Filed
Pursuant to Rule 424(b)(3)
Registration
Nos. 333-136187, 333-108645, 333-111135,
333-113796,
333-117178 and 333-130008
HEMISPHERX
BIOPHARMA, INC.
8,564,225
Shares of Common Stock
This
prospectus relates to the sale of up to 8,564,225 shares of our common stock
that may be offered and sold from time to time by selling stockholders and
the
persons to whom such selling stockholders may transfer their shares, consisting
of: (1) 1,255,877 shares of our common stock issuable to Fusion Capital Fund
II,
LLC (“Fusion Capital”) under a common stock purchase agreement; (2) 5,594,104
shares of common stock issuable upon exercise of outstanding warrants; (3)
135%
of 3,615,514 shares of common stock issuable upon the exercise of outstanding
warrants related to our former 2003 and 2004 7% Senior Convertible Debentures
(“Debenture Warrants”); and (4) 448,814 shares of outstanding common stock
issued to Fusion Capital. We will not receive any of the proceeds from the
sale
of these shares by the selling stockholders, but we will receive proceeds from
sales of shares to Fusion Capital and the cash exercise of warrants, if
any.
Our
common stock is listed on the American Stock Exchange under the symbol HEB.
The
reported last sale price on the American Stock Exchange on April 18, 2008 was
$0.68.
The
selling stockholders may sell their shares from time to time on the American
Stock Exchange or otherwise, in one or more transactions at fixed prices, at
prevailing market prices at the time of sale or at prices negotiated with
purchasers. The selling stockholders will be responsible for any commissions
or
discounts due to brokers or dealers. We will pay substantially all expenses
of
registration of the shares covered by this prospectus.
Please
see the risk factors beginning on page 6 to read about certain factors you
should consider before buying shares of common stock.
Fusion
Capital is an "underwriter" within the meaning of the Securities Act of 1933.
Other selling stockholders may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined that this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is May 1, 2008
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed with the Securities and Exchange Commission a registration statement
(which includes this prospectus) on Form S-1 (File No. 333-136187) under the
Securities Act of 1933, as amended, with respect to the common stock the selling
stockholders are offering by this prospectus. This prospectus does not contain
all of the information included in the registration statement and the exhibits
and schedules to the registration statement. For further information about
us
and our securities, you should refer to the registration statement and the
exhibits filed with the registration statement. Statements contained in this
prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, we refer you to the copy of that
contract or document filed as an exhibit to the Registration
Statement.
We
are
subject to the information requirements of the Securities Exchange Act of 1934
and file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read our SEC filings, including the
registration statement, over the Internet at the SEC’s website at www.sec.gov
or
through our website at www.hemispherx.net.
Information contained on our website is not considered to be a part of, nor
incorporated by reference in, this prospectus. You may also read and copy any
document we file with the SEC at its Public Reference Room at 100 F Street,
NE,
Washington, D.C. 20549.
You
may
also obtain copies of the documents at prescribed rates by writing to the Public
Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of
the
Public Reference Room.
INFORMATION
INCORPORATED BY REFERENCE
The
SEC
allows us to “incorporate by reference” the information that we file with them,
which means that we can disclose important information to you by referring
you
to those documents. The information incorporated by reference is an important
part of this prospectus, and you should review that information in order to
understand the nature of any investment by you in our common stock. Information
contained in this prospectus automatically updates and supersedes previously
filed information. We are incorporating by reference the following documents:
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(a)
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Our
annual report on Form 10-K for our fiscal year ended December 31,
2007,
SEC
File No. 1-13441.
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(b)
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Our
current report on Form 8-K, SEC File No. 1-13441 filed with the SEC
on
March 10, 2008.
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(c)
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Our
proxy statement on schedule 14A for our 2007 annual meeting, SEC
File No. 1-13441.
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(d)
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A
description of our common stock contained in our registration statement
on
Form S-1, SEC File No. 333-117178, and any amendment or report filed
for
the purpose of updating this description filed subsequent to the
date of
this prospectus and prior to the termination of this
offering.
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(e)
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All
of our filings pursuant to Sections 13(a) or 15(d) under the Securities
Exchange Act of 1934, as amended, since the date of the filing of
our
Annual Report on Form 10-K for the fiscal year ended December 31,
2007
through the date of this
prospectus.
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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 we have
incorporated by reference in this prospectus, at no cost. To obtain any such
documents please write or telephone us at the following address: Hemispherx
Biopharma, Inc., 1617 JFK Boulevard, Philadelphia, Pennsylvania 19103, telephone
number 215-988-0080. In addition, these documents may be accessed at our website
at www.hemispherx.net
via a
link to the SEC’s website. Information contained on our website is not
considered to be a part of, nor incorporated by reference in, this
prospectus.
You
should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. We and the selling stockholders will not make
offers to sell these shares in any state where the offer is not permitted.
You
should not assume that the information in this prospectus or any supplement
is
accurate as of any date other that the date on the front of those
documents.
PROSPECTUS
SUMMARY
The
following is a brief summary of certain information contained elsewhere in
this
prospectus or incorporated in this prospectus by reference. This summary is
not
intended to be a complete description of the matters covered in this prospectus
and is qualified in its entirety by reference to the more detailed information
contained or incorporated by reference in this prospectus. You are urged to
read
this prospectus in its entirety, including all materials incorporated in this
prospectus by reference.
The
registration statement that contains this prospectus, including the exhibits
to
the registration statement, contains additional information about us and the
securities being offered under this prospectus. You should read the registration
statement and the accompanying exhibits for further information. The
registration statement and exhibits can be read and are available to the public
over the Internet at the SEC's website at http://www.sec.gov as described under
the heading "Where You Can Find More Information."
About
Hemispherx
We
are a
biopharmaceutical company engaged in the clinical development, manufacture,
marketing and distribution of new drug therapies based on natural immune system
enhancing technologies for the treatment of viral and immune based chronic
disorders. We were founded in the early 1970s doing contract research for the
National Institutes of Health. Since that time, we have established a strong
foundation of laboratory, pre-clinical, and clinical data with respect to the
development of nucleic acids to enhance the natural antiviral defense system
of
the human body and to aid the development of therapeutic products for the
treatment of certain chronic diseases.
Our
current strategic focus is derived from four applications of our two core
pharmaceutical technology platforms Ampligen® and Alferon N Injection®. The
commercial focus for Ampligen includes application as a treatment for Chronic
Fatigue Syndrome (CFS) and as a vaccine enhancer (adjuvant) for both therapeutic
and preventative vaccine development. Alferon N Injection® is an FDA approved
product with an indication for refractory or recurring genital warts. Alferon
LDO (Low Dose Oral) is an application currently under early stage development
targeting influenza and viral diseases both as an adjuvant as well as a single
entity anti-viral.
Ampligen®
is an experimental drug currently undergoing clinical development for the
treatment of Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (“ME/CFS” or
“CFS”), and HIV. We completed Phase III clinical trials using Ampligen® to treat
ME/CFS patients and are presently in the registration process for a new drug
application (“NDA”) with the Food and Drug Administration (“FDA”). An NDA for
treatment of CFS was filed on October 10, 2007. On December 3, 2007 a refusal
to
file (RTF) letter was received because the application was deemed “not
substantially complete”. A written response was developed and submitted to the
FDA addressing 14 pre-clinical and clinical questions. We are currently in
the
process of submitting amendments to the NDA filing that we believe address
certain of these questions. Ampligen represents the first drug in class of
RNA
(nucleic acid) molecules to apply for NDA review.
We
own
and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, New Jersey
primarily designed to produce Alferon N. In 2006, we completed the installation
of a polymer production line to produce Ampligen® raw materials on a more
reliable and consistent basis.
Our
principal executive offices are located at One Penn Center, 1617 JFK Boulevard,
Philadelphia, Pennsylvania 19103, and our telephone number is
215-988-0080.
We
maintain a website at “http://www.hemispherx.net.” Information contained on our
website is not considered to be a part of, nor incorporated by reference in,
this prospectus.
Fusion
Capital Transactions
On
April
12, 2006, we entered into a common stock purchase agreement with Fusion Capital
Fund II, LLC, ("Fusion Capital"), pursuant to which, Fusion Capital has agreed,
under certain conditions, to purchase from us on each trading day $100,000
of
our common stock up to an aggregate of $50,000,000 through August 1, 2008,
subject to earlier termination at our discretion. At our option, 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 is 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 $1.00. As of the date hereof, Fusion is not permitted to purchase
shares under the common stock purchase agreement because the price of our common
stock is less than $1.00.
Through
April 18, 2008, we have sold to Fusion Capital an aggregate of 10,682,032 shares
under the common stock purchase agreement for aggregate gross proceeds of
approximately $19,739,000. In addition, we have issued 448,814 Commitment
Shares. Fusion Capital is offering for sale herein up to 1,704,691 shares of
our
common stock consisting of 448,814 shares
currently owned by Fusion Capital (Commitment Shares) and 1,255,877
shares
(inclusive of an additional 194,688 Commitment Shares) issuable under the common
stock purchase agreement. We will realize much less than the maximum $50,000,000
proceeds from the sale of stock under the Purchase Agreement (please see
“Selling
Stockholders; The Fusion Transaction; Commitment Shares Issued to Fusion
Capital”
for a
description of the Commitment Shares).
