FORTICELL BIOSCIENCE, INC. (OTCI) SPO
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|Company Name||FORTICELL BIOSCIENCE, INC.|
|Company Address||3960 BROADWAY
NEW YORK, NY 10032
|Company Phone||(212) 740-6999|
|Employees (as of 2/14/2008)||21|
|State of Inc||DE|
|Fiscal Year End||12/31|
|Shares Over Alloted||--|
|Shareholder Shares Offered||36,349,706|
|Lockup Period (days)||180|
|Quiet Period Expiration||3/10/2008|
We will not receive any proceeds from the sale by the Selling Stockholders of the shares of common stock pursuant to this prospectus which are already owned by them, or which are to be issued to them upon their conversion of shares of any of our convertible preferred stock or when they exercise any of the warrants we granted in equity financings in which we sold shares of our convertible preferred stock if the holders of those warrants use the cashless exercise provisions in those warrants.
We are aware of several companies that are actively engaged in the research and development of products for the repair and regeneration of skin. There are currently three primary and distinct approaches to the repair and regeneration of skin: the acellular (no cell) approach, including the use of cadaver based products; the cell-based unilayered (epidermal or dermal cell) approach, and the cell-based bi-layered (epidermal and dermal cell) approach. A cell-based approach makes use of human donor cells. The approach we believe to be the most advanced and effective is the cell-based bi-layered approach. The production of ORCEL consists of a top layer of epidermal cells and a bottom layer of dermal cells in a collagen matrix, that is a bi-layered approach utilizing donor cells. There are many products available for treating skin wounds. However, as already noted, we believe that the use of donor cells delivered to the wound on a matrix is the most effective process for healing skin wounds and in particular hard to heal skin wounds. Therefore, we believe that only products using donor cells placed on a matrix will directly compete with ORCEL. We consider the Apligraf product manufactured by Organogenesis, Inc. and Dermagraft product manufactured by Advanced BioHealing, Inc. (ABH) to be our principal competitors. Apligraf is an FDA cleared product using human dermal and epidermal cells (bi-layered) placed on a collagen matrix, for the treatment of both venous stasis and diabetic foot ulcers. The Apligraf product is not cryopreserved and has a reported shelf life of 10 days. The Dermagraft product which is cryopreserved uses human derived dermal cells only (unilayered) placed on a polyglactin matrix and is FDA cleared to treat diabetic foot ulcers. Dermagraft is not approved for use in treatment of venous leg ulcers. The Dermagraft product was purchased from Smith & Nephew by ABH in June 2006 and is back on the U.S. market. Both Organogenesis, Inc. and ABH are private companies that market and sell their own products. Due to their private company status, limited financial information is available regarding these companies. However we believe based on the information that is available, that both companies have greater resources than we do. The biomedical field is continually undergoing rapid and significant technological changes. Other companies may succeed in developing other products that are more effective than ORCEL. If such new products are accepted by the medical community, or if those products receive FDA approval for treatment of venous stasis and diabetic foot ulcers before ORCEL does, or if other companies develop products that are more effective than ORCEL, any such developments could impede our ability to continue our operations.
We are a biotechnology company which was organized in 1991 under the laws of the State of Delaware. We are currently in the development stage, and accordingly, have no revenues. Our offices are located at 3960 Broadway, New York, New York 10032. Our telephone number is 212-740-6999. Our website
address is www.ortecinternational.com. Our OTC Bulletin Board Symbol is OTCI. Our company is focused on advancing regenerative medicine and stem cell therapy through the development and commercialization of innovative products by combining advanced cell technology and advanced biomaterials. Our lead product is OrCel ® (Bilayered Cellular Matrix) (ORCEL). Our current focus is the application of ORCEL to heal chronic and acute wounds. ORCEL is composed of a collagen sponge seeded with allogeneic epidermal and dermal cells. These cells secrete growth factors and cytokines normally found in acute human wounds and are believed to have a beneficial role in promoting tissue repair. We have completed a pivotal clinical trial evaluating a cryopreserved version of ORCEL in the treatment of venous stasis ulcers and we have filed a Pre Market Approval (PMA) application for commercial sales of ORCEL to treat venous stasis ulcers. We completed patient enrollment in a confirmatory trial required by the FDA and the data from this confirmatory trial has been integrated with the results of the completed pivotal clinical trial and submitted to the FDA as a clinical supplement to our PMA filing. We already obtained FDA clearance for use of a