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As filed with the Securities and Exchange Commission on April 13, 1999.
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NEOPROBE CORPORATION (Exact Name of Registrant as Specified in Its Charter)
DELAWARE (State of Incorporation)
31-1080091 (I.R.S. Employer Identification Number)
425 Metro Place North
Suite 300
Dublin, Ohio 43017-1367 (Address of Registrant's Principal Executive Offices)
(614) 793-7500 (Telephone Number of Registrant's Principal Executive Offices)
Robert S. Schwartz, Esq. (Name, Address, and Telephone Number, of Agent for Service)
Benesch, Friedlander, Coplan & Aronoff LLP
88 East Broad Street, Suite 900
Columbus, OH 43215-3506
(614) 223-9300
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Approximate date of commencement of proposed sale to the public:
as soon as possible after the effective date of this registration statement
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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, 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, 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. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each Proposed Proposed Maximum Amount
class of Amount maximum aggregate of
securities to be offering price offering price registration
to be registered registered (2) per unit(3) fee
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common stock, 5,124,835 $0.8125 $4,163,928.44 $1,157.58 (4)
par value $.001
per share (1)
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(1) Each share of common stock carries one Right to purchase a unit which
currently consists of one-hundredths of a share of Series A Junior
Participating Preferred Stock, par value $.001 per share, pursuant to a
Rights Agreement dated July 18, 1995.
(2) Pursuant to Rule 416, this Registration Statement also relates to an
indefinite number of shares of common stock issuable as stock dividends or
to prevent dilution.
(3) Based upon the average of the high and low prices of common stock on April
9, 1999 pursuant to rule 457(c).
(4) Pursuant to paragraph (a) of Rule 429, the Prospectus contained herein also
relates to Registration Statement No. 33-72700; 723,115 shares of common
stock out of the 5,711,965 shares registered under No. 33-72700 are being
carried forward. A registration fee of $10,956.14 was paid to register the
5,711,965 shares of common stock under No. 33-72700, $1,387 of which is
allocable to the 723,115 shares of common stock being carried forward under
this Registration Statement. The Prospectus contained herein also relates
to Registration Statement No. 33-73622; 45,661 shares of common stock out
of the 1,978,344 shares registered under No. 33-73622 are being carried
forward. A registration fee of $2,100.23 was paid to register the 1,978,344
shares of common stock under No. 33-73622, $48.47 of which is allocable to
the 45,661 shares of common stock being carried forward under this
Registration Statement. The Prospectus contained herein also relates to
Registration Statement No. 333-15989; all 125,805 shares of common stock
registered under No. 333-15989 are being carried forward. A registration
fee of $507.51 was paid to register the 125,805 shares of common stock
under No. 333-15989, all of which is allocable to the 125,805 shares of
common stock being carried forward under this Registration Statement.
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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 Commission, acting pursuant to said Section 8(a),
may determine.
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PURSUANT TO RULE 429 THE PROSPECTUS CONTAINED HEREIN ALSO RELATES TO
REGISTRATION STATEMENTS NOS. 33-72700; 33-73622; 333-15989.
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PROSPECTUS
[NEOPROBE LOGO]
6,019,416 SHARES OF COMMON STOCK
The Selling Shareholders named in this Prospectus (page 10) may sell up to
6,019,416 shares of common stock of Neoprobe Corporation at prices based on
market conditions at the time of sale. The Selling Shareholders may make these
sales at any time that they choose. Neoprobe will not receive any of the
proceeds of the sale of common stock by the Selling Shareholders.
The common stock is listed on the Nasdaq National Market under the symbol
"NEOP." On April 12, 1999, the closing price for the common stock was $0.75.
The Selling Shareholders may sell their shares of common stock through
brokers selected by them individually. The Selling Shareholders may compensate
their brokers for selling shares by giving them discounts on the shares they are
selling or paying them commissions and fees in amounts set through negotiations
between them and their brokers.
Neoprobe is located at 425 Metro Place North, Suite 300, Dublin, Ohio 43017,
and its telephone number is (614) 793-7500.
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SEE "RISK FACTORS," BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED NOR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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April 13, 1998
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RISK FACTORS
LIMITED HISTORY; CONTINUING NET LOSSES; ACCUMULATED DEFICIT
Neoprobe began active marketing of its gamma radiation detection devices for
use in intraoperative lymphatic mapping (ILM) in 1997 and has limited experience
in manufacturing, marketing and selling ILM products. Since its organization in
1983, Neoprobe expended the vast majority of its efforts and resources in the
research and development of its RIGS technology. During 1998, based on
disappointing regulatory feedback from the FDA and European regulatory
authorities, Neoprobe revised its business plan to severely curtail research and
development of the RIGS technology and to focus on gamma guided surgery
products. Neoprobe has experienced significant operating losses in each year in
its history, and had an accumulated deficit of approximately $115 million as of
December 31, 1998. For the years ended December 31, 1996, 1997 and 1998,
Neoprobe's net losses were $21 million, $23.2 million and $28 million. Neoprobe
expects its operating losses to continue into 1999 as it expends substantial
resources to continue development and marketing of its products. Neoprobe may
never become profitable. Neoprobe's prospects must be evaluated in light of the
substantial risks, expenses, delays and difficulties normally encountered by
small companies in the medical device industry, which is characterized by an
increasing number of participants, intense competition and a high rate of
failure.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF CAPITAL FUNDING
Neoprobe has depended on the proceeds of sales of its securities to fund its
losses, continue research and development and provide working capital. Neoprobe
expects to continue to devote substantial capital resources to market and sell
its products, to fund research and development of additional gamma guided
surgery products, and to secure manufacturing capacity. Neoprobe may need to
raise additional funds through the sale of assets, public or private financing,
collaborative relationships or other arrangements. Neoprobe's ability to raise
additional financing may be dependent on many factors beyond Neoprobe's control,
including the state of capital markets and the development or prospects for
development of competitive technology by others. The necessary additional
financing may not be available to Neoprobe or may be available only on terms
that would result in further dilution to the owners of Neoprobe's common stock.
If Neoprobe is unable to raise additional funds when needed, it may be forced to
curtail its operations.
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Trademarks -- Neoprobe is the owner of United States and foreign registered
trademarks "Neoprobe(R)," "RIGS(R)" and "RIGScan(R)." "Radioimmunoguided
Surgery(TM)," "RIGSystem(TM)," "ILM(TM)," and "RIGS/ACT(TM)" are
commercially used trademarks of Neoprobe.
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"GOING CONCERN" AUDITOR'S OPINION
Neoprobe has suffered recurring losses from operations and may need
substantial amounts of additional capital. Neoprobe's auditors, KPMG, stated in
their report on Neoprobe's 1998 financial statements that these factors raise
substantial doubt, in their minds, about Neoprobe's ability to continue as a
going concern. Neoprobe has obtained a waiver from the Selling Shareholders of
the requirement to redeem their securities for $3.6 million occasioned by KPMG's
report on Neoprobe's 1998 financial statements. However, this opinion may make
it harder for Neoprobe to raise capital or to market its products. It may also
depress the price of common stock. See "Low Stock Price." Furthermore, if
Neoprobe's auditors materially qualify their opinion on Neoprobe's financial
statements again, Neoprobe would be required to redeem the Selling Shareholders
securities for $3.6 million dollars, which would deplete its cash. If this
happened, Neoprobe might not be able to continue operations.
LIMITED MARKET FOR PRODUCTS; UNCERTAINTY OF MARKET ACCEPTANCE
Neoprobe's products are currently only widely used in the treatment and
diagnosis of two primary types of cancer: melanoma and breast cancer. Neoprobe's
success is dependent on acceptance of ILM, and of its devices for use in ILM, by
the medical community as a reliable, safe and cost effective alternative to
current treatments and procedures. Although Neoprobe believes that ILM has
significant advantages over other currently competing procedures, broad-based
clinical adoption of ILM will not occur until physicians outside the major
cancer centers and teaching hospitals determine that the ILM approach is an
attractive alternative to current treatments for use in melanoma and breast
cancer and expand its use to other types of cancer. These things may not happen.
