DOR FUSHION EQUITY LINE
As
filed with the Securities and Exchange Commission on January 20,
2006.
Registration
No. 333-_____
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
______________________________________________________
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
______________________________________________________
DOR
BioPharma, Inc.
(Exact
name of registrant as specified in its charter)
_________________________________________
Delaware 2834
41-150502
(State
or
other jurisdiction of (Primary
Standard Industrial (I.R.S.
incorporation
or
organization)
Classification
Code Number) Identification
No.)
DOR
BioPharma, Inc.
Lincoln
Building, 1691 Michigan Ave
Miami,
Florida 33139
(305)
534-3383
(Address,
including zip code, and telephone number, including area code, of Registrant’s
principal executive offices)
President
and Chief Executive Officer
DOR
BioPharma, Inc.
Lincoln
Building, 1691 Michigan Ave
Miami,
Florida 33139
(305)
534-3383
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
______________________________________________________
with
copies to:
Leslie
J. Croland, Esq.
Edwards
Angell Palmer & Dodge LLP
350
East Las Olas Blvd., Suite 1150
Fort
Lauderdale, Florida 33334-3607
(954)
727-2600
______________________________________________________
Approximate
date of commencement of proposed sale to the public: From
time
to time, at the discretion of the selling stockholder, after the effective
date
of this registration statement.
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, 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
this
Form is a post-effective amendment filed pursuant to Rule 462(d) 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. ¨
______________________________________________________
CALCULATION
OF REGISTRATION FEE
|
Title
of Each Class
of
Securities to be Registered
|
Amount
to be registered
|
Proposed
maximum offering price per unit (1)
|
Proposed
maximum aggregate offering price (1)
|
Amount
of registration fee(1)
|
|
Common
Stock,
$.001
par value per share(2)(3)
|
9,962,500
|
$0.27
|
$2,689,875
|
$287.82
|
(1) Estimated
solely for purposes of calculating the registration fee according to Rule 457(c)
under the Securities Act of 1933, as amended, on the basis of the average of
the
high and low prices of the Registrant’s common stock reported on the American
Stock Exchange on January 12, 2006.
(2) In
the event that the shares registered in this prospectus are insufficient to
meet
the delivery requirements at the actual time of the put date settlement, the
Registrant will file a new registration statement to register the additional
shares.
(3) All
of the shares of common stock registered in this registration statement will
be
sold by the selling security holder.
______________________________________________________
The
Registrant hereby amends this Registration Statement on such date or dates
as
may be necessary to delay its effective date until the Registrant shall file
a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to Section 8(a), may
determine.
The
information in this prospectus is not complete and may be changed. The selling
stockholder may not sell these securities until the registration statement
filed
with the Securities and Exchange Commission is effective. This prospectus is
not
an offer to sell 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 JANUARY 20, 2006
PROSPECTUS
DOR
BioPharma, Inc.
9,962,500
Shares of Common Stock
_______________________________________
This
prospectus relates to the sale of up to 9,962,500
shares
of
our common stock by Fusion Capital Fund II, LLC. Fusion Capital is sometimes
referred to in this prospectus as the selling stockholder. The prices at which
Fusion Capital may sell the shares will be determined by the prevailing market
price for the shares or in negotiated transactions. We will not receive proceeds
from the sale of our shares by Fusion Capital.
Our
common stock is quoted on the American Stock Exchange under the symbol "DOR."
On
January 13, 2006, the last reported sale price for our common stock as reported
on the American Stock Exchange was $0.29 per share. We have applied to have
the
shares of common stock offered pursuant to this prospectus approved for trading
on the American Stock Exchange.
____________________
Investing
in the common stock involves certain risks. See "Risk Factors" beginning on
page
5 for a discussion of these risks.
____________________
The
selling stockholder is an "underwriter" within the meaning of the Securities
Act
of 1933, as amended.
____________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is January 20, 2006
Table
of Contents
|
|
Page
Number
|
|
FORWARD-LOOKING
STATEMENTS
|
1
|
|
PROSPECTUS
SUMMARY
|
2
|
|
THE
OFFERING
|
4
|
|
RISK
FACTORS
|
5
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
16
|
|
INCORPORATION
OF CERTAIN DOCUMENTS BY
REFERENCE
|
16
|
|
INFORMATION
WITH RESPECT TO THE REGISTRANT
|
17
|
|
THE
FUSION TRANSACTION
|
18
|
|
SELLING
STOCKHOLDER
|
22
|
|
USE
OF PROCEEDS
|
22
|
|
PLAN
OF DISTRIBUTION
|
23
|
|
DESCRIPTION
OF SECURITIES
|
24
|
|
DISCLOSURE
OF COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES AND LIABILITIES
|
25
|
|
EXPERTS
|
25
|
|
LEGAL
MATTERS
|
26
|
| |
|
You
should rely only on the information contained or incorporated by reference
in
this prospectus and in any accompanying prospectus supplement. We have not
authorized anyone to provide you with different information.
We
have not authorized the selling stockholder to make an offer of these shares
of
common stock in any jurisdiction where the offer is not permitted.
You
should not assume that the information in this prospectus or prospectus
supplement is accurate as of any date other than the date on the front of this
prospectus.
FORWARD-LOOKING
STATEMENTS
The
information contained in this prospectus, including the information incorporated
by reference into this prospectus, includes forward-looking statements as
defined in the Private Securities Reform Act of 1995. These forward-looking
statements are often identified by words such as “may,” “will,” “expect,”
“intend,” “anticipate,” “believe,” “estimate,” “continue,” “plan” and similar
expressions. These statements involve estimates, assumptions and uncertainties
that could cause actual results to differ materially from those expressed for
the reasons described in this prospectus. You should not place undue reliance
on
these forward-looking statements.
You
should be aware that our actual results could differ materially from those
contained in the forward-looking statements due to a number of factors,
including:
| · |
significant
uncertainty inherent in developing vaccines against bioterror threats,
and
manufacturing and conducting preclinical and clinical trials of vaccines;
|
| · |
our
ability to obtain regulatory
approvals;
|
| · |
uncertainty
as to whether our technologies will be safe and
effective;
|
| · |
our
ability to make certain that our cash expenditures do not exceed
projected
levels;
|
| · |
our
ability to obtain future financing or funds when needed;
|
| · |
that
product development and commercialization efforts will be reduced
or
discontinued due to difficulties or delays in clinical trials or
a lack of
progress or positive results from research and development efforts;
|
| · |
our
ability to successfully obtain further grants and awards from the
U.S.
Government and other countries, and maintenance of our existing grants;
|
| · |
our
ability to enter into any biodefense procurement contracts with the
U.S.
Government or other countries;
|
| · |
our
ability to patent, register and protect our technology from challenge
and
our products from competition;
|
| · |
maintenance
or expansion of our license agreements with our current licensors;
|
| · |
our
ability to maintain our listing on the American Stock
Exchange;
|
| · |
maintenance
of a successful business strategy;
|
| · |
the
FDA not considering orBec® approvable based upon existing studies because
orBec® did not achieve statistical significance in its primary endpoint
in
the pivotal Phase III clinical study (i.e. a p-value of less than
or equal
to 0.05);
|
| · |
orBec®
may not show therapeutic effect or an acceptable safety profile in
future
clinical trials, if required, or could take a significantly longer
time to
gain regulatory approval than we expect or may never gain approval;
|
| · |
we
are dependent on the expertise, effort, priorities and contractual
obligations of third parties in the clinical trials, manufacturing,
marketing, sales and distribution of our
products;
|
| · |
orBec®
may not gain market acceptance;
|
| · |
others
may develop technologies or products superior to our
products;
|
| · |
if
our present negotiations with potential investors are successful
or the
pending acquisition of the closely-held, private company, Gastrotech
Pharma A/S is consummated, either or both of these transactions could
result in the issuance of a significant number of shares of our equity
securities which would dilute the equity interests of existing
stockholders and cause a concentration of ownership and may result
in a
change in control of the company.
|
You
should also consider carefully the statements under "Risk Factors" and other
sections of this prospectus, which address additional factors that could cause
our actual results to differ from those set forth in the forward-looking
statements and could materially and adversely affect our business, operating
results and financial condition. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the applicable cautionary statements.
The
forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by federal securities laws, we undertake
no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. In addition, we cannot assess the impact
of
each factor on our business or the extent to which any factor, or combination
of
factors, may cause actual results to differ materially from those contained
in
any forward-looking statements.
PROSPECTUS
SUMMARY
The
Company
We
are a
biopharmaceutical company focused on the development of biodefense vaccines
and
oral therapeutic products intended for areas of unmet medical need. Our business
strategy is to (a) prepare the submission of a New Drug Application, (“NDA”) for
orBec®
with
the
U.S. Food and Drug Administration, (“FDA”) for the treatment of intestinal
Graft-versus-Host Disease, “iGVHD”; (b) consider prophylactic use studies of
orBec®
for the
prevention of iGVHD; (c) evaluate and possibly initiate additional clinical
trials to explore the effectiveness of oral BDP (orBec®)
in
other therapeutic indications involving inflammatory conditions of the
gastrointestinal tract; (d) identify a marketing and sales partner for
orBec®
for
territories outside of the U.S., and potentially inside the U.S.; (e) secure
government funding for each of our biodefense programs through grants,
contracts, and procurements; (f) convert the biodefense vaccine programs from
early stage development to advanced development and manufacturing; (g)
transition the biodefense vaccine development programs from academic
institutions into commercial manufacturing facilities with the goal of
soliciting government contracts; (h) identify the development candidates for
botulinum therapeutic screening program; and (i) acquire or in-license new
clinical-stage compounds for development.
orBec®
We
intend
to file an NDA with the FDA for orBec®
for
the
treatment of iGVHD in the first quarter of 2006. We have assembled an
experienced team of employees and contractors who are currently working on
all
aspects of the NDA preparation, including data management, data analysis, and
biostatistics medical writing. Manufacturing of the requisite batches of drug
product (registration batches) is completed and these batches are currently
undergoing stability testing.
We
anticipate the market potential
for
orBec®
for
the
treatment of iGVHD to be at least 50 percent of the approximately 10,000
bone
marrow
and stem cell transplants that occur each year in the U.S.
We
have
had strategic discussions with a number of pharmaceutical companies regarding
the partnering or sale of orBec®.
We
may seek
a marketing partner in the U.S. and abroad in anticipation of commercialization
of orBec®.
We also
intend to seek a partner for the other potential indications of
orBec®.
We are
also evaluating an alternative strategy of a commercial launch of
orBec®
by
ourselves in the U.S.
RiVax™
The
scientific development of RiVaxTM,
our
ricin toxin vaccine, has progressed significantly this year. We initiated a
Phase I safety and immunogenicity trial in February of this year and in June
we
announced positive interim safety and immunogenicity data. In January of this
year we entered into a manufacturing and supply agreement for RiVax™ with
Cambrex Corporation. We recently announced that Cambrex has successfully
achieved the first milestone of fermentation and downstream process development
under their development and manufacturing agreement. RiVaxTM
is being
developed for intramuscular delivery. We are also working on a formulation
technology that could permit the vaccine to be delivered nasally, with the
objective of providing immunity in the respiratory tract.