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. For more detailed information, please see “The
Fusion Transaction”
in
“Selling
Stockholders” below.
Securities
Offered
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Common
stock to be offered
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by
the selling stockholders
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8,564,225
Shares consisting of:
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·
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1,255,877
shares of our common stock issuable to Fusion Capital pursuant to
a common
stock purchase agreement (inclusive
of 194,688 Commitment Shares);
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| |
·
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5,594,104
shares of common stock issuable upon exercise of other outstanding
warrants;
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·
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135%
of 3,615,514 shares of common stock issuable upon the exercise of
outstanding warrants related to our former 2003 and 2004 7% Senior
Convertible Debentures; and
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| |
·
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448,814
outstanding shares of common stock owned by Fusion Capital.
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|
Common
stock outstanding
prior to this offering
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73,975,265
Shares
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Use
of Proceeds
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We
will not receive any of the proceeds from the sale of the shares
of common
stock because they are being offered by the selling stockholders
and we
are not offering any shares for sale under this prospectus, but we
may
receive proceeds from the exercise of warrants held by certain of
the
selling stockholders. In addition, if the price of our common stock
reaches $1.00 per share, we may receive gross proceeds from the sale
of up
to 1,255,877 shares of our common stock to Fusion Capital under the
common
stock purchase agreement. We will apply such proceeds, if any, for
general
corporate operating purposes. See "Use of Proceeds."
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HEB
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RISK
FACTORS
Special
Note Regarding Forward-Looking Statements
Certain
statements in this prospectus constitute “forwarding-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1995 (collectively, the
“Reform Act”). Certain, but not necessarily all, of such forward-looking
statements can be identified by the use of forward-looking terminology such
as
“believes,” “expects,” “may,” “will,” “should,” or “anticipates” or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy that involve risks and uncertainties. All statements other than
statements of historical fact, included in this prospectus regarding our
financial position, business strategy and plans or objectives for future
operations are forward-looking statements. Without limiting the broader
description of forward-looking statements above, we specifically note that
statements regarding potential drugs, their potential therapeutic effect, the
possibility of obtaining regulatory approval, our ability to manufacture and
sell any products, market acceptance or our ability to earn a profit from sales
or licenses of any drugs or our ability to discover new drugs in the future
are
all forward-looking in nature.
Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors, including but not limited to, the risk factors discussed below,
which may cause the actual results, performance or achievements of Hemispherx
and its subsidiaries to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements and other factors referenced in this prospectus. We do not undertake
and specifically decline any obligation to publicly release the results of
any
revisions which may be made to any forward-looking statement to reflect events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.
The
following cautionary statements identify important factors that could cause
our
actual results to differ materially from those projected in the forward-looking
statements made in this prospectus. Among the key factors that have a direct
bearing on our results of operations are:
Risks
Associated With Our Business
No
assurance of successful product development.
Ampligen®
and related products.
The
development of Ampligen® and
our
other related products is subject to a number of significant risks.
Ampligen® may
be
found to be ineffective or to have adverse side effects, fail to receive
necessary regulatory clearances, be difficult to manufacture on a commercial
scale, be uneconomical to market or be precluded from commercialization by
proprietary right of third parties. Our products are in various stages of
clinical and pre-clinical development and, require further clinical studies
and
appropriate regulatory approval processes before any such products can be
marketed. We do not know when, if ever, Ampligen® or
our
other products will be generally available for commercial sale for any
indication. Generally, only a small percentage of potential therapeutic products
are eventually approved by the FDA for commercial sale. Please see the next
risk
factor.
Alferon
N Injection®.
Although Alferon N Injection® is approved for marketing in the United States for
the intra-lesional treatment of refractory or recurring external genital warts
in patients 18 years of age or older, to date it has not been approved for
other
indications. We face many of the risks discussed above, with regard to
developing this product for use to treat other ailments.
Our
drug and related technologies are investigational and subject to regulatory
approval. If we are unable to obtain regulatory approval, our operations will
be
significantly adversely affected.
All
of
our drugs and associated technologies, other than Alferon N Injection®, are
investigational and must receive prior regulatory approval by appropriate
regulatory authorities for general use and are currently legally available
only
through clinical trials with specified disorders. At present, Alferon N
Injection® is only approved for the intra-lesional treatment of refractory or
recurring external genital warts in patients 18 years of age or older. Use
of
Alferon N Injection® for other indications will require regulatory
approval.
Our
products, including Ampligen®, are subject to extensive regulation by numerous
governmental authorities in the U.S. and other countries, including, but not
limited to, the FDA in the U.S., the Health Protection Branch (“HPB”) of Canada,
and the Agency for the Evaluation of Medicinal Products (“EMEA”) in Europe.
Obtaining regulatory approvals is a rigorous and lengthy process and requires
the expenditure of substantial resources. In order to obtain final regulatory
approval of a new drug, we must demonstrate to the satisfaction of the
regulatory agency that the product is safe and effective for its intended uses
and that we are capable of manufacturing the product to the applicable
regulatory standards. We require regulatory approval in order to market
Ampligen® or any other proposed product and receive product revenues or
royalties. We cannot assure you that Ampligen® will ultimately be demonstrated
to be safe or efficacious. In addition, while Ampligen® is authorized for use in
clinical trials including a cost recovery program in the United States and
Europe, we cannot assure you that additional clinical trial approvals will
be
authorized in the United States or in other countries, in a timely fashion
or at
all, or that we will complete these clinical trials.
We
filed
an NDA with the FDA for treatment of CFS on October 10, 2007. On December 3,
2007 we received a refusal to file (“RTF”) letter from the FDA because the
application was deemed “not substantially complete”. We submitted a written
response to the FDA addressing 14 pre-clinical and clinical questions. Ampligen
represents the first drug in class of RNA (nucleic acid) molecules to apply
for
NDA review.
We are
currently in the process of submitting amendments to the NDA filing that we
believe address certain of these questions. We can provide no guidance as to
the
tentative date at which the filing of the NDA will be accepted or, if accepted,
when or if the NDA will be approved. The timing of the FDA review process of
the
NDA is subject to the control of the FDA and could result in one of the
following events: 1) approval to market Ampligen® for use in treating ME/CFS
patients; 2) require more research, development, and clinical work; 3) approval
to market as well as conduct more testing; or 4) reject our NDA application.
If
Ampligen® or one of our other products does not receive regulatory approval in
the U.S. or elsewhere, our operations most likely will be materially adversely
affected.
Although
preliminary in vitro testing indicates that Ampligen® enhances the effectiveness
of different drug combinations on avian influenza, preliminary testing in the
laboratory is not necessarily predictive of successful results in clinical
testing or human treatment.
Ampligen®
is undergoing pre-clinical testing for possible treatment of avian flu. Although
preliminary in vitro testing indicates that Ampligen® enhances the effectiveness
of different drug combinations on avian flu, preliminary testing in the
laboratory is not necessarily predictive of successful results in clinical
testing or human treatment. No assurance can be given that similar results
will
be observed in clinical trials. Use of Ampligen® in the treatment of avian flu
requires prior regulatory approval. Only the FDA can determine whether a drug
is
safe, effective or promising for treating a specific application. As discussed
in the prior risk factor, obtaining regulatory approvals is a rigorous and
lengthy process.
In
addition, Ampligen® is being tested on two strains of avian influenza virus.
There are a number of strains and strains mutate. No assurance can be given
that
Ampligen® will be effective on any strains that might infect
humans.
We
may continue to incur substantial losses and our future profitability is
uncertain.
We
began
operations in 1966 and last reported net profit from 1985 through 1987. Since
1987, we have incurred substantial operating losses, as we pursued our clinical
trial effort to get our experimental drug, Ampligen®, approved. As of
December
31,
2007,
our accumulated deficit was approximately $185,190,000. We have not yet
generated significant revenues from our products and may incur substantial
and
increased losses in the future. We cannot assure that we will ever achieve
significant revenues from product sales or become profitable. We require, and
will continue to require, the commitment of substantial resources to develop
our
products. We cannot assure that our product development efforts will be
successfully completed or that required regulatory approvals will be obtained
or
that any products will be manufactured and marketed successfully, or be
profitable.
We
may require additional financing which may not be
available.
The
development of our products will require the commitment of substantial resources
to conduct the time-consuming research, preclinical development, and clinical
trials that are necessary to bring pharmaceutical products to market. As of
December 31, 2007, we had approximately $15,415,000 in
cash
and cash equivalents and short-term investments. We anticipate, but cannot
assure, that these
funds will be sufficient to meet our operating cash requirements for the next
18
months.