Neoprobe's marketing efforts may not result in significant demand for its
products, and the current demand for Neoprobe's products may not be maintained
or continue to grow.
LIMITED MARKETING EXPERIENCE
Neoprobe has limited experience in sales, marketing and distribution medical
devices. Neoprobe currently employs a small sales and marketing organization in
the United States and Europe. Neoprobe also currently markets its products in
the United States with the assistance of a marketing partner. In the past 3
years, Neoprobe has terminated marketing arrangements with 2 other companies.
Neoprobe may not be able to maintain satisfactory arrangements with marketing
partners, and marketing partners may not devote adequate resources to selling
Neoprobe's products. Neoprobe has entered into distribution agreements for the
sale of its product in some foreign countries, and it will depend on their
efforts. Neoprobe may not be able to maintain satisfactory arrangements with
distributors, and distributors may not devote adequate resources to selling
Neoprobe's products. Neoprobe may not have sufficient to successfully market its
products. If this happens, Neoprobe's business will suffer.
COMPETITION
The medical device industry is intensely competitive. Neoprobe's competitors
have significantly greater financial, technical, manufacturing, and distribution
resources as well as greater experience in the medical device industry than
Neoprobe. The particular medical conditions that can be treated using Neoprobe's
ILM products can also be treated and diagnosed by other medical devices,
procedures or drugs. Many of these alternatives are widely accepted by
physicians and have a long history of use. Physicians may use Neoprobe's
competitors" products. Neoprobe's products may not be competitive with other
technologies. If these things happen, Neoprobe's business will suffer.
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RISK OF TECHNOLOGICAL OBSOLESCENCE
The medical device industry is undergoing rapid and significant
technological change. Third parties may succeed in developing or marketing
technologies and products that are more effective than those developed or
marketed by Neoprobe, or that would make Neoprobe's technology and products
obsolete or noncompetitive. Additionally, new surgical procedures and
medications could be developed that replace or reduce the importance of the
procedures that use Neoprobe's products. Accordingly, Neoprobe's success will
depend, in part, on its ability to respond quickly to medical and technological
changes through the development and introduction of new products. Neoprobe may
not have the resources to do this. If Neoprobe's products become obsolete and
its efforts to develop new products do not result in any commercially successful
products, Neoprobe's business will suffer.
RISKS OF INTERNATIONAL OPERATIONS
Neoprobe markets its products internationally. Changes in overseas economic
conditions, currency exchange rates, foreign tax laws or tariffs and trade
regulations could have a material adverse effect on Neoprobe's business.
Neoprobe and its distributors will also be subject to laws and regulations of
the foreign countries where they operate or Neoprobe's products are sold. The
regulation of medical devices in a number of foreign countries, particularly the
European Union, continues to develop and new laws or regulations may adversely
affect Neoprobe's business.
RELIANCE ON THIRD PARTY MANUFACTURING
Neoprobe relies on independent contract manufacturers for the manufacture of
the principal components of its current line of gamma guided surgery products.
Neoprobe's business will suffer if its contract manufacturers have production
delays by or quality problems. Furthermore, medical device manufacturers are
subject to FDA GMP regulations, international quality standards, and other
regulatory requirements. If Neoprobe's contractors do not operate in accordance
with regulatory requirements and quality standards, Neoprobe's business will
suffer. Neoprobe uses or relies on components and services used in its devices
that are provided by sole source suppliers. The qualification of additional or
replacement vendors is time consuming and costly. If a sole source supplier has
significant problems supplying Neoprobe, its business would suffer until a new
source of supply is found.
GOVERNMENT REGULATION
Neoprobe's medical device products are regulated in the United States the
FDA. Foreign countries also subject Neoprobe's medical device products to
varying government regulations. In addition, such regulatory authorities may
impose limitations
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on the use of Neoprobe's products. FDA enforcement policy strictly prohibits the
marketing of FDA approved medical devices for unapproved uses. Within the
European Union, Neoprobe's products are required to display the CE mark in order
to be sold. Neoprobe has obtained FDA clearance to market its medical device
products and European certification to display the CE mark on its current line
of portable radiation detection instruments. Neoprobe may not be able to obtain
certification for any new products in a timely manner, or at all.
The manufacturing operations of Neoprobe's contract manufacturers are
subject to compliance with Good Manufacturing Practices ("GMP") regulations of
the FDA and similar regulations of the European Union. These regulations include
controls over design, testing, production, labeling, documentation, and storage
of medical devices. the FDA has significantly increased enforcement of GMP
regulations in the last several years, and has publicly stated that it will more
strictly scrutinized compliance in the future. Neoprobe's facilities and
manufacturing processes, as well as those of current and future third party
suppliers, are subject to periodic inspection by the FDA, Neoprobe's European
Union notified body, and other agencies. Failure to comply with these and other
regulatory requirements could result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, refusal of the government to grant premarket
clearance or premarket approval for devices, withdrawal of clearances or
approvals, and criminal prosecution.
Neoprobe does not currently market any RIGS or ACT products or radioactive
targeting agent to be used in ILM applications. However, if a development
partner is identified to fund and assist in the development of RIGS or ACT
products, or if Neoprobe were to undertake development of a radioactive
targeting agent for use in ILM, these products would also be subject to detailed
and substantive regulation by the FDA and by comparable agencies in foreign
countries. The process of obtaining regulatory licenses and approvals is costly,
time consuming, and prone to unexpected delay. Neoprobe has encountered and may
continue to encounter problems in the completion of testing or in the
application process for RIGS and ACT products. Problems could result from, among
other things, slower than expected patient enrollment rates, difficulties in
analyzing data from clinical trials or in validating manufacturing processes,
longer than expected regulatory review process, and changes in regulatory
requirements. Moreover, foreign and domestic approvals, if granted, may include
significant limitations on uses of the products. Further, even if such
regulatory approval is obtained, use of Neoprobe's products could reveal side
effects that, if serious, could result in suspension of existing licenses and
delays in obtaining licenses in other jurisdictions. A marketed product,
manufacturer, and manufacturing facilities are subject to continual review and
periodic inspections, and later discovery of previously unknown problems with a
product, manufacturer, or facility may result in restrictions on such product or
manufacturer, including withdrawal of the product from the market. Noncompliance
with applicable governmental requirements can result in
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import detentions, fines, civil penalties, injunctions, suspensions or loss of
regulatory approvals, recall or seizure of Neoprobe's products, operating
restrictions, government refusal to approve product export applications or to
allow Neoprobe to enter into supply contracts, and criminal prosecution.
PATENTS, PROPRIETARY TECHNOLOGY AND TRADE SECRETS
Neoprobe's success depends, in part, on its ability to secure and maintain
patent protection, to preserve its trade secrets, and on its ability to operate
without infringing on the patents of third parties. Neoprobe seeks to protect
its proprietary positions by filing United States and foreign patent
applications for its important inventions and improvements, but, the patents
Neoprobe has applied for may not be issued to Neoprobe. Third parties may
challenge, invalidate, or circumvent Neoprobe's patents or patent applications
in the future. Competitors, many of which have substantially more resources than
Neoprobe and have made substantial investments in competing technologies, apply
for and obtain patents that will prevent, limit, or interfere with Neoprobe's
ability to make, use, or sell its products either in the United States or
abroad.
In the United States, patent applications are secret until patents issue,
and in foreign countries, patent applications are secret for a time after
filing. Publications of discoveries in tend to significantly lag the actual
discoveries and the filing of related patent applications. Third parties may
have already filed applications for patents for products or processes that will
make Neoprobe's products obsolete or will limit Neoprobe's patents or invalidate
its patent applications.
Neoprobe typically requires its employees, consultants, and advisers to
execute confidentiality and assignment of invention agreements in connection
with their employment, consulting, or advisory relationships with Neoprobe.
These agreements may be breached and Neoprobe may not obtain an adequate remedy
for breach. Further, third parties may gain access to Neoprobe's trade secrets
or independently develop or acquire the same or equivalent information.
