SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission file number ____________
AVAX TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3575874
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
4520 MAIN STREET, SUITE 930
KANSAS CITY, MISSOURI 64111
(Address of principal executive offices) (Zip Code)
Registrants's telephone number, including area code: (816) 960-1333
Securities registered under Section 12 (b) of the Exchange Act: NONE
Securities registered under Section 12 (g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.004 PER SHARE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
As of August 13, 1997, 3,563,874 shares of the Registrant's common stock, par
value $.004 per share, were outstanding.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format: [ ] Yes [X] No
<PAGE>
AVAX TECHNOLOGIES, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements
BALANCE SHEETS -- As of December 31, 1996
and June 30, 1997 (unaudited) Page 3
STATEMENTS OF OPERATIONS (unaudited) -- For the Three Months Ended June 30,
1996 and June 30, 1997, For the Six Months Ended June 30,
1996 and June 30, 1997 and the Period from January 12, 1990
(Incorporation) through June 30,
1997 Page 4
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STATEMENTS OF CASH FLOWS (unaudited) -- For the Six
Months Ended June 30, 1996 and June 30, 1997 and the Period
from January 12, 1990 (Incorporation) through June 30, 1997 Page 5
-----------------------------
Notes to Financial Statements Page 6
------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations Page 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Page 10
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Item 2. Change in Securities. Page 10
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Item 3. Defaults Upon Senior Securities. Page 10
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Item 4. Submission of Matters to a Vote of Security Holders. Page 10
-------------------------------------
Item 5. Other Information. Page 10
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Item 6. Exhibits and Reports on Form 8-K. Page 10
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Signatures Page 11
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS (SEE NOTE) (UNAUDITED)
Current assets:
Cash and cash equivalents $ 13,832,179 $ 9,707,661
Marketable securities 6,134,853 8,182,100
Common stock receivable from a related party 2,249,459 1,130,669
Prepaid expenses and other current assets 61,285 154,970
------------ ------------
Total current assets 22,277,776 19,175,400
Furniture and equipment, at cost 45,777 71,689
Less accumulated depreciation 2,007 7,589
------------ ------------
Net furniture and equipment 43,770 64,100
============ ============
Total assets $ 22,321,546 $ 19,239,500
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued liabilities $ 277,677 $ 274,465
Amount payable to preferred stockholders' 2,156,106 1,083,747
Amount payable to Former Officer 93,353 46,922
------------ ------------
Total current liabilities 2,527,136 1,405,134
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value:
Authorized shares - 5,000,000, including Series B - 300,000 shares Series B
convertible preferred stock:
Issued and outstanding shares - 259,198 and 244,948 at December 31, 1996
and June 30, 1997, respectively (liquidation preference $34,991,730 and
$33,067,980 at December 31, 1996 and June 30, 1997,
respectively) 2,592 2,449
Common stock, $.004 par value:
Authorized shares - 50,000,000
Issued and outstanding shares - 3,111,158 and 3,518,250 at December 31,
1996 and June 30, 1997, respectively) 12,445 14,073
Additional paid-in capital 24,002,882 24,001,321
Subscription receivable (4,026) (2,280)
Deferred Compensation (963,424) (828,874)
Unrealized loss on marketable securities (2,037) --
Deficit accumulated during the development stage (3,254,022) (5,352,323)
------------ ------------
Total stockholders' equity 19,794,410 17,834,366
============ ============
Total liabilities and stockholder's equity $ 22,321,546 $ 19,239,500
============ ============
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements
SEE ACCOMPANYING NOTES.
Page 3
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 12, 1990
THREE MONTHS ENDED SIX MONTHS ENDED (INCORPORATION)
JUNE 30, JUNE 30, THROUGH
1996 1997 1996 1997 JUNE 30, 1997
---------- ---- ----------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Gain from sale of the Product
$ -- $ -- $ -- $ -- $ 1,951,000
Costs and expenses:
Research and development
94,604 590,013 177,378 969,782 3,322,091
Marketing and selling -- -- -- -- 543,646
General and administrative
206,860 769,365 282,881 1,591,878 4,430,014
----------- ----------- ----------- ----------- -----------
Total operating loss (301,464) (1,359,378) (460,259) (2,561,660) (6,344,751)
Other income (expense):
Interest income 95,750 264,632 171,238 544,597 1,423,590
Interest expense (102,165) (41,390) (206,222) (81,238) (576,930)
Other, net (8,331) -- (9,834) -- 145,768
----------- ----------- ----------- ----------- -----------
Total other income
(expense) (14,746) 223,242 (44,818) 463,359 992,428
----------- ----------- ----------- ----------- -----------
Net loss (316,210) (1,136,136) (505,077) (2,098,301) (5,352,323)
Amount payable for
liquidation preference (565,872) -- (1,131,744) -- (1,870,033)
----------- ----------- ----------- ----------- -----------
Net loss attributable to
common stockholders $ (882,082) $(1,136,136) $(1,636,821) $(2,098,301) $(7,222,356)
=========== =========== =========== =========== ===========
Net loss per common share
$ (.29) $ (.33) $ (.55) $ (.62)
=========== =========== =========== ===========
Weighted average number of
shares outstanding
$ 3,031,414 3,441,314 2,988,668 3,394,844
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
Page 4
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 12, 1990
(INCORPORATION)
SIX MONTHS ENDED JUNE 30, THROUGH
1996 1997 JUNE 30, 1997
---------------- ----------------- -------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (505,077) $ (2,098,301) $ (5,352,323)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 59,471 140,132 370,395
Gain from sale of the Product -- -- (1,951,000)
Gain on sale of intellectual property -- -- (787)
Accretion of interest on common stock receivable (150,975) (81,210) (379,669)
Accretion of interest on amount payable to preferred stockholders
and Former Officer 150,975 81,210 379,669
Loss on sale or abandonment of furniture and equipment 8,156 -- 37,387
Issuance of common stock for services -- -- 147,000
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (12,793) (93,685) (154,970)
Accounts payable and accrued liabilities (36,415) (3,212) 274,465
Amount payable to Former Officer -- -- 80,522
------------ ------------ ------------
Net cash used in operations (486,658) (2,055,066) (6,549,313)
INVESTING ACTIVITIES
Purchase of marketable securities and short-term investments -- (4,000,000) (11,116,472)
Proceeds from sale of short-term investments -- 1,954,790 2,934,372
Purchases of furniture and equipment -- (25,912) (137,623)
Proceeds from sale of furniture and equipment -- -- 4,600
Organization costs incurred -- -- (1,358)
------------ ------------ ------------
Net cash used in investing activities -- (2,071,122) (8,316,481)
FINANCING ACTIVITIES
Proceeds from issuance of notes payable to related party -- -- 957,557
Principal payments on notes payable to related party (207,000) -- (797,000)
Proceeds from loans payable 400,000 -- 1,389,000
Principal payments on loans payable (1,050,000) -- (1,389,000)
Payments for fractional shares from reverse splits and stock conversions
-- (76) (76)
Financing costs incurred (36,000) -- (90,000)
Payments received on subscription receivable 208 1,746 4,517
Proceeds received from exercise of stock warrants 375 -- 6,250
Net proceeds received from issuance of preferred and common stock 22,347,403 -- 24,492,207
------------ ------------ ------------
Net cash provided by financing activities 21,454,986 1,670 24,573,455
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
20,968,328 (4,124,518) 9,707,661
Cash and cash equivalents at beginning of period 503 13,832,179 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 20,968,831 $ 9,707,661 $ 9,707,661
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid $ 157,721 $ -- $ 197,072
============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
Page 5
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (UNAUDITED)
For the Three and Six Months ended June 30, 1997
1. DESCRIPTION OF BUSINESS
AVAX Technologies, Inc. (formerly Walden Laboratories, Inc.) (the Company) is a
development stage biopharmaceutical company. The Company changed its name to
AVAX Technologies, Inc. effective March 26, 1996.
In November 1995, the Company sold its leading product under development, an
over-the-counter nutritional, dietary, medicinal and/or elixorative food
supplement or drug and all of the related patents and other intellectual
property. Also in November 1995, the Company entered into a license agreement
with Thomas Jefferson University ("TJU") to develop, commercially manufacture
and sell products embodying immunotherapeutic vaccines for the treatment of
malignant melanoma and other carcinomas.
In December 1996, the Company entered into a license agreement with Rutgers, The
State University of New Jersey ("Rutgers") to develop, commercially manufacture
and sell products embodying a series of compounds for the treatment of cancer
and infectious diseases. In February 1997, the Company entered into a license
agreement with The Texas A&M University System to develop, commercially
manufacture and sell products embodying a series of compounds for the treatment
of cancer.
