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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 2001
REGISTRATION NO. 333-__________
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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 No.)
23800 COMMERCE PARK ROAD, SUITE A
CLEVELAND, OH 44122
(Address of Principal Executive Offices, Including Zip Code)
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COPY TO:
RICHARD C. ADAMANY, PRESIDENT JOSEPH G. TEGREENE, ESQ.
EMPYREAN BIOSCIENCE, INC. BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP
23800 COMMERCE PARK ROAD, SUITE A 2300 BP TOWER
CLEVELAND, OH 44122 200 PUBLIC SQUARE
(216) 360-7900 CLEVELAND, OH 44114-2378
(216) 363-4500
(Name, Address, and Telephone Number of Agent for Service)
CALCULATION OF REGISTRATION FEE
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Proposed
Proposed Maximum Amount of
Title of Securities to be Amount Maximum Offering Aggregate Registration
Registered to be Registered Price per Share (1) Offering Price Fee
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Common Stock, par value $.0001 per 372,185(2) .2258(3) $84,039 $21.00
share
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TOTAL REGISTRATION FEE --- --- $84,039 $21.00
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) of the Securities Act of 1933 as
amended.
(2) Represents shares of Common Stock issued to directors and consultants as
compensation. See "Selling Stockholders."
(3) Represents average price of shares of Common Stock issued as compensation
(average of prices on dates of issuance, as quoted on the Over-the-Counter
Bulletin Board).
EXPLANATORY NOTE
This Registration Statement has been prepared in accordance with the
requirements of Form S-8 under the 1933 Act to register shares of Common Stock
issued as compensation to directors and consultants.
Under cover of this Form S-8 is a Reoffer Prospectus prepared in accordance with
Part I of Form S-3 under the 1933 Act. The Reoffer Prospectus may be utilized
for reofferings and resales of up to 372,185 shares of common stock acquired by
Selling Stockholders.
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REOFFER PROSPECTUS
EMPYREAN BIOSCIENCE, INC.
23800 COMMERCE PARK ROAD, SUITE A
CLEVELAND, OHIO 44122
372,185 SHARES OF COMMON STOCK
The shares of common stock, par value $.0001 per share, of Empyrean Bioscience,
Inc. offered by this Prospectus consist of 372,185 shares which will be sold
from time to time by the individuals set forth in the Selling Stockholders
section of this Prospectus. The Selling Stockholders have acquired, or will
acquire, a total of 372,185 shares granted as compensation to directors and
consultants. The shares offered by Selling Stockholders will be reoffered, from
time to time, for sale to the public.
Sales by Selling Stockholders may occur in transactions on the Over-the-Counter
Bulletin Board at prevailing market prices or in negotiated transactions. We
will not receive proceeds from the sale of any of the shares sold by Selling
Stockholders. We are paying for the expenses incurred in registering the shares
offered by Selling Stockholders.
To our knowledge, the Selling Stockholders have no arrangement with any
brokerage firm for the sale of the shares held by them. Each of the Selling
Stockholders may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933. Any commissions received by a broker or dealer in
connection with resales of shares held by Selling Stockholders may be deemed to
be underwriting commissions or discounts under the Securities Act of 1933.
The Common Stock is publicly traded on the Over-the-Counter Bulletin Board under
the symbol "EMDG." The Common Stock is not listed on any exchange or on NASDAQ.