Agencies of the United States government conducted some of the research
activities that led to the development of antibody technology that some of
Neoprobe's proposed RIGS system technology products use. When the United States
government participates in research activities, it retains rights that include
the right to use the technology for governmental purposes under a royalty-free
license, as well as rights to use and disclose technical data that could
preclude Neoprobe from asserting trade secret rights in that data and software.
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PRODUCT LIABILITY
Neoprobe's products are medical devices. If one of them malfunctions or is
misused and injury results to a patient, he could assert a product liability
claim against Neoprobe. Neoprobe currently has product liability insurance
which, Neoprobe believes, is adequate for its current activities. However,
Neoprobe may not be able to continue to obtain insurance at a reasonable cost.
Furthermore insurance may not be sufficient to cover all of the liabilities
resulting from a product liability claim, and Neoprobe might not have sufficient
funds available to pay any claims over the limits of its insurance. Because
personal injury claims based on product liability in a medical setting may be
very large, an underinsured or an uninsured claim could financially damage
Neoprobe.
NEED TO RETAIN QUALIFIED PERSONNEL
Neoprobe's business has experienced developments during 1998, which have
resulted in several significant changes in Neoprobe's strategy and business
plan, including downsizing to what Neoprobe considers to be the minimal level of
management and employees necessary to operate a publicly traded medical device
business. Neoprobe believes its restructured organization is appropriate to
support modest growth over the next few years. However, losing any members of
the management team could have an adverse effect on Neoprobe's operations.
Neoprobe's success is dependent on its ability to attract and retain technical
and management personnel with expertise and experience in the medical device
business. The competition for qualified personnel in the medical device industry
is intense and Neoprobe may not be successful in hiring or retaining the
requisite personnel. If Neoprobe is not able to attract and retain qualified
technical and management personnel, its chances of future success will be
diminished.
LOW STOCK PRICE
Common stock traded for less than $5.00 per share during most of the second
half of 1998, and all of the first half of 1999 through the date of this
prospectus. Common stock has traded as low as $0.44 during 1998. Common stock is
listed on the Nasdaq Stock Market, whose rules require that all listed shares
must have a minimum bid price of $1.00. If common stock trades on 120 business
days without meeting the minimum bid price requirement for at least 10
consecutive trading days, Nasdaq may delist it. Common stock traded for less
than $1.00 per share during the fourth quarter of 1998, and most of January and
February 1999. Nasdaq notified Neoprobe that the Common Stock would be delisted,
unless the minimum bid price of common stock rose above $1 for an adequate
period, which it has done. Delisting would adversely affect the ability of the
Company to attract new investors. If the common stock is delisted, the Selling
Shareholders may require Neoprobe to redeem their securities for $3.6 million
dollars, which would deplete Neoprobe's cash. If this happened, Neoprobe might
not be able to continue operations.
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Furthermore, if common stock trades below $5.00 per share, it may be
designated as a "penny stock." The Securities Exchange Act of 1934 and SEC Rules
impose special requirements on the trading of "penny stock." These requirements
include that a broker give investment risk, penny stock price history and broker
direct and indirect compensation disclosures to his customer, that the broker
make a reasonable determination that the transactions in penny stock are
suitable for the customer, and that the customer has sufficient knowledge and
experience in financial matters to evaluate the risks of penny stock
transactions before effecting any penny stock transactions for the customer. If
common stock is designated to be a "penny stock," these requirements may
diminish the market for, and the price of, common stock.
ANTI-TAKEOVER PROVISIONS
Neoprobe has adopted a stockholder rights plan. The stockholder rights plan
and some provisions of Neoprobe's charter and applicable corporate laws may have
the effect of deterring third parties from making takeover bids for control of
Neoprobe or may be used to hinder or delay a takeover bid. This would decrease
the chance that Neoprobe's stockholders would realize a premium over market
price for their shares of common stock as a result of a takeover bid. See
"DESCRIPTION OF STOCK -- Stockholder Rights Plan; and -- Anti-takeover Charter
Provisions And Laws"
BLANK CHECK PREFERRED STOCK
Neoprobe's certificate of incorporation has "blank check" preferred stock.
The board of directors may divide this stock into series and set their rights.
The board of directors may, without prior stockholder approval, issue any of the
shares "blank check" preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the relative voting power or
other rights of the common stock. Preferred stock could be used as a method of
discouraging, delaying, or preventing a take-over of Neoprobe. If Neoprobe
issues "blank check" preferred stock, it could have a dilutive effect upon the
common stock. See "DESCRIPTION OF STOCK -- Preferred Stock."
SERIES B PREFERRED STOCK
On February 16, 1999, Neoprobe sold $3.0 million of Series Preferred Stock
to the Selling Shareholders in a private placement. Neoprobe has the option to
sell an additional $3.0 million Series B Preferred Stock in the fourth quarter,
at the earliest, subject to several conditions, including shareholder approval
of the transaction, and meeting operating revenue and stock price targets.
Neoprobe may not be able to achieve the required targets and close the
additional placement on a timely basis, on terms acceptable to Neoprobe, or at
all. If the shareholders do not approve the transactions, Neoprobe will be
required to redeem the preferred stock for $3.6 million. If this were to
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come to pass, Neoprobe would be in severe financial straights and might not be
able to continue operations. The terms of the Series B Preferred Stock allow the
owners to convert it into common stock at $1.03 per share. The conversion price
will be decreased to market values if the common stock is trading at less than
$1.03 per share subject to a floor price of $0.55 per share. The dilutive effect
of this provision could have a negative impact on the market price of common
stock if it begins to go down. See "SELLING SHAREHOLDERS -- Terms of Series B
Preferred Stock."
NO DIVIDENDS
Neoprobe has never paid dividends on its common stock. Neoprobe intends to
retain any future earnings to finance its growth. The terms of the Series B
Preferred Stock forbid Neoprobe from paying any dividends on its common stock
until it has paid a special dividend of $100 per share of Series B Preferred
Stock plus any portion of the accrued cumulative dividend. See "SELLING
SHAREHOLDERS -- Terms of Series B Preferred Stock." This would amount to at
least $3 million, a sum that the Company is unlikely to be able to use for this
purpose in the foreseeable future. Accordingly, any potential investor who
anticipates the need for current dividends from his investment should not
purchase common stock.
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SELLING SHAREHOLDERS
COMMON STOCK
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Name Shares Owned Percent Owned Shares Saleable
(1) (2) (4)
The Aries Master 4,077,670 4.9% 4,077,670
Fund, a Cayman Island
exempted company
The Aries Domestic 1,747,572 4.9% 1,747,572
Fund, L.P.
Paramount Capital, Inc. 194,174 (3) 194,174
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(1) These shares will be obtained through the conversion of the Series B
Preferred Stock and dividends on the Series B Preferred Stock as
described below under the sub-heading "Terms of the Series B Preferred
Stock," or the exercise of the Aries Warrants as described below under
the sub-heading "Aries' Warrants" or the Option Units as described below
under the sub-heading "Option Units."
(2) See the description of the Series B Preferred Stock under the
sub-heading "Terms of the Series B Preferred Stock -- Conversion
Limitations," the Aries Warrants under the sub-heading "Aries' Warrants
-- Exercise Limitations" and the Option Units under the sub-heading
"Option Units -- Exercise Limitations." below.
(3) Less than 1%.
(4) The Selling Shareholder's will sell shares of common stock in amounts,
and at times, chosen by them. Neoprobe cannot currently determined the
number of shares of common stock the Selling Shareholders will own after
these sales or the percent of the outstanding shares at that time.
TRANSACTIONS BETWEEN NEOPROBE AND THE SELLING SHAREHOLDERS
Overview. On February 16, 1999, Neoprobe entered into a Preferred Stock and
Warrant Purchase Agreement with The Aries Master Fund and The Aries Domestic
Fund, L.P. and a Financial Advisory Agreement with Paramount Capital, which is
an affiliate of
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Aries. Under the Purchase Agreement, Neoprobe sold preferred stock and warrants
to Aries on February 16, 1999 for $3,000,000. This sale was the first of two
possible sales by Neoprobe to Aries and is referred to as the First Sale, and
February 16, 1999 is referred to as the First Sale Date. If the conditions in
the Purchase Agreement are satisfied, Neoprobe has the option of requiring Aries
to purchase more securities for an additional $3,000,000. This sale is referred
to as the Second Sale and the date on which this sale may occur is referred to
as the Second Sale Date.
