As Filed with the Securities and Exchange Commission on September 12, 2003
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GENETRONICS BIOMEDICAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
3841 (Primary Standard Industrial Classification Code Number) |
33-0969592 (I.R.S. Employer Identification Number) |
11199 Sorrento Valley Road
San Diego, California 92121
Telephone (858) 597-6006
Facsimile (858) 597-0119
(Address including zip code and telephone number, including area code, of registrant's principal executive offices)
Avtar Dhillon
Chief Executive Officer and President
11199 Sorrento Valley Road
San Diego, California 92121
Telephone (858) 597-6006
Facsimile (858) 597-0119
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to
Thomas J. Poletti, Esq.
Ted Weitzman, Esq.
Kirkpatrick & Lockhart LLP
10100 Santa Monica Blvd., 7th Floor
Los Angeles, CA 90067
Telephone (310) 552-5000
Facsimile (310) 552-5001
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered pursuant to dividend or interest reinvestment plans, please check the following box. o
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. ý
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o
CALCULATION OF REGISTRATION FEE
| Title of each class of securities to be registered |
Amount to be Registered |
Proposed Maximum Offering Price per Share(1) |
Proposed Maximum Aggregate Offering Price |
Amount of Registration Fee |
|||||
|---|---|---|---|---|---|---|---|---|---|
| Common Stock, $.001 par value | 13,616,666(2) | $1.02 | $13,888,999 | $1,124 | |||||
| Common Stock, $.001 par value | 10,714,284(3) | 1.02 | 10,928,570 | 884 | |||||
| Common Stock, $.001 par value | 11,580,643(4) | 1.02 | 11,812,255 | 956 | |||||
| Common Stock, $.001 par value | 156,166(5) | 1.02 | 159,290 | 13 | |||||
| Total Registration Fee | $36,789,114 | $2,977 | |||||||
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registration 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.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement relating to these securities that has been filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated September 12, 2003
PROSPECTUS
36,067,759 Shares
[LOGO]
Common Stock
This prospectus relates to 36,067,759 shares of common stock of Genetronics Biomedical Corporation that may be sold from time to time by the selling stockholders named on page 18 of this prospectus. We will not receive any proceeds from the sales by the selling stockholders.
Our common stock is traded on the American Stock Exchange under the symbol "GEB." On September 10, 2003, the last reported sale price for our common stock on the American Stock Exchange was $1.08 per share.
The securities offered by this prospectus involve a high degree of risk. See "Risk Factors" beginning on page 6.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated September , 2003
| Prospectus Summary | 3 | |
| Special Note on Forward Looking Statements | 5 | |
| Risk Factors | 6 | |
| Additional or Updated Risk Factors | 16 | |
| Use of Proceeds | 16 | |
| Selling Stockholders | 17 | |
| Plan of Distribution | 19 | |
| Legal Matters | 20 | |
| Experts | 20 | |
| Where You Can Find More Information | 21 | |
| Incorporation of Certain Documents by Reference | 21 |
You should rely only on the information contained or incorporated by reference in this prospectus or any prospectus supplement. We have not authorized anyone to provide you with information different from that contained or incorporated by reference into this prospectus. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representation. You should assume that the information contained in this prospectus or any prospectus supplement is accurate only as of the date on the front of the document and that any information contained in any document we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus or any prospectus supplement or any sale of a security. These documents are not an offer to sell or a solicitation of an offer to buy these shares of common stock in any circumstances under which the offer or solicitation is unlawful.
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This summary highlights some information from this prospectus, and it may not contain all of the information that is important to you. You should read the following summary together with the more detailed information regarding our company and the shares being sold in this offering, including "Risk Factors" and our consolidated financial statements and related notes, included elsewhere in, or incorporated by reference into, this prospectus.
Our Company
We are a San Diego-based biomedical company developing drug and gene delivery systems that use Electroporation Therapy (EPT) to deliver drugs and genes into cells. We are developing and commercializing novel medical therapies based on electroporation, addressing critical unmet treatment needs. Clinical results validate the unique capability of our local cancer therapy to preserve healthy tissue while treating solid tumors, which consists of our MedPulser® System to deliver a series of electroporation pulses in combination with the chemotherapy drug bleomycin (bleo). Pre-clinical evidence indicates that our non-viral gene delivery platform may be instrumental in fulfilling the promise of important gene therapies, and warrants initiation of clinical trials. We believe that the planned commercial launch of our oncology therapy in 2004, in Europe, is an important milestone following significant investment to date. We believe that our compelling asset base of intellectual property, scientific and engineering accomplishment and know-how, and validating clinical results position us as a leader in EPT.
Modern medicine's quest to improve therapeutic outcomes while reducing treatment costs is strongly focused on emerging drugs and gene therapies. Many drugs and all gene therapies act on cellular machinery inside cells, and delivering beneficial molecules through a cell's membrane is a critical, persistent challenge. We believe that our electroporation solution is an effective, safe, and economical method of intracellular molecular delivery in selected local tissue. After therapeutic agents are injected, our pulse generator and applicator are used to deliver brief, controlled electrical pulses into the tissue. The pulses transiently increase cell permeability, enabling dramatic increases in cellular uptake of beneficial molecules. Examples of benefit may include significant enhancement to chemotherapeutic cytotoxicity, DNA delivery, gene expression, or desired physiological response are well established. We have identified many potential applications for developing drug delivery systems that are designed to use EPT to enhance drug or gene delivery. Currently, the two main areas being developed are oncology and gene therapy.
We were organized as Genetronics Biomedical Ltd., a British Columbia corporation and reincorporated in Delaware on June 15, 2001, at which time we changed our name to Genetronics Biomedical Corporation. All of our business activities are conducted through Genetronics, Inc., a California corporation.
All periods presented in the consolidated financial statements and notes thereto that appear in this prospectus or in the documents incorporated herein by reference have been restated to financial statements prepared in accordance with accounting principles generally accepted in the United States. ALL DOLLAR AMOUNTS SET FORTH IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE ARE STATED IN UNITED STATES DOLLARS, EXCEPT WHERE OTHERWISE INDICATED.
Our principal executive offices are located at 11199 Sorrento Valley Road, San Diego, California 92121, and our telephone number is (858) 597-6006.
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Recent Developments
On May 8, 2002, we announced a Phase III trial for late stage, recurrent head and neck cancer. As part of that trial process we completed the review of our protocols with a number of Institutional Review Boards, representing institutions in the US. The goal of this Phase III trial was to demonstrate increased survival in patients receiving EPT+bleo in combination with the normal standard of care, compared to patients receiving the normal standard of care only. Subsequent to 2002, we announced in a Corporate Update released on January 27, 2003, that we are in the process of preparing two new protocols for trials that compare EPT+bleo to surgery. In the newly proposed trials, the primary endpoint is tissue and function preservation, rather than survival. One proposal is for recurrent head and neck cancer and the other is for disfiguring cutaneous cancer.
