1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 8, 2001
REGISTRATION NO. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EMPYREAN BIOSCIENCE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 86-0973095
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
23800 COMMERCE PARK ROAD, SUITE A
CLEVELAND, OHIO 44122
(216) 360-7900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
JOSEPH G. TEGREENE, ESQ.
BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP
2300 BP TOWER
200 PUBLIC SQUARE
CLEVELAND, OHIO 44114
(216) 363-4643
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: FROM
TIME TO TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
========================================= ============= ======================= ==================== =================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE REGISTERED TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED PER SHARE OFFERING PRICE FEE
- ----------------------------------------- ------------- ----------------------- -------------------- -----------------
Common Stock, par value $.0001 per share 2,213,399 (1) $0.25 (1) $553,350 $138.34
========================================= ============= ======================= ==================== =================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act. Based on the closing
price of the common stock on August 6, 2001 on the Over-the-Counter
Bulletin Board.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
Subject to Completion - August 8, 2001
EMPYREAN BIOSCIENCE, INC.
2,213,399 SHARES OF COMMON STOCK
$.0001 PAR VALUE PER SHARE
This prospectus relates to the resale of up to 2,213,399 shares of our common
stock by the selling stockholders. The selling stockholders may sell common
stock from time to time in the principal market on which the stock is traded at
the prevailing market price or in negotiated transactions. Please see the
"Selling Stockholders" section in this prospectus for a complete description of
the selling stockholders.
We will not receive any proceeds from the sale of shares by the selling
stockholders. However, we will receive proceeds upon the exercise of any
warrants or options that may be exercised by the selling stockholders.
Our common stock is traded on the Over-The-Counter Bulletin Board under the
symbol "EMDG." On August 6, 2001, the closing price of our common stock was
$0.25 per share.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5 IN THIS PROSPECTUS.
Neither the SEC nor any state securities commission has approved
or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated August ___, 2001.
2
3
TABLE OF CONTENTS
PAGE
----
Empyrean Bioscience, Inc......................................................4
The Offering..................................................................4
Risk Factors..................................................................5
Forward-Looking Statements...................................................11
Use of Proceeds..............................................................11
Selling Stockholders.........................................................12
Plan of Distribution.........................................................13
Legal Matters................................................................13
Experts......................................................................14
Where You Can Find More Information..........................................14
Indemnification..............................................................15
3
4
EMPYREAN BIOSCIENCE, INC.
Business. We market, sell and distribute innovative personal care
products that are intended to prevent the spread of infectious disease. The
products in our complete germ protection program, which include a hand sanitizer
and first-aid antiseptic, antibacterial towelettes and an antibacterial surface
disinfectant cleaner, are sold over-the-counter in the retail markets and also
to commercial, industrial and institutional customers. The hand sanitizer and
first-aid antiseptic and the antibacterial towelettes are marketed under both
the Preventx(R) and Coleman(R) with Advanced Preventx(R) brands. The
antibacterial surface disinfectant cleaner is marketed under the Coleman(R)
brand.
We have a negative net worth and have incurred net losses in 1999 and
2000 and expect to incur net losses at least through 2001. We expect operations
to generate negative cash flow at least through 2001 and we do not have existing
capital resources or credit lines available that are sufficient to fund our
operations and capital requirements as presently planned over the next twelve
months. These factors raise doubts about our ability to continue as a going
concern and our audit report contains an explanatory paragraph with respect to
this matter.
Our principal executive offices are located at 23800 Commerce Park
Road, Suite A, Cleveland, Ohio 44122 and our phone number is (216) 360-7900.
THE OFFERING
Common stock outstanding
before this offering 51,177,686 shares.
Common stock offered by the
selling stockholders 2,213,399 shares.
Common stock outstanding after
this offering 51,177,686 shares.
Use of proceeds We will not receive any proceeds from the
sale of the common stock by the selling
stockholders. However, we will receive
proceeds upon the exercise of any warrants
or options that may be exercised by the
selling stockholders. We anticipate
receiving approximately $41,000 if all of
the warrants and options are exercised,
which proceeds will be used for general
corporate purposes.
Risk factors Investing in these securities involves a
high degree of risk. As an investor, you
should be able to bear a complete loss of
your investment. See "Risk Factors" for a
more detailed discussion.
4
5
RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS AND OTHER INFORMATION IN THIS
PROSPECTUS BEFORE DECIDING TO BUY THE COMMON STOCK.
RISKS RELATING TO OUR BUSINESS:
FDA Decisions May Adversely Affect Marketing our Hand Sanitizer, Resulting in
Loss of Sales.
The Food and Drug Administration regulates the manufacture and sale of
hand sanitizers. In April 1999, the FDA took an adverse position regarding the
marketing of a lotion, made and sold by the Andrew Jergens Co., that contained
an active ingredient similar to the one in our hand sanitizer and first-aid
antiseptic. If the FDA decides similarly regarding our hand sanitizer and
first-aid antiseptic, we would be required to modify the labeling and marketing
of our product using only the claims allowed for first-aid antiseptic products.