First Sale of Securities. On the First Closing Date, Aries paid Neoprobe
$3,000,000 and Neoprobe issued to Aries 30,000 shares of Series B Preferred
Stock and warrants to purchase an additional 2,912,621 shares of common stock.
Also, on the First Closing Date, Neoprobe entered into the Advisory
Agreement with Paramount Capital. Under the Advisory Agreement, Paramount
Capital will help Neoprobe find future sources of capital, Neoprobe agreed to
pay Paramount Capital $150,000 and Neoprobe issued 1.5 Option Units to Paramount
Capital as payment for Paramount Capital's services.
Second Sale of Securities. Neoprobe has the right to require Aries to purchase
another 30,000 shares of Series B Preferred Stock and warrants to purchase an
additional 2,912,621 shares of common stock from Neoprobe for an additional
$3,000,000 if:
o Stockholders approve the transactions at the 1999 annual meeting;
o A registration statement to register the shares of common stock issuable
through securities sold under the Purchase Agreement and the Advisory
Agreement is effective;
o Neoprobe's sales for any two consecutive quarters in the period from the
second quarter of 1999 through the third quarter of 2000 are at least
90% of Neoprobe's forecast; and
o The market value of a share of common stock is not less than $1.236 on
the day Neoprobe exercises its right or on the day that Aries is
required to buy the additional shares of Series B Preferred Stock.
Reasons for the Sales of Securities. Neoprobe sold securities to Aries because
Neoprobe needed working capital. Neoprobe's board of directors unanimously
approved the sale of securities and determined that any significant delay in
selling the securities would seriously jeopardized the financial viability of
Neoprobe.
Meaning of "Market Value". The Purchase Agreement, Advisory Agreement and the
terms of the Series B Preferred Stock employ a variety of methods for
calculating the
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market value of shares of common stock. Each method is intended to approximate
the fair market value of a share on a specific day. However, the application of
different methods may result in different numbers in similar situations.
TERMS OF THE SERIES B PREFERRED STOCK
Dividend Rights and Preferences. Neoprobe will pay dividends on Series B
Preferred Stock. The dividends will accrue daily and be payable on each
six-month and one-year anniversary of the First Sale Date. Neoprobe has the
option of paying these dividends in cash or in shares of common stock.
The annual dividend rate on a share of Series B Preferred Stock is 5% of
$100 plus all previously accrued but currently unpaid dividends on the share. On
any day that common stock trades below $0.55 per share, the annual rate will be
10%.
Before Neoprobe may declare a dividend on classes of stock that are junior
to the Series B Preferred Stock, including common stock and Series A Preferred
Stock, Neoprobe must pay a special dividend of $100 per share to owners of
Series B Preferred Stock, pay all accrued and unpaid dividends on the Series B
Preferred Stock and declare a dividend on the Series B Preferred Stock which is
identical to the dividend being declared on the other class of stock.
Liquidation Preference. If Neoprobe liquidates, sells substantially all of its
assets, or is involved in a merger which terminates its existence or in which
more than half of the outstanding common stock is exchanged for cash, property
or securities of another company, then owners of shares of Series B Preferred
Stock must be paid before owners of shares of other classes.
The per share amount of this payment will be: $100 PLUS the amount of any
unpaid dividends on the share PLUS the excess of any redemption amount due on
the share over the sum of $100 plus the amount of unpaid dividends due or
declared on the share LESS the amount of any dividend previously paid on the
share so that a dividend could be paid on a junior class of shares.
Redemption. Neoprobe is obligated to redeem the outstanding shares of Series B
Preferred Stock for $120 per share if:
o Neoprobe is unable to commence its 1999 annual meeting of stockholders
by May 28, 1999 and obtain the stockholder approval of these
transactions within 30 days of the commencement of the meeting;
o Neoprobe does not file the registration statement with the SEC by May
18, 1999;
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o Neoprobe does not amend the registration statement within 30 days after
the Second Sale Date to include the shares of common stock issuable
through any securities sold in the Second Sale;
o Neoprobe does not keep the registration statement effective
for at least 3 years;
o Neoprobe commits a material breach of the Purchase Agreement which
continues for more than 20 days after Neoprobe is notified of the
breach;
o NASDAQ delists the common stock;
o Neoprobe fails to properly deliver any of the securities
sold under the Purchase Agreement;
o Neoprobe's auditors materially qualify their opinion on
Neoprobe's financial statements;
o Neoprobe is liquidated;
o Neoprobe sells substantially all of its assets; or
o Neoprobe is merged out of existence or more than half of the
outstanding common stock is exchanged for cash, property or securities
of another company.
Conversion. Generally, each share of Series B Preferred Stock may be converted,
at the option of the owner, into the number of shares of common stock calculated
by dividing the sum of $100 and any accrued and unpaid dividends on the share of
Series B Preferred Stock by the conversion price. The initial conversion price
for the shares of Series B Preferred Stock sold in the First Sale is $1.03 per
share of common stock. If on February 16, 2000 the market value of common stock
is less than $1.03, the conversion price will be reset to the market value of a
share on February 16, 2000, but not less than $0.515.
If the market value of common stock is less than $1.03, the conversion price
will be the average of the three lowest closing bid prices for a share of common
stock during the previous 10 trading days. But the Company may refuse to convert
a share of Series B Preferred Stock that the Company sold in the First Sale if
its conversion price is less than $0.55. However, if the conversion price of a
share of Series B Preferred Stock which the Company sold in the First sale is
less than $0.55 for more than 60 trading days in any 12-month period, then the
Company must either convert the share at the share's conversion price or pay the
owner cash. The amount of the cash payment per share of Series B Preferred Stock
would be the highest closing price for common stock during the period from the
date of the owner's conversion request until the payment
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date MULTIPLIED BY the number of shares of common stock into which the share of
Series B Preferred Stock is convertible.
The conversion price will be adjusted to prevent the dilution of the
economic interests of the owners of Series B Preferred Stock each time:
o Shares of common stock are sold by the Company for less than
the conversion price;
o Shares of common stock are sold by the Company for less than
market value;
o Shares of common stock are issued by the Company as
dividends on common stock;
o Shares of common stock are split or combined; or
o The Company enters into a binding contract to sell shares of common
stock for a price less than the conversion price or the market value of
common stock.
If the common stock is reclassified or Neoprobe merges with another company
and is not the continuing entity, the owners of Series B Preferred Stock may
choose to either receive the same payments as the owners of common stock on an
as converted basis or convert their Series B Preferred Stock into an
economically comparable number of the other company's common shares. The
proposed successor company in any merger must agree to these terms in writing
before the merger may occur.
Any shares of Series B Preferred Stock sold in the Second Sale will have
terms which are similar to the terms of the shares sold in the First Sale. The
terms of the shares of Series B Preferred Stock sold in the Second Sale include:
o The conversion price will be the market value of a share of common stock
on the Second Closing Date;
o The conversion price will be adjusted in the same manner as the shares
of Series B Preferred Stock sold in the First Sale;
o The Company may refuse to convert these shares if the conversion price
is less than half of the market value of a share of common stock on the
Second Closing Date; and
o If the conversion price of these shares is less than half of the market
value of a share of common stock on the Second Closing Date for more
than 60 trading days in any 12-month period, then the Company must
either convert the shares
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at the conversion price or pay the owner cash in an amount calculated as
described above for shares sold in the First Sale.
Conversion Limitations. An owner of Series B Preferred Stock may not convert its
shares into shares of common stock if the conversion would cause the owner to
own more than 4.9% of Neoprobe's outstanding common stock. An owner may waive
this restriction by giving notice to Neoprobe 61 days before the conversion.
The rules of the National Association of Securities Dealers, Inc. do not
allow Neoprobe to issue shares of common stock representing more than 20% of the
total number of outstanding shares of common stock without stockholder approval.