On March 27, 2002, we announced the results from an ongoing European market seeding trial involving a number of acclaimed cancer centers. Eighteen patients with newly diagnosed, previously untreated stage T1 or T2 head and neck cancer were treated with EPT + bleo. The treated tumor area and a small margin was excised after 4 weeks in the 20 patients treated, in 16 patients there was no evidence of disease in a histological examination of the excised mass. This equates to a complete response rate of 80%. We have continued to carry out clinical studies in Europe using the MedPulser® System to deliver bleomycin for the treatment of cancer. The results from these clinical studies allowed us to obtain CE Mark certification qualifying the MedPulser® System for sale in Europe. We are continuing to carry out clinical trials in Europe using the MedPulser® System to deliver bleomycin for the treatment of both early and late stage head and neck cancer patients. We anticipate a commercial launch to occur in Europe in fiscal 2004, based on continued positive results from market seeding trials in 2003.
Our focus on non-viral gene delivery thus far has continued to be on research collaborations where our partner assumes the cost of animal models using our proprietary EPT and their proprietary gene construct. The collaborator and we share the data jointly. As a result, we have entered into an aggregate of 22 collaborative agreements with entities such as Boehringer Ingelheim International GmbH, Chiron, Valentis, and two United States Naval Medical Centers to assess the viability of using our MedPulser® System for various gene therapy applications.
On December 3, 2002, we announced the extension of our collaboration with Chiron, to continue to explore the delivery of its proprietary DNA vaccine for HIV using EPT, with the potential for possible clinical development. In our current fiscal year, we plan to enter into at least two agreements with respect to the licensing of our MedPulser® System for use in the delivery of specific genes and to initiate pre-clinical studies as a precursor to our own clinical trials with respect to the use of our MedPulser® System for the delivery of a gene found in the public domain or which we have in-licensed.
On January 17, 2003, we voluntarily de-listed from the Toronto Stock Exchange (TSE) where our common stock had been listed since September 2, 1997. The decision was made to decrease the time required and costs of dual regulatory filings, to concentrate all of the volume on one exchange and to focus on building a higher profile with our expanding domestic investor base.
On January 21, 2003, we entered into a $1,000,000 bridge loan with a major stockholder. In February 2003, the bridge loan was paid in full with proceeds from the sale of the BTX Division. Warrants to purchase 60,000 shares of our common stock at $0.01 per share were granted in lieu of interest being charged on the loan. The warrants expire in January 2005.
On January 31, 2003, we sold the majority of the assets of our BTX Instrument Division to Harvard Biosciences. The BTX Instrument Division developed, manufactured, and marketed electroporation instrumentation and accessories used by scientists and researchers in research
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laboratories worldwide to perform genetic engineering techniques, such as cell fusion, gene transfer, cell membrane research and genetic mapping.
On July 16, 2003, we issued a press release announcing that we had raised an aggregate of $15.67 million, through the sale of $8.17 million of our Series A Cumulative Convertible Preferred Stock and $7.50 million of our Series B Cumulative Convertible Preferred Stock, to institutional and accredited investors. All proceeds from the sale of Series A Cumulative Convertible Preferred Stock were received. The proceeds from the sale of the Series B Preferred Stock will remain in escrow, to be released to the Company, upon the achievement of specific milestones.
Special Note on Forward Looking Statements
This prospectus and the documents and information incorporated by reference in this prospectus, such as from Item 1. "Business" and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2002, include "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include the information concerning our possible or assumed future operating results, business strategies, financing plans, competitive position, industry environment, the anticipated impact on our business and financial results of recent and future acquisitions, the effects of competition, our ability to produce new products in a cost-effective manner and estimates relating to our industry. Forward-looking statements may be identified by the use of words like "believes," "intends," "expects," "may," "will," "should" or "anticipates," or the negative equivalents of those words or comparable terminology, and by discussions of strategies that involve risks and uncertainties.
Actual results may differ materially from those expressed or implied by forward-looking statements for a number of reasons, including those appearing elsewhere in this prospectus under the heading "Risk Factors." In addition, we base forward-looking statements on assumptions about future events, which may not prove to be accurate. In light of these risks, uncertainties and assumptions, you should be aware that the forward-looking events described in this prospectus and the documents incorporated by reference in this prospectus may not occur.
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You should carefully consider and evaluate all of the information contained or incorporated by reference in this prospectus, including the following risk factors, before deciding to invest in our notes. Any of these risks could materially and adversely affect our business, financial condition and results of operations, which in turn could adversely affect the price of the notes and our common stock.
We Have Operated At A Loss And We Expect To Continue To Accumulate A Deficit; Our Auditors Have Included In Their Report An Explanatory Paragraph Describing Conditions That Raise Substantial Doubt About Our Ability To Continue As A "Going Concern".
As of June 30, 2003, we had a deficit of $54,545,737. We have operated at a loss since 1994, and we expect this to continue for some time. The amount of our accumulated deficit will continue to grow, as it will be expensive to continue our clinical, research, and development efforts. If these activities are successful, and if we receive approval from the FDA to market human-use equipment, then even more money will be required to market and sell the equipment.
A majority of cash we have received during 2003, came from the sale of our BTX Division, exercise of employee stock options and investor warrants, and the sale of preferred stock. Other funds came from collaborative research arrangements, and interest income on our investments. Because we did not have access to sufficient committed capital to meet our projected operating needs at December 31, 2002, our auditor has included in their report on the financial statements for the year ended December 31, 2002, an explanatory paragraph describing conditions that raise substantial doubt about our ability to continue as a going concern. On July 16, 2003, we issued a press release announcing that we had raised an aggregate of $15.67 million, through the sale of $8.17 million of our Series A Cumulative Convertible Preferred Stock and $7.50 million of our Series B Cumulative Convertible Preferred Stock, to institutional and accredited investors. All proceeds from the sale of Series A Cumulative Convertible Preferred Stock were received. The proceeds from the sale of the Series B Preferred Stock will remain in escrow to be released to us upon the achievement of specific milestones. Including the cash proceeds received from the July 2003 financing, the exercises of employee stock options and investor warrants, and the sale of the BTX Division, we believe we have sufficient funds to fund operations through November, 2004.
We Will Have A Need For Significant Amounts Of Money In The Future And There Is No Guarantee That We Will Be Able To Obtain The Amounts We Need.
As discussed, we have operated at a loss, and expect that to continue for some time in the future. Our plans for continuing clinical trials, conducting research, furthering development and, eventually, marketing our human-use equipment will involve substantial costs. The extent of these costs will depend on many factors, including some of the following:
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We plan to fund operations by several means. We will attempt to enter into contracts with partners that will fund either general operating expenses or specific programs or projects. Some funding also may be received through government grants. We cannot promise that we will enter into any such contracts, or receive such grants, or, if we do, that these transactions will provide enough money to meet our needs.
In the past, we have raised funds by public and private sale of our stock, and we may do this in the future to raise needed funds. Sale of our stock to new private or public investors usually results in existing stockholders becoming "diluted". The greater the number of shares sold, the greater the dilution. A high degree of dilution can make it difficult for the price of our stock to rise rapidly, among other things. Dilution also lessens a stockholder's voting power.