As a result, sales of our hand sanitizer and first-aid antiseptic, our primary
product, could suffer and we could go out of business.
FDA hand sanitizer regulations require that hand sanitizers be marketed
for hand use only. We believe that our marketing claims comply with this FDA
requirement. Our product is labeled as a hand sanitizer and first-aid antiseptic
and its hand sanitizer directions state that it is for hand use only. The
Jergens product claimed to be a lotion, implying it may be used on all skin
parts. Our hand sanitizer and first-aid antiseptic also claims that it helps
prevent bacterial contamination or skin infection on minor cuts, scrapes and
burns. We are unaware that the Jergens product made the same or similar claims.
We understand that the Jergens product has been discontinued. Our label claims
that our hand sanitizer and first-aid antiseptic is long lasting. That claim is
not provided for under either the hand sanitizer monograph or the first-aid
antiseptic monograph. However, based on studies conducted by IBC, we believe we
could independently substantiate this claim to the FDA if required. We do not
make prophylactic claims with respect to our hand sanitizer and first-aid
antiseptic.
If the FDA prohibited the use of benzalkonium chloride in our hand
sanitizer and first-aid antiseptic, we would be forced to market this product
using only the claims allowed for first-aid antiseptic products. Further, any
claims we make about a first-aid antiseptic product which are not within the
FDA's first-aid antiseptic rules would have to be substantiated to the FDA or
omitted.
We May Not be Able to Obtain Sufficient Capital to Fund our Operations and, as a
Result, We May Cut Back or Discontinue Operations or Limit our Business
Strategies.
While we will need significant additional capital in the near future,
we may be unable to obtain funding for our operations on favorable terms, or at
all. If adequate funds are not available, we may be required to cut back or
discontinue one or more of our product introductions, sales, marketing or
distribution programs or plans; or reduce operating expenses, or attempt to
obtain funds through strategic alliances that may require us to relinquish
rights to one or more of our technologies or products.
Our future capital requirements will depend on many factors, including:
o the progress of our product introductions, sales, marketing and
distribution efforts;
o the scope and results of clinical trials related to our products;
o the progress in filing for and obtaining regulatory approvals;
o the rate of technological advances;
o the market acceptance of our products;
o the levels of administrative and legal expenses; and
o competitive products.
5
6
In addition, future financing may be increasingly difficult to obtain
due to such factors as our limited operating history and results, the level of
risk associated with our business and business plans, increases in our
vulnerability to general economic conditions, and increased stockholder
dilution. Debt financing, if available, may have several negative effects on our
future operations, including:
o a portion of our cash flow from operations will be dedicated to
payment of principal and interest and this would reduce the funds
available for operations and capital expenditures;
o increased debt burdens will substantially increase our vulnerability
to adverse changes in general economic and competitive conditions;
o we may be subject to restrictive debt covenants and other conditions
in our debt instruments that may limit our capital expenditures,
limit our expansion or future acquisitions, and restrict our ability
to pursue our business strategies; and
o future debt financing may be convertible into common stock or
include the issuance of warrants, or both, which would increase
stockholder dilution.
Additional equity financing, if available, would result in increased
dilution of common stockholders.
A Third Party Claim May Adversely Affect our Rights to Make or Sell our Products
and We Would be Unable to Generate Revenues.
Our hand sanitizer and first-aid antiseptic product is based on a
formula licensed to us by IBC. A third party claims a prior worldwide licensing
and marketing right without an expiration date to use the IBC formula. If the
claim is successful, it could materially adversely affect our rights to license
and market our hand sanitizer and first-aid antiseptic and future potential
products that may be developed based on the IBC formula. IBC is seeking a
declaratory judgment that the third party has no rights in the product line, but
the litigation may not succeed. If IBC does not succeed, we may be unable to
market, sell or distribute our hand sanitizer and first-aid antiseptic or any
other products under development. If that were to occur, IBC has agreed to
assign us certain rights. However, we may be unable to generate revenues, which
would likely require the termination of our business.
We Expect to Incur Losses for the Foreseeable Future and Continued Losses Could
Result in our Inability to Fund Business Operations and Cause our Stock Price to
Decline.
We have incurred a net loss in each year of our existence and expect to
incur a net loss at least through 2001. We incurred losses of $3,147,000 in
1998, $4,785,000 in 1999 and $8,459,000 in 2000. We incurred a loss of
$1,097,000 for the three months ended March 31, 2001. We may never make a
profit. These losses are due in part to expenses associated with sales and
marketing, overhead, market development and, in 2000, the settlement of our
litigation with IBC. As a result, our accumulated deficit has increased from
$15,224,000 at December 31, 1997 to $32,712,000 at March 31, 2001. If we
continue to incur losses, we may not be able to fund continuing business
operations, which could lead to the limitation or closure of some or all of our
operations.
Existing or Potential Markets May Not Accept our Products and We May Experience
an Inability to Generate Revenue or Profits.
