Filed Pursuant to Rule 424(b)(3)
File Number 333-139880
PROSPECTUS SUPPLEMENT NO. 4
Prospectus Supplement dated February 26, 2007
to Prospectus Declared Effective on January 24, 2007
(Registration No. 333-139880)
As Supplemented by that Prospectus Supplement No. 1 dated January 31, 2007,
that Prospectus No. 2 dated February 12, 2007
and that Prospectus Supplement No. 3 dated February 20, 2007.
AURIGA LABORATORIES, INC.
This Prospectus Supplement No. 4 supplements our Prospectus dated January 24, 2007, the Prospectus Supplement No. 1 dated January 31, 2007, the Prospectus Supplement No. 2 dated February 12, 2007 and the Prospectus Supplement No. 3 dated February 20, 2007.
The shares that are the subject of the Prospectus have been registered to permit their resale to the public by the selling stockholders named in the Prospectus. We are not selling any shares of common stock in this offering and therefore will not receive any proceeds from this offering. You should read this Prospectus Supplement No. 4 together with the Prospectus and each prior Prospectus Supplement referenced above.
This Prospectus Supplement No. 4 includes the attached Current Report on Form 8-K of Auriga Laboratories, Inc. filed on February 26, 2007 with the Securities and Exchange Commission.
Our common stock is traded on the Over-the-Counter Bulletin Board under the trading symbol “ARGA.”
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement is February 26, 2007.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
CURRENT REPORT
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
Date of Report (Date of Earliest Event Reported): February 23, 2007
Auriga Laboratories, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-26013 | 84-1334687 |
| (State or other jurisdiction | (Commission File Number) | (IRS Employer |
| of incorporation) | Identification No.) |
2029 Century Park East, Suite 1130
Los Angeles, California 90067
(Address of principal executive offices (zip code))
678-282-1600
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a – 12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13d-4(c)) |
On February 23, 2007, Auriga Laboratories, Inc. (“Auriga”) entered into the attached Settlement Agreement with Athlon Pharmaceuticals, Inc. (“Athlon”) to settle a dispute between the parties related to the Amended and Restated License Agreement, dated as of August 19, 2006, between Auriga and Athlon, pursuant to which Auriga obtained an exclusive license to certain pharmaceutical products developed by Athlon, including the Levall brand of cough and cold medication. Auriga had previously filed a lawsuit against Athlon in the United States District Court for the Northern District of Georgia under the captionAuriga Laboratories, Inc. v. Athlon Pharmaceuticals, Inc., No. 1:07-CV-0308-CC (2007), regarding certain sales practices allegedly engaged in by Athlon regarding the Levall products. The terms of the Settlement Agreement, as set forth in more detail below, provide for a full and final settlement of all disputes and claims currently between the parties.
The Settlement Agreement provides that Athlon will refrain from certain allegedly unfair competitive practices, including making or distributing false, misleading, deceptive or disparaging statements, representations and/or writings regarding Auriga and/or the Levall products. Pursuant to the Settlement Agreement, Auriga will dismiss the litigation referred to above by filing a stipulation of dismissal with prejudice within five business days following the execution of the Settlement Agreement and the Letter Agreement. The Settlement Agreement also contains certain customary terms, including releases by each of Auriga and Athlon for any and all claims each may have against the other through the date of the Settlement Agreement.
In connection with the Settlement Agreement, Auriga and Athlon entered into the Letter Agreement attached as Exhibit A to the Settlement Agreement. The Letter Agreement primarily provides for a reduction in the royalties to be paid on net sales of the Levall products, as well as effecting changes to Auriga’s reporting and payment obligations. The License Agreement originally provided that Auriga would pay to Athlon a royalty payment equal to 50% of net sales up to $10,000,000 through the end of the first year following the closing date of the License Agreement, with such rate to decrease to 20% for net sales in excess of $10,000,000. The royalty payments for the second and third years of the License Agreement were equal to 35% of net sales and 25% of net sales, respectively. In addition, the License Agreement required for royalty payments equal to 8% of net sales for each year following the third year until such time as the aggregate royalty payments under the agreement totaled $20,000,000, plus royalty payments equal to 1% of net sales for each year subsequent to the time such aggregate royalty payments exceeded $20,000,000.
The Letter Agreement amends the License Agreement by reducing the period of time for which Auriga is obligated to make royalty payments at the rate of 50% of net sales from the first year following the closing date of the License Agreement to December 31, 2006. Furthermore, effective February 1, 2007, the royalty payment rate on all sales by Auriga is reduced to 25% of net sales, until such time as the aggregate royalty payments total $10,000,000. Once aggregate royalty payments total $10,000,000, Auriga will not be required to make any further royalty payments to Athlon, thus potentially reducing the total royalty payments required under the License Agreement by approximately $10,000,000.