We cannot assure you that we will be able to raise money needed to fund operations, or that we will be able to raise money under terms that are favorable to us.
If We Do Not Have Enough Money To Fund Operations, Then We Will Have To Cut Costs Or Raise More Money Or Change Strategic Direction.
If we are not able to raise needed money under acceptable terms, then we will have to take measures to cut costs, such as:
If it became necessary to take one or more of the above-listed actions, then we may have a lower valuation, which probably would be reflected in our stock price.
If We Are Not Successful Developing Our Current Products, Our Business Model May Change As Our Priorities and Opportunities Change; And Our Business May Never Develop To Be Profitable or Sustainable.
There are many products and programs that to us seem promising and that we could pursue. However, with limited resources, we may decide to change priorities and shift programs away from those that we had been pursuing, for the purpose of exploiting our core technology of electroporation. The choices we may make will be dependent upon numerous factors, which we cannot predict. We cannot assure you that our business model, as it currently exists or as it may evolve, will enable us to become profitable or to sustain operations.
If We Do Not Successfully Commercialize Products From Our Drug and Gene Delivery Division, Then Our Business Will Suffer.
Our Drug and Gene Delivery Division is in the early development stage and our success depends on the success of the technology being developed by the Drug and Gene Delivery Division. Although we have received various regulatory approvals which apply to Europe for our equipment for use in treating solid tumors, the products related to such regulatory approval have not yet been commercialized. In addition, we have not yet received any regulatory approvals to sell our clinical products in the United States and further clinical trials are still necessary before we can seek regulatory approval to sell our products in the United States for treating solid tumors. We cannot assure you that
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we will successfully develop any products. If we fail to develop or successfully commercialize any products, then our business will suffer. Additionally, much of the commercialization efforts for our products must be carried forward by a licensing partner. We may not be able to obtain such a partner.
Pre-Clinical And Clinical Trials Of Human-Use Equipment Are Unpredictable; If We Experience Unsuccessful Trial Results Our Business Will Suffer.
Before any of our human-use equipment can be sold, the Food and Drug Administration (FDA), or applicable foreign regulatory authorities, must determine that the equipment meets specified criteria for use in the indications for which approval is requested. The FDA will make this determination based on the results from our pre-clinical testing and clinical trials.
Clinical trials are unpredictable, especially human-use trials. Results achieved in early stage clinical trials may not be repeated in later stage trials, or in trials with more patients. When early, positive results are not repeated in later stage trials, pharmaceutical and biotechnology companies have suffered significant setbacks. Not only are commercialization timelines pushed back, but some companies, particularly smaller biotechnology companies with limited cash reserves, have gone out of business after releasing news of unsuccessful clinical trial results.
If we experience unexpected, inconsistent or disappointing results in connection with a clinical or pre-clinical trial our business will suffer. If any of the following events arise during our clinical trials or data review, then we would expect this to have a serious negative effect on our company and your investment:
Clinical trials are generally quite expensive. A delay in our trials, for whatever reason, will probably require us to spend additional funds to keep the product(s) moving through the regulatory process. If we do not have or cannot raise the needed funds, then the testing of our human-use products could be shelved. In the event the clinical trials are not successful, we will have to determine whether to put more money into the program to address its deficiencies or whether to abandon the clinical development programs for the products in the tested indications. Loss of the human-use product line would be a significant setback for our company.
Because there are so many variables inherent in clinical trials, we cannot predict whether any of our future regulatory applications to conduct clinical trials will be approved by the FDA or other regulatory authorities, whether our clinical trials will commence or proceed as planned, and whether the trials will ultimately be deemed to be successful. To date, our experience has been that submission and approval of clinical protocols has taken longer than desired or expected.
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Our Business Is Highly Dependent On Receiving Approvals From Various United States And International Government Agencies And Will Be Dramatically Affected If Approval To Manufacture And Sell Our Human-Use Equipment Is Not Granted Or Is Not Granted In A Timely Manner.
The production and marketing of our human-use equipment and the ongoing research, development, preclinical testing, and clinical trial activities are subject to extensive regulation. Numerous governmental agencies in the United States and internationally, including the FDA, must review our applications and decide whether to grant approval. All of our human-use equipment must go through an approval process, in some instances for each indication in which we want to label it for use (such as, use for dermatology, use for transfer of a certain gene to a certain tissue, or use for administering a certain drug to a certain tumor type in a patient having certain characteristics). These regulatory processes are extensive and involve substantial costs and time.
We have limited experience in, and limited resources available for, regulatory activities. Failure to comply with applicable regulations can, among other things, result in non-approval, suspensions of regulatory approvals, fines, product seizures and recalls, operating restrictions, injunctions and criminal prosecution.
Any of the following events can occur and, if any did occur, any one could have a material adverse effect on us:
We Rely On Collaborative And Licensing Relationships To Fund A Portion Of Our Research And Development Expenses; If We Are Unable To Maintain Or Expand Existing Relationships, Or Initiate New Relationships, We Will Have To Defer Or Curtail Research And Development Activities In One Or More Areas.
Our partners and collaborators fund a portion of our research and development expenses and assist us in the research and development of our human-use equipment. These collaborations and partnerships can help pay the salaries and other overhead expenses related to research. Our largest partner at this time is Valentis, Inc. In November 2001, we entered into a non-exclusive license and supply agreement with Valentis, whereby Valentis obtained rights to use our electroporation technology in the development of certain Genemedicine products. We received an upfront cash payments of $100,000 from Valentis in each of the first and fourth quarters of 2002 and we may receive additional revenues from this partnership depending on various regulatory approvals and other events outside of our control. In the past, we encountered operational difficulties after the termination of a similar agreement by a former partner. Because this partnership was terminated, we did not receive significant milestone payments which we had expected and were forced to delay some clinical trials as well as some product development. The Valentis partnership is not of the same size and scope and termination of the Valentis partnership would not present operational difficulties.
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Our clinical trials to date have used our equipment with the anti-cancer drug bleomycin. We do not currently intend to package bleomycin together with the equipment for sale, but if it should be necessary or desirable to do this, we would need a reliable source of the drug. In 1998, we signed a supply agreement with Abbott Laboratories under which Abbott would sell us bleomycin. If it becomes necessary or desirable to include bleomycin in our package, and this relationship with Abbott should be terminated, then we would have to form a relationship with another provider of this generic drug before any product could be launched.
We also rely on scientific collaborators at universities and companies to further our research and test our equipment. In most cases, we lend our equipment to a collaborator, teach him or her how to use it, and together design experiments to test the equipment in one of the collaborator's fields of expertise. We aim to secure agreements that restrict collaborators' rights to use the equipment outside of the agreed upon research, and outline the rights each of us will have in any results or inventions arising from the work.