The Company's business is subject to significant risks consistent with
biotechnology companies that are developing products for human therapeutic use.
These risks include, but are not limited to, uncertainties regarding research
and development, access to capital, obtaining and enforcing patents, receiving
regulatory approval, and competition with other biotechnology and pharmaceutical
companies. The Company plans to continue to finance its operations with a
combination of equity and debt financing and, in the longer term, revenues from
product sales, if any. However, there can be no assurance that it will
successfully develop any product or, if it does, that the product will generate
any or sufficient revenues.
Page 6
<PAGE>
2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company without
audit, in accordance with GAAP for interim financial information and with the
rules and regulations of the Securities and Exchange Commission (the
"Commission"). Certain information and footnote disclosure normally included in
the Company's audited annual financial statements has been condensed or omitted
in the Company's interim financial statements. In the opinion of the Company,
these financial statements contain all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation. The results of
operations for the three and six month periods ended June 30, 1997 may not
necessarily be indicative of the results of operations expected for the full
year, except that the Company expects to incur a significant loss for the year
ended December 31, 1997.
The accompanying financial statements and the related notes should be read in
conjunction with the Company's audited financial statements for the years ended
December 31, 1996 and 1995 included in the Company's Registration Statement on
Form SB-2, Registration No. 333-09349.
3. NET LOSS PER COMMON SHARE
Net loss per share is based on net loss divided by the weighted average number
of shares of common stock outstanding during the respective periods,
retroactively adjusted to reflect the reverse stock splits described below. The
weighted average number of common shares outstanding have been calculated in
accordance with Staff Accounting Bulletin 83 ("SAB 83") of the Commission. SAB
83 requires that shares of common stock, warrants and options issued one-year
prior to the initial filing of a registration statement relating to an initial
public offering at amounts below the public offering price be considered
outstanding for all periods presented in the Company's registration statement.
For purposes of calculating the loss per share, the private placement of Series
B convertible preferred stock has been considered to be the equivalent of an
initial public offering, and the initial public offering price was determined to
be $3.92 per share by assuming that the preferred stock issued was immediately
converted into common stock. Series A Convertible Preferred Stock, actually
converted in June 1996, was included in the calculation of the weighted average
number of shares for the year ended December 31, 1995, as if converted.
Prior to the first closing of a private placement on May 15, 1996, the Company
effected a 1-for-2 reverse stock split of the Company's common stock. Pursuant
to an amendment to the Company's Certificate of Incorporation dated May 7, 1997,
a second 1-for-2 reverse split of the Company's common stock was effected as of
the close of business on May 13, 1997. All outstanding share and per share
amounts included in the accompanying financial statements have been adjusted to
reflect both 1-for-2 reverse stock splits.
Page 7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PLAN OF OPERATION
Statements in this Form 10-QSB that are not descriptions of historical facts
are forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due
to a number of factors, including those set forth in the Company's filings
under the Securities Act of 1933 and under the Securities Exchange Act of
1934, including under the headings "Risk Factors" and elsewhere, including
without limitation, risks relating to the early stage of the Company and its
products under development, government regulation, dependence on third
parties, patent risks, lack of manufacturing facilities and competition. The
Company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new events, future information or
otherwise.
The Company is currently engaged in the development and commercialization of
biotechnology and pharmaceutical products and technologies for the treatment of
cancer and other life-threatening diseases. In November 1995, the Company
entered into a License Agreement with Thomas Jefferson University whereby the
Company acquired the rights to an issued U.S. patent and certain patent
applications covering a process for the modification of a patient's own tumor
cells into a cancer vaccine. This process allows the Company to produce an
autologous cell vaccine (an "AC Vaccine") that attempts to stimulate the patient
s immune system to eliminate the cancer. The Company initially intends to be
engaged primarily in the development and commercialization of the AC Vaccine
technology, as well as the potential anti-cancer and anti-infective technology
licensed pursuant to the Rutgers License and the potential anti-cancer
technology licensed pursuant to the Texas A&M License. The Company anticipates
that during the next 12 months it will conduct substantial research and
development of the AC Vaccine technology, including, without limitation, Phase
III clinical trials on M-Vax(TM), the Company's lead AC Vaccine technology for
metastatic melanoma. The Company also anticipates that it will expend
substantial resources on the research and development of that same technology
for the treatment of other cancers, which may include ovarian, breast, prostate,
lung and colorectal cancer and acute myelogenous leukemia (AML). For example,
the Company is enrolling patients for its Phase II clinical trial of O-Vax(TM),
its AC Vaccine for ovarian cancer. This trial is being conducted at TJU under
the direction of Dr. David Berd, the inventor of the AC Vaccine technology and
Chairman of the Company's Scientific Advisory Board. It is also expected that
during the next 12 months, in order to support these clinical trial efforts, the
Company will be required to expend substantial resources on the establishment of
laboratory facilities for the manufacture of its products. See
"Business--Technology Applications and Product Candidates," "Research and
Development" and "Manufacturing and Marketing."
In connection with the Company's strategy to acquire, develop and commercialize
other potential biotechnology products and technologies, the Company has
licensed from Rutgers University and the University of Medicine and Dentistry of
New Jersey (collectively, "Rutgers"), certain patent applications relating to a
series of compounds for the potential treatment of cancer and infectious
diseases (the "Rutgers License"). The Company also has licensed from The Texas
A&M University System ("Texas A&M"), an issued U.S. patent and certain patent
applications relating to a series of compounds for the potential treatment of
cancer (the "Texas A&M License"). Pursuant to the Rutgers License and the Texas
A&M License (and under its related sponsored research agreements with each of
Rutgers and Texas A&M), the Company intends to expend substantial resources on
the research and development of these compounds.
While there can be no assurance, the Company may acquire additional products and
technologies during the next 12 months, which may or may not be in the cancer
immunotherapy field. Should the Company acquire such additional products or
technologies, it is anticipated that such additional products or technologies
will require substantial resources for research, development and clinical
evaluation. However, there can be no assurance that the Company will be able to
obtain the additional financing necessary to acquire and develop such additional
products and technologies. In addition, there can be no assurance, that changes
in the Company's research and development plans or other changes which would or
could alter the Company's operating expenses will not require the Company to
reallocate funds among its planned activities and curtail certain planned
expenditures. In such event, the Company may need additional financing. There
can be no assurance as to the availability or the terms of any required
additional financing, when and if needed. In the event that the Company fails to
raise any funds it requires, it may be necessary for the Company to
significantly curtail its activities or cease operations
Page 8
<PAGE>
During the past 12 months, the Company hired five new employees and it
anticipates that over the next 12 months it may hire additional employees, and
may establish facilities for the clinical development and manufacture of the AC
Vaccine products or any other technologies which may have been, or may be,
acquired. The timing and cost of hiring any additional employees or the
establishment of any such facility may vary depending on need and cannot
currently be predicted with any certainty.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has concentrated its efforts and resources in
the development and commercialization of biotechnology and pharmaceutical
products and technologies. The Company has been unprofitable since its founding
and has incurred a cumulative net loss of approximately $5,352,323 as of June
30, 1997. The Company expects to incur significantly increasing operating losses
over the next several years, primarily due to the expansion of its research and
development programs, including clinical trials for M-Vax(TM), and other
preclinical studies and clinical trials for other products that may arise from
the AC Vaccine technology and from the compounds licensed from Rutgers and Texas
A&M and other products that it may acquire or develop.
The Company currently anticipates that its current resources should be
sufficient to fund operations for approximately the next 18-30 months based upon
the Company's current operating plan. The Company does not currently expect to
be required to raise additional capital in the next 12 months, although from
time to time, depending upon its anticipated future needs, the Company may avail
itself of opportunities in the capital markets to raise additional capital if
acceptable terms may be obtained. However, since the Company's working capital
requirements will depend upon numerous factors, including, without limitation,
progress of the Company's research and development programs, preclinical and
clinical testing, timing and cost of obtaining regulatory approvals, changes in
levels of resources that the Company devotes to the development of manufacturing
and marketing capabilities, competitive and technological advances, status of
competitors, and the ability of the Company to establish collaborative
arrangements with other organizations, there can be no assurance that the
Company will be able to meets its business objectives under its current
operations plan and/or not need to raise additional capital. Since the Company
has no committed external sources of capital, and expects no product revenues
for the foreseeable future, it will likely require additional financing to fund
future operations. There can be no assurance, however, that the Company will be
able to obtain the additional funds it will require on acceptable terms, if at
all. If adequate funds are not available the Company may be required to delay,
reduce the scope of or eliminate one or more of its research or development
programs; to obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain
technologies, product candidates or products that the Company would otherwise
seek to develop or commercialize itself; or to license the rights to such
products on terms that are less favorable to the Company that might otherwise be
available.