In addition, the Letter Agreement reduces the frequency of Auriga’s reporting and payment obligations. The License Agreement previously required Auriga to make monthly reports and payments until such time as the aggregate royalty payments made by Auriga equaled or exceeded $10,000,000, with such reports and payments to be made on a quarterly basis thereafter. The License Agreement now only requires Auriga to make quarterly reports and payments.
| (d) Exhibits. |
| 10 | Settlement Agreement, dated February 23, 2007, between Auriga Laboratories, Inc. and Athlon Pharmaceuticals, Inc. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| By: | /s/ Charles R. Bearchell Charles R. Bearchell Chief Financial Officer |
Dated: February 26, 2007
SETTLEMENT AGREEMENT
This Settlement Agreement (hereinafter the “Settlement Agreement”) is made and entered into by and between the Auriga Laboratories, Inc, (“Auriga”) and Athlon Pharmaceuticals, Inc. (“Athlon”) (collectively the “Parties”) on the last date executed below.
W I T N E S S E T H:
WHEREAS, Auriga and Athlon have entered into that certain Amended and Restated License Agreement dated August 19, 2006 (the “Agreement”) regarding the Levall brand of cough and cold medication, including without limitation Levall 12, Levall 5 and Levall-G and other products defined as “Products” in Section 1.1(hh) of the Agreement (the “Levall Product Line”);
WHEREAS, a dispute has arisen between Auriga and Athlon regarding the Agreement, and regarding certain sales practices allegedly engaged in by Athlon (the “Dispute”);
WHEREAS, Auriga has filed a lawsuit against Athlon in the United States District Court for the Northern District of Georgia styled asAuriga Laboratories, Inc. v. Athlon Pharmaceuticals, Inc., No. 1:07-CV-0308-CC (2007) (the “Litigation”) based on claims arising out of, and related to, the Dispute.
WHEREAS, Auriga and Athlon desire to settle fully and finally any and all disputes and claims currently between them, in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and releases set out below, and for other good and valuable consideration set forth herein, the receipt and sufficiency of which is hereby acknowledged, Auriga and Athlon hereby agree as follows:
1. Dismissal with Prejudice.
Within five (5) business days after execution of this Settlement Agreement and the Letter Agreement described below, Auriga will file a stipulation of dismissal with prejudice.
2. Agreement to Discontinue Allegedly Unfair Competition; False Advertising; and/or Deceptive Trade Practices.
Athlon agrees that it will refrain from making or distributing false, misleading, deceptive or disparaging statements, representations, and/or writings regarding Auriga or the Levall Product Line, including without limitation those stating, representing, writing or implying that any product of the Levall Product Line is unavailable, no longer on the market, discontinued, or has been replaced by Dynex or any other product, or statements, representations or writings to that effect. The foregoing agreement should not be construed as an admission by Athlon that it has in the past engaged in any unfair competition, false or misleading advertising or unfair completion.
3. Royalty Reduction and Amendment to Agreement.
Athlon and Auriga agree to execute the Letter Agreement attached hereto as “Exhibit A” simultaneously with the execution of the Settlement Agreement primarily in order to effectuate a reduction in the royalties to be paid on Net Sales of the Levall Product Line. Except as expressly stated in said Letter Agreement or in this Settlement Agreement, the Agreement shall remain in full force and effect.
4. Release by Auriga.
2
Auriga on behalf of itself and its parent companies, subsidiaries and affiliates, does hereby release and forever discharge, Athlon, and its predecessors, successors, assigns, shareholders, partners, members, managers, directors, officers, attorneys, representatives, employees, insurers, sureties and agents, from and for any and all debts, demands, claims, disputes, disagreements, causes of action and rights of action, whether in law or equity, and damages, expenses, injuries, losses and costs of every kind, character or description, whether presently known or unknown (collectively, “Claims”), accrued or arising from the beginning of time through the date of this Settlement Agreement, including but not limited to Claims that (a) were or could have been asserted by Auriga in the Litigation; or (b) arise from or otherwise relate to the Dispute, the Agreement, or the Levall Product Line, except as set forth below. This release, however, shall not apply to the Parties’ respective rights and obligations set forth in this Settlement Agreement. This release also does not apply to Claims which arise or accrue under the Agreement after the effective date of this Settlement Agreement, or to monetary obligations which arise or accrue under the Agreement, as amended, after January 31, 2007. It is expressly agreed and acknowledged that all obligations of Athlon to Auriga arising under Section 6.1 of the Agreement prior to February 1, 2007, have been satisfied and discharged in full. Auriga further acknowledges that this release applies to any claim for royalty reduction based upon any continuation of Pharmafab’s manufacturing problems after the effective date of this Settlement Agreement, and to any claim that Athlon’s continuing to offer for sale “Dynex” products, as currently formulated, after the effective date of this Settlement Agreement violates the Agreement, as amended.