Botulinum
Programs
BT-VACC™
Our
mucosal botulinum toxin vaccine
program
has made important strides this year. We are developing a mucosal vaccine
against botulinum neurotoxins serotypes A, B and E, which account
for almost all human cases of disease. We
have
identified lead antigens against Serotypes A and B consisting of the Hc50
fragment of the botulinum toxin. Our preclinical data to date, demonstrates
that
Hc50, A and B are completely effective at low, mid and high doses as an
intranasal vaccine and completely effective at the higher dose level orally
in
mice and rats. Ongoing
studies are focused on serotype E; multivalent immunization experiments using
serotype A, B and E antigens given simultaneously to animals and formulation
work to create a microencapsulated, enterically formulated oral dosage form,
which we anticipate will be a more active and stable oral formulation improving
immunogenicity and potency.
To date
much of the preclinical work is being conducted at Thomas Jefferson University
under a sponsored research agreement funded by us. We have applied for and
intend to continue to apply for research grants and contracts from the U.S.
government to continue development of this vaccine. We have also recently
entered into a joint development agreement with Dowpharma, a business unit
of
the Dow Chemical Company. Dowpharma is providing process development leading
to
current Good Manufacturing Practices (cGMP) production services for BT-VACC™
using its Pfēnex
Expression TechnologyTM,
a
Pseudomonas-based
technology that accelerates speed to market for vaccines and biotherapeutics
by
surpassing the quality and yield capabilities of existing microbial
systems. In a very short duration, we have demonstrated successful high
expression of soluble material from all three Hc50 fragments.
Botulinum
Therapeutics
Early
this year, we entered into an agreement with Blue Dolphin, LLC, a firm
specializing in rational drug development, to apply computer-aided design to
the
discovery of small molecule drugs to counter the deadly effects of Botulinum
toxin exposure. Under the agreement, Blue Dolphin is exploring novel drug-like
inhibitors of Botulinum toxin by targeting a new site on the toxin's structure.
Candidate molecules will be modeled for structural and chemical fit to the
target site on the toxin using computer aided discovery techniques. The best
fitting molecules will be experimentally tested for their effectiveness in
treating Botulinum toxin exposure. By focusing on the structure of the Botulinum
toxin, as opposed to derivatives of previously known inhibitors, this "virtual
screening" will allow DOR to target new parts of the toxin with new candidate
inhibitors. To date, we have identified several lead inhibitors. Planned
studies will focus on initial profiling of hits and validation testing for
activity against botulinum toxin exposure, in addition to investigating the
mechanism of action of confirmed quality hits.
We
will
apply for research
grants
and contracts from the U.S. government to continue development of these
programs. The goal of our biodefense programs is to supply the United States
government with qualified countermeasures that can protect citizens against
ricin toxin and botulinum toxin exposure.
Material
Letter of Intent - Acquisition of Gastrotech Pharma
On
October 28, 2005, we entered into a binding letter of intent to acquire
Gastrotech Pharma A/S (“Gastrotech”), a private Danish biotechnology company
developing
therapeutics based on gastrointestinal peptide hormones to treat
gastrointestinal and cancer diseases and conditions. Gastrotech
develops therapeutics based on peptide hormones to treat cancer and
gastrointestinal (GI) diseases and conditions. Gastrotech was founded on
technology developed at the Sahlgrenska University Hospital in Sweden.
Following
the closing of this acquisition, our pipeline will be bolstered by the addition
of two Phase 2 programs: GTP-010, an analogue of glucagon-like peptide-1
(“GLP-1”), and GTP-200, Gastrotech’s wild type ghrelin compound, a naturally
occurring peptide hormone produced in the stomach to stimulate appetite. GTP-010
is being studied in collaboration with Eli Lilly in a Phase 2, double-blinded,
placebo-controlled trial for the treatment of pain associated with irritable
bowel syndrome (“IBS”). The product also has application in the treatment of
functional dyspepsia. GLP-1 has been shown to reduce the gastrointestinal
contractions associated with IBS and other GI disorders.
Preclinical
and clinical studies have demonstrated GTP-200’s positive effect on regulation
of appetite, food intake, and metabolism. Cancer cachexia is estimated to be
a
$4 billion market and an unmet medical need affecting 50% of all cancer patients
and fatal in 40% of patients. GTP-200 completed patient treatment in a
Phase 1/2 clinical trial for the treatment of cancer cachexia in September
2005.
Results from this study will be available in early 2006. GTP-200 is also being
evaluated for the treatment of gastrectomized patients as well as for several
other indications.
In
connection with the closing of the acquisition, we will issue the stockholders
of Gastrotech $9 million in our common stock priced at the 10-day volume
weighted average price immediately prior to the closing. In no event will we
issue less than 20 million or more than 30 million shares of our common stock
to
Gastrotech’s shareholders. This corresponds to a price collar on the transaction
of between $0.30 and $0.45 per share of our common stock. We will also issue
to
the new December 2005 investors in Gastrotech $1.9 million in our common stock
priced at the 10-day volume weighted average price immediately prior to the
closing. The shares issued to the Gastrotech shareholders at closing would
represent up to 41.9% of our outstanding shares following such transaction,
assuming we issue the maximum of 30 million shares for the $9 million of our
common stock and 6,551,724 shares
of
our common stock for the additional $1.9 million (assuming for purposes of
this
calculation a stock price of $0.29, the closing sale price of our common stock
on January 13, 2006). In addition, we will pay Gastrotech
shareholders another $30 million upon the occurrence of the following
milestones: $4 million in stock priced at the time of initiation of a pivotal
Phase 3 study of any of Gastrotech’s compounds, $6 million in stock priced at
the time of filing of an NDA for any of Gastrotech’s compounds, $10 million
payable in cash or stock when either of Gastrotech’s compounds achieves $50
million in sales in any calendar year, and $10 million payable in cash or stock
when either of Gastrotech’s compounds achieves $200 million in sales in any
calendar year. The parties intend that the acquisition would include the
transfer of Gastrotech’s ongoing clinical programs to us as well as all
intellectual property and facilities.
The
closing of the acquisition is subject to the negotiation of definitive
agreements between the parties containing representations,
warranties, covenants, and conditions which are typically included in
transactions of this nature and to completion of due diligence on Gastrotech's
intellectual property by our outside patent counsel. We have agreed to register
the shares issued to the Gastrotech stockholders for resale under the Securities
Act of 1933. The largest Gastrotech stockholder has agreed to limit its sales
of
our common stock to 20% of its holdings per quarter. We have agreed to expand
our Board of Directors to nine members, with three positions being appointed
by
the Gastrotech stockholders. There is a breakup fee of $1.0 million if either
party breaches the terms of the binding letter of intent.
THE
OFFERING
On
January 17, 2006, we entered into a common stock purchase agreement with Fusion
Capital Fund II, LLC, pursuant to which Fusion Capital has agreed, under certain
conditions, including that the registration statement of which this prospectus
is a part of is declared effective by the SEC, to purchase on each trading
day
$20,000 of our common stock up to an aggregate of $6.0 million over
approximately a 15 month period, subject to earlier termination at our
discretion. In our discretion, we may elect to sell less of our common stock
to
Fusion Capital than the daily amount and we may increase the daily amount as
the
market price of our stock increases. The purchase price of the shares of common
stock will be equal to a price based upon the future market price of the common
stock without any fixed discount to the market price. Fusion Capital does not
have the right or the obligation to purchase shares of our common stock in
the
event that the price of our common stock is less than $0.12.
Fusion
Capital is offering for sale up to 9,962,500 shares of our common stock. In
the
event we elect to issue more than the 9,962,500 shares offered hereby, we will
be required to file a new registration statement and have it declared effective
by the SEC. In the event that we decide to issue more than 10,117,439, i.e.,
greater than 19.99% of our outstanding shares of common stock as of the date
of
the agreement, we would first seek stockholder approval in order to be in
compliance with American Stock Exchange rules. The number of shares ultimately
offered for sale by Fusion Capital is dependent upon the number of shares
purchased by Fusion Capital under the common stock purchase agreement.
As
of
January 13, 2006, there were 50,612,504 shares outstanding, excluding the
9,962,500 shares offered by Fusion Capital pursuant to this prospectus which
have not yet been issued by us. If all of the shares offered by this prospectus
were issued and outstanding as of the date hereof, the number of shares offered
by this prospectus would represent approximately 16.4% of the total common
stock
outstanding as of January 13, 2006.
We
are
also registering for sale any additional shares of common stock which may become
issuable by reason of any stock dividend, stock split, recapitalization or
other
similar transaction effected without the receipt of consideration, which results
in an increase in the number of outstanding shares of our common
stock.
RISK
FACTORS
You
should carefully consider the risks described below before making an investment
decision. The risks described below are not the only ones facing our company.
Additional risks not presently known to us or that we currently believe are
immaterial may also impair our business operations. Our business could be harmed
by any of these risks. The trading price of our common stock could decline
due
to any of these risks and you may lose all or part of your investment. In
assessing these risks, you should also refer to the other information contained
or incorporated by reference in this prospectus, including our consolidated
financial statements and related notes.
Risks
Related To Our Industry
We
have had significant losses and anticipate future losses; if additional funding
cannot be obtained, we may reduce or discontinue our product development and
commercialization efforts and we may be unable to continue our
operations.
We
are a
company that has experienced significant losses since inception and have a
significant accumulated deficit. We expect to incur additional operating losses
in the future and expect our cumulative losses to increase. As of September
30,
2005, we had approximately $1.8 million in cash available. We expect that we
will need additional sources of funding to meet our cash requirements for the
next twelve months. In addition, through a National Institute of Health grant,
a
portion of our personnel and overhead expenditures will be supported. All of
our
products are currently in development, preclinical studies or clinical trials,
and we have not generated any revenues from sales or licensing of these
products. Through September 30, 2005, we had expended approximately $12.2
million developing our current product candidates for preclinical research
and
development and clinical trials, and we currently expect to spend at least
$8.0
million over the next two years in connection with the development and
commercialization of our vaccines and therapeutic products, licenses, employee
agreements, and consulting agreements. Unless and until we are able to generate
sales or licensing revenue from orBec®, our leading product candidate, or
another one of our product candidates, we will require additional funding to
meet these commitments, sustain our research and development efforts, provide
for future clinical trials, and continue our operations. We may not be able
to
obtain additional required funding on terms satisfactory to our requirements,
if
at all. If we are unable to raise additional funds when necessary, we may have
to reduce or discontinue development, commercialization or clinical testing
of
some or all of our product candidates or take other cost-cutting steps that
could adversely affect our ability to achieve our business objectives. If
additional funds are raised through the issuance of equity securities,
stockholders may experience dilution of their ownership interests, and the
newly
issued securities may have rights superior to those of the common stock. If
additional funds are raised by the issuance of debt, we may be subject to
limitations on our operations.