The Company's ability to achieve profitability depends upon, among other things,
its ability to develop products, obtain regulatory approval for its proposed
products, and enter into agreements for product development, manufacturing and
commercialization. The Company's M-Vax(TM) product does not currently generate
revenue and the Company does not expect to achieve revenues from this or other
products for the foreseeable future. Moreover, there can be no assurance that
the Company will ever achieve significant revenues or profitable operations from
the sale of M-Vax(TM) or any other products that it may develop.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGE IN SECURITIES.
On May 7, 1997, the Company filed an amendment to its
Certificate of Incorporation to effectuate a two-for-one
reverse stock split of the Common Stock of the Company (the
"Reverse Stock Split"). As a result of this reverse stock
split, every two shares of Common Stock, par value $.002 per
share issued and outstanding at the close of business on May
13, 1997 was automatically reclassified, and became one share
of Common Stock, par value $.004 per share, of the Company.
The conversion price of the Series B Convertible Preferred
Stock was adjusted, effective June 11, 1997, to $3.83 per
share, which corresponds to a new conversion rate of 26.0875
shares of Common Stock per share of Series B Preferred Stock.
Cash was paid in lieu of the issuance of any fractional shares
that otherwise would have been issuable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER.
In connection with the Reverse Stock Split, the Company
solicited and received written consents from a majority of the
holders of Common Stock and Series B Convertible Preferred
Stock of the Company.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS:
+ 10.16 Sponsored Research Agreement dated May 2,
1997, by and between the Registrant and Rutgers,
The State University of New Jersey and the
University of Medicine and Dentistry.
+ 10.17 Sponsored Research Agreement dated May 12,
1997, by and between the Registrant and Rutgers,
The Texas A&M University System.
11.1 Statement Concerning Computation of Per Share
Earnings.
27.1 Financial Data Schedule.
+ Confidential treatment has been requested as to certain
portions of these exhibits. Such portions have been
redacted.
(B) REPORTS ON FORM 8-K: None.
Page 1
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AVAX Technologies, Inc.
(Registrant)
Date: August 14, 1997
/s/ Jeffrey M. Jonas, M.D.
Jeffrey M. Jonas, M.D.
President and Chief Executive Officer
Date: August 14, 1997
/s/ David L. Tousley
David L. Tousley
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 2
EXHIBIT 10.16
SPONSORED RESEARCH AGREEMENT
THIS SPONSORED RESEARCH AGREEMENT (the "Agreement") is made and is
effective as of this 2nd day of May, 1997, by and between both RUTGERS, THE
STATE UNIVERSITY OF NEW JERSEY, having its principal offices at Old Queens, New
Brunswick, New Jersey 08903 and the University of Medicine and Dentistry
("UMDNJ"), having its principal offices at Newark, New Jersey 07107 (hereinafter
collectively referred to as "Rutgers/UMDNJ"), and AVAX Technologies, Inc., a
corporation having its principal place of business at 4520 Main Street, Ste.
930, Kansas City, Missouri 64111 (hereinafter referred to as "Sponsor"). The
parties to this agreement shall also be referred to hereinafter as "Parties" and
individually identified as "Party" when appropriate. All capitalized terms used
herein and not otherwise defined shall have the meanings ascribed for such terms
in the License Agreement (as hereinafter defined).
WHEREAS, Sponsor, pursuant to the License Agreement dated December
10th, 1996, between Rutgers/UMDNJ and Sponsor (the "License Agreement"), is the
exclusive licensee of Rutgers/UMDNJ's rights to certain inventions (the
"Inventions") disclosed under Rutgers Docket # 94-1003-1 entitled "Noncharged
Bisbenzimidazoles and Trisbenzimidazoles as Mammalian Topoisomerase I Poisons";
Rutgers' Docket # 94-0930-1 entitled "Substituted Benzimidazoles as Mammalian
Topoisomerase I Poisons", Rutgers' Docket # 95-0419-2 entitled "Protoberberines
and Related Compounds as Potent Inhibitors of Mammalian Topoisomerase I",
Rutgers' Docket # 95-0419-3 entitled "Substituted Benzimidazo[2,1-a]-
isoquinolines,5,6-Dihydro-benimidazo [2,1-a]-isoquinolines, and Benzimidazole
as Mammalian Topoisomerase I Poisons" and Rutgers' Docket # 96-0508-1, entitled
"Substituted Benz[a]acridine Derivatives as Novel Topoisomerase I Poisons" were
made in the course of research at Rutgers/UMDNJ by Dr. Edmond LaVoie and Dr.
Leroy Liu (hereinafter, "Inventors");
WHEREAS, Sponsor desires to support research conducted by Rutgers/UMDNJ
upon the terms and conditions as set forth herein including clinical studies and
research programs;
WHEREAS, Rutgers/UMDNJ has the facilities and the personnel with the
requisite skills, experience, and knowledge to undertake such Study; and
WHEREAS, the Study contemplated by this Agreement is of mutual interest
and benefit to Rutgers/UMDNJ and Sponsor, and will further the instructional and
research objectives of Rutgers/UMDNJ in a manner consistent with their status as
a non-profit educational and health care institutions;
NOW, THEREFORE, the parties agree as follows:
1. Description of the Study. Rutgers/UMDNJ and the Principal
Investigators (as defined below) agree to conduct a research program for the
further development of the Inventions (the "Study") during the term of this
agreement. The Study shall be conducted according to the research
1
<PAGE>
protocol which is attached hereto as Exhibit B (the "Research Protocol") and
fully details the research activities and responsibilities to be undertaken for
the first year of the Study. The Research Protocol for each year of the Study
commencing after the first year shall be added to Exhibit B, following the
completion of good-faith negotiations between Sponsor and Rutgers/UMDNJ, which
discussions shall begin ninety (90) days prior to the end of the Study for the
immediately preceding year. Sponsor shall fund this Study for a period of three
(3) years pursuant to paragraph 4 and subject to the termination provisions of
paragraph 7.
2. Principal Investigators. The Principal Investigators (the "Principal
Investigators") shall be Dr. Edmond LaVoie, a full-time employee of Rutgers and
Dr. Leroy Liu, a full time employee of UMDNJ. The Principal Investigators agree
to use their reasonable best efforts to perform the work required under this
Agreement. If either Dr. LaVoie or Dr. Liu is unable to continue to serve as
Principal Investigator and the Parties hereto are unable to agree on a successor
acceptable to both Rutgers/UMDNJ and Sponsor within a reasonable time not to
exceed ninety (90) days, Sponsor may terminate this Agreement in accordance with
paragraph 7.
3. Compliance with Laws. The Study shall be conducted in accordance
with, and the Principal Investigators shall comply with all federal, state, and
local laws and regulations applicable to the Study.
4. Awards and Payments. In consideration of the work to be performed
under this Agreement, Sponsor will provide financial support for the Study in
the amount of $300,000 with an additional $[***] in indirect costs (for research
performed during the time period set forth in paragraph 1 and as more fully set
forth in the budget (the "Budget") attached hereto and included as part of
Exhibit A. The funding for the first year of the Study shall be made to
Rutgers/UMDNJ by Sponsor according to the payment schedule included in Exhibit
A, with the exception that the first such payment shall be made within thirty
(30) days of the Effective Date (defined in Paragraph 6 below). The Budget and
the payment schedule for each year of the Study commencing after the first year
shall be added to Exhibit A at the same time the Research Protocol for such year
is agreed upon in writing between the parties subsequent to the negotiations
contemplated in paragraph 1. Payment for Research Protocols after the first year
shall be made thirty (30) days after the Parties have agreed upon such Research
Protocols in accordance with the immediately preceding sentence.
A portion of the overhead costs normally expected by Rutgers/UMDNJ (57%
of the direct costs) shall be deferred according to the following schedule:
Year Research Funding Overhead Cost (%) Deferred Overhead (%)
- ---- ---------------- ----------------- ---------------------
1 $100,000 $[***] $[***]
2 $100,000 $[***] $[***]
3 $100,000 $[***] $[***]
The total amount of the non-deferred Research Funding shall be $[***]. The
total amount of
[***] Confidential Treatment Requested
2
<PAGE>
deferred overhead costs during the time period of the Agreement equals $[***].
Sponsor agrees to pay to Rutgers/UMDNJ this amount at such time as (a) Sponsor
is selling the Licensed Products under the License Agreement and/or is in
receipt of royalty income in excess of $[***] or (b) this Agreement is
concluded.
5. Independent Contractor. Rutgers/UMDNJ's relationship to Sponsor
under this Agreement shall be that of an independent contractor and not an
agent, joint venturer or partner of Sponsor and shall not otherwise be construed
as creating any other form of legal association or arrangement which would
impose liability upon one party for the act or failure to act of the other
party.