In
April
2006, we entered into a common stock purchase agreement with Fusion Capital
pursuant to which Fusion Capital has agreed, under certain conditions and with
certain limitations, to purchase on each trading day $100,000 of our common
stock up to an aggregate of $50,000,000 until August 1, 2008 (see “The
Fusion Transaction” in Selling Stockholders” below).
We
only
have the right to receive up to $100,000 per trading day under the agreement
with Fusion Capital unless our stock price exceeds $1.90 by at least $0.10,
in
which case the daily amount may be increased under certain conditions as the
price of our common stock increases. Fusion Capital does 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 $1.00. We have registered
an aggregate of 13,201,840 shares purchasable by Fusion Capital pursuant to
the
common stock purchase agreement (inclusive of up to 643,502 additional
Commitment Shares) and, through April 18, 2008, we have sold to Fusion Capital
an aggregate of 10,682,032 shares under the common stock purchase agreement
for
aggregate gross proceeds of approximately $19,739,000. Assuming a purchase
price
of $1.00 per share, the lowest price at which Fusion is obligated to purchase
shares from us (the closing sale price of the common stock on April 18, 2008
was
$0.68) and the purchase by Fusion Capital of the remaining 1,061,189 shares
(not
including the remaining 194,688 Commitment Shares), total gross proceeds to
us
from the remaining shares would only be approximately $1,061,000 ($20,800,000
in
the aggregate under the common stock purchase agreement).
Unless
and until the market price for our common stock increases to at least $1.00,
no
additional shares will be sold to Fusion Capital under the agreement. We will
realize much less than the maximum $50,000,000 proceeds from the sale of stock
under the Purchase Agreement.
Assuming
no material additional financing from Fusion Capital and if we are unable to
commercialize and sell Ampligen® and/or increase sales of Alferon N Injection®
or our other products, we will need to secure other sources of funding through
additional equity or debt financing or from other sources in order to satisfy
our working capital needs and to complete the necessary clinical trials and
the
regulatory approval processes including the commercializing of Ampligen®
products. There can be no assurances that we will raise adequate funds which
may
have a material adverse effect on our ability to develop our products.
We
may not be profitable unless we can protect our patents and/or receive approval
for additional pending patents.
We
need
to preserve and acquire enforceable patents covering the use of Ampligen® for a
particular disease in order to obtain exclusive rights for the commercial sale
of Ampligen® for such disease. We obtained all rights to Alferon N Injection®,
and we plan to preserve and acquire enforceable patents covering its use for
existing and potentially new diseases. Our success depends, in large part,
on
our ability to preserve and obtain patent protection for our products and to
obtain and preserve our trade secrets and expertise. Certain of our know-how
and
technology is not patentable, particularly the procedures for the manufacture
of
our experimental drug, Ampligen®, which is carried out according to standard
operating procedure manuals. We have been issued certain patents including
those
on the use of Ampligen® and Ampligen® in combination with certain other drugs
for the treatment of HIV. We also have been issued patents on the use of
Ampligen® in combination with certain other drugs for the treatment of chronic
Hepatitis B virus, chronic Hepatitis C virus, and a patent which affords
protection on the use of Ampligen® in patients with Chronic Fatigue Syndrome. We
have not yet been issued any patents in the United States for the use of
AmpligenÒ
as a
sole treatment for any of the cancers, which we have sought to target. With
regard to Alferon N Injection®, we have acquired from ISI its patents for
natural alpha interferon produced from human peripheral blood leukocytes and
its
production process and we have filed a patent application for the use of
Alferon® LDO in treating viral diseases including avian influenza. We cannot
assure that our competitors will not seek and obtain patents regarding the
use
of similar products in combination with various other agents, for a particular
target indication prior to our doing such. If we cannot protect our patents
covering the use of our products for a particular disease, or obtain additional
patents, we may not be able to successfully market our products.
The
patent position of biotechnology and pharmaceutical firms is highly uncertain
and involves complex legal and factual questions.
To
date,
no consistent policy has emerged regarding the breadth of protection afforded
by
pharmaceutical and biotechnology patents. There can be no assurance that new
patent applications relating to our products or technology will result in
patents being issued or that, if issued, such patents will afford meaningful
protection against competitors with similar technology. It is generally
anticipated that there may be significant litigation in the industry regarding
patent and intellectual property rights. Such litigation could require
substantial resources from us and we may not have the financial resources
necessary to enforce the patent rights that we hold. No assurance can be made
that our patents will provide competitive advantages for our products or will
not be successfully challenged by competitors. No assurance can be given that
patents do not exist or could not be filed which would have a materially adverse
effect on our ability to develop or market our products or to obtain or maintain
any competitive position that we may achieve with respect to our products.
Our
patents also may not prevent others from developing competitive products using
related technology.
There
can be no assurance that we will be able to obtain necessary licenses if we
cannot enforce patent rights we may hold. In addition, the failure of third
parties from whom we currently license certain proprietary information or from
whom we may be required to obtain such licenses in the future, to adequately
enforce their rights to such proprietary information, could adversely affect
the
value of such licenses to us.
If
we
cannot enforce the patent rights we currently hold we may be required to obtain
licenses from others to develop, manufacture or market our products. There
can
be no assurance that we would be able to obtain any such licenses on
commercially reasonable terms, if at all. We currently license certain
proprietary information from third parties, some of which may have been
developed with government grants under circumstances where the government
maintained certain rights with respect to the proprietary information developed.
No assurances can be given that such third parties will adequately enforce
any
rights they may have or that the rights, if any, retained by the government
will
not adversely affect the value of our license.
There
is
no guarantee that our trade secrets will not be disclosed or known by our
competitors.
To
protect our rights, we require certain employees and consultants to enter into
confidentiality agreements with us. There can be no assurance that these
agreements will not be breached, that we would have adequate and enforceable
remedies for any breach, or that any trade secrets of ours will not otherwise
become known or be independently developed by competitors.
We
have limited marketing and sales capability. If we are unable to obtain
additional distributors and our current and future distributors do not market
our products successfully, we may not generate significant revenues or become
profitable.
We
have
limited marketing and sales capability. We are dependent upon existing and,
possibly future, marketing agreements and third party distribution agreements
for our products in order to generate significant revenues and become
profitable. As a result, any revenues received by us will be dependent in large
part on the efforts of third parties, and there is no assurance that these
efforts will be successful.
Our
commercialization strategy for Ampligen-CFS may include licensing/co-marketing
agreements utilizing the resources and capacities of a strategic partner(s).
We
are currently seeking worldwide marketing partner(s), with the goal of having
a
relationship in place before approval is obtained. In parallel to partnering
discussions, appropriate pre-marketing activities will be undertaken. We intend
to control manufacturing of Ampligen on a worldwide basis.
We
cannot
assure that our U.S. or foreign marketing strategy will be successful or that
we
will be able to establish future marketing or third party distribution
agreements on terms acceptable to us, or that the cost of establishing these
arrangements will not exceed any product revenues. Our inability to establish
viable marketing and sales capabilities would most likely have a materially
adverse effect on us.
There
are no long-term agreements with suppliers of required materials. If we are
unable to obtain the required raw materials, we may be required to scale back
our operations or stop manufacturing Alferon N Injection® and/or
Ampligen®.
A
number
of essential materials are used in the production of Alferon N Injection®,
including human white blood cells. We do not have long-term agreements for
the
supply of any of such materials. There can be no assurance we can enter into
long-term supply agreements covering essential materials on commercially
reasonable terms, if at all.
There
are
a limited number of manufacturers in the United States available to provide
the
polymers for use in manufacturing Ampligen®. At present, we do not have any
agreements with third parties for the supply of any of these polymers. We have
established relevant manufacturing operations within our New Brunswick, New
Jersey facility for the production of Ampligen® polymers from raw materials in
order to obtain polymers on a more consistent manufacturing basis.
If
we are
unable to obtain or manufacture the required polymers, we may be required to
scale back our operations or stop manufacturing. The costs and availability
of
products and materials we need for the production of Ampligen® and the
commercial production of Alferon N Injection® and other products which we may
commercially produce are subject to fluctuation depending on a variety of
factors beyond our control, including competitive factors, changes in
technology, and FDA and other governmental regulations and there can be no
assurance that we will be able to obtain such products and materials on terms
acceptable to us or at all.
There
is no assurance that successful manufacture of a drug on a limited scale basis
for investigational use will lead to a successful transition to commercial,
large-scale production.
Small
changes in methods of manufacturing, including commercial scale-up, may affect
the chemical structure of Ampligen® and other RNA drugs, as well as their safety
and efficacy, and can, among other things, require new clinical studies and
affect orphan drug status, particularly, market exclusivity rights, if any,
under the Orphan Drug Act. The transition from limited production of
pre-clinical and clinical research quantities to production of commercial
quantities of our products will involve distinct management and technical
challenges and will require additional management and technical personnel and
capital to the extent such manufacturing is not handled by third parties. There
can be no assurance that our manufacturing will be successful or that any given
product will be determined to be safe and effective, capable of being
manufactured economically in commercial quantities or successfully
marketed.