We
only
have the right to receive $20,000 per trading day under the agreement with
Fusion Capital unless our stock price equals or exceeds $0.40, in which case
the
daily amount may be increased under certain conditions as the price of our
common stock increases. Fusion Capital shall not have the right nor the
obligation to purchase any shares of our common stock on any trading days that
the market price of our common stock is less than $0.12. Since we initially
registered 9,000,000 shares for sale by Fusion Capital pursuant to this
prospectus (excluding the 900,000 commitment fee shares and 62,500 expense
reimbursement shares that we have registered), the selling price of our common
stock to Fusion Capital will have to average at least $0.67 per share for us
to
receive the maximum proceeds of $6.0 million without registering additional
shares of common stock. Assuming a purchase price of $0.29 per share (the
closing sale price of the common stock on January 13, 2006), proceeds to us
would only be $2,610,000 unless we choose to register more than 9,962,500
shares, which we have the right to do. Subject to approval by our board of
directors, we have the right under the common stock purchase agreement to issue
more than 9,962,500 shares to Fusion Capital. In the event we elect to issue
more than 9,962,500 shares offered hereby, we will be required to file a new
registration statement and have it declared effective by the U.S. Securities
& Exchange Commission.
In
addition, in the event that we decide to issue more than 10,117,439 (19.99%
of
our outstanding shares of common stock as of the date of our agreement), we
would first be required to seek stockholder approval in order to be in
compliance with the American Stock Exchange rules. We currently do not intend
to
seek stockholder approval to effect sales to Fusion Capital in excess of
10,117,439 shares.
If
we are unsuccessful in developing our products, our ability to generate revenues
will be significantly impaired.
To
be
profitable, our organization must, along with corporate partners and
collaborators, successfully research, develop and commercialize our technologies
or product candidates. Our current product candidates are in various stages
of
clinical and preclinical development and will require significant further
funding, research, development, preclinical and/or clinical testing, regulatory
approval and commercialization, and are subject to the risks of failure inherent
in the development of products based on innovative or novel technologies.
Specifically, each of the following is possible with respect to any of our
other
product candidates:
|
·
|
we
will not be able to maintain our current research and development
|
schedules;
|
·
|
we
may be unsuccessful in our efforts to secure profitable procurement
contracts from the U.S.
government
or others for our biodefense products;
|
|
·
|
we
will encounter problems in clinical trials; or
|
|
·
|
the
technology or product will be found to be ineffective or unsafe.
|
If
any of
the risks set forth above occurs, or if we are unable to obtain the necessary
regulatory approvals as discussed below, we may not be able to successfully
develop our technologies and product candidates and our business will be
seriously harmed. Furthermore, for reasons including those set forth below,
we
may be unable to commercialize or receive royalties from the sale of any other
technology we develop, even if it is shown to be effective, if:
|
·
|
it
is uneconomical or the market for the product does not develop or
diminishes;
|
|
·
|
we
are not able to enter into arrangements or collaborations to manufacture
and/or market the
product;
|
|
·
|
the
product is not eligible for third-party reimbursement from government
or
private insurers;
|
|
·
|
others
hold proprietary rights that preclude us from commercializing the
product;
|
|
·
|
others
have brought to market similar or superior products; or
|
|
·
|
the
product has undesirable or unintended side effects that prevent or
limit
its commercial use.
|
Our
business is subject to extensive governmental regulation, which can be costly,
time consuming and subjects us to unanticipated
delays.
Our
business is subject to very stringent United States, federal, foreign, state
and
local government laws and regulations, including the Federal Food, Drug and
Cosmetic Act, the Environmental Protection Act, the Occupational Safety and
Health Act, and state and local counterparts to these acts. These laws and
regulations may be amended, additional laws and regulations may be enacted,
and
the policies of the FDA and other regulatory agencies may change.
The
regulatory process applicable to our products requires pre-clinical and clinical
testing of any product to establish its safety and efficacy. This testing can
take many years and require the expenditure of substantial capital and other
resources. We may be unable to obtain, or we may experience difficulties and
delays in obtaining, necessary domestic and foreign governmental clearances
and
approvals to market a product. Also, even if regulatory approval of a product
is
granted, that approval may entail limitations on the indicated uses for which
the product may be marketed. The pivotal clinical trial of our product candidate
orBec®
began in
2001. In December of 2004, we announced top line results for our pivotal Phase
III trial of orBec®
in
iGVHD,
in which orBec®
demonstrated
a highly statistically significant reduction in mortality during the
prospectively defined Day 200 post-transplant period and positive trends on
its
primary endpoint. While orBec®
did not
achieve statistical significance in its primary endpoint of time to treatment
failure at Day 50 (p-value 0.1177), orBec®
did
achieve a statistically significant reduction in mortality compared to placebo.
We plan to file a new drug application with the FDA. Additional clinical trials
may be necessary prior to either submission of a marketing application or
approval by the FDA of a marketing application.
Following
any regulatory approval, a marketed product and its manufacturer are subject
to
continual regulatory review. Later discovery of problems with a product or
manufacturer may result in restrictions on such product or manufacturer. These
restrictions may include withdrawal of the marketing approval for the product.
Furthermore, the advertising, promotion and export, among other things, of
a
product are subject to extensive regulation by governmental authorities in
the
United States and other countries. If we fail to comply with applicable
regulatory requirements, we may be subject to fines, suspension or withdrawal
of
regulatory approvals, product recalls, seizure of products, operating
restrictions and/or criminal prosecution.
There
may be unforeseen challenges in developing biodefense
products.
For
development of biodefense vaccines and therapeutics, the FDA has instituted
policies that are expected to result in accelerated approval. This includes
approval for commercial use using the results of animal efficacy trials, rather
than efficacy trials in humans. However, we will still have to establish that
the vaccine is safe in humans at doses that are correlated with the beneficial
effect in animals. Such clinical trials will also have to be completed in
distinct populations that are subject to the countermeasures; for instance,
the
very young and the very old, and in pregnant women, if the countermeasure is
to
be licensed for civilian use. Other agencies will have an influence over the
risk benefit scenarios for deploying the countermeasures and in establishing
the
number of doses utilized in the Strategic National Stockpile. We may not be
able
to sufficiently demonstrate the animal correlation to the satisfaction of the
FDA, as these correlates are difficult to establish and are often unclear.
Invocation of the two animal rule may raise issues of confidence in the model
systems even if the models have been validated. For many of the biological
threats, the animal models are not available and we may have to develop the
animal models, a time-consuming research effort. There are few historical
precedents, or recent precedents, for the development of new countermeasure
for
bioterrorism agents. Despite the two animal rule, the FDA may require large
clinical trials to establish safety and immunogenicity before licensure and
it
may require safety and immunogenicity trials in additional populations. Approval
of biodefense products may be subject to post-marketing studies, and could
be
restricted in use in only certain populations.
We
will be dependent on government funding, which is inherently uncertain, for
the
success of our biodefense operations.
We
are
subject to risks specifically associated with operating in the biodefense
industry, which is a new and unproven business area. We do not anticipate that
a
significant commercial market will develop for our biodefense products. Because
we anticipate that the principal potential purchasers of these products, as
well
as potential sources of research and development funds, will be the U.S.
government and governmental agencies, the success of our biodefense division
will be dependent almost entirely upon government spending decisions. The
funding of government programs is dependent on budgetary limitations,
congressional appropriations and administrative allotment of funds, all of
which
are inherently uncertain and may be affected by changes in U.S. government
policies resulting from various political and military developments.
Our
products, if approved, may not be commercially viable due to health care changes
and third party reimbursement limitations.
Recent
initiatives to reduce the federal deficit and to change health care delivery
are
increasing cost-containment efforts. We anticipate that Congress, state
legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations
on
the growth of private health insurance premiums and Medicare and Medicaid
spending, price controls on pharmaceuticals, and other fundamental changes
to
the health care delivery system. Any changes of this type could negatively
impact the commercial viability of our products, if approved. Our ability to
successfully commercialize our product candidates, if they are approved, will
depend in part on the extent to which appropriate reimbursement codes and
authorized cost reimbursement levels of these products and related treatment
are
obtained from governmental authorities, private health insurers and other
organizations, such as health maintenance organizations. In the absence of
national Medicare coverage determination, local contractors that administer
the
Medicare program may make their own coverage decisions. Any of our product
candidates, if approved and when commercially available, may not be included
within the then current Medicare coverage determination or the coverage
determination of state Medicaid programs, private insurance companies or other
health care providers. In addition, third-party payers are increasingly
challenging the necessity and prices charged for medical products, treatments
and services.
We
may not be able to retain rights licensed to us by third parties to
commercialize key products or to develop the third party relationships we need
to develop, manufacture and market our products.
We
currently rely on license agreements from, the University of Texas Southwestern
Medical Center, The University of Texas Medical Branch at Galveston, Thomas
Jefferson University, Southern Research Institute, the University of Alabama
Research Foundation, and George B. McDonald M.D. for the rights to commercialize
key product candidates. We may not be able to retain the rights granted under
these agreements or negotiate additional agreements on reasonable terms, or
at
all.
Furthermore,
we currently have very limited product development capabilities and no
manufacturing, marketing or sales capabilities. For us to research, develop
and
test our product candidates, we need to contract or partner with outside
researchers, in most cases with or through those parties that did the original
research and from whom we have licensed the technologies. If products are
successfully developed and approved for commercialization, then we will need
to
enter into collaboration and other agreements with third parties to manufacture
and market our products. We may not be able to induce the third parties to
enter
into these agreements, and, even if we are able to do so, the terms of these
agreements may not be favorable to us. Our inability to enter into these
agreements could delay or preclude the development, manufacture and/or marketing
of some of our product candidates or could significantly increase the costs
of
doing so. In the future, we may grant to our development partners rights to
license and commercialize pharmaceutical and related products developed under
the agreements with them, and these rights may limit our flexibility in
considering alternatives for the commercialization of these products.
Furthermore, third-party manufacturers or suppliers may not be able to meet
our
needs with respect to timing, quantity and quality for the products.
Additionally,
if we do not enter into relationships with third parties for the marketing
of
our products, if and when they are approved and ready for commercialization,
we
would have to build our own sales force. Development of an effective sales
force
would require significant financial resources, time and expertise. We may not
be
able to obtain the financing necessary to establish a sales force in a timely
or
cost effective manner, if at all, and any sales force we are able to establish
may not be capable of generating demand for our product candidates, if they
are
approved.
We
may suffer product and other liability claims; we maintain only limited product
liability insurance, which may not be sufficient.
The
clinical testing, manufacture and sale of our products involves an inherent
risk
that human subjects in clinical testing or consumers of our products may suffer
serious bodily injury or death due to side effects, allergic reactions or other
unintended negative reactions to our products. As a result, product and other
liability claims may be brought against us. We currently have clinical trial
and
product liability insurance with limits of liability of $5 million, which may
not be sufficient to cover our potential liabilities. Because liability
insurance is expensive and difficult to obtain, we may not be able to maintain
existing insurance or obtain additional liability insurance on acceptable terms
or with adequate coverage against potential liabilities. Furthermore, if any
claims are brought against us, even if we are fully covered by insurance, we
may
suffer harm such as adverse publicity.
We
may not be able to compete successfully with our competitors in the
biotechnology industry.