Our success depends significantly on obtaining and increasing
penetration of existing and new markets and the acceptance of our products in
these markets. Our products may not achieve or maintain market acceptance. We
also may not be successful in increasing our market share with respect to any of
our current products. Market acceptance will depend, in large part, upon our
ability to educate consumers, health care providers and other institutional end
users as to the distinctive characteristics and benefits of our products. If we
fail to achieve significant market acceptance of our preventative products, we
would lose revenues and not generate sufficient revenues to make a profit in the
future.
Adverse Product Publicity and Product Recalls of Other Products May Have a
Negative Effect On the Sales or Acceptance of our Products and Could Result in a
Loss of Revenues or Affect our Ability to Ever Become Profitable.
Antibacterial products containing triclosan as the active ingredient
have been the focus of adverse publicity. Some products have been recalled due
to triclosan's side effects and its ineffectiveness in killing germs. Although
our products do not use triclosan and, we believe, are superior to other
antibacterial sanitizing products,
6
7
adverse publicity stemming from problems with, or recalls of, other products may
adversely affect the sales of our products and our ability to ever become
profitable. Such confusion about our product identity may cause our customers to
confuse our products with those subject to adverse publicity.
We May Incur Significant Liabilities and Expenses If our Products Cause Personal
Injury or Property Damage.
Although we believe that our products are safe, there is a possibility
that personal injury, including death or property damage could occur from the
use or misuse of our products. If so, injured parties could initiate significant
product liability claims and litigation against us. Any claims relating to our
products, even if without merit, may exceed our existing insurance coverages and
assets, and we may be required to pay these losses and expenses from funds for
operations, causing significant losses.
We Have Limited Sales, Marketing and Distribution Capabilities and Rely
Extensively On Third Parties to Market and Distribute our Products. The Failure
or Unwillingness of These Parties to Market our Products Could Limit our Ability
to Generate Revenues or Profits.
We rely extensively on third party manufacturers' sales representatives
and on marketing and distribution companies to market and distribute our
products. Accordingly, sales of our products depend largely on the strength and
financial condition of others, the expertise and relationships of our
manufacturers' sales representatives, marketers and distributors with customers,
and the interest of these parties in selling and marketing our products. Our
manufacturers' sales representatives and marketing and distribution parties also
sell, market and distribute the products of other companies. If we do not
generate substantial sales through our manufacturers' sales representatives and
distributors, we may not generate sufficient revenues and profits. If our
relationships with our third party manufacturers' sales representatives and our
marketing and distribution partners were to terminate, we would need to develop
relationships with other third parties or substantially increase our own sales
and marketing forces. To develop sales and marketing forces internally would
require significant cash and other resources and could cause delays or
interruptions in our product supply to customers. This could result in the loss
of significant sales or customers and limit our ability to become profitable.
We Have No Internal Manufacturing Capability and Depend Heavily Upon Third Party
Suppliers, and the Inability or Unwillingness of These Third Parties to Supply
our Products Could Result in Interruptions of our Product Supply Capability and
a Loss of Customers and Revenues.
Canadian Custom Packaging ("CCP"), the sole third party manufacturer
for the IBC formulation that is used in our current product, purchases raw
materials used in the manufacture of our product from various suppliers. Since
we do not have a written agreement, CCP could terminate our arrangement at any
time. CCP and our suppliers may not be able to supply our product in a timely or
cost-effective manner or in accordance with specifications. We maintain an
inventory of these finished products and carry contingent business interruption
insurance on CCP's facility. A lengthy delay or interruption in the supply of
these materials or finished products would significantly impair our ability to
compete, would cause a loss of revenue and could cause a loss of significant
customers.
We are Subject to Intense Competition and Pricing Pressures From Substantially
Larger Competitors, Which Can Limit our Ability to Ever Make a Profit.
The consumer products industry in which we compete is intensely
competitive. Among our more significant competitors are large and
well-established companies, including the Dial Corporation, GoJo Industries,
Colgate-Palmolive Company, Reckitt & Coleman, Inc., and others. All of these
companies have significantly greater financial resources than us and are willing
to commit significant resources to protecting or capturing market share. As a
result, it will be difficult for us to successfully capture market share from
these competitors, promote and advertise our products effectively against the
products of these competitors, and develop product innovations in response to
market demands and opportunities. We may be unable to successfully compete with
these companies even if our products have recognized superior qualities.
7
8
In addition, our consumer products and those products we plan to offer
are subject to significant price competition. To respond to these competitive
and consumer pressures, we may need to cut prices from time to time. We may be
unable to absorb price reductions that could cause a loss of sales volume or
limit our profits from product sales.
We Depend On Key Employees for our Success and the Loss of our Key Employees
Could Limit our Success.
Our future success will depend in large part on our ability to attract
and retain highly qualified managerial and technical personnel. The competition
for qualified personnel in our industry is intense and, accordingly, we may be
unable to hire or retain necessary personnel. We are presently highly dependent
upon the efforts of Mr. Richard C. Adamany, our President and Chief Executive
Officer, and Mr. Bennett S. Rubin, our Executive Vice President and Chief
Operating Officer. The loss of the services of Mr. Adamany or Mr. Rubin could
limit our success in the future. Messrs. Adamany and Rubin are subject to
employment agreements.