Under the Purchase Agreement and the Advisory Agreement, Neoprobe is not
obligated to issue more than 4,539,582 shares of common stock upon conversion of
shares of Series B Preferred Stock if the issuance would violate the rules of
the National Association of Securities Dealers. If further issuances of shares
of common stock upon conversion of shares of Series B Preferred Stock would
violate those rules, then Neoprobe will convert the shares for cash instead of
for shares of common stock.
Mandatory Conversion. Neoprobe may require an owner of Series B Preferred Stock
to convert its shares if:
o The shares have been outstanding for more than one year;
o The registration statement has been effective for more than
one year; and
o For 20 trading days during any 30 day period ending on the day Neoprobe
demands conversion, the market value of common stock has been more than
300% of the market value of common stock on February 16, 2000.
Voting Rights. Each share of Series B Preferred Stock entitles its owner to cast
the same number of votes the owner would be entitled to cast if the owner had
converted the share on the record date. Owners of shares of Series B Preferred
Stock have the right to vote with owners of common stock as a single class.
However, no owner of a share of Series B Preferred Stock may exercise more than
4.9% of Neoprobe's voting power, but an owner may waive this restriction by
giving Neoprobe notice 61 days in advance.
Neoprobe may not, without the consent of the owners of a majority of the
shares of Series B Preferred Stock,:
o Amend or repeal any provision of Neoprobe's certificate of
incorporation or Bylaws in a way that adversely affects the rights of
the owners of Series B Preferred Stock;
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o Change the rights of the Series B Preferred Stock;
o Authorize any security with rights superior or equal to those of the
Series B Preferred Stock or
o Approve the incorporation of any subsidiary of Neoprobe.
ARIES' WARRANTS
General Terms. Aries received warrants to purchase 2,912,621 shares of common
stock in the First Sale and, if the Second Sale occurs, will receive warrants to
purchase an additional 2,912,621 shares of common stock in. The warrants expire
seven years after the date of their issuance.
Exercise of the Warrants. Aries may purchase the shares available under the
warrants by exercising the warrants and paying the exercise price. Aries also
has the option of making a "cashless" exercise of the warrants. The number of
shares of common stock Aries would receive upon a cashless exercise of a warrant
is the number of shares available under the warrant multiplied by the excess of
the market value of common stock on the date of exercise over the exercise
price, and divided by the market value of common stock on the date of exercise.
Exercise Price. Initially, the exercise price per share of the warrants issued
in the first sale is $1.03. If the market value of common stock on February 16,
2000 is less than $1.03 then the exercise price will be reset to the market
value of common stock on February 16, 2000, but not less than $0.515, and the
number of shares issuable upon the exercise of a warrant will be increased to
the aggregate pre-reset exercise price of the warrant divided by the per share
reset exercise price.
If the exercise price of a warrant sold in the First Sale is, and has been
for 60 or more trading days in any 12-month period, less than $0.62, the Company
will effect an exercise by either delivering shares of common stock or making a
cash payment. The cash payment would equal the number of shares for which the
warrant is exercised multiplied by the highest closing trade price of common
stock during the period from the date of exercise and the date of payment.
The exercise price will be adjusted to prevent the dilution of the economic
interests of warrant owners each time:
o Shares of common stock are sold by the Company for less than
the exercise price;
o Shares of common stock are sold by the Company for less than
market value;
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o Shares of common stock are issued by the Company as
dividends on common stock;
o Shares of common stock are subdivided or combined; or
o The Company enters into a binding contract to sell shares of
common stock for a price less than the exercise price or the market
value of common stock.
If the exercise price of a warrant is adjusted, the number of shares
issuable upon the exercise of the warrant will be adjusted to the aggregate
pre-adjustment exercise price of the warrant divided by the per share adjusted
exercise price.
Initially, the exercise price of the warrants sold in the Second Sale will
be the market value of common stock on the Second Sale Date. The exercise price
of these warrants will be adjusted in the same manner as the warrants sold in
the First Sale.
If the common stock is reclassified, Neoprobe sells substantially all of its
assets or Neoprobe merges with another company and is not the continuing entity,
the owners of warrants will be entitled to the cash, securities and property
they would have received if they had exercised the warrants immediately prior to
the reclassification, sale or merger.
Mandatory Exercise. Neoprobe may require Aries to exercise the warrants if the
warrants have been outstanding for more than one year and the market value of
common stock has been more than 300% of the warrant exercise price for 20
trading days during any 30 day period ending on the day Neoprobe demands
exercise.
Exercise Limitations. Aries may not exercise a warrant if the exercise would
cause Aries to own more than 4.9% of Neoprobe's outstanding common stock. Aries
may waive this restriction by giving notice to Neoprobe at least 61 days before
the exercise.
OPTION UNITS
General Terms. Paramount received 1.5 Option Units in the First Sale. Each
Option Unit entitles Paramount Capital to purchase, for an exercise price of
$100,000, 1,000 shares of Series B Preferred Stock and 97,087 Class L Warrants.
Paramount Capital has the option of making a "cashless" exercise of the Unit
Options. In a cashless exercise, Paramount Capital would receive the number of
shares of Series B Preferred Stock and the number of Class L Warrants available
under the Unit Option LESS the total number available under the Unit Option
multiplied by the exercise price and divided by the market value of the Unit
Option.
Expiration. The Unit Options expire on February 16, 2004.
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Class L Warrants. The owner of a Class L Warrant may receive one share of common
stock by exercising the Class L Warrant and paying the exercise price of $1.03
per share of common stock.
Price Adjustment. The Unit Options contain provisions to protect Paramount
Capital from the dilution of its interests in Series B Preferred Stock and
common stock. These provisions are similar to those which protect owners of
Series B Preferred Stock and owners of warrants from the dilution of their
interests.
Reclassification or Merger. If the common stock is reclassified, Neoprobe sells
substantially all of its assets or Neoprobe merges with another company and is
not the continuing entity, the owners of Unit Options will be entitled to the
cash, securities and property they would have received if they had exercised the
Unit Options immediately prior to the reclassification, sale or merger.
Exercise Limitations. Paramount Capital may not exercise a Unit Option or Class
L Warrant, and may not convert a share of Series B Preferred Stock, if the
exercise or conversion would cause Paramount Capital to own more than 4.9% of
Neoprobe's outstanding common stock. Paramount Capital may waive these
restrictions by giving Neoprobe notice at least 61 days in advance.
RESTRICTIONS UNDER THE PURCHASE AGREEMENT
Right to Nominate a Board Member. Aries may nominate a candidate for Neoprobe's
board of directors. Neoprobe's existing board of directors will support the
nominee by creating a new position on the board of directors and electing the
nominee to fill the vacancy, nominating the nominee for election by stockholders
and using its best efforts to ensure that stockholders elect the nominee.
Registration Rights. Not later than 30 days after the First Closing Date,
Neoprobe will file with the SEC a shelf registration statement for the resale
of:
o The shares of common stock issuable upon the exercise of
Aries' Warrants;
o The shares of common stock issuable upon the exercise of Class L
Warrants;
o The shares of common stock issuable upon conversion of Series B
Preferred Stock;
o Any shares of common stock issued to pay dividends on the Series B
Preferred Stock; and
o Any other shares of common stock owned by Aries and Paramount Capital.
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Use of Proceeds; Restrictions on Use of Cash. The Purchase Agreement requires
Neoprobe to use the net proceeds for general corporate purposes. Neoprobe may
not use any of the proceeds to repay its debts or repurchase its own securities.
Neoprobe may not make a payment in excess of $25,000 without Aries' approval. If
the registration statement is effective and Neoprobe has at least $1,000,000 of
cash, this limit will be increased to $100,000.
Neoprobe must escrow $1,000,000 in cash from the proceeds of the Purchase
Agreement until the stockholders approve these transactions and the registration
statement becomes effective.
Limitations on Merger or Sale of Assets. Neoprobe may not merge or sell
substantially all of its assets without Aries' approval.
Limitations on Acquisitions. Neoprobe may not acquire any interest in any
business without Aries' approval. But, Neoprobe may acquire 1% or less of any
class of publicly traded securities.
Limitations on Dividends and Repurchases. Neoprobe may not pay any dividends on
its stock or repurchase any shares of its stock, without Aries' approval.
