares of Class C Stock. See
"Description of Securities." The natural person controlling Fortune Fund
LTD Seeker III is Arlette Siaretta.
(12) Includes up to 3,357 Shares issuable upon conversion of 2 shares of Class
C Stock and up to 840 Shares issuable upon exercise of Warrants to be
issued to such Registered Stockholder upon conversion of such shares of
Class C Stock. See "Description of Securities."
(13) Includes up to 3,357 Shares issuable upon conversion of 2 shares of Class
C Stock and up to 840 Shares issuable upon exercise of Warrants to be
issued to such Registered Stockholder upon conversion of such shares of
Class C Stock. See "Description of Securities."
(14) Includes up to 21,819 Shares issuable upon conversion of 13 shares of
Class C Stock and up to 5,455 Shares issuable upon exercise of Warrants
to be issued to such Registered Stockholder upon conversion of such
shares of Class C Stock. See "Description of Securities." Proprietary
Convertible Investments Group, Inc. was subsequently renamed to Marshall
Capital Management, Inc. Marshall Capital Management, Inc. is a
wholly-owned subsidiary of Credit Suisse First Boston Group, a publicly
held Swiss company.
(15) Includes 21,008 Shares issuable upon exercise of outstanding Warrants
which are currently exercisable.
(16) Includes 67,935 Shares issuable upon exercise of outstanding Warrants
which are currently exercisable.
(17) Includes 84,034 Shares issuable upon exercise of outstanding Warrants
which are currently exercisable.
(18) Includes 10,504 Shares issuable upon exercise of outstanding Warrants
which are currently exercisable.
(19) Includes 10,504 Shares issuable upon exercise of outstanding Warrants
which are currently exercisable.
(20) Includes 44,014 Shares issuable upon exercise of outstanding Warrants
which are currently exercisable.
(21) Includes 21,008 Shares issuable upon exercise of outstanding Warrants
which are currently exercisable.
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(22) Includes 70,588 issued and outstanding Shares and 17,647 Shares issuable
upon exercise of outstanding Warrants which are currently exercisable,
held by Ms. Gorbett-Frost, as Trustee of the Doug & Lisa Family Trust,
and 13,446 issued and outstanding Shares and 3,361 Shares issuable upon
exercise of outstanding Warrants which are currently exercisable, held by
Ms. Gorbett-Frost, as Trustee of The Gorbett-Frost Children's Trust. Also
includes 3,600 shares of Common Stock owned by members of Ms.
Gorbett-Frost's family, as to which she may be deemed to be the
beneficial owner, and 113,334 shares of Common Stock issuable upon
exercise of outstanding stock options which are currently exercisable.
Ms. Gorbett-Frost served as the Company's Chief Financial Officer until
November 2, 1998 and as Corporate Secretary of the Company until November
30, 1998.
(23) Includes 335,000 Shares issuable upon exercise of outstanding Warrants
which are currently exercisable.
(24) Includes 500,000 Shares issuable upon exercise of outstanding Warrants
owned by Biotechnology Development, Ltd., a limited partnership
controlled by Mr. Legere, issued in connection with the establishment of
a commitment for a $2,000,000 bridge loan credit facility by the Company
in March 1998, which Warrants are currently exercisable. Also includes
3,123,333 shares owned Legere Enterprises, Ltd., a Nevada limited
partnership owned by Mr. Legere and members of his family, and 9,587
shares of Common Stock issuable upon exercise of outstanding stock
options which are currently exercisable.
The Company will prepare and file such amendments and supplements to the
registration statement as may be necessary in accordance with the rules and
regulations of the Securities Act to keep it effective until the earlier to
occur of (i) the date as of which all Shares may be resold in a public
transaction without volume limitations or other material restrictions without
registration under the Securities Act, including without limitation, pursuant to
Rule 144 under the Securities Act or (ii) the date as of which all Shares
offered hereby have been resold.
The Company has agreed to pay the expenses (other than broker discounts and
commissions, if any) in connection with this Prospectus.
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PLAN OF DISTRIBUTION
The Company has been advised by the Registered Stockholders that all or a
portion of the Shares offered by this Prospectus may be offered for sale, from
time to time, by the Registered Stockholders in one or more private or
negotiated transactions, in open market transactions on the Nasdaq SmallCap
Market, in settlement or short sale transactions, in settlement of option
transactions, or otherwise, or a combination of these methods, at prices and
terms then obtainable, at fixed prices, at prices then prevailing at the time of
sale, at prices related to such prevailing prices, or at negotiated prices, or
otherwise. The Registered Stockholders may effect these transactions by selling
the Shares (i) to or through underwriters; (ii) to or through broker-dealers or
agents (which may include underwriters) including: (a) in a block trade in which
the broker or dealer so engaged will attempt to sell the shares of Common Stock
as agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) in purchases by a broker or dealer and resale by
such broker or dealer as a principal for its account pursuant to this
Prospectus; (c) in ordinary brokerage transactions and (d) in transactions in
which the broker solicits purchasers; or (iii) directly to one or more
purchasers. The Registered Stockholders and any underwriters, dealers, brokers
or agents executing selling orders on behalf of the Registered Stockholders may
be deemed to be "underwriters" within the meaning of the Securities Act and any
profits on the sale of the Shares by them and any discounts, commissions or
concessions received by such underwriters, dealers, brokers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act.