6. Effective Date and Term. This Agreement shall become effective upon
the signing of this Agreement and shall continue in effect for a period of three
(3) years or until completion of the Study or termination of this Agreement
pursuant to paragraph 7. The Study will be deemed completed for purposes of this
paragraph 6 whenever:
(a) the Study is concluded by the Principal
Investigators;
(b) further Research Protocols and/or Budgets are not
agreed to pursuant to Paragraphs 1 and 4 hereof.
7. Termination. This Agreement may be terminated as follows:
(a) Either Party may terminate this Agreement due to
any material breach or default of any material
provision of this Agreement upon receipt of sixty
(60) days prior written notice to the other Party
unless such breach or default is cured within
such sixty (60) day period.
(b) Sponsor may terminate this Agreement upon receipt
of ninety (90) days written notice.
(c) Sponsor may terminate this Agreement upon sixty
(60) days written notice if the Principal
Investigators are unable to complete the Study
and the parties are unable to agree upon a
successor within a reasonable time pursuant to
paragraph 2 hereinabove.
(d) Sponsor may terminate this Agreement with
Rutgers/UMDNJ if either Principal Investigator
leaves the employment of his respective
institution.
If this Agreement is terminated prior to the end of the Term, all funds paid up
to the time of termination shall be considered non-recoverable by Sponsor.
Additionally, Rutgers/UMDNJ's sole damages and remedy shall be to recover from
Sponsor all amounts owed for work completed and non-cancelable expenses
committed through the date of termination based pro-rata upon the figures
[***] Confidential Treatment Requested
3
<PAGE>
in Exhibit A, provided, however, that Sponsor shall reimburse Rutgers/UMDNJ for
non-cancelable employment obligations entered into by Rutgers/UMDNJ as a result
of this Agreement, except for the Principal Investigators, for the remainder of
any Agreement year which has begun and within such year the termination has
occurred. Paragraphs 9 (Confidential Information), 10 (Publication), 11
(Inventions and Patent Rights), 12 (Indemnification), and 13 (Use of Name) shall
survive any termination of this Agreement. Termination of this Agreement shall
have no effect on the rights and obligations of Sponsor contained in the License
Agreement.
8. Research and Clinical Data and Reporting; Site Visits.
(a) The Principal Investigators shall promptly and fully
provide Sponsor with all research and clinical data, including
a copy of laboratory notebooks and case report forms and other
relevant information generated during the Study shall be
freely usable by Sponsor, consistent with paragraphs 9 and 11
hereof. Rutgers/UMDNJ will submit a complete written progress
report after the Study is completed. Rutgers/UMDNJ shall also
submit interim progress reports on a semi-annual basis
providing the Sponsor with a narrative account of the research
performed, expenditures incurred, the results of the research
and the supporting data concerning the research conducted
during said semi-annual period, as the case may be, within
sixty (60) days of the end of such quarter or year.
(b) From time to time during the term of this Agreement,
Sponsor may, upon reasonable notice, send one or more
representatives to Rutgers/UMDNJ to discuss with the Principal
Investigators and their associates the results of the Study
(the "Study Results") and the details of the investigative
techniques being employed therein. The representatives shall
be identified to Rutgers and the timing of such site visits
shall be reasonably acceptable to Rutgers/UMDNJ.
(c) Milestones are expected to change during the course of the
Project and will be jointly agreed to between the Principal
Investigators and Sponsor during the course of expected
monthly meetings.
9. Confidential Information. "Confidential Information" shall mean all
information provided by one Party to the other and clearly identified as
"Confidential" by the transmitting Party at the time of disclosure. If such
transmittal occurs orally, the transmitting party shall promptly reduce such
transmittal to writing, mark and identify it as confidential, and provide such
record to the other Party within thirty (30) days of such oral transmittal.
Specifically excepted from this is all information:
(a) known by the receiving Party prior to the receipt of such
information from the disclosing Party;
(b) that was in the public domain or enters the public domain
through no improper act
4
<PAGE>
on the part of the Sponsor or any of the Sponsor's
employees;
(c) approved for public release by written authorization of
the transmitting party;
(d) rightfully received by the receiving Party without an
express obligation of confidence;
(e) independently developed by personnel of either Party who
are not working under this Agreement; or
(f) disclosed pursuant to any judicial or government request,
requirement or order, provided that the disclosing Party
takes reasonable steps to provide the other Party
reasonable notice to contest such request, requirement or
order.
Subject to the publication provisions of paragraph 10, neither party will
disclose Confidential Information without authorization from the other. This
provision shall remain in effect for three (3) years following the termination
of this Agreement.
10. Publication. Subject to paragraph 9, Rutgers/UMDNJ and Principal
Investigators shall be free to use the Study Results for their own
non-commercial purposes, including teaching, research, education, clinical and
publication purposes. Rutgers/UMDNJ shall submit to Sponsor for its review, a
copy of any proposed written disclosure resulting from the Study at least sixty
(60) days prior to the estimated date of publication, and if no response is
received within thirty (30) days of the date submitted to Sponsor, it will be
conclusively presumed that the publication may proceed without delay. For
abstracts, oral presentations or other proposed public disclosures,
Rutgers/UMDNJ shall submit a copy of such abstract, or oral presentation or
other disclosure to Sponsor no later than thirty (30) days prior to the
estimated date of publication, and if no response is received within fifteen
(15) days of the date submitted to Sponsor, it will be conclusively presumed
that the publication may proceed without day. In accordance with Paragraph 13.3
of the License Agreement, if Sponsor determines that the proposed publication
contains patentable subject matters which require protection, Sponsor may
require the delay of publication for such period as may be required to file such
patent application or other Intellectual Property protection not to exceed
ninety (90) days. Rutgers/UMDNJ, Sponsor, the Principal Investigator, and any
other applicable employee of Rutgers/UMDNJ, including but not limited to the
Inventors, shall cooperate in accordance with Paragraph 13.3 of the License
Agreement so as to enable the filing of any patent applications or other
Intellectual Property protection necessary to protect the proprietary interests
of Sponsor and Rutgers/UMDNJ.
11. Improvements and Patent Rights. It is recognized and understood
that certain existing Inventions and technologies are the separate property of
Sponsor or Rutgers/UMDNJ and are not affected by this Agreement, and neither
Party shall have any claims to or rights in such separate inventions and
technologies. Any Improvements (as that term is defined in Section 1.06(b) of
the License Agreement) ("Improvements") resulting from the Study shall be
promptly disclosed
5
<PAGE>
in writing to Sponsor but in no event shall disclosure of such Improvements by
Rutgers/UMDNJ, the Principal Investigator or other researcher be made to any
third party unless in accordance with this paragraph 11; provided, however, that
title to any new Inventions resulting from the Study shall be in Rutgers/UMDNJ.
Inventorship of such Improvements shall be determined in accordance with patent
law or by mutual agreement if the Improvements is not patentable. To the extent
that Rutgers/UMDNJ owns the rights of sole or joint inventorship of such
Invention, Sponsor is hereby granted, without further consideration, an
exclusive right and license to any Improvements upon the terms and conditions
set forth in the License Agreement and such Invention shall be included as a
part of the Patent Rights and Technology Rights. In addition, if any such
Invention is not patentable or otherwise protectable as a trade secret, Sponsor
shall have the right to use, develop, manufacture, have manufactured, market and
employ any such unpatentable Inventions without the obligation to pay any
royalties.
12. Indemnification.
(a) Sponsor agrees to indemnify, hold harmless and defend
Rutgers/UMDNJ, its trustees, officers, employees, and agents from and against
any and all claims, suits, losses, damages, costs, fees, expenses (including
reasonable attorney's fees), and other liabilities asserted by third parties,
both government and non-government, resulting from or arising out of the Study
carried out pursuant to this Agreement; provided, however, that Sponsor shall
not be liable for (a) the negligence, intentional wrongdoing, or failure to
follow the Research Protocol of the Principal Investigators, Rutgers/UMDNJ, its
trustees, officers, employees and agents and (b) any and all claims for damages
to Rutgers/UMDNJ property or for bodily injury, death or property damage to
employees of Rutgers/UMDNJ or to any third party acting on behalf of or under
the authorization of Rutgers/UMDNJ arising out of the performance of this
Agreement, except for the negligent or intentional acts solely of the Sponsor
with respect to both (a) and (b) above. Without limiting the foregoing, except
for the negligence or willful misconduct of Rutgers/UMDNJ, Sponsor agrees to
indemnify and defend Rutgers/UMDNJ from all liabilities, demands, damages,
expenses and losses (including reasonable attorney fees and expenses of
litigation) arising out of the use by Sponsor, or any party acting on behalf of
or under authorization from Sponsor, of the Study Results or out of any use,
sale or other disposition by Sponsor, or by any party acting on behalf of or
under authorization from Sponsor, of products made or developed incorporating
the Study Results or made by a process incorporating the Study Results. This
paragraph shall survive termination of this Agreement.