We
have limited manufacturing experience and capacity.
Ampligen®
has been only produced in limited quantities for use in our clinical trials
and
we are dependent upon a third party supplier for substantially all of the
production process. The failure to continue these arrangements or to achieve
other such arrangements on satisfactory terms could have a material adverse
affect on us. Also, to be successful, our products must be manufactured in
commercial quantities in compliance with regulatory requirements and at
acceptable costs. To the extent we are involved in the production process,
our
current facilities are not adequate for the production of our proposed products
for large-scale commercialization, and we currently do not have adequate
personnel to conduct commercial-scale manufacturing. We intend to utilize
third-party facilities if and when the need arises or, if we are unable to
do
so, to build or acquire commercial-scale manufacturing facilities. We will
need
to comply with regulatory requirements for such facilities, including those
of
the FDA pertaining to current Good Manufacturing Practices (“cGMP”) regulations.
There can be no assurance that such facilities can be used, built, or acquired
on commercially acceptable terms, or that such facilities, if used, built,
or
acquired, will be adequate for our long-term needs.
We
may not be profitable unless we can produce Ampligen® or other products in
commercial quantities at costs acceptable to us.
We
have
never produced Ampligen® or any other products in large commercial quantities.
We must manufacture our products in compliance with regulatory requirements
in
large commercial quantities and at acceptable costs in order for us to be
profitable. We intend to utilize third-party manufacturers and/or facilities
if
and when the need arises or, if we are unable to do so, to build or acquire
commercial-scale manufacturing facilities. If we cannot manufacture commercial
quantities of Ampligen® or enter into third party agreements for its manufacture
at costs acceptable to us, our operations will be significantly affected. Also,
each production lot of Alferon N Injection® is subject to FDA review and
approval prior to releasing the lots to be sold. This review and approval
process could take considerable time, which would delay our having product
in
inventory to sell.
Rapid
technological change may render our products obsolete or
non-competitive.
The
pharmaceutical and biotechnology industries are subject to rapid and substantial
technological change. Technological competition from pharmaceutical and
biotechnology companies, universities, governmental entities and others
diversifying into the field is intense and is expected to increase. Most of
these entities have significantly greater research and development capabilities
than us, as well as substantial marketing, financial and managerial resources,
and represent significant competition for us. There can be no assurance that
developments by others will not render our products or technologies obsolete
or
noncompetitive or that we will be able to keep pace with technological
developments.
Our
products may be subject to substantial competition.
Ampligen®.
Competitors may be developing technologies that are, or in the future may be,
the basis for competitive products. Some of these potential products may have
an
entirely different approach or means of accomplishing similar therapeutic
effects to products being developed by us. These competing products may be
more
effective and less costly than our products. In addition, conventional drug
therapy, surgery and other more familiar treatments may offer competition to
our
products. Furthermore, many of our competitors have significantly greater
experience than us in pre-clinical testing and human clinical trials of
pharmaceutical products and in obtaining FDA, HPB and other regulatory approvals
of products. Accordingly, our competitors may succeed in obtaining FDA, HPB
or
other regulatory product approvals more rapidly than us. There are no drugs
approved for commercial sale with respect to treating ME/CFS in the United
States. The dominant competitors with drugs to treat disease indications in
which we plan to address include Gilead Pharmaceutical, Pfizer, Bristol-Myers,
Abbott Labs, Glaxo Smith Kline, Merck and Schering-Plough Corp. These potential
competitors are among the largest pharmaceutical companies in the world, are
well known to the public and the medical community, and have substantially
greater financial resources, product development, and manufacturing and
marketing capabilities than we have. Although we believe our principal advantage
is the unique mechanism of action of Ampligen® on the immune system, we cannot
assure that we will be able to compete.
ALFERON
N
Injection®. Our competitors are among the largest pharmaceutical companies in
the world, are well known to the public and the medical community, and have
substantially greater financial resources, product development, and
manufacturing and marketing capabilities than we have. Alferon N Injection®
currently competes with Schering’s injectable recombinant alpha interferon
product (INTRON® A) for the treatment of genital warts. 3M Pharmaceuticals also
offer competition from its immune-response modifier, Aldara®, a
self-administered topical cream, for the treatment of external genital and
perianal warts. In addition, Medigene recently received FDA approval for a
self-administered ointment, VeregenTM, which is indicated for the topical
treatment of external genital and perianal warts. Alferon N Injection® also
competes with surgical, chemical, and other methods of treating genital warts.
We cannot assess the impact products developed by our competitors, or advances
in other methods of the treatment of genital warts, will have on the commercial
viability of Alferon N Injection®. If and when we obtain additional approvals of
uses of this product, we expect to compete primarily on the basis of product
performance. Our competitors have developed or may develop products (containing
either alpha or beta interferon or other therapeutic compounds) or other
treatment modalities for those uses. There can be no assurance that, if we
are
able to obtain regulatory approval of Alferon N Injection® for the treatment of
new indications, we will be able to achieve any significant penetration into
those markets. In addition, because certain competitive products are not
dependent on a source of human blood cells, such products may be able to be
produced in greater volume and at a lower cost than Alferon N Injection®.
Currently, our wholesale price on a per unit basis of Alferon N Injection® is
higher than that of the competitive recombinant alpha and beta interferon
products.
General.
Other companies may succeed in developing products earlier than we do, obtaining
approvals for such products from the FDA more rapidly than we do, or developing
products that are more effective than those we may develop. While we will
attempt to expand our technological capabilities in order to remain competitive,
there can be no assurance that research and development by others or other
medical advances will not render our technology or products obsolete or
non-competitive or result in treatments or cures superior to any therapy we
develop.
Possible
side effects from the use of Ampligen® or Alferon N Injection® could adversely
affect potential revenues and physician/patient acceptability of our
product.
Ampligen®.
We believe that Ampligen® has been generally well tolerated with a low incidence
of clinical toxicity, particularly given the severely debilitating or life
threatening diseases that have been treated. A mild flushing reaction has been
observed in approximately 15% of patients treated in our various studies. This
reaction is occasionally accompanied by a rapid heart beat, a tightness of
the
chest, urticaria (swelling of the skin), anxiety, shortness of breath,
subjective reports of ''feeling hot'', sweating and nausea. The reaction is
usually infusion-rate related and can generally be controlled by reducing the
rate of infusion. Other adverse side effects include liver enzyme level
elevations, diarrhea, itching, asthma, low blood pressure, photophobia, rash,
transient visual disturbances, slow or irregular heart rate, decreases in
platelets and white blood cell counts, anemia, dizziness, confusion, elevation
of kidney function tests, occasional temporary hair loss and various flu-like
symptoms, including fever, chills, fatigue, muscular aches, joint pains,
headaches, nausea and vomiting. These flu-like side effects typically subside
within several months. One or more of the potential side effects might deter
usage of Ampligen® in certain clinical situations and therefore, could adversely
affect potential revenues and physician/patient acceptability of our product.
Alferon
N
Injection®. At present, Alferon N Injection® is only approved for the
intra-lesional (within the lesion) treatment of refractory or recurring external
genital warts in adults. In clinical trials conducted for the treatment of
genital warts with Alferon N Injection®, patients did not experience serious
side effects; however, there can be no assurance that unexpected or unacceptable
side effects will not be found in the future for this use or other potential
uses of Alferon N Injection® which could threaten or limit such product’s
usefulness.
We
may be subject to product liability claims from the use of Ampligen®, Alferon N
Injection®, or other of our products which could negatively affect our future
operations.
We
face
an inherent business risk of exposure to product liability claims in the event
that the use of Ampligen® or other of our products results in adverse effects.
This liability might result from claims made directly by patients, hospitals,
clinics or other consumers, or by pharmaceutical companies or others
manufacturing these products on our behalf. Our future operations may be
negatively affected from the litigation costs, settlement expenses and lost
product sales inherent to these claims. While we will continue to attempt to
take appropriate precautions, we cannot assure that we will avoid significant
product liability exposure. Although we currently maintain product liability
insurance coverage, there can be no assurance that this insurance will provide
adequate coverage against Ampligen® and/or Alferon N Injection® product
liability claims. A successful product liability claim against us in excess
of
Ampligen®’s $1,000,000 in insurance coverage; $3,000,000 in aggregate, or in
excess of Alferon N Injection®’s $5,000,000 in insurance coverage; $5,000,000 in
aggregate; or for which coverage is not provided could have a negative effect
on
our business and financial condition.
The
loss of services of key personnel including Dr. William A. Carter could hurt
our
chances for success.
Our
success is dependent on the continued efforts of Dr. William A. Carter because
of his position as a pioneer in the field of nucleic acid drugs, his being
the
co-inventor of Ampligen®, and his knowledge of our overall activities, including
patents and clinical trials. The loss of Dr. Carter’s services could have a
material adverse effect on our operations and chances for success. We have
secured key man life insurance in the amount of $2,000,000 on the life of Dr.