The compensation to a particular underwriter, broker-dealer or agent may be in
excess of customary commissions. To the knowledge of the Company, the Registered
Stockholders have made no arrangement with any brokerage firm for the sale of
the Shares.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Registered Stockholders (and, if they act as agent for the
purchaser of such Shares, from such purchaser). Broker-dealers may agree with
the Registered Stockholders to sell a specified number of Shares at a stipulated
price per share and, to the extent such a broker-dealer is unable to do so
acting as agent for the Registered Stockholder, to purchase as principal any
unsold Shares at the price required to fulfill the broker-dealer commitment to
the Registered Stockholder. Broker-dealers who acquire Shares as principal may
thereafter resell such Shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
Shares commissions computed as described above. To the extent required under the
Securities Act, a supplemental prospectus will be filed, disclosing (a) the name
of any such broker-dealers; (b) the number of Shares involved; (c) the price at
which such Shares are to be sold; (d) the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable; (e) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus, as supplemented; and (f)
other facts material to the transaction.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not simultaneously engage in market
making activities with respect to the Shares for a period beginning when such
person becomes a distribution participant and ending upon such person's
completion of participation in the distribution, including stabilization
activities in the Common Stock to effect covering transactions, to impose
penalty bids or to effect passive marketing making bids. In addition to and
without limiting the foregoing, in connection with transactions in the Shares,
the Company and the Registered Stockholders and any underwriters, dealers,
brokers or agents executing selling orders on behalf of the Registered
Stockholders may be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including, without limitation, Rule 10b-5
thereof and, insofar as the Company and the Registered Stockholders are
distribution participants, Regulation M and Rules 100, 101, 102, 103, 104 and
105 thereof. All of the foregoing may affect the marketability of the Shares.
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The Registered Stockholders will pay all commissions, transfer taxes and
other expenses associated with the sales of the Shares by them. The Shares
offered hereby are being registered pursuant to contractual obligations of the
Company, and the Company has agreed to pay the expenses of the preparation of
this prospectus. The Company has also agreed to indemnify the Registered
Stockholders against certain liabilities, including, without limitation,
liabilities arising under the Securities Act.
The Company will receive the proceeds, if any, from the exercise of the
Warrants. Holders of Warrants are not obligated to exercise their Warrants and
there can be no assurance that the holders of the Warrants will choose to
exercise all or any of their Warrants or, if some or all of such holders do
choose to exercise all or any of their Warrants, that such holders will exercise
such Warrants for cash (instead of a cashless exercise, as permitted by the
express terms of the Warrants). If all of the holders of the Warrants exercise
all of the Warrants for cash, the Company will receive proceeds of approximately
$1,135,016. The Company will not receive any of the proceeds from the sale of
the Shares by the Registered Shareholders.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless the Shares have been registered or qualified for
sale in these states or an exemption from registration or qualification is
available and complied with.
The Common Stock of the Company is currently traded on the Nasdaq SmallCap
Market under the symbol "TCLN". Concurrently with sales under this prospectus,
the Registered Stockholders may effect other sales of Shares under Rule 144 or
other exempt resale transactions. There can be no assurance that the Registered
Stockholders, or any of them, will sell any or all of the Shares offered
hereunder.
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DESCRIPTION OF SECURITIES
As of the date of this Prospectus, the authorized capital stock of the
Company consists of 120,000,000 shares of Common Stock, par value $.001 per
share, and 5,000,000 shares of Preferred Stock, par value $.001 per share, of
which 10,000 shares are designated as Series B Convertible Preferred Stock
("Series B Stock") and 17,200 shares are designated as 5% Adjustable Convertible
Class C Preferred Stock ("Class C Stock"). As of November 24, 1998, there were
66,840,971 shares of Common Stock outstanding held by 5,831 stockholders of
record, 270 shares of Class C Stock outstanding held by 8 holders of record and
no shares of Series B Stock outstanding.
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Subject to preferences that may be
applicable to the holders of outstanding shares of Preferred Stock, if any, the
holders of Common Stock are entitled to receive such lawful dividends as may be
declared by the Board of Directors. In the event of liquidation, dissolution or
winding up of the Company, and subject to the rights of the holders of
outstanding shares of Preferred Stock, if any, the holders of shares of Common
Stock shall be entitled to receive pro rata all of the remaining assets of the
Company available for distribution to its stockholders. There are no redemption
or sinking fund provisions applicable to the Common Stock. All outstanding
shares of Common Stock are fully paid and nonassessable, and shares of Common
Stock to be issued pursuant to this offering shall be fully paid and
nonassessable.