Government Regulation of our Products May Prevent Us From Selling our Current
Product or May Result in Delays in Launching or Selling Future Products, and Can
Significantly Increase our Costs.
The testing, manufacture, labeling, distribution, advertising,
marketing, and sale of our products are subject to extensive government
regulation. To sell some or all of our drug products within the United States,
we must comply with FDA guidelines or, through IBC, obtain premarket approval
from the FDA. The FDA approval process is very costly, time consuming, and
uncertain. It is possible that the FDA will not approve our products or approve
them in a timely manner. IBC may not have sufficient resources to complete the
required testing and regulatory review process for our products currently under
development. Further, we do not have the right under our license agreement from
IBC to independently seek FDA approval of any of the IBC products.
Approval by the FDA is subject to continual review, and later discovery
of previously unknown problems may result in product labeling restrictions or
withdrawal of products from the market. Also, the FDA may restrict or prohibit
us from making pertinent product claims and this may limit the successful
marketing of our products or may reduce the price for our products. Finally, if
we and/or IBC fail to comply with requirements for testing, manufacturing,
labeling, distributing, advertising, marketing, and selling drugs, we may be
subject to administrative or court-imposed sanctions. These sanctions could
include product recalls or seizures, injunctions against production,
distribution, sales and marketing, delays in obtaining marketing approvals or
the refusal of the government to grant approvals, suspensions and withdrawals of
previous approvals, and possible criminal prosecution. Our distributors,
suppliers and CCP, our third party manufacturer, are subject to the same
sanctions.
The Protection of our Rights to our Products May Not Be Complete and This Could
Impair our Ability to Successfully Compete Against Others.
Our ability to effectively compete may be materially dependent upon the
proprietary nature of the products that we license from third parties.
Currently, there are no patents or patent applications pending with respect to
our products. We depend primarily on confidentiality provisions in our written
agreements with third parties and on trade secret laws, which vary from
jurisdiction to jurisdiction and are subject to interpretation. As a result, we
have no ability to prevent third parties from duplicating our products if they
can do so without either violating an agreement with us or improperly using our
trade secrets. We may never be able to obtain any key patents or other
protection and our licensors may never be able to obtain similar protection for
our products. Our existing rights may not be sufficient to protect our products,
may not be valid, and may not provide significant commercial benefits in any
event. Although we do not believe that our products infringe on the patent
rights or proprietary rights of others, they may infringe on other products.
8
9
We Have a Limited Product Line and our Inability to Successfully Market Any One
or a Few of our Products Could Cause a Significant Decline in our Revenues or
Future Profitability.
Nearly all of our revenues from product sales in 1999 and 2000 were
derived from our hand sanitizer and first-aid antiseptic product. Towelettes and
our antibacterial surface disinfectant cleaner were introduced in the fourth
quarter of 2000. The GEDA Plus(R) microbicidal contraceptive gel will not be
available for sale, marketing and distribution in the United States until an IND
(Investigative New Drug) number is obtained from the FDA by IBC and Phase III
studies acceptable to the FDA are completed. These studies must successfully
demonstrate that the gel is safe and effective both as a contraceptive and as a
preventative of sexually transmitted diseases. Neither successful completion of
the study nor FDA approval can be assured. In the foreseeable future, we expect
most of our revenue will derive from sales of the hand sanitizer and first-aid
antiseptic lotion, towelette products and the antibacterial surface disinfectant
cleaner. Since we lack product diversification, our ability to generate revenues
or profits depends on our successful introduction of new products and marketing
of existing products.
We Have No Research and Development Rights Under our License Agreement With IBC
and our Success Depends in Part On IBC's Research and Development Efforts. IBC's
Inability to Develop New Products or Improvements of Existing Products May Harm
our Future Profitability and Ability to Generate Revenues.
Due to the early developmental stage of our business, we expended only
limited amounts on research and development of infectious disease preventative
products in 1999 and 2000. Additionally, effective with the settlement of the
lawsuit with IBC in August 2000, responsibility for research and development of
products based on the IBC formulation rests exclusively with IBC. Since our only
products on the market to date are our hand sanitizer and first-aid antiseptic
lotion and towelette products, our success depends heavily on the ability of IBC
to develop additional products using the IBC formulation. Unless IBC is able to
obtain and devote sufficient resources to research and development efforts, we
may only have limited product offerings based on the IBC formulation in the
future. As a result, this may limit our ability to achieve market acceptance, to
leverage that acceptance through the introduction of follow-on products, or to
better diversify our risks through multiple product offerings. As a result, we
may fail to achieve significant growth in revenues or profitability in the
future.
Our Inability to Manage Growth May Strain our Resources and Systems.
We anticipate additional growth in the scope and geographic areas of
our operations as current and new products are developed and commercialized.