Carter and we have an employment agreement with Dr. Carter that, as amended,
runs until December 31, 2010. However, Dr. Carter has the right to terminate
his
employment upon not less than 30 days prior written notice. The loss of Dr.
Carter or other personnel or the failure to recruit additional personnel as
needed could have a materially adverse effect on our ability to achieve our
objectives.
Uncertainty
of health care reimbursement for our products.
Our
ability to successfully commercialize our products will depend, in part, on
the
extent to which reimbursement for the cost of such products and related
treatment will be available from government health administration authorities,
private health coverage insurers and other organizations. Significant
uncertainty exists as to the reimbursement status of newly approved health
care
products, and from time to time legislation is proposed, which, if adopted,
could further restrict the prices charged by and/or amounts reimbursable to
manufacturers of pharmaceutical products. We cannot predict what, if any,
legislation will ultimately be adopted or the impact of such legislation on
us.
There can be no assurance that third party insurance companies will allow us
to
charge and receive payments for products sufficient to realize an appropriate
return on our investment in product development.
There
are risks of liabilities associated with handling and disposing of hazardous
materials.
Our
business involves the controlled use of hazardous materials, carcinogenic
chemicals, flammable solvents and various radioactive compounds. Although we
believe that our safety procedures for handling and disposing of such materials
comply in all material respects with the standards prescribed by applicable
regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident or the failure
to comply with applicable regulations, we could be held liable for any damages
that result, and any such liability could be significant. We do not maintain
insurance coverage against such liabilities.
Risks
Associated With an Investment in Our Common Stock
The
market price of our stock may be adversely affected by market
volatility.
The
market price of our common stock has been and is likely to be volatile. In
addition to general economic, political and market conditions, the price and
trading volume of our stock could fluctuate widely in response to many factors,
including:
|
|
· |
announcements
of the results of clinical trials by us or our
competitors;
|
|
|
· |
adverse
reactions to products;
|
|
|
· |
governmental
approvals, delays in expected governmental approvals or withdrawals
of any
prior governmental approvals or public or regulatory agency concerns
regarding the safety or effectiveness of our
products;
|
|
|
· |
changes
in U.S. or foreign regulatory policy during the period of product
development;
|
|
|
· |
developments
in patent or other proprietary rights, including any third party
challenges of our intellectual property
rights;
|
|
|
· |
announcements
of technological innovations by us or our
competitors;
|
|
|
· |
announcements
of new products or new contracts by us or our
competitors;
|
|
|
· |
actual
or anticipated variations in our operating results due to the level
of
development expenses and other
factors;
|
|
|
· |
changes
in financial estimates by securities analysts and whether our earnings
meet or exceed the estimates;
|
|
|
· |
conditions
and trends in the pharmaceutical and other industries;
|
| |
· |
new accounting standards;
and |
|
|
· |
the
occurrence of any of the risks described in these "Risk
Factors."
|
Our
common stock is listed for quotation on the American Stock Exchange. For the
12-month period ended December 31, 2007, the price of our common stock has
ranged from $0.53 to $2.49 per share. We expect the price of our common stock
to
remain volatile. The average daily trading volume of our common stock varies
significantly. Our relatively low average volume and low average number of
transactions per day may affect the ability of our stockholders to sell their
shares in the public market at prevailing prices and a more active market may
never develop.
In
the
past, following periods of volatility in the market price of the securities
of
companies in our industry, securities class action litigation has often been
instituted against companies in our industry. If we face securities litigation
in the future, even if without merit or unsuccessful, it would result in
substantial costs and a diversion of management attention and resources, which
would negatively impact our business.
Our
stock price may be adversely affected if a significant amount of shares are
sold
in the public market.
Fusion
Capital is offering for sale herein up to 1,704,691 shares of our common stock
consisting of shares currently owned by Fusion Capital and shares issuable
under
the common stock purchase agreement. Also,
we
have registered 3,615,514 shares issuable upon exercise of 135% of certain
Warrants and upon exercise of certain other warrants. Registration of the shares
permits the sale of the shares in the open market or in privately negotiated
transactions without compliance with the requirements of Rule 144. To the extent
the exercise price of the warrants is less than the market price of the common
stock, the holders of the warrants are likely to exercise them and sell the
underlying shares of common stock and to the extent that the conversion price
and exercise price of these securities are adjusted pursuant to anti-dilution
protection, the securities could be exercisable or convertible for even more
shares of common stock. We also may issue shares to be used to meet our capital
requirements or use shares to compensate employees, consultants and/or
directors. We are unable to estimate the amount, timing or nature of future
sales of outstanding common stock. Sales of substantial amounts of our common
stock in the public market could cause the market price for our common stock
to
decrease. Furthermore, a decline in the price of our common stock would likely
impede our ability to raise capital through the issuance of additional shares
of
common stock or other equity securities.
The
sale of our common stock to Fusion Capital may cause dilution and the sale
of
the shares of common stock acquired by Fusion Capital and other shares
registered for selling stockholders could cause the price of our common stock
to
decline.
The
sale
by Fusion Capital and other selling stockholders of our common stock will
increase the number of our publicly traded shares, which could depress the
market price of our common stock. Moreover, the mere prospect of sales by Fusion
Capital and other selling stockholders 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.
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 sold to Fusion Capital are to be 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 Fusion Capital and other
selling stockholders will be sold over a period of six to twelve months.
Depending upon market liquidity at the time, a sale of shares by Fusion or
other
selling stockholders at any given time could cause the trading price of our
common stock to decline. Given the current market price of our common stock
which is below the $1.00 threshold for Fusion to purchase shares, we do not
anticipate sales by Fusion to materially affect the market price. Nevertheless,
should the market price rise, the sale of a substantial number of shares of
our
common stock to Fusion Capital pursuant to the purchase agreement, 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.
Provisions
of our Certificate of Incorporation and Delaware law could defer a change of
our
management which could discourage or delay offers to acquire
us.
Provisions
of our Certificate of Incorporation and Delaware law may make it more difficult
for someone to acquire control of us or for our stockholders to remove existing
management, and might discourage a third party from offering to acquire us,
even
if a change in control or in management would be beneficial to our stockholders.
For example, our Certificate of Incorporation allows us to issue shares of
preferred stock without any vote or further action by our stockholders. Our
Board of Directors has the authority to fix and determine the relative rights
and preferences of preferred stock. Our Board of Directors also has the
authority to issue preferred stock without further stockholder approval. As
a
result, our Board of Directors could authorize the issuance of a series of
preferred stock that would grant to holders the preferred right to our assets
upon liquidation, the right to receive dividend payments before dividends are
distributed to the holders of common stock and the right to the redemption
of
the shares, together with a premium, prior to the redemption of our common
stock. In this regard, in November 2002, we adopted a stockholder rights plan
and, under the Plan, our Board of Directors declared a dividend distribution
of
one Right for each outstanding share of Common Stock to stockholders of record
at the close of business on November 29, 2002. Each Right initially entitles
holders to buy one unit of preferred stock for $30.00. The Rights generally
are
not transferable apart from the common stock and will not be exercisable unless
and until a person or group acquires or commences a tender or exchange offer
to
acquire, beneficial ownership of 15% or more of our common stock. However,
for
Dr. Carter, our chief executive officer, who already beneficially owns 7.9%
of
our common stock, the Plan’s threshold will be 20%, instead of 15%. The Rights
will expire on November 19, 2012, and may be redeemed prior thereto at $.01
per
Right under certain circumstances.
Because
the risk factors referred to above could cause actual results or outcomes to
differ materially from those expressed in any forward-looking statements made
by
us, you should not place undue reliance on any such forward-looking statements.
Further, any forward-looking statement speaks only as of the date on which
it is
made and we undertake no obligation to update any forward-looking statement
or
statements to reflect events or circumstances after the date on which such
statement is made or reflect the occurrence of unanticipated events. New factors
emerge from time to time, and it is not possible for us to predict which will
arise. 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. Our research in clinical efforts may continue for the next several
years and we may continue to incur losses due to clinical costs incurred in
the
development of Ampligen® for commercial application. Possible losses may
fluctuate from quarter to quarter as a result of differences in the timing
of
significant expenses incurred and receipt of licensing fees and/or cost recovery
treatment revenue.
BUSINESS
Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2007,
incorporated by reference into this Prospectus, contains information about
us,
including audited financial statements for our fiscal year ended December 31,
2007. Please refer to this report for additional information.
SELLING
STOCKHOLDERS
The
following table provides information regarding the selling stockholders and
the
number of shares of common stock they are offering.
Unless
otherwise indicated in the footnotes below, we believe that the persons and
entities named in the table have sole voting and investment power with respect
to all shares beneficially owned. The information regarding shares beneficially
owned after the offering assumes the sale of all shares offered by each of
the
selling stockholders. The percentage ownership data is based on 73,975,265
shares of our common stock issued and outstanding as of April 18,
2008.