In April 1997, the Company issued 12,000 shares of Class C Stock, at a
price of $1,000 per share, for net proceeds of $11,068,971. The holders of the
Class C Stock do not have voting rights except as provided under Delaware law.
Under the terms of the Company's agreement with the holders of the Class C
Stock, the shares of the Class C Stock are convertible into shares of the
Company's Common Stock at the lower of $0.5958 per share or a conversion price
equal to the average of the lowest trading price of the Company's Common Stock
for the five consecutive trading days ending with the trading date prior to the
date of conversion reduced by 27 percent. The Company's agreement with the
holders of the Class C Stock also provides that upon conversion, the holders of
the Class C Stock will also receive warrants to purchase one-fourth of the
number of shares of Common Stock issued upon conversion of the Class C Stock at
an exercise price of $0.6554 per share (or 110% of the Conversion Cap).
Dividends on the Class C Stock are payable quarterly in shares of Class C Stock
or cash, at the option of the Company, at the rate of $50.00 per share per
annum. During fiscal year 1998, the Company issued 448 Class C Stock dividend
shares and paid cash dividends of $12,473 for fractional shares thereon.
From September 26, 1997 (the date the Class C Stock became convertible into
Common Stock) through November 24, 1998, 13,703 shares of Class C Stock,
including Class C dividend shares and additional shares of Class C Stock issued
during fiscal year 1998 (as described below), were converted. In addition, in
conjunction with the conversion of the Class C Stock, the holders were granted
warrants to purchase shares of Common Stock of the Company. Class C Warrants to
purchase 6,144,537 shares of common stock have been exercised through November
24, 1998, at an exercise price of $.6554 per share. During fiscal year 1998, the
registration statement required to be filed by the Company pursuant to the
Company's agreement with the holders of the Class C Stock was not declared
effective by the 180th day following the closing date of such offering, and
therefore, the Company was required to issue an additional 325 shares of Class C
Stock. The shares of Common Stock issuable upon conversion of such 325 shares of
Class C Stock and the shares of Common Stock issuable upon exercise of the Class
C Warrants issuable upon conversion of such shares of Class C Stock constitute a
portion of the Shares to which this Prospectus relates. Shares of Common Stock
issued or issuable upon conversion of the other shares of Class C Stock and
shares of Common Stock issued or issuable upon exercise of Class C Warrants
issued or issuable upon conversion of such other shares of Class C Stock have
been separately registered for resale under the Securities Act and are the
subject of a separate prospectus.
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The Class C Stock is subject to mandatory redemption upon certain events as
defined in the Class C Stock agreement. Some of the mandatory redemption
features are within the control of the Company. For those mandatory redemption
features that are not within the control of the Company, the Company has the
option to redeem the Class C Stock in cash or common stock. On July 17, 1998,
the Company notified the holders of the Class C Stock of its intent to redeem
the Class C Warrants issued in conjunction with the Class C Stock offering in
April 1997, if such Class C Warrants were not exercised on or before August 6,
1998. As a result, the holders of Class C Warrants elected to exercise 4,076,157
of the Class C Warrants on a combined cash and cashless basis and the Company
issued to such holders an aggregate of 3,763,600 shares of its Common Stock for
which it received an aggregate of $2,244,264.
At November 24, 1998, 270 shares of Class C Stock remained outstanding and
may be converted into shares of Common Stock at the lower of a 27% discount from
the average of the lowest market trading price for the five consecutive trading
days preceding the date of conversion or $0.5958 per share. Assuming the
conversion of all of such remaining shares of Class C Stock at the Conversion
Cap, the Company is required to issue to the holders of the Class C Stock upon
conversion thereof an aggregate of approximately 453,000 shares of Common Stock
and Class C Warrants to purchase an aggregate of up to approximately113,000
shares of Common Stock at an exercise price of $.6554 per share. Pursuant to the
Company's agreement with the holders of the Class C Stock, the Company is
required to have registered up to 150% of the number of shares of Common Stock
that would otherwise be issuable upon conversion of the Class C Stock and upon
exercise of the Class C Warrants (including up to 545,460 Shares to which this
Prospectus relates issuable upon conversion of 325 shares of Class C Stock and
up to 136,369 Shares to which this Prospectus relates issuable upon exercise of
Class C Warrants).
In April 1998, through a private placement, the Company sold 1,120,065
shares of restricted common stock for $625,000, including 84,034 shares to an
officer of the Company, which shares constitute a portion of the Shares to which
this Prospectus relates. In conjunction with the private placement, the Company
issued the April 1998 Private Placement Warrants to purchase up to 280,015
shares of Common Stock, which shares constitute a portion of the Shares to which
this Prospectus relates.