(b) Rutgers/UMDNJ agrees to indemnify, hold harmless and defend the
Sponsor, its directors, officers, employees, and agents from and against any and
all claims, suits, losses, damages, costs, fees, expenses (including reasonable
attorney's fees), and other liabilities asserted by third parties, both
government and non-government, resulting from or arising out of the Study
carried out pursuant to this Agreement as a result of the negligence,
intentional wrongdoing of Rutgers/UMDNJ, its trustees, officers, employees and
agents and any and all claims for bodily injury, death or property damage to
employees of Rutgers/UMDNJ or to any third party acting on behalf of or under
the authorization of Rutgers/UMDNJ arising out of the performance of this
Agreement, provided, however, that Rutgers/UMDNJ shall not be liable for the
negligent or intentional acts solely of the
6
<PAGE>
Sponsor. Rutgers/UMDNJ, its trustees, officers, employees and agents shall incur
no liability under this Section 12(b) with respect to any claims, suits, losses,
damages, costs, fees, expenses (including reasonable attorney's fees), and other
liabilities asserted by third parties, both government and non-government, as a
result of product liability and/or patent infringement.
13. Use of a Party's Name. Neither Party will, without the prior
written consent of the other Party, use in advertising, publicity, or otherwise,
the name, trademark, logo, symbol, or other image of the Party or that Party's
employee or agent; provided, however, that Rutgers/UMDNJ ac knowledges and
agrees that Sponsor may use Rutgers/UMDNJ's name and references to this
Agreement and related agreements and the names of the their employees
(including, without limitation, the Principal Investigators) as they may relate
to such agreements in any private placement memorandum, prospectus, registration
statement or any similar disclosure document used by Sponsor for capital raising
and financing purposes as may be required by and in accordance with applicable
laws without such prior written consent. Rutgers/UMDNJ may list the existence of
this Agreement in its internal documents and annual reports and databases which
are available to the public and identify the Project by title, Principal
Investigators, Sponsor, and period and amount of funding.
14. Equipment. Subject to paragraph 11 hereof, title to any equipment,
materials, sup plies and things of value purchased, built, manufactured or
acquired either from Sponsor or from third parties in conjunction with
performance of the Study shall vest in Rutgers/UMDNJ. All such equipment
purchased and/or fabricated by Rutgers/UMDNJ with the funds provided by Sponsor
shall be and remain the property of Rutgers/UMDNJ.
15. Notice. Any notice or other communication required or permitted
under the Agreement shall be in writing and will be deemed be effective on the
date of delivery if delivered in person, by facsimile where confirmed by the
receiving party or if mailed by registered or certified mail (return receipt
requested) to the respective addresses given below, or to such other address as
it shall designate by written notice given to the other party:
If to Rutgers:
- -------------
Rutgers, The State University of New Jersey
Office of Corporate Liaison and Technology Transfer
P.O. Box 1179
ASB Annex II, Bevier Road, Busch Campus
Piscataway, NJ 08855-1179
Attn: Director
Fax: (908) 445-5670
If to UMDNJ:
- -----------
UMDNJ
Office of Patents and Licensing
45 Knightsbridge Road
7
<PAGE>
P.O. Box 6810
Piscataway, NJ 08855-6810
Attn: Director
Fax: (908) 235-4449
If to Sponsor:
- -------------
President and CEO
AVAX Technologies, Inc.
4520 Main Street, Ste. 930
Kansas City, Missouri 64111
Attn: Dr. Jeff Jonas
Fax: (816) 960-1334
16. Modification. Any alteration, modification, or amendment to this
Agreement must be in writing and signed by both parties. No changes in the
Research Protocol will be made unless agreed upon in writing by Rutgers/UMDNJ,
Principal Investigators, and Sponsor or unless necessary to protect the safety,
rights, or welfare of the patients or research subjects.
17. Assignment. This Agreement and the rights and duties appertaining
thereto may not be assigned by either Party without first obtaining the written
consent of the other. Any such purported assignment, without the written consent
of the other Party, shall be null and void and of no binding effect.
Notwithstanding the foregoing, Rutgers/UMDNJ or Sponsor may assign this
Agreement to the following:
(a) a purchaser, merging or consolidating
corporation, or acquiror of substantially all of
Rutgers/UMDNJ's or Sponsor's assets or business;
or
(b) an Affiliate of Rutgers/UMDNJ or Sponsor subject
to the consent of the other Party, which consent
shall not be unreasonably withheld.
18. Governing Law. The laws of the State of New Jersey shall govern
this Agreement without regard to principles of conflict of laws.
19. Arbitration. In the event that a Party to this Agreement perceives
the existence of a dispute arising from or relating to any provision of this
Agreement, the Parties shall, as soon as practicable, confer in an attempt to
resolve the dispute. If within a reasonable time not to exceed sixty (60) days
from the first notification of a dispute a resolution is not forthcoming, the
dispute shall be determined before a tribunal of three arbitrators in New York,
New York in accordance with the rules of the American Arbitration Association.
One arbitrator shall be selected by Rutgers/UMDNJ, one arbitrator shall be
selected by Sponsor and the third arbitrator shall be selected by mutual
agreement of the first two arbitrators. The costs of such arbitration shall be
borne by the nonprevailing Party. Judgment on the arbitration award may be
entered by any court of competent jurisdiction.
8
<PAGE>
20. Warranties. RUTGERS/UMDNJ MAKES NO WARRANTIES, EXPRESSED OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE OF THE STUDY OR ANY INVENTION OR PRODUCT INCORPORATING THE
STUDY RESULTS. RUTGERS/UMDNJ WILL NOT BE LIABLE FOR ANY DIRECT, CONSEQUENTIAL,
OR OTHER DAMAGES RESULTING FROM THE USE OF THE RESEARCH OR ANY SUCH INVENTION OR
PRODUCT.
RUTGERS/UMDNJ MAKES NO REPRESENTATION OR WARRANTY REGARDING ACTUAL OR
POTENTIAL INFRINGEMENT OF PATENTS COPYRIGHTS OR OTHER INTELLECTUAL PROPERTY OF
THIRD PARTIES.
21. Miscellaneous.
(a) Any of the provisions of this Agreement which are
determined to be invalid or unenforceable in any
jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or
unenforceable the remaining provisions hereof or
affecting the validity or unenforceability of any
of the terms of this Agreement in any other
jurisdiction.
(b) The headings and captions used in this Agreement
are for convenience of reference only and shall
not affect its construction or interpretation.
(c) Nothing in this Agreement, express or implied, is
intended to confer on any person other than the
Parties hereto or their permitted assigns, any
benefits, rights or remedies.
9
<PAGE>
IN WITNESS WHEREOF, the Parties, intending to be legally bound, have
caused this Agreement to be executed by their duly authorized representatives.
Sponsor:
AVAX TECHNOLOGIES, INC.
By: /s/ Dr. Jeffrey Jonas
-------------------------------------
Name: Dr. Jeff Jonas
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
Date: 5/1/97
-------------------------------------
Rutgers:
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
By: /s/ William Adams
-------------------------------------
Name: William Adams
-------------------------------------
Title: Director
-------------------------------------
Date: 4/29/97
-------------------------------------
UNIVERSITY OF MEDICINE AND DENTISTRY
By: /s/ L.M. Stephenson
-------------------------------------
Name: L.M. Stephenson
-------------------------------------
Title: Director, Patents & Licensing
-------------------------------------
Date: 5/1/97
-------------------------------------
Acknowledged and Approved:
/s/ Dr. Edmond LaVoie
--------------------------------------------
Principal Investigator
Name: Dr. Edmond LaVoie
--------------------------------------
Date: 4/28/97
--------------------------------------
/s/ Dr. Leroy Liu
--------------------------------------------
Principal Investigator
Name: Dr. Leroy Liu
--------------------------------------
Date: 4/28/97
--------------------------------------
10
<PAGE>
Exhibit A
Budget Allocations Projected for Year 1
The major objective of this program is to advance the development of
terbenzimidazoles and protoberberines and related compounds as clinical
topoisomerase I poisons. A full time Research Assistant, working together with
Dr. Zhao, under the direction of Professor LaVoie will advance these research
programs.