The
biotechnology industry is intensely competitive, subject to rapid change and
sensitive to new product introductions or enhancements. Most of our existing
competitors have greater financial resources, larger technical staffs, and
larger research budgets than we have, as well as greater experience in
developing products and conducting clinical trials. Our competition is
particularly intense in the gastroenterology and transplant areas and is also
intense in the therapeutic area of inflammatory bowel disease. We face intense
competition in the area of biodefense from various public and private companies
and universities as well as governmental agencies, such as the U.S. Army, which
may have their own proprietary technologies that may directly compete with
our
technologies. In addition, there may be other companies that are currently
developing competitive technologies and products or that may in the future
develop technologies and products that are comparable or superior to our
technologies and products. We may not be able to compete successfully with
our
existing and future competitors.
We
may be unable to commercialize our products if we are unable to protect our
proprietary rights, and we may be liable for significant costs and damages
if we
face a claim of intellectual property infringement by a third
party.
Our
success depends in part on our ability to obtain and maintain patents, protect
trade secrets and operate without infringing upon the proprietary rights of
others. In the absence of patent and trade secret protection, competitors may
adversely affect our business by independently developing and marketing
substantially equivalent or superior products and technology, possibly at lower
prices. We could also incur substantial costs in litigation and suffer diversion
of attention of technical and management personnel if we are required to defend
ourselves in intellectual property infringement suits brought by third parties,
with or without merit, or if we are required to initiate litigation against
others to protect or assert our intellectual property rights. Moreover, any
such
litigation may not be resolved in our favor.
Although
we and our licensors have filed various patent applications covering the uses
of
our product candidates, patents may not be issued from the patent applications
already filed or from applications that we might file in the future. Moreover,
the patent position of companies in the pharmaceutical industry generally
involves complex legal and factual questions, and recently has been the subject
of much litigation. Any patents we have obtained, or may obtain in the future,
may be challenged, invalidated or circumvented. To date, no consistent policy
has been developed in the United States Patent and Trademark Office regarding
the breadth of claims allowed in biotechnology patents.
In
addition, because patent applications in the United States are maintained in
secrecy until patents issue, and because publication of discoveries in the
scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we and our licensors are the first creators of inventions
covered by any licensed patent applications or patents or that we or they are
the first to file. The Patent and Trademark Office may commence interference
proceedings involving patents or patent applications, in which the question
of
first inventorship is contested. Accordingly, the patents owned or licensed
to
us may not be valid or may not afford us protection against competitors with
similar technology, and the patent applications licensed to us may not result
in
the issuance of patents.
It
is
also possible that our patented technologies may infringe on patents or other
rights owned by others, licenses to which may not be available to us. We are
aware of at least one issued U.S. patent assigned to the U.S. Government
relating to one component of one of our vaccine candidates that we may be
required to license in order to commercialize that vaccine candidate. We may
not
be successful in our efforts to obtain a license under such patent on terms
favorable to us, if at all. We may have to alter our products or processes,
pay
licensing fees or cease activities altogether because of patent rights of third
parties.
In
addition to the products for which we have patents or have filed patent
applications, we rely upon unpatented proprietary technology and may not be
able
to meaningfully protect our rights with regard to that unpatented proprietary
technology. Furthermore, to the extent that consultants, key employees or other
third parties apply technological information developed by them or by others
to
any of our proposed projects, disputes may arise as to the proprietary rights
to
this information, which may not be resolved in our favor.
Our
business could be harmed if we fail to retain our current personnel or if they
are unable to effectively run our business.
We
have
only ten employees and we depend upon these employees to manage the day-to-day
activities of our business. Because we have such limited personnel, the loss
of
any of them or our inability to attract and retain other qualified employees
in
a timely manner would likely have a negative impact on our operations. Michael
Sember, Chief Executive Officer, was hired in December 2004; Evan
Myrianthopoulos, our Chief Financial Officer, was hired in November 2004,
although he was on the Board for two years prior to that; James Clavijo, our
Controller, Treasurer and Corporate Secretary was hired in October 2004; and
Dr.
Robert Brey, our Chief Scientific Officer was hired in 1996. In the fourth
quarter of 2004, Alexander P. Haig was appointed Chairman of the Board replacing
his father, General (Ret.) Alexander M. Haig, Jr., who resigned from our Board
and joined our BioDefense Strategic Advisory Board. Because of this inexperience
in operating our business, there continues to be significant uncertainty as
to
how our management team will perform. We will not be successful if this
management team cannot effectively manage and operate our business. Several
members of our board of directors are associated with other companies in the
biopharmaceutical industry. Stockholders should not expect an obligation on
the
part of these board members to present product opportunities to us of which
they
become aware outside of their capacity as members of our board of
directors.
If
the Gastrotech acquisition is completed, the integration of Gastrotech into
our
operations involves numerous risks which could cause our business and growth
prospects could suffer.
We
have
signed a binding letter of intent to acquire Gastrotech. The
closing of the acquisition is subject to execution of definitive agreements
between the parties, containing such representations, warranties, covenants,
conditions, indemnities and limitations on the Gastrotech stockholders'
liability as are customary in a transaction of this kind. There can be no
assurance that we will be successful in negotiating definitive agreements
between the parties, or that if we enter into definitive agreements, that we
will consummate the acquisition.
If
we
complete the Gastrotech acquisition, the integration of an acquired business
into our operations involves numerous risks, including difficulties in
integrating an acquired company's hardware and software
products
and services with our own; the diversion of our resources and management's
attention from other business concerns; the potential loss of key employees;
the
need for greater amounts of working capital to support the newly combined
company and the day-to-day management of a substantially larger and more
geographically diverse combined company. In addition, we may not realize the
synergies, operating efficiencies, market position or revenue growth we
anticipate from this acquisition and our failure to effectively manage the
above
risks and other problems associated with the acquisition could have a material
adverse effect on our business, growth prospects and financial
performance.
This
acquisition also poses the risk that we may be exposed to successor liability
relating to actions by Gastrotech and its management before the acquisition.
The
due diligence we conduct in connection with this acquisition, and any
contractual indemnities we may receive from the shareholders of Gastrotech,
may
not be sufficient to protect us from, or compensate us for, actual liabilities.
A material liability associated with this acquisition could also adversely
affect our financial position and reduce the anticipated benefits of the
acquisition.
Risks
Related to the Offering
Our
stock price is highly volatile.
The
market price of our common stock, like that of many other research and
development public pharmaceutical and biotechnology companies, has been highly
volatile and may continue to be so in the future due to a wide variety of
factors, including:
| · |
announcements
of technological innovations, more important bio-threats or new commercial
therapeutic products by us, our collaborative partners or our present
or
potential competitors;
|
| · |
our
quarterly operating results and
performance;
|
| · |
announcements
by us or others of results of pre-clinical testing and clinical
trials;
|
| · |
developments
or disputes concerning patents or other proprietary
rights;
|
| · |
litigation
and government proceedings;
|
| · |
changes
in government regulations;
|
| · |
economic
and other external factors; and
|
| · |
general
market conditions
|
Our
per
share stock price has fluctuated between January 1, 2001 through January 13,
2006 between a high of $2.10 per share to a low of $0.11 per share. As of
January 13, 2006, the closing sale price of our common stock was $0.29. The
fluctuation in the price of our common stock has sometimes been unrelated or
disproportionate to our operating performance.
Our
stock may not remain listed on the American Stock
Exchange
Because
we continue to incur losses from operations in fiscal 2005, the stockholders’
equity standard applicable to us of the American Stock Exchange’s (AMEX)
continued listing requirements is $6 million. As of September 30, 2005, we
had
stockholders’ equity of $3,519,342.
In
June
30, 2003, our net equity of $2.3 million did not satisfy the $4 million minimum
stockholders’ equity requirement that was applicable to calendar quarters ending
during 2003, and we received notification from the AMEX that we were no longer
in compliance with their minimum listing requirements. This requirement was
increased to $6 million minimum stockholders’ equity for fiscal years ending
2003 and beyond. On August 4, 2003 we submitted a compliance plan, and the
AMEX
accepted our plan and allowed us 18 months to regain compliance in accordance
with the terms of our plan. Our deadline to meet the plan was December 26,
2004, to avoid delisting from the AMEX. Although we did not meet the plan
submitted, AMEX provided us with the opportunity to submit a new plan of
compliance with the listing standard, which we submitted on December 30, 2004.
On January 24, 2005 AMEX accepted the compliance plan and provided us until
July
12, 2005 to comply with the continued listing standard of section 1003 (a)
(iii)
of the AMEX company guide. This compliance date was then extended by AMEX until
October 15, 2005. On such date, we did not have $6 million in stockholders’
equity. Therefore on October 26, 2005, the Company received notice from the
AMEX
staff indicating that the Company no longer complies with AMEX's continued
listing standards because the Company had shareholders' equity of less than
$6.0
million and losses from continuing operations and/or net losses in its five
most
recent fiscal years, as set forth in Section 1003(a)(iii) of the Company Guide,
and that the AMEX intends to proceed with removal of the Company's common stock
from listing and registration on AMEX. The Company appealed this determination
and requested a hearing before a committee of the AMEX which was held on
December 2, 2005. In addition, on November 22, 2005, the Company received notice
from the AMEX staff indicating that the Company also no longer complies with
AMEX's continued listing standards because the Company had shareholders' equity
of less than $4.0 million and losses from continuing operations and/or net
losses in three of its four most recent fiscal years, as set forth in Section
1003(a)(iii) of the Company Guide. AMEX also considered this deficiency at
the
hearing on December 2, 2005. On December 8, 2005, we received notice from AMEX
that we had been granted an extension until March 31, 2006 to regain compliance
with AMEX's rules. If we have not done so by that date, AMEX will delist us
with
no further opportunity to appeal. We cannot assure you that we will regain
compliance by March 31, 2006 nor can we assure you that we will continue to
satisfy other requirements necessary to remain listed on the AMEX or that the
AMEX will not take additional actions to delist our common stock.
If
our
stock were to be delisted from the AMEX, we may not be able to list our common
stock on another national exchange or market. If our common stock is not listed
on a national exchange or market, the trading market for our common stock may
become illiquid. Upon any such delisting, our common stock would become subject
to the penny stock rules of the SEC, which generally are applicable to equity
securities with a price of less than $5.00 per share, other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system. The
penny
stock rules require a broker-dealer, before a transaction in a penny stock
not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer
also
must provide the customer with bid and ask quotations for the penny stock,
the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held
in
the customer’s account. In addition, the penny stock rules require that, before
a transaction in a penny stock that is not otherwise exempt from such rules,
the
broker-dealer must make a special written determination that the penny stock
is
a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. As a result of these requirements, if our common
stock were to become subject to the penny stock rules, it is likely that the
price of our common stock would decline and that our stockholders would find
it
more difficult to sell their shares.
Stockholders
may suffer substantial dilution.
We
have a
number of agreements or obligations that may result in dilution to investors.
These include:
|
·
|
warrants
to purchase a total of approximately 22.2 million shares of our common
stock at a
current
weighted average exercise price of approximately $0.93;
|
|
·
|
anti-dilution
rights associated with a portion of the above warrants which can
permit
purchase of
additional
shares and/or lower exercise prices under certain circumstances;
and
|
|
·
|
options
to purchase approximately 10.3 million shares of our common stock
at a
current
weighted
average exercise price of approximately $0.59.
|
To
the
extent that anti-dilution rights are triggered, or warrants or options are
exercised, our stockholders will experience substantial dilution and our stock
price may decrease.