Restriction on Securities. Until August 16, 2000, Neoprobe may not, without
Aries' approval, sell any of its securities. However Neoprobe may, so long as it
honors Aries' right of first refusal, sell a maximum of 1,700,000 shares of
common stock and 500,000 warrants to purchase shares of common stock for a
maximum of $1,500,000. Also, Neoprobe may issue shares of common stock upon
conversion or exercise of outstanding securities or in an offering with
Paramount Capital acting as placement agent.
Until February 16, 2002, Neoprobe may not, without Aries' approval, extend
the expiration date or lower the exercise price of any options or take any
similar action affecting any convertible securities.
Restrictions on debt. Neoprobe may not incur debt except:
o To Aries and Paramount Capital;
o Under equity lease financings;
o Customary accounts receivable and inventory financing in the
ordinary course of business;
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o Debt for borrowed money disclosed to Aries at the time of
the Purchase Agreement; and
o Amounts less than $25,000 incurred in the ordinary course of business
(if the registration statement is effective and Neoprobe has at least
$1,000,000 in cash, this limit will be increased to $100,000).
Other Public Sales and Registrations. Until at least 180 days after the
effective date of the registration statement, Neoprobe will not make a public
offering of its securities except to its employees.
Additional Common Stock Issuable to Purchasers. If Neoprobe does not file the
registration statement by March 31, 1999 or if the SEC does not declare the
registration statement effective within the time constraints established in the
Purchase Agreement, Neoprobe will immediately issue warrants to Aries to
purchase a number of additional shares of common stock and pay a cash penalty to
Aries.
The number of shares of common stock available under these additional warrants
would be 1.5% of shares of common stock available under Aries' warrants issued
in the First Sale.
The amount of the cash payment would be 1.5% of the total liquidation preference
of Aries' shares of Series B Preferred Stock.
Amendment to Rights Plan. Neoprobe amended its stockholder rights plan,
described below under the heading "DESCRIPTION OF STOCK -- Stockholder Rights
Plan," to exempt the acquisition of common stock by Aires in the transactions
described above together with up to 1,000,000 more shares even though these
transactions may result in Aires owning more than 15% of the common stock.
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PLAN OF DISTRIBUTION
The Selling Shareholders may sell shares of common stock through brokers
selected by them individually. The Selling Shareholders may make these sales at
any time that they choose. Sales may be made through ordinary transactions on
the Nasdaq National Market; special offerings in accordance with the rules of
the National Association of Securities Dealers in which the brokers may act as
principals or agents; block trades in which the brokers may attempt to sell
shares as agents and may position and resell all or part of the block as a
principal to facilitate the transaction or a combination of these methods. The
Selling Shareholders may also sell their shares in privately negotiated
transactions off the Nasdaq National Market, which need not be through brokers.
The shares are expected to be sold at market related prices prevailing at the
time of sale. The pledgees, trustees and other successors to the Selling
Shareholders may also use this prospectus to sell common stock. The Selling
Shareholders may, if they so choose, sell their shares under this prospectus or
may sell them under Rule 144 if the shares and their sale meet the conditions of
the Rule.
The Selling Shareholders may compensate the brokers for selling shares of
common stock by giving them discounts on the shares they are selling or paying
them commissions and fees in amounts determined by negotiations between them and
their brokers. The brokers selected by the Selling Shareholders may be
considered to be underwriters as that term is defined in the Securities Act of
1933, in which event discounts, commissions and fees received by the brokers may
be considered to be underwriting compensation. The Selling Shareholders may
agree to indemnify their brokers against some types of liabilities, including
liabilities under the Securities Act of 1933.
When they are selling common stock under this prospectus, the Selling
Shareholders may be considered to be underwriters as that term is defined in the
Securities Act of 1933. It is unlikely that they will perform any of the
functions of an underwriter as that term is understood in its usual commercial
usage, including performing a due diligence investigation of Neoprobe or making
any estimates of the value of its securities. By making this disclosure, the
Selling Shareholders do not admit that they are underwriters within the meaning
of the Securities Act of 1933 and they reserve the right to contest any
allegation that they are acting as underwriters or that they have any
liabilities as underwriters.
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DESCRIPTION OF STOCK
AUTHORIZED AND ISSUED STOCK
NUMBER OF SHARES AT FEBRUARY 28, 1999
----------------------------------------
TITLE OF CLASS NAME IN AUTHORIZED OUTSTANDING RESERVED
THIS
PROSPECTUS
Common Stock, par common 50,000,000 22,977,910 9,081,155
value $0.001 per share stock
Series A Junior Series A 500,000 0 500,000
Participating Preferred Preferred
Stock, par value $0.001 Stock
per share
5% Series B Series B 63,000 30,000 33,000
Convertible Preferred Preferred
Stock, par value $0.001 Stock
per share
Preferred Stock, par Preferred 4,437,000 0 0
value $0.001 per share Stock
COMMON STOCK
Dividends Each share will receive an equal dividend, if one
is declared, which is unlikely. See "RISK FACTORS
-- No Dividends."
Liquidation If Neoprobe is liquidated, any assets that remain
after the creditors are paid and the owners of
preferred stock receive any liquidation
preferences will be distributed to the owners of
common stock pro-rata.
Voting Rights One vote per share.
No Cumulative Voting There is no cumulative voting. A simple majority
can elect all of the directors at a given meeting
and the minority would not be able to elect any
directors at that meeting.
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Free Transfer Common stock sold under this prospectus will be
freely transferable.
No Personal Liability Owners of common stock are not personally liable
for Neoprobe's debts, just because they own
shares of common stock.
No Preemptive Rights Neoprobe can sell common stock to third parties
without first offering it to current
stockholders.
No Redemption Rights Neoprobe does not have the right to buy back
shares except in extraordinary transactions such
as mergers and court approved bankruptcy
reorganizations. Owners of common stock do not
ordinarily have the right to require Neoprobe to
buy their common stock. Neoprobe does not have a
sinking fund to provide assets for any buy back.
No Conversion Rights Common stock can not be converted into any other
kind of stock except in extraordinary
transactions such as mergers and court approved
bankruptcy reorganizations.
PREFERRED STOCK
Neoprobe's certificate of incorporation has "blank check" preferred stock.
The board of directors may divide this stock into series and set their rights.
Neoprobe's board of directors has created two series of preferred stock. 500,000
shares of preferred stock have been designated as Series A Junior Participating
Preferred Stock and reserved for issuance under the stockholder rights plan
described below. 63,000 shares of preferred stock have been designated as 5%
Series B Convertible Preferred Stock and are described above, see "Selling
Shareholders -- Terms of the Series B Preferred Stock. The board of directors
may, without prior stockholder approval, issue any of the remaining 4,437,000
shares preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the relative voting power or other rights of
the common stock. Preferred stock could be used as a method of discouraging,
delaying, or preventing a take-over of Neoprobe. Although Neoprobe has no
present intention of issuing any shares of preferred stock other than through
the sale of the remaining Series B Preferred Stock, it may do so in the future.
If Neoprobe issues preferred stock, it could have a dilutive effect upon the
common stock. See "Risk Factors -- Blank Check Preferred Stock."
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STOCKHOLDER RIGHTS PLAN
Operation of the Plan. Neoprobe has a stockholder rights plan. The purpose of
the stockholder rights plan is to protect the interests of Neoprobe's
stockholders if Neoprobe is confronted with coercive or unfair takeover tactics
by encouraging third parties interested in acquiring Neoprobe to negotiate with
the board of directors. Under the plan Neoprobe distributed rights to purchase
one hundredth of a share of Series A Preferred Stock at an exercise price of $35
per right to the stockholders at the rate of one right per share of common
stock. The rights are attached to the common stock and are not exercisable until
after 15 percent of the common stock has been acquired or tendered for. At that
point, the rights would be separately traded and exercisable. If a third party
crosses the 15 percent threshold, the rights would "flip-in" (but not the rights
of the 15 percent stockholder) and become rights to acquire, upon payment of the
exercise price, common stock (or, in some circumstances, other securities) with
a value of twice the exercise price of the right. If a third party were to take
actions to acquire Neoprobe, such as a merger, the rights would "flip-over" and
entitle the owners of the rights to acquire stock of the acquiring person with a
value of twice the exercise price. Neoprobe has amended its stockholder rights
plan to exempt the acquisition of common stock by Aires in the transactions
described above together with up to 1,000,000 more shares even though these
transactions may result in Aires owning more than 15% of the common stock.