None
of
the selling stockholders has had any position, office or other material
relationship with us or any of our affiliates within the past three years,
other
than as a stockholder, unless otherwise disclosed in the footnotes.
|
Selling
Stockholder
|
|
Common
Stock Owned
Prior
To Offering
|
|
No. of Shares
Being Offered
|
|
Common Stock
Owned After
The Offering
|
|
|
Fusion
Capital Fund II, LLC (1) (2)
|
|
|
448,814
|
|
|
1,704,691
|
|
|
-
|
|
|
Portside
Growth & Opportunity Fund (3)
|
|
|
2,721,649
|
|
|
2,721,649
|
|
|
-
|
|
|
Leonardo
L.P. (4)
|
|
|
2,447,757
|
|
|
2,447,757
|
|
|
-
|
|
|
Christopher
Chipman (5)
|
|
|
30,000
|
|
|
30,000
|
|
|
-
|
|
|
Mid
South Capital, LLC (6)
|
|
|
25,000
|
|
|
25,000
|
|
|
-
|
|
|
Windward
Capital Advisors, LLC (7)
|
|
|
212,292
|
|
|
212,292
|
|
|
-
|
|
|
HefCap
Holdings, LLC (8)
|
|
|
212,292
|
|
|
212,292
|
|
|
-
|
|
|
Baxter
Capital Advisors, Inc. (9)
|
|
|
30,000
|
|
|
30,000
|
|
|
-
|
|
|
William
Mason (10)
|
|
|
131,066
|
|
|
41,666
|
|
|
89,400
|
|
|
W.
Barry McDonald (10)
|
|
|
131,067
|
|
|
41,667
|
|
|
89,400
|
|
|
Wayne
Pambianchi (10)
|
|
|
131,067
|
|
|
41,667
|
|
|
89,400
|
|
|
Gordon
Ramseier (10)
|
|
|
131,666
|
|
|
41,666
|
|
|
89,400
|
|
|
Daniel
Tripodi (10)
|
|
|
131,667
|
|
|
41,667
|
|
|
89,400
|
|
|
Michael
Burrows (11)
|
|
|
690,000
|
|
|
150,000
|
|
|
540,000
|
|
|
UBS
O’Connor LLC (12)
|
|
|
30,000
|
|
|
30,000
|
|
|
-
|
|
|
Kingsbridge
Capital Ltd. (13)
|
|
|
28,846
|
|
|
28,846
|
|
|
-
|
|
|
Fenmore
Holdings (14)
|
|
|
36,058
|
|
|
36,058
|
|
|
-
|
|
|
Smithfield
Fiduciary, LLC (15)
|
|
|
72,115
|
|
|
72,115
|
|
|
-
|
|
|
Spectra
Investments, LLC (16)
|
|
|
36,058
|
|
|
36,058
|
|
|
-
|
|
|
Gemini
Master Fund, Ltd. (17)
|
|
|
7,211
|
|
|
7,211
|
|
|
-
|
|
|
Provident
Premier Master Fund, Ltd. (18)
|
|
|
36,058
|
|
|
36,058
|
|
|
-
|
|
|
Asset
Managers International (19)
|
|
|
188,461
|
|
|
188,461
|
|
|
-
|
|
|
JMG
Capital Partners, LP (20)
|
|
|
37,116
|
|
|
37,116
|
|
|
-
|
|
|
JMG
Triton Off shore Fund, Ltd. (21)
|
|
|
72,116
|
|
|
72,116
|
|
|
-
|
|
|
Winton
Capital Holdings, Ltd. (22)
|
|
|
60,000
|
|
|
60,000
|
|
|
-
|
|
|
Iroquois
Capital, LP (23)
|
|
|
57,692
|
|
|
57,692
|
|
|
-
|
|
|
Jefferies
& Company, Inc. (24)
|
|
|
150,480
|
|
|
150,480
|
|
|
-
|
|
|
Sage
Healthcare Advisors (25)
|
|
|
10,000
|
|
|
10,000
|
|
|
-
|
|
|
(1)
|
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.
|
|
(2)
|
Includes
448,814 shares
currently owned by Fusion Capital (Commitment Shares) and 1,255,877
shares
issuable under the common stock purchase agreement..
|
|
(3)
|
Includes
135% of (i) 107,104 shares of common stock issuable upon exercise
of
certain Debenture Warrants; (ii) 650,000 shares of common stock issuable
upon exercise of Warrants that expire in May 2009, (iii) 650,000
shares of
common stock issuable upon exercise of Warrants that expire in June
2009
and (iv) 395,257 shares of common stock issuable upon exercise of
Warrants
that expire in July 2009. Also includes 288,462 shares issuable upon
exercise of warrants issued in the August 5, 2004 Private Placement.
Ramius Capital Group, LLC ("Ramius Capital") is the investment adviser
of
Portside Growth & Opportunity Fund ("Portside") and consequently has
voting control and investment discretion over securities held by
Portside.
Ramius Capital disclaims beneficial ownership of the shares held
by
Portside. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and
Jeffrey
M. Solomon are the sole managing members of C4S& Co., LLC, the sole
managing member of Ramius Capital. As a result, Messrs. Cohen, Stark,
Strauss and Solomon may be considered beneficial owners of any shares
deemed to be beneficially owned by Ramius Capital. Messrs. Cohen,
Stark,
Strauss and Solomon disclaim beneficial ownership of these
shares.
|
|
(4)
|
Includes
135% of (i) 117,896 shares of common stock issuable upon exercise
of the
Debenture Warrants; (ii) 1,300,000 shares of common stock issuable
upon
exercise of Warrants that expire in May 2009, and (iii) 395,257 shares
of
common stock issuable upon exercise of Warrants that expire in July
2009.
Angelo, Gordon & Co., L.P. ("Angelo, Gordon") is the sole director of
the general partner of Leonardo, L.P. ("Leonardo") and consequently
has
voting control and investment discretion over securities held by
Leonardo.
Angelo, Gordon disclaims beneficial ownership of the shares held
by
Leonardo. Mr. John M. Angelo, the Chief Executive Officer of Angelo,
Gordon, and Mr. Michael L. Gordon, the Chief Operating Officer of
Angelo,
Gordon, are the sole general partners of AG Partners, L.P., the sole
general partner of Angelo, Gordon. As a result, Messrs. Angelo and
Gordon
may be considered beneficial owners of any shares deemed to be
beneficially owned by Angelo, Gordon. Messrs. Angelo and Gordon disclaim
beneficial ownership of these
shares.
|
|
(5)
|
Includes
(i) 5,000 shares issuable upon exercise of warrants exercisable at
$3.91
per share expiring on February 28, 2009, (ii) 5,000 shares issuable
upon
exercise of warrants exercisable at $4.25 per share expiring on January
31, 2009, (iii) 5,000 shares issuable upon the exercise of warrants
at
$3.51 per share expiring March 31, 2009, (iv) 5,000 shares issuable
upon
the exercise of warrants at $2.17 expiring January 3, 2011, (v) 5,000
shares issuable upon the exercise of warrants at $3.60 expiring April
1,
2011 and (vi) 5,000 shares issuable upon the exercise of warrants
at $2.54
expiring July 1, 2011, Mr. Chipman provides us with financial and
accounting consulting services.
|
|
(6)
|
Includes
up to 25,000 shares of common stock issuable upon exercise of warrants
owned by Mid South Capital which are exercisable at a price of $3.00
per
share. Mark Hill and Jack Magerson are the principals of Mid South
Capital
and are therefore considered the beneficial owner of these
securities.
|
|
(7)
|
H.
David Coherd is the sole member of Windward Capital Advisors, LLC.
Accordingly, the shares beneficially owned by Windward Capital are
deemed
to be beneficially owned by this selling stockholder. Shares owned
and
offered include up to 212,292 shares of common stock issuable upon
exercise of warrants of which (i) 33,750 are exercisable at a price
of
$2.57 per share, (ii) 91,667 are exercisable at a price of $2.50
per
share, (iii) 16,875 are exercisable at a price if $2.57 per share,
and
(iv) 15,000 are exercisable at a price of $3.04 per share, (v) 25,000
are
exercisable at a price of $4.07 per share, and (vi) 30,000 are exercisable
at $3.04 per share.
|
|
(8)
|
Robert
Rosenstein is the sole member of Hefcap Holdings, LLC. Accordingly,
the
shares beneficially owned by Hefcap Holdings are deemed to be beneficially
owned by this selling stockholder. In addition, shares owned and
offered
include up to 212,292 shares of common stock issuable upon exercise
of
warrants of which (i) 33,750 are exercisable at a price of $2.57
per
share, (ii) 91,667 are exercisable at a price of $2.50 per share,
(iii)
16,875 are exercisable at a price if $2.57 per share, (iv) 45,000
are
exercisable at a price of $3.04 per share, and (v) 25,000 are exercisable
at a price of $4.07 per share.
|
|
(9)
|
Peter
Baxter is the president of Baxter Capital Advisors, Inc. Shares owned
and
offered include up to 30,000 shares of common stock issuable upon
exercise
of warrants of which (i) 11,250 are exercisable at a price of $2.57
per
share, (ii) 8,750 are exercisable at a price if $2.42 per share,
and (iii)
10,000 are exercisable at a price of $3.04 per share.
|
| (10) |
Includes
share issuable upon the exercise of outstanding options exercisable
at
$1.55 per share expiring February 14, 2015. The principals of The
Sage
Group are Wayne Pambianchi, Daniel Tripodi, W. Barry McDonald, Gordon
Ramseier, William Mason and R. Douglas Hulse. The foregoing securities
were issued to The Sage Group and its principals for services provided
to
us.
|
|
(11)
|
Consists
of shares issuable upon exercise of 150,000 options issued in 2005
to
purchase common stock at $2.00 per share expiring September 23, 2015.
