Filed
pursuant to Rule 424(b)(5)
File Nos.
333-143280 and 333-159857
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated June 7, 2007)
869,565
Units
| DELCATH SYSTEMS, INC. |
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Consisting
of Common Stock and Warrants
$3.45 per
unit
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Delcath
Systems is offering for sale 869,565 units pursuant to this prospectus
supplement, with each unit consisting of one share of common stock and a
warrant to buy 1.2 shares of common stock. Each warrant has an
exercise price of $3.99 per share, has a term of five years and is
exercisable beginning on the date of issue. The shares of
common stock and warrants comprising the units are immediately separable
and will be issued separately.
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The
last reported sale price of our common stock on the NASDAQ Capital Market
on June 9, 2009 was $3.66 per share.
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Trading
symbol: NASDAQ Capital Market –
DCTH.
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This
investment involves a high degree of risk. See “Risk Factors” on page
S-2 of this prospectus supplement.
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Per Unit
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Total
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Public
offering price
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$ | 3.4500 | $ | 3,000,000 | ||||
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Placement
agency fees
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$ | 0.2415 | $ | 210,000 | ||||
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Proceeds,
before expenses, to Delcath Systems
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$ | 3.2085 | $ | 2,790,000 | ||||
The above
summary of offering proceeds to us does not give effect to any exercise of the
warrants being issued in this offering. Delivery of the units will be
made on or about June 15, 2009, as described under “Plan of Distribution” on
page S-10 of this prospectus supplement.
Piper
Jaffray & Co. is acting as the sole placement agent in this
offering. Because there is no minimum offering amount required as a
condition to closing in this offering, the placement agency fees and net
proceeds to us, if any, in this offering may be less than the maximum offering
amounts set forth above.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved of anyone’s investment in these securities or determined if this
prospectus supplement and the accompanying prospectus is truthful or
complete. Any representation to the contrary is
a criminal offense.
Piper
Jaffray
The
date of this prospectus supplement is June 9, 2009.
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Prospectus
Supplement
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S-1
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S-2
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S-9
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S-9
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S-10
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S-11
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S-11
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Accompanying
Prospectus
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Unless
otherwise mentioned or unless the context requires otherwise, all references in
this prospectus supplement and the accompanying prospectus to “the Company,”
“Delcath,” “we,” “us,” “our” or similar references mean Delcath Systems and our
subsidiaries, on a consolidated basis.
This
prospectus supplement and the accompanying prospectus dated June 7, 2007 are
part of a “shelf” registration statement on Form S-3 we filed on May 25, 2007
with the Securities and Exchange Commission. By using a “shelf” registration
statement, we may sell an indeterminate amount of any combination of the
securities described in the accompanying prospectus in one or more offerings up
to a total dollar amount of $30,000,000. We have previously sold
$22,864,489 of securities pursuant to the registration statement.
In
connection with this offering, we registered an additional $27,966 of securities
pursuant to Rule 462(b) of the Securities Act on a registration statement on
Form S-3.
This
document is in two parts. The first part is this prospectus
supplement, which describes the terms of this offering of our common stock and
warrants and supplements information contained in the accompanying prospectus
and the documents incorporated by reference into the accompanying
prospectus. The second part consists of the accompanying prospectus,
which gives more general information about us and the shares of common stock and
warrants we may offer from time to time under our shelf registration
statements. To the extent there is a conflict between the information
contained in this prospectus supplement, on the one hand, and the information
contained in the accompanying prospectus or any document incorporated by
reference therein, on the other hand, the information in this prospectus
supplement shall control.
We have
not authorized any dealer, salesman or other person to give any information or
to make any representation other than those contained or incorporated by
reference in this prospectus supplement and the accompanying
prospectus. You should not rely upon any information or
representation not contained or
S-i
incorporated
by reference in this prospectus supplement or the accompanying
prospectus. This prospectus supplement and the accompanying
prospectus do not constitute an offer to sell or the solicitation of an offer to
buy common stock or warrants, nor do this prospectus supplement and the
accompanying prospectus constitute an offer to sell or the solicitation of an
offer to buy common stock or warrants in any jurisdiction to any person to whom
it is unlawful to make such offer or solicitation in such
jurisdiction. You should not assume that the information contained in
this prospectus supplement and the accompanying prospectus is accurate on any
date subsequent to the date set forth on the front of the document or that any
information we have incorporated by reference is correct on any date subsequent
to the date of the document incorporated by reference, even though this
prospectus supplement and any accompanying prospectus are delivered or common
stock or warrants are sold on a later date.
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Common
stock offered by us pursuant to this
prospectus
supplement
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869,565
shares, plus 1,043,478 shares of common stock underlying the warrants
offered hereby
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Common
stock to be outstanding after this offering
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26,224,819
shares, or 27,268,297 shares if the warrants sold in this offering are
exercised in full
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Use
of
proceeds
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We
intend to use the net proceeds from this offering to fund our ongoing
clinical trials and for general working capital. See “Use of
Proceeds” on page S-9.
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NASDAQ
Capital Market
symbol
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DCTH
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Risk
factors
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This
investment involves a high degree of risk. See “Risk Factors”
beginning on page S-2 of this prospectus
supplement.
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The
number of shares of common stock to be outstanding after this offering is based
on 25,355,254 shares outstanding as of March 31, 2009, and excludes options and
warrants outstanding as of that date representing the right to purchase a total
of 3,708,936 shares of common stock at weighted average exercise price of
$4.01.
Unless
otherwise indicated, this prospectus supplement assumes the sale of the maximum
number of units offered hereunder and does not assume that any of the warrants
issued hereunder will be exercised.
Our
principal executive offices are located at 600 Fifth Avenue, 23rd Floor,
New York, NY 10020. Our telephone number is (212) 489-2100
and our e-mail address is info@delcath.com. Information contained on
our website does not constitute part of this prospectus supplement or the
accompanying prospectus.
Before making an investment decision,
you should carefully consider the risks described in this prospectus supplement,
together with all of the other information incorporated by reference into this
prospectus supplement and the accompanying prospectus, including from our most
recent annual report on Form 10-K. Our business, financial condition
or results of operations could be materially adversely affected by any of these
risks. The trading price of our securities could decline due to any
of these risks, and you may lose part or all of your investment. This
prospectus supplement, the accompanying prospectus and the incorporated
documents also contain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks mentioned below.
Risks
Related to Our Business and Financial Condition
If
we are not successful in the development and commercialization of the Delcath
PHP Systemä, or if we
are unable to market and sell the product, we will not generate operating
revenue or become profitable.
The
Delcath PHP System™, a platform technology for the isolation of various organs
or regions of the body to permit the regional delivery of high doses of drugs
for the treatment of a variety of diseases, is our only product, and our entire
focus has been the development and commercialization of this product. If the
Delcath PHP System™ fails as a commercial product, we have no other products to
sell.
Continuing
losses may exhaust our capital resources. We have had no revenue to date, a
substantial accumulated deficit, recurring operating losses and negative cash
flow.
We expect
to incur significant and increasing losses while generating minimal revenues
over the next few years. From our inception on August 5, 1988 through December
31, 2008, we have incurred cumulative net losses of approximately $45.8 million.
For the years ended December 31, 2008 and 2007, we incurred net losses of
approximately $6.9 million and $3.7 million, respectively.
To date,
we have funded our operations through a combination of private placements of our
securities and through the proceeds of our public offerings in 2000, 2003 and
2007. Please see the detailed discussion of our sales of securities described in
Note 3 to our 2008 financial statements included in this report. We received
proceeds of approximately $5.6 million from private placements we completed in
2004; approximately $2.2 million on exercise of warrants and options in 2004;
approximately $2.5 million from a private placement we completed in 2005;
approximately $5.5 million on exercise of warrants and options in 2005;
approximately $5.1 million on exercise of warrants and options in 2006;
approximately $1.3 million on exercise of options in 2007; and approximately
$13.3 million from a registered direct offering we completed in 2007. As of
December 31, 2008, we had cash and cash equivalents of approximately $10.8
million.
If we
continue to incur losses, we may exhaust our capital resources, and as a result
may be unable to complete our clinical trials, product development and
commercialization of the Delcath PHP System™.
If
we cannot raise the additional capital that may be required to commercialize the
Delcath PHP Systemä,
our potential to generate future revenues will be significantly limited even if
we receive FDA pre-market approval.
Before we
can obtain approval to sell our product commercially, we will need pre-market
approval from the FDA. While we believe that we have sufficient capital to
conduct our operations for this year, our current resources may not be
sufficient to complete the Phase III clinical trial using melphalan or other
clinical trials that we may pursue and will be insufficient to fund the costs of
commercializing the Delcath PHP System™, which will be significant. Many of the
costs of conducting clinical trials are uncertain and not within our control,
including (i) the possibility that the FDA may require additional trials (ii)
the charges payable to each current or prospective clinical test site which is
based on the number of participants in the trial; (iii) the amount of the fee
per patient, which is individually negotiated with each test site; (iv) the
number of patients that may be required to be enrolled in any particular trial;
(v) the location of the test site which can affect other costs, including the
costs of retaining a clinical research organization, monitoring and other out of
pocket costs such as travel; (vi) the actual number of treatments performed per
patient in each clinical trial; and (vii) the possible increase or reduction in
trial costs billed to us where a patient’s insurer refuses or agrees to cover
certain treatment expenses. We do not know if additional financings
will be available when needed, or if they are available, that they will
be
available
on acceptable terms. If we are unable to obtain additional financing as needed,
we may not be able to complete our trials, obtain regulatory approvals or sell
the Delcath PHP System™ commercially.
If
we are unable to obtain additional funding, our general business operations will
be harmed.
While we
believe that we have sufficient capital to conduct current operations, we will
require additional capital for research and development and for clinical trials.
Our liquidity and capital requirements will depend on numerous factors,
including: our research and product development programs, including clinical
studies; the timing and costs of our various United Sates and foreign regulatory
filings, obtaining approvals and complying with regulations; the timing of
product commercialization activities; the timing and costs involved in
preparing, filing, prosecuting, defending and enforcing intellectual property
rights; and the impact of competing technological and market developments. We do
not know if additional financing will be available when needed, or if it is
available, if it will be available on acceptable terms. Insufficient funds may
require us to curtail or stop our research and development
activities.
There
are risks associated with forward-looking statements made by us and actual
results may differ.
Some of
the information contained in this filing contains forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as “may,” “will,” “expect,”
“anticipate,” “believe,” “estimate” and “continue,” or similar words. You should
read statements that contain these words carefully because they:
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discuss
our future expectations;
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contain
projections of our future results of operations or of our financial
condition; and
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state
other “forward-looking”
information.
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We
believe it is important to communicate our expectations. However, there may be
events in the future that we are not able to accurately predict and/or over
which we have no control. The risk factors listed in this section, other risk
factors about which we may not be aware, as well as any cautionary language in
this document, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. You should be aware that the occurrence of
the events described in these risk factors could have an adverse effect on our
business, results of operations and financial condition.
Risks
Related to FDA and Foreign Regulatory Approval
Even
if the FDA grants pre-market approval for use of the Delcath PHP Systemä for the treatment of
melanoma that has metastasized to the liver with melphalan, our ability to
market the device would be limited to that use.
If the
FDA grants pre-market approval for use of the Delcath PHP Systemä in the treatment of
melanoma that has metastasized to the liver with the drug melphalan, our ability
to market the System would be limited to its use with that drug in treating that
disease. Thereafter, physicians could use the System for the treatment of other
cancers or use other drugs (“off-label” use), but we could not market it for
such uses, unless we obtained separate FDA approval to market the System for use
with those other drugs or diseases.
If
we do not obtain FDA pre-market approval, we may not be able to export the
Delcath PHP Systemä to
foreign markets, which will limit our sales opportunities.
If the
FDA does not approve our application for pre-market approval for the Delcath PHP
Systemä, we will not
be able to export the Delcath PHP Systemä from the United States for
marketing abroad unless approval has been obtained from one of a number of
developed nations. We may not be able to obtain approval from one or more
countries where we would like to sell the Delcath PHP Systemä. If we are unable to
market the Delcath PHP Systemä internationally because we
are unable to obtain required approvals, our international market opportunity
will be materially limited.
Conduct
of clinical trials and obtaining FDA pre-market approval could be
delayed.
We have
experienced, and may continue to experience, delays in conducting and completing
required clinical trials, caused by many factors. The pace of
completion of these clinical trials will be dependent on a number of factors,
some of which are out of our control.
Completion
of our clinical trials depends heavily on the ability of the clinical test sites
to identify patients to enroll in the clinical trials. The population
of appropriate patients (i.e., patients with melanoma that has metastasized to
the liver) is limited. Any significant delay in completing clinical trials or in
the FDA’s response to our submission, or a requirement by the FDA for us to
conduct additional trials, would delay the commercialization of the Delcath PHP
Systemä and our
ability to generate revenues.
The
FDA could temporarily or permanently halt the conduct of our clinical
trials.
If the
FDA decides for any reason that the Delcath PHP System™ is not sufficiently safe
or efficacious, it may require the Company to halt the trials. We may not be
able to resume our trials or be able to launch trials overseas if the FDA were
to halt the United States trials.
In
October 2007, Delcath received a letter from the FDA recommending that we
temporarily suspend enrollment in the Phase III and Phase II trials of the
Delcath PHP Systemä in
anticipation of a meeting with the Agency to discuss certain gastrointestinal
(“GI”) safety concerns. The recommendation was issued by the FDA following
reports by Delcath of four serious adverse GI events, which may have been
related to the infusion of melphalan. Following receipt of this letter, we
decided to voluntarily defer enrollment of new patients in our Phase III and
Phase II trials pending that meeting.
During a
meeting at the FDA that was attended by senior reviewers from both the Drug and
Device arms of the FDA, the Principal Investigator at the NCI presented an
analysis of the previously reported gastrointestinal toxicities and of the
changes incorporated into the trial protocols to prevent a recurrence of those
toxicities. These changes had been previously approved by the NCI Institutional
Review Board and were subsequently approved by the Data Safety Monitoring Board
that monitors the Phase III trial. Following that meeting, we were notified in
writing by the FDA that the studies could proceed and we resumed patient
enrollment in the trials less than a month after receiving the October
letter.
We may
experience a number of events that could further delay or prevent development of
the Delcath PHP System™, including:
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the
FDA may put the Phase III and/or Phase II trials on clinical
hold;
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additional
serious adverse events in the clinical trials could
occur;
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other
regulators or institutional review boards may not authorize, or may delay,
suspend or terminate the clinical trial program due to safety
concerns.
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If
similar events were to occur in the future, our clinical trials, and as a
result, our business, operations and stock price could be materially
impacted.
Third-party
reimbursement may not be available to purchasers of the Delcath PHP Systemä or may be inadequate,
resulting in lower sales even if FDA pre-market approval is
granted.
Physicians,
hospitals and other health care providers may be reluctant to purchase our
System if they do not receive substantial reimbursement for the cost of using
our products from third-party payors, including Medicare, Medicaid and private
health insurance plans.
The
Delcath PHP Systemä is
currently characterized by the FDA as an experimental device. As such, Medicare,
Medicaid and private health insurance plans will not reimburse its use in the
United States. We will seek reimbursement by third-party payors of the cost of
the Delcath PHP System™ after its use is approved by the FDA. There are no
assurances that third-party payors in the United States or abroad will agree to
cover the cost of procedures using the Delcath PHP System™. Further, third-party
payors may deny
reimbursement
if they determine that the Delcath PHP System™ is not used in accordance with
established payor protocols regarding cost effective treatment methods or is
used for forms of cancer or with drugs not specifically approved by the
FDA.