Personnel:
- ----------------------------------------------------------------------------
Fringe
Effort Cost Benefits Total
- ----------------------------------------------------------------------------
E.J. LaVoie, Ph.D. 40% $12,190 $0 $12,190
(Summer Salary)
- ----------------------------------------------------------------------------
Bao-Ping Zhao 50% $21,000 $4,620 $25,620
- ----------------------------------------------------------------------------
Research Assistant 100% $32,000 $7,040 $39,040
(22%)
============================================================================
Total Personnel: $76,850
- ----------------------------------------------------------------------------
Supplies:
-----------------------------------------------
Chemicals, Solvents, Gases $12,500
-----------------------------------------------
Glassware $2,000
-----------------------------------------------
Chromatography Absorbents $2,500
-----------------------------------------------
Total Supplies $17,000
-----------------------------------------------
Other:
-----------------------------------------------
Equipment Repair $1,200
-----------------------------------------------
Mass Spectrometry $2,000
-----------------------------------------------
Elemental Analyses $ 500
-----------------------------------------------
NMR Spectrometry $1,500
-----------------------------------------------
Office Costs $ 950
-----------------------------------------------
Total Miscellaneous Costs $6,150
-----------------------------------------------
Total Direct Costs: $100,000
<PAGE>
Exhibit A (Continued)
This budget will essentially remain similar for years 2-3.
Normal annual costs: $ 100,000 direct costs
[***] indirect costs @ 57%
---------
$ [***] total costs
Special Indirect Cost Schedule: Year 1 Year 2 Year 3
- ------------------------------- ------ ------ ------
Normal IC @ 57% $[***] $[***] $[***]
Available IC @ 25% $[***]
------
Available IC @ 30% $[***]
------
Available IC @ 35% $[***]
------
Net Reduction (Deferred Indirect) $[***] $[***] $[***]
Total Budget for Year 1
$100,000 + $[***] (indirect costs not deferred) = $[***]
Total Budget for Year 2
$100,000 + $[***] (indirect costs not deferred) = $[***]
Total Budget for Year 3
$100,000 + $[***] (indirect costs not deferred) = $[***]
Deferred Indirect Costs of $[***] to be paid according to Article 4.
[***] Confidential Treatment Requested
<PAGE>
Exhibit B
The objectives associated with this research agreement can be divided into three
distinct categories. These are [***]. This document outlines the specific aims
which will be undertaken in the advancement of these objectives.
[***]
[***] Confidential Treatment Requested
EXHIBIT 10.17
SPONSORED RESEARCH AGREEMENT
----------------------------
This Research Agreement (the "Agreement") dated as of May 12, 1997 is
entered into by and between The Texas A&M University System ("University"), with
principal offices in College Station, Texas, and Avax Technologies, Inc.
("Sponsor"), a Delaware corporation having its principal place of business at
4520 Main Street, Ste. 930, Kansas City, MO, 64111. All capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed for
such terms in the License Agreement (as hereinafter defined).
WHEREAS, Sponsor, pursuant to the License Agreement dated February 17,
1997 between University and Sponsor (the "License Agreement"), is the exclusive
licensee of University's rights to certain patent applications (as more fully
defined therein) relating to a family of molecules known as the
Alkyl-Substituted Dibenzofurans.
WHEREAS, Sponsor desires to support research conducted by University
upon the terms and conditions as set forth herein;
WHEREAS, University has the facilities and the personnel with the
requisite skills, experience, and knowledge to undertake such Study; and
WHEREAS, the Study contemplated by this Agreement is of mutual interest
and benefit to University and Sponsor.
NOW, THEREFORE, the parties agree as follows:
1. Description of the Study and Budget. University and the Principal
Investigator agree to conduct research at the Texas Agricultural Experimentation
Station of the Texas A&M University System to further develop the dibenzofurans
technology (the "Study"). The Study shall be conducted in accordance with the
plan of work, attached hereto as Exhibit A and forming a part of this Agreement.
The Principal Investigator (as defined in the below paragraph 2) may make shifts
among items of expense when necessary to accomplish objectives of the Study.
2. Principal Investigator. The Principal Investigator (the "Principal
Investigator"), a full-time employee of the University, shall be Dr. Stephen
H. Safe. The Principal Investigator agrees to use best efforts to perform the
work required under this Agreement. If Dr. Safe is unable to continue to
serve as Principal Investigator and the parties hereto are unable to agree on
a successor acceptable to both University and Sponsor within a reasonable
time not to exceed ninety (90) days, the Agreement shall be terminated in
accordance with Paragraph 7.
<PAGE>
3. Compliance with Laws. The Study will be conducted in
accordance with, and the Principal Investigator shall comply with all
federal, state, and local laws and regulations applicable to the Study.
4. Awards and Payments. In consideration of the work to be performed
under this Agreement as set forth in Exhibit A, Sponsor shall provide financial
support for the Study as set forth in the budget (the "Budget") attached hereto
as Exhibit B and forming a part of this Agreement. The Budget for the first year
of the Study, and extensions mutually agreed upon by the parties, shall be
payable in accordance with the payment schedule included in Exhibit B, with the
exception that the first such payment by Sponsor to University shall be due
ninety (90) days from the Effective Date (as defined in Paragraph 6 below).
Subject to the immediately succeeding sentence, the exact Budget for each year
of the Study commencing after the first year shall be added to Exhibit at the
same time the Research Protocol for such year is added to Exhibit A pursuant to
Paragraph 1 and shall be part of the negotiations contemplated in Paragraph 1.
Subject to Paragraph 7 of this Agreement, Sponsor shall provide University with
sponsored research funding of Dr. Stephen H. Safe's laboratory at University in
the amount of not more than $108,750 for each of the first three agreement years
unless such greater amount is mutually agreed to by the parties hereto.
5. Independent Contractor. University and the Principal Investigator's
relationship to Sponsor under this Agreement shall be that of an independent
contractor and not an agent, joint venturer or partner of Sponsor and shall not
otherwise be construed as creating any other form of legal association or
arrangement which would impose liability upon one Party for the act or failure
to act of the other Party.
6. Effective Date and Term. The "Effective Date" shall be thirty (30)
days from the date of the signing of this Agreement. This Agreement shall
continue in effect for three (3) years or until completion of the Study (the
"Term") or termination of this Agreement pursuant to Paragraph 7 herein. The
research proposal set forth in Exhibit A shall be deemed completed for the
purposes of this Paragraph 6 whenever:
(a) the Study is concluded by the Principal Investigator;
(b) the Principal Investigator leaves the employ of the
University.
7. Termination. This Agreement may be terminated as follows:
(a) Either Party may immediately terminate this Agreement due
to any material breach or default of any material
provision of this Agreement upon sixty (60) days prior
written notice to the other Party unless such breach or
default is cured within such sixty (60) day period.
<PAGE>
(b) Sponsor may terminate this Agreement upon ninety (90)
days written notice.
(c) Sponsor may terminate this Agreement upon thirty (30)
days written notice if the Principal Investigator is
unable to complete the Study and the parties are unable
to agree upon a successor within a reasonable time
pursuant to Paragraph 2 hereinabove.
(d) Sponsor may terminate this Agreement if the
Principal Investigator leaves the employment of the
University.
If this Agreement is terminated prior to the end of the Term, all funds paid to
the time of termination shall be considered non-recoverable. Also, University's
sole damages and remedy shall be to recover from Sponsor all amounts owed for
work completed and expenses committed through the date of termination based
pro-rata upon the figures in Exhibit A; provided, however, that Sponsor shall
continue to pay to University for all non-cancelable employment obligations
incurred by University as a result of this Agreement, except for the Principal
Investigator, for the remainder of any Agreement year which has begun and within
such year the termination has occurred. Paragraphs 9 (Confidential Information),
10 (Publication), 11 (Inventions and Patent Rights), 12 (Indemnification), and
13 (Use of Name) shall survive any termination of this Agreement.
Termination of this Agreement shall have no effect on the rights and obligations
of the Sponsor in contained in the License Agreement.
8. Research Data and Reporting; Site Visits.
(a) All research data, including copies of laboratory
notebooks and other relevant information generated during the Study shall be
promptly and fully disclosed to Sponsor, and shall be freely usable by Sponsor
consistent with good business judgment. University shall submit a complete
written progress report after the Study is completed. The Principal
Investigator, with the concurrence of the University, shall submit interim
progress reports not less than annually nor more than quarterly, providing the
Sponsor with a narrative account of the research performed, expenditures
incurred, the results of the research and the supporting data concerning the
research conducted during such period, within (60) days of the end of such
quarter or year, as the case may be.
(b) From time to time during the term of this Agreement,
Sponsor may, upon reasonable notice, send one or more representatives to the
University to discuss with the Principal Investigator and their associates the
results of the Study and the details of the investigative techniques being
employed therein. The representatives shall be identified to University and the
timing of such site visits shall be reasonably acceptable to University.