Mr.
Burrows is a former member of the Board of Directors and serves as
an
advisor to the Company from time to time.
|
|
(12)
|
Shares
offered and owned include 30,000 shares issuable upon exercise of
warrants
issued in the Private Placement. The shares are beneficially owned
by
O’Connor PIPES Corporate Strategies Master Ltd. UBS O'Connor LLC is
the
investment manager for O’Connor PIPES Corporate Strategies Master Ltd. UBS
O'Connor LLC is a wholly owned subsidiary of UBS AG, which is traded
on
the NYSE.
|
|
(13)
|
Shares
offered and owned includes 28,846 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder
has
identified Adam Gurney, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the
selling
stockholder.
|
|
(14)
|
Shares
offered and owned includes 36,058 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder
has
identified Mark Nordlicht, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the
selling
stockholder. Mr. Nordlicht disclaims beneficial ownership of the
securities held by Fennmore.
|
|
(15)
|
Shares
offered and owned includes 72,115 shares issuable upon exercise of
warrants issued in the Private Placement. Highbridge Capital Management,
LLC is the trading manager of Smithfield Fiduciary LLC and consequently
has voting control and investment discretion over securities held
by
Smithfield. Glenn Dubin and Henry Swieca control Highbridge. Each
of
Highbridge, Glenn Dubin and Henry Swieca disclaims beneficial ownership
of
the securities held by Smithfield.
|
|
(16)
|
Shares
offered and owned includes 36,058 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder
has
identified Greg Porges, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the
selling
stockholder. Mr. Porges disclaims beneficial ownership of the securities
held by Spectra.
|
|
(17)
|
Shares
offered and owned includes 7,211 shares issuable upon exercise of
warrants
issued in the Private Placement. Shares listed as owned and offered
excludes shares beneficially owned by Provident Premier Master Fund,
Ltd.
The Investment Manager of Gemini Master Fund, Ltd. is Gemini Investment
Strategies, LLC. The Managing Members of Gemini Investment Strategies,
LLC
are Messrs. Steven W. Winters and Mr. Richard S. Yakomin. As such,
Messrs.
Winters and Yakomin may be deemed beneficial owners of the shares.
Messrs.
Winters and Yakomin, however, disclaim beneficial ownership of such
shares.
|
|
(18)
|
Shares
offered and owned includes 36,058 shares issuable upon exercise of
warrants issued in the Private Placement. Shares listed as owned
and
offered excludes shares beneficially owned by Gemini Master Fund,
Ltd. The
Investment Advisor to Provident Premier Master Fund, Ltd. is Gemini
Investment Strategies, LLC. The Managing Members of Gemini Investment
Strategies, LLC are Messrs. Steven W. Winters and Mr. Richard S.
Yakomin.
As such, Messrs. Winters and Yakomin may be deemed beneficial owners
of
the shares. Messrs. Winters and Yakomin, however, disclaim beneficial
ownership of such shares.
|
|
(19)
|
Shares
offered and owned includes 188,461 shares issuable upon exercise
of
warrants issued in the Private Placement. The selling stockholder
has
identified Adam Benowitz, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the
selling
stockholder. Mr. Benowitz disclaims beneficial ownership of the securities
held by Asset Managers
International.
|
|
(20)
|
Shares
offered and owned includes 37,116 shares issuable upon exercise of
warrants issued in the Private Placement. Shares listed as owned
and
offered excludes shares beneficially owned by JMG Triton Offshore
Fund,
Ltd. JMG Capital Partners, L.P. (“JMG Partners”) is a California limited
partnership. Its general partner is JMG Capital Management, LLC (the
“Manager”), a Delaware limited liability company and an investment adviser
registered with the Securities and Exchange Commission. The Manager
has
voting and dispositive power over JMG Partners’ investments, including the
Registrable Securities. The equity interests of the Manager are owned
by
JMG Capital Management, Inc., (“JMG Capital”) a Delaware corporation, and
Asset Alliance Holding Corp., a Delaware corporation. Jonathan M.
Glaser
is the Executive Officer and Director of JMG Capital and has sole
investment discretion over JMG Partners’ portfolio
holdings.
|
|
(21)
|
Shares
offered and owned includes 72,116 shares issuable upon exercise of
warrants issued in the Private Placement. Shares listed as owned
and
offered excludes shares beneficially owned by JMG Capital Partners,
L.P.
JMG Triton Offshore Fund, Ltd. (The “Fund”) is an international business
company under the laws of the British Virgin Islands. The Fund’s
investment manager is Pacific Assets Management LLC, a Delaware limited
liability company (the “Manager”). The Manager is an investment adviser
registered with the Securities and Exchange Commission and has voting
and
dispositive power over the Fund’s investments, including the Registrable
Securities. The equity interests of the Manager are owned by Pacific
Capital Management, Inc., a Delaware company (“the Pacific”) and Asset
Alliance Holding Corp., a Delaware company. The equity interests
of
Pacific are owned by Messrs. Roger Richter, Jonathan M. Glaser and
Daniel
A. David and Messrs. Glaser and Richter have sole investment discretion
over the fund’s portfolio holdings.
|
|
(22)
|
Shares
offered and owned includes 60,000 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder
has
identified Marc Belzberg, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the
selling
stockholder.
|
|
(23)
|
Shares
offered and owned include 57,692 shares issuable upon exercise of
warrants
issued in the Private Placement. The selling stockholder has identified
Joshua Silverman, as a natural person with voting and investment
control
over shares of our common stock beneficially owned by the selling
stockholder. Mr. Silverman disclaims beneficial ownership of the
shares
held by Iroquois Capital, LP.
|
|
(24)
|
Includes
150,480 shares issuable upon exercise of immediately exercisable
warrants.
Jefferies acted as the sole placement agent in the financing and
is a
registered broker-dealer. Based upon representations made to us by
Jefferies, the warrant to purchase common stock were acquired in
the
ordinary course of its business for its own account for investment
purposes only and not with a view to, or for, distributing the warrant
or
the shares of common stock issuable upon exercise thereof. Jefferies
does
not have any agreements, plans or understandings, directly or indirectly,
with any person or entity to distribute the warrant to purchase common
stock or the shares of common stock issuable upon exercise of the
warrant.
|
| (25) |
Reflects
10,000 warrants to purchase common stock at $2.46 per share expiring
December 8, 2010.
|
The
Fusion Transaction
General
On
April
12, 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 $100,000 of our common stock up
to
an aggregate of $50,000,000 through August 1, 2008 , subject to earlier
termination at our discretion. The purchase price of the shares of common stock
is equal to a price based upon the future market price of the 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
$1.00. As of the date hereof, Fusion is not permitted to purchase shares under
the common stock purchase agreement because the price of our common stock is
less than $1.00.
Through
April 18, 2008, we have sold to Fusion Capital an aggregate of 10,682,032 shares
under the common stock purchase agreement for aggregate gross proceeds of
approximately $19,739,000. Fusion Capital is offering for sale herein up to
1,704,691 shares of our common stock consisting of 448,814
shares
currently owned by Fusion Capital (Commitment Shares) and 1,255,877 shares
(inclusive of an additional 194,688 Commitment Shares) issuable under the common
stock purchase agreement.
Under
the
rules of the American Stock Exchange, in the event that we elect to sell more
than 12,386,723 shares to Fusion Capital, we were required to seek stockholder
approval. This approval was obtained on September 20, 2006. However, we do
not
plan on filing a registration statement to permit the sale of any additional
shares of Common Stock to Fusion Capital under the common stock purchase
agreement.
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 is
purchasing on each trading day during the term of the agreement $100,000 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 $100,000 unless
our
stock price exceeds $1.90 per share by at least $0.10 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 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.
Minimum
Purchase Price
Under
the
common stock purchase agreement, we have set a minimum purchase price (“floor
price”) of $1.00. Fusion Capital shall not have the right nor the obligation to
purchase any shares of our common stock in the event that the purchase price
would be less than the floor price. As of the date hereof, Fusion is not
permitted to purchase shares under the common stock purchase agreement because
the price of our common stock is less than $1.00.