This growth, if achieved, will result in an increase in responsibilities for
management personnel. Our ability to manage growth effectively will require us
to continue to implement and improve our operating, financial and management
information systems and to train and motivate our employees. Our failure to
manage any expansion effectively could strain our resources and systems and
result in further operating losses, or the loss of customers and revenues.
International Sales of our Products Through our Joint Venture With IBC Expose Us
to Currency Fluctuations and Other Special Risks, Which Could Reduce or
Eliminate Profits or Cause Operating Losses.
We are attempting to expand the sale of our current products and to
introduce new products under development in several foreign countries through
our joint venture with IBC. Our international sales efforts are subject to
several customary risks of doing business abroad, including regulatory
requirements, political and economic instability, trade barriers, foreign taxes
and tariff restrictions, restrictions on the ability to transfer funds, and
export licensing requirements. In addition, although our limited foreign
transactions to date have been U.S. dollar denominated, foreign customers may
later require us to receive payment in foreign currency. Fluctuations in the
value of foreign currencies relative to the U.S. dollar could have an adverse
impact on the price of our products in foreign markets, which could reduce or
eliminate our ability to generate profits from the sale of these products or
cause significant operating losses.
9
10
RISKS RELATING TO OUR STOCK:
The Lack of a Mature Trading Market for our Common Stock May Cause our Stock
Price to Decline Significantly and Limit the Liquidity of our Common Stock.
We do not meet the listing requirements for the listing or quotation of
our common stock on any national or regional securities exchange or on Nasdaq.
Currently, our common stock is traded on the Over-The-Counter Bulletin Board. As
a result, accurate current quotations as to the value of our common stock are
unavailable making it more difficult for investors to dispose of our common
stock. The lack of current quotations and liquidity can cause our stock price to
decline or to trade lower than the prices that might prevail if our securities
were listed or quoted on an exchange or on Nasdaq.
Our Common Stock is Subject to the "Penny Stock" Rules of the SEC and the
Trading Market in our Securities is Limited, Which Makes Transactions in our
Stock Cumbersome and May Reduce the Value of an Investment in our Stock.
Since our common stock is not listed or quoted on any exchange or on
Nasdaq, and no other exemptions currently apply, trading in our common stock on
the Over-The-Counter Bulletin Board is subject to the "penny stock" rules of the
SEC. These rules require, among other things, that any broker engaging in a
transaction in our securities provide its customers with a risk disclosure
document, disclosure of market quotations, if any, disclosure of the
compensation of the broker and its salespersons in the transaction, and monthly
account statements showing the market values of our securities held in the
customer's accounts. The brokers must provide bid and offer quotations and
compensation information before making any purchase or sale of a penny stock and
also provide this information in the customer's confirmation. Generally, brokers
may be less willing to execute transactions in securities subject to the "penny
stock" rules. This may make it more difficult for investors to dispose of our
common stock and cause a decline in the market value of our stock.
There are a Large Number of Shares Underlying Our Warrants, Options and
Debentures That May be Available for Future Sale and the Sale of These Shares
May Depress the Market Price of Our Common Stock.
As of August 6, 2001, we have 51,177,686 shares of common stock issued
and outstanding, outstanding notes and debentures that are convertible into
5,305,548 shares of common stock at current market prices, and outstanding
warrants and options to purchase 9,546,716 shares of common stock. In addition,
the number of shares of common stock issuable on conversion of the outstanding
notes and debentures may increase if the market price of our common stock
declines. 65,709,950 of the shares, including all of the shares issuable upon
exercise of our warrants and options and upon conversion of our notes and
debentures, may be sold without restriction. The sale of these shares may
adversely affect the market price of our common stock. The issuance of shares
upon conversion of outstanding notes and debentures, and upon exercise of
outstanding warrants and options will also cause immediate and substantial
dilution to our existing stockholders and may make it difficult to obtain
additional capital.
Our Stock Price May be Volatile Due to Factors Beyond our Control Which Could
Subject the Value of our Shares to Rapid Decline.
The securities markets have from time to time experienced significant
price and volume fluctuations that can be unrelated to the operating performance
or financial condition of any particular company. This is especially true for
emerging companies like ours and for other companies in our industry. For
instance, stock prices can be significantly impacted by announcements of
technology innovations or new products by other companies, release of reports by
securities analysts or regulatory developments. Economic or other external
factors, as well as quarterly fluctuations in our or in our competitors'
operating results, also can have a significant impact on our stock price. For
example, during 2000, the closing bid price of our common stock quoted on the
Over-The-Counter Bulletin Board ranged from a low of $0.24 per share to a high
of $3.56 per share. We have experienced similar fluctuations in other periods.
10
11
FORWARD-LOOKING STATEMENTS
The statements made in this prospectus or in the documents we have
incorporated by reference that are not statements of historical fact, 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.
Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate" or "believe," or similar terminology.
The forward-looking statements include discussions about business
strategy and expectations concerning market position, future operations,
margins, profitability, liquidity and capital resources, and statements
concerning the integration into our business of the operations we have acquired.
