| PROSPECTUS | Filed Pursuant to Rule 424(b)(3) | |
Registration No. 333-168197 |
BIONOVO, INC.
21,395,349 Shares
Common Stock
This prospectus relates to the sale of up to 21,395,349 shares of our common stock by Aspire Capital Fund, LLC. Aspire Capital is also referred to in this prospectus as the selling stockholder. The prices at which the selling stockholder may sell the shares will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive proceeds from the sale of the shares by the selling stockholder. However, we may receive proceeds of up to $15.0 million from the sale of our common stock to the selling stockholder, pursuant to a common stock purchase agreement entered into with the selling stockholder on July 6, 2010.
The selling stockholder is an “underwriter” within the meaning of the Securities Act of 1933, as amended. We will pay the expenses of registering these shares, but all selling and other expenses incurred by the selling stockholder will be paid by the selling stockholder.
Our common stock is listed on The NASDAQ Capital Market under the ticker symbol “BNVI.” On August 3, 2010, the last reported sale price per share of our common stock was $0.412 per share. The shares of common stock offered pursuant to this prospectus have been approved for listing on The NASDAQ Capital Market.
You should read this prospectus and any prospectus supplement, together with additional information described under the headings “Incorporation of Certain Documents by Reference” and “Where You Can Find More Information,” carefully before you invest in any of our securities.
Investing in our securities involves a high degree of risk. See “Risk Factors” on page 5 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is August 4, 2010.
| i | ||
| 1 | ||
| 5 | ||
| 7 | ||
| 8 | ||
| 8 | ||
| 9 | ||
| 11 | ||
| 15 | ||
| 16 | ||
| 18 | ||
| 20 | ||
| 20 | ||
| 20 | ||
| 21 |
We incorporate by reference important historical business and financial information about us into this prospectus. You may obtain the information incorporated by reference into this prospectus without charge by following the instructions under “Where You Can Find More Information.” You should carefully read this prospectus as well as additional information described under “Incorporation of Certain Documents by Reference.” If the information in, or incorporated by reference into, this prospectus conflicts with information in a document incorporated by reference into this prospectus, the information in this prospectus will control. All references in this prospectus to “Bionovo,” “BNVI,” the “Company,” “we,” “us” or “our” mean Bionovo, Inc. and any subsidiary, unless we state otherwise or the context otherwise requires.
You should rely only on the information contained in, or incorporated by reference into, this prospectus. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer is not permitted. The information contained in this prospectus is accurate only as of the applicable dates, regardless of the time of delivery of this prospectus or the time of issuance or sale of any securities. Our business, financial condition, results of operations and prospects may have changed since those dates.
i
The following summary provides an overview of certain information about our company and the offering and may not contain all the information that may be important to you. This summary is qualified in its entirety by and should be read together with the information contained in, or incorporated by reference into, other parts of this prospectus. You should carefully read this entire prospectus before making a decision about whether to invest in our securities.
Bionovo, Inc.
Company Overview
We are a clinical stage drug discovery and development company focusing on women’s health and cancer, two large markets with significant unmet needs. Building on our understanding of the biology of menopause and cancer, we design new drugs derived from botanical sources which have novel mechanisms of action. Based on the results of our clinical trials and preclinical studies to date, we believe that we have discovered new classes of drug candidates with the potential to be leaders in their markets.
Our lead drug candidate, MenerbaTM (formerly MF-101), represents a new class of receptor sub-type selective estrogen receptor modulator (SERM), for the treatment of vasomotor symptoms of menopause, or “hot flashes.” We have designed Menerba to selectively modulate estrogen receptor beta (ERß) and to provide a safe and effective alternative to existing FDA approved therapies that pose a significant risk to women for developing breast cancer, stroke, cardiovascular disease, blood clots and other serious diseases. In preclinical studies, Menerba does not lead to tumor formation in either breast or uterine tissues and it does not increase the risk for clotting. This activity, if confirmed in clinical testing, would differentiate Menerba from some existing therapies and other therapies in clinical development. We announced results of our completed, multicenter, randomized, double-blinded, placebo-controlled Phase 2 trial, involving 217 women, which showed the higher of two Menerba doses tested was well tolerated and resulted in a statistically significant reduction of hot flashes after 12 weeks of treatment. In addition, treatment with the higher of the two doses of Menerba led to a statistically significant reduction in nighttime awakenings when compared to placebo, which represents superior efficacy to existing non-hormonal therapies. We are seeking FDA approval to conduct further clinical testing at multiple clinical sites in the U.S. We believe that Menerba’s novel mechanism of action could lead to a more favorable safety profile than currently approved hormone therapies (HT) and other therapies under development and testing.
We are also developing BezielleTM, an oral anticancer agent for advanced breast cancer. Unlike most other anticancer drugs and drug candidates, which try to control cancer through genomic and proteomic signaling pathways, Bezielle is designed to take advantage of a unique metabolism of cancer cells, with a well-characterized mechanism of action which leads to very selective tumor cell DNA damage and the death of cancer cells, without lasting harm to normal cells. This is accomplished by Bezielle’s secondary inhibition of glycolysis, a metabolic pathway on which cancer cells rely for energy production. Glycolysis inhibition leads to energy collapse in the cells and results in death of cancer cells. Since normal cells do not rely for the most part on glycolysis for energy production they are not killed by Bezielle. Based on our clinical and pre-clinical studies we believe that Bezielle may have a preferential effect on hormone-independent cancers, a subset with few treatment options. To date, 48 women with metastatic breast cancer have been treated with Bezielle in two separate Phase 1 clinical trials. As predicted by the mechanism of action, Bezielle had very limited toxicities with an extremely favorable tolerability profile. Moreover, Bezielle showed encouraging clinical activity among a cohort of women with metastatic breast cancer who had been heavily pretreated with other regimens. A Phase 2 trial has been approved by the FDA and the institutional review boards (“IRBs”) at several prestigious breast cancer clinical sites in the U.S. Bionovo is awaiting funding to commence this open-label, non-randomized trial in 80 women diagnosed with metastatic breast cancer who have failed no more than two prior chemotherapy regimens. We believe that Bezielle’s novel mechanism of action and favorable tolerability profile could lead to preferential use over existing drugs in the treatment of advanced breast cancer, and potentially in the broader, adjuvant care of breast cancer. We also plan to evaluate Bezielle for the treatment of other forms of cancer, including pancreatic cancer and adjuvant use in breast cancer.