In July 1998, the Company renegotiated its short-term note payable for
$2,385,000 with a construction contractor to provide for an extension of time
until July 29, 1998, to repay such note, and issued to the contractor a warrant,
expiring on March 31, 2001, to purchase up to 240,000 shares of Common Stock at
an exercise price of $.5625 per share. On July 29, 1998, the Company repaid
$500,000 of the note to the contractor and renegotiated the payment terms of the
note to provide for an extension of time until August 17, 1998 to repay the
remaining balance of the note. In connection with this subsequent extension
agreement, the Company issued to the contractor a warrant, expiring in July
2001, to purchase up to 95,000 shares of the Company's common stock at an
exercise price of $1.375 per share and also issued an aggregate of 147,235
shares of Common Stock in lieu of repayment of accrued and unpaid interest on
such note. On August 17, 1998, the Company utilized funds received from the
exercise of Class C Warrants during July 1998 and August 1998 to repay the
remaining balance of $1,885,000 of such note in full, plus related legal fees in
the amount of $5,000. The shares of Common Stock underlying such Repayment
Extension Warrants and the shares of Common Stock issued in lieu of repayment of
accrued and unpaid interest on such note constitute a portion of the Shares to
which this Prospectus relates.
In March 1998, the Company obtained a commitment for a $2,000,000 bridge
loan credit facility from Legere Enterprises, Ltd., a Nevada limited partnership
("LEL"). The commitment expired May 31, 1998 and the Company did not exercise
its rights to borrow under the commitment. In connection with the establishment
of such bridge loan commitment, the Company issued to BTD, an affiliate of
Edward Legere, a former director of the Company, warrants to purchase up to
500,000 shares of Common Stock, at an exercise price of $1.00 per share. The
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31
Shares issuable upon exercise of the Bridge Loan Commitment Warrants constitute
a portion of the Shares to which this Prospectus relates.
The Class C Warrants will be exercisable at any time beginning on the date
of issuance thereof and ending in April 2002, at an exercise price of $.6554 per
share. The April 1998 Private Placement Warrants are exercisable at any time
beginning on the date of issuance thereof and ending in April 2001, at an
exercise price of $1.00 per share. Of the 335,000 Shares issuable upon exercise
of the Repayment Extension Warrants, warrants to purchase up to 240,000 Shares
are exercisable at any time beginning on the date of issuance thereof and ending
in March 2001, at an exercise price of $.5625 per share, and warrants to
purchase up to 95,000 Shares are exercisable at any time beginning on the date
of issuance thereof and ending in July 2001, at an exercise price of $1.375 per
share. The Bridge Loan Commitment Warrants are exercisable at any time beginning
on the date of issuance thereof and ending in March, 2003, at an exercise price
of $1.00 per share. The shares of Common Stock underlying the Warrants, when
issued upon exercise in whole or in part, will be fully paid and nonassessable,
and the Company will pay any transfer tax incurred as a result of the issuance
of the Common Stock to the holder upon its exercise.
Each of the Warrants contain provisions that protect the holder against
dilution by adjustment of the exercise price. Such adjustments will occur in the
event, among others, of a merger, stock split or reverse stock split, stock
dividend or recapitalization. The Company is not required to issue fractional
shares upon the exercise of any Warrant. The holder of the Warrant will not
possess any rights as a stockholder of the Company until such holder exercises
the Warrant. The Warrant may be exercised upon surrender on or before the
expiration date of the Warrant at the offices of the Company, with an exercise
form completed and executed as indicated, accompanied by payment of the exercise
price for the number of shares with respect to which the Warrant is being
exercised. The exercise price is payable either (i) by check or bank draft
payable to the order of the Company or by wire transfer to an account designated
by the Company or (ii) by a "cashless exercise," in which that number of shares
of Common Stock underlying the Warrant having a fair market value equal to the
aggregate exercise price are canceled as payment of the exercise price.
For the life of each of the Warrants, the holder thereof has the
opportunity to profit from a rise in the market price of the Common Stock
without assuming the risk of ownership of the shares of Common Stock issuable
upon the exercise of the Warrant. The Warrant holder may be expected to exercise
the Warrant at a time when the Company would, in all likelihood, be able to
obtain any needed capital by an offering of Common Stock on terms more favorable
than those provided for by the Warrant. Furthermore, the terms on which the
Company could obtain additional capital during the life of the Warrant may be
adversely affected.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Rutan & Tucker, LLP, Costa Mesa, California.
EXPERTS
The consolidated financial statements and related consolidated financial
statement schedule, incorporated in this Prospectus by reference from
Techniclone Corporation's Annual Report on Form 10-K for the year ended April
30, 1998, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide that the Company will indemnify its directors
and officers and may indemnify its employees and other agents to the fullest
extent permitted by law. The Company believes that indemnification under its
Bylaws covers at least negligence and gross negligence by indemnified parties,
and permits the Company to advance litigation expenses in the case of
stockholder derivative actions or other actions, against an undertaking by the
indemnified party to repay such advances if it is ultimately determined that the
indemnified party is not entitled to indemnification. The Company has liability
insurance for its officers and directors.