Until the date 90 days after the filing of this Reoffer Prospectus, all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
THIS INVESTMENT INVOLVES RISK. PLEASE SEE THE SECTION ENTITLED "RISK FACTORS" ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS REOFFER PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is October 9, 2001
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TABLE OF CONTENTS
Page
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Where You Can Find More Information.........................................2
Incorporated By Reference Documents.........................................2
Summary.....................................................................3
Risk Factors................................................................4
Use of Proceeds............................................................12
Selling Stockholders.......................................................12
Plan of Distribution.......................................................12
Legal Matters..............................................................13
Experts....................................................................13
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You should only rely on the information incorporated by reference or provided in
this Reoffer Prospectus or any supplement. We have not authorized anyone else to
provide you with different information. The common stock is not being offered in
any state where the offer is not permitted. You should not assume that the
information in this Reoffer Prospectus or any supplement is accurate as of any
date other than the date on the front of this Reoffer Prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual, quarterly and special reports, proxy statements
and other information with the SEC under the Securities Exchange Act of 1934. On
August 27, 2001, our Registration Statement on Form S-3 was declared effective
pursuant to the Securities Act of 1933. You may read and copy any such reports
and information at the public reference facilities of the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 and at the SEC's
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of these materials can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates, and can also be obtained electronically through the
SEC's Electronic Data Gathering, Analysis and Retrieval System at the SEC's
Internet web site (http://www.sec.gov).
INCORPORATED BY REFERENCE DOCUMENTS
The SEC allows the Company to "incorporate by reference" information into this
Reoffer Prospectus, which means that we can disclose important information to
you by referring you to another document filed or to be filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
Reoffer Prospectus, except for any information superseded by information in this
Reoffer Prospectus. Each of the documents listed below in (i) through (vi) are
hereby incorporated by reference into this Prospectus.
(i) Our Annual Report on Form 10-KSB for the fiscal year ended December 31,
2000, filed with the Commission on March 30, 2001.
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(ii) Our Proxy/Prospectus dated January 31, 2001, filed with the SEC under
Rule 424(b) on February 20, 2001.
(iii) Our Prospectus dated July 3, 2001, filed with the SEC on June 22, 2001.
(iv) Our Prospectus dated August 27, 2001, filed with the SEC under Rule
424(b) on September 6, 2001.
(v) Our quarterly reports filed on Form 10-QSB for the fiscal periods ended
March 31, 2001 and June 30, 2001, filed with the Commission May 14,
2001 and August 14, 2001, respectively.
(vi) All documents subsequently filed by us pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
and prior to the termination of the offering made hereby, shall be
deemed to be incorporated by reference and to be a part hereof from the
date of the filing of such documents.
We will provide without charge to each person to whom a copy of this Reoffer
Prospectus is delivered, upon written request, a copy of any or all documents
incorporated by reference into this Reoffer Prospectus (excluding exhibits
unless the exhibits are specifically incorporated by reference into the
information the Reoffer Prospectus incorporates). Requests should be directed to
our Chief Financial Officer at the Company's executive office, located at 23800
Commerce Park Road, Suite A, Cleveland, Ohio 44122. Our telephone number is
(216) 360-7900.
SUMMARY
THIS SUMMARY CONTAINS BASIC INFORMATION ABOUT OUR COMPANY. BECAUSE IT IS A
SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU.
YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO WHICH WE
HAVE REFERRED YOU OR INCORPORATED BY REFERENCE.
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 also
have licensing rights in the United States to a microbicidal contraceptive gel
as well as a line of related products such as baby wipes and a disinfectant
surface spray. We intend to market and sell these additional preventative
products based on a formula licensed to us by International Bioscience
Corporation.
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
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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.
RISK FACTORS
In this section we highlight some of the risks associated with our business and
operations. Prospective investors should carefully consider the following risk
factors when evaluating an investment in the Common Stock offered by this
Reoffer Prospectus.
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.
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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:
- the progress of our product introductions, sales, marketing
and distribution efforts;
- the scope and results of clinical trials related to our
products;
- the progress in filing for and obtaining regulatory approvals;
- the rate of technological advances;
- the market acceptance of our products;
- the levels of administrative and legal expenses; and
- competitive products.
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:
- 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;
- increased debt burdens will substantially increase our
vulnerability to adverse changes in general economic and
competitive conditions;
- 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
- 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
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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
$2,098,000 for the six months ended June 30, 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 $33,712,000 at June 30, 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, 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.
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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
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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.
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.
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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.
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, 2000, and the first six months of 2001. 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 and our antibacterial surface disinfectant cleaner, 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
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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.
If we are able to obtain adequate financing, we would 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.