1
We have a diverse pipeline of additional preclinical drug candidates in both women’s health and cancer. We have prepared an investigational new drug, or IND, application and plan to initiate a Phase 1 trial for our second women’s health drug candidate, SealaTM (formerly VG101), for the treatment of post-menopausal vulvar and vaginal atrophy, or “vaginal dryness”. We have identified or begun preclinical work on other drug candidates for a variety of indications within women’s health and cancer. We have internally discovered and developed all of our drug candidates using our proprietary biological and chemical techniques.
Our drug development process targets herbs and other botanical sources, used in Traditional Chinese Medicine, believed to produce biologically active compounds. We apply our clinical knowledge, experience with natural compounds and knowledge of proper scientific screening tools to isolate and purify botanical compounds and extracts for pharmaceutical development. In June 2004, the FDA released a document to provide drug developers with guidance on the approval for botanical drugs. This guidance states that applicants may submit reduced documentation of nonclinical (preclinical) safety to support an IND application for initial clinical studies of botanicals. The first botanical extract drug developed pursuant to these guidelines was approved by the FDA in October 2006. To date, all of our drug candidates are derived from botanical extracts and are being developed in accordance with this FDA guidance. In addition, we have identified the active chemical components underpinning the mechanism of action for our novel drugs, and in some cases, we have developed synthetic methods of production.
We expect to continue to incur significant operating losses over at least the next several years, and do not expect to generate profits until and unless our drug candidates have been approved and are being marketed with commercial partners.
Corporate Information
Our principal executive offices are located at 5858 Horton Street, Suite 400, Emeryville, California 94608, and our telephone number is (510) 601-2000. Our website is located at www.bionovo.com. Information on our website is not, and should not be considered, part of this prospectus.
2
The Offering
Common stock being offered by the selling stockholder | 21,395,349 shares |
Common stock outstanding | 109,014,039 (as of July 7, 2010) |
Use of proceeds | The selling stockholder will receive all of the proceeds from the sale of the shares offered for sale by it under this prospectus. We will not receive proceeds from the sale of the shares by the selling stockholder. However, we may receive up to $15.0 million in proceeds from the sale of our common stock to the selling stockholder under the common stock purchase agreement described below. Any proceeds from the selling stockholder that we receive under the purchase agreement are expected to be used to progress the scientific and clinical development of our drug candidates and for working capital and general corporate purposes. |
The NASDAQ Capital Market Symbol | BNVI |
Listing | The shares of common stock offered pursuant to this prospectus have been approved for listing on The NASDAQ Capital Market. |
Risk Factors | Investing in our securities involves a high degree of risk. You should carefully review and consider the “Risk Factors” section of this prospectus for a discussion of factors to consider before deciding to invest in shares of our common stock. |
On July 6, 2010, we entered into a common stock purchase agreement, which we refer to as the Purchase Agreement, with Aspire Capital Fund, LLC, an Illinois limited liability company, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $15.0 million of our shares of common stock over the term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, we issued to Aspire Capital 1,395,349 shares of our common stock as a commitment fee, which we refer to as the Commitment Shares. Concurrently with entering into the Purchase Agreement, we also entered into a registration rights agreement with Aspire Capital, which we refer to as the Registration Rights Agreement, in which we agreed to file one or more registration statements, including the registration statement of which this prospectus is a part, as permissible and necessary to register under the Securities Act of 1933, as amended, or the Securities Act, the sale of the shares of our common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.
As of July 7, 2010, there were 109,014,039 shares of our common stock outstanding (89,707,851 shares held by non-affiliates) excluding the 20,000,000 shares offered that may be issuable to Aspire Capital pursuant to the Purchase Agreement. If all of such 21,395,349 shares of our common stock offered hereby were issued and outstanding as of the date hereof, such shares would represent 16.6% of the total common stock outstanding or 19.5% of the non-affiliate shares of common stock outstanding as of the date hereof. The number of shares of our common stock ultimately offered for sale by Aspire Capital is dependent upon the number of shares purchased by Aspire Capital under the Purchase Agreement.
Pursuant to the Purchase Agreement and the Registration Rights Agreement, we are registering 21,395,349 shares of our common stock under the Securities Act, which includes the Commitment Shares that have already been issued to Aspire Capital and 20,000,000 shares of common stock which we may issue to Aspire Capital. All 21,395,349 shares of common stock are being offered pursuant to this prospectus. Under the Purchase Agreement, we have the right but not the obligation to issue more than the 20,000,000 shares of common stock included in this prospectus to Aspire Capital. As of the date hereof, we do not have any plans or intent to issue to Aspire Capital any shares of common stock in addition to the
3
21,395,349 shares of common stock offered hereby. However, if we elect to issue more than the 21,395,349 shares of common stock offered hereby, we must first register under the Securities Act the sale by Aspire Capital of any additional shares we may elect to issue to Aspire Capital before we can issue such additional shares to Aspire Capital under the Purchase Agreement.
On any trading day on which the closing sale price of our common stock exceeds $0.25, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice, directing Aspire Capital (as principal) to purchase up to 300,000 shares of our common stock per trading day, up to $15.0 million of our common stock in the aggregate at a purchase price equal to the lesser of (i) the lowest sale price of our common stock on the purchase date and (ii) the arithmetic average of the three lowest closing sale prices for our common stock during the 12 consecutive trading days ending on the trading day immediately preceding the purchase date. There are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales of our common stock to Aspire Capital. Aspire Capital has no right to require any sales by us, but is obligated to make purchases from us as we direct in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Purchase Agreement may be terminated by us at any time, at our discretion, without any penalty or cost to us.
The Purchase Agreement further provides that the purchase price shall not be less than $0.396 per share, which was equal to the sum of (i) the consolidated closing bid price of our common stock on July 2, 2010, the trading day immediately preceding the date of the Purchase Agreement, plus (ii) $0.026 per share. However, if we elect to sell shares of our common stock to Aspire Capital at a purchase price below $0.396, we would be required to obtain the approval of our stockholders of the transactions contemplated by the Purchase Agreement before we would be able to complete such sale, in order to be in compliance with the applicable listing maintenance rules of The NASDAQ Capital Market. We currently do not intend to issue any shares of our common stock at a purchase price below $0.396 and, accordingly, we currently do not intend to seek stockholder approval.