Nevertheless, there is always risk that:
We cannot guarantee that any of the results from these collaborations will be fruitful. We also cannot tell you that we will be able to continue to collaborate with individuals and institutions that will further our work, or that we will be able to do so under terms that are not too restrictive. If we are not able to maintain or develop new collaborative relationships, then it is likely the research pace will slow down and it will take longer to identify and commercialize new products, or new indications for our existing products.
We Could Be Substantially Damaged If Physicians And Hospitals Performing Our Clinical Trials Do Not Adhere To Protocols Or Promises Made In Clinical Trial Agreements.
Our company also works and has worked with a number of hospitals to perform clinical trials, primarily in oncology. We depend on these hospitals to recruit patients for the trials, to perform the trials according to our protocols, and to report the results in a thorough, accurate and consistent fashion. Although we have agreements with these hospitals, which govern what each party is to do with respect to the protocol, patient safety, and avoidance of conflict of interest, there are risks that the terms of the contracts will not be followed, such as:
Risk of Deviations from Protocol. The hospitals or the physicians working at the hospitals may not perform the trial correctly. Deviations from protocol may make the clinical data not useful and the trial could be essentially worthless.
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Risk of Improper Conflict of Interest. Physicians working on protocols may have an improper economic interest in our company, or other conflict of interest. When a physician has a personal stake in the success of the trial, such as can be inferred if the physician owns stock, or rights to purchase stock, of the trial sponsor, it can create suspicion that the trial results were improperly influenced by the physician's interest in economic gain. Not only can this put the clinical trial results at risk, but it can also do serious damage to a company's reputation.
Risks Involving Patient Safety and Consent. Physicians and hospitals may fail to secure formal written consent as instructed or report adverse effects that arise during the trial in the proper manner, which could put patients at unnecessary risk. This increases our liability, affects the data, and can damage our reputation.
If any of these events were to occur, then it could have a material adverse effect on our ability to receive regulatory authorization to sell our human-use equipment, not to mention on our reputation. Negative events that arise in the performance of clinical trials sponsored by biotechnology companies of our size and with limited cash reserves similar to ours have resulted in companies going out of business. While these risks are ever present, to date our contracted physicians and clinics have been successful in collecting significant data regarding the clinical protocols under which they have operated, and we are unaware of any conflicts of interest or improprieties regarding our protocols.
We Rely Heavily On Our Patents And Proprietary Rights To Attract Partnerships And Maintain Market Position.
Another factor that will influence our success is the strength of our patent portfolio. Patents give the patent holder the right to prevent others from using its patented technology. If someone infringes upon the patented material of a patent holder, then the patent holder has the right to initiate legal proceedings against that person to protect the patented material. These proceedings, however, can be lengthy and costly. We are in the process of performing an ongoing review of our patent portfolio to confirm that our key technologies are adequately protected. If we determine that any of our patents require either additional disclosures or revisions to existing information, we may ask that such patents be reexamined or reissued, as applicable, by the United States patent office.
The patenting process, enforcement of issued patents, and defense against claims of infringement are inherently risky. Because our Drug and Gene Delivery Division relies heavily on patent protection, for us, the risks are significant and include the following:
Risk of Inadequate Patent Protection for Product. The United States or foreign patent offices may not grant patents of meaningful scope based on the applications we have already filed and those we intend to file. If we do not have patents that adequately protect our human-use equipment and indications for its use, then we will not be competitive.
Risk Important Patents Will Be Judged Invalid. Some of the issued patents we now own or license may be determined to be invalid. If we have to defend the validity of any of our patents, the costs of such defense could be substantial, and there is no guarantee of a successful outcome. In the event an important patent related to our drug delivery technology is found to be invalid, we may lose competitive position and may not be able to receive royalties for products covered in part or whole by that patent under license agreements.
Risk of Being Charged With Infringement. Although we, and our partners, try to avoid infringement, there is the risk that we will use a patented technology owned by another person and/or be charged with infringement. Defending or indemnifying a third party against a charge of infringement can involve lengthy and costly legal actions, and there can be no guarantee of a successful outcome. Biotechnology companies of roughly our size and financial position have gone out of business after
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fighting and losing an infringement battle. If we, or our partners, were prevented from using or selling our human-use equipment, then our business would be seriously affected.
Freedom to Operate Risks. We are aware that patents related to electrically assisted drug delivery have been granted to, and patent applications filed by, our potential competitors. We or our partners have taken licenses to some of these patents, and will consider taking additional licenses in the future. Nevertheless, the competitive nature of our field of business and the fact that others have sought patent protection for technologies similar to ours, makes these significant risks.
In addition to patents, we also rely on trade secrets and proprietary know-how. We try to protect this information with appropriate confidentiality and inventions agreements with our employees, scientific advisors, consultants, and collaborators. We cannot assure you that these agreements will not be breached, that we will be able to do much to protect ourselves if they are breached, or that our trade secrets will not otherwise become known or be independently discovered by competitors. If any of these events occurs, then we run the risk of losing control over valuable company information, which could negatively affect our competitive position.
We Run The Risk That Our Technology Will Become Obsolete Or Lose Its Competitive Advantage.
The drug delivery business is very competitive, fast moving and intense, and expected to be increasingly so in the future. Other companies and research institutions are developing drug delivery systems that, if not similar in type to our systems, are designed to address the same patient or subject population. Therefore, we cannot promise you that our products will be the best, the safest, the first to market, or the most economical to make or use. If competitors' products are better than ours, for whatever reason, then we could make less money from sales and our products risk becoming obsolete.
There are many reasons why a competitor might be more successful than us, including:
Financial Resources. Some competitors have greater financial resources and can afford more technical and development setbacks than we can.
Greater Experience. Some competitors have been in the drug delivery business longer than we have. They have greater experience than us in critical areas like clinical testing, obtaining regulatory approval, and sales and marketing. This experience or their name recognition may give them a competitive advantage over us.
Superior Patent Position. Some competitors may have a better patent position protecting their technology than we have or will have to protect our technology. If we cannot use our patents to prevent others from copying our technology or developing similar technology, or if we cannot obtain a critical license to another's patent that we need to make and use our equipment, then we would expect our competitive position to lessen. However, we feel that our patent position adequately protects our technology portfolio.
Faster to Market. Some companies with competitive technologies may move through stages of development, approval, and marketing faster than us. If a competitor receives FDA approval before us, then it will be authorized to sell its products before we can sell ours. Because the first company "to market" often has a significant advantage over late-comers, a second place position could result in less than anticipated sales.
Reimbursement Allowed. In the United States, third party payers, such as Medicare, may reimburse physicians and hospitals for competitors' products but not for our human-use products. This would significantly affect our ability to sell our human-use products in the United States and would have a serious effect on revenues and our business as a whole. Outside of the United States, reimbursement and funding policies vary widely.
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Our Ability To Achieve Significant Revenue From Sales Or Leases Of Human-Use Equipment Will Depend On Establishing Effective Sales, Marketing And Distribution Capabilities Or Relationships And We Lack Substantial Experience In These Areas.