5. Release by Athlon.
Athlon, on behalf of itself and its parent companies, subsidiaries and affiliates, does hereby release and forever discharge, Auriga, and its predecessors, successors, assigns, shareholders, partners, members, managers, directors, officers, attorneys, representatives, employees, insurers, sureties and agents, from and for any and all debts, demands, claims, disputes, disagreements, causes of action and rights of action, whether in law or equity, and damages, expenses, injuries, losses and costs of every kind, character or description, whether presently known or unknown (collectively, “Claims”), accrued or arising from the beginning of time through the date of this Settlement Agreement, including but not limited to Claims that (a) were or could have been asserted by Athlon in the Litigation; or (b) arise from or otherwise relate to the Dispute, the Agreement, or the Levall Product Line, except as set forth below. This release, however, shall not apply to the Parties’ respective rights and obligations set forth in this Settlement Agreement. This release also does not apply to Claims which arise or accrue under the Agreement after the effective date of this Settlement Agreement, or to monetary obligations which arise or accrue under the Agreement, as amended, after January 31, 2007. It is expressly agreed and acknowledged that all obligations of Auriga to Athlon arising under Section 3.1 of the Agreement based on Net Sales prior to February 1, 2007, have been satisfied and discharged in full.
3
6. Entire Agreement.
This Settlement Agreement contains the entire agreement between the Parties with respect to the subject matter of this Settlement Agreement, and supercedes all prior or contemporaneous discussions, statements, representations, warranties, conditions, promises, agreements, negotiations and understandings, unless otherwise expressly recited in this Settlement Agreement. The Parties acknowledge that they have not relied upon any statements, other than those expressly set forth herein, in entering into this Settlement Agreement.
4
7. Full Understanding.
The Parties acknowledge and declare that the terms of this Settlement Agreement have been completely read, are fully understood, and are voluntarily accepted. The Parties have had the opportunity to consult with their attorneys as to all claims or potential claims released, or to be released, pursuant to the terms of the Settlement Agreement.
8. Authorship and Interpretation.
The Parties acknowledge and agree that this Settlement Agreement is entirely the product of the collective, joint drafting efforts of the Parties and their respective legal counsel. Should there be any claim of ambiguity, such ambiguity shall not be construed more strictly against (or more favorably for) any party solely as a result of that party’s particular contribution to this effort.
9. Costs of Litigation.
The Parties shall each bear their own costs and expenses of litigation, including but not limited to their attorneys’ fees, expenses of litigation and costs.
10. Authority.
The Parties each warrant the authority of the person executing this Settlement Agreement on their behalf and shall be estopped from asserting lack of authority of their signatory as a defense to the enforceability of this Settlement Agreement.
11. No Prior Assignments.
The Parties represent and warrant that they have not transferred, assigned, sold or pledged any of the Claims which are the subject of this Settlement Agreement.
12. Choice of Law.
This Settlement Agreement shall be governed by the laws of the State of Georgia without reference to the conflict of laws rules thereof.
5
13. Severability.
If any term or provision of this Settlement Agreement is held invalid or unenforceable to any extent, the remaining terms and provisions of this Settlement Agreement shall not be affected thereby, but each term and provision of this Settlement Agreement shall be valid and enforced to the fullest extent permitted by law.
14. No Admission of Liability
This Settlement Agreement is intended as a compromise to resolve claims and disputes between the parties and is not an admission by either of them as to the validity of positions asserted by the other regarding such claims and disputes.
15. Termination of Master Commercial Outsourcing Services Agreement
The parties acknowledge and agree that each has now fully performed its obligations to the other pursuant to the Master Commercial Outsourcing Services Agreement entered into between them as of August 31, 2006 and that such agreement shall be deemed terminated as of the date of execution of this Settlement Agreement. The parties further acknowledge and agree that any claims pursuant or related to that agreement are intended to be included within the scope of their respective releases as provided in Sections 4 and 5 of this Settlement Agreement.
16. Counterparts.
This Settlement Agreement may be signed in counterparts, each constituting an original.
* * *
IN WITNESS WHEREOF, the parties have caused this SETTLEMENT AGREEMENT to be duly executed as of the date first written below.