On August 2, 2010 the SEC declared effective the registration statement of which this prospectus is part and on August 3, 2010, all conditions to commencement were satisfied and we may now begin selling shares of our common stock to Aspire pursuant to the Purchase Agreement.
4
In addition to the risk factors set forth below, you should carefully consider the specific risks set forth under the caption “Risk Factors” in any of our filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, incorporated by reference into this prospectus before making an investment decision. For more information, see “Where You Can Find More Information.”
We may require additional financing to sustain our operations and without it we may not be able to continue operations.
We will require substantial capital resources in order to conduct our operations and develop our therapeutic products, and we cannot assure you that our existing capital resources and the exercise of outstanding warrants and interest income will be sufficient to fund our current and planned operations. The timing and degree of any future capital requirements will depend on many factors.
Additional financing through grants, strategic collaborations, public or private equity financings or other financing sources may not be available on acceptable terms, or at all. The interest of the public and private equity markets to any proposed financing is substantially affected by the general economic, market and political climate and by other factors which are unpredictable and over which we have no control. Additional equity financings, if we obtain them, could result in significant dilution to current shareholders. Further, in the event that additional funds are obtained through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies, product candidates, or products that we would otherwise seek to develop and commercialize ourselves.
To conserve funds, we may pursue less expensive but higher-risk development paths or suspend all development activity. Historically, we have limited our product development activities to the minimum we felt was sufficient to support our development and commercialization goals, in particular, with respect to Menerba. While we successfully completed Phase 1 clinical trials of Menerba, without extensive product development experience, we may lack the information and resources necessary to complete product development and may be unable to manufacture successfully on a commercially-viable scale. If we are unable to complete our product development, we may be unable to effectively commercialize our products, if approved.
We have sustained recurring losses and negative cash flows from operations. At March 31, 2010, we had an accumulated deficit of $60.5 million, working capital of $9.6 million and shareholders’ equity of $17.6 million. Over the past years, our growth has been funded through a combination of private equity, debt, lease financing and public offerings. As of March 31, 2010, we had $3.4 million in cash and cash equivalents and $8.4 million in short-term securities, for a total of $11.8 million. We have experienced and continue to experience operating losses and negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investment. We expect that we will need to raise substantial additional capital to fully pursue our business plan before the end of 2010. We are currently pursuing a variety of funding options, including government grants, partnering/co-investment, venture debt and equity offerings. There can be no assurance as to the availability or terms upon which such financing and capital might be available. If we are not successful in our efforts to raise additional funds by the end of 2010, we may be required to delay, reduce the scope of, or eliminate one or more of our development programs. Based on available cash and the sale of common stock under the Purchase Agreement and our ability to prioritize spending, we believe we have sufficient cash to meet our operating needs for at least the next 12 months.
Under the Purchase Agreement, we only have the right to direct Aspire Capital (as principal) to purchase up to 300,000 shares of our common stock per trading day. We and Aspire Capital may not effect any sales of shares of our common stock under the Purchase Agreement on any trading day that the closing sale price of our common stock is less than $0.25 per share. Additionally, the Purchase Agreement provides that without stockholder approval, the purchase price shall not be less than $0.396 per share, which was equal to the sum of (i) the consolidated closing bid price of our common stock on July 2, 2010, the trading day immediately preceding the date of the Purchase Agreement, plus (ii) $0.026 per share. Since we are registering 21,395,349 shares for sale by Aspire Capital pursuant to the registration statement of which this prospectus is part, the purchase price on sales of our common stock to Aspire Capital will need to average at least $0.75 per share for us to receive the maximum proceeds of $15.0 million. Assuming a purchase price of $0.396 per share (the consolidated closing bid price of our common stock on July 2, 2010, the trading day immediately preceding the date of the Purchase Agreement, plus $0.026 per share) and the purchase by Aspire Capital of the 20,000,000 shares of our common stock being registered
5
for sale hereby pursuant to the Purchase Agreement, proceeds to us would only be $7,920,000. Subject to any required approval by our board of directors, we have the right but not the obligation to issue more than the 20,000,000 shares included in this prospectus to Aspire Capital. In the event we elect to issue more than 20,000,000 shares offered hereby, we will be required to file a new registration statement relating to the sale by Aspire Capital of any additional shares and have it declared effective by the SEC before we can issue such additional shares to Aspire Capital under the Purchase Agreement.
The extent to which we rely on Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources. Specifically, we and Aspire Capital may not effect any sales of shares of our common stock under the Purchase Agreement on any trading day that the closing sale price of our common stock is less than $0.25 per share, or on any trading day that the sale price to Aspire Capital of our common stock would be less than $0.396 per share without stockholder approval (which we do not intend to seek). If obtaining sufficient financing from Aspire Capital were to prove unavailable or prohibitively dilutive and if we are unable to commercialize and sell enough of our products, we will need to secure additional sources of funding in order to satisfy our working capital needs. Even if we are able to access the full $15.0 million under the Purchase Agreement, we may still need additional capital to fully implement our business, operating and development plans. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected and we may be unable to continue our operations.
The sale of our common stock to Aspire Capital may cause substantial dilution to our existing stockholders and the sale of the shares of common stock acquired by Aspire Capital could cause the price of our common stock to decline.
We are registering for sale the Commitment Shares that we have issued, and 20,000,000 shares that we may sell, to Aspire Capital. It is anticipated that shares registered in this offering will be sold over a period of up to approximately 24 months from the date of this prospectus. The number of shares ultimately offered for sale by Aspire Capital under this prospectus is dependent upon the number of shares purchased by Aspire Capital under the Purchase Agreement. Depending upon market liquidity at the time, sales of shares of our common stock under the Purchase Agreement may cause the trading price of our common stock to decline.
Aspire Capital may ultimately purchase all, some or none of the 20,000,000 shares of common stock that are included in this prospectus. After it has acquired shares under the Purchase Agreement, Aspire Capital may sell all, some or none of those shares. Therefore, sales to Aspire Capital by us pursuant to the Purchase Agreement may result in substantial dilution to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock by Aspire Capital in this offering, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of our shares to Aspire Capital and the Purchase Agreement may be terminated by us at any time at our discretion without any penalty or cost to us.
Volatility of our stock price could adversely affect current and future stockholders.