Risks
Related to Manufacturing, Commercialization and Market Acceptance of the Delcath
PHP Systemä
We
purchase components for the Delcath PHP Systemä from sole-source
suppliers. These manufacturers must comply with a number of FDA requirements and
regulations. If one of our suppliers fails to meet such requirements or if we
change suppliers, the successful completion of the clinical trials and/or the
commercialization of the Delcath PHP System™ could be jeopardized.
The
components of the Delcath PHP Systemä must be manufactured in
accordance with manufacturing and performance specifications of the Delcath PHP
System™ on file with the FDA and meet good manufacturing practice requirements.
Many of the components of the Delcath PHP System™ are manufactured by
sole-source suppliers. If any of our suppliers fails to meet those regulatory
obligations, we may be forced to suspend or terminate our clinical trials.
Further, if we need to find a new source of supply, we may face long
interruptions in obtaining necessary components for the System, which could
jeopardize our ability to supply the Delcath PHP Systemä to the
market.
We
do not have any contracts with suppliers for the manufacture of components for
the Delcath PHP System™. If we are unable to obtain an adequate supply of the
necessary components, we may not be able to complete our clinical
trials.
We do not
have long term supply contracts with suppliers of components for the Delcath PHP
System™. Certain components are available from only a limited number of sources.
Components of the Delcath PHP System™ are currently manufactured for us in small
quantities for use in our pre-clinical and clinical studies. We will require
significantly greater quantities to commercialize the product. We may not be
able to find alternate sources of comparable components. If we are unable to
obtain adequate supplies of components from our existing suppliers or need to
switch to an alternate supplier, commercialization of the Delcath PHP System™
could be delayed.
We
have limited experience in marketing products and lack adequate personnel to
market and sell products, and as a result, we may not be successful in marketing
and selling the Delcath PHP Systemä even if we receive FDA
pre-market approval.
Delcath
has not previously sold, marketed or distributed any products and currently does
not have the personnel, resources, experience or other capabilities to market
the Delcath PHP System™. Our success will depend upon our ability to attract and
retain skilled sales and marketing personnel or our reaching an agreement with a
third party to market our product. Competition for sales and marketing personnel
is intense, and we may not be successful in attracting or retaining such
personnel. Our inability to attract and retain skilled sales and marketing
personnel or to reach an agreement with a third party could adversely affect our
business, financial condition and results of operations.
Market
acceptance of the Delcath PHP System™ will depend on substantial efforts and
expenditures in an area with which we have limited experience.
Market
acceptance of the Delcath PHP Systemä will depend upon a variety
of factors including:
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Whether
our clinical trials demonstrate significantly improved, cost effective
patient outcomes;
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Our
ability to educate physicians and drive acceptance of the use of the
Delcath PHP System™;
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Our
ability to convince healthcare payors that use of the Delcath PHP System™
results in reduced treatment costs and improved outcomes for
patients;
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Whether
the Delcath PHP Systemä replaces treatment
methods in which many hospitals have made a significant investment.
Hospitals may be unwilling to replace their existing technology in light
of their investment and experience with competing technologies;
and
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Whether
doctors and hospitals are reluctant to use a new medical technology until
its value has been demonstrated. As a result, the Delcath PHP System™ may
not gain significant market acceptance among physicians, hospitals,
patients and healthcare payors.
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Rapid
technological developments in treatment methods for liver cancer and competition
with other forms of liver cancer treatments could result in a short product life
cycle for the Delcath PHP Systemä.
Competition
in the cancer treatment industry is intense. The Delcath PHP Systemä competes with all forms of
liver cancer treatments that are alternatives to the “gold standard” treatment
of surgical resection. Many of our competitors have substantially greater
resources and considerable experience in conducting clinical trials and
obtaining regulatory approvals. If these competitors develop more effective or
more affordable products or treatment methods, our profitability will be
substantially reduced and the Delcath PHP System™ could have a short product
life cycle.
The
loss of key personnel could adversely affect our business.
Our Chief
Executive Officer is responsible for the operation of our business, and we have
entered into an employment agreement with him for his services. The loss of his
services could delay our completion of the clinical trials, our obtaining FDA
pre-market approval, our introducing the Delcath PHP Systemä commercially and our
generating revenues and profits. Competition for experienced personnel is
intense. If we cannot retain our current personnel or attract additional
experienced personnel, our ability to compete could be adversely
affected.
Risks
Related to Patents, Trade Secrets and Proprietary Rights
Our
success depends in large part on our ability to obtain patents, maintain trade
secret protection and operate without infringing on the proprietary rights of
third parties.
Due to
the uncertainty of the patent prosecution process, there are no guarantees that
any of our pending patent applications will result in the issuance of a patent.
Even if we are successful in obtaining a patent, there is no assurance that it
will be upheld if later challenged or will provide significant protection or
commercial advantage. Because of the length of time and expense associated with
bringing new medical devices to the market, the healthcare industry has
traditionally placed considerable emphasis on patent and trade secret protection
for significant new technologies. Companies in the medical device industry may
use intellectual property infringement litigation to gain a competitive
advantage. If this type of litigation is successful, a third party may be able
to obtain an injunction prohibiting us from offering our product. Litigation may
be necessary to enforce any patents issued or assigned to us or to determine the
scope and validity of third-party proprietary rights. Litigation could be costly
and could divert our attention from our business. There are no guarantees that
we will receive a favorable outcome in any such litigation. If others file
patent applications with respect to inventions for which we already have patents
issued to us or have patent applications pending, we may be forced to
participate in interference proceedings declared by the United States Patent and
Trademark Office to determine priority of invention, which could also be costly
and could divert our attention from our business. If a third party violates our
intellectual property rights, we may be unable to enforce our rights because of
our limited resources. Use of our limited funds to defend our intellectual
property rights may also affect our financial condition adversely.
Risks
Related to Products Liability
We
may not carry sufficient products liability insurance and we may not be able to
acquire sufficient coverage in the future to cover large claims.
Clinical
trials, manufacturing and product sales may expose us to liability claims from
the use of the Delcath PHP Systemä. Though participants in
clinical trials are generally required to execute consents and waivers of
liability, a court might find such consents and waivers of liability to be
ineffective or invalid. Were such a claim asserted we would likely incur
substantial legal and related expenses even if we prevail on the merits. Claims
for damages, whether or not successful, could cause delays in the clinical
trials and result in the loss of physician endorsement. A successful products
liability claim or recall would have a material adverse effect on our business,
financial condition and results of operations. We currently carry
some clinical trial insurance coverage, but it may be insufficient to cover one
or more large claims.
Risks
Related to an Investment in Our Securities
Our
stock price and trading volume may be volatile, which could result in losses for
our stockholders.
The
equity markets may experience periods of volatility, which could result in
highly variable and unpredictable pricing of equity securities. The market price
of our common stock could change in ways that may or may not be related to our
business, our industry or our operating performance and financial condition.
Some of the factors that could negatively affect our share price or result in
fluctuations in the price or trading volume of our common stock
include:
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actual
or anticipated quarterly variations in our operating
results;
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changes
in expectations as to our future financial performance or changes in
financial estimates, if any, of public market
analysts;
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announcements
relating to our business or the business of our
competitors;
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conditions
generally affecting the healthcare and cancer treatment industries;
and
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the
success of our operating strategy.
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Many of
these factors are beyond our control, and we cannot predict their potential
impact on the price of our common stock. We cannot assure you that the market
price of our common stock will not fluctuate or decline significantly in the
future.
Future
sales of our common stock may cause our stock price to decline.
The
market price of our common stock has historically been volatile. During the
three years ended December 31, 2008, the range of the high and low sales prices
of our common stock have ranged from a high of $6.00 (during the quarter ended
June 30, 2006) to a low of $0.82 (during the quarter ended December 31,
2008).
Sales of
substantial amounts of common stock, or the perception that such sales could
occur, could have an adverse effect on prevailing market prices for our common
stock.
Our
insiders beneficially own a significant portion of our stock.
As of
December 31, 2008, our executive officers, directors and affiliated persons
beneficially owned approximately 12.2% of our common stock. As a result, our
executive officers, directors and affiliated persons will have significant
influence to:
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elect
or defeat the election of our
directors;
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amend
or prevent amendment of our articles of incorporation or
bylaws;
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effect
or prevent a merger, sale of assets or other corporate transaction;
and
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affect
the outcome of any other matter submitted to the stockholders for
vote.
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Sales of
significant amounts of shares held by our directors and executive officers, or
the prospect of these sales, could adversely affect the market price of our
common stock.
Anti-takeover
provisions in our Certificate of Incorporation and By-laws and under our
stockholder rights agreement may reduce the likelihood of a potential change of
control, or make it more difficult for our stockholders to replace
management.
Certain
provisions of our Certificate of Incorporation and By-laws and of our
stockholders rights agreement could have the effect of making it more difficult
for our stockholders to replace management at a time when a substantial number
of our stockholders might favor a change in management. These provisions
include:
|
●
|
providing
for a staggered board; and
|
|
●
|
authorizing
the board of directors to fill vacant directorships or increase the size
of our board of directors.
|
Furthermore,
our board of directors has the authority to issue up to 10,000,000 shares of
preferred stock in one or more series and to determine the rights and
preferences of the shares of any such series without stockholder approval. Any
series of preferred stock is likely to be senior to the common stock with
respect to dividends, liquidation rights and, possibly, voting rights. Our
board’s ability to issue preferred stock may have the effect of discouraging
unsolicited acquisition proposals, thus adversely affecting the market price of
our common stock and warrants.
We also
have a stockholder rights agreement that could have the effect of substantially
increasing the cost of acquiring us unless our board of directors supports the
transaction even if the holders of a majority of our common stock are in favor
of the transaction.
Our
Common Stock is listed on the NASDAQ Capital Market. If we fail to meet the
requirements of the NASDAQ Capital Market for continued listing, our Common
Stock could be delisted.
Our
Common Stock is currently listed on the NASDAQ Capital Market. To keep such
listing, we are required to maintain: (i) a minimum bid price of $1.00 per
share, (ii) a certain public float, (iii) a certain number of round lot
shareholders and (iv) one of the following: a net income from continuing
operations (in the latest fiscal year or two of the three last fiscal years) of
at least $500,000, a market value of listed securities of at least $35 million
or a stockholders' equity of at least $2.5 million. We are presently in
compliance with these requirements.
We are
also required to maintain certain corporate governance requirements. In the
event that in the future we are notified that we no longer comply with NASDAQ’s
corporate governance requirements, and we fail to regain compliance within the
applicable cure period, our Common Stock could be delisted from the NASDAQ
Capital Market.
If
our common stock is delisted from the NASDAQ Capital Market, we may be subject
to the risks relating to penny stocks.
If our
common stock were to be delisted from trading on the NASDAQ Capital Market and
the trading price of the common stock were below $5.00 per share on the date the
common stock were delisted, trading in our common stock would also be subject to
the requirements of certain rules promulgated under the Exchange Act. These
rules require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a “penny stock” and impose various sales
practice requirements on broker-dealers who sell penny stocks to persons other
than established customers and accredited investors, generally institutions.
These additional requirements may discourage broker-dealers from effecting
transactions in securities that are classified as penny stocks, which could
severely limit the market price and liquidity of such securities and the ability
of purchasers to sell such securities in the secondary market.
A penny
stock is defined generally as any non-exchange listed equity security that has a
market price of less than $5.00 per share, subject to certain
exceptions.
We
do not expect to pay dividends in the foreseeable future. As a result, holders
of our common stock must rely on stock appreciation for any return on their
investment.
We have
never declared or paid any dividends to the holders of our common stock and we
do not expect to pay cash dividends in the foreseeable future. We currently
intend to retain all earnings for use in connection with the expansion of our
business and for general corporate purposes. Our board of directors will have
the sole discretion in determining whether to declare and pay dividends in the
future. The declaration of dividends will depend on our profitability, financial
condition, cash requirements, future prospects and other factors deemed relevant
by our board of directors. Our ability to pay cash dividends in the future could
be limited or prohibited by the terms of financing agreements that we may enter
into or by the terms of any preferred stock that we may authorize and
issue.
The
exercise price and number of certain warrants will be adjusted in connection
with this and possibly other offerings.
In
connection with our September 2007 registered direct offering, we issued
warrants to purchase an aggregate of 1,916,554 shares of our common stock at an
exercise price per share of $4.53. The warrants provide that the
exercise price and the number of shares issuable upon exercise of the warrants
shall be adjusted from time to time if and whenever we issue or sell, or are
deemed to have issued or sold, any shares of our common stock at a price per
share less than the then-current exercise price of the warrants. In
such event, the exercise price of the warrants shall be reduced to an amount
equal to the new issuance price. Further, upon each such adjustment
of the exercise price, the number of shares issuable upon exercise of the
warrants shall be adjusted to such number of shares determined by multiplying
the exercise price in effect immediately prior to such adjustment by the number
of shares issuable upon exercise of the warrants immediately prior to such
adjustment and dividing the product thereof by the exercise price resulting from
such adjustment. Applying the foregoing provisions to the offering by
this prospectus supplement results in the warrants issued and outstanding from
our September 2007 registered direct offering being adjusted such that the
number of shares issuable under the warrants increases by 599,965 and the
exercise price decreases to $3.45. The warrants sold in the offering
by this prospectus supplement also contain an adjustment of only the exercise
price thereof in the event of issuances or deemed issuances of our common stock
at a price below the exercise price thereof.
We
anticipate using the net proceeds from the sale of our securities offered by
this prospectus supplement principally to fund our ongoing clinical trials, as
well as for general corporate and administrative expenses. However,
we will retain broad discretion over the use of proceeds from this offering and
may use the net proceeds for other purposes, including the acquisitions of
complementary technologies or companies. Pending the use of the net
proceeds, we intend to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
Our pro
forma net tangible book value as of March 31, 2009 was approximately $7.864
million, or $0.31 per share of common stock. Pro forma net tangible
book value per share is calculated by subtracting our total liabilities from our
total tangible assets, which is total assets less intangible assets, and
dividing this amount by the number of shares of common stock
outstanding. After giving effect to the sale by us of the full
869,565 shares of common stock underlying the units offered by this prospectus
supplement at a price of $3.45 per unit, and after deducting estimated offering
expenses and sales commissions payable by us, our pro forma, as-adjusted net
tangible book value as of March 31, 2009 would have been approximately
$10.654 million, or $0.41 per share of common stock. This
represents an immediate increase in the pro forma net tangible book value of
$0.10 per share to our existing shareholders and an immediate and substantial
dilution in pro forma net tangible book value of $3.04 per share to new
investors. The following table illustrates this hypothetical per
share dilution:
|
Offering
price per unit
|
$
|
3.45
|
||||||
|
Pro
forma net tangible book value per share as of March 31,
2009
|
$
|
0.31
|
||||||
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Increase
per share attributable to new investors
|
$
|
0.10
|
||||||
|
Pro
forma, as-adjusted net tangible book value per share after this
offering
|
$
|
0.41
|
||||||
|
Dilution
per share to new investors
|
$
|
3.04
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||||||
The
foregoing dilution information is based on 25,355,254 shares outstanding as of
March 31, 2009 and excludes options and warrants outstanding as of that date
representing the right to purchase a total of 3,708,936 shares of common stock
at weighted average exercise price of $4.01.
The
foregoing dilution information does not give effect to the exercise of the
warrants that are being offered with the units.
We have
entered into a placement agency agreement, dated as of June 9, 2009, with Piper
Jaffray & Co. Subject to the terms and conditions contained in
the placement agency agreement, Piper Jaffray has agreed to act as the placement
agent in connection with the sale of up to 869,565 units, with each unit
consisting of one share of common stock and a warrant to purchase 1.2 shares of
common stock. The placement agent is not purchasing or selling any
securities by this prospectus supplement and the accompanying prospectus, nor is
it required to arrange the purchase or sale of any specific number or dollar
amount of the securities, but it has agreed to use its best efforts to arrange
for the sale of all of the securities in this offering. There is no
required minimum number of securities that must be sold as a condition to
completion of the offering.