6
| Auriga Laboratories, Inc. |
| By: /s/ Philip S. Pesin |
| DATE: February 23, 2007 |
| Athlon Pharmaceuticals, Inc. |
| By: /s/ Bobby Joe King, Jr. |
| DATE: February 23, 2007 |
7
EXHIBIT A
AURIGA LABORATORIES, INC
2029 Century Park East, Suite 1130
Los Angeles, CA 90067
February 23, 2007
Bobby Joe King, Jr.
Athlon Pharmaceuticals, Inc.
Chairman & CEO
6311 Ridgewood Road
Suite 401
West Jackson, Mississippi 39211
Dear Mr. King:
The letter agreement shall amend that certain Amended and Restated License Agreement entered into by and between Auriga Laboratories, Inc. (“Auriga”) and Athlon Pharmaceuticals, Inc. (“Athlon”) dated as of August 19, 2006 (the “Agreement”). This amendment shall be deemed effective as of January 1, 2007.
1. Section 3.1(a)-(j) of the Agreement shall be deleted and replaced in its entirety as follows:
“Section 3.1Purchase Price. The purchase price for the Licensed Assets shall be the sum of the following (the “Purchase Price”):
| (a) | One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00); |
| (b) | Two Million Five Hundred Thousand (2,500,000) shares of restricted common stock of LICENSEE (the “Shares”); |
| (c) | Fifty percent (50%) of Net Sales up to Ten Million and No/100 Dollars ($10,000,000.00) commencing forty-five (45) days after the Closing Date through December 31, 2006; |
| (d) | Twenty-Five percent (25%) of Net Sales commencing February 1, 2007, until such time as the amounts paid pursuant to Sections 3.1(c) and (d) total Ten Million and No/100 Dollars ($10,000,000.00) (such $10,000,000 amount hereinafter referred to as the “Royalty Payment Ceiling”). It is acknowledged and agreed that LICENSEE has previously paid royalties pursuant to Section 3.1(c) in the amount of $48,490.00 and that said amount shall be included in calculating the Royalty Payment Ceiling. |
| (e) | RESERVED; |
| (f) | RESERVED; |
| (g) | RESERVED; |
| (h) | RESERVED; and |
| (i) | Notwithstanding the foregoing, in the event any Action or Proceeding is commenced by the FDA against any Product which impairs Net Sales, beginning ninety (90) days after such Action or Proceeding, all royalty obligations set forth in subsections (c) through (h) above, will be automatically reduced by a percentage equal to the applicable Products’ percentage of revenue (as determined by IMS or NDC data adjusted to wholesale equivalent dollars) of the Levall product line during the twelve (12) months prior to the applicable Action or Proceeding. |
| (j) | For purposes of calculating the amount of Purchase Price paid to ATHLON pursuant to Section 3.1(b), the parties agree that the Shares shall be valued at the closing bid price, on the earlier of (i) the earliest date after the LICENSEE’s Form SB-2 registration statement is declared effective by the SEC and the twenty (20) day average daily trading volume of LICENSEE’s common stock is equal to or greater than 15,000 shares per day, or (ii) the earliest date on which the Shares become freely tradable under Rule 144 and the twenty (20) day average daily trading volume of LICENSEE’s common stock is equal to or greater than 15,000 shares per day.” |
2. Section 3.3 of the Agreement shall be deleted and replaced in its entirety as follows:
“Section 3.3Reports. For purposes of determining the payments described in Sections 3.1(c)-(h), LICENSEE shall provide ATHLON with quarterly reports indicating LICENSEE’s Net Sales for such Calendar Quarter, and supporting documentation therefore.”
3. Section 3.5 of the Agreement shall be deleted and replaced in its entirety as follows:
“Section 3.5Payment of Purchase Price. That portion of the Purchase Price described in Section 3.1(a) shall be paid by LICENSEE to ATHLON in immediately available funds by wire transfer on such dates as due, pursuant to wiring instructions provided by ATHLON to LICENSEE not less than three (3) Business Days prior to the Closing Date. That portion of the Purchase Price described in Section 3.1(d) shall be paid by LICENSEE to ATHLON not later than the thirtieth (30th) day following the Calendar Quarter in which the respective sale of the Products occurs.”
If Athlon is in agreement with these modifications, please sign below.
| Very truly yours, |
| Auriga Laboratories, Inc. |
| /s/ Philip S. Pesin Philip S. Pesin, Chairman & CEO |
AGREED AND ACCEPTED:
Athlon Pharmaceuticals, Inc.
/s/ Bobby Joe King, Jr.
Bobby Joe King, Jr., Chief Executive Officer