We have no experience in sales, marketing and distribution of clinical and human-use products. If we want to be direct distributors of the human-use products, then we must develop a marketing and sales force. This would involve substantial costs, training, and time. Alternatively, we may decide to rely on a company with a large distribution system and a large direct sales force to undertake the majority of these activities on our behalf. This route could result in less profit for us, but may permit us to reach market faster. In any event, we may not be able to undertake this effort on our own, or contract with another to do this at a reasonable cost. Regardless of the route we take, we may not be able to successfully commercialize any product.
Our Dependence Upon Non-Marketed Products, Lack Of Experience In Manufacturing And Marketing Human-Use Products, And Our Continuing Deficit May Result In Even Further Fluctuations In Our Trading Volume And Share Price.
Successful approval, marketing, and sales of our human-use equipment are critical to the financial future of our company. Our human-use products are not yet approved for sale in the United States and some other jurisdictions and we may never obtain those approvals. Even if we do obtain approvals to sell our human-use products in the United States, those sales may not be as large or timely as we expect. These uncertainties may cause our operating results to fluctuate dramatically in the next several years. We believe that quarter-to-quarter or annual comparisons of our operating results are not a good indication of our future performance. Nevertheless, these fluctuations may cause us to perform below the expectations of the public market analysts and investors. If this happens, the price of our common stock would likely fall.
There Is A Risk Of Product Liability With Human-Use Equipment
The testing, marketing and sale of human-use products expose us to significant and unpredictable risks of equipment product liability claims. These claims may arise from patients, clinical trial volunteers, consumers, physicians, hospitals, companies, institutions, researchers or others using, selling, or buying our equipment. Product liability risks are inherent in our business and will exist even after the products are approved for sale. If and when our human-use equipment is commercialized, we run the risk that use (or misuse) of the equipment will result in personal injury. The chance of such an occurrence will increase after a product type is on the market.
We possess liability insurance in connection with ongoing business and products, and we will purchase additional policies if such policies are determined by management to be necessary. The insurance we purchase may not provide adequate coverage in the event a claim is made, however, and we may be required to pay claims directly. If we did have to make payment against a claim, then it would impact our financial ability to perform the research, development, and sales activities we have planned.
If and when our human-use equipment is commercialized, there is always the risk of product defects. Product defects can lead to loss of future sales, decrease in market acceptance, damage to our brand or reputation, and product returns and warranty costs. These events can occur whether the defect resides in a component we purchased from a third party or whether it was due to our design and/or manufacture. We expect that our sales agreements will contain provisions designed to limit our exposure to product liability claims. However, we do not know whether these limitations are enforceable in the countries in which the sale is made. Any product liability or other claim brought against us, if successful and of sufficient magnitude, could negatively impact our financial performance, even if we have insurance.
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We Cannot Be Certain That We Will Be Able To Manufacture Our Human-Use Products In Sufficient Volumes At Commercially Reasonable Rates.
Our manufacturing facilities for human-use products will be subject to quality systems regulations, international quality standards and other regulatory requirements, including pre-approval inspection for the human-use equipment and periodic post-approval inspections for all human-use products. While we have undergone and passed a quality systems review from an international body, we have never undergone a quality systems inspection by the FDA. We may not be able to pass an FDA inspection when it occurs. If our facilities are not up to the FDA standards in sufficient time, prior to United States launch of product, then it will result in a delay or termination of our ability to produce the human-use equipment in our facility. Any delay in production will have a negative effect on our business. There are no immediate dates set forth for launch of our products in the United States. We plan on launching these products once we successfully perform a Phase III clinical study, obtain the requisite regulatory approval, and engage a partner who has the financial resources and marketing capacity to bring our products to market.
Our products must be manufactured in sufficient commercial quantities, in compliance with regulatory requirements, and at an acceptable cost to be attractive to purchasers. We rely on third parties to manufacture and assemble most aspects of our equipment.
Disruption of the manufacture of our products, for whatever reason, could delay or interrupt our ability to manufacture or deliver our products to customers on a timely basis. This would be expected to affect revenues and may affect our long-term reputation, as well. In the event we provide product of inferior quality, we run the risk of product liability claims and warranty obligations, which will negatively affect our financial performance.
We Depend On The Continued Employment Of Qualified Personnel.
Our success is highly dependent on the people who work for us. If we cannot attract and retain top talent to work in our company, then our business will suffer. Our staff may not decide to stay with our company, and we may not be able to replace departing employees or build departments with qualified individuals.
We have an employment agreement in place for Avtar Dhillon, our President and Chief Executive Officer. If Dr. Dhillon leaves us, that might pose significant risks to our continued development and progress. Our progress may also be curtailed if Dietmar Rabussay, Ph.D., our Vice President of Research and Development, were to leave us.
We May Not Meet Environmental Guidelines, And As A Result Could Be Subject To Civil And Criminal Penalties.
Like all companies in our line of work, we are subject to a variety of governmental regulations relating to the use, storage, discharge and disposal of hazardous substances. Our safety procedures for handling, storage and disposal of such materials are designed to comply with applicable laws and regulations. Nevertheless, if we are found to not comply with environmental regulations, or if we are involved with contamination or injury from these materials, then we may be subject to civil and criminal penalties. This would have a negative impact on our reputation, our finances, and could result in a slowdown, or even complete cessation of our business.
A Majority Of Our Directors Are Canadian Citizens And Service And Enforcement Of Legal Process Upon Them May Be Difficult.
A majority of our directors are residents of Canada and most, if not all, of these persons' assets are located outside of the United States. It may be difficult for a stockholder in the United States to effect service or realize anything from a judgment against these Canadian residents as a result of any
14
possible civil liability resulting from the violation of United States federal securities laws. We currently have five directors, four of whom are Canadian citizens.
The Market For Our Stock Is Volatile, Which Could Adversely Affect An Investment In Our Stock.
Our share price and volume are highly volatile. This is not unusual for biomedical companies of our size, age, and with a discrete market niche. It also is common for the trading volume and price of biotechnology stocks to be unrelated to a company's operations, i.e., to go up or down on positive news and to go up or down on no news. Our stock has exhibited this type of behavior in the past, and may well exhibit it in the future. The historically low trading volume of our stock, in relation to many other biomedical companies of about our size, makes it more likely that a severe fluctuation in volume will affect the stock price.
Some factors that we would expect to depress the price of our stock include:
Some provisions of our certificate of incorporation and bylaws may deter takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.
Some of the provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders by providing them with the opportunity to sell their shares possibly at a premium over the then market price.
For example, our certificate of incorporation authorizes the board of directors to issue up to 10,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by the stockholders. These terms may include voting rights including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. No shares of preferred stock will be outstanding upon the closing of this offering and we have no present plans for the issuance of any preferred stock. The issuance of any preferred stock, however, could diminish the rights of holders of our common stock, and therefore could reduce the value of our common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock could make it more difficult, delay, discourage,
15
prevent or make it more costly to acquire or effect a change in control, thereby preserving the current stockholders' control.