In addition, the Company's Certificate of Incorporation provides that,
pursuant to Delaware law, its directors shall not be liable for monetary damages
for breach of the directors' fiduciary duty as a director to the Company and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Company for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
Provisions of the Company's Bylaws require the Company, among other things,
to indemnify them against certain liabilities that may arise by reason of their
status or service as directors or officers (other than liabilities arising from
actions not taken in good faith or in a manner the indemnitee believed to be
opposed to the best interests of the Company) to advance their expenses incurred
as a result of any proceeding against them as to which they could be indemnified
and to obtain directors' insurance if available on reasonable terms. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable. The Company
believes that its Certificate of Incorporation and Bylaw provisions are
necessary to attract and retain qualified persons as directors and officers.
The Company has in place a directors' and officers' liability insurance
policy that, subject to the terms and conditions of the policy, insures the
directors and officers of the Company against loses arising from any wrongful
act (as defined by the policy) in his or her capacity as a director of officer.
The policy reimburses the Company for amounts which the Company lawfully
indemnifies or is required or permitted by law to indemnify its directors and
officers.
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================================================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE REGISTERED STOCKHOLDERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES BY ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH AN OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------------------------
TABLE OF CONTENTS
PAGE
----
Available Information.............................................. 2
Incorporation of Certain Documents
By Reference.................................................... 3
Cautionary Statement Regarding
Forward-Looking Statements...................................... 4
The Company........................................................ 5
Risk Factors....................................................... 7
Use of Proceeds.................................................... 18
Recent Developments................................................ 18
Registered Stockholders............................................ 21
Plan of Distribution............................................... 25
Description of Securities.......................................... 27
Legal Matters...................................................... 29
Experts............................................................ 29
Indemnification of Directors
and Officers.................................................... 30
-------------------------------
3,064,144 Shares
(Techniclone TECHNICLONE
Logo CORPORATION
Here)
COMMON STOCK
-----------------
PROSPECTUS
-----------------
, 1998
================================================================================
34
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the Offering described in this Registration Statement:
SEC registration fee........................... $ 1,264
Printing and engraving expenses................ 5,000
Legal fees and expenses........................ 25,000
Blue Sky fees and expenses..................... 2,500
Accounting fees and expenses................... 25,000
Miscellaneous.................................. 10,000
------
Total.................................. $ 68,764
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation (the "Certificate") and Bylaws
include provisions that eliminate the directors' personal liability for monetary
damages to the fullest extend possible under Delaware Law or other applicable
law (the "Director Liability Provision"). The Director Liability Provision
eliminates the liability of Directors to the Company and its stockholders for
monetary damages arising out of any violation by a director of his fiduciary
duty of due care. However, the Director Liability Provision does not eliminate
the personal liability of a director for (i) breach of the director's duty of
loyalty, (ii) acts or omissions not in good faith or involving intentional
misconduct or knowing violation of law, (iii) payment of dividends or
repurchases or redemption of stock other than from lawfully available funds, or
(iv) any transactions from which the director derived an improper benefit. The
Director Liability Provision also does not affect a director's liability under
the federal securities laws or the recovery of damages by third parties.
Furthermore, pursuant to Delaware Law, the limitation liability afforded by the
Director Liability Provision does not eliminate a director's personal liability
for breach of the director's duty of due care. Although the directors would not
be liable for monetary damages to the corporation or its stockholders for
negligent acts or commissions in exercising their duty of due care, the
directors remain subject to equitable remedies, such as actions for injunction
or rescission, although these remedies, whether as a result of timeliness or
otherwise, may not be effective in all situations. With regard to directors who
also are officers of the Company, these persons would be insulated from
liability only with respect to their conduct as directors and would not be
insulated from liability for acts or omissions in their capacity as officers.
These provisions may cover actions undertaken by the Board of Directors, which
may serve as the basis for a claim against the Company under the federal and
state securities laws. The Company has been advised that it is the position of
the Commission that insofar as the foregoing provisions may be involved to
disclaim liability for damages arising under the Securities Act, such provisions
are against public policy as expressed in the Act and are therefore
unenforceable.
Delaware Law provides a detailed statutory framework covering
indemnification of directors, officers, employees or agents of the Company
against liabilities and expenses arising out of legal proceedings brought
against them by reason of their status or service as directors, officers,
employees or agents. Section 145 of the Delaware General Corporation Law
("Section 145") provides that a director, officer, employee or agent of a
corporation (i) shall be indemnified by the corporation for expenses actually
and reasonably incurred in defense of any action or proceeding if such person is
sued by reason of his service to the corporation, to the extent that such person
has been successful in defense of such action or proceeding, or in defense of
any claim, issue or matter raised in such litigation, (ii) may, in actions other
than actions by or in the right of the corporation (such as derivative actions),
II-1
35
be indemnified for expenses actually and reasonably incurred, judgments, fines
and amounts paid in settlement of such litigation, even if he is not successful
on the merits, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation (and in a
criminal proceeding, if he did not have reasonable cause to believe his conduct
was unlawful), and (iii) may be indemnified by the corporation for expenses
actually and reasonably incurred (but not judgments or settlements) of any
action by the Corporation or of a derivative action (such as a suit by a
stockholder alleging a breach by the director or officer of a duty owed to the
corporation), even if he is not successful, provided that he acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation, provided that no indemnification is permitted
without court approval if the director has been adjudged liable to the
corporation.