The market price of our common stock has been volatile, and fluctuates widely in price in response to various factors which are beyond our control. The price of our common stock is not necessarily indicative of our operating performance or long-term business prospects. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. During the period from January 1, 2005 to August 3, 2010, the lowest and highest reported trading prices of our common stock on The NASDAQ Capital Market, or for periods before May 29, 2007, as reported on the OTC Bulletin Board, were $0.11 and $6.80. Factors such as the following could cause the market price of our common stock to fluctuate substantially:
| • | the results of research or development testing of our or our competitors’ products; |
| • | technological innovations related to diseases we are studying; |
| • | new commercial products introduced by our competitors; |
6
| • | government regulation of our industry; |
| • | receipt of regulatory approvals by our competitors; |
| • | our failure to receive regulatory approvals for products under development; |
| • | future sales of shares of our common stock by us or by our shareholders (including Aspire Capital pursuant to this prospectus), and subsequent sale of common stock by the holders of warrant and options; |
| • | developments concerning proprietary rights; or |
| • | litigation or public concern about the safety of our products. |
The stock market in general has recently experienced extreme price and volume fluctuations. In particular, market prices of securities of drug development companies have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. Price volatility might be worse if the trading volume of our common stock is low.
This prospectus, and the documents incorporated by reference into this prospectus, contain forward-looking statements. Statements made in, or incorporated by reference into, this prospectus other than statements of historical fact, including statements about us and the future of our respective clinical trials, research programs, product pipelines, current and potential corporate partnerships, licenses and intellectual property, the adequacy of capital reserves and anticipated operating results and cash expenditures, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in, or incorporated by reference into, this prospectus the words “anticipate,” “objective,” “may,” “might,” “should,” “could,” “can,” “intend,” “expect,” “believe,” “estimate,” “predict,” “potential,” “plan” or the negative of these and similar expressions identify forward-looking statements. These statements reflect our current views with respect to uncertain future events and are based on imprecise estimates and assumptions and subject to risk and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. While we believe our plans, intentions and expectations reflected in those forward-looking statements are reasonable, these plans, intentions or expectations may not be achieved. Our actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in, or incorporated by reference into, this prospectus for a variety of reasons.
We have included more detailed descriptions of these risks and uncertainties and other risks and uncertainties applicable to our business in “Risk Factors” included under Item 1A. to our Annual Report on Form 10-K for the year ended December 31, 2009, which is incorporated by reference into this prospectus. We encourage you to read those descriptions carefully. We caution investors not to place significant reliance on forward-looking statements contained in, or incorporated by reference into, this document; such statements need to be evaluated in light of all the information contained in, or incorporated by reference into, this document.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the risk factors and other cautionary statements set forth in this prospectus. Other than as required by applicable securities laws, we are under no obligation, and we do not intend, to update any forward-looking statement, whether as result of new information, future events or otherwise.
7
The selling stockholder will receive all of the proceeds from the sale of the shares offered for sale by it under this prospectus. We will not receive proceeds from the sale of the shares by the selling stockholder. However, we may receive up to $15.0 million in proceeds from the sale of our common stock to Aspire Capital under the Purchase Agreement. Any proceeds from Aspire Capital that we receive under the Purchase Agreement are expected be used to progress the scientific and clinical development of our drug candidates and for working capital and general corporate purposes. We will bear all expenses incident to the registration of the shares of our common stock under federal and state securities laws other than expenses incident to the delivery of the shares to be sold by the selling stockholder. Any transfer taxes payable on these shares and any commissions and discounts payable to underwriters, agents, brokers or dealers will be paid by the selling stockholder.
MARKET PRICE OF OUR COMMON STOCK
Our common stock is listed on The NASDAQ Capital Market under the ticker symbol “BNVI.” The following table sets forth the high and low sale prices of our common stock for the periods indicated. On August 3, 2010, the last reported sale price per share of our common stock was $0.412 per share.
| Fiscal 2010 | Fiscal 2009 | Fiscal 2008 | ||||||||||||||||
| High | Low | High | Low | High | Low | |||||||||||||
First Quarter | $ | 0.76 | $ | 0.38 | $ | 0.40 | $ | 0.18 | $ | 2.15 | $ | 1.12 | ||||||
Second Quarter | $ | 0.63 | $ | 0.38 | $ | 0.95 | $ | 0.22 | $ | 1.55 | $ | 0.76 | ||||||
Third Quarter(1) | $ | 0.46 | $ | 0.35 | $ | 1.15 | $ | 0.36 | $ | 1.49 | $ | 0.70 | ||||||
Fourth Quarter | — | — | $ | 0.79 | $ | 0.34 | $ | 0.93 | $ | 0.17 | ||||||||
| (1) | Through August 3, 2010. |
8
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of and for the fiscal years ended December 31, 2009, 2008, 2007, 2006, 2005, and for the cumulative period since inception (February 1, 2002) through December 31, 2009 have been derived from our consolidated financial statements. Our consolidated financial statements as of December 31, 2009 and 2008 and for the fiscal years ended December 31, 2009, 2008 and 2007 are incorporated by reference into this prospectus. Our consolidated financial statements as of December 31, 2007, 2006 and 2005 and for the fiscal years ended December 31, 2006 and 2005 are not incorporated by reference into this prospectus. The selected condensed consolidated financial data presented below as of March 31, 2010 and for the three months ended March 31, 2010 and 2009 have been derived from our condensed financial statements incorporated by reference into this prospectus, and include, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of our financial position and results of operations as of and for these periods. Data from interim periods are not necessarily indicative of the results to be expected for a full year. This selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes incorporated by reference into this prospectus.