In addition, we are also subject to Section 203 of the Delaware General Corporation Law that, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder. The preceding provisions of our certificate of incorporation and bylaws, as well as Section 203 of the Delaware General Corporation Law, could discourage potential acquisition proposals, delay or prevent a change of control and prevent changes in our management, even if such things would be in the best interests of our stockholders.
Additional or Updated Risk Factors
Prior to making an investment decision with respect to the common stock offered hereby, prospective investors should also carefully consider any specific factors set forth under a caption "risk factors" in the applicable prospectus supplement, together with all of the other information appearing in this prospectus or the prospectus supplement or incorporated by reference into this prospectus.
We will not receive any proceeds from the sale by any selling stockholder of the 36,067,759 shares of our common stock being offered in this prospectus. If the warrants that were issued to the selling stockholders to purchase 11,580,643 shares of our common stock are exercised, we will receive estimated proceeds of $8,469,986 which would be used to offset the approximately $140,000 of expenses, which we have agreed to bear, that relate to the registration of the shares being offered and sold by the selling stockholders, including the SEC registration fee and legal, accounting, printing and other expenses of this offering.
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We originally sold and issued (i) shares of Series A preferred stock that are convertible into shares of our common stock, (ii) shares of Series B preferred stock that are convertible into shares of our common stock and (iii) warrants to purchase shares of our common stock, pursuant to transactions exempt from registration under the Securities Act of 1933. Selling stockholders may convert the preferred stock into shares of our common stock and/or exercise the warrants to purchase shares of our common stock. The shares of common stock are being registered to permit public sales of the shares, and the selling stockholders may offer the shares for resale from time to time pursuant to this prospectus.
The following table sets forth certain information regarding the selling stockholders and the shares offered by them in this prospectus. None of the selling stockholders within the past three years has had any material relationship with us or any of our affiliates. The term "selling stockholders" also includes any transferees, pledges, donees, or other successors in interest to the selling stockholders named in the table below. The percentage ownership is calculated based on 87,513,529 shares, which represents the number of shares of our common stock that were outstanding as of September 10, 2003 and the total number of shares issuable to the selling stockholders upon the conversion of the Series A and Series B preferred stock and the exercise of the warrants.
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 the securities, or the right to acquire voting or investment power within 60 days through the exercise of an option, warrant or right, through the conversion of a security, or through the power to revoke a trust. All shares of our common stock registered in this offering represent shares that have been or may be acquired within 60 days upon the exercise of warrants or conversion of convertible securities issued to the selling stockholders. Assuming that all shares registered in this offering will be sold, all other shares of our common stock beneficially owned by the selling stockholders after completion of this offering are shares that they currently hold. To our knowledge, subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares of common stock set forth opposite such person's name.
| Selling Stockholder |
Number of Shares of Common Stock Beneficially Owned Prior to the Offering |
Percentage of Shares of Common Stock Beneficially Owned Prior to the Offering |
Number of Shares of Common Stock Registered for Sale Hereby |
Number of Shares of Common Stock Held After Completion of the Offering (1) |
||||
|---|---|---|---|---|---|---|---|---|
| East Hudson Inc. (BVI) | 725,234 | * | 147,980 | 577,254 | ||||
| The Conus Fund L.P. | 4,928,513 | 5.63 | % | 2,099,894 | 2,828,619 | |||
| The Conus Fund Offshore Ltd. | 631,666 | * | 308,794 | 322,872 | ||||
| The Conus Fund QP, L.P. | 713,166 | * | 326,666 | 386,500 | ||||
| Kinetic Capital Limited Partnership | 3,350,000 | 3.83 | % | 1,750,000 | 1,600,000 | |||
| JR Jay Public Investments, LLC | 1,166,666 | 1.33 | % | 1,166,666 | — | |||
| RAM Capital Group, LLC | 700,000 | * | 700,000 | — | ||||
| Park Place Columbia Ltd. | 303,334 | * | 303,334 | — | ||||
| Park Place Galileo Ltd. | 841,666 | * | 396,666 | 445,000 | ||||
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| Aran Asset Management SA | 1,951,040 | 2.23 | % | 466,666 | 1,484,374 | |||
| Finter Bank Zurich | 882,667 | 1.01 | % | 583,334 | 299,333 | |||
| Bernard Leroux | 233,334 | * | 233,334 | — | ||||
| Glenariff Investments Ltd. | 116,666 | * | 116,666 | — | ||||
| Colin Paul Sabiston | 116,666 | * | 116,666 | — | ||||
| Mike Fitzmaurice | 116,666 | * | 116,666 | — | ||||
| Catalyst Capital LLC | 516,166 | * | 506,166 | 10,000 | ||||
| Brian Noble | 341,166 | * | 326,666 | 14,500 | ||||
| Northern Rivers Innovation Fund LP | 978,334 | 1.12 | % | 233,334 | 745,000 | |||
| B.C. Equities Inc. | 106,666 | * | 46,666 | 60,000 | ||||
| Otape Investments LLC | 583,334 | * | 583,334 | — | ||||
| SCO Capital Partners LLC | 2,924,130 | 3.34 | % | 2,924,130 | — | |||
| The Chloe H. Rouhandeh Trust | 190,000 | * | 190,000 | — | ||||
| The Sophie C. Rouhandeh Trust | 190,000 | * | 190,000 | — | ||||
| The Steven H. Rouhandeh 1999 Family Trust | 190,000 | * | 190,000 | — | ||||
| SDS Merchant Fund, LP | 2,533,334 | 2.89 | % | 2,533,334 | — | |||
| BayStar Capital II, L.P. | 3,800,000 | 4.34 | % | 3,800,000 | — | |||
| North Sound Legacy Fund LLC | 190,000 | * | 190,000 | — | ||||
| North Sound Legacy International Ltd. | 1,900,000 | 2.17 | % | 1,900,000 | — | |||
| North Sound Legacy Institutional Fund LLC | 1,710,000 | 1.95 | % | 1,710,000 | — | |||
| ProMed Partners, L.P. | 886,666 | 1.01 | % | 886,666 | — | |||
| ProMed Offshore Fund, Ltd. | 190,000 | * | 190,000 | — | ||||
| Xmark Fund, Ltd. | 1,013,334 | 1.16 | % | 1,013,334 | — | |||
| Xmark Fund, L.P. | 570,000 | * | 570,000 | — | ||||
| Paul Scharfer | 1,853,356 | 2.12 | % | 1,853,356 | — | |||
| Shekura K. Basu | 496,666 | * | 316,666 | 180,000 | ||||
| John W. Mellors | 63,334 | * | 63,334 | — | ||||
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| Crescent International Ltd. | 1,266,666 | 1.45 | % | 1,266,666 | — | |||
| David Isreal | 316,666 | * | 316,666 | — | ||||
| Kenneth S. Pilot | 190,000 | * | 190,000 | — | ||||
| Qfinance, Inc. | 3,166,666 | 3.62 | % | 3,166,666 | — | |||
| Ellis International Ltd. Inc. | 443,334 | * | 443,334 | — | ||||
| Gamma Opportunity Capital Partners, LP | 1,013,334 | 1.16 | % | 1,013,334 | — | |||
| Musket Research Associates, Inc. | 120,000 | * | 120,000 | — | ||||
| Jeffrey B. Davis | 300,552 | * | 300,552 | — | ||||
| Preston Tsao | 66,201 | * | 66,201 | — | ||||
| Daniel DiPietro | 89,445 | * | 89,445 | — | ||||
| Joshua Golomb | 32,513 | * | 32,513 | — | ||||
| Jeremy Kaplan | 12,064 | * | 12,064 | — |
The selling stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. Subject to any agreements by the selling stockholders described above, the selling stockholders may sell the shares from time to time at market prices prevailing on the American Stock Exchange at the time of offer and sale, or at prices related to such prevailing market prices; or in negotiated transactions; or a combination of such methods of sale directly or through brokers.