Although we believe that the expectations in such statements are reasonable, we
cannot give any assurance that those expectations will be correct.
We caution you not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus.
Our operations are subject to several uncertainties, risks and other
influences, many of which are outside our control and any of which could
materially affect our results of operations and ultimately prove the statements
we make to be inaccurate.
Important factors that could cause actual results to differ materially
from our expectations are discussed under the heading "Risk Factors" and
elsewhere in this prospectus.
USE OF PROCEEDS
We will not receive any of the proceeds from the resale of the common
stock by the selling stockholders. However, we will receive proceeds upon the
exercise of any warrants or options that may be exercised by the selling
stockholders. We anticipate receiving approximately $41,000 if all of the
warrants and options are exercised, which proceeds will be used for general
corporate purposes.
11
12
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to each
selling stockholder for whom we are registering for resale shares of our common
stock. Beneficial ownership of the common stock by the selling stockholders
after this offering will depend on the number of shares of common stock sold by
each selling stockholder; however, the table assumes that all shares of common
stock owned by a beneficial owner are offered and resold pursuant to this
prospectus.
- --------------------------------------------------------------------------------------------------------------------
Name Shares Owned Shares Owned
Before The Offering Shares Offered After The Offering
- --------------------------------------------------------------------------------------------------------------------
Richard C. Adamany (1) 2,507,393 211,052 2,296,341
- --------------------------------------------------------------------------------------------------------------------
Authentech Software Developers, 10,000 10,000 -0-
Inc.
- --------------------------------------------------------------------------------------------------------------------
Benesch, Friedlander, Coplan & 225,000 225,000 -0-
Aronoff LLP (2)
- --------------------------------------------------------------------------------------------------------------------
Robert G.J. Burg II (3) 181,030 9,615 171,415
- --------------------------------------------------------------------------------------------------------------------
Michael Cicak (3) 1,151,030 9,615 1,141,415
- --------------------------------------------------------------------------------------------------------------------
Connie Dial (4) 156,250 156,250 -0-
- --------------------------------------------------------------------------------------------------------------------
Facile, Inc. (4) 312,500 312,500 -0-
- --------------------------------------------------------------------------------------------------------------------
Andrew J. Fishleder (3) 341,099 9,225 331,874
- --------------------------------------------------------------------------------------------------------------------
Ronald Horner (4) 156,250 156,250 -0-
- --------------------------------------------------------------------------------------------------------------------
Neal D. Horrigan (5) 319,869 125,000 194,869
- --------------------------------------------------------------------------------------------------------------------
Integrated Commercialization 200,000 200,000 -0-
Solutions (6)
- --------------------------------------------------------------------------------------------------------------------
Investor Relations Group (7) 150,000 150,000 -0-
- --------------------------------------------------------------------------------------------------------------------
May Davis Group, Inc. (8) 8,000 8,000 -0-
- --------------------------------------------------------------------------------------------------------------------
National B-CAM Inc. 100,000 100,000 -0-
- --------------------------------------------------------------------------------------------------------------------
Richard J. Rapacz 44,444 44,444 -0-
- --------------------------------------------------------------------------------------------------------------------
Bennett S. Rubin (9) 2,499,264 211,052 2,288,212
- --------------------------------------------------------------------------------------------------------------------
Uptic Investments Corp. (10) 9,893,780 275,396 9,618,384
- --------------------------------------------------------------------------------------------------------------------
(1) Mr. Adamany is a director and the President and Chief Executive Officer of
the Company. Includes 375,000 shares beneficially owned by Mr. Adamany's
spouse.
(2) Serves as general legal counsel to the company.
(3) Director of the Company.
(4) Represents shares issuable under immediately convertible debentures dated
April 26, 2001.
(5) Mr. Horrigan is Vice President - Logistics of the Company.
(6) Formerly served as third-party warehousing, distribution, and customer
service center within the past three years.
(7) Performs public relations and investor relations work for the Company.
Represents shares issuable under immediately exercisable stock options to
be exercised.
(8) Represents shares issuable under an immediately exercisable warrant issued
April 3, 2001.
(9) Mr. Rubin is a director and the Executive Vice President, Secretary and
Chief Operating Officer of the Company. Includes 195,000 shares held by
Rubin Consulting, Inc., a company wholly-owned by Mr. Rubin, and 138,212
shares held by a trust for the benefit of Mr. Rubin's family.
(10) Uptic Investments Corp. is wholly-owned by Lawrence D. Bain, a director of
the Company. Also includes 114,987 shares held of record by Mr. Bain
individually, 22,400 shares owned by Mr. Bain's family, 5,000,000 shares
owned by International Bioscience Corp. over which Mr. Bain has voting
control, and options to purchase 2,226,000 shares held by International
Bioscience Corp. over which shares, upon issuance following exercise, Mr.
Bain will have voting control.
The information in the table with respect to selling stockholders has
been prepared based upon information furnished to the company by or on behalf of
the selling stockholders.