The
placement agency agreement provides that the obligations of the placement agent
and the purchasers are subject to certain conditions precedent, including, among
other things, the absence of any material adverse change in our business and the
receipt of certain opinions, letters and certificates from our counsel, our
independent auditors and us.
We will
enter into purchase agreements directly with purchasers in connection with this
units offering, and we will only sell to purchasers who have entered into
purchase agreements.
We
currently anticipate that the closing of the sale of the units offered hereby
will take place on or about June 15, 2009.
We have
agreed to pay the placement agent an aggregate fee equal to 7.0% of the gross
proceeds from the sale of units in this offering. In addition, we
have agreed to pay the fees, disbursements and other charges of counsel to the
placement agent in an amount not to exceed $30,000.
Pursuant
to a requirement by the Financial Industry Regulatory Authority, or FINRA, the
maximum commission or discount to be received by any FINRA member or independent
broker/dealer may not be greater than 8.0% of the gross proceeds received by us
for the sale of any securities being registered pursuant to SEC Rule
415. The following table shows the per unit and total fees we will
pay to the placement agent in connection with the sale of the securities offered
pursuant to this prospectus supplement and the accompanying prospectus, assuming
the sale of all of the securities offered hereby.
|
Per
unit placement agent fees
|
$ 0.2415
|
|
Maximum
offering total
|
$210,000
|
Because
there is no minimum offering amount required as a condition to closing in this
offering, the actual total offering fees, if any, are not presently determinable
and may be substantially less than the maximum amount set forth
above.
We have
agreed to indemnify the placement agent against certain liabilities, including
civil liabilities under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and to contribute to payments that
the placement agent may be required to make in respect of those
liabilities.
The
placement agent has informed us that it will not engage in over-allotment,
stabilizing transactions or syndicate covering transactions in connection with
this offering.
We and
each of our directors and executive officers have agreed to certain restrictions
on the ability to sell shares of our common stock and other securities that they
beneficially own, including securities convertible into or exercisable or
exchangeable for our common stock, for a period of 60 days following the date of
this prospectus supplement. This means that, subject to certain
exceptions, for a period of 60 days following the date of this prospectus
supplement, we and such persons may not, directly or indirectly, offer, pledge,
announce the intention to sell, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of any shares of
our common stock or any, without the prior written consent of Piper
Jaffray. Notwithstanding the foregoing, if (x) during the last 17
days of such 60 day period, we announce that we will release earnings results or
publicly announce other material news or a material event relating to us occurs
or (y) prior to the expiration of the 60 day period, we announce that we will
release earnings results during the 16 day period beginning on the last day of
the 60 day period, then in each case the 60 day period will be extended until
the expiration of the 18 day period beginning on the date of release of the
earnings results or the public announcement regarding the material news or the
occurrence of the material event, as applicable, unless Piper Jaffray waives, in
writing, such extension. At any time and without public notice, Piper
Jaffray may in its sole discretion release all or some of the securities from
these lock-up agreements.
The
transfer agent for our common stock is American Stock Transfer & Trust
Co.
Our
common stock is traded on the NASDAQ Capital Market under the symbol
“DCTH.”
The
placement agent may distribute this prospectus supplement and the accompanying
prospectus electronically.
The
placement agency agreement will be included as an exhibit to a Current Report on
Form 8-K that we will file with the SEC and that will be incorporated by
reference into the registration statements of which this prospectus supplement
forms a part.
From time
to time in the ordinary course of its business, the placement agent or its
affiliates may in the future engage in investment banking, commercial banking
and/or other services with us and our affiliates for which it may in the future
receive customary fees and expenses.
The
material terms and provisions of the warrants being offered pursuant to this
prospectus supplement and the accompanying prospectus are summarized
below. This summary is subject to, and qualified in its entirety by,
the form of warrant, which will be provided to each purchaser in this offering
and will be filed on a Current Report on Form 8-K in connection with this
offering.
The
warrants will be exercisable at any time and from time to time for a period of
five years from issuance. The warrants will be exercisable, at the
option of each holder, upon the surrender of the warrants to us and at an
exercise price equal to $3.99, which, except as described below, must be paid in
cash at the time of exercise. The exercise price is subject to
appropriate adjustment in the event of stock dividends, stock splits,
reorganizations or similar events affecting our common stock. In the
event the Company under certain circumstances issues equity securities at a per
share price less than the exercise price of the warrants, the exercise price of
the warrants will be reduced to such lower price. The warrant holders must
surrender payment in cash of the exercise price of the shares being acquired
upon exercise of the warrants; provided, however, that if the Company is unable
to offer and sell the shares underlying these warrants pursuant to this
prospectus supplement due to the ineffectiveness of the registration statements
of which this prospectus supplement is a part, then the warrants may only be
exercised on a “net” or “cashless” basis. In no event is the warrant
holder entitled to a cash settlement from the Company upon
exercise.
Various
legal matters with respect to the validity of the securities offered by this
prospectus supplement will be passed upon for us by Hughes Hubbard & Reed
LLP, New York, New York. Goodwin Procter LLP, New York, New York, is
counsel for the placement agent in connection with this offering.
PROSPECTUS
$30,000,000
DELCATH
SYSTEMS, INC.
COMMON
STOCK, PREFERRED STOCK, DEBT SECURITIES,
WARRANTS
TO PURCHASE COMMON STOCK,
WARRANTS
TO PURCHASE PREFERRED STOCK,
WARRANTS
TO PURCHASE DEBT SECURITIES,
STOCK
PURCHASE CONTRACTS AND
STOCK
PURCHASE UNITS
- - - - -
- - - - - -
We will
provide the specific terms of these securities in supplements to this
prospectus. The prospectus supplements may also add, update or change
information contained in this prospectus. You should read this prospectus and
any supplements carefully before you invest. This prospectus may not be used to
offer and sell securities unless accompanied by a prospectus
supplement.
Our
common stock is listed on the NASDAQ Capital Market and the Boston Stock
Exchange under the symbol "DCTH." The closing sale price of our common stock, as
reported on the NASDAQ Capital Market on May 23, 2007 was $3.90.
We will
provide specific terms of these securities in supplements to this prospectus.
You should read this prospectus and any supplement carefully before you purchase
any of our securities.
This
prospectus may not be used to offer and sell securities unless accompanied by a
prospectus supplement.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS,"
BEGINNING ON PAGE 4.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE
We may
offer the securities in amounts, at prices and on terms determined at the time
of offering. We may sell the securities directly to you, through agents we
select, or through underwriters and dealers we select. If we use agents,
underwriters, or dealers to sell the securities, we will name them and describe
their compensation in a prospectus supplement.
The date
of this prospectus is June 7, 2007
This
prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission, which we refer to
as the "SEC," using a "shelf" registration process. Under this shelf process, we
may, from time to time, sell an indeterminate amount of any combination of the
securities described in this prospectus in one or more offerings up to a total
dollar amount of $30,000,000. This prospectus provides you with a general
description of the securities we may offer pursuant to this prospectus. Each
time we sell securities, we will provide one or more prospectus supplements that
will contain specific information about the terms of that offering. This
prospectus does not contain all of the information included in the registration
statement. For a more complete understanding of the offering of the securities,
you should refer to the registration statement relating to this prospectus,
including its exhibits. A prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any accompanying prospectus supplement, including the risk factors, together
with the additional information described under the heading "Where You Can Find
More Information."
You
should rely only on the information incorporated by reference or provided in
this prospectus and any accompanying prospectus supplement. We have not
authorized any dealer, salesman or other person to provide you with additional
or different information. This prospectus and any accompanying prospectus
supplement are not an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which they relate and are not an offer
to sell or the solicitation of an offer to buy securities in any jurisdiction to
any person to whom it is unlawful to make an offer or solicitation in that
jurisdiction. You should not assume that the information in this prospectus or
any accompanying prospectus supplement or in any document incorporated by
reference in this prospectus or any accompanying prospectus supplement is
accurate as of any date other than the date of the document containing the
information.
Unless
the context requires otherwise or unless otherwise noted, all references in this
prospectus or any accompanying prospectus supplement to "Company," "we," "us" or
"our" are to Delcath Systems, Inc. and its subsidiaries.
WHERE
YOU CAN FIND MORE INFORMATION
We are a
reporting company and file annual, quarterly and current reports, proxy
statements and other information with the SEC. Our SEC filings (File No.
1-16133) are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You can
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the Public Reference Rooms.
Our
common stock is listed on the NASDAQ Capital Market and the Boston Stock
Exchange under the symbol "DCTH." Our reports, proxy statements and other
information also may be read and copied at the NASDAQ Stock Exchange at One
Liberty Plaza, 165 Broadway, New York, NY 10006.
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 information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (other
than information deemed to have been furnished to, and not filed in accordance
with, SEC rules) until we sell all of the securities or until we terminate this
offering:
|
o
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Annual
Report on Form 10-K for the year ended December 31, 2006 filed with the
SEC on March 16, 2007;
|
|
o
|
Current
Report on Form 8-K filed with the SEC on April 2,
2007;
|
|
o
|
Current
Report on Form 8-K filed with the SEC on April 16,
2007;
|
|
o
|
Current
Report on Form 8-K filed with the SEC on April 20,
2007;
|
|
o
|
Definitive
proxy statement relating to our 2007 annual meeting of stockholders filed
with the SEC May 1, 2007;
|
|
o
|
Current
Report on Form 8-K filed with the SEC on May 4,
2007;
|
|
o
|
Quarterly
Report on Form 10-Q filed with the SEC on May 10,
2007;
|
|
o
|
Annual
Report on Form 10-K/A for the year ended December 31, 2006, filed with the
SEC on May 16, 2007;
|
|
o
|
Current
Report on Form 8-K filed with the SEC on May 17, 2007;
and
|
|
o
|
The
description of our common stock contained under the caption "Description
of Our Capital Stock and Other Securities - Units" in the Prospectus
included in our registration statement on Form
SB-2 (Registration No.: 333-101661), declared effective on May
15, 2003.
|
You may
request a copy of these filings at no cost, by writing or telephoning us at the
following address or telephone number:
Delcath
Systems, Inc.
1100
Summer Street
Stamford,
Connecticut 06905
Attn:
Paul Feinstein
(203)
323-8668
BACKGROUND
Delcath
Systems, Inc. ("Delcath," the "Company," "we" or "us") was incorporated under
Delaware law in 1988. We are a development stage company with a platform
technology that isolates specific organs and body regions from the body's
general circulatory system in order to administer high dose chemotherapy and
other therapeutic agents directly to a diseased organ or body region. The first
application being investigated for our system uses the Delcath technology to
isolate the liver from the general circulatory system for the treatment of
tumors of the liver. High doses of chemotherapy are delivered directly to tumors
in the liver while protecting the patient from the toxicities that would
normally result from systemic exposure to the administered chemotherapeutic
drug. These higher doses could be potentially lethal to the patient if
administered systemically. One of our trials is in the final phase III United
States Food and Drug Administration (the "FDA") approval process. However, the
Delcath system is not currently approved for marketing by the FDA, and it cannot
be marketed in the United States without FDA pre-market approval. As mentioned,
we are in the process of conducting a Phase III clinical trial designed to
secure marketing approval in the United States and possibly in foreign markets
for use of the Delcath system with the chemotherapy agent Melphalan, for the
treatment of malignant melanoma that has spread to the liver. We are also
testing the Delcath system with Melphalan against hepatocellular, neuroendocrine
and adenocarcinoma; cancers that have spread to the liver in Phase II clinical
trials. Additionally, we plan to conduct pre-clinical and clinical trials on the
use of the Delcath system with other chemotherapy agents used to treat liver
cancer.
STRATEGY
Our
objectives are to establish the use of the Delcath system as the standard
technique for delivering chemotherapy agents to the liver and expand the Delcath
technology so that it may be used in the treatment of other liver diseases and
of cancers in other parts of the body, and to generate growth, revenues and high
returns for our shareholders through a strategy that includes the following
elements:
|
o
|
COMPLETING
CLINICAL TRIALS TO OBTAIN FDA PRE-MARKET APPROVAL FOR USE OF THE DELCATH
SYSTEM WITH MELPHALAN TO TREAT MALIGNANT MELANOMA THAT HAS SPREAD TO THE
LIVER. Our highest priority is completing the Phase III clinical trial,
data preparation, statistical analysis and filing of necessary regulatory
documents associated with an application for FDA pre-market approval of
the commercial sale of the Delcath system in the United States for use in
administering Melphalan in the treatment of melanoma that has spread to
the liver. We are presently treating patients in trials being conducted by
the National Cancer Institute and will seek to add clinical centers to
this trial in order to speed the completion of the
trial.
|
|
o
|
OBTAINING
APPROVAL TO MARKET THE DELCATH SYSTEM IN THE UNITED STATES FOR THE
TREATMENT OF ADDITIONAL CANCERS IN THE LIVER. We are testing our system in
the treatment of other cancers of
the
|
liver
such as primary liver cancer, and tumors of neuroendocrine and adenocarcinoma
origin that have spread to the liver using the drug Melphalan. In 2004, we
commenced Phase II studies of these three cancers in the liver and are currently
recruiting and treating patients within this trial. We will also continue to
evaluate other promising drug candidates to use with our system to treat other
specific tumors in the liver.
|
o
|
EXPLORE
OTHER REGIONAL THERAPY APPLICATIONS FOR THE DELCATH SYSTEM. We are
evaluating other organs and procedures that may be well suited for the use
of our device. Other organs or body regions that may be evaluated for
compatibility with our catheter technology include limbs, lungs, pancreas,
and kidneys.
|
|
o
|
INVESTIGATING
TREATMENT OF HEPATITIS USING ANTI-VIRAL DRUGS. In addition to researching
the use of other chemotherapy agents with the Delcath system to treat a
variety of cancers, we plan to research the use of other compounds with
the Delcath system to treat other diseases of the liver including
hepatitis. We intend to develop strategic alliances with a number of
cancer centers. To this end, we are presently contacting recognized
leading institutions and liver transplant centers that focus on regional
cancer treatments. By working together with these institutions we intend
to explore new applications for our technology and to help in the design
and expansion of our clinical
trials.
|
|
o
|
IMPROVING
OUR TECHNOLOGY. We will continue to identify improvements which increase
potential drug dosing, simplify the procedure, shorten recovery times and
expand the uses of the system. These changes may include new catheter
designs, system architectures and the development of filters with specific
affinity to newer anticancer and antiviral
agents.
|
|
o
|
INTRODUCING
THE DELCATH SYSTEM INTO FOREIGN MARKETS. We may seek to establish
strategic relationships with domestic and foreign firms
that have an established presence or experience in the foreign
markets that we intend to target. Our strategy is to focus on markets that
have a high incidence of liver disease and the public or private means to
provide and pay for the associated medical treatments. According to the
World Health Organization, many Asian and European countries, including
China, Japan, Hong Kong, the Philippines, Australia, Greece, France,
Germany, Italy and Spain, have a higher incidence of hepatitis and liver
cancer than the United States. We may explore arrangements with strategic
partners who have experience with obtaining the necessary regulatory
approvals and the marketing of medical devices in those
markets.
|
A more
complete description of our business is contained in our Annual Reports on Form
10-K and 10-K/A for the year ended December 31, 2006. See "Where you can find
more information" above.