Shareholders
are also subject to the risk of substantial dilution to their interests as
a
result of our issuance of shares under the common stock purchase agreement.
See
"—Holders of our common stock are subject to the risk of additional and
substantial dilution to their interests as a result of the issuances of common
stock to Fusion Capital." We are also involved in negotiations that could result
in the issuance of a significant number of shares of our equity securities.
This
transaction as well as the issuances in the Gastrotech acquisition could result
in substantial dilution to our existing stockholders.
The
purchase by Fusion Capital may not be available when we need it, thus limiting
our ability to continue our product development and
commercialization.
We
cannot
begin sales of our common stock to Fusion Capital until the effectiveness of
the
registration statement of which this prospectus is a part and the common stock
purchase agreement may be terminated in the event of a default under the
agreement. In addition, Fusion Capital does not have the right or the obligation
to purchase any shares of our common stock if the purchase price is less than
$0.12 per share. Thus, we may be unable to sell shares of our common stock
to
Fusion Capital when we need the funds, and that could severely harm our business
and financial condition and our ability to continue to develop and commercialize
our products. See "Fusion Transaction."
Holders
of our common stock are subject to the risk of additional and substantial
dilution to their interests as a result of the issuances of common stock to
Fusion Capital.
Shareholders
are subject to the risk of substantial dilution to their interests as a result
of our issuance of shares under the common stock purchase agreement. The sale
by
the selling stockholder of our common stock as contemplated by this prospectus
will increase the number of our publicly traded shares, which could depress
the
market price of our common stock. Moreover, the mere prospect of resales by
the
selling stockholder as contemplated by this prospectus could depress the market
price for our common stock. The issuance of shares to Fusion Capital under
the
common stock purchase agreement will dilute the equity interest of existing
stockholders and could have an adverse effect on the market price of our common
stock. In addition, in the event we elect to issue more than the 9,962,500
shares offered hereby, we will be required to file a new registration statement
and have it declared effective by the SEC. If such registration were declared
effective by the SEC, Fusion Capital could also sell any shares registered
on
such a subsequent registration statement and this in turn would result in
additional dilution to our other stockholders. If we elect to issue more than
the 9,962,500 shares offered hereby and the average price at which we sell
$6.0
million of our stock is $0.29
(the closing sale price of our common stock on January 13, 2006) we would issue
20.7 million shares. We do not have the right to sell shares to Fusion Capital
at a price below $0.12 per share and accordingly we could not issue more than
50,000,000 shares under the agreement.
The
purchase price for the common stock to be sold to Fusion Capital pursuant to
the
common stock purchase agreement will fluctuate based on the price of our common
stock. All shares in this offering are freely tradable. Fusion Capital may
sell
none, some or all of the shares of common stock purchased from us at any time.
We expect that the shares offered by this prospectus will be sold over a period
of in excess of 15 months from the date of this prospectus. Depending upon
market liquidity at the time, a sale of shares under this offering at any given
time could cause the trading price of our common stock to decline. The sale
of a
substantial number of shares of our common stock under this offering, or
anticipation of such sales, could make it more difficult for us to sell equity
or equity-related securities in the future at a time and at a price that we
might otherwise wish to effect sales.
The
Gastrotech, Fusion and other contemplated transactions could cause our stock
to
be held by a small group of stockholders and result in a change in
control.
Following
consummation of the Gastrotech transactions, the former Gastrotech stockholders
potentially could beneficially own up
to
41.9% of our outstanding shares following such transaction, assuming we issue
the maximum of 30 million shares for the $9 million of our common stock and
6,551,724 shares
of
our common stock for the additional $1.9 million (assuming for purposes of
this
calculation a stock price of $0.29, the closing sale price of our common stock
on January 13, 2006). In
addition, we are presently involved in negotiations that could result in the
issuance of an additional significant number of shares of senior equity
securities to a small number of investors that, if successful, could result
in a
change in control in a series of one or more transactions. Either Gastrotech’s
shareholders or such potential new investors would be able to effectively or
actually control all matters requiring approval by stockholders, including
the
election of directors, the approval of amendments to our charter and approval
of
significant corporate transactions. The interests of these stockholders may
differ from the interests of other stockholders since they may be issued with
rights and preferences that are senior to those of our current stockholders,
and
their concentration of ownership could have the effect of causing our current
stockholders to lose the control premium currently associated with their shares
by denying stockholders the ability to vote upon subsequent change in control
transactions of the company. Depending upon the structure of such one or more
series of new issuance of stock, stockholders may not be afforded an adequate
opportunity to vote on the terms of such series of transactions. Such potential
concentration of ownership or change in control could also have the effect
of
delaying or preventing a change in control of our business or otherwise
discouraging a potential acquiror from attempting to take control of us, even
if
the transactions would be beneficial to our other stockholders.
If
the market price of our common stock declines, we may be unable to utilize
the
Fusion Capital agreement without requesting our shareholders to approve the
issuance of more than 19.99% of our common stock or registering additional
shares, both of which would impose additional costs and time
delays.
If
the
market price of our common stock declines, the number of shares of common stock
issuable in connection with the Fusion Capital agreement will increase.
Accordingly, we may be required to ask our shareholders to approve
issuances over 19.99% of our common stock as required under AMEX rules or we
may
run out of shares registered under this registration statement to issue to
the
investor in connection with our use of the Fusion Capital agreement. In
such an event, we would be required to ask our shareholders to approve such
issuance and/or would be required to file additional registration statements
to
cover the resale of additional shares, both of which would impose additional
costs and time delays.
Our
shares of common stock are thinly traded, so you may be unable to sell at or
near ask prices or at all if you need to sell your shares to raise money or
otherwise desire to liquidate your shares.
Our
common stock has from time to time been "thinly-traded", meaning that the number
of persons interested in purchasing our common stock at or near ask prices
at
any given time may be relatively small or non-existent. This situation is
attributable to a number of factors, including the fact that we are a small
company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate
or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance
that a broader or more active public trading market for our common shares will
develop or be sustained, or that current trading levels will be
sustained.
Fusion
Capital's purchase and sale into the market of $20,000 of our common stock
could
cause our common stock price to decline due to the additional shares available
in the market, particularly in light of the relatively thin trading volume
of
our common stock. Using the closing price on January 13, 2006, of $0.29 as
an
example, Fusion Capital would be issued approximately 68,966 shares each trading
day if we elected to have them purchase the $20,000 daily purchase amount,
whereas our average trading volume for the three months ending on January 13,
2006, is approximately 145,185 per day. The market price of our common stock
could decline given our minimal average trading volume compared to the number
of
shares potentially issuable to Fusion Capital, and the voting power and value
of
your investment would be subject to continual dilution if Fusion Capital
purchases the shares and resells those shares into the market, although there
is
no obligation for Fusion Capital to sell such shares. Any adverse affect on
the
market price of our common stock would increase the number of shares issuable
to
Fusion Capital each trading day which would increase the dilution of your
investment. Although we have the right to reduce or suspend Fusion Capital
purchases at any time, our financial condition at the time may require us to
waive our right to suspend purchases even if there is a decline in the market
price.
Contractual
9.9% beneficial ownership limitations prohibit Fusion Capital, together with
its
affiliates, from beneficially owning more than 9.9% of our outstanding common
stock. This 9.9% limitation does not prevent Fusion Capital from purchasing
shares of our common stock and then reselling those shares in stages over time
so that Fusion Capital and its affiliates do not, at any given time,
beneficially own shares in excess of the 9.9% limitation. Consequently, these
limitations will not necessarily prevent substantial dilution of the voting
power and value of your investment.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed with the SEC a Registration Statement on Form S-1 with all amendments
and
exhibits under the Securities Act of 1933, concerning the common stock offered
in this prospectus. This prospectus does not contain all of the information
contained in the registration statement. We have omitted parts of the
registration statement in accordance with the rules and regulations of the
SEC.
For further information with respect to us and our securities, you should refer
to the registration statement, including its schedules and exhibits. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete and, in each instance, you should refer
to
the copy of the filed contract or document which is qualified in all respects
by
such reference. You may obtain copies of the registration statement from the
SEC's principal office in Washington, D.C. upon payment of the fees prescribed
by the SEC, or you may examine the registration statement without charge at
the
offices of the SEC described below.
We
have
filed annual, quarterly and special reports, proxy statements, and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 100 F Street, N.E., Washington, DC 20549. Please
call the SEC at 1-800-SEC-0330 for further filing information and locations
of
public reference rooms. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers, such as us, that file electronically with the SEC. Our SEC filings
are
available to the public on that website at http://www.sec.gov.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The
SEC
allows us to "incorporate by reference" the information that we file with it,
meaning we can disclose important information to you by referring you to those
documents already on file with the SEC. The information incorporated by
reference is considered to be part of this prospectus. We incorporate by
reference the following documents:
1.
Our
annual report on Form 10-KSB for the year ended December 31, 2004, filed on
March 11, 2005.
2.
Our
quarterly reports on Form 10-QSB for the quarters ended March 31, 2005, June
30,
2005 and September 30, 2005, filed on May 16, 2005, August 15, 2005 and November
14, 2005, respectively.
3.
Our
current reports on Form 8-K filed on January 25, 2005, February 3, 2005,
February 9, 2005, May 4, 2005, July 13, 2005, November 1, 2005, November 2,
2005, November 29, 2005, December 9, 2005 and January 3,
2006.
We
will
provide to each person, including any beneficial owner, to whom a prospectus
is
delivered, a copy of any or all of the reports or documents that have been
incorporated by reference in this prospectus, at no cost. Any such request
may
be made by writing or telephoning us at the following address or phone
number:
Corporate
Secretary
DOR
BioPharma, Inc.
1691
Michigan Avenue
Suite
435
Miami
Beach, Florida 33139
(305)
534-3393
These
documents also may be accessed through our Internet web site at www.dorbiopharma.com.
INFORMATION
WITH RESPECT TO THE REGISTRANT
The
information required to be disclosed in the registration statement pertaining
to
the Company is incorporated by reference from the documents listed as
incorporated by reference in "Incorporation of Certain Documents by Reference."
Such documents are being delivered with this prospectus. See "Documents
Incorporated by Reference," "Prospectus Summary" and "Risk
Factors".
THE
FUSION TRANSACTION
General
On
January 17, 2006, we entered into a common stock purchase agreement with Fusion
Capital Fund II, LLC, pursuant to which Fusion Capital has agreed, under certain
conditions, to purchase on each trading day $20,000 of our common stock up
to an
aggregate of $6.0 million over a period of approximately 15 months, subject
to
earlier termination at our discretion. In our discretion under certain
conditions, we may elect to sell more of our common stock to Fusion Capital
than
the minimum daily amount. The purchase price of the shares of common stock
will
be equal to a price based upon the future market price of our common stock.
Fusion Capital does not have the right or the obligation to purchase shares
of
our common stock in the event that the price of our common stock is less than
$0.12.