12
13
PLAN OF DISTRIBUTION
Sales of common stock may be effected by selling stockholders from time
to time in one or more types of transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through put or call option transactions relating to the selling stock, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. Such transactions may or may not involve brokers
or dealers. The selling stockholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of common stock issued to them, nor is there
an underwriter or coordinating broker acting in connection with the proposed
sale of this common stock by the selling stockholders.
The selling stockholders may effect such transactions by selling common
stock directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Such broker-dealers may receive compensation in the form
of discounts, concessions, or commissions from the selling stockholders and/or
the purchasers of common stock for whom such broker-dealers may act as agents or
to whom they sell as principal, or both which compensation as to a particular
broker-dealer might be in excess of customary commissions.
The selling stockholders and any broker-dealers that act in connection
with the sale of common stock might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
such broker-dealers and any profit on the resale of the common stock sold by
them while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act. The selling stockholders may agree to
indemnify any agent dealer or broker-dealer that participates in transactions
involving sales of common stock against certain liabilities, including
liabilities arising under the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling stockholders may
be subject to the prospectus delivery requirements of the Securities Act.
Selling stockholders also may resell all or a portion of the common
stock held by them in open market transactions in reliance upon Rule 144 under
the Securities Act, provided they meet the criteria and conform to the
requirements of such rule.
After we are notified by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of common
stock held by them through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, disclosing (i) the name of each such selling
stockholder and of the participating broker-dealer(s), (ii) the number of
securities involved, (iii) the price at which such securities were sold, (iv)
the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigations to verify the information set out or incorporated by
reference in this prospectus and (vi) other facts material to the transaction.
We will bear all costs, expenses and fees in connection with
registration of the securities covered by this prospectus. Brokerage commissions
and similar selling expenses, if any, attributable to the common stock will be
borne by the selling stockholders.
LEGAL MATTERS
Certain legal matters relating to the validity of the common stock will
be passed on by Benesch, Friedlander, Coplan & Aronoff, LLP.
13
14
EXPERTS
The consolidated financial statements of the Company and its
wholly-owned subsidiary as of December 31, 2000 and 1999 have been incorporated
by reference in this prospectus in reliance upon the report of Grant Thornton
LLP, independent auditors, upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 (Reg.
No. ________________) with respect to this offering. This prospectus, which is a
part of the registration statement, does not contain all the information
contained in the registration statement, including its exhibits and schedules.
For further information about us, you should refer to the registration
statement, including the exhibits and schedules. Statements we make in this
prospectus about certain contracts or other documents are not necessarily
complete. When we make such statements, we refer you to the copies of the
contracts or documents that are filed as exhibits to the registration statement,
because those statements are qualified in all respects by reference to those
exhibits. The registration statement, including exhibits and schedules, is on
file at the offices of the SEC and may be inspected without charge.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings, including the registration
statement, are available to the public over the Internet at the SEC's web site
at http://www.sec.gov. You also may read and copy any document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms.
SEC rules allow us to include some of the information required to be in
the registration statement by incorporating that information by reference to
documents we file with the SEC. That means we can disclose important information
to you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information.
14
15
We incorporate by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act:
- Annual Report on Form 10-KSB for the year ended December 31, 2000;
- Quarterly Report on Form 10-QSB for the quarter ended March 31,
2001;
- Our prospectus dated July 3, 2001, as filed with the SEC on June 22,
2001;
- Our prospectus dated January 31, 2001, as filed with the SEC under
Rule 424(b) on February 20, 2001; and
- The description of our common stock contained in Form 10-SB dated
October 27, 1999, including any amendments or reports that have been
filed to update the description.
You may request a copy of these filings, which we will provide to you
at no cost, by writing or telephoning us at the following address:
Empyrean Bioscience, Inc.
23800 Commerce Park Road, Suite A
Cleveland, Ohio 44122
(216) 360-7900
investor@empyreanbio.com
INDEMNIFICATION
Our Certificate of Incorporation provides for the indemnification of
directors and officers of the Company against all expense, liability and loss
(including attorneys' fees, judgments and fines) reasonably incurred with
respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative. The Company maintains insurance, at its
expense, to protect, among others, its directors and officers against any such
expense, liability or loss, whether or not the Company would have the power to
indemnify such person against such expense, liability or loss under Delaware
law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the provisions of our Certificate of Incorporation, or
otherwise, the Company issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
15
16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the amount of fees and expenses to be
incurred in connection with the issuance and distribution of the securities
registered hereby, other than underwriting discounts and commissions.
Registration Fee Under Securities Act $ 138.34
Legal Fees 5,000
Accounting Fees 5,000
Printing and Engraving 2,000
Miscellaneous Fees 3,000
----------
Total $15,138.34
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") permits
the indemnification of the directors and officers of the Company. The Company's
Certificate of Incorporation provides that it will indemnify the officers,
directors, employees and agents of the Company to the extent permitted by the
DGCL.