AN
INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS SET FORTH IN THE DOCUMENTS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS AND IN THE SUPPLEMENTS TO THIS PROSPECTUS AND ALL
OF THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS AND IN SUPPLEMENTS TO THIS
PROSPECTUS BEFORE DECIDING TO INVEST IN OUR SECURITIES. THE RISKS DESCRIBED ARE
NOT THE ONLY ONES FACING OUR COMPANY. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US
OR WHICH WE CURRENTLY CONSIDER IMMATERIAL ALSO MAY ADVERSELY AFFECT OUR COMPANY.
IF ANY OF THE FOLLOWING RISKS AND UNCERTAINTIES ACTUALLY OCCURS, OUR BUSINESS,
FINANCIAL CONDITION OR OPERATING RESULTS MAY BE MATERIALLY AND ADVERSELY
AFFECTED. IN THIS EVENT, THE TRADING PRICE OF OUR SECURITIES MAY DECLINE AND YOU
MAY LOSE PART OR ALL OF YOUR INVESTMENT.
RISKS
RELATED TO OUR BUSINESS AND FINANCIAL CONDITION
IF WE ARE
NOT SUCCESSFUL IN THE DEVELOPMENT AND COMMERCIALIZATION OF THE DELCATH SYSTEM,
OR IF WE ARE UNABLE TO MARKET AND SELL THE PRODUCT, WE WILL NOT GENERATE
OPERATING REVENUE OR BECOME PROFITABLE.
The
Delcath system, an enabling technology for the isolation of various organs in
the body to permit the delivery of otherwise unacceptably toxic doses of drugs,
is our only product, and our entire focus has been the development and
commercialization of this product. If the Delcath system fails as a commercial
product, we have no other products to sell.
CONTINUING
LOSSES MAY EXHAUST OUR CAPITAL RESOURCES. WE HAVE HAD NO REVENUE TO DATE, A
SUBSTANTIAL ACCUMULATED DEFICIT, RECURRING OPERATING LOSSES AND NEGATIVE CASH
FLOW.
We expect
to incur significant and increasing losses while generating minimal revenues
over the next few years. From our inception on August 5, 1988 through December
31, 2006, we have incurred cumulative net losses of approximately $35.3 million
which were principally incurred in connection with our product development
efforts and, in 2006, legal expenses. For the year ended December31, 2006, we
incurred net losses of approximately $11.0 million.
In the
past, we have funded our operations through a combination of private placements
of our securities and through the proceeds of our public offerings in 2000 and
2003. In addition, we received proceeds of approximately $5.6 million from
private placements we completed in 2004, approximately $2.2 on exercise of
warrants and options in 2004, approximately $2.5 million from a private
placement we completed in 2005, approximately $5.5 million on exercise of
warrants and options in 2005; and approximately $5.1 million on exercise of
warrants and options in 2006.
Although
we may receive approximately $30,000,000 from the sale of securities under this
prospectus, there are no assurances that any such offerings will be successful,
nor can the Company estimate when, if such offerings are successful, these
offerings may close and capital will become
available
to the Company. Additionally, we do not know if additional financing will be
available when needed, or if it is available, if it will be available on
acceptable terms. Insufficient funds may prevent us from implementing our
business strategy. If we continue to incur losses we may exhaust our capital
resources resulting in our being unable to complete the development and
commercialization of our product. As we incur additional losses, our accumulated
deficit will further increase. As of December 31, 2006, we had cash and cash
equivalents and short term investments of approximately $8.7
million.
IF WE ARE
UNABLE TO RAISE ADDITIONAL FUNDS, OUR ABILITY TO COMPLETE THE REQUIRED CLINICAL
TRIALS WILL BE HARMED.
Before we
can obtain approval to sell our product commercially, we will need premarket
approval from the FDA which, in turn, requires that we complete clinical trials
to establish the effectiveness of our system. Many of the costs incurred in
conducting clinical trials are due to uncertainties that are not within our
control, including (i) the possibility that the FDA may require additional
trials and the number of trials that may be required; (ii) the charges payable
to each current or prospective clinical test site which may be a flat fee for a
certain time period or a fee based on the number of participants in the trial;
(iii) the amount of the fee per participant which is individually negotiated
with each test site; (iv) the number of patients that may be required to be
enrolled in any particular trial; (v) the location of the test site which can
affect our other costs, including the costs of retaining a clinical research
organization and out of pocket costs such as travel; (vi) the actual number of
treatments per patient in each clinical trial; and (vii) the possible reduction
in trial costs billed to the Company where a patient's insurer agrees to cover
treatment expenses. As a result, we are unable to estimate the total costs we
will incur in completing the clinical trials. In addition, completion of the
clinical trials does not guarantee that the FDA will give us the required
approvals in a timely manner or will give them to us at all.
IF WE DO
NOT RAISE ANY ADDITIONAL CAPITAL THAT MAY BE REQUIRED TO COMMERCIALIZE THE
DELCATH SYSTEM, OUR POTENTIAL TO GENERATE FUTURE REVENUES WILL BE SIGNIFICANTLY
LIMITED EVEN IF WE RECEIVE FDA PREMARKET APPROVAL.
While we
have sufficient capital to conduct our operations, we believe that our current
resources will not be sufficient to complete Phase III clinical trials using
Melphalan or other clinical trials that we may pursue and will be insufficient
to fund the costs of commercializing the Delcath system, which will be
significant. In addition, although we may receive approximately $30,000,000 from
the sale of securities under this prospectus, there are no assurances that any
such offerings will be successful, nor can the Company estimate when, if such
offerings are successful, these offerings may close and capital will become
available to the Company. If we are unable to obtain additional financing as
needed, we will not be able to sell the system commercially.
IF WE ARE
UNABLE TO OBTAIN ADDITIONAL FUNDING OUR GENERAL BUSINESS OPERATIONS WILL BE
HARMED.
As
described above, while we have sufficient capital to conduct our operations
through the end of 2007, we require additional capital for research and
development and for additional clinical trials. Our further liquidity and
capital requirements will depend on numerous factors, including the
progress
of our research and product development programs, including clinical studies;
the timing and costs of making various United Sates and foreign regulatory
filings, obtaining approvals and complying with regulations; the timing and
effectiveness of product commercialization activities, including marketing
arrangements overseas; the timing and costs involved in preparing, filing,
prosecuting, defending and enforcing intellectual property rights; and the
effect of competing technological and market developments. Although we may
receive approximately $30,000,000 from the sale of securities under this
prospectus, there are no assurances that any such offerings will be successful,
nor can the Company estimate when, if such offerings are successful, these
offerings may close and capital will become available to the Company.
Additionally, we do not know if additional financing will be available when
needed, or if it is available, if it will be available on acceptable terms.
Insufficient funds may prevent us from implementing our business
strategy.
THERE ARE
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS MADE BY US AND ACTUAL RESULTS
MAY DIFFER.
Some of
the information in this Form S-3 contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as "may," "will," "expect," "anticipate,"
"believe," "estimate" and "continue," or similar words. You should read
statements that contain these words carefully because they:
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discuss
our future expectations;
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contain
projections of our future results of operations or of our financial
condition; and
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state
other "forward-looking"
information.
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We
believe it is important to communicate our expectations. However, there may be
events in the future that we are not able to accurately predict and/or over
which we have no control. The risk factors listed in this section, other risk
factors about which we may not be aware, as well as any cautionary language in
this prospectus, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. You should be aware that the occurrence of
the events described in these risk factors could have an adverse effect on our
business, results of operations and financial condition (See Cautionary Note
Regarding Forward-Looking Statements on page 10).
RISKS
RELATED TO FDA AND FOREIGN REGULATORY APPROVAL
EVEN IF
THE FDA GRANTS PREMARKET APPROVAL FOR USE OF THE DELCATH SYSTEM FOR THE
TREATMENT OF MELANOMA THAT HAS METASTASIZED TO THE LIVER WITH MELPHALAN, OUR
ABILITY TO MARKET THE DEVICE WOULD BE LIMITED TO THAT USE.
If the
FDA grants premarket approval for use of the Delcath system in the treatment of
melanoma that has metastasized to the liver with Melphalan, our ability to
market the system would be limited to its use with that drug in treating that
disease. Thereafter, physicians could use the system for the treatment of other
cancers or using other drugs ("off label" use), but we could not market it for
such uses, unless we obtained separate FDA approval to market the system for use
with other drugs or to
treat
other diseases. The lack of separate specific approvals would limit our ability
to market our product and could result in substantially reduced
sales.
IF WE DO
NOT OBTAIN FDA PREMARKET APPROVAL, WE MAY NOT BE ABLE TO EXPORT THE DELCATH
SYSTEM TO FOREIGN MARKETS, WHICH WILL LIMIT OUR SALES
OPPORTUNITIES.
If the
FDA does not approve our application for premarket approval for the Delcath
system, we will not be able to export the Delcath system from the United States
for marketing abroad unless approval has been obtained from one of a number of
developed nations. If we do not have such approval, we will not be eligible to
use a simplified registration process for the Delcath system in a number of
countries including the members of the European Union, Great Britain and
Australia. We have not begun to seek foreign regulatory approval and may not be
able to obtain approval from one or more countries where we would like to sell
the Delcath system. If we are unable to market the Delcath system
internationally because we are unable to obtain required approvals, our
international market opportunity will be materially limited.
BECAUSE
OF OUR LIMITED EXPERIENCE, CONDUCT OF CLINICAL TRIALS AND OBTAINING FDA
PREMARKET APPROVAL COULD BE DELAYED.
We have
experienced, and may continue to experience, delays in conducting and completing
required clinical trials, caused by many factors, including our limited
experience in the following areas:
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arranging
for clinical trials;
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evaluating
and submitting the data gathered from clinical
trials;
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designing
trials to conform to the trial protocols authorized by the
FDA;
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complying
with the requirements of institutional review boards at the sites where
the trials may be conducted; and
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identifying
clinical test sites and sponsoring
physicians.
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Completion
of our clinical trials will also depend on the ability of the clinical test
sites to identify patients to enroll in the clinical trials, as the population
of appropriate subjects (i.e., patients with melanoma that has metastasized to
the liver) is limited. The trials may also take longer to complete because of
difficulties we may encounter in entering into agreements with clinical testing
sites to conduct the trials. Any significant delay in completing clinical trials
or in the FDA's response to our submission, or a requirement by the FDA for us
to conduct additional trials, would delay the commercialization of the Delcath
system and our ability to generate revenues.
THIRD-PARTY
REIMBURSEMENT MAY NOT BE AVAILABLE TO PURCHASERS OF THE DELCATH SYSTEM OR MAY BE
INADEQUATE, RESULTING IN LOWER SALES EVEN IF FDA PREMARKET APPROVAL IS
GRANTED.
Physicians,
hospitals and other health care providers may be reluctant to purchase our
system if they do not receive substantial reimbursement for the cost of the
procedures using our products from third-party payors, including Medicare,
Medicaid and private health insurance plans.
The
Delcath system is currently characterized by the FDA as an experimental device.
As such, Medicare, Medicaid and private health insurance plans will not
reimburse its use in the United States. We will not begin to seek reimbursement
by third-party payors of the cost of the Delcath system until after its use is
approved by the FDA. Each third-party payor independently determines whether and
to what extent it will reimburse for a medical procedure or product. There are
no assurances that third-party payors in the United States or abroad will agree
to cover procedures using the Delcath system. Further, third-party payors may
deny reimbursement if they determine that the Delcath system is not used in
accordance with established payor protocols regarding cost effective treatment
methods or is used for forms of cancer or with drugs not specifically approved
by the FDA.
In
addition, new products are under increased scrutiny as to whether they will be
covered by the various healthcare plans and as to the level of reimbursement
that would be applicable to respective covered products and procedures. A
third-party payor may deny reimbursement for the treatment and medical costs
associated with the Delcath system, notwithstanding FDA or other regulatory
approval, if that payor determines that the Delcath system is unnecessary,
inappropriate, not cost effective, and experimental or is used for a
non-approved indication.
RISKS
RELATED TO MANUFACTURING, COMMERCIALIZATION AND MARKET ACCEPTANCE OF THE DELCATH
SYSTEM
WE OBTAIN
NECESSARY COMPONENTS FOR THE DELCATH SYSTEM FROM SOLE-SOURCE SUPPLIERS. BECAUSE
MANUFACTURERS MUST DEMONSTRATE COMPLIANCE WITH FDA REQUIREMENTS, IF OUR PRESENT
SUPPLIERS FAIL TO MEET SUCH REQUIREMENTS OR IF WE CHANGE ANY SUPPLIER, THE
SUCCESSFUL COMPLETION OF THE CLINICAL TRIALS AND/OR THE COMMERCIALIZATION OF THE
DELCATH SYSTEM COULD BE JEOPARDIZED.
We must
ensure that the components of the Delcath system are manufactured in accordance
with manufacturing and performance specifications of the Delcath system on file
with the FDA and with drug and device good manufacturing practice requirements.
Many of the components of the Delcath system are manufactured by sole source
suppliers. If any of our suppliers fails to meet our needs, or if we need to
seek an alternate source of supply, we may be forced to suspend or terminate our
clinical trials. Further, if we need a new source of supply after commercial
introduction of the Delcath system, we may face long interruptions in obtaining
necessary components, which could jeopardize our ability to supply the Delcath
system to the market.
Currently
the Delcath system kit is being manufactured domestically by the OEM division of
B. Braun Medical, Inc. of Germany which also supplies the other catheters and
accessories and assembles the Delcath system kit. Medtronic USA, Inc. currently
manufactures the components of the blood filtration circuit located outside of
the body, including the medical tubing through which the patient's blood flows
and various connectors and the blood filtration pump head. The Company purchases
activated charcoal filters used in the Delcath system from a single
supplier.
WE DO NOT
HAVE ANY CONTRACTS WITH SUPPLIERS FOR THE MANUFACTURE OF COMPONENTS FOR THE
DELCATH SYSTEM. IF WE ARE UNABLE TO OBTAIN AN ADEQUATE SUPPLY OF THE NECESSARY
COMPONENTS, WE MAY NOT BE ABLE TIMELY TO COMPLETE OUR CLINICAL
TRIALS.
We do not
have any contracts with suppliers for the manufacture of components for the
Delcath system. Certain components are available from only a limited number of
sources. To date, we have only had components of the Delcath system manufactured
for us in small quantities for use in pre-clinical studies and clinical trials.
We will require significantly greater quantities to commercialize the product.
Notwithstanding our best efforts, we may not be able to find
an alternate source of comparable components. If we are unable to
obtain adequate supplies of components from our existing suppliers or need to
switch to an alternate supplier, commercialization of the Delcath system could
be delayed.
BECAUSE
OF OUR LIMITED EXPERIENCE IN MARKETING PRODUCTS AND OUR LACK OF ADEQUATE
PERSONNEL TO MARKET AND SELL PRODUCTS, WE MAY NOT BE SUCCESSFUL IN MARKETING AND
SELLING THE DELCATH SYSTEM EVEN IF WE RECEIVE FDA PREMARKET
APPROVAL.
We have
not previously sold, marketed or distributed any products and currently do not
have the personnel, resources, experience or other capabilities to market the
Delcath system adequately. Our success will depend upon our ability to attract
and retain skilled sales and marketing personnel or our reaching an agreement
with a third party to market our product. Competition for sales and marketing
personnel is intense, and we may not be successful in attracting or retaining
such personnel. Our inability to attract and retain skilled sales and marketing
personnel or to reach an agreement with a third party could adversely affect our
business, financial condition and results of operations.
MARKET
ACCEPTANCE OF THE DELCATH SYSTEM WILL DEPEND ON SUBSTANTIAL EFFORTS AND
EXPENDITURES IN AN AREA WITH WHICH WE HAVE LIMITED EXPERIENCE.