Fusion
Capital is offering for sale up to 9,962,500 shares of our common stock pursuant
to this prospectus including 900,000 shares to be issued to Fusion Capital
as
the commitment fee and 62,500 shares to be issued to Fusion Capital as a partial
expense reimbursement. In connection with entering into the agreement, we
authorized the sale to Fusion Capital of 9,000,000 shares of our common stock.
In the event we elect to issue more than the 9,962,500 shares offered hereby,
we
will be required to file a new registration statement and have it declared
effective by the SEC. In the event that we decide to issue more than 10,117,439,
i.e., greater than 19.99% of our outstanding shares of common stock as of the
date of the agreement, we would first seek stockholder approval in order to
be
in compliance with American Stock Exchange rules. The number of shares
ultimately offered for sale by Fusion Capital is dependent upon the number
of
shares purchased by Fusion Capital under the common stock purchase agreement.
Purchase
of Shares Under the Common Stock Purchase Agreement
Under
the
common stock purchase agreement, on each trading day Fusion Capital is obligated
to purchase a specified dollar amount of our common stock. Subject to our right
to suspend such purchases at any time, and our right to terminate the agreement
with Fusion Capital at any time, each as described below, Fusion Capital shall
purchase on each trading day during the term of the agreement $20,000 of our
common stock. This daily purchase amount may be decreased by us at any time.
We
also have the right to increase the daily purchase amount at any time, provided
however, we may not increase the daily purchase amount above $20,000 unless
our
stock price is above $0.40 per share for five consecutive trading
days.
The
purchase price per share is equal to the lesser of:
| · |
the
lowest sale price of our common stock on the purchase date; or
|
| · |
the
average of the three lowest closing sale prices of our common stock
during
the twelve consecutive trading days ending on the trading day immediately
prior to the date of a purchase by Fusion Capital.
|
The
purchase price will be adjusted for any reorganization, recapitalization,
non-cash dividend, stock split, or other similar transaction. Fusion Capital
may
not purchase shares of our common stock under the common stock purchase
agreement if Fusion Capital, together with its affiliates, would beneficially
own more than 9.9% of our common stock outstanding at the time of the purchase
by Fusion Capital. Fusion Capital has the right at any time to sell any shares
purchased under the common stock purchase agreement which would allow it to
avoid the 9.9% limitation. Therefore, we do not believe that Fusion Capital
will
ever reach the 9.9% limitation.
The
following table sets forth the amount of proceeds we would receive from Fusion
Capital from the sale of 9.0 million shares of our common stock offered by
this
prospectus at varying purchase prices:
|
Assumed
Average
Purchase
Price
|
Proceeds
from the Sale of 9,000,000 Shares to Fusion Capital Under the Common
Stock
Purchase Agreement
|
|
$0.12
|
$1,080,000
|
|
$0.15
|
$1,350,000
|
|
$0.25
|
$2,250,000
|
|
$0.29(1)
|
$2,610,000
|
|
$0.50
|
$4,500,000
|
|
$0.66
|
$6,000,000
|
(1)
Closing sale price of our common stock on January 13, 2006.
In
connection with entering into the agreement, we authorized the sale to Fusion
Capital of 9.0 million shares of our common stock. We have the right to
terminate the agreement without any payment or liability to Fusion Capital
at
any time, including in the event that all $6.0 million shares are sold to Fusion
Capital under the common stock purchase agreement. In the event we elect to
issue more than the 9,962,500 shares offered hereby, we will be required to
file
a new registration statement and have it declared effective by the SEC. In
the
event that we decide to issue more than 10,117,439, i.e., greater than 19.99%
of
our outstanding shares of common stock as of the date of the agreement, we
would
first be required to seek stockholder approval in order to be in compliance
with
American Stock Exchange rules.
Minimum
Purchase Price
Under
the
common stock purchase agreement, we have set a minimum purchase price ("floor
price") of $0.12. Fusion Capital does not have the right or the obligation
to
purchase shares of our common stock on any trading day that the market price
of
our common stock is below $0.12.
Our
Right To Suspend Purchases
We
have
the unconditional right to suspend purchases at any time for any reason
effective upon one trading day's notice. Any suspension would remain in effect
until our revocation of the suspension.
Our
Right To Increase and Decrease the Amount to be Purchased
Under
the
common stock purchase agreement, Fusion Capital has agreed to purchase on each
trading day during a period of approximately 15 months, $20,000 of our common
stock or an aggregate of $6.0 million. We have the unconditional right to
decrease the daily amount to be purchased by Fusion Capital at any time for
any
reason effective upon one trading day's notice.
In
our
discretion, we may elect to sell more of our common stock to Fusion Capital
than
the minimum daily amount. First, in respect of the daily purchase amount, we
have the right to increase the daily purchase amount as the market price of
our
common stock increases. Specifically, for every $0.10 increase in Threshold
Price (as defined below) above $.30, we have the right to increase the daily
purchase amount by up to an additional $5,000. For example, if the Threshold
Price is $0.50 we would have the right to increase the daily purchase amount
by
up to an additional $10,000. The "Threshold Price" is the lowest sale price
of
our common stock during the five trading days immediately preceding our notice
to Fusion Capital to increase the daily purchase amount. If at any time during
any trading day the sale price of our common stock is below the Threshold Price,
the applicable increase in the daily purchase amount will be void.
In
addition to the daily purchase amount, we may elect to require Fusion Capital
to
purchase on any single trading day our shares in an amount up to $200,000,
provided that our share price is above $0.60 during the ten trading days prior
to that trading day. The price at which such shares would be purchased would
be
the lower of (i) the lowest Purchase Price (as defined above) during the
previous fifteen trading days prior to the date that such purchase notice was
received by Fusion Capital or (ii) the lowest sale price on the date such
purchase notice was received by Fusion Capital. We may increase this amount
to
$400,000 and $600,000 if our share price is above $0.90 and $1.20, respectively,
during the ten trading days prior to our delivery of the purchase notice to
Fusion Capital. We may deliver multiple purchase notices; however at least
ten
trading days must have passed since the most recent non-daily purchase was
completed. The daily purchases shall be suspended for ten (10) trading days
each
time any such notice is delivered.
Events
of Default
Generally,
Fusion Capital may terminate the common stock purchase agreement without any
liability or payment to us upon the occurrence of any of the following events
of
default:
| · |
the
effectiveness of the registration statement of which this prospectus
is a
part of lapses for any reason (including, without limitation, the
issuance
of a stop order) or is unavailable to Fusion Capital for sale of
our
common stock offered hereby and such lapse or unavailability continues
for
a period of five (5) consecutive trading days or for more than an
aggregate of twenty (20) trading days in any 365-day period;
|
| · |
suspension
by our principal market of our common stock from trading for a period
of
three consecutive trading days;
|
| · |
the
de-listing of our common stock from the American Stock Exchange,
our
principal market, provided our common stock is not immediately thereafter
trading on the Nasdaq National Market, the Nasdaq SmallCap Market
or the
New York Stock Exchange or the OTC Bulleting Board;
|
| · |
the
transfer agent's failure for five (5) trading days to issue to Fusion
Capital shares of our common stock which Fusion Capital is entitled
to
under the common stock purchase agreement;
|
| · |
any
material breach of the representations or warranties or covenants
contained in the common stock purchase agreement or any related agreements
which has or which could have a material adverse affect on us subject
to a
cure period of five (5) trading days;
|
| · |
any
participation or threatened participation in insolvency or bankruptcy
proceedings by or against us;
|
| · |
a
material adverse change in our business, properties, operations,
financial
condition or results of operations; or
|
| · |
the
issuance of an aggregate of 10,117,439 (or 19.99% of our current
shares
outstanding) shares to Fusion Capital under our agreement and we
fail to
obtain the requisite stockholder approval.
|
Our
Termination Rights
We
have
the unconditional right at any time for any reason to give notice to Fusion
Capital terminating the common stock purchase agreement. Such notice shall
be
effective one trading day after Fusion Capital receives such
notice.
Effect
of Performance of the Common Stock Purchase Agreement on Our Stockholders
All
shares registered in this offering will be freely tradable. It is anticipated
that shares registered in this offering will be sold over a period of up to
15
months from the date of this prospectus. The sale of a significant amount of
shares registered in this offering at any given time could cause the trading
price of our common stock to decline and to be highly volatile. Fusion Capital
may ultimately purchase all of the 9,000,000 shares of common stock registered
in this offering, and it may sell some, none or all of the shares of common
stock it acquires upon purchase. Therefore, the purchases under the common
stock
purchase agreement may result in substantial dilution to the interests of other
holders of our common stock. However, we have the right at any time for any
reason to: (1) reduce the daily purchase amount, (2) suspend purchases of the
common stock by Fusion Capital and (3) terminate the common stock purchase
agreement.
No
Short-Selling or Hedging by Fusion Capital
Fusion
Capital has agreed that neither it nor any of its affiliates shall engage in
any
direct or indirect short-selling or hedging of our common stock during any
time
prior to the termination of the common stock purchase agreement.
Commitment
Shares Issued to Fusion Capital
Under
the
terms of the common stock purchase agreement we have agreed to issue to Fusion
Capital 450,000 shares of our common stock as a partial commitment fee upon
entering into the agreement. Those shares will be issued to Fusion Capital
as
soon as they are approved for listing with AMEX. Fusion Capital is also entitled
to receive up to an additional 450,000 commitment shares. These additional
commitment shares will be issued in an amount equal to the product of (x)
450,000 (y) the Purchase Amount Fraction. The "Purchase Amount Fraction" means
a
fraction, the numerator of which is the dollar amount of the shares being
purchased by Fusion Capital and the denominator of which is $6.0 million. Unless
an event of default occurs these shares must be held by Fusion Capital until
15
months from the date of the common stock purchase agreement or the date the
common stock purchase agreement is terminated or in the event that we cannot
commence sales of stock to Fusion Capital prior to March 15, 2006.
No
Variable Priced Financings
Until
the
termination of the common stock purchase agreement, we have agreed not to issue,
or enter into any agreement with respect to the issuance of, any variable priced
equity or variable priced equity-like securities unless we have obtained Fusion
Capital's prior written consent.
SELLING
STOCKHOLDER
The
following table presents information regarding the selling stockholder. Neither
the selling stockholder nor any of its affiliates has held a position or office,
or had any other material relationship, with us.
|
Selling
Security Holders' Table
|
|
Name
and Address of Security Holder
|
|
|
Common
Shares Beneficially Owned Prior to Offering (1)
|
|
Total
Number of Shares to be Registered (1)
|
|
Total
Number of Shares held by Security Holder After Offering
|
| |
|
|
|
|
|
|
|
|
Fusion
Capital II, LLC (2)
22
Merchandise Mart Plaza
Suite
9-112
Chicago,
IL 60654
|
|
|
512,500
|
|
9,962,500
|
|
-
0
-
|
| |
|
|
|
|
|
|
|
(1)
We
have agreed in the common stock purchase agreement to issue 512,500 shares
of
our common stock to Fusion Capital as a partial commitment fee and partial
expense reimbursement. These shares will be issued upon approval for listing
by
the AMEX. Fusion Capital may acquire an additional 9,450,000 shares under the
common stock purchase agreement. Fusion Capital may not purchase shares of
our
common stock under the common stock purchase agreement if Fusion Capital,
together with its affiliates, would beneficially own more than 9.9% of our
common stock outstanding at the time of the purchase by Fusion Capital. Fusion
Capital has the right at any time to sell any shares purchased under the common
stock purchase agreement which would allow it to avoid the 9.9% limitation.