Neoprobe may redeem the rights at any time before they become exercisable for
$.01 per right. The plan expires on August 28, 2005. The number of rights per
share of common stock will be adjusted in the future to reflect future splits
and combinations of, and common stock dividends on, the common stock. The
exercise price of the rights will be adjusted to reflect changes in the Series A
Preferred Stock.
Series A Preferred Stock.
Redemption Neoprobe may redeem Series A Preferred Stock at a
price equal to 100 times the current per share
market price of the common stock, together with
accrued but unpaid dividends. Neoprobe is not
required to create a sinking fund to provide
assets for a redemption.
Dividend A minimum quarterly dividend of $.05 per share
plus an aggregate dividend of 100 times any
dividend declared on the common stock.
Election of Directors If dividends on Series A Preferred Stock are in
arrears in an amount equal to six quarterly
payments, all owners of Preferred Stock of
Neoprobe (including holders of Series A Preferred
Stock) with dividends in arrears equal to this
amount, voting as a class, could elect two
directors.
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Liquidation If Neoprobe is liquidated, the holders of the
Series A Preferred Stock will receive a preferred
liquidation payment of $.10 per share and, after
the common stock has received a proportionate
distribution, will share in the remaining assets
on a proportionate basis with the common stock.
Priority Series A Preferred Stock is senior to common
stock, but junior to all other classes of
preferred stock as to the payment of dividends
and the distribution of assets.
Voting 100 votes per share.
Exchanges In any merger or other transaction where common
stock is exchanged, each share of Series A
Preferred Stock will be entitled to receive 100
times the amount received by the common stock.
Anti-Dilution Neoprobe intended each share of Series A
Preferred Stock to approximate 100 shares of
common stock as they existed on the date the
rights were distributed (August 28, 1995);
therefore, the redemption price, dividend,
liquidation price and voting rights will be
adjusted to reflect splits and combinations of,
and common stock dividends on, the common stock
after that date.
Anti-Takeover Effects. Neoprobe's stockholder rights plan is designed to deter
coercive takeover tactics and otherwise to encourage persons interested in
acquiring Neoprobe to negotiate with the board of directors. The stockholder
rights plan will confront a potential acquirer of Neoprobe with the possibility
that Neoprobe's stockholders will be able to substantially dilute the acquirer's
equity interest by exercising rights to buy additional stock in Neoprobe or, in
some cases, stock in the acquirer, at a substantial discount. The plan may have
the effect of deterring third parties from making takeover bids for control of
Neoprobe or may be used to hinder or delay a takeover bid. This would decrease
the chance that Neoprobe's stockholders would realize a premium over market
price for their shares of common stock as a result of a takeover bid. See "Risk
Factors -- Anti-Takeover Provisions." The board of directors may redeem the
rights for a nominal payment if it considers the proposed acquisition of
Neoprobe to be in the best interests of Neoprobe and its stockholders.
Accordingly, the stockholder rights plan would not interfere with any merger or
other business combination which has been approved by the board of directors.
Any plan which effectively requires an acquiring company to negotiate with
Neoprobe's management may be characterized as increasing management's ability to
maintain its position with Neoprobe, including the
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negotiation of a transaction which provides less value to the stockholders while
providing benefits to management.
ANTI-TAKEOVER CHARTER PROVISIONS AND LAWS
In addition to the stockholder rights plan and the "blank check" preferred stock
described above, some features of Neoprobe's certificate of incorporation and
by-laws and the Delaware General Corporation Law (DGCL), which are further
described below, may have the effect of deterring third parties from making
takeover bids for control of Neoprobe or may be used to hinder or delay a
takeover bid. This would decrease the chance that Neoprobe's stockholders would
realize a premium over market price for their shares of common stock as a result
of a takeover bid. See "Risk Factors -- Anti-Takeover Provisions."
Limitations on Stockholder Actions. Neoprobe's certificate of incorporation
provides that stockholder action may only be taken at a meeting of the
stockholders. Thus an owner of a majority of the voting power could not take
action to replace the board of directors, or any class of directors, without a
meeting of the stockholders nor could he amend the by-laws without presenting
the amendment to a meeting of the stockholders. Furthermore, under the
provisions of the certificate of incorporation and by-laws, only the board of
directors has the power to call a special meeting of stockholders. Therefore, a
stockholder, even one who owns a majority of the voting power, may neither
replace sitting board of directors members nor amend the by-laws before the next
annual meeting of stockholders.
Advance Notice Provisions. Neoprobe's by-laws establish advance notice
procedures for the nomination of candidates for election as directors by
stockholders, as well as for other stockholder proposals to be considered at
annual meetings. Generally, notice of intent to nominate a director or raise
matters at meetings must be received by Neoprobe not less than 120 days before
the first anniversary of the mailing of Neoprobe's proxy statement for the
previous year's annual meeting, and must contain required information concerning
the person to be nominated or the matters to be brought before the meeting and
concerning the stockholder submitting the proposal.
Delaware Law. Neoprobe is subject to Section 203 of the DGCL, which provides
that a corporation may not engage in any business combination with an
"interested stockholder" during the three years after he becomes an interested
stockholder unless:
o Neoprobe's board of directors approved in advance either the business
combination or the transaction which resulted in the stockholder
becoming an interested stockholder;
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o The interested stockholder owned at least 85 percent of Neoprobe's
voting stock at the time the transaction commenced; or
o The business combination is approved by the Neoprobe's board of
directors and the affirmative vote of at least two-thirds of the voting
stock which is not owned by the interested stockholder.
An interested stockholder is anyone who owns 15 percent or more of Neoprobe's
voting stock, or who is Neoprobe's affiliate or associate and was the owner of
15 percent or more of Neoprobe's voting stock at any time within the previous
three years; and the affiliates and associates of any those persons. Section 203
of the DGCL makes it more difficult for an "interested stockholder" to implement
various business combinations with Neoprobe for a three-year period, although
Neoprobe's stockholders may vote to exclude it from the law's restrictions.
Classified Board. Neoprobe's certificate of incorporation and by-laws divide its
board of directors into three classes with staggered three year terms. There are
currently seven directors, three in two classes and one in the third. At each
annual meeting of stockholders, the terms of one class of directors will expire
and the newly nominated directors of that class will be elected for a term of
three years. The board of directors will be able to determine the total number
of directors constituting the full board of directors and the number of
directors in each class, but the total number of directors may not exceed 17 nor
may the number of directors in any class exceed six. Subject to these rules, the
classes of directors need not have equal numbers of members. No reduction in the
total number of directors or in the number of directors in a given class will
have the effect of removing a director from office or reducing the term of any
then sitting director. Stockholders may only remove directors for cause. If the
board of directors increases the number of directors in a class, it will be able
to fill the vacancies created for the full remaining term of a director in that
class even though the term may extend beyond the next annual meeting. The
directors will also be able to fill any other vacancies for the full remaining
term of the director whose death, resignation or removal caused the vacancy.
A person who has a majority of the voting power at a given meeting will not
in any one year be able to replace a majority of the directors since only one
class of the directors will stand for election in any one year. As a result, at
least two annual meeting elections will be required to change the majority of
the directors by the requisite vote of stockholders. The purpose of classifying
the board of directors is to provide for a continuing body, even in the face of
a person who accumulates a sufficient amount of voting power, whether by
ownership or proxy or a combination, to have a majority of the voting power at a
given meeting and who may seek to take control of Neoprobe without paying a fair
premium for control to all of the owners of common stock. This will allow the
board of directors time to negotiate with such a person and to protect the
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interests of the other stockholders who may constitute a majority of the shares
not actually owned by that person. However, it may also have the effect of
deterring third parties from making takeover bids for control of Neoprobe or may
be used to hinder or delay a takeover bid.