<PAGE>
(c) Milestones are expected to change during the course of the
Study and shall be jointly agreed to between the Principal Investigator and
Sponsor during the course of expected monthly meetings.
9. Confidential Information. "Confidential Information" shall mean
all information provided by one Party to the other and clearly
identified as "Confidential" by the transmitting Party at the time of
disclosure. If such transmittal occurs orally, the transmitting Party will
promptly reduce such transmittal in writing, mark and identify it as
confidential, and provide such record to the other Party. Specifically
excepted from this is all information:
(a) known by the receiving Party prior to the receipt
of such information from the disclosing Party;
(b) that was in the public domain or enters the public
domain through no improper act on the part of the
Sponsor or on the part of any of the Sponsor's employees;
(c) subject to Paragraph 10 of this Agreement, which has
been approved for public release by written
authorization by the Foundation;
(d) rightfully received by the receiving Party
without an express obligation of confidence;
(e) independently developed by personnel of either Party
who are not working under this Agreement; or
(f) disclosed pursuant to any judicial or government request,
requirement or order, provided that the disclosing Party
takes reasonable steps to provide the other Party to
contest such request, requirement or order.
Subject to publication provisions of Paragraph 10, neither Party will disclose
the other Party's Confidential Information without prior written authorization
from the other. This provision shall remain in effect for five (5) years
following the termination of this Agreement.
10. Publication. Subject to Paragraph 9, University and Principal
Investigator shall be free to use the results of the research for their own
non-commercial purposes, including teaching, research, education, clinical and
publication purposes, without the payment of royalties or other fees. University
shall submit to Sponsor for its review, a copy of any proposed written, oral or
other disclosure which relates to the Patent Rights, Licensed Improvements and
Technology (as those terms are defined in the License Agreement) at least sixty
(60) days prior to the estimated date of publication, and if no
<PAGE>
response is received within thirty (30) days of the date submitted to Sponsor,
it will be conclusively presumed that the publication may proceed without delay.
For abstracts, oral presentations or other proposed public disclosures,
University shall submit a copy of such abstract, or oral presentation or other
disclosure to Sponsor no later than thirty (30) days prior to the estimated date
of publication, and if no response is received within fifteen (15) days of the
date submitted to Sponsor, it will be conclusively presumed that the publication
may proceed without day. If Sponsor determines that the proposed publication
contains information that should remain proprietary Sponsor may request that
such information be removed from the proposed publication or disclosure. If
Sponsor determines that such disclosures contain patentable subject matters
which require protection, Sponsor may require the delay of publication for such
period as may be required to file such patent application or other Intellectual
Property protection. University, Sponsor, the Principal Investigator and any
other applicable employee of University shall cooperate so as to enable the
filing of any patent applications or other Intellectual Property protection
necessary to protect the proprietary interests of Sponsor and University.
11. Inventions and Patent Rights. It is recognized and understood that
certain existing inventions and technologies are the separate property of
Sponsor or University and are not affected by this Agreement, and neither Party
shall have any claims to or rights in such separate inventions and technologies.
Any new inventions, developments or discoveries (including, without limitations,
technical information, know-how, and Improvements [as that term is defined in
the License Agreement]) (collectively referred to hereinafter as the
"Inventions") resulting from the Study shall be promptly disclosed in writing to
Sponsor but in no event shall disclosure of such Invention by University, the
Principal Investigator or other researcher be made to any third Party unless in
accordance with Paragraph 10. Title to any new Inventions resulting from the
Study shall be in University if discovered by University employees, and in
Sponsor if discovered by employees of Sponsor. Inventorship of such Inventions
shall be determined in accordance with patent law or by mutual agreement if the
Invention is not patentable. To the extent that University owns the rights of
sole or joint inventorship of such Invention, Sponsor is hereby granted, without
further consideration, an exclusive worldwide right and license to any
patentable Invention upon the terms and conditions set forth in the License
Agreement if Sponsor elects to fund the patent prosecution of such Invention and
such patentable Invention shall be included as a part of the Patent Rights. In
addition, if any such Invention is not patentable or otherwise protectable as a
trade secret, Sponsor shall have the right to use, develop, manufacture, have
manufactured, market and employ any such unpatentable Inventions without the
obligation to pay any royalties.
12. Indemnification.
(a) Sponsor agrees to indemnify, hold harmless and defend
University, its trustees, officers, employees, and agents from and against any
and all claims, suits, losses, damages, costs, fees, expenses (including
reasonable attorney's fees), and other liabilities asserted by third parties,
both government and non-government, resulting from
<PAGE>
or arising out of the Study carried out pursuant to this Agreement; provided,
however, that Sponsor shall not be liable for (a) the negligence, intentional
wrongdoing, or failure to follow the Research Protocol of the Principal
Investigators, University, its trustees, officers, employees and agents and (b)
any and all claims for damages to University property or for bodily injury,
death or property damage to employees of University or to any third party acting
on behalf of or under the authorization of University arising out of the
performance of this Agreement, except for the negligent or intentional acts
solely of the Sponsor with respect to both (a) and (b) above. Without limiting
the foregoing, except for the negligence or willful misconduct of University,
Sponsor agrees to indemnify and defend University from all liabilities, demands,
damages, expenses and losses (including reasonable attorney fees and expenses of
litigation) arising out of the use by Sponsor, or any Party acting on behalf of
or under authorization from Sponsor, of the Study Results or out of any use,
sale or other disposition by Sponsor, or by any Party acting on behalf of or
under authorization from Sponsor, of products made or developed incorporating
the Study Results or made by a process incorporating the Study Results. This
paragraph shall survive termination of this Agreement.
(b) University agrees, to the extent permitted by the laws of
the State of Texas, to indemnify, hold harmless and defend the Sponsor, its
directors, officers, employees, and agents from and against any and all claims,
suits, losses, damages, costs, fees, expenses (including reasonable attorney's
fees), and other liabilities asserted by third parties, both government and
non-government, resulting from or arising out of the Study carried out pursuant
to this Agreement as a result of the negligence, intentional wrongdoing of
University, its trustees, officers, employees and agents and any and all claims
for bodily injury, death or property damage to employees of University or to any
third party acting on behalf of or under the authorization of University arising
out of the performance of this Agreement, provided, however, that University
shall not be liable for the negligent or intentional acts solely of the Sponsor.
University, its trustees, officers, employees and agents shall incur no
liability under this Section 12(b) with respect to any claims, suits, losses,
damages, costs, fees, expenses (including reasonable attorney's fees), and other
liabilities asserted by third parties, both government and non-government, as a
result of product liability and/or patent infringement.
13. Use of a Party's Name. Neither Party shall, without the prior
written consent of the other Party, use in advertising, publicity, or otherwise,
the name, trademark, logo, symbol, or other image of the Party or that Party's
employee or agent; provided, however, that University acknowledges and agrees
that Sponsor may use University's name and references to this Agreement and
related agreements and the names of the their employees (including, without
limitation, the Principal Investigator) as they may relate to such agreements in
any private placement memorandum, prospectus, registration statement or any
similar disclosure document used by Sponsor for capital raising and financing
purposes as may be required by and in accordance with applicable laws without
such prior written consent.
<PAGE>
14. Notice. Any notice or other communication required or permitted
under the Agreement shall be in writing and will be deemed given as of the
date it is received by the receiving Party. Notice shall be given to the
parties at the addresses listed below:
If to University:
Dr. Stephen H. Safe
Texas A&M University
Department of Veterinary Physiology & Pharmacology
College Station, TX 77843-4466
Office of Technology Transfer
Attn: John C. Key, III
Technology Licensing Manager
The Texas A&M University System
310 Wisenbaker
College Station, TX 77843-3369
If to Sponsor:
Dr. Jeff Jonas
President and Chief Executive Officer
Avax Technologies, Inc.
4520 Main Street, Ste. 930
Kansas City, MO 64111
15. Modification. Any alteration, modification, or amendment to this
Agreement must be in writing and signed by both parties. No changes in the
Research Protocol will be made unless agreed upon by University, Principal
Investigator, and Sponsor or unless necessary to protect the safety, rights, or
welfare of the patients or research subjects.
16. Assignment. This Agreement and the rights and duties
appertaining thereto may not be assigned by either Party without first
obtaining the written consent of the other. Any such purported assignment,
without the written consent of the other Party, shall be null and of no
effect. Notwithstanding the foregoing, University or Sponsor may assign this
Agreement to the following:
(a) a purchaser, merging or consolidating corporation, or
acquiror of substantially all of University's or
Sponsor's assets or business; or
(b) an Affiliate of University or Sponsor subject to the
consent of the other Party which consent shall not be
unreasonably withheld.