Delaware Law also permits a corporation to elect to indemnify its officers,
directors, employees and agents under a broader range of circumstances than that
provided under Section 145. The Certificate contains a provision that takes full
advantage of the permissive Delaware indemnification laws (the "Indemnification
Provision") and provides that the Company is required to indemnify its officers,
directors, employees and agents to the fullest extent permitted by law,
including those circumstances in which indemnification would otherwise be
discretionary, provided, however, that prior to making such discretionary
indemnification, the Company must determine that the person acted in good faith
and in a manner he or she believed to be in the best interests of the Company
and, in the case of any criminal action or proceeding, the person had no reason
to believe his or her conduct was unlawful.
In furtherance of the objectives of the Indemnification Provision, the
Company has also entered into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Certificate and Bylaws (the "Indemnification Agreements"). The Company
believes that the Indemnification Agreements are necessary to attract and retain
qualified directors and executive officers. Pursuant to the Indemnification
Agreements, an indemnitee will be entitled to indemnification to the extent
permitted by Section 145 or other applicable law. In addition, to the maximum
extent permitted by applicable law, an indemnitee will be entitled to
indemnification for any amount or expense which the indemnitee actually and
reasonably incurs as a result of or in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, preparing to be a witness, or
otherwise participating in any threatened, pending or completed claim, suit,
arbitration, inquiry or other proceeding (a "Proceeding") in which the
indemnitee is threatened to be made or is made a party or participant as a
result of his or her position with the Company, provided that the indemnitee
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company and had no reasonable cause to
believe his or her conduct was unlawful. If the Proceeding is brought by or in
the right of the Company and applicable law so provides, the Indemnification
Agreement provides that no indemnification against expenses shall be made in
respect of any claim, issue or matter in the Proceeding as to which the
indemnitee shall have been adjudged liable to the Company.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
II-2
36
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1............ Certificate of Incorporation of Techniclone
Corporation, a Delaware corporation
(Incorporated by reference to Exhibit B to the
Company's 1996 Proxy Statement as filed with
the Commission on or about August 20, 1996)
3.2............ Bylaws of Techniclone Corporation, a Delaware
corporation (Incorporated by reference to
Exhibit C to the Company's 1996 Proxy
Statement as filed with the Commission on or
about August 20, 1996)
3.3............ Certificate of Designation of 5% Adjustable
Convertible Class C Preferred Stock as filed
with the Delaware Secretary of State on April
23, 1997. (Incorporated by reference to
Exhibit 3.1 contained in Registrant's Current
Report on Form 8-K as filed with the
Commission on or about May 12, 1997)
4.1............ Form of Certificate for Common Stock
(Incorporated by reference to the exhibit of
the same number contained in the Registrants'
Annual Report on Form 10-K for the fiscal year
ended April 30, 1988)
4.4............ Form of Subscription Agreement entered into
with Series B Convertible Preferred Stock
Subscribers (Incorporated by reference to
Exhibit 4.1 contained in Registrant's Report
on Form 8-K dated December 27, 1995, as filed
with the Commission on or about January 24,
1996)
4.5............ Registration Rights Agreement dated December
27, 1995, by and among Swartz Investments,
Inc. and the holders of the Registrant's
Series B Convertible Preferred Stock
(incorporated by reference to Exhibit 4.2
contained in Registrant's Current Report on
Form 8-K dated December 27, 1995 as filed with
the Commission on or about January 24, 1996)
4.6............ Warrant to Purchase Common Stock of Registrant
issued to Swartz Investments, Inc.