The Company's Certificate of Incorporation provides for the
indemnification of directors and officers of the Company, and persons who serve
or served at the request of the Company as a director, officer, employee or
agent of another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties in amounts paid or to be paid in settlement)
reasonably incurred with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, provided, however, the Company
shall indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the Company's Board of Directors. In the event a claim for indemnification by
any person has not been paid in full by the Company after written request has
been received by the Company, the claimant may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim and, if successful
in whole or in part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. The right to indemnification conferred in the Company
Certificate is a contract right and shall include the right to be paid by the
Company the expenses incurred in defending any such proceeding in advance of its
final disposition. The Company maintains insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Company against any
such expense, liability or loss, whether or not the Company would have the power
to indemnify such person against such expense, liability or loss under state
law.
16
17
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
-----------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION
-----------------------------------------------------------------------------------------------
4.1 Form of Convertible Debenture dated April 26, 2001 (1)
-----------------------------------------------------------------------------------------------
4.2 Warrant Agreement dated April 3, 2001 (1)
-----------------------------------------------------------------------------------------------
*4.3 Registration Rights Agreement dated as of April 3, 2001
-----------------------------------------------------------------------------------------------
*4.4 Securities Purchase Agreement dated as of April 3, 2001
-----------------------------------------------------------------------------------------------
*5.1 Opinion of Benesch, Friedlander, Coplan & Aronoff, LLP
-----------------------------------------------------------------------------------------------
23.1 Consent of Benesch, Friedlander, Coplan & Aronoff, LLP
(included in Exhibit 5.1)
-----------------------------------------------------------------------------------------------
*23.2 Consent of Grant Thornton LLP, independent auditors
-----------------------------------------------------------------------------------------------
*24.1 Power of Attorney (included on signature page)
-----------------------------------------------------------------------------------------------
* Filed herewith
(1) Incorporated by reference to the Company's Registration
Statement on Form SB-2 filed on June 22, 2001.
(b) Financial Statement Schedules
Schedules are omitted since the information required to be submitted
has been included in the Consolidated Financial Statements of Empyrean
Bioscience, Inc., or the notes thereto, or the required information is not
applicable.
Item 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
this registration statement or any material change to
such information in this registration statement;
provided, however, that subparagraphs (i) and (ii) do
not apply if the information required to be included
in a post-effective amendment by those paragraphs is
contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of
the Securities and Exchange Act of 1934 that are
incorporated by reference in this registration
statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
17
18
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) The undersigned Registrant hereby undertakes as follows: that
prior to any public offering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.
(5) The registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii)
that purports to meet the requirements of Section 10(a)(3) of
the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange of 1934 that is incorporated by reference in
this registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
18
19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Empyrean Bioscience, Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cleveland, State of Ohio on August 8,
2001.
EMPYREAN BIOSCIENCE, INC.
By: /s/ RICHARD C. ADAMANY
-----------------------------------------
Richard C. Adamany, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated; and each of the
undersigned officers and directors of Empyrean Bioscience, Inc. hereby severally
constitutes and appoints Richard C. Adamany and Brenda K. Brown, and each of
them, to sign for him, and in his name in the capacity indicated below, such
Registration Statement on Form S-3 and for the purpose of registering such
securities under the Securities Act of 1933, as amended, and any and all
amendments thereto, including without limitation any registration statements or
post-effective amendment thereof filed under and meeting the requirements of
Rule 462(b) under the Securities Act, hereby ratifying and confirming our
signatures as they may be signed by our attorneys to such Registration Statement
and any and all amendments thereto.
Signatures Title
---------- -----
/s/ Richard C. Adamany President, Chief Executive
- ------------------------------------ Officer and Director
August 8, 2001 (Principal Executive Officer)
/s/ Lawrence D. Bain Director
- ------------------------------------
August 8, 2001
/s/ Robert G.J. Burg, II Director
- ------------------------------------
August 8, 2001
/s/ Michael Cicak Director
- ------------------------------------
August 8, 2001
/s/ Andrew J. Fishleder Director
- ------------------------------------
August 8, 2001
/s/ Bennett S. Rubin Executive Vice President,
- ------------------------------------ Chief Operating Officer,
August 8, 2001 Secretary and Director
/s/ Brenda K. Brown Vice President and
- ----------------------------------- Chief Financial Officer
August 8, 2001 (Principal Financial Officer)
19
20
EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Form of Convertible Debenture dated April 26, 2001 (1)
4.2 Warrant Agreement dated April 3, 2001 (1)
*4.3 Registration Rights Agreement dated as of April 3, 2001
*4.4 Securities Purchase Agreement dated as of April 3, 2001
*5.1 Opinion of Benesch, Friedlander, Coplan & Aronoff LLP
23.1 Consent of Benesch, Friedlander, Coplan & Aronoff LLP
(included in Exhibit 5.1)
*23.2 Consent of Grant Thornton LLP, independent auditors
*24.1 Power of Attorney (included on signature page)
- ----------------------
* Filed herewith.
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-2 filed on June 22, 2001.
20