<PAGE>
17. Miscellaneous.
(a) Any of the provisions of this Agreement which are
determined to be invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the remaining
provisions hereof or affecting the validity or unenforceability of any of the
terms of this Agreement in any other jurisdiction.
(b) The headings and captions used in this Agreement are for
convenience of reference only and shall not affect its construction or
interpretation.
(c) Nothing in this Agreement, express or implied, is intended
to confer on any person other than the parties hereto or their permitted
assigns, any benefits, rights or remedies.
<PAGE>
IN WITNESS WHEREOF, the parties, intending to be legally bound, have
caused this Agreement to be executed by their duly authorized representatives.
Sponsor:
AVAX TECHNOLOGIES, INC.
By: /s/ Dr. Jeffrey Jonas
-------------------------------------
Name: Dr. Jeffrey Jonas
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
Date: 5/12/97
-------------------------------------
TEXAS AGRICULTURAL EXPERIMENT
STATION:
By: /s/ Barry Thompson
-------------------------------------
Name: Barry Thompson
-------------------------------------
Title: Chancellor
-------------------------------------
Date: 5/12/97
-------------------------------------
Acknowledged and Approved:
By: /s/ Steven H. Safe
-------------------------------------
Name: Dr. Steven H. Safe
-------------------------------------
Title: Principal Investigator
-------------------------------------
Date: 5/12/97
-------------------------------------
<PAGE>
EXHIBIT A
---------
ANTIESTROGENIC ACTIVITIES OF ALTERNATED-SUBSTITUTED
ALKYL PCDFs - PROPOSED STUDIES
S. Safe
Department of Veterinary Physiology & Pharmacology
Texas A&M University
College Station, TX 77843-4466
Background
[***]
Proposed Studies
1. [***]
2. [***]
[***] Confidential Treatment Requested
<PAGE>
EXHIBIT B
ANNUAL BUDGET
-------------
EST. SALARY
% EFFORT + FRINGE AMOUNT
- -----------------------------------------------------------------------
PERSONNEL
- ---------
Research Assistant for
chemical synthesis 100% $30,000
Graduate research assistant
for biology/toxicology 100% $19,000
Secretarial/data analysis 8% $21,500
SUB-TOTAL $ 51,500
CHEMICALS
- ---------
Purchase of chemical intermediates, glassware,
equipment, chromatographic supplies, upgrade
of gas chromatograph, NMR and GC-MS services $ 13,500
ANIMALS
- -------
Cost of carcinogenesis preliminary
toxicology studies $ 10,000
--------
TOTAL DIRECT COSTS $ 75,000
TOTAL INDIRECT COSTS $ 33,750
========
TOTAL $108,750
ESTIMATED COST FOR A THREE (3) YEAR COMMITMENT $326,250
Exhibit 11
AVAX Technologies, Inc.
Computation of Earnings (Loss) Per Share
<TABLE>
<CAPTION>
Six Six
Month of Months O/S Weighted Year Year Months Months
Issuance For Number of Each Given Average Ended Ended Ended Ended
F/S Purposes Shares Year Shares 1995 1996 30-Jun-96 30-Jun-97
<S> <C> <C> <C> <C> <C> <C> <C>
January '90 582,500 582,500 582,500 582,500 582,500
August '91 230,000 230,000 230,000 230,000 230,000
June '92 287,098 287,098 287,098 287,098 287,098
Series A Preferred:
June '92 259,375 (a) (a) (a)
July '92 59,375
Sept '92 3,125
321,875 321,875
July '93 7,358
November '93 1,359
8,717 8,717 8,717 8,717 8,717
July '94 3,750 - 3,750 3,750 3,750 3,750
April '95 (111,330) 8.5 (78,859) (78,859)
May '95 (196,618) 7.5 (122,886) (122,886)
September '95 402,490 3.5 117,393 (b)
November '95 1,374,728 2.5 286,402 (b)
1,469,270 202,050 1,469,270 1,469,270 1,469,270
March '96 (77,901) 9.5 (61,672) (45,442)
May & June '96 321,875 7 187,760 53,646
May & June '96 129,099 7 75,308 21,517
June '96 500 6.5 271 42
July '96 (d) 46,875 5.5 21,484
420,448 223,152 223,152 420,448
June '97 (g) 371,755 0.5 15,490 15,490
Cheap Shares:
September and
November '95 1,777,218
Treasury Shares (1,814)
1,775,404 1,775,404
June '96 9,375
Treasury Shares (96)
9,279 9,279 9,279 9,279 9,279
CheapWarrants (c):
January and February '96
and August '95 120,000
Treasury Shares (1,225)
118,775 118,775 118,775 118,775 118,775
June, July and ( f )
September '92 warrants 35,337
Treasury Shares (23,348)
11,989 11,989 11,989 11,989 11,989
Cheap Options (e)
May '96 318,873
Treasury Shares (81,345)
237,528 237,528 237,528 237,528 237,528
</TABLE>
<PAGE>
AVAX Technologies, Inc.
Computation of Earnings (Loss) Per Share (continued)
<TABLE>
<S> <C> <C> <C> <C>
Weighted Average Shares 3,385,171 3,182,058 2,988,668 3,394,844
Net Income (Loss) Attributable to Common Stockholders 642,282 (2,668,586) (1,636,821) (2,098,301)
Net Income (Loss) Per Share $ 0.19 $ (0.84) $ (0.55) $ (0.62)
</TABLE>
(a)- Not included because it would be anti-dilutive
(b - see cheap shares
(c)- represents bridge loan warrants (100,000) issued within one year of
IPO, exercised after June '96 Also includes 20,000 bridge placement
warrants issued within one year of IPO, not yet exercised, and excludes
11,250 bridge placement warrants issued prior to June '95, not yet
exercised (20,000 + 11,250 = 31,250 total bridge placement warrants)
(d)- represents the non-cheap portion of the bridge warrants exercised in
July issued prior to June '95 (9,375 + 100,000 + 46,875 = 156,250 total
bridge warrants)
(e)- 252,500 options issued to Officers and an employee in September not
considered cheap options since issued subsequent to IPO and not
included because it would be anti-dilutive
(f)- represents additional warrants, exercised in June '97 in cashless
exercise, issued under anti-dilution provisions within one year of IPO
(g)- includes 14,433 additional warrants, exercised in June '97 in a
cashless exercise, issued under anti-dilution provisions more than one
year prior to IPO
<PAGE>
AVAX Technologies, Inc.
Computation of Supplementary Earnings (Loss) Per Share
<TABLE>
<CAPTION>
Six Six
Year Months Months
Ended Ended Ended
1996 30-Jun-96 30-Jun-97
<S> <C> <C> <C> <C>
Net Income (Loss) Attributable to Common Stockholders (2,668,586) (1,636,821) (2,098,301)
Interest on Debt Repaid 55,247 55,247 -
Deferred Financing Cost related to Debt Repaid - - -
---------- ---------- ----------
Supplementary Net Income (Loss) (2,613,339) (1,581,574) (2,098,301)
--------- --------- ----------
Weighted Average Shares 3,182,058 2,988,668 3,394,844
Additional Shares:
Conversion of Series A Preferred 321,875 321,875 (f)
Less:Series A Preferred included in primary calculation (187,760) - -
Common Stock Equivalents sold to retire debt 320,664 320,664 320,664
--------- --------- ---------
Supplementary Weighted Average Shares 3,636,837 3,631,207 3,715,508
--------- -------- ---------
Supplementary Net Income (Loss) per share $ (0.72) $ (0.44) $ (0.56)
</TABLE>
(f) - Included in weighted average shares for primary calculation
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 29, 1997 (except Note 1, as to which the date is
May 7, 1997) in Post-Effective Amendment No. 1 to the Registration Statement
(Form SB-2 No. 333-09349) and related Prospectus of AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.) for the registration of 7,047,788 shares of
common stock.
/s/ Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
August 13, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S REGISTRATION STATEMENT ON FORM SB-2, FILE NO. 333-09349
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 20,968,831 9,707,661
<SECURITIES> 0 8,182,100
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 21,952,624 19,175,400
<PP&E> 0 71,689
<DEPRECIATION> 0 7,589
<TOTAL-ASSETS> 23,084,002 19,239,500
<CURRENT-LIABILITIES> 1,209,231 1,405,134
<BONDS> 0 0
0 0
2,592 2,449
<COMMON> 11,857 14,073
<OTHER-SE> 20,729,249 17,834,366
<TOTAL-LIABILITY-AND-EQUITY> 20,743,698 19,239,500
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 460,259 463,359
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 206,222 (81,238)
<INCOME-PRETAX> (505,077) 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (505,077) (2,098,301)
<EPS-PRIMARY> (0.27) (.62)
<EPS-DILUTED> 0 0
</TABLE>