Market
acceptance of the Delcath system will depend upon a variety of factors including
whether our clinical trials demonstrate a significant reduction in the mortality
rate for the kinds of cancers treated on a cost-effective basis, our ability to
educate physicians on the use of the Delcath system and our ability to convince
healthcare payors that use of the Delcath system results in reduced treatment
costs to patients. We have only limited experience in these areas and we may not
be successful in achieving these goals. Moreover, the Delcath system replaces
treatment methods in which many hospitals have made a significant investment.
Hospitals may be unwilling to replace their existing technology in light of
their investment and experience with competing technologies. Many doctors and
hospitals are reluctant to use a new medical technology until its value has been
demonstrated. As a result, the Delcath system may not gain significant market
acceptance among physicians, hospitals, patients and healthcare
payors.
RAPID
TECHNOLOGICAL DEVELOPMENTS IN TREATMENT METHODS FOR LIVER CANCER AND COMPETITION
WITH OTHER FORMS OF LIVER CANCER TREATMENTS COULD RESULT IN A SHORT PRODUCT LIFE
CYCLE FOR THE DELCATH SYSTEM.
Competition
in the cancer treatment industry, particularly in the markets for systems and
devices to improve the outcome of chemotherapy treatment, is intense. The
Delcath system competes with all forms of liver cancer treatments that are
alternatives to the "gold standard" treatment of surgical resection. Many of our
competitors have substantially greater resources, especially financial and
technological. In addition, some of our competitors have considerable experience
in conducting clinical trials and other regulatory procedures. These competitors
are developing systems and devices to improve the outcome of chemotherapy
treatment for liver cancer. If these competitors develop more effective or more
affordable products or treatment methods, our profitability will be
substantially reduced and the Delcath system could have a short product life
cycle.
WE
BELIEVE THAT OUR CHIEF EXECUTIVE OFFICER AND OUR CHIEF OPERATING OFFICER ARE
IMPORTANT TO OUR EFFORTS TO COMMERCIALIZE THE DELCATH SYSTEM. THE UNAVAILABILITY
OF THE SERVICES OF EITHER OF THEM COULD DELAY OUR SUCCESSFUL COMMERCIAL
INTRODUCTION OF THE DELCATH system.
The loss
of the services of either our Chief Executive Officer or our Chief Operating
Officer could delay our completing the clinical trials, our obtaining FDA
premarket approval, our introducing the Delcath system commercially and our
generating revenues and profits. We do not have an employment agreement with
either of them.
RISKS
RELATED TO PATENTS, TRADE SECRETS AND PROPRIETARY RIGHTS
OUR
SUCCESS DEPENDS IN LARGE PART ON OUR ABILITY TO OBTAIN PATENTS, MAINTAIN TRADE
SECRET PROTECTION AND OPERATE WITHOUT INFRINGING ON THE PROPRIETARY RIGHTS OF
THIRD PARTIES.
Because
of the length of time and expense associated with bringing new medical devices
to the market, the healthcare industry has traditionally placed considerable
emphasis on patent and trade secret protection for significant new technologies.
Litigation may be necessary to enforce any patents issued or assigned to us or
to determine the scope and validity of third-party proprietary rights.
Litigation could be costly and could divert our attention from our business. If
others file patent applications with respect to inventions for which we already
have patents issued to us or have patent applications pending, we may be forced
to participate in interference proceedings declared by the United States Patent
and Trademark Office to determine priority of invention, which could also be
costly and could divert our attention from our business. If a third party
violates our intellectual property rights, we may be unable to enforce our
rights because of our limited resources. Use of our limited funds to defend our
intellectual property rights may also affect our financial condition
adversely.
RISKS
RELATED TO PRODUCTS LIABILITY
WE DO NOT
CURRENTLY CARRY PRODUCTS LIABILITY INSURANCE AND WE MAY NOT BE ABLE TO ACQUIRE
SUFFICIENT COVERAGE IN THE FUTURE TO COVER LARGE CLAIMS.
Clinical
trials, manufacturing and product sales may expose us to liability claims from
the use of the Delcath system. Though participants in clinical trials are
generally required to execute consents and waivers of liability, a court might
find such consents and waivers of liability to be ineffective or
invalid.
Were such a claim asserted and even if we prevail on the merits, we would likely
incur substantial legal and related expenses. Claims for damages, whether or not
successful, could cause delays in the clinical trials and result in the loss of
physician endorsement. A successful products liability claim or recall would
have a material adverse effect on our business, financial condition and results
of operations.
RISKS
RELATING TO OUR COMMON STOCK
OUR STOCK
PRICE AND TRADING VOLUME MAY BE VOLATILE, WHICH COULD RESULT IN LOSSES FOR OUR
STOCKHOLDERS.
The
equity trading markets may experience periods of volatility, which could result
in highly variable and unpredictable pricing of equity securities. The market
price of our common stock could change in ways that may or may not be related to
our business, our industry or our operating performance and financial condition.
In addition, the trading volume in our common stock may fluctuate and cause
significant price variations to occur. Some of the factors that could negatively
affect our share price or result in fluctuations in the price or trading volume
of our common stock include:
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actual
or anticipated quarterly variations in our operating
results;
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changes
in expectations as to our future financial performance or changes in
financial estimates, if any, of public market
analysts;
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announcements
relating to our business or the business of our
competitors;
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conditions
generally affecting the healthcare and cancer treatment
industries
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the
success of our operating strategy;
and
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the
operating and stock price performance of other comparable
companies.
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Many of
these factors are beyond our control, and we cannot predict their potential
effects on the price of our common stock. If the market price of our common
stock declines significantly, you may be unable to resell your shares of common
stock at or above the public offering or other offering price. We cannot assure
you that the market price of our common stock will not fluctuate or decline
significantly, including a decline below the public offering price, in the
future. In addition, the stock markets in general can experience considerable
price and volume fluctuations.
FUTURE
SALES OF OUR COMMON STOCK MAY CAUSE STOCK PRICE TO DECLINE.
There is
a relatively limited public float of our common stock. Because of this, trades
of relatively small amounts of our common stock can have a disproportionate
effect on the market price for our common stock. The market price of our common
stock has historically been volatile. During the three years ended December 31,
2006, the range of the high and low sales prices of our common stock have ranged
from a high of $6.00 (during the quarter ended June 30, 2006) to a low of $0.92
(during the quarter ended March 31, 2004).
Sales of
substantial amounts of common stock or the perception that such sales could
occur, could have an adverse effect on prevailing market prices for our common
stock. In addition, the sale of these shares could impair our ability to raise
capital through the sale of additional common or preferred stock.
OUR
INSIDERS BENEFICIALLY OWN A SIGNIFICANT PORTION OF OUR STOCK.
As of May
23, 2007, our executive officers, directors and affiliated persons beneficially
own approximately 13.4% of our common stock. As a result, our executive
officers, directors and affiliated persons will have significant influence
to:
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elect
or defeat the election of our
directors;
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amend
or prevent amendment of our articles of incorporation or
bylaws;
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effect
or prevent a merger, sale of assets or other corporate transaction;
and
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affect
the outcome of any other matter submitted to the stockholders for
vote.
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In
addition, sales of significant amounts of shares held by our directors and
executive officers, or the prospect of these sales, could adversely affect the
market price of our common stock. Management's stock ownership may discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain
control of us, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our stock price.
EXISTING
STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE SALE OF OUR COMMON
STOCK PURSUANT TO THIS PROSPECTUS AND PURSUANT TO EFFECTIVE REGISTRATION
STATEMENTS CURRENTLY ON FILE WITH THE SEC.
The sale
of our common stock pursuant to this prospectus and pursuant to effective
registration statements currently on file with the SEC may have a dilutive
impact on our shareholders. As a result, any future net income per share could
decrease in future periods and the market price of our common stock could
decline. If our stock price decreases, then our existing shareholders would
experience greater dilution.
The
perceived risk of dilution may cause our stockholders to sell their shares,
which would contribute to a decline in the price of our common stock. Moreover,
the perceived risk of dilution and the resulting downward pressure on our stock
price could encourage investors to engage in short sales of our common stock. By
increasing the number of shares offered for sale, material amounts of short
selling could further contribute to progressive price declines in our common
stock.
ANTI-TAKEOVER
PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BY-LAWS AND UNDER OUR
STOCKHOLDER RIGHTS AGREEMENT MAY REDUCE THE LIKELIHOOD OF A POTENTIAL CHANGE OF
CONTROL, AND CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BY-LAWS
AND OF OUR STOCKHOLDERS RIGHTS PLAN COULD MAKE IT MORE DIFFICULT FOR THE
COMPANY'S STOCKHOLDERS TO REPLACE MANAGEMENT.
Provisions
of our certificate of incorporation and by-laws and our stockholders rights
agreement may have the effect of discouraging, delaying or preventing a change
in control of us or unsolicited acquisition proposals that a stockholder might
consider favorable. Certain provisions of our certificate of incorporation and
by-laws and of our stockholders rights agreement could have the effect of making
it more difficult for the Company's stockholders to replace management at a time
when a substantial number of our stockholders would favor a change in
management. These include provisions:
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providing
for a classified board; and
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authorizing
the board of directors to fill vacant directorships or increase the size
of our board of directors.
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Furthermore,
our board of directors has the authority to issue shares of preferred stock in
one or more series and to fix the rights and preferences of the shares of any
such series without stockholder approval. Any series of preferred stock is
likely to be senior to the common stock with respect to dividends, liquidation
rights and, possibly, voting rights. Our board's ability to issue preferred
stock may have the effect of discouraging unsolicited acquisition proposals,
thus adversely affecting the market price of our common stock and
warrants.
We also
have a stockholder rights agreement which could have the effect of substantially
increasing the cost of acquiring us unless our board of directors supports the
transaction even if the holders of a majority of our common stock are in favor
of the transaction.
OUR
COMMON STOCK IS LISTED ON THE NASDAQ CAPITAL MARKET. IF WE FAIL TO MEET THE
REQUIREMENTS OF THE NASDAQ CAPITAL MARKET FOR CONTINUED LISTING, OUR COMMON
STOCK COULD BE DELISTED.
Our
common stock is currently listed on the Nasdaq Capital Market. To keep such
listing, we are required to maintain: (i) a minimum bid price of $1.00 per
share, (ii) a certain public float, (iii) a certain number of round lot
shareholders and (iv) one of the following: a net income from continuing
operations (in the latest fiscal year or two of the three last fiscal years ) of
at least $500,000, a market value of listed securities of at least $35 million
or a stockholders' equity of at least $2.5 million. We were notified by the
Nasdaq Capital Market on one occasion that we failed to meet the minimum bid
price requirement and on two occasions that we did not meet the requirement that
we meet one of the following conditions: that the market value of our common
stock be at least $35 million; that we have stockholders' equity of not less
than $2.5 million; or that we meet certain income tests. We have since complied
with these requirements.
We are
also required to maintain certain corporate governance requirements. On April
30, 2007, we were notified by NASDAQ that due to the resignations of two of our
independent directors on April 16, 2007, we no longer comply with NASDAQ's
requirements to have a majority of independent directors on our Board of
Directors, and for our Audit Committee to have three members. We have since
complied with these requirements. However, if we fail to meet any of the other
applicable criteria, our common stock could be delisted from the NASDAQ Capital
Market.
IF OUR
COMMON STOCK IS DELISTED FROM THE NASDAQ CAPITAL MARKET, WE MAY BE SUBJECT TO
THE RISKS RELATING TO PENNY STOCKS.
If our
common stock were to be delisted from trading on the Nasdaq Capital Market and
the trading price of the common stock were below $5.00 per share on the date the
common stock were delisted, trading in our common stock would also be subject to
the requirements of certain rules promulgated under the Exchange Act. These
rules require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a penny stock and impose various sales
practice requirements on broker-dealers who sell penny stocks to persons other
than established customers and accredited investors, generally institutions. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in securities that are
classified as penny stocks, which could severely limit the market price and
liquidity of such securities and the ability of purchasers to sell such
securities in the secondary market.
A penny
stock is defined generally as any non-exchange listed equity security that has a
market price of less than $5.00 per share, subject to certain
exceptions.
WE DO NOT
EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE. AS A RESULT, HOLDERS OF OUR
COMMON STOCK MUST RELY ON STOCK APPRECIATION FOR ANY RETURN ON THEIR
INVESTMENT.
We have
never declared or paid any dividends to the holders of our common stock and we
do not expect to pay cash dividends in the foreseeable future. We currently
intend to retain all earnings for use in connection with the expansion of our
business and for general corporate purposes. Our board of directors will have
the sole discretion in determining whether to declare and pay dividends in the
future. The declaration of dividends will depend on our profitability, financial
condition, cash requirements, future prospects and other factors deemed relevant
by our board of directors. Our ability to pay cash dividends in the future could
be limited or prohibited by the terms of financing agreements that we may enter
into or by the terms of any preferred stock that we may authorize and
issue.
This
prospectus contains forward-looking statements. These forward-looking statements
are subject to a number of risks and uncertainties, many of which are beyond our
control, which may include statements about:
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our
expansion and possible results from
expansion,
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our
expected growth,
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our
capital budget and future capital
requirements,
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the
availability of funds and our ability to meet future capital
needs,
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the
realization of our deferred tax
assets,
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our
business strategy;
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our
ability to obtain FDA approvals and other governmental permits and
approvals;
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our
technology and our research and development
costs
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our
financial strategy;
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our
operating expenses, general and administrative
costs
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our
research and development costs;
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our
future operating results; and
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our
plans, objectives, expectations and
intentions.
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All of
these types of statements, other than statements of historical fact included in
this prospectus, are forward-looking statements. These forward-looking
statements may be found in the "Prospectus Summary", "Risk Factors", "Business",
and other sections of the prospectus. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "could",
"should", "expect", "plan", "project", "intend", "anticipate", "believe",
"estimate", "predict", "potential", "pursue", "target", "seek", "objective", or
"continue", the negative of such terms or other comparable
terminology.
The
forward-looking statements contained in this prospectus are based largely on our
expectations, which reflect estimates and assumptions made by our management.
These estimates and assumptions reflect our best judgment based on currently
known market conditions and other factors. Although we believe such estimates
and assumptions to be reasonable, they are inherently uncertain and involve a
number of risks and uncertainties that are beyond our control. In addition,
management's assumptions about future events may prove to be inaccurate. All
readers are cautioned that the forward-looking statements contained in this
prospectus are not guarantees of future performance, and we cannot assure any
reader that such statements will be realized or the forward-looking events and
circumstances will occur. Actual results may differ materially from those
anticipated or implied in the forward-looking statements due to many factors
including those listed in the "Risk Factors" section and elsewhere in this
prospectus, our expansion strategy, our ability to achieve operating
efficiencies, industry pricing and technology trends, evolving industry
standards, domestic and international regulatory matters, general economic and
business conditions, the strength and financial resources of our competitors,
our ability to find and retain skilled personnel and the political and economic
climate in which we conduct operations. All forward-looking statements speak
only as of the date of this prospectus. We do not intend to publicly update or
revise any forward-looking statements as a result of new information, future
events or otherwise. These cautionary statements qualify all forward-looking
statements attributable to us or persons acting on our behalf.
We do not
currently, and did not during the last five fiscal years, have any debt or
preferred stock outstanding. Accordingly, no ratios of earnings to fixed
charges, or to fixed charges and preferred dividends combined, are included
herein.
The
specific allocation of net proceeds of an offering of securities will be
determined at the time of the offering and will be described in an accompanying
prospectus supplement. Unless we specify otherwise in the applicable prospectus
supplement, the net proceeds we receive from the sale of the securities offered
by this prospectus and any prospectus supplement will be used for research and
development, furthering our clinical trials, FDA compliance, and general
corporate purposes, which may include providing working capital, funding capital
expenditures, and paying for possible acquisitions or the expansion of our
business.
