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As filed with the Securities and Exchange Commission on August 17, 1998
Registration No. 333-09349
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 6
ON
FORM S-3
TO
REGISTRATION STATEMENT
ON FORM SB-2
UNDER THE SECURITIES ACT OF 1933
AVAX TECHNOLOGIES, INC.
(Exact Name of Registrant in Its Charter)
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Delaware 13-3575874
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4520 Main Street
Suite 930
Kansas City, MO 64111
(816) 960-1333
www.avax-tech.com
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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Copy to:
JEFFREY M. JONAS, M.D. IRA L. KOTEL
President and Chief Executive Officer Roberts, Sheridan & Kotel
4520 Main Street A Professional Corporation
Suite 930 12 East 49th Street, 30th floor
Kansas City, MO 