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
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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 October 5, 2001, we have 52,931,131 shares of common stock issued
and outstanding, outstanding notes and debentures that are convertible into
12,691,002 shares of common stock at current market prices, and outstanding
warrants and options to purchase 9,673,799 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. 72,141,789 shares, including all of the shares issuable upon exercise
of our warrants and options and 9,593,109 of the shares issuable 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, in the twelve months preceding the date of this Prospectus, the closing
price of our common stock quoted on the Over-The-Counter Bulletin Board ranged
from a low of $0.10 per share to a high of $0.84 per share. We have experienced
similar fluctuations in other periods.
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares offered by
Selling Stockholders.
SELLING STOCKHOLDERS
The following table sets forth as of October 5, 2001 certain information with
respect to Selling Stockholders. The number of shares which may actually be sold
by Selling Stockholder will be determined from time to time by them and will
depend upon a number of factors, including the price of our Common Stock from
time to time. Because Selling Stockholders may offer all or none of the shares
that they hold and because the offering contemplated by the Reoffer Prospectus
is not being underwritten, no estimate can be given as to the number of shares
that will be held by Selling Stockholders upon termination of such offering.
No Selling Stockholder has told us that he or she intends to engage in passive
market making transactions or in short selling activities. Passive market making
transactions or short selling activities, if undertaken, are restricted by the
requirements of Regulation M of the Securities Exchange Act of 1934.
-------------------------------------------------------------------------------------------------------------------------
NAME(1) NUMBER OF NUMBER OF % OF SHARES
SHARES OF SHARES OF (1% OR GREATER)
COMMON NUMBER OF COMMON STOCK OF COMMON
STOCK OWNED SHARES OWNED STOCK OWNED
BEFORE REGISTERED AFTER AFTER
OFFERING BY PROSPECTUS OFFERING(4) OFFERING
-------------------------------------------------------------------------------------------------------------------------
Robert G.J. Burg II 189,908 8,878 181,030 --
-------------------------------------------------------------------------------------------------------------------------
Michael Cicak 1,161,447 10,417 1,151,030 2.2%
-------------------------------------------------------------------------------------------------------------------------
Dian Griesel(2) 470,000 320,000 150,000 --
-------------------------------------------------------------------------------------------------------------------------
Cale Orosz(3) 39,689 32,890 6,790 --
-------------------------------------------------------------------------------------------------------------------------
(1) Consists of directors and consultants. Messrs. Burg and Cicak are
currently members of the Board.
(2) Ms. Griesel is a consultant. 320,000 shares were issued to her as
compensation for services.
(3) Mr. Orosz is a consultant. 32,890 shares were issued to him as
compensation for services.
(4) Assumes the sale by Selling Stockholders of all of the shares offered
hereby.
PLAN OF DISTRIBUTION
Selling Stockholders may sell shares for value from time to time under this
Reoffer Prospectus in one or more transactions on the Over-the-Counter Bulletin
Board, or other exchange, in a negotiated transaction or in a combination of
such methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at prices otherwise negotiated.
Selling Stockholders may sell shares to or through broker-dealers, who may
receive compensation in the form of underwriting discounts, concessions or
commissions (which compensation may be less than or in excess of customary
commissions).
Selling Stockholders and any broker-dealers that participate in the distribution
of the shares may be deemed to be "underwriters" within the meaning of Section
2(a)(11) of the Securities Act of 1933, and any commissions received by them and
any profit on the resale of the shares sold by
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them may be deemed be underwriting discounts and commissions under the
Securities Act of 1933. All selling and other expenses incurred by a Selling
Stockholder will be borne by him or her.
In addition to any shares sold hereunder, Selling Stockholders may, at the same
time, sell any shares of Common Stock, including the shares offered by this
Reoffer Prospectus, in compliance with all of the requirements of Rule 144,
regardless of whether such shares are covered by this Reoffer Prospectus.
There is no assurance that Selling Stockholders will sell all or any portion of
the shares offered by this Reoffer Prospectus.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Benesch, Friedlander, Coplan & Aronoff LLP of Cleveland, Ohio.