We will
set forth in any prospectus supplement the following information regarding any
material dilution of the equity interests of investors purchasing securities in
an offering under this prospectus:
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the
net tangible book value per share of our equity securities before and
after the offering;
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the
amount of the increase in such net tangible book value per share
attributable to the cash payments made by the purchasers in the offering;
and
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the
amount of the immediate dilution from the public offering
price which will be absorbed by such
purchasers.
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We may
from time to time offer under this prospectus, separately or
together:
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common
stock;
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preferred
stock;
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unsecured
senior or subordinated debt
securities;
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warrants
to purchase common stock;
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warrants
to purchase preferred stock;
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warrants
to purchase debt securities;
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stock
purchase contracts to purchase common stock;
and
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stock
purchase units, each representing ownership of a stock purchase contract
and, as security for the holder's obligation to purchase common stock
under the stock purchase contract, either our debt securities or U.S.
Treasury securities.
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The
aggregate initial offering price of the offered securities will not exceed
$30,000,000.
AUTHORIZED
AND OUTSTANDING CAPITAL STOCK
Our
authorized capital stock consists of 70,000,000 shares of common stock, $.01 par
value per share, and 10,000,000 shares of preferred stock, $.01 par value per
share. The following description of our common stock, preferred stock, and
certain rights associated with our common stock, together with the additional
information included in any applicable prospectus supplements, summarizes the
material terms and provisions of these types of securities, but it is not
complete. For the complete terms of our common stock and preferred stock, please
refer to our certificate of incorporation and our bylaws that are incorporated
by reference into the registration statement which includes this prospectus and,
with respect to preferred stock, any certificate of designation that we may file
with the Commission for a series of preferred stock we may designate, if
any.
We will
describe in a prospectus supplement the specific terms of any common stock or
preferred stock we may offer pursuant to this prospectus. If indicated in a
prospectus supplement, the terms of such common stock or preferred stock may
differ from the terms described below.
DESCRIPTION
OF COMMON STOCK
As of May
23, 2007, there were 21,386,107 shares of common stock issued and
outstanding.
Each
holder of common stock is entitled to one vote for each share on all matters to
be voted upon by the stockholders and there are no cumulative voting rights.
Subject to preferences to which holders of any outstanding preferred stock may
be entitled, holders of common stock are entitled to receive ratably those
dividends, if any, that may be declared from time to time by our board of
directors out of funds legally available for the payment of dividends. In the
event of liquidation, dissolution or winding up of the Company, holders of our
common stock would be entitled to share pro rata in our assets remaining
after
the
payment of liabilities and the satisfaction of any liquidation preference
granted to holders of any outstanding shares of preferred stock. Holders of our
common stock have no preemptive or conversion rights or other subscription
rights and there are no redemption or sinking fund provisions applicable to our
common stock. The rights, preferences and privileges of the holders of common
stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that we may designate in the
future. All outstanding shares of common stock are, and the shares underlying
all options and warrants will be, duly authorized, validly issued, fully paid
and non-assessable upon our issuance of these shares.
The
transfer agent and registrar for our common stock is American Stock Transfer
& Trust Company, whose address is 59 Maiden Lane, New York, NY 10038, and
whose phone number is (800) 937-5449 (toll-free).
DESCRIPTION
OF PREFERRED STOCK
The
following description of preferred stock and the description of the terms of a
particular series of preferred stock that will be set forth in the related
prospectus supplement are not complete. These descriptions are qualified in
their entirety by reference to the certificate of designation relating to that
series. The rights, preferences, privileges and restrictions of the preferred
stock of each series will be fixed by the certificate of designation relating to
that series. The prospectus supplement also will contain a description of
certain United States federal income tax consequences relating to the purchase
and ownership of the series of preferred stock that is described in the
prospectus supplement.
As of May
23, 2007, there were no shares of our preferred stock issued and outstanding.
Pursuant to our certificate of incorporation, our board of directors has the
authority without further action by our stockholders to issue up to 10 million
shares of preferred stock. Our board of directors has the authority to issue
such preferred stock in one or more series and to fix the number of shares of
any series of preferred stock and to determine the designation of any such
series. The board of directors is also authorized to determine and alter the
designation, powers, rights, preferences and the qualifications, limitations and
restrictions granted to or imposed upon any wholly unissued series of preferred
stock. In addition, within the limitations or restrictions stated in any
resolution or resolutions of the board of directors originally fixing the number
of shares constituting any series, the board of directors has the authority to
increase or decrease, but not below the number of shares of such series then
outstanding, the number of shares of any series subsequent to the issue of
shares of that series. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of delaying, deferring or preventing a
change in control without further action by our stockholders and may adversely
affect the market price of, and the voting and other rights of, the holders of
our common stock.
Whenever
preferred stock is to be sold pursuant to this prospectus, we will file a
prospectus supplement relating to that sale which will specify:
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the
number of shares in the series of preferred
stock;
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the
designation for the series of preferred stock by number, letter or title
that will distinguish the series from any other series of preferred
stock;
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the
dividend rate, if any, and whether dividends on that series of preferred
stock will be cumulative, noncumulative or partially
cumulative;
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the
voting rights of that series of preferred stock, if
any;
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any
conversion provisions applicable to that series of preferred
stock;
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any
redemption or sinking fund provisions applicable to that series of
preferred stock;
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the
liquidation preference per share of that series of preferred stock;
and
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the
terms of any other preferences or rights, if any, applicable to that
series of preferred stock.
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ANTI-TAKEOVER
EFFECTS OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, SHAREHOLDER RIGHTS
PLAN AND DELAWARE LAW
GENERAL.
Our certificate of incorporation, our status as a corporation incorporated under
Delaware law, and our shareholder rights plan contain provisions that are
designed in part to make it more difficult and time-consuming for a person to
obtain control of our Company. The provisions of our certificate of
incorporation, certain sections of Delaware law, and shareholder rights plan
reduce the vulnerability of our Company to an unsolicited takeover proposal.
These provisions may also have an adverse effect on the ability of stockholders
to influence the governance of our Company.
In
addition, because we have a significant amount of authorized but unissued common
stock and preferred stock, our board of directors may make it more difficult or
may discourage an attempt to obtain control of our Company by issuing additional
stock in our Company.
SHAREHOLDER
RIGHTS PLAN. Our board implemented a shareholder rights plan on October 30,
2001, a copy of which has been filed with the SEC, and declared a dividend of
one right ("Right") for each outstanding share of our common stock to
stockholders of record on November 14, 2001. One Right will also attach to each
share issued after November 14, 2001, but prior to the earlier of the
Distribution Date, the Redemption Date or the Final Expiration Date (as those
terms are defined in the Rights Agreement). The Rights will only become
exercisable, and transferable apart from our common stock, upon the earlier of:
(a) the close of business on the first date of public announcement that a person
or group of affiliated or associated persons ("Acquiring Person") has acquired
15% or more of the outstanding Common Stock, or (b) the tenth business day
following the commencement of, or announcement of an intention to commence, a
tender or exchange offer which would result in the beneficial ownership by a
person or group of 15% or more of the outstanding Common Stock (the earlier of
such dates being called the "Distribution Date").
On April
10, 2007, the Company announced that its Board of Directors voted unanimously to
increase the threshold level for triggering the Shareholder Rights Plan from 15%
to 20%, effective immediately.
The
discussion that follows sets forth the operation of the Rights.
Until the
Distribution Date, the Rights will be evidenced by the certificates for the
Common Stock and will be transferable only in connection with a transfer of the
Common Stock certificates. As soon as practicable following the Distribution
Date, separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Company's Common Stock as of the close of
business on the Distribution Date. The Right Certificates alone will evidence
the Rights from and after the Distribution Date.
RIGHT TO
PURCHASE COMPANY STOCK. In the event a person becomes the owner of 15% or more
of the outstanding shares of Common Stock and thus becomes an Acquiring Person
(a "Flip-In Event"), the Rights not held by the Acquiring Person "flip-in" and,
instead of continuing as rights to buy one share of Common Stock, become rights
to buy from the Company shares of Common Stock having a value equal to two times
the Purchase Price of the Right. In other words, a Rights holder (other than the
Acquiring Person) may purchase Common Stock at a 50% discount from the then
current fair market value.
In the
event there is insufficient Common Stock to permit exercise in full of the
Rights, the Company must issue cash, property or other securities of the Company
with an aggregate value equal to twice the Purchase Price.
Upon the
occurrence of any such Flip-In Event, any Rights owned by an Acquiring Person,
its affiliates and associates and certain transferees thereof, shall become null
and void.
RIGHT TO
PURCHASE ACQUIRING PERSON STOCK. In the event that a person becomes an Acquiring
Person, the Company is then merged, and the Common Stock is exchanged or
converted in the merger, then each Right (other than those formerly held by the
Acquiring Person, which became void) would "flip-over" and be exercisable for a
number of shares of Common Stock of the acquiring company having a market value
of two times the Purchase Price of the Right. In other words, a Rights holder
may purchase the acquiring company's common stock at a 50% discount from the
then current fair market value.
EXCHANGE
OF RIGHTS FOR COMMON STOCK. After a Flip-In Event but before a "flip-over" event
(as described above) occurs and before an Acquiring Person becomes the owner of
50% or more of the Common Stock, the Board may cause the Rights (either in whole
or in part) to be exchanged for shares of Common Stock (or equivalent
securities, of equal value) at a one-to-one exchange ratio or pursuant to an
equivalent cashless exercise method. Rights held by the Acquiring Person,
however, which became void upon the Flip-In Event, would not be entitled to
participate in such exchange.
REDEMPTION.
The Rights may be redeemed by the Board at a redemption price of $0.01 per Right
at any time prior to the earlier of: (a) the time that a person or a group
becomes an Acquiring Person, or (b) October 30, 2011, the expiration date of the
Rights Agreement. Immediately upon redemption and without further action and
without any notice, the right to exercise the Rights will terminate and the only
right of the holders will be to receive the redemption price.
EXPIRATION
OF RIGHTS. The Rights will expire on October 30, 2011, unless the expiration
date is extended by amendment or unless the Rights are earlier redeemed or
exchanged by the Company as described above.
AMENDMENTS
OR SUPPLEMENTS. For so long as the Rights are redeemable, the terms of the
Rights may be amended or supplemented by the Board of Directors at any time and
from time to time without the consent of the holders of the Rights. At any time
when the Rights are not redeemable, the Board of Directors may amend or
supplement the terms of the Rights, provided that such amendment does not
adversely affect the interests of the holders of the Rights.
NO RIGHTS
AS STOCKHOLDERS. Until a Right is exercised, the holder thereof will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
MISCELLANEOUS.
In order to prevent dilution, the Purchase Price, the number of Common Stock or
other securities or property purchasable upon exercise of each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in the Rights Agreement.
The
Company is not required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights (except as may be provided for in
the Rights Agreement). In lieu of such fractional Rights, the Company will pay
to the registered holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount of cash equal to the
same fraction of the current market value of a whole Right.
The
Rights have certain anti-takeover effects. The Rights will cause substantial
dilution to a person or group who attempts to acquire us without the approval of
our board of directors. Although the shareholder rights plan is not intended to
prevent acquisitions through negotiations with our board of directors, the
existence of the shareholder rights plan may nevertheless discourage a third
party from making a partial tender offer or otherwise attempting to obtain a
substantial position in our equity securities or seeking to obtain control of
the Company. To the extent any potential acquirers are deterred by our
shareholder rights plan, the plan may have the effect of preserving incumbent
directors and management in office or preventing acquisitions of the Company. As
a result, the overall effect of the Rights may be to render more difficult or
discourage any attempt to acquire us even if such acquisition may be favorable
to the interests of our stockholders.
Because
our board of directors can redeem the Rights or approve certain offers, the
Rights should not interfere with any merger or other business combination
approved by our board of directors.
Additional
descriptions of the rights plan may be found in the Form 8-A12B filed with the
SEC on November 14, 2001 and the Current Report on Form 8-K filed with the SEC
on April 16, 2007, which filings are incorporated herein by reference. The
description and terms of the Rights are set forth in a rights plan between the
Company and American Stock Transfer & Trust Company, as Rights Agent, which
agreement is on file with the SEC and incorporated herein by
reference.
The
following description of our debt securities sets forth the general terms and
provisions of the debt securities to which any prospectus supplement may relate.
The particular terms of the debt securities offered by any prospectus
supplement, and the extent to which the general provisions described below may
apply to any offered debt securities, will be described in the applicable
prospectus supplement. We may issue senior debt securities under an indenture
between us and a trustee. This prospectus refers to this indenture as the
"senior indenture." We may issue subordinated debt securities under an indenture
between us and a trustee. This prospectus refers to this indenture as the
"subordinated indenture." The senior indenture and the subordinated indenture
are sometimes referred to collectively as the "indentures" and each individually
as an "indenture." The indentures will be subject to, and governed by, the Trust
Indenture Act of 1939.
The
following description of certain provisions of the forms of indentures does not
purport to be complete and is subject to, and is qualified by reference to, all
the provisions of the indentures. We urge you to read the indentures applicable
to a particular series of debt securities because they, and not this
description, define your rights as the holders of the debt securities. Except as
otherwise indicated, the terms of the senior indenture and the subordinated
indenture are identical.
GENERAL
The
indentures may limit the aggregate principal amount of the debt securities which
we may issue and will provide that we may issue the debt securities from time to
time in one or more series. The indentures may or may not limit the amount of
our other indebtedness or the debt securities which we or our subsidiaries may
issue.
Unless
otherwise provided in the applicable prospectus supplement, the senior debt
securities will be unsecured obligations of the Company and will rank equally
with all of our other unsecured and unsubordinated indebtedness. The
subordinated debt securities will be unsecured obligations of ours, subordinated
in right of payment to the prior payment in full of all of our senior
indebtedness as described below under "Subordination of the Subordinated Debt
Securities" and in the applicable prospectus supplement.
We may
grant security interests in some or substantially all of our assets, including
equipment, inventory, reserves, cash and cash equivalents, and general
intangibles to secure our debt, including debt that will not be issued pursuant
to the prospectus such as a bank revolving line of credit secured by our
reserves. As a result, any debt securities and related guarantees issued
pursuant to this prospectus may be, unless otherwise agreed to between
creditors, effectively subordinated to the secured debt to the extent of the
value of the assets that secure that debt. As of December 31, 2006, we had $0 of
secured debt outstanding.
The
applicable prospectus supplement will describe the terms of the debt securities
offered, including:
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the
title of the debt securities;
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any
limit on the aggregate principal amount of the debt
securities;
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the
date or dates on which the debt securities will
mature;
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the
rate or rates at which the debt securities will bear interest, if any, or
the method by which the rate or rates will be determined,
and the date or dates from which the interest, if any, will
accrue or the method by which the date or dates will be
determined;
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the
date or dates on which interest, if any, on the debt securities will be
payable;
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the
place or places where payments will be
payable;
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whether
any of the debt securities will be redeemable at our option, whether we
will be obligated to redeem or purchase any of the debt securities
pursuant to any
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sinking
fund or analogous provision or at the option of any holder, and the terms of the
option or obligation;
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the
denominations the debt securities will be issued in, if other than
denominations of $1,000 and multiples of
$1,000;
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whether
the debt securities will be convertible or exchangeable and, if so, the
securities or rights into which the debt securities
are convertible or exchangeable, and the terms and conditions
of conversion or exchange;
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if
other than the entire principal amount, the portion of the principal
amount, or the method by which the portion will be determined, of the debt
securities that will be payable upon declaration of acceleration of the
maturity thereof;
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if
other than United States dollars, the currency of payment of the principal
of, any premium or interest on or any additional amounts with respect to
any of the debt securities;
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whether
the debt securities will be issued in global form and, if so, who the
depositary will be;
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classification
as senior or subordinated debt
securities;
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in
the case of subordinated debt securities, the degree, if any, to which the
subordinated debt securities of the series will be senior to or be
subordinated to other indebtedness of ours in right of payment, whether
the other indebtedness is outstanding or
not;
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whether
the debt securities are subject to defeasance;
and
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any
other specific terms of the debt securities, including any additional
events of default or covenants.