| Year Ended December 31, | Accumulated from February 1, 2002 (Date of inception) to December 31, | Three Months Ended March 31, | ||||||||||||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||||||||||||||
Revenues | $ | 288 | $ | 233 | $ | 582 | $ | 15 | $ | 15 | $ | 1,180 | $ | — | $ | — | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Research and development | 12,499 | 11,416 | 9,938 | 4,021 | 1,535 | 39,706 | 3,806 | 3,601 | ||||||||||||||||||||||||
General and administrative | 4,053 | 6,097 | 4,284 | 1,799 | 1,056 | 17,602 | 852 | 1,009 | ||||||||||||||||||||||||
Merger cost | — | — | — | — | 1,964 | 1,964 | — | — | ||||||||||||||||||||||||
Total operating expenses | 16,552 | 17,513 | 14,222 | 5,820 | 4,555 | 59,272 | 4,658 | 4,610 | ||||||||||||||||||||||||
Loss from operations | (16,264 | ) | (17,280 | ) | (13,640 | ) | (5,805 | ) | (4,540 | ) | (58,092 | ) | (4,658 | ) | (4,610 | ) | ||||||||||||||||
Change in fair value of warrant liability | — | — | — | — | 831 | 831 | — | — | ||||||||||||||||||||||||
Interest income | 84 | 730 | 850 | 261 | 148 | 2,074 | 8 | 54 | ||||||||||||||||||||||||
Interest expense | (95 | ) | (129 | ) | (87 | ) | (47 | ) | (74 | ) | (460 | ) | (14 | ) | (33 | ) | ||||||||||||||||
Other income (expense) | (88 | ) | (17 | ) | (21 | ) | (24 | ) | (2 | ) | (153 | ) | 3 | (79 | ) | |||||||||||||||||
Loss before income tax | (16,363 | ) | (16,696 | ) | (12,898 | ) | (5,615 | ) | (3,637 | ) | (55,800 | ) | (4,661 | ) | (4,668 | ) | ||||||||||||||||
Income tax provision | (1 | ) | (4 | ) | (3 | ) | (3 | ) | (1 | ) | (14 | ) | — | — | ||||||||||||||||||
Net loss | $ | (16,364 | ) | $ | (16,700 | ) | $ | (12,901 | ) | $ | (5,618 | ) | $ | (3,638 | ) | $ | (55,814 | ) | $ | (4,661 | ) | $ | (4,668 | ) | ||||||||
Basic and diluted net loss per common share | $ | (0.20 | ) | $ | (0.22 | ) | $ | (0.20 | ) | $ | (0.11 | ) | $ | (0.09 | ) | $ | (1.18 | ) | $ | (0.04 | ) | $ | (0.06 | ) | ||||||||
Shares used in computing basic and diluted net loss per common share | 83,623 | 76,353 | 65,763 | 49,923 | 40,063 | 47,345 | 107,541 | 76,363 | ||||||||||||||||||||||||
9
| As of December 31, | As of March 31, | |||||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | 2010 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Balance Sheet Data: | (unaudited) | |||||||||||||||||||||||
Cash, cash equivalents and short term investments | $ | 15,934 | $ | 13,562 | $ | 33,296 | $ | 3,055 | $ | 6,448 | $ | 11,759 | ||||||||||||
Working capital | $ | 14,524 | $ | 12,166 | $ | 31,271 | $ | 2,153 | $ | 5,954 | $ | 9,617 | ||||||||||||
Total assets | $ | 24,149 | $ | 22,504 | $ | 38,165 | $ | 4,972 | $ | 7,094 | $ | 20,298 | ||||||||||||
Long-term obligations | $ | 217 | $ | 545 | $ | 526 | $ | 301 | $ | 240 | $ | 121 | ||||||||||||
Accumulated deficit | $ | (55,814 | ) | $ | (39,450 | ) | $ | (22,750 | ) | $ | (9,849 | ) | $ | (4,231 | ) | $ | (60,475 | ) | ||||||
Total shareholders’ equity (deficit) | $ | 21,896 | $ | 19,632 | $ | 34,922 | $ | 3,496 | $ | 6,201 | $ | 17,604 | ||||||||||||
10
General
On July 6, 2010, we entered into the Purchase Agreement which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $15.0 million of our shares of common stock over the term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, we issued to Aspire Capital the Commitment Shares. Concurrently with entering into the Purchase Agreement, we also entered into the Registration Rights Agreement, in which we agreed to file one or more registration statements as permissible and necessary to register under the Securities Act, the sale of the shares of our common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.
As of July 7, 2010, there were 109,014,039 shares of our common stock outstanding (89,707,851 shares held by non-affiliates) excluding the 20,000,000 shares offered that may be issuable to Aspire Capital pursuant to the Purchase Agreement. If all of such 21,395,349 shares of our common stock offered hereby were issued and outstanding as of the date hereof, such shares would represent 16.6% of the total common stock outstanding or 19.5% of the non-affiliate shares of common stock outstanding as of the date hereof. The number of shares of our common stock ultimately offered for sale by Aspire Capital is dependent upon the number of shares purchased by Aspire Capital under the Purchase Agreement.
Pursuant to the Purchase Agreement and the Registration Rights Agreement, we are registering 21,395,349 shares of our common stock under the Securities Act, which includes the Commitment Shares that have already been issued to Aspire Capital and 20,000,000 shares of common stock which we may issue to Aspire Capital. All 21,395,349 shares of common stock are being offered pursuant to this prospectus. Under the Purchase Agreement, we have the right but not the obligation to issue more than the 20,000,000 shares of common stock included in this prospectus to Aspire Capital. As of the date hereof, we do not have any plans or intent to issue to Aspire Capital any shares of common stock in addition to the 21,395,349 shares of common stock offered hereby. However, if we elect to issue more than the 21,395,349 shares of common stock offered hereby, we must first register under the Securities Act the sale by Aspire Capital of any additional shares we may elect to issue to Aspire Capital before we can issue such additional shares to Aspire Capital under the Purchase Agreement.
On any trading day on which the closing sale price of our common stock exceeds $0.25, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice, directing Aspire Capital (as principal) to purchase up to 300,000 shares of our common stock per trading day, up to $15.0 million of our common stock in the aggregate at a purchase price equal to the lesser of (i) the lowest sale price of our common stock on the purchase date and (ii) the arithmetic average of the three lowest closing sale prices for our common stock during the 12 consecutive trading days ending on the trading day immediately preceding the purchase date. There are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales of our common stock to Aspire Capital. Aspire Capital has no right to require any sales by us, but is obligated to make purchases from us as we direct in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Purchase Agreement may be terminated by us at any time, at our discretion, without any penalty or cost to us.
On August 2, 2010 the SEC declared effective the registration statement of which this prospectus is part and on August 3, 2010, all conditions to commencement were satisfied and we may now begin selling shares of our common stock to Aspire pursuant to the Purchase Agreement.