(Incorporated by reference to Exhibit 4.3
contained in Registrant's Current Report on
Form 8-K dated December 27, 1995 as filed with
the Commission on or about January 24, 1996)
II-3
37
4.7............ 5% Preferred Stock Investment Agreement
between Registrant and the Investors named
therein (Incorporated by reference to Exhibit
4.1 contained in Registrant's Current Report
on Form 8-K as filed with the Commission on or
about May 12, 1997)
4.8............ Registration Rights Agreement between the
Registrant and the holders of the Class C
Preferred Stock (Incorporated by reference to
Exhibit 4.2 contained in Registrant's Current
Report on Form 8-K as filed with the
Commission on or about May 12, 1997)
4.9............ Form of Stock Purchase Warrant to be issued to
the holders of the Class C Preferred Stock
upon conversion of the Class C Preferred Stock
(Incorporated by reference to Exhibit 4.3
contained in Registrant's Current Report on
Form 8-K as filed with the Commission on or
about May 12, 1997)
4.10........... Regulation D Common Equity Line Subscription
Agreement dated as of June 16, 1998 between
the Registrant and the Subscribers named
therein (the "Equity Line Subscribers")
(Incorporated by reference to Exhibit 4.4
contained in Registrant's Report on Form 8-K
dated as filed with the Commission on or about
June 29, 1998)
4.11........... Form of Amendment to Regulation D Common Stock
Equity Line Subscription Agreement
(Incorporated by reference to Exhibit 4.5
contained in Registrant's Current Report on
Form 8-K filed with the Commission on or about
June 29, 1998)
4.12........... Registration Rights Agreement dated as of June
16, 1998 between the Registrant and the Equity
Line Subscribers (Incorporated by reference to
Exhibit 4.6 contained in Registrant's Current
Report on Form 8-K as filed with the
Commission on or about June 29, 1998)
4.13........... Form of Stock Purchase Warrant to be issued to
the Equity Line Subscribers pursuant to the
Regulation D Common Stock Equity Subscription
Agreement (Incorporated by reference to
Exhibit 4.7 contained in Registrant's Current
Report on Form 8-K as filed with the
Commission on or about June 29, 1998)
II-4
38
4.14........... Placement Agent Agreement dated as of June 16,
1998, by and between the Registrant and Swartz
Investments LLC, a Georgia limited liability
company d/b/a Swartz Institutional Finance
(Incorporated by reference to the exhibit
contained in Registrant's Registration
Statement on Form S-3 (File No. 333-63773))
4.15........... Second Amendment to Regulation D Common Stock
Equity Line Subscription Agreement dated as of
September 16, 1998, by and among the
Registrant, The Tail Wind Fund, Ltd. and
Resonance Limited (Incorporated by reference
to the exhibit contained in Registrant's
Registration Statement on Form S-3 (File No.
333-63773))
4.16........... Form of Stock Purchase Warrant issued to
investors (the "April 1998 Private Placement
Investors") in connection with the private
placement by the Registrant in April 1998 (the
"April 1998 Private Placement")*
4.17........... Form of Registration Rights Agreement between
the Registrant and the April 1998 Private P*
4.18........... Stock Purchase Warrant to purchase up to
240,000 Shares of Common Stock of the
Registrant issued to Rudolph & Sletten, Inc.*
4.19........... Stock Purchase Warrant to purchase up to
95,000 Shares of Common Stock of the
Registrant issued to Rudolph & Sletten, Inc.*
4.20........... Form of Registration Rights Agreement between
the Registrant and Rudolph & Sletten, Inc.*
4.21........... Stock Purchase Warrant to purchase up to
500,000 Shares of Common Stock of the
Registrant issued to Biotechnology Development
Ltd.*
5.............. Opinion of Rutan & Tucker, LLP*
10.22.......... 1982 Stock Option Plan (Incorporated by
reference to the exhibit contained in
Registrant's Registration Statement on Form
S-8 (File No. 2-85628))
10.23.......... Incentive Stock Option, Nonqualified Stock
Option and Restricted Stock Purchase Plan -
1986 (Incorporated by reference to the exhibit
contained in Registrant's Registration
Statement on Form S-8 (File No. 33-15102))
II-5
39
10.24.......... Cancer Biologics Incorporated Incentive Stock
Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan - 1987
(Incorporated by reference to the exhibit
contained in Registrant's Registration
Statement on Form S-8 (File No. 33-8664))
10.25.......... Amendment to 1982 Stock Option Plan dated
March 1, 1988 (Incorporated by reference to
the exhibit of the same number contained in
Registrants' Annual Report on Form 10-K for
the year ended April 30, 1988)
10.26.......... Amendment to 1986 Stock Option Plan dated
March 1, 1988 (Incorporated by reference to
the exhibit of the same number contained in
Registrant's Annual Report on Form 10-K for
the year ended April 30, 1988)
10.31.......... Agreement dated February 5, 1996, between
Cambridge Antibody Technology, Ltd. and
Registrant (Incorporated by reference to
Exhibit 10.1 contained in Registrant's Current
Report on Form 8-K dated February 5, 1996, as
filed with the Commission on or about February
8, 1996)
10.32.......... Distribution Agreement dated February 29,
1996, between Biotechnology Development, Ltd.
and Registrant (Incorporated by reference to
Exhibit 10.1 contained in Registrant's Current
Report on Form 8-K dated February 29, 1996, as
filed with the Commission on or about March 7,
1996)
10.33.......... Option Agreement dated February 29, 1996, by
and between Biotechnology Development, Ltd.