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The debt
securities may be issued as original issue discount securities, bearing no
interest or bearing interest at a rate which at the time of issuance is below
market rates, to be sold at a substantial discount below their principal amount.
Special United States federal income tax and other considerations applicable to
original issue discount securities will be described in the applicable
prospectus supplement.
PAYMENT
AND PAYING AGENTS
Unless
otherwise provided in the applicable prospectus supplement, payment of the
interest on any debt securities on an interest payment date will be made to the
person in whose name the debt securities are registered at the close of business
on the regular record date for the interest.
Principal
of and any premium and interest on the debt securities of a particular series
will be payable at the office of the paying agents designated by us, except that
unless otherwise provided in the applicable prospectus supplement, interest
payments may be made by check mailed to the
holder.
Unless otherwise provided in the applicable prospectus supplement, the corporate
trust office of the trustee will be required to have an office in New York and
will be designated as our sole paying agent for payments with respect to debt
securities of each series. Any other paying agents initially designated by us
for the debt securities of a particular series will be named in the applicable
prospectus supplement. We will be required to maintain a paying agent in each
place of payment for the debt securities of a particular series.
All
moneys paid by us to a paying agent or the trustee for the payment of the
principal of or any premium or interest on any debt securities which remains
unclaimed at the end of two years after the principal, premium or interest has
become due and payable may be repaid to us, and the holders of the debt
securities may then look only to us for payment.
FORM,
EXCHANGE AND TRANSFER
The debt
securities will be issued only in fully registered form, without coupons, and,
unless otherwise provided in the applicable prospectus supplement, in minimum
denominations of $1,000 and any multiple of $1,000. The debt securities may be
represented in whole or in part by one or more global debt securities registered
in the name of a depositary and, if so represented, interests in the global debt
security will be shown on, and transfers thereof will be effected only through,
records maintained by the designated depositary and its
participants.
At the
option of the holder and unless otherwise provided in the applicable prospectus
supplement, the debt securities may be exchanged for other debt securities of
the same series in any authorized denominations, and of a like aggregate
principal amount and the debt securities may be presented for exchange or for
registration of transfer at the office of any transfer agent designated by us.
The transfer or exchange will be made without service charge, but we may require
payment of a sum sufficient to cover any tax or other governmental
charge.
Any
transfer agent initially designated by us for any debt securities will be named
in the applicable prospectus supplement. We may at any time designate additional
transfer agents, rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts, except that we will
be required to maintain a transfer agent in each place of payment for the debt
securities.
If the
debt securities of any series are to be redeemed in part, we will not be
required to:
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issue,
register the transfer of, or exchange, the debt securities during a period
beginning at the opening of business 15 days before the day of mailing of
a notice of redemption of any of the debt securities that may be selected
for redemption and ending at the close of business on the day of the
mailing; or
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register
the transfer of or exchange any debt security so selected for redemption,
in whole or in part, except the unredeemed portion of any debt security
being redeemed in part.
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CONVERSION
AND EXCHANGE
The
terms, if any, on which debt securities of any series are convertible into or
exchangeable for common stock or other securities, property or cash, or a
combination of any of the foregoing, will be described in the applicable
prospectus supplement. These terms may include provisions as to whether
conversion or exchange is mandatory, at the option of the holder or at our
option, and may include provisions pursuant to which the securities, property or
cash to be received by the holders of the debt securities would be subject to
adjustment as described in the applicable prospectus supplement.
GLOBAL
SECURITIES
The debt
securities of a series may be issued in whole or in part in the form of one or
more global debt securities that will be deposited with, or on behalf of, a
depositary identified in the prospectus supplement relating to that
series.
The
specific terms of the depositary arrangement with respect to a series of the
debt securities will be described in the applicable prospectus
supplement.
We
anticipate that the following provisions will apply to all depositary
arrangements:
Upon the
issuance of a global security, the depositary for the global security or its
nominee will credit, on its book-entry registration and transfer system, the
respective principal amounts of the debt securities represented by the global
security. The accounts will be designated by the underwriters or agents with
respect to the debt securities or by us if the debt securities are offered and
sold directly by us. Ownership of beneficial interests in a global security will
be limited to persons that may hold interests through participants. Ownership of
beneficial interests in the global security will be shown on, and the transfer
of that ownership will be effected only through, records maintained by the
depositary or its nominee with respect to interests of participants, and on the
records of participants with respect to interests of persons other than
participants. The laws of some states require that certain purchasers of
securities take physical delivery of the securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a global security.
So long
as the depositary for a global security, or its nominee, is the registered
holder of the global security, the depositary or the nominee, as the case may
be, will be considered the sole owner and holder of the debt securities
represented by the global security for all purposes. Except as described below,
owners of beneficial interests in a global security will not be entitled to have
the debt securities of the series represented by the global security registered
in their names, will not receive or b entitled to receive physical
delivery of the debt securities of that series in definitive form and will not
be considered the owners or holders of the debt securities represented by the
global security for any purpose under the debt securities or the applicable
indenture.
Principal
of, and any premium and interest on, a global security will be made to the
depositary. None of the trustee, any paying agent, the security registrar or us
will have any responsibility or liability for any aspect of the records relating
to, or payments made on
account
of, beneficial interests of the global security for the debt securities, or for
maintaining, supervising or reviewing any records relating to the beneficial
interests.
We expect
that the depositary for a series of the debt securities, upon receipt of any
payment with respect to the debt securities, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of the global security
for the debt securities as shown on the records of the depositary. We also
expect that payments by participants to owners of beneficial interests in the
global security held through the participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in "street name," and
will be the responsibility of the participants.
Each
global security authenticated will be registered in the name of the depositary
and delivered to the depositary or its nominee or custodian, and each global
security will constitute a single debt security. In addition, no global security
may be exchanged, in whole or in part, for debt securities registered, and no
transfer of a global security, in whole or in part, may be registered, in the
name of any person other than the depositary or its nominee unless:
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o
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the
depositary has notified us that it is unwilling or unable to continue as
depositary or has ceased to be qualified to act as required;
or
|
|
o
|
there
will have occurred and be continuing an event of default with respect to
the debt securities of a series represented by the global
security.
|
Subject
to the foregoing, all debt securities issued in exchange for a global security
or any portion thereof will be registered in the names as the depositary for the
global security will direct.
CONSOLIDATION,
MERGER, CONVEYANCE, TRANSFER OR LEASE
The
description of the debt securities in the prospectus supplement or the
indentures may provide that we may not consolidate or amalgamate with or merge
into any person or convey, transfer or lease our properties and assets as an
entirety or substantially as an entirety to any person, and we may not permit
any person to consolidate or amalgamate with or merge into us, or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to us, unless:
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o
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the
person is an entity organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and will
expressly assume all of our obligations under the indenture and the debt
securities;
|
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o
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immediately
after giving effect to the transaction, no event of default, and no event
which after notice or lapse of time or both would become an event of
default, will have occurred and be continuing;
and
|
|
o
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certain
other conditions are met.
|
EVENTS OF
DEFAULT
Each of
the following constitute reasonably standard events that may be included in any
finalized indenture or prospectus supplement as constituting an event of default
under the debt securities with respect to any series of debt securities
issued:
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o
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default
in the payment of any interest on any debt security of that series when it
becomes due, and the default continues for a period of 30
days;
|
|
o
|
default
in the payment of the principal of or any premium on any debt security of
that series when due;
|
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o
|
default
in the deposit of any sinking fund payment, when due in respect of any
debt security of that series;
|
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o
|
default
in the performance of any covenant contained in the debt securities for
the benefit of that series of the debt securities, and the default
continues for a period of 90 days after written notice has been given as
provided in the debt securities;
|
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o
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a
default under any bond, debenture, note or other evidence of our
indebtedness of at least $10,000,000, or under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any of our indebtedness for money borrowed having an
aggregate principal amount outstanding of at least $10,000,000, whether
the indebtedness now exists or will hereafter be created, which default
will have resulted in the indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, without the indebtedness having been discharged, or the
acceleration having been rescinded or annulled, within a period of 10 days
after there has been given written notice as provided in the applicable
indenture;
|
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o
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certain
events of bankruptcy, insolvency or reorganization;
and
|
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o
|
any
other event of default provided in or pursuant to the applicable indenture
or debt securities with respect to the debt securities of that
series.
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If an
event of default with respect to the debt securities of any series, other than
certain events of default relating to bankruptcy, insolvency or reorganization,
occurs and is continuing, then the trustee or the holders of at least 25 percent
in aggregate principal amount of the outstanding debt securities of that series
may declare the principal amount of all the debt securities of that series (or,
in the case of original issue discount securities, the portion of the principal
amount as may be specified by their terms) to be due and payable immediately, by
a notice in writing to us (and to the trustee if given by holders). If an event
of default relating to bankruptcy, insolvency or reorganization occurs, the
principal amount of all the debt securities of that series (or, in the case of
original issue discount securities, the portion of the principal amount as may
be specified by their terms) will automatically become immediately due and
payable, and without any other action on the part of the trustee or any
holder.
The
holders of a majority in aggregate principal amount of the outstanding debt
securities of any series may waive any event of default with respect to the debt
securities of that series and rescind a declaration of acceleration of payment
if sums sufficient to pay all amounts due other than amounts due upon
acceleration are provided to the trustee and all defaults are
remedied.
If an
event of default with respect to the debt securities of any series occurs and is
continuing, the trustee may proceed to protect and enforce its rights and the
rights of the holders of the debt securities of that series by the appropriate
judicial proceedings, whether to enforce any covenant or agreement in the
applicable indenture or debt security, to help in the exercise of any power
granted by the indenture or debt security, or to enforce any other proper
remedy.
The
holders of a majority in aggregate principal amount of the outstanding debt
securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee, with respect to the debt
securities of such series. However, the direction by the holders must not be in
conflict with any rule of law or with the applicable indenture or debt security
and the trustee may take any other action deemed proper by the trustee which is
not inconsistent with the direction.
We will
be required to deliver to the trustee annually a statement by certain of our
officers as to whether or not, to their knowledge, we are in default in the
performance of any of the terms, provisions and conditions of the applicable
indenture or debt security and, if we are in default, specifying those
defaults.
SUPPLEMENTAL
INDENTURES AND WAIVERS
We and
the trustee, with the consent of the holders of at least a majority in aggregate
principal amount of the outstanding debt securities of each series affected, may
enter into a supplemental indenture to add, change or modify the applicable
indenture or the rights of the holders of the debt securities of that series;
provided, however, no supplemental indenture will, without the consent of the
holder of each outstanding debt security affected:
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o
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change
the stated maturity of any debt
securities;
|
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o
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reduce
the principal amount of or the rate of interest on the debt security or
any premium payable upon the redemption of any debt
securities;
|
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o
|
reduce
the amount of the principal of an original issue discount security or any
other debt security payable upon acceleration of its
maturity;
|
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o
|
change
the currency in which, any debt security or any premium or interest on any
debt security is payable;
|
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o
|
impair
the right to enforce any payment on or after the stated maturity of any
debt security (or, in the case of redemption, on or after
the redemption
date);
|
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o
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modify
the provisions of the applicable indenture or debt securities with respect
to the subordination of the debt securities in a manner adverse to the
holders of that debt security;
|
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o
|
reduce
the percentage in principal amount of the outstanding debt securities of
any series, the consent of whose holders is required for any
supplemental indenture, or for any waiver of compliance
with certain provisions of the applicable indenture or debt
securities or for certain defaults;
or
|
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o
|
modify
any of the above provisions.
|
We and
the trustee, without the consent of any holders of a series of debt securities,
may enter into one or more supplemental indentures for any of the following
purposes:
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o
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to
provide for our successor and the assumption by our successor of
our covenants under the applicable indenture or debt
securities;
|
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o
|
to
add to our covenants for the benefit of the holders of all or any series
of debt securities or to surrender any right or power herein conferred
upon us;
|
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o
|
to
add any additional events of default for the benefit of the holders of all
or any series of debt securities;
|
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o
|
to
permit or facilitate the issuance of debt securities in bearer form,
registrable or not registrable as to principal, and with or without
interest coupons, or to permit or facilitate the issuance of debt
securities in uncertificated form;
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o
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to
add, change or eliminate any provisions of the applicable
indenture or debt securities in respect to one or more series
of debt securities, provided that the addition, change or elimination (i)
will not apply to any outstanding debt security or (ii) will become
effective only when there is no debt security outstanding of
series created prior to the execution of the supplemental
indenture which is entitled to the benefit of that
provision;
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o
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to
secure the debt securities;
|
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o
|
to
establish the form or terms of debt securities of that series as provided
in the applicable indenture or debt securities;
or
|
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o
|
to
evidence and provide for the acceptance of appointment by a successor
trustee with respect to the debt securities of one or
more series and to add to or change any of the provisions of
this indenture or debt security as will be necessary to provide
for or facilitate the administration of the trusts by more than one
trustee, pursuant to the requirements of the applicable
indenture or debt security.
|
The
holders of at least a majority in aggregate principal amount of the outstanding
debt securities of a series may waive compliance with certain restrictive
covenants.
The
holders of at least a majority in aggregate principal amount of the outstanding
debt securities of a series may waive any past default under the applicable
indenture or debt security, except a default in the payment of the principal of
or any premium or interest and some covenants or provisions of
the
applicable indenture or debt security which cannot be modified or amended
without the consent of the holder of each outstanding debt security of such
series affected.
SUBORDINATION
OF THE SUBORDINATED DEBT SECURITIES
The
subordinated debt securities will, to the extent set forth in the subordinated
indenture, be subordinate in right of payment to the prior payment in full of
all of our senior indebtedness. In the event of:
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o
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any
insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, dissolution or other winding up, reorganization or other
similar case or proceeding in connection therewith, relative to us or to
our creditors, as such, or to our assets,
or
|
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o
|
any
voluntary or involuntary liquidation, dissolution or other winding up of
ours, whether or not involving insolvency or bankruptcy,
or
|
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o
|
any
assignment for the benefit of creditors or any other marshalling of assets
and liabilities of ours,
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and in
any like event, the holders of our senior indebtedness will be entitled to
receive payment in full of all amounts due or to become due on or in respect of
all of our senior indebtedness, or provision will be made for the payment in
cash, before the holders of the subordinated debt securities are entitled to
receive or retain any payment on account of principal of, or any premium or
interest on, or any additional amounts with respect to, subordinated debt
securities, and to that end the holders of our senior indebtedness will be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of ours being subordinated to
the payment of subordinated debt securities, which may be payable or deliverable
in respect of subordinated debt securities in any such case, proceeding,
dissolution, liquidation or other winding up event.
By reason
of such subordination, in the event of our liquidation or insolvency, holders of
our senior indebtedness and holders of other obligations of ours that are not
subordinated to our senior indebtedness may recover more than the holders of
subordinated debt securities.
Subject
to the payment in full of all of our senior indebtedness, the rights of the
holders of subordinated debt securities will be subrogated to the rights of the
holders of our senior indebtedness to receive payments or distributions of cash,
property or securities of ours applicable to the senior indebtedness until the
principal of, any premium and interest on, and any additional amounts with
respect to, senior debt securities have been paid in full.