Purchase Of Shares Under The Common Stock Purchase Agreement
Under the common stock Purchase Agreement, on any trading day selected by us on which the closing sale price of our common stock exceeds $0.25 per share, we may direct Aspire Capital to purchase up to 300,000 shares of our common stock. The purchase price is equal to the lesser of:
| • | the lowest sale price of our common stock on the purchase date; or |
11
| • | the arithmetic average of the three lowest closing sale prices for our common stock during the twelve consecutive trading days ending on the trading day immediately preceding the purchase date. |
The purchase price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the trading day(s) used to compute the purchase price. We may deliver multiple purchase notices to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed.
Minimum Share Price
Under the Purchase Agreement, we and Aspire Capital may not effect any sales of shares of our common stock under the Purchase Agreement on any trading day that the closing sale price of our common stock is less than $0.25 per share.
Compliance with Nasdaq Capital Market Rules
The Purchase Agreement provides that the purchase price shall not be less than $0.396 per share, which was equal to the sum of (i) the consolidated closing bid price of our common stock on July 2, 2010, the trading day immediately preceding the date of the Purchase Agreement, plus (ii) $0.026 per share. However, if we elect to sell shares of our common stock to Aspire Capital at a purchase price below $0.396, we would be required to obtain the approval of our stockholders of the transactions contemplated by the Purchase Agreement before we would be able to complete such sale, in order to be in compliance with the applicable listing maintenance rules of The NASDAQ Capital Market. We currently do not intend to issue any shares of our common stock at a purchase price below $0.396 and, accordingly, we currently do not intend to seek stockholder approval.
The Purchase Agreement further provides that we will not issue, and Aspire Capital will not purchase, any shares of our common stock under the Purchase Agreement which, when aggregated with all other shares of our common stock then beneficially owned by Aspire Capital and its affiliates, would result in the beneficial ownership by Aspire Capital and its affiliates of more than 19.99% of the then issued and outstanding shares of our common stock.
Events of Default
Generally, Aspire Capital may terminate the Purchase Agreement upon the occurrence of any of the following events of default:
| • | while any registration statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such registration statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to Aspire Capital for sale of our shares of common stock in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of twenty consecutive business days or for more than an aggregate of sixty business days in any 365-day period; |
| • | the suspension from trading or failure of our common stock to be listed on our principal market for a period of ten consecutive business days; |
| • | the de-listing of our common stock from our principal market, provided our common stock is not immediately thereafter trading on the OTC Bulletin Board, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the NYSE AMEX Equities; |
| • | our transfer agent’s failure to issue to Aspire Capital shares of our common stock which Aspire Capital is entitled to receive under the Purchase Agreement within five business days after an applicable purchase date; |
12
| • | any breach by us of the representations or warranties or covenants contained in the Purchase Agreement or any related agreements which could have a material adverse effect on us, subject to a cure period of five business days; |
| • | if we become insolvent or are generally unable to pay our debts as they become due; or |
| • | any participation or threatened participation in insolvency or bankruptcy proceedings by or against us. |
Our Termination Rights
The Purchase Agreement may be terminated by us at any time, at our discretion, without any penalty or cost to us.
No Short-Selling or Hedging by Aspire Capital
Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of our common stock during any time prior to the termination of the Purchase Agreement.
Effect of Performance of the Purchase Agreement on Our Stockholders
The Purchase Agreement does not limit the ability of Aspire Capital to sell any or all of the 21,395,349 shares registered in this offering. It is anticipated that shares registered in this offering will be sold over a period of up to approximately 24 months from the date of this prospectus. The sale by Aspire Capital of a significant amount of shares registered in this offering at any given time could cause the market price of our common stock to decline and/or to be highly volatile. Aspire Capital may ultimately purchase all, some or none of the 20,000,000 shares of common stock not yet issued but registered in this offering. After it has acquired such shares, it may sell all, some or none of such shares. Therefore, sales to Aspire Capital by us pursuant to the Purchase Agreement also may result in substantial dilution to the interests of other holders of our common stock. However, we have the right to control the timing and amount of any sales of our shares to Aspire Capital and the Purchase Agreement may be terminated by us at any time at our discretion without any penalty or cost to us.
13
Percentage of Outstanding Shares After Giving Effect to the Purchased Shares Issued to Aspire Capital
In connection with entering into the Purchase Agreement, we authorized the sale to Aspire Capital of up to $15.0 million of our shares of common stock. However, we estimate that we will sell no more than 20,000,000 shares to Aspire Capital under the Purchase Agreement (exclusive of the Commitment Shares), all of which are included in this offering. Subject to any required approval by our board of directors, we have the right but not the obligation to issue more than the 20,000,000 shares included in this prospectus to Aspire Capital under the Purchase Agreement. In the event we elect to issue more than 20,000,000 shares under the Purchase Agreement, we will be required to file a new registration statement and have it declared effective by the SEC. The number of shares ultimately offered for sale by Aspire Capital in this offering is dependent upon the number of shares purchased by Aspire Capital under the Purchase Agreement. The following table sets forth the number and percentage of outstanding shares to be held by Aspire Capital after giving effect to the sale of shares of common stock issued to Aspire Capital at varying purchase prices:
Assumed Average | Proceeds from the | Number of Shares to be | Percentage of | |||
$0.396 | $7,920,000 | 20,000,000 | 16.6% | |||
$0.50 | $10,000,000 | 20,000,000 | 16.6% | |||
$0.75 | $15,000,000 | 20,000,000 | 16.6% | |||
$1.00 | $15,000,000 | 15,000,000 | 13.2% | |||
$2.00 | $15,000,000 | 7,500,000 | 7.6% | |||
$3.00 | $15,000,000 | 5,000,000 | 5.6% | |||
$4.00 | $15,000,000 | 3,750,000 | 4.6% | |||
$5.00 | $15,000,000 | 3,000,000 | 3.9% |
| (1) | The Purchase Agreement provides that the purchase price shall not be less than $0.396 per share, which was equal to the sum of (i) the consolidated closing bid price of our common stock on July 2, 2010, the trading day immediately preceding the date of the Purchase Agreement, plus (ii) $0.026 per share. However, if we elect to sell shares of our common stock to Aspire Capital at a purchase price below $0.396, we would be required to obtain the approval of our stockholders of the transactions contemplated by the Purchase Agreement before we would be able to complete such sale, in order to be in compliance with the applicable listing maintenance rules of The NASDAQ Capital Market. We currently do not intend to issue any shares of our common stock at a purchase price below $0.396 and, accordingly, we currently do not intend to seek stockholder approval. |
| (2) | The denominator is based on 109,014,039 shares outstanding as of July 7, 2010, which includes the 1,395,349 shares previously issued to Aspire Capital and the number of shares set forth in the adjacent column which we would have sold to Aspire Capital. The numerator is based on the number of shares which we may issue to Aspire Capital under the Purchase Agreement (that are the subject of this offering) at the corresponding assumed purchase price set forth in the adjacent column. We have agreed not to issue, and Aspire Capital has agreed not to purchase, any shares of our common stock under the Purchase Agreement which, when aggregated with all other shares of our common stock then beneficially owned by Aspire Capital and its affiliates, would result in the beneficial ownership by Aspire Capital and its affiliates of more than 19.99% of the then issued and outstanding shares of our common stock. |
14
The selling stockholder may from time to time offer and sell any or all of the shares of our common stock set forth below pursuant to this prospectus. When we refer to the “selling stockholder” in this prospectus, we mean the entity listed in the table below, and its respective pledgees, donees, permitted transferees, assignees, successors and others who later come to hold any of the selling stockholder’s interests in shares of our common stock other than through a public sale.