LEGAL INSTRUMENT
Neoprobe's certificate of incorporation is the legal instrument that created
its stock and gives the express terms of the common and preferred stock. A copy
of Neoprobe's certificate of incorporation is on file with the SEC. Neoprobe is
incorporated in the state of Delaware, and has filed its certificate of
incorporation with the Delaware Secretary of State. However, in order to fully
understand the rights of the different classes of stock, you should also review
Neoprobe's by-laws and its Shareholders rights Plan, both of which are also on
file with the SEC, and consult with a lawyer who knows Delaware corporate law
TRANSFER AGENT
The transfer agent for the common stock, and the rights agent for the
stockholder rights plan is Continental Stock Transfer & Trust Company, 2
Broadway, New York, New York 10004; telephone (212) 509-4000.
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents that Neoprobe has filed or will file with the SEC
are incorporated in this prospectus by reference:
1. Neoprobe's Annual Report on Form 10-K for the fiscal year ended December
31, 1998 as amended by Amendment No. 1 (SEC File Number 0-26520);
2. The description of the common stock contained in Neoprobe's Registration
Statement on Form 8-A, as amended by Amendment No. 4 (SEC File Number
0-26520);
3. The description of the rights to purchase Series A preferred stock
contained in Neoprobe's Registration Statement on Form 8-A (SEC File No.
0-26520); and
4. All documents subsequently filed by Neoprobe pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, prior to the
termination of the offering of the securities hereunder.
Neoprobe will provide to each person, including a beneficial owner, to whom
a copy of this prospectus is delivered, a copy of any or all of the information
that has been incorporated by reference in this prospectus but not delivered
with the prospectus. Neoprobe will provide this information upon written or oral
request and at no cost to the requester. Requests for this information must be
made to: Brent L. Larson, Vice President--Finance and Administration; Neoprobe
Corporation, 425 Metro Place North, Suite 400, Dublin, Ohio 43017; Telephone
(614) 793-7500
You should not rely on a statement contained in any of these documents if a
statement in this prospectus or in any other subsequently filed document which
is also listed above modifies or supersedes it.
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MORE INFORMATION
Neoprobe files annual, quarterly and periodic reports, proxy statements and
other information with the SEC. You may read and copy any materials Neoprobe
files with the SEC at its Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Neoprobe electronically files its reports, proxy statements and other
information with the SEC through the SEC's EDGAR system. The SEC maintains a
World Wide Web site on the Internet that contains the reports, proxy statements
and other information filed by Neoprobe and other issuers who file
electronically through the EDGAR system. The Internet address of this site (its
uniform resource locator or URL) is http://www.sec.gov.
This prospectus is part of a registration statement under the Securities Act
of 1933 that Neoprobe has filed with the SEC. This Prospectus does not contain
all of the information in the registration statement or any of the exhibits. You
can learn more about Neoprobe and the common stock, by reading the entire
registration statement, including any amendments, and the exhibits to the
registration statement.
The statements in this prospectus about the provisions of documents are
summaries of the documents. Summaries, by their nature, omit details of
documents. If you need to know the details of a document, you must read the
original. In most cases, Neoprobe has filed the original document with the SEC.
Summaries, by their nature, also interpret documents. The interpretations
implied by the summaries of documents in this prospectus do not control the
legal meaning of the documents, which will be determined by the parties to the
document or the courts without referring to these summaries. If you need to
interpret a document, you must read the original.
This prospectus and the documents incorporated by reference are dated
material. Even if we deliver any of them to you at a latter date, it does not
mean that the information in those documents is correct at any time after their
dates.
Neoprobe has not authorized any broker, salesman or other person to give you
any information or make any statements about Neoprobe, the Selling Shareholders,
the common stock or its sale through this prospectus other than the information
in this prospectus.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be borne by the registrant, other
than underwriting discounts and commissions, in connection with the issuance and
distribution of the common stock.
Registration Fee - Securities and Exchange Commission $ 1,157.58
Accounting fees and expenses $ 5,000.00
Legal fees and expenses $ 7,000.00
Printing costs $ 500.00
Miscellaneous $ 1,342.42
----------
Total $15,000.00
All expenses other than the Securities and Exchange Commission filing fee are
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware ("Section
145") provides that directors and officers of Delaware corporations may, under
certain circumstances, be indemnified against expenses (including attorneys'
fees) and other liabilities actually and reasonably incurred by them as a result
of any suit brought against them in their capacity as a director or officer, if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, if they had no reasonable cause to believe their
conduct was unlawful. Section 145 also provides that directors and officers may
also be indemnified against expenses (including attorneys' fees) incurred by
them in connection with a derivative suit if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification may be made without court
approval if such person was adjudged liable to the corporation.
Article V of Neoprobe's by-laws has provisions requiring Neoprobe to indemnify
its officers, directors, employees and agents that are in substantially the same
language as Section 145.
Article Nine, section (b), of Neoprobe's certificate of incorporation further
provides that no director will be personally liable to Neoprobe or its
stockholders for monetary damages or for any breach of fiduciary duty except for
breach of the director's duty of loyalty to Neoprobe or its stockholders, for
acts or omissions not in good faith or involving intentional misconduct or a
knowing violation of law, pursuant to Section 174 of the Delaware General
Corporation Law (which imposes liability in connection with the payment of
certain unlawful dividends, stock purchases or redemptions), or any amendment or
successor provision thereto, or for any transaction from which the director
derived an improper personal benefit.
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ITEM 16. EXHIBITS.
The following exhibits are part of this Registration Statement:
(4) INSTRUMENTS DEFINING THE RIGHTS OF HOLDERS, INCLUDING INDENTURES
4.1. See Articles FOUR, FIVE, SIX, SEVEN and EIGHT of the Restated
Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of Registrant's Annual Report on Form 10-K,
dated March 31, 1999; Commission File No. 0-20676).
4.2. See Articles II and VI and Section 2 of Article III and Section 4 of
Article VII of the Amended and Restated By-laws of the Registrant
(incorporated by reference to Exhibit 99.4 of Registrant's Current
Report on Form 8-K dated June 20, 1996; Commission File No. 0-20676).
4.6. Rights Agreement dated as of July 18, 1995 between the Registrant and
Continental Stock Transfer & Trust Company (incorporated by reference
to Exhibit 1 of the registration statement on Form 8-A; Commission
File No. 0-20676).
(5) OPINION REGARDING LEGALITY
5.1. Opinion of Benesch, Friedlander, Coplan & Aronoff LLP.
(23) CONSENTS
23.1. Consent of KPMG LLP.
23.2. Consent of PricewaterhouseCoopers LLP.
23.3. Consent of Benesch, Friedlander, Coplan & Aronoff LLP is set
forth as part of Exhibit 5.1 above.*
(24) POWERS OF ATTORNEY
24.1. Powers of Attorney.*
24.2. Certified resolution of the Registrant's Board of Directors.*
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ITEM 17. 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;
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the plan or
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, Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the 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 therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(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.
(b) 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 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.
(h) 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 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 Act 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, the registrant
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 Dublin, State of Ohio, on April 13, 1999.
NEOPROBE CORPORATION
By s/ David C. Bupp
-------------------------------
David C. Bupp, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed on March 31, 1999 by the following persons in the
capacities indicated.
SIGNATURES CAPACITY
s/ David C. Bupp Director, President, Chief Executive Officer
- ----------------------- (principal executive officer)
David C. Bupp
Brent L. Larson* Vice President, Finance and Chief Financial
- ----------------------- Officer (principal financial and
Brent L. Larson accounting officer)
Julius R. Krevans* Director, Chairman of the Board
- -----------------------
Julius R. Krevans
Director
- -----------------------
Melvin D. Booth
John S. Christie* Director
- -----------------------
John S. Christie
Michael P. Moore* Director
- -----------------------
Michael P. Moore
J. Frank Whitley, Jr.* Director
- -----------------------
J. Frank Whitley, Jr.
James F. Zid* Director
- -----------------------
James F. Zid
*By s/ David C. Bupp
- -----------------------
David C. Bupp
Attorney-in-Fact
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