Therefore, we do not believe that Fusion Capital will ever reach the 9.9%
limitation.
(2)
Steven G. Martin and Joshua B. Scheinfeld, the principals of Fusion Capital,
are
deemed to be beneficial owners of all of the shares of common stock owned by
Fusion Capital. Messrs. Martin and Scheinfeld have shared voting and investment
power over the Fusion Capital shares being offered under this prospectus.
USE
OF PROCEEDS
This
prospectus relates to shares of our common stock that may be offered and sold
from time to time by the selling stockholder. We will receive no proceeds from
the sale of shares of common stock in this offering. However, we may receive
up
to $6.0 million in proceeds from the sale of our common stock to Fusion Capital
under the common stock purchase agreement.
We
intend to use the net proceeds from sales under the Common Stock Purchase
Agreement as working capital to cover costs associated with the assembly and
filing of the NDA for orBec®,
other
research and development expenses, and general overhead costs including salaries
until such time, if ever, as we are able to generate a positive cash flow from
operation.
PLAN
OF DISTRIBUTION
The
common stock offered by this prospectus is being offered by the selling
stockholder. The common stock may be sold or distributed from time to time
by
the selling stockholder only for cash directly to one or more purchaser or
through brokers, dealers, or underwriters who may act solely as agents at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices, at negotiated prices, or at fixed prices, which may be changed.
The
sale
of the common stock offered by this Prospectus may be effected in one or more
of
the following methods:
| · |
ordinary
brokers' transactions;
|
| · |
transactions
involving cross or block trades;
|
| · |
through
brokers, dealers or underwriters who may act solely as agents;
|
| · |
"at
the market" into an existing market for the common stock;
|
| · |
in
other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
|
| · |
in
privately negotiated transactions;
|
| · |
any
combination of the foregoing methods of sale; and
|
| · |
any
other method permitted pursuant to applicable
law.
|
In
order
to comply with the securities laws of certain states, if applicable, the shares
may be sold only through registered or licensed brokers or dealers. In addition,
in certain states, the shares may not be sold unless they have been registered
or qualified for sale in the state or an exemption from the registration or
qualification requirement is available and complied with.
Brokers,
dealers, underwriters, or agents participating in the distribution of the shares
as agents may receive compensation in the form of commissions, discounts, or
concessions from the selling stockholders and/or purchasers of the common stock
for whom the broker-dealers may act as agent. The compensation paid to a
particular broker-dealer may be less than or in excess of customary
commissions.
Fusion
Capital is an "underwriter" within the meaning of the Securities Act of 1933.
Any broker-dealers or agents that are involved in selling the shares for the
selling stockholders may be deemed to be "underwriters" within the meaning
of
the Securities Act of 1933 in connection with such sales.
Neither
we nor the selling stockholder can presently estimate the amount of compensation
that any agent will receive. We know of no existing arrangements between the
selling stockholder, any other stockholder, broker, dealer, underwriter, or
agent relating to the sale or distribution of the shares offered by this
Prospectus. At the time a particular offer of shares is made, a prospectus
supplement, if required, will be distributed that will set forth the names
of
any agents, underwriters, or dealers and any compensation from the selling
stockholder, and any other required information.
We
will
pay all of the expenses incident to the registration, offering, and sale of
the
shares to the public other than commissions or discounts of underwriters,
broker-dealers, or agents. We have also agreed to indemnify Fusion Capital
and
related persons against specified liabilities, including liabilities under
the
Securities Act of 1933.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers, and controlling persons, we have been
advised that in the opinion of the SEC this indemnification is against public
policy as expressed in the Securities Act and is therefore,
unenforceable.
Fusion
Capital and its affiliates have agreed not to engage in any direct or indirect
short selling or hedging of our common stock during the term of the common
stock
purchase agreement.
We
have
advised Fusion Capital that while it is engaged in a distribution of the shares
included in this Prospectus it is required to comply with Regulation M
promulgated under the Securities Exchange Act of 1934, as amended. With certain
exceptions, Regulation M precludes the selling stockholder, any affiliated
purchasers, and any broker-dealer or other person who participates in the
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any
bids
or purchases made in order to stabilize the price of a security in connection
with the distribution of that security. All of the foregoing may affect the
marketability of the shares offered hereby this Prospectus.
This
offering will terminate on the date that all shares offered by this Prospectus
have been sold by the selling stockholder.
DESCRIPTION
OF SECURITIES
Our
authorized capital stock consists of 155,000,000 shares of capital stock, of
which 150,000,000 shares are common stock, par value $.001 per share, 4,600,000
shares are preferred stock, par value $.001 per share, 200,000 are Series B
Convertible Preferred Stock, par value $.05 per share and 200,000 shares are
Series C Convertible Preferred Stock, par value $.05 per share. As of January
13, 2006, there were issued and outstanding 50,612,504 shares
of
common stock, options to purchase 10,264,339 shares of common stock and warrants
to purchase 22,167,118 shares of common stock. The amount outstanding does
not
include 450,000 shares to be issued to Fusion as a partial commitment fee and
62,500 shares to be issued to Fusion as partial expense reimbursement, all
of
which will be issued as soon as those shares are approved for listing with
AMEX.
The amount outstanding also does not include the balance of the commitment
fee
to be issued to Fusion Capital.
Common
Stock
Holders
of our common stock are entitled to one vote for each share held in the election
of directors and in all other matters to be voted on by the stockholders. There
is no cumulative voting in the election of directors. Holders of common stock
are entitled to receive dividends as may be declared from time to time by our
board of directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the corporation, holders of common
stock are to share in all assets remaining after the payment of liabilities.
Holders of common stock have no pre-emptive or conversion rights and are not
subject to further calls or assessments. There are no redemption or sinking
fund
provisions applicable to the common stock. The rights of the holders of the
common stock are subject to any rights that may be fixed for holders of
preferred stock. All of the outstanding shares of common stock are fully paid
and non-assessable.
Preferred
Stock
Our
Certificate of Incorporation authorizes the issuance of 4,600,000 shares of
preferred stock with designations, rights, and preferences as may be determined
from time to time by the board of directors. The board of directors is
empowered, without stockholder approval, to designate and issue additional
series of preferred stock with dividend, liquidation, conversion, voting or
other rights, including the right to issue convertible securities with no
limitations on conversion, which could adversely affect the voting power or
other rights of the holders of our common stock, substantially dilute a common
stockholder’s interest and depress the price of our common stock.
No
shares
of the Series B Convertible Preferred Stock or the Series C Convertible
Preferred Stock are outstanding.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Section
102(b)(7) of the Delaware General Corporation Law allows companies to limit
the
personal liability of its directors to the company or its stockholders for
monetary damages for breach of a fiduciary duty. Article IX of the Company’s
Certificate of Incorporation, as amended, provides for the limitation of
personal liability of the directors of the Company as follows:
“A
Director of the Corporation shall have no personal liability to the Corporation
or its stockholders for monetary damages for breach of his fiduciary duty as
a
Director; provided, however, this Article shall not eliminate or limit the
liability of a Director (i) for any breach of the Director’s duty of loyalty to
the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for the unlawful payment of dividends or unlawful stock repurchases under
Section 174 of the General Corporation Law of the State of Delaware; or (iv)
for
any transaction from which the Director derived an improper personal benefit.
If
the General Corporation Law is amended after approval by the stockholders of
this Article to authorize corporate action further eliminating or limiting
the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted
by
the General Corporation Law of the State of Delaware, as so amended.”
Article
VIII of the Company’s Bylaws, as amended and restated, provide for
indemnification of directors and officers to the fullest extent permitted by
the
Delaware General Corporation Law.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant 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.
EXPERTS
Sweeney,
Gates & Co., an independent registered public accounting firm, has audited
our consolidated financial statements included in our Annual Report on Form
10-KSB for the year ended December 31, 2004 and 2003 as set forth in their
report, which is incorporated by reference in this prospectus and elsewhere
in
the registration statement. Our financial statements are incorporated by
reference in this prospectus in reliance on Sweeney, Gates & Co.’s report,
given on their authority as experts in accounting and auditing.
LEGAL
MATTERS
The
validity of the shares of our common stock offered by the Selling Stockholder
will be passed upon by the law firm of Edwards Angell Palmer & Dodge LLP,
Fort Lauderdale, Florida.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. Other
Expenses of Issuance and Distribution.
The
following table sets forth the estimated costs and expenses of the Registrant
in
connection with the offering described in the registration statement.
SEC
registration fee . . . . . . . . . . . . . . . . . . . . .
$
287.82
Legal
fees and expenses . . . . . . . . . . . . . . . . . .
$30,000.00
Accounting
fees and expenses . . . . . . . . . . . . . $1,000.00
Miscellaneous
. . . . . . . . . . . . . . . . . . . . . . . . .
$
712.18
TOTAL
$32,000.00
=
= = = =
=
ITEM
14. Indemnification
of Directors and Officers.
Section
102(b)(7) of the Delaware General Corporation Law grants the Registrant the
power to limit the personal liability of its directors to the Registrant or
its
stockholders for monetary damages for breach of a fiduciary duty. Article X
of
the Registrant’s Certificate of Incorporation, as amended, provides for the
limitation of personal liability of the directors of the Registrant as follows:
"A
Director of the Corporation shall have no personal liability to the corporation
or its stockholders for monetary damages for breach of his fiduciary duty as
a
Director; provided, however, this Article shall not eliminate or limit the
liability of a Director (i) for any breach of the Director’s duty of loyalty to
the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for the unlawful payment of dividends or unlawful stock repurchases under
Section 174 of the General Corporation Law of the State of Delaware; or (iv)
for
any transaction from which the Director derived an improper personal benefit.
If
the General Corporation Law is amended after approval by the stockholders of
this Article to authorize corporate action further eliminating or limiting
the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted
by
the General Corporation Law of the State of Delaware, as so
amended."
Article
VIII of the Registrant's Bylaws, as amended and restated, provide for
indemnification of directors and officers to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law.
The
Registrant has a directors’ and officers’ liability insurance policy.
The
above
discussion is qualified in its entirety by reference to the Registrant’s
Certificate of Incorporation and Bylaws.
ITEM
15. Recent
Sales of Unregistered Securities.
During
February 2003, the Registrant entered into an exclusive license agreement with
Thomas Jefferson University to exclusively license certain U.S. and
international patent applications related to the oral administration of nontoxic
modified botulinum toxins as vaccines. As part of the compensation received
pursuant to the license agreement,
the
Registrant issued 141,305 shares of its common stock to Jefferson University
for
$0.92 per share. In connection with the license agreement, the Registrant
entered into a consulting agreement with Dr. Lance Simpson, the inventor of
the
botulinum toxin vaccine, for a period of three years under which
the
Registrant granted Dr. Simpson options to purchase 100,000 shares of
Registrant's common stock for $0.99 per share vesting over three years. The
shares of common stock and options were issued in transactions exempt from
registration under the Securities Act of 1933 in reliance upon Section 4(2)
of
the Securities Act, as transactions not involving a public
offering.