The selling stockholders may effect such transactions by offering and selling the shares directly to or through securities broker-dealers, and such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of the shares for whom such broker-dealers may act as agent or to whom the selling stockholders may sell as principal, or both, which compensation as to a particular broker-dealer might be in excess of customary commissions.
The selling stockholders and any broker-dealers who act in connection with the sale of his shares shall be deemed to be "underwriters" within the meaning of the Securities Act of 1933, and any discounts, concessions or commissions received by them and profit on any resale of the shares as principal shall be deemed to be underwriting discounts, concessions and commissions under the
19
Securities Act of 1933. We have agreed to indemnify the selling stockholders against certain liabilities, including liabilities under the Securities Act of 1933, as underwriters or otherwise.
We have advised the selling stockholders that they and any securities broker-dealers or others who may be deemed to be statutory underwriters will be governed by the prospectus delivery requirements under the Securities Act of 1933. Under applicable rules and regulations under the Securities Exchange Act of 1934, any person engaged in a distribution of any of the shares may not simultaneously engage in market activities with respect to the common stock for the applicable period under Regulation M prior to the commencement of such distribution. In addition and without limiting the foregoing, the selling stockholders will be governed by the applicable provisions of the Securities and Exchange Act of 1934, and the rules and regulations thereunder, including without limitation Rules 10b-5 and Regulation M, which provisions may limit the timing of purchases and sales of any of the shares by the selling stockholders. All of the foregoing may affect the marketability of the common stock.
We have advised the selling stockholders that the anti-manipulation rules under the Securities Exchange Act of 1934 may apply to sales of shares in the market and to the activities of the selling stockholders and any of their affiliates. The selling stockholders have advised us that during the time the selling stockholders may be engaged in the attempt to sell shares registered under this prospectus, they will:
The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act of 1933. Any commissions paid or any discounts or concessions allowed to any broker-dealers, and any profits received on the resale of shares, may be deemed to be underwriting discounts and commissions under the Securities Act of 1933 if the broker-dealers purchase shares as principal.
In the absence of this registration statement, the selling stockholders would be able to sell their shares only pursuant to the limitations of Rule 144 promulgated under the Securities Act of 1933 as described above.
The validity of the issuance of the shares offered in this prospectus will be passed upon for us by Kirkpatrick & Lockhart, LLP, Los Angeles, California.
Ernst & Young LLP (San Diego, California), independent auditors, have audited our 2002 and 2001 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2002, as set forth in their report (which contains an explanatory paragraph describing conditions that raise substantial doubt about the Company's ability to continue as a going concern as described in Note 1 to the consolidated financial statements), which is incorporated by reference in this
20
prospectus and elsewhere in the registration statement. Our financial statements are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing.
Ernst & Young LLP (Vancouver, Canada), independent auditors, have audited our consolidated financial statements for the year ended March 31, 2001 included in our annual report on Form 10-K for the year ended December 31, 2002, as set forth in their report, which are incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial statements are incorporated by reference in reliance on Ernst & Young LLP's report and comments, given on their authority as experts in accounting and auditing.
Where You Can Find More Information
We file annual, quarterly and special reports, along with other information with the SEC. You may read and copy any document we file at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the SEC at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and at 75 Park Place, New York, New York 10007. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our common stock is traded on The American Stock Exchange and the Toronto Stock Exchange. You may inspect reports and other information concerning us at the offices of the American Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006. These filings and other information may also be inspected without charge at a Web site maintained by the SEC. The address of the site is http://www.sec.gov.
Incorporation of Certain Documents by Reference
This prospectus is part of a registration statement filed with the SEC. The SEC allows us to "incorporate by reference" into this prospectus the information that we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. The following documents were filed with the SEC pursuant to the Exchange Act and are incorporated by reference and made a part of this prospectus:
We are incorporating by reference the documents listed above and any future filings that we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the sale of all the shares covered by this prospectus.
Any statement contained in a document that is incorporated by reference will be modified or superseded for all purposes to the extent that a statement contained in this prospectus, or in any other document that is subsequently filed with the SEC and incorporated by reference, modifies or is contrary to that previous statement. Any statement so modified or superseded will not be deemed a part of this prospectus except as so modified and superseded.
We will provide without charge to each person to whom this prospectus is delivered, upon oral or written request, a copy of any or all of the foregoing documents incorporated herein by reference (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into the information that this prospectus incorporates). Written or telephone requests should be directed to Shareholder Relations at Genetronics Biomedical Corporation, 11199 Sorrento Valley Road, San Diego, CA 92121-1334, telephone number (858) 597-6006. These reports are also available on our web site, the address of which is http://www.genetronics.com.
You should rely only on the information incorporated by reference or provided in this prospectus or any supplement. We have not authorized anyone else to provide you with different information. The selling stockholders will not make an offer of these shares in any state where the offer is not permitted. You should not assume that the information in this prospectus or any supplement is accurate as of any date other than the date of those documents.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable by the Registrant in connection with this offering, other than underwriting commissions and discounts, all of which are estimated except for the SEC registration fee.
| Item |
Amount |
|||
|---|---|---|---|---|
| SEC registration fee | $ | 2,627 | ||
| Printing and engraving expenses | 3,000 | |||
| Legal fees and expenses | 120,000 | |||
| Accounting fees and expenses | 10,000 | |||
| Transfer agent and registrar's fees and expenses | 2,000 | |||
| Miscellaneous expenses | 2,373 | |||
| Total | $ | 140,000 | ||
Item 15. Indemnification of Directors and Officers.
Under Section 145 of the General Corporation Law of the State of Delaware, we can indemnify our directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). Our certificate of incorporation provides that, pursuant to Delaware law, our directors shall not be liable for monetary damages for breach of the directors' fiduciary duty of care to us and our stockholders. This provision in the certificate of incorporation does not eliminate the duty of care, and in appropriate circumstances equitable remedies such as injunctive or other forms of nonmonetary 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 us or our stockholders, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of the 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.