The following table sets forth, as of the date of this prospectus, the name of the selling stockholder for whom we are registering shares for sale to the public, the number of shares of common stock beneficially owned by the selling stockholder prior to this offering, the total number of shares of common stock that the selling stockholder may offer pursuant to this prospectus and the number of shares of common stock that the selling stockholder will beneficially own after this offering. Except as noted below, the selling stockholder does not have, or within the past three years has not had, any material relationship with us or any of our predecessors or affiliates and the selling stockholder is not or was not affiliated with registered broker-dealers.
Based on the information provided to us by the selling stockholder and as of the date the same was provided to us, assuming that the selling stockholder sells all of the shares of our common stock beneficially owned by it that have been registered by us and does not acquire any additional shares during the offering, the selling stockholder will not own any shares other than those appearing in the column entitled “Beneficial Ownership After This Offering.” We cannot advise you as to whether the selling stockholder will in fact sell any or all of such shares of common stock. In addition, the selling stockholder may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, the shares of our common stock in transactions exempt from the registration requirements of the Securities Act of 1933 after the date on which it provided the information set forth in the table below.
We may amend or supplement this prospectus from time to time in the future to update or change the selling stockholder and shares that may be resold.
| Beneficial��Ownership After this Offering (1) | |||||||||
Name | Shares of Common Stock Owned Prior to this Offering | Shares of Common Stock Being Offered | Number of Shares | % (2) | |||||
Aspire Capital Fund, LLC (3) | 1,395,349 | (4) | 21,395,349 | — | — | ||||
| (1) | Assumes the sale of all shares of common stock registered pursuant to this prospectus, although the selling stockholder is under no obligation known to us to sell any shares of common stock at this time. |
| (2) | Based on 109,014,039 shares of common stock outstanding on July 7, 2010. Beneficial ownership is calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934 and Rule 13d-3 promulgated thereunder. |
| (3) | Steven G. Martin, Erik J. Brown & Christos Komissopoulos, the principals of Aspire Capital, are deemed to be beneficial owners of all of the shares of common stock owned by Aspire Capital. Messrs. Martin, Brown & Komissopoulos have shared voting and investment power over the shares being offered under this prospectus. Aspire Capital is not a registered broker-dealer or an affiliate of a registered broker-dealer. |
| (4) | As of the date hereof, 1,395,349 shares of our common stock have been acquired by Aspire Capital under the Purchase Agreement, consisting of shares we issued to Aspire Capital as a commitment fee. We may elect in our sole discretion to sell to Aspire Capital up to an additional 20,000,000 shares under the Purchase Agreement but Aspire Capital does not presently beneficially own those shares as determined in accordance with the rules of the SEC. |
15
The common stock offered by this prospectus is being offered by Aspire Capital, the selling stockholder. The common stock may be sold or distributed from time to time by the selling stockholder directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the common stock offered by this prospectus may be effected in one or more of the following methods:
| • | ordinary brokers’ transactions; |
| • | transactions involving cross or block trades; |
| • | through brokers, dealers, or underwriters who may act solely as agents; |
| • | “at the market” into an existing market for the common stock; |
| • | in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents; |
| • | in privately negotiated transactions; or |
| • | any combination of the foregoing. |
In order to comply with the securities laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the registration or qualification requirement is available and complied with.
The selling stockholder may also sell shares of common stock under Rule 144 promulgated under the Securities Act, if available, rather than under this prospectus. In addition, the selling stockholder may transfer the shares of common stock by other means not described in this prospectus.
Brokers, dealers, underwriters, or agents participating in the distribution of the shares as agents may receive compensation in the form of commissions, discounts, or concessions from the selling stockholder and/or purchasers of the common stock for whom the broker-dealers may act as agent. Aspire Capital has informed us that each such broker-dealer will receive commissions from Aspire Capital which will not exceed customary brokerage commissions.
Aspire Capital is an “underwriter” within the meaning of the Securities Act.
Neither we nor Aspire Capital can presently estimate the amount of compensation that any agent will receive. We know of no existing arrangements between Aspire Capital, any other shareholder, broker, dealer, underwriter, or agent relating to the sale or distribution of the shares offered by this prospectus. At the time a particular offer of shares is made, a prospectus supplement, if required, will be distributed that will set forth the names of any agents, underwriters, or dealers and any compensation from the selling stockholder, and any other required information. Pursuant to a requirement of the Financial Industry Regulatory Authority, or FINRA, the maximum commission or discount and other compensation to be received by any FINRA member or independent broker-dealer shall not be greater than eight percent (8%) of the gross proceeds received by us for the sale of any securities being registered pursuant to Rule 415 under the Securities Act.
We will pay all of the expenses incident to the registration, offering, and sale of the shares to the public other than commissions or discounts of underwriters, broker-dealers, or agents. We have agreed to indemnify Aspire Capital and certain other persons against certain liabilities in connection with the offering of shares of common stock offered hereby, including liabilities arising under the Securities Act or, if such indemnity is
16
unavailable, to contribute amounts required to be paid in respect of such liabilities. Aspire Capital has agreed to indemnify us against liabilities under the Securities Act that may arise from certain written information furnished to us by Aspire Capital specifically for use in this prospectus or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable.