And Registrant (Incorporated by reference to
Exhibit 10.2 contained in Registrant's Current
Report on Form 8-K dated February 29, 1996, as
filed with the Commission on or about March 7,
1996)
10.34.......... Purchase Agreement for Real Property and
Escrow Instructions dated as of March 22,
1996, by and between TR Koll Tustin Tech Corp.
and Registrant (Incorporated by reference to
Exhibit 10.1 contained in Registrant's Current
Report on Form 8-K dated March 25, 1996, as
filed with the Commission on or about April 5,
1996)
10.35.......... Incentive Stock Option and Nonqualified Stock
Option Plan-1993 (Incorporated by reference to
the exhibit contained in Registrants'
Registration Statement on Form S-8 (File No.
33-87662))
II-6
40
10.36.......... Promissory Note dated October 24, 1996 in the
original principal amount of $1,020,000
payable to Imperial Thrift and Loan
Association by Registrant (Incorporated by
reference to Exhibit 10.1 to Registrants'
Current Report on Form 8-K dated October 25,
1996)
10.37.......... Deed of Trust dated October 24, 1996 among
Registrant and Imperial Thrift and Loan
Association (Incorporated by reference to
Exhibit 10.2 to Registrants' Current Report on
Form 8-K dated October 25, 1996)
10.38.......... Assignment of Lease and Rents dated October
24, 1996 between Registrant and Imperial
Thrift and Loan Association (Incorporated by
reference to Exhibit 10.3 on Registrants'
Current Report on Form 8-K dated October 25,
1996)
10.39.......... Commercial Security Agreement dated October
24, 1996 between Imperial Thrift and Loan
Association and Registrant (Incorporated by
reference to Exhibit 10.4 on Registrants'
Current Report on Form 8-K dated October 25,
1996)
10.40.......... 1996 Stock Incentive Plan (Incorporated by
reference to the exhibit contained in
Registrants' Registration Statement on Form
S-8 (File No. 333-17513))
10.41.......... Stock Exchange Agreement dated as of January
15, 1997 among the stockholders of Peregrine
Pharmaceuticals, Inc. and Registrant
(Incorporated by reference to Exhibit 2.1 to
Registrants' Quarterly Report on Form 10-Q for
the quarter ended January 31, 1997)
10.42.......... First Amendment to Stock Exchange Agreement
among the Stockholders of Peregrine
Pharmaceuticals, Inc. and Registrant
(Incorporated by reference to Exhibit 2.1
contained in Registrant's Current Report on
Form 8-K as filed with the Commission on or
about May 12, 1997)
10.43.......... Termination and Transfer Agreement dated as of
November 14, 1997 by and between Registrant
and Alpha Therapeutic Corporation
(Incorporated by reference to Exhibit 10.1
contained in Registrant's Current Report on
Form 8-K as filed with the Commission on or
about November 24, 1997)
23.1........... Consent of Rutan & Tucker, LLP (contained in
Exhibit 5)*
23.2........... Consent of Deloitte & Touche LLP**
- -------------------------
* Previously filed.
** Filed herewith.
II-7
41
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price present no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes 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 Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) 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 the time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
II-8
42
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-9
43
SIGNATURES
In accordance with 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
Pre-Effective Amendment No. 1 to Registration Statement on Form S-3 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Tustin, State of California, on November 25, 1998.
TECHNICLONE CORPORATION
By: /S/ LARRY O. BYMASTER
------------------------------------
Larry O. Bymaster, President
In accordance with the requirements of the Securities Act of 1933, this
Pre-effective Amendment No. 1 to Registration Statement on Form S-3 has been
signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Larry O. Bymaster President, Chief Executive November 25, 1998
- ----------------------------- Officer and Director (Principal
Larry O. Bymaster Executive Officer)
/s/ Steven C. Burke Chief Financial Officer November 30, 1998
- ----------------------------- (Principal Financial and
Steven C. Burke Principal Accounting Officer)
/s/ Thomas R. Testman Chairman of the Board November 30, 1998
- -----------------------------
Thomas R. Testman
/s/ Rock Hankin Director November 28, 1998
- -----------------------------
Rock Hankin
Director November , 1998
- -----------------------------
William C. Shepherd
/s/ Carmelo J. Santoro, Ph.D. Director November 25, 1998
- -----------------------------
Carmelo J. Santoro, Ph.D.
Director November , 1998
- -----------------------------
Clive R. Taylor, M.D., Ph.D.
II-10
44
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ------------
23.2 Consent of Deloitte & Touche LLP _____
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-effective Amendment No.
1 to Registration Statement No.333-65125 of Techniclone Corporation (the
Company) on Form S-3 of our report dated June 15, 1998, except for Note 12, as
to which the date is July 17, 1998 (which expresses an unqualified opinion and
includes an explanatory paragraph regarding substantial doubt about the
Company's ability to continue as a going concern), appearing in the Annual
Report on Form 10-K of Techniclone Corporation for the year ended April 30, 1998
and to the reference to us under the heading "Experts" in the Prospectus, which
is a part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
November 30, 1998