non-frozen version of ORCEL in the treatment of Epidermolysis Bullosa and donor sites in burn patients. In addition, the FDA has granted us approval to initiate a pivotal (Phase III) trial evaluating ORCEL for the treatment of diabetic foot ulcers. In April 2006, we acquired two fibrin derived advanced biomaterial technologies, Fibrin Microbeads (FMB's) and Haptides™. FMB's have the potential to play a significant role in advancing stem cell therapy having demonstrated the ability to efficiently recover adult stem cells and allow for their growth, proliferation, and potential reimplantation into the patient. Haptides™ utilize proprietary synthetic peptides that mimic the mechanism of cell attachment to fibrin. These peptides have demonstrated the ability to significantly enhance cell attraction and attachment providing the potential to use Haptides™ in the development of products for cosmetic tissue augmentation, wound healing, orthopedics, and drug delivery markets. On June 18, 2007, we entered into the Amended and Restated Exchange Agreement (Exchange Agreement) with Paul Royalty Fund (PRF), and PRF exchanged its interest in our future revenues, recorded as a $43,401,000 liability at that date, for 500 shares of our new Series A-1 Convertible Preferred Stock (A-1 Preferred) and 500 shares of our new Series A-2 Convertible Preferred Stock (A-2 Preferred), each share having a liquidation preference of $10,000. The stated values of the A-1 and A-2 Preferred can be converted to our common stock at conversion rates of $0.50 and $5.00 per common share, respectively, or an aggregate of 11,000,000 common shares on an as converted basis for both the A-1 and A-2 Preferred. Our earlier agreements with PRF were cancelled and PRF's liens were therefore removed from our intellectual property. As a result of this transaction we recorded a gain of $35,527,695. In three closings of our Series A Convertible Preferred Stock, beginning June 18, 2007 and ending July 31, 2007, we sold an aggregate of 842.198 shares of A Preferred with warrants attached and received gross cash proceeds of $8,421,980. Of this amount, we immediately repaid $226,936 to bridge loan holders who did not wish to participate in the private placement, and paid our placement agent fees aggregating $1,132,098. As part of the first closing, holders of $2,701,500 of previously outstanding convertible bridge notes, the proceeds of which were used to finance our operations during the months of October 2006 to the first closing on June 18, 2007, exchanged their notes with $94,264 of interest, or $2,795,764, at 125% of their face value, or $3,494,705, for 349.470 shares of A Preferred with warrants attached. The total outstanding 1,191.668 shares of A Preferred can be converted into 23,833,360 shares of our common stock. We issued Series A warrants to purchase an aggregate of 11,916,680 shares of our common stock at $1.00 per share, Series M warrants to purchase an aggregate of 15,466,680 shares of our common stock at $0.50 per share, and Series M-1 warrants to purchase an aggregate of 7,733,340 shares of our common stock at $1.00 per share. Our placement agent received five-year warrants to purchase an aggregate of 3,156,670 shares of our common stock at $0.55 per share. We recorded net income applicable to common shareholders of $15.1 million during the nine months ended September 30, 2007 because of our gain of $35.5 million on the early extinguishment of our revenue interest obligation. Without such gain we would have incurred a net loss applicable to common shareholders of $20.4 million during the nine months ended September 30, 2007. We have a deficit accumulated in the development stage of $164 million. These factors, among others, raise substantial doubt about our ability to continue as a going concern. As of September 30, 2007, we have 11,972,235 common shares outstanding. We also have 1,191.668 shares of Series A convertible preferred stock convertible to 23,833,360 common shares, 500 shares of Series A-1 convertible preferred stock convertible to 10,000,000 common shares, 500 shares of Series A-2 convertible preferred stock convertible to 1,000,000 common shares, and 5,948.6148 shares of Series D-1 preferred stock convertible to 1,586,297 common shares. Additionally, we have warrants outstanding entitling the holders to purchase an aggregate of 51,179,359 shares of our common stock at a weighted average exercise price of $0.93, and stock options to purchase 2,032,061 shares of common stock, of which 2,005,000 shares can be purchased at prices ranging from $0.38 to $0.55 per share with the balance exercisable at prices in excess of $2.85. We have also given stock options to purchase shares of our Series A convertible preferred stock with warrants attached, which options and warrants give the holder the right to acquire an aggregate of 900,000 shares of our common stock as follows: 400,000 shares upon payment of $2.000 and 500,000 shares at warrant exercise prices of $0.50 and $1.00 per common share.
|Auditor||BDO Seidman, LLP|
|Company Counsel||Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP|
|Transfer Agent||Registrar and Transfer Company|
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