During
September 2003, the Registrant completed a private placement in which it issued
(i) 6,796,919 shares of common stock at $0.796 per share and
(ii)
warrants exercisable for 6,796,919 shares of its common stock at an exercise
price of $0.8756 per share, resulting in net proceeds of approximately $4.9
million.
The
warrants have a five-year term. Also,
as
part of the compensation received for its assistance in the private placement,
the
placement agents/dealers received warrants to purchase an aggregate of 1,359,383
shares of the Registrant's common stock at an exercise price of $0.8756 per
share. The
shares of common stock and warrants were issued in transactions exempt from
registration under the Securities Act of 1933 in reliance upon Rule 506 of
Regulation D under Section 4(2) of the Securities Act, as transactions not
involving a public offering.
During
March 2004, the Registrant completed a private placement in which it issued
(i)
4,113,924 shares of common stock at $0.79 per share and (ii) warrants
exercisable for 1,645,569 shares of its common stock at an exercise price of
$0.87 per share, resulting in net proceeds of approximately $3.0 million. The
warrants have a five-year term. Also,
as
part of the compensation received for its assistance in the private placement,
the placement agent received warrants to purchase an aggregate of 257,120 shares
of the Registrant's common stock at an exercise price of $0.87 per share. The
shares of common stock and warrants were issued in transactions exempt from
registration under the Securities Act of 1933 in reliance upon Rule 506 of
Regulation D under Section 4(2) of the Securities Act, as transactions not
involving a public offering.
During
February 2005, the Registrant completed a private placement in which it issued
(i) 8,396,100 shares of common stock at $0.45 per share and (ii) warrants
exercisable for 6,247,075 shares of its common stock at an exercise price of
$0.505 per share, resulting in net proceeds of approximately $3.5 million.
The
warrants have a five-year term. Also,
as
part of the compensation received for its assistance in the private placement,
the placement agent received warrants to purchase an aggregate of 629,708 shares
of the Registrant's common stock at an exercise price of $0.625 per share.
The
shares of common stock and warrants were offered in transactions exempt from
registration under the Securities Act of 1933 in reliance upon Rule 506 of
Regulation D under Section 4(2) of the Securities Act, as transactions not
involving a public offering.
ITEM
16. Exhibits.
3.1 Amended
and Restated Certificate of Incorporation. (10)
3.2 By-laws.
(11)
4.1 Form
of
Investor Warrant issued to each investor dated as of April 12, 2000. (1)
4.2 Finder
Warrant issued to Paramount Capital, Inc. dated as of April 12, 2000. (1)
4.3 Warrant
issued to Aries Fund dated as of May 19, 1997. (1)
4.4 Warrant
issued to Aries Domestic Fund, L.P. dated as of May 19, 1997. (1)
4.5 Warrant
issued to Paramount Capital, Inc. dated as of October 16, 1997. (2)
4.6 Warrant
issued to Paramount Capital, Inc. dated as of October 16, 1997. (2)
4.7 Warrant
issued to Élan International Services, Ltd. dated January 21, 1998. (3)
4.8 Form
of
Warrant to be issued to CTD warrant holders. (4)
4.9 Form
of
Warrant issued to each investor in the December 2002 private
placement.
4.10 Form
of
Warrant issued to each investor in the September 2003 private placement. (8)
4.11 Form
of
Warrant issued to each investor in the March 2004 private placement. (9)
4.12 Form
of
Warrant issued to each investor in the February 2005 private placement. (13)
4.13 Form
of
Warrant issued to Mid South Capital, Inc. in the February 2005 private
placement. (14)
5.1 Opinion
of Edwards Angell Palmer & Dodge LLP
10.1 Amended
and Restated 1995 Omnibus Incentive Plan. (10)
10.2 Lease
dated September 1, 2003 between the Company and L.N.R. Jefferson LLC.
|
10.3
|
Form
of Affiliate Agreement dated as of August 15, 2001 by and between
the
Company and the affiliates of CTD. (5)
|
|
10.4
|
Noncompetition
and Nonsolicitation Agreement entered into by and among the Company,
CTD
and Steve H. Kanzer dated as of November 29, 2001. (7)
|
|
10.5
|
Termination
of the Endorex Newco joint venture between the Company, Élan Corporation,
Élan international services, and Elan
Pharmaceutical dated December 12, 2002. (7)
|
10.6 Option
Agreement with General Alexander M. Haig Jr. (7) *
|
10.7
|
Separation
Agreement and General Release between the Company and Ralph Ellison
dated
July 9, 2004. (14)
|
|
10.8
|
License
Agreement between the Company and The University of Texas Southwestern
Medical Center. (14)
|
10.9 License
Agreement between the Company and Thomas Jefferson University. (14)
10.10 License
Agreement between the Company and The University of Texas Medical Branch. (14)
|
10.11
|
Consulting
Agreement between the Company and Lance Simpson of Thomas Jefferson
University. (14)
|
|
10.12
|
Form
of Subscription Agreement between the Company and each investor dated
July
18, 2003. (8)
|
|
10.13
|
Form
of Securities Purchase Agreement between the Company and each investor
dated March 4, 2004. (9)
|
|
10.14
|
Form
of Registration Rights Agreement between the Company and each Investor
dated March 4, 2004. (9)
|
|
10.15
|
Employment
agreement between the Company and Greg Davenport dated September
1,
2004. (14)*
|
10.16 Employment
agreement between the Company and Mike Sember dated December 7, 2004.
(14)*
|
10.17
|
Employment
agreement between the Company and Evan Myrianthopoulos dated December
9,
2004. (14)*
|
10.18 Employment
agreement between the Company and James Clavijo dated February 18, 2005.
(14)*
|
10.19
|
Form
of Securities Purchase Agreement between the Company and each investor
dated February 1, 2005 (13).
|
|
10.20
|
Amendment
No. 1 dated February 17, 2005 to the Securities Purchase Agreement
between
the Company and each investor dated February 1, 2005.
(14)
|
|
10.21
|
Form
Registration Rights agreement between the Company and each investor
dated
February 1, 2005 (13).
|
|
10.22
|
Securities
Purchase Agreement dated as of February 1, 2005 among the Company
and the
investors named therein. (15)
|
|
10.23
|
Form
of Common Stock Purchase Warrant.
(15)
|
|
10.24
|
Registration
Rights Agreement dated as of February 1, 2005 among the Company and
the
investors named therein. (15)
|
|
10.25
|
Binding
Letter of Intent Dated October 28, 2005 between the Company and
Gastrotech. (16)
|
|
10.26
|
Common
Stock Purchase Agreement dated January 17, 2006 between the Company
and
Fusion Capital. (17)
|
|
10.27
|
Registration
Rights Agreement dated January 17, 2006 between the Company and Fusion
Capital. (17)
|
23.1 Consent
of Sweeney, Gates & Co., independent registered public accounting firm.
23.2 Consent
of Edwards Angell Palmer & Dodge LLC (contained in the opinion filed as
Exhibit 5.1
hereto).
*
Management contract or compensatory plan or arrangement
_________________________________
|
(1)
|
Incorporated
by reference to our Registration Statement on Form S-3 (File No.
333-
36950), as amended on December 29, 2000.
|
|
(2)
|
Incorporated
by reference to our Quarterly Report on Form 10-QSB, as amended,
for the
fiscal quarter ended September 30, 1997.
|
|
(3)
|
Incorporated
by reference to our Annual Report on Form 10-KSB, as amended, for
the
fiscal year ended December 31, 1997.
|
(4) Incorporated
by reference to our Registration Statement on Form S-4 filed on October
2, 2001.
(5) Incorporated
by reference to our current report on Form 8-K filed on December 14, 2001.
|
(6)
|
Incorporated
by reference to our Annual Report on Form 10-KSB as amended for the
fiscal
year ended December 31, 2001.
|
|
(7)
|
Incorporated
by reference to our Annual Report on Form 10-KSB as amended for the
fiscal
year ended December 31, 2002.
|
(8) Incorporated
by reference to our current report on Form 8-K filed on July 18, 2003.
(9) Incorporated
by reference to our current report on Form 8-K filed on March 4, 2004.
|
(10)
|
Incorporated
by reference to our Quarterly Report on Form 10-QSB, as amended,
for the
fiscal quarter ended September 30, 2003.
|
|
(11)
|
Incorporated
by reference to our Quarterly Report on Form 10-QSB, as amended,
for the
fiscal quarter ended June 30, 2003.
|
|
(12)
|
Incorporated
by reference to our Annual Report on Form 10-KSB, as amended, for
the
fiscal year ended December 31,
2003.
|
(13) Incorporated
by reference to our current report on Form 8-K filed on February 3, 2005.
|
(14)
|
Incorporated
by reference to our Annual Report on Form 10-KSB for the fiscal year
ended
December 31, 2004.
|
|
(15)
|
Incorporated
by reference to our Current Report on Form 8-K filed on February
3,
2005.
|
|
(16)
|
Incorporated
by reference to our Current Report on Form 8-K filed on November
2,
2005.
|
|
(17)
|
Incorporated
by reference to our Current Report on Form 8-K filed on January 19,
2006.
|
ITEM
17. Undertakings.
(a) The
undersigned Registrant hereby undertakes as follows:
(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 this 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 this registration statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 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 this 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 this
offering.
(b) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the Registrant of expenses incurred or paid by a director, officer
or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of our 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.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-1 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Miami, State of Florida, on the 19 day of January, 2006.
DOR
BIOPHARMA, INC.
By:
/s/
Michael T. Sember________________
Michael
T. Sember
President
and Chief Executive Officer
POWER
OF ATTORNEY
KNOW
ALL MEN BY THESE PRESENTS,
that
each person whose signature appears below constitutes and appoints Michael
T.
Sember and Evan Myrianthopoulos, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead in any and all
capacities, to sign any or all amendments to this Registration Statement on
Form
S-1 (including post-effective amendments), 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 full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and
to
all intents and purposes as he might or could do in person, hereby ratifying
and
confirming that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
/s/Michael
T. Sember
Michael
T. Sember
|
|
Director,
President and Chief Executive Officer (Principal Executive Officer)
|
|
January
19, 2006
|
|
/s/Evan
Myrianthopoulos
Evan
Myrianthopoulos
|
|
Director,
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
January
19, 2006
|
|
/s/Alexander
P. Haig
Alexander
P. Haig
|
|
Chairman
of the Board
|
|
January
19, 2006
|
|
/s/Steve
H. Kanzer
Steve
H. Kanzer
|
|
Vice-Chairman
of the Board
|
|
January
19, 2006
|
|
/s/James
S. Kuo
James
S. Kuo
|
|
Director
|
|
January
19, 2006
|
|
/s/T.J.
Madison
T.J.
Madison
|
|
Director
|
|
January
19, 2006
|