EXPERTS
The consolidated financial statements of the Company as of December 31, 2000 and
1999 and for each of the two years then ended included in its Annual Report
(Form 10-KSB) for the year ended December 31, 2000, have been audited by Grant
Thornton LLP, independent auditors, as set forth in their report thereon,
included therein and incorporated by reference in this Registration Statement.
Such consolidated financial statements are incorporated by reference in reliance
upon such report, given upon the authority of such firm as experts in accounting
and auditing.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed or to be filed by Empyrean Bioscience, Inc.
("Registrant") with the Securities and Exchange Commission are hereby
incorporated or deemed to be incorporated by reference in this Registration
Statement:
(i) Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2000, filed with the Commission on March 30,
2001.
(ii) Proxy/Prospectus dated January 31, 2001, filed with the SEC
under Rule 424(b) on February 20, 2001.
(iii) Prospectus dated July 3, 2001, filed with the SEC on June 22,
2001.
(iv) Prospectus dated August 27, 2001, filed with the SEC under
Rule 424(b) on September 6, 2001.
(v) Quarterly reports filed on Form 10-QSB for the fiscal periods
ended March 31, 2001 and June 30, 2001, filed with the
Commission May 14, 2001 and August 14, 2001, respectively.
(vi) The description of the Registrant's common stock contained in
the Joint Proxy/Prospectus dated January 31, 2001, filed with
the Commission February 20, 2001.
(vii) All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), or 15(d) of the Securities Exchange Act
of 1934, as amended, and prior to the termination of the
offering made hereby, shall be deemed to be incorporated by
reference and to be a part hereof from the date of the filing
of such documents. Any statement incorporated by reference in
this registration statement to the extent that a statement
contained herein or in any other subsequently filed document
which also is or deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so
modified or superseded, to be part of this registration
statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
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ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
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.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The shares were issued to directors and consultants as compensation. These sales
were made in reliance on the exemption from registration requirements of the
Securities Act of 1933, as amended, contained in Section 4(2) thereof covering
transactions not involving any public "offer" or "sale."
ITEM 8. EXHIBITS
4.1 Articles of Incorporation and Bylaws of Registrant
(incorporated by reference from the Registrant's
Proxy/Prospectus dated January 31, 2001 filed with the
Commission on February 20, 2001).
5.1 Opinion of Benesch, Friedlander, Coplan & Aronoff, LLP,
Counsel to the Company regarding legality.
23.1 Consent of Grant Thornton, LLP, independent auditors.
23.2 Consent of Benesch, Friedlander, Coplan & Aronoff, LLP
(contained in its opinion filed as Exhibit 5.1 to this
Registration Statement).
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ITEM 9. UNDERTAKINGS
(a) 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 the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the Registration Statement is on Form S-3 or Form S-8 and the
information required in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Registrant under Section
13 or Section 15(d) of the 1934 Act that are incorporated by reference
in the Registration Statement.
(b) 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 therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned Registrant hereby undertakes that, for 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 Act of 1934 and where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement 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.
(d) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 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 October 9, 2001.
EMPYREAN BIOSCIENCE, INC.
/s/ Richard C. Adamany
----------------------
By: Richard C. Adamany
Its: President, Chief Executive Officer, and
Director
Pursuant to the requirements of the 1933 Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on October 9, 2001.
/s/ Richard C. Adamany President and Chief Executive Officer and Director
---------------------------
Richard C. Adamany
/s/ Bennett S. Rubin Executive Vice President, Chief Operating Officer,
--------------------------- Secretary, and Director
Bennett S. Rubin
/s/ Brenda K. Brown Vice President and Chief Financial Officer
---------------------------
Brenda K. Brown
/s/ Lawrence D. Bain Chairman of the Board of Directors
---------------------------
Lawrence D. Bain
/s/ Robert G.J. Burg, II Director
---------------------------
Robert G.J. Burg, II
/s/ Michael Cicak Director
---------------------------
Michael Cicak
/s/ Andrew J. Fishleder Director
---------------------------
Andrew J. Fishleder
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