No
payment of principal, including redemption and sinking fund payments, of or any
premium or interest on or any additional amounts with respect to the
subordinated debt securities may be made:
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o
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if
any of our senior indebtedness is not paid when due and
any applicable grace period with respect to the default has
ended and the default has not been cured or waived or ceased to
exist; or
|
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o
|
if
the maturity of any of our senior indebtedness has been
accelerated because of a
default.
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The
subordinated indenture will not limit or prohibit us from incurring additional
senior indebtedness, which may include indebtedness that is senior to
subordinated debt securities, but subordinate to our other obligations. The
senior debt securities will constitute senior indebtedness under the
subordinated indenture.
The term
"senior indebtedness" means all indebtedness of ours outstanding at any time,
except:
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o
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the
subordinated debt securities;
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o
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indebtedness
as to which, by the terms of the instrument creating or evidencing the
same, is subordinated to or ranks equally with the subordinated debt
securities;
|
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o
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indebtedness
of ours to an affiliate of ours;
|
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o
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interest
accruing after the filing of a petition initiating any bankruptcy,
insolvency or other similar proceeding unless the interest is an allowed
claim enforceable against us in a proceeding under federal or
state bankruptcy laws; and
|
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o
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trade
accounts payable, general and administrative expenses necessary to
continue the day-to-day operations of the Company, joint interest accounts
payable, delay rentals, and royalties payable pursuant to the Company's
oil and gas lease obligations.
|
The
senior indebtedness will continue to be senior indebtedness and be entitled to
the benefits of the subordination provisions of any and all subordinated
indentures irrespective of any amendment, modification or waiver of any term of
the senior indebtedness.
The
subordinated indenture will provide that the foregoing subordination provisions,
insofar as they relate to any particular issue of subordinated debt securities,
may be changed prior to issuance. Any such change would be described in the
related prospectus supplement.
NEW YORK
LAW TO GOVERN
The
indentures and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
or instruments entered into and, in each case, performed wholly in that
state.
INFORMATION
CONCERNING THE TRUSTEE
We may
from time to time borrow from, maintain deposit accounts with and conduct other
banking transactions with the trustee and its respective affiliates in the
ordinary course of business. The trustee will be named in the applicable
prospectus supplement.
Under
each indenture, the trustee may be required to transmit annual reports to all
holders regarding its eligibility and qualifications as trustee under the
applicable indenture and related matters.
The
following statements with respect to the common stock warrants and the preferred
stock warrants are summaries of, and subject to, the detailed provisions of a
stock warrant agreement to be entered into by us and a stock warrant agent to be
selected at the time of issue of either or both of the common stock or preferred
stock warrants. The stock warrant agreement may include or incorporate by
reference standard warrant provisions substantially in the form of the Common
Stock Warrant Agreement or the Preferred Stock Warrant Agreement to be filed in
an amendment to the registration statement which includes this prospectus or
filed in a current report on Form 8-K and incorporated by reference in the
registration statement which includes this prospectus.
GENERAL
The
common stock warrants and preferred stock warrants, evidenced by stock warrant
certificates, may be issued under a stock warrant agreement independently or
together with any other securities offered by any prospectus supplement and may
be attached to or separate from such other offered securities. If stock warrants
are offered, the applicable prospectus supplement will describe the designation
and terms of the stock warrants, including:
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o
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the
offering price, if any;
|
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o
|
the
designation and terms of the common or preferred stock purchasable upon
exercise of the stock warrants;
|
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o
|
if
applicable, the date on and after which the stock warrants and the related
offered securities will be separately
transferable;
|
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o
|
the
number of shares of common or preferred stock purchasable upon exercise of
one stock warrant and the initial price at which the shares may be
purchased upon exercise;
|
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o
|
the
date on which the right to exercise the stock warrants will commence and
expire;
|
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o
|
a
discussion of certain United States Federal income tax
considerations;
|
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o
|
the
call provisions, if any;
|
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o
|
the
currency, currencies or currency units in which the offering price, if
any, and exercise price are
payable;
|
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o
|
any
antidilution provisions of the stock warrants;
and
|
|
o
|
any
other terms of the stock warrants.
|
The
shares of common or preferred stock issuable upon exercise of the stock warrants
will, when issued in accordance with the stock warrant agreement, be fully paid
and nonassessable.
EXERCISE
OF STOCK WARRANTS
Stock
warrants may be exercised by surrendering the stock warrant certificate to the
stock warrant agent with the form of election to purchase on the reverse side of
the stock warrant certificate properly completed and signed and by payment in
full of the exercise price, as set forth in the applicable prospectus
supplement. The signature must be guaranteed by a bank or trust company, by a
broker or dealer which is a member of the National Association of Securities
Dealers, Inc. or by a member of a national securities exchange. Upon receipt of
the certificates, the stock warrant agent will requisition from the transfer
agent for the common stock for issuance and delivery to or upon the
written order of the exercising warrantholder, a certificate
representing the number of shares of common stock purchased. If less than all of
the stock warrants evidenced by any stock warrant certificate are exercised, the
stock warrant agent will deliver to the exercising warrantholder a new stock
warrant certificate representing the unexercised stock warrants.
NO RIGHTS
AS STOCKHOLDERS
Holders
of stock warrants will not be entitled, by virtue of being such holders, to
vote, to consent, to receive dividends, to receive notice as stockholders with
respect to any meeting of stockholders for the election of our directors or any
other matter, or to exercise any rights whatsoever as our
stockholders.
WARRANTS
OUTSTANDING
As of May
7, 2007, warrants to purchase 564,033 shares of common stock were outstanding.
These warrants have a weighted average exercise price of $3.41 per share and
expire between May 20, 2008 and November 27, 2010.
The
following statements with respect to the debt warrants are summaries of, and
subject to, the detailed provisions of a debt warrant agreement to be entered
into by us and a debt warrant agent to be selected at the time of issue. The
debt warrant agreement may include or incorporate by reference standard warrant
provisions substantially in the form of the debt warrant agreement to be filed
in an amendment to the registration statement which includes this prospectus or
filed in a current report on Form 8-K and incorporated by reference in the
registration statement which includes this prospectus.
GENERAL
The debt
warrants, evidenced by debt warrant certificates, may be issued under the debt
warrant agreement independently or together with any other securities offered by
any prospectus supplement and may be attached to or separate from such other
offered securities. If debt warrants are offered, the applicable prospectus
supplement will describe the designation and terms of the debt warrants,
including:
the
offering price, if any;
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o
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the
designation, aggregate principal amount and terms of the debt securities
purchasable upon exercise of the debt
warrants;
|
|
o
|
if
applicable, the date on and after which the debt warrants and the related
offered securities will be separately
transferable;
|
|
o
|
the
principal amount of debt securities purchasable upon exercise of one debt
warrant and the price at which that principal amount of debt securities
may be purchased upon exercise;
|
|
o
|
the
date on which the right to exercise the debt warrants will commence and
expire;
|
|
o
|
a
discussion of certain United States Federal income tax
considerations;
|
|
o
|
whether
the warrants represented by the debt warrant certificates will be issued
in registered or bearer form;
|
|
o
|
the
currency, currencies or currency units in which the offering price, if
any, and exercise price are
payable;
|
|
o
|
any
antidilution provisions of the debt warrants;
and
|
|
o
|
any
other terms of the debt warrants.
|
Debt
Warrantholders will not have any of the rights of holders of debt securities,
including the right to receive the payment of principal of, any premium or
interest on, or any additional amounts with respect to, the debt securities or
to enforce any of the covenants of the debt securities or the applicable
indenture except as otherwise provided in the applicable indenture or debt
securities.
EXERCISE
OF DEBT WARRANTS
Debt
warrants may be exercised by surrendering the debt warrant certificate to the
debt warrant agent, with the form of election to purchase on the reverse side of
the debt warrant certificate properly completed and signed, and by payment in
full of the exercise price, as set forth in the applicable prospectus
supplement. The signature must be guaranteed by a bank or trust company, by a
broker or dealer which is a member of the National Association of Securities
Dealers, Inc. or by a member of a national securities exchange. Upon the
exercise of debt warrants, we will issue the debt securities in authorized
denominations in accordance with the instructions of the exercising
warrantholder. If less than all of the debt warrants evidenced by the debt
warrant certificate are exercised, a new debt warrant certificate will be issued
for the remaining number of debt warrants.
The
following statements with respect to stock purchase contracts and stock purchase
units are summaries of, and subject to, the detailed provisions of a stock
purchase contract agreement or stock purchase unit agreement to be entered into
by us and a stock purchase contract agent or stock purchase unit agent to be
selected at the time of issue. The stock purchase contract agreement or stock
purchase unit agreement may include or incorporate by reference standard
provisions substantially in the form of the stock purchase contract agreement or
stock purchase unit agreement to be filed in an amendment to the registration
statement which includes this prospectus or filed in a current report on Form
8-K and incorporated by reference in the registration statement which includes
this prospectus.
We may
issue stock purchase contracts, representing contracts obligating holders to
purchase from us, and obligating us to sell to the holders, a specified number
of shares of common stock or preferred stock at a future date or dates. The
price per share of common stock, or preferred stock may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contract agreement. Any such
formula may include anti-dilution provisions to adjust the number of shares
issuable pursuant to such stock purchase contract upon the occurrence of certain
events. The stock purchase contracts may be issued separately or as a part of
stock purchase units, consisting of a stock purchase contract and, as security
for the holder's obligations to purchase the shares of common stock or preferred
stock under the stock purchase contracts, either our senior or subordinated debt
securities or the debt obligations of third parties, including U.S. Treasury
securities.
The stock
purchase contract agreements may require us to make periodic payments to the
holders of the stock purchase units or vice versa, and these payments may be
unsecured or prefunded on some basis. The stock purchase contract agreements may
require holders to secure their obligations in a specified manner and in certain
circumstances we may deliver newly issued prepaid stock purchase contracts upon
release to a holder of any collateral securing such holder's obligations under
the original stock purchase contract agreement.
The
applicable prospectus supplement will describe the terms of any stock purchase
contracts or stock purchase units and, if applicable, prepaid stock purchase
contracts. The description in the prospectus supplement will not purport to be
complete and will be qualified in its entirety by reference to:
|
o
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the
stock purchase contracts;
|
|
o
|
the
collateral arrangements, if applicable, relating to such
stock purchase contracts or stock purchase units;
and
|
|
o
|
if
applicable, the prepaid stock purchase contracts and the
stock purchase contract agreement pursuant to which the prepaid
stock purchase contracts will be
issued.
|
Unless
otherwise set forth in a prospectus supplement accompanying this prospectus, we
may sell the offered securities in any one or more of the following ways from
time to time:
|
o
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through
agents;
|
|
o
|
to
or through underwriters;
|
|
o
|
through
dealers;
|
|
o
|
directly
to purchasers; or
|
|
o
|
through
remarketing firms.
|
The
prospectus supplement with respect to the offered securities will set forth the
terms of the offering of the offered securities, including:
|
o
|
the
name or names of any underwriters, dealers or
agents;
|
|
o
|
the
purchase price of the offered securities and the proceeds to us from such
sale;
|
|
o
|
any
underwriting discounts and commissions or agency fees and
other items constituting underwriters' or agents'
compensation;
|
|
o
|
any
initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers;
and
|
|
o
|
any
securities exchange on which such offered securities may be
listed.
|
Any
initial public offering price, discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The
distribution of the offered securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Offers
to purchase the offered securities may be solicited by agents designated by us
from time to time. Any agent involved in the offer or sale of the offered
securities will be named, and any commissions payable by us to such agent will
be set forth, in the applicable prospectus supplement. Unless otherwise
indicated in the prospectus supplement, the agent will be acting on a reasonable
best efforts basis for the period of its appointment.
If
underwriters are used in the sale of the offered securities, the offered
securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices determined by
the underwriters at the time of sale. The offered securities may be offered to
the public either through underwriting syndicates represented by managing
underwriters or directly by the managing underwriters. Unless otherwise
indicated in the applicable prospectus supplement, the
underwriters
are subject to certain conditions precedent and will be obligated to purchase
all the offered securities of a series if they purchase any of the offered
securities.
If a
dealer is used in the sale of the offered securities, we will sell the offered
securities to the dealer as principal. The dealer may then resell the offered
securities to the public at varying prices to be determined by the dealer at the
time of resale. The name of the dealer and the terms of the transaction will be
set forth in the applicable prospectus supplement.
Offers to
purchase the offered securities may be solicited directly by us and the sale
thereof may be made by us directly to institutional investors or others. The
terms of any such sales will be described in the applicable prospectus
supplement.
The
offered securities may also be offered and sold by a remarketing firm in
connection with a remarketing arrangement upon their purchase. Remarketing firms
will act as principals for their own accounts or as agents for us. These
remarketing firms will offer or sell the offered securities pursuant to the
terms of the offered securities. Any remarketing firm will be identified and the
terms of its agreements, if any, with us and its compensation will be described
in the applicable prospectus supplement.
We may
authorize underwriters, dealers and agents to solicit from third parties offers
to purchase the offered securities under contracts providing for payment and
delivery on future dates. The applicable prospectus supplement will describe the
material terms of these contracts, including any conditions to the purchasers'
obligations, and will include any required information about commissions we may
pay for soliciting these contracts.
In
connection with the sale of the offered securities, agents, underwriters,
dealers or remarketing firms may receive compensation from us or from purchasers
of the offered securities for whom they act as agents in the form of discounts,
concessions or commissions. Underwriters may sell the offered securities to or
through dealers, and those dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from
the purchasers for whom they may act as agents. Agents, underwriters, dealers
and remarketing firms that participate in the distribution of the offered
securities, and any institutional investors or others that purchase offered
securities directly and then resell the securities, may be deemed to be
underwriters, and any discounts or commissions received by them from us and any
profit on the resale of the securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act. Agents, underwriters,
dealers and remarketing firms may be entitled under relevant agreements entered
into with us to indemnification by us against certain civil liabilities,
including liabilities under the Securities Act or to contribution with respect
to payments which the agents, underwriters or dealers may be required to
make.
Each
series of the offered securities will be a new issue and, other than the shares
of common stock which are listed on the Nasdaq Capital Market and the Boston
Stock Exchange, will have no established trading market. Any underwriters to
whom we sell the offered securities for public offering and sale may make a
market in the securities, but such underwriters will not be obligated to do so
and may discontinue any market making at any time without notice. We may elect
to list any series of offered securities on an exchange, and in the case of
common stock, on any additional exchange, but, unless otherwise specified in the
applicable prospectus supplement, we will not be
obligated
to do so. We cannot predict the liquidity of the trading market for any of the
offered securities.
In
connection with an offering, the underwriters may purchase and sell the offered
securities in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
offered securities than they are required to purchase in an offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the offered
securities while an offering is in progress.
The
underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the underwriters have repurchased offered securities sold
by or for the account of that underwriter in stabilizing or short-covering
transactions.
These
activities by the underwriters may stabilize, maintain or otherwise affect the
market price of the offered securities. As a result, the price of the offered
securities may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on an exchange or
automated quotation system, if the offered securities are listed on that
exchange or admitted for trading on that automated quotation system, or in the
over-the-counter market or otherwise.
Underwriters,
dealers, agents and remarketing firms, or their affiliates, may be customers of,
engage in transactions with, or perform services for, us and our subsidiaries in
the ordinary course of business.
Gersten
Savage LLP, New York, New York, will pass upon the validity of the securities
for us in connection with this offering.
The
financial statements incorporated in this prospectus by reference to the Annual
Report on Form 10-K as of and for the year ended December 31, 2006 have been so
incorporated in reliance on the report of Carlin, Charron & Rosen, LLP,
independent registered public accountants, given on the authority of said firm
as experts in auditing and accounting.
869,565
Units
Consisting
of Common Stock and Warrants
PROSPECTUS
SUPPLEMENT
Piper
Jaffray
June
9, 2009