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 25 months, $100,000 of our common
stock up to an aggregate of $50,000,000. 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 $1.90, we have the right to increase the daily
purchase amount by up to an additional $10,000. For example, if the Threshold
Price is $2.20 we would have the right to increase the daily purchase amount
by
up to $30,000 to an aggregate of $130,000. 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 $250,000,
provided that our share price is above $1.50 during the five trading days prior
thereto. The price at which such shares would be purchased will be the lower
of
the lowest Sale Price of our common stock on the trading day that Fusion Capital
receives such purchase notice from us, or the lowest Purchase Price (as defined
above) during the previous ten trading days prior to the date that such purchase
notice was received by Fusion Capital. We may increase this amount as
follows:
|
|
|
Increased Amount
|
|
| |
|
|
|
|
|
$3.00
|
|
$
|
500,000
|
|
|
|
|
$
|
1,000,000
|
|
|
$8.00
|
|
$
|
2,000,000
|
|
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 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 ten consecutive trading days or for more than an aggregate
of 30
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
Bulletin Board;
|
| |
·
|
the
transfer agent's failure for five 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 ten trading days;
|
| |
·
|
any
participation or threatened participation in insolvency or bankruptcy
proceedings by or against us; or
|
| |
·
|
a
material adverse change in our business, properties, operations,
financial
condition or results of operations.
|
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 on behalf of Fusion Capital in this offering will be freely
tradable. It is anticipated that shares registered on behalf of Fusion Capital
in this offering will be sold over a period of up to six to twelve 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 1,061,189 shares of common stock still available for
purchase under the common stock purchase agreement, and it may sell some, none
or all of the shares of common stock it acquires under the agreement. 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 Fusion Capital has received 448,814
shares of our common stock as a partial commitment fee and is entitled to
receive up to an additional 194,688 commitment shares (collectively, the
“Commitment Shares”). These additional Commitment Shares will be issued in an
amount equal to the product of (x) 321,751 and (y) the Purchase Amount Fraction.
The “Purchase Amount Fraction” means a fraction, the numerator of which is the
purchase price at which the shares are being purchased by Fusion Capital and
the
denominator of which is $50,000,000.
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.
PLAN
OF DISTRIBUTION
Selling
Stockholders other than Fusion Capital
The
following Plan of distribution relates to all selling stockholders other than
Fusion Capital.
The
common stock offered by this prospectus is being offered by the selling
stockholders. The
selling stockholders may sell their shares of common stock from time to time
in
various ways and at various prices. The shares may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be affected in transactions that may involve crosses or block
transactions. Some of the methods by which the selling stockholders may sell
the
shares include:
|
·
|
on
any national securities exchange or quotation service on which the
shares
may be listed or quoted at the time of sale;
|
|
·
|
in
the over-the-counter market;
|
|
·
|
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
|
·
|
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker solicits
purchasers;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
block
trades in which the broker or dealer will attempt to sell the shares
as
agent but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
|
·
|
purchases
by a broker or dealer as principal and resale by that broker or dealer
for
the selling stockholder's account under this prospectus;
|
|
·
|
sales
under Rule 144 rather than by using this prospectus;
|
|
·
|
through
the settlement of short sales;
|
|
·
|
a
combination of any of these methods of sale;
or
|
|
·
|
any
other legally permitted method.
|
In
connection with sales of the shares or otherwise, the selling stockholders
may
enter into hedging transactions with broker-dealers, which may in turn engage
in
short sales of the shares in the course of hedging in positions they assume.
The
selling stockholders may also sell shares short and deliver shares to close
out
short positions, provided that the selling stockholders may not close out short
positions entered into prior to the effective date of the registration statement
of which this prospectus is a part with any shares included in this prospectus.
The selling stockholders may also pledge their shares as collateral for a margin
loan under their customer agreements with their brokers. If there is a default
by the selling stockholders, the brokers may offer and sell the pledged shares
from time to time under this prospectus or an amendment to this prospectus
under
Rule 424(b)(3) or other applicable provisions of the Securities Act amending
the
list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this
prospectus.
Brokers
or dealers may receive commissions or discounts from the selling stockholders
(or, if the broker-dealer acts as agent for the purchaser of the shares, from
that purchaser) in amounts to be negotiated. These commissions may exceed those
customary in the types of transactions involved.
We
cannot
estimate at the present time the amount of commissions or discounts, if any,
that will be paid by the selling stockholders in connection with sales of the
shares.
The
selling stockholders and any broker-dealers or agents that participate with
the
selling stockholders in sales of the shares may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales. In
that
event, any commissions received by the broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The selling stockholders
have
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of
the
shares. There is no underwriter or coordinating broker acting in connection
with
the proposed sale of shares by the selling stockholders. In addition, each
of
the selling stockholders who is a registered broker-dealer or is affiliated
with
a registered broker-dealer has advised us that:
| |
·
|
it
purchased the shares in the ordinary course of business; and
|
| |
·
|
at
the time of the purchase of the shares to be resold, it had no agreements
or understandings, directly or indirectly, with any person to distribute
the shares.
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Under
the
securities laws of certain states, the shares may be sold in those states only
through registered or licensed broker-dealers. In addition, the shares may
not
be sold unless they have been registered or qualified for sale in the relevant
state or unless they qualify for an exemption from registration or
qualification.
We
do not
know whether any selling stockholder will sell any or all of the shares
registered by the registration statement of which this prospectus forms a
part.
We
have
agreed to pay all fees and expenses incident to the registration of the shares,
including certain fees and disbursements of counsel to certain of the selling
stockholders. We have agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under
the
Securities Act.
Certain
of the selling stockholders have also agreed to indemnify us, our directors,
officers, agents and representatives against certain liabilities, including
certain liabilities under the Securities Act.
The
selling stockholders and other persons participating in the distribution of
the
shares offered under this prospectus are subject to the applicable requirements
of Regulation M promulgated under the Exchange Act in connection with sales
of
the shares. With certain exceptions, Regulation M precludes the selling
stockholders, 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.
We
have
agreed with the selling stockholders to keep the registration statement of
which
this prospectus is a part effective until all the shares registered under the
registration statement have been resold.
This
offering will terminate on the date that all shares offered by this Prospectus
have been sold by the selling stockholders.
Fusion
Capital
The
following Plan of distribution relates to Fusion Capital.
The
common stock offered by Fusion Capital may be sold or distributed from time
to
time by Fusion Capital only for cash directly to one or more purchasers 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 may be affected in one or more of the following
methods:
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ordinary
brokers’ transactions;
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·
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transactions
involving cross or block trades;
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through
brokers, dealers or underwriters who may act solely as
agents;
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·
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“at
the market” into an existing market for the common
stock;
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·
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in
other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through
agents;
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·
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in
privately negotiated transactions;
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any
combination of the foregoing methods of sale;
and
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any
other method permitted pursuant to applicable
law.
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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 stockholder 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 stockholders, 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 stockholders.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of the shares of common stock offered
by
the selling stockholders. We will receive proceeds from the exercising of the
Warrants, if any. In addition, if the price of our common stock reaches $1.00
per share, we may receive gross proceeds from the sale of up to 1,255,877 shares
of our common stock to Fusion Capital under the common stock purchase agreement.
We will apply such proceeds, if any, for general corporate operating
purposes.
SEC
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the company pursuant
to
the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
LEGAL
MATTERS
The
validity of the common stock offered in this prospectus has been passed upon
for
us by Silverman Sclar Shin & Byrne PLLC, 381 Park Avenue South, Suite 1601,
New York, New York 10016.
EXPERTS
The
financial statements, the related financial statement schedule, and management’s
report on the effectiveness of internal control over financial reporting
incorporated by reference in this Prospectus and Registration Statement have
been audited by McGladrey & Pullen, LLP, an independent registered public
accounting firm, as stated in their reports incorporated herein by reference,
and are incorporated in reliance upon such reports and upon the authority of
such firm as experts in accounting and auditing.
The
financial statements and schedules as of December 31, 2005 and for the year
then
ended incorporated by reference in this Prospectus and in the Registration
Statement have been so incorporated in reliance on the report of BDO Seidman,
LLP, an independent registered public accounting firm, incorporated herein
by
reference and in the Registration Statement, given on the authority of said
firm
as experts in auditing and accounting.
No
dealer, salesman or any other person is authorized to give any information
or to
represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is an offer to
sell
these securities and it is not a solicitation of an offer to buy these
securities in any state where the offer or sale is not permitted. The
information contained in this Prospectus is current only as of this
date.
TABLE
OF CONTENTS
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Page
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Where
you can find More information
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2
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Information
Incorporated
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By
Reference
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2
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Prospectus
Summary
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3
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Risk
Factors
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6
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Business
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20
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Selling
Stockholders
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20
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Plan
of Distribution
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30
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Use
of Proceeds
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34
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SEC
Position On Indemnification For Securities Act Liabilities
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35
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35
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Experts
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35
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8,564,225
SHARES OF
COMMON
STOCK
HEMISPHERX
BIOPHARMA, INC.
PROSPECTUS
May
1,
2008