Our bylaws provide for the indemnification of our directors to the fullest extent permitted by the Delaware General Corporation Law. Our bylaws further provide that our Board of Directors has sole discretion to indemnify our officers and other employees. We may limit the extent of such indemnification by individual contracts with our directors and executive officers, but have not done so. We are not, however, required to indemnify any director or executive officer in connection with any proceeding initiated by us and approved by a majority of our Board of Directors, that alleges (a) unlawful misappropriation of corporate assets, (b) disclosure of confidential information or (c) any other willful breach of such director or executive officer's duty to us or our stockholders. We are required to advance, prior to the final disposition of any proceeding, promptly on request, all expenses incurred by any director or executive officer in connection with that proceeding on receipt of an undertaking by or on behalf of that director or executive officer to repay those amounts if it should be determined ultimately that he or she is not entitled to be indemnified under our bylaws or otherwise.
We also have directors' and officers' liability insurance.
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Item 16. Exhibits.
| Exhibit Number |
Description of Exhibit |
|
|---|---|---|
| 3.1 | Certificate of Incorporation. | |
3.2 |
Certificate of Amendment to Certificate of Incorporation (incorporated by reference to exhibit number 3.2 of the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2003). |
|
3.3 |
Certificate of Designations, Rights and Preferences of Series A Cumulative Convertible Preferred Stock. |
|
3.4 |
Certificate of Designations, Rights and Preferences of Series B Cumulative Convertible Preferred Stock. |
|
3.5 |
Amended and Restated Bylaws (incorporated by reference to exhibit number 3.2 of the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2002). |
|
4.1 |
Preferred Stock and Warrant Purchase Agreement, dated July 14, 2003, between the Registrant and the Purchasers listed on Schedule 1 thereto. |
|
4.2 |
Investors Rights Agreement, dated July 14, 2003, between the Registrant and the Purchasers listed on Schedule 1 thereto. |
|
4.3 |
Form of Series A Common Stock Purchase Warrant, dated July 14, 2003, between the Registrant and the Purchasers listed on Schedule 1 of Purchase Agreement (Exhibit 4.1). |
|
4.4 |
Form of Series B Common Stock Purchase Warrant, dated July 14, 2003, between the Registrant and the Purchasers listed on Schedule 1 of Purchase Agreement (Exhibit 4.1). |
|
4.5 |
Placement Agent Series A Common Stock Purchase Warrant, dated July 14, 2003, between the Registrant and SCO Securities LLC. |
|
4.6 |
Placement Agent Series B Common Stock Purchase Warrant, dated July 14, 2003, between the Registrant and SCO Securities LLC. |
|
4.7 |
Financial Consultant Agreement, dated October 3, 2002, between the Registrant and Catalyst Capital, LLC. |
|
4.7 |
(a) |
Amendment to Financial Consultant Agreement, dated July 14, 2003, between the Registrant and Catalyst Capital, LLC. |
4.8 |
Specimen Common Stock Certificate. |
|
5.1 |
Opinion of Kirkpatrick & Lockhart, LLP. |
|
23.1 |
Consent of Ernst & Young LLP (San Diego, United States), Independent Auditor. |
|
23.2 |
Consent of Ernst & Young LLP (Vancouver, Canada), Independent Auditors |
|
23.3 |
Consent of Kirkpatrick & Lockhart, LLP (contained in Exhibit 5.1). |
|
24.1 |
Power of Attorney (included on signature page). |
II-2
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
II-3
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 in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-4
Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of San Diego, State of California, on September 12, 2003.
| Genetronics Biomedical Corporation | |||
| By: | /s/ AVTAR DHILLON Avtar Dhillon President, Chief Executive Officer |
||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Avtar Dhillon as his true and lawful attorneys-in-fact and agents, with full power of substitution for him in any and all capacities, to sign (1) any and all amendments (including post-effective amendments) to this Registration Statement and (2) any registration statement or post-effective amendment thereto to be filed with the Securities and Exchange Commission pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
| Signature |
Title |
Date |
||
|---|---|---|---|---|
| /s/ AVTAR DHILLON Avtar Dhillon |
Chief Executive Officer, President and Director (Principal Executive Officer) |
September 12, 2003 | ||
/s/ PETER D. KIES Peter D. Kies |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
September 12, 2003 |
||
James L. Heppell |
Director |
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/s/ GORDON J. POLITESKI Gordon J. Politeski |
Director |
September 12, 2003 |
||
/s/ FELIX THEEUWES Felix Theeuwes |
Director |
September 12, 2003 |
||
/s/ TAZDIN ESMAIL Tazdin Esmail |
Director |
September 12, 2003 |
II-6
| Exhibit Number |
Description of Exhibit |
|
|---|---|---|
| 3.1 | Certificate of Incorporation. | |
3.2 |
Certificate of Amendment to Certificate of Incorporation (incorporated by reference to exhibit number 3.2 of the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2003). |
|
3.3 |
Certificate of Designations, Rights and Preferences of Series A Cumulative Convertible Preferred Stock. |
|
3.4 |
Certificate of Designations, Rights and Preferences of Series B Cumulative Convertible Preferred Stock. |
|
3.5 |
Amended and Restated Bylaws (incorporated by reference to exhibit number 3.2 of the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2002). |
|
4.1 |
Preferred Stock and Warrant Purchase Agreement, dated July 14, 2003, between the Registrant and the Purchasers listed on Schedule 1 thereto. |
|
4.2 |
Investors Rights Agreement, dated July 14, 2003, between the Registrant and the Purchasers listed on Schedule 1 thereto. |
|
4.3 |
Form of Series A Common Stock Purchase Warrant, dated July 14, 2003, between the Registrant and the Purchasers listed on Schedule 1 of Purchase Agreement (Exhibit 4.1). |
|
4.4 |
Form of Series B Common Stock Purchase Warrant, dated July 14, 2003, between the Registrant and the Purchasers listed on Schedule 1 of Purchase Agreement (Exhibit 4.1). |
|
4.5 |
Placement Agent Series A Common Stock Purchase Warrant, dated July 14, 2003, between the Registrant and SCO Securities LLC. |
|
4.6 |
Placement Agent Series B Common Stock Purchase Warrant, dated July 14, 2003, between the Registrant and SCO Securities LLC. |
|
4.7 |
Financial Consultant Agreement, dated October 3, 2002, between the Registrant and Catalyst Capital, LLC. |
|
4.7 |
(a) |
Amendment to Financial Consultant Agreement, dated July 14, 2003, between the Registrant and Catalyst Capital, LLC. |
4.8 |
Specimen Common Stock Certificate. |
|
5.1 |
Opinion of Kirkpatrick & Lockhart, LLP. |
|
23.1 |
Consent of Ernst & Young LLP (San Diego, United States), Independent Auditors. |
|
23.2 |
Consent of Ernst & Young LLP (Vancouver, Canada), Independent Auditors |
|
23.3 |
Consent of Kirkpatrick & Lockhart, LLP (contained in Exhibit 5.1). |
|
24.1 |
Power of Attorney (included on signature page). |