Aspire Capital and its affiliates have agreed not to engage in any direct or indirect short selling or hedging of our common stock during the term of the Purchase Agreement.
We have advised Aspire Capital that while it is engaged in a distribution of the shares included in this prospectus it is required to comply with Regulation M promulgated under the Securities Exchange Act of 1934, as amended. With certain exceptions, Regulation M precludes the selling stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the shares offered hereby this prospectus.
We may suspend the sale of shares by Aspire Capital pursuant to this prospectus for certain periods of time for certain reasons, including if the prospectus is required to be supplemented or amended to include additional material information.
This offering will terminate on the date that all shares offered by this prospectus have been sold by Aspire Capital.
17
The following is a summary of all material characteristics of our capital stock as set forth in our articles of incorporation and bylaws. The summary does not purport to be complete and is qualified in its entirety by reference to our articles of incorporation and bylaws, and to the provisions of the General Corporation Law of the State of Delaware, as amended, or the Delaware General Corporation Law.
Common Stock
We are authorized to issue 340,000,000 shares of common stock, par value $0.0001 per share. Holders of our common stock are entitled to one vote per share in the election of directors and on all other matters on which stockholders are entitled or permitted to vote. Holders of our common stock are not entitled to cumulative voting rights for election of directors. Subject to the terms of any outstanding series of preferred stock, the holders of common stock are entitled to dividends in the amounts and at times as may be declared by our Board of Directors out of funds legally available. We have not paid any dividends and do not anticipate paying any dividends on our common stock in the foreseeable future. It is our present policy to retain earnings, if any, for use in the development of our business. Upon liquidation, dissolution or winding-up, holders of our common stock are entitled to share ratably in all net assets available for distribution to stockholders after payment of any liquidation preferences to holders of our preferred stock, if any. Holders of our common stock do not have preemptive rights.
As of July 7, 2010, there were issued and outstanding 109,014,039 shares of common stock.
Preferred Stock
We are authorized to issue up to 10,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, rights and preferences as may be determined from time to time by our Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of common stock. The issuance of preferred stock could have the effect of restricting dividends on the common stock, diluting the voting power of the common stock, impairing the liquidation rights of the common stock, or delaying or preventing a change in control of our company, all without further action by our stockholders.
No shares of preferred stock currently are outstanding.
Market Information
Our common stock is listed on The NASDAQ Capital Market under the ticker symbol “BNVI.” On August 3, 2010, the last reported sale price per share of our common stock was $0.412 per share. The shares of common stock offered pursuant to this prospectus have been approved for listing on The NASDAQ Capital Market.
Transfer Agent
The transfer agent and registrar for our common stock is Colonial Stock Transfer, 66 Exchange Place, Salt Lake City, Utah 84111.
Certain Provisions Of Delaware Law, The Certificate Of Incorporation And Bylaws
Provisions that May Have an Anti-Takeover Effect
We are subject to the provisions of Section 203 of the Delaware General Corporation Law statute. Section 203 prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales and other
18
transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within the prior three years did own, 15% or more of the corporation’s voting stock.
We expect the existence of this provision to have an anti-takeover effect with respect to transactions our Board of Directors does not approve in advance. We also anticipate that Section 203 may discourage attempted acquisitions that might result in a premium over the market price for the shares of our common stock held by stockholders.
Limitations on Directors’ Liability
Our certificate of incorporation contains certain provisions permitted under Delaware General Corporation Law relating to the liability of directors. The provisions eliminate a director’s liability for monetary damages for a breach of fiduciary duty, except in certain circumstances where such liability may not be eliminated under applicable law. Further, our certificate of incorporation contains provisions to indemnify our directors and officers to the fullest extent permitted by Delaware General Corporation Law.
19
The validity of the issuance of the shares of our common stock described in this prospectus has been passed upon for us by Greenberg Traurig, LLP, New York, New York. A shareholder of Greenberg Traurig, LLP beneficially owns 140,000 shares of our common stock, inclusive of warrants to purchase 35,000 shares of common stock.
The consolidated financial statements of Bionovo, Inc., as of December 31, 2009 and 2008, and for each of the three years in the period ended December 31, 2009 and for the period from February 1, 2002 (date of inception) through December 31, 2009 have been audited by PMB Helin Donovan, LLP, an independent registered public accounting firm, as set forth in their report thereon, and incorporated by reference into this prospectus. These consolidated financial statements appear in Bionovo, Inc.’s Annual Report (Form 10-K) for the year ended December 31, 2009. These consolidated financial statements have been incorporated into this prospectus by reference in reliance upon such report given on the authority of such firm as an expert in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate by reference” into this prospectus the information we file with them, which means that we can disclose important information to you by referring you to those documents instead of having to repeat the information in this prospectus. The information incorporated by reference into this prospectus is considered to be part of this prospectus. We incorporate by reference into this prospectus the documents listed below:
| • | our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC on March 16, 2010; |
| • | our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010 filed with the SEC on May 11, 2010; |
| • | our Current Reports on Form 8-K filed with the SEC on March 19, 2010, April 28, 2010, May 5, 2010 and July 7, 2010; and |
| • | the description of our common stock contained in our registration statement on Form 8-A filed with the SEC on May 23, 2007, including any amendment or reports filed for the purpose of updating such description. |
You may request a copy of any or all of the information incorporated by reference into this prospectus, at no cost, by writing or telephoning us at the following address:
Bionovo, Inc.
5858 Horton Street, Suite 400
Emeryville, CA 94608
(510) 601-2000
20
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities Act of 1933 that registers the distribution of the securities offered under this prospectus. The registration statement, including the attached exhibits and schedules and the information incorporated by reference into this prospectus, contains additional relevant information about us and the securities. The rules and regulations of the SEC allow us to omit from this prospectus certain information included in the registration statement.
In addition, we file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy this information and the registration statement at the SEC public reference room located at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference room.
In addition, any information we file with the SEC, including the documents incorporated by reference into this prospectus, is also available on the SEC’s website at http://www.sec.gov. We also maintain a web site at www.bionovo.com, which provides additional information about our company and through which you can also access our SEC filings. The information set forth on our web site is not part of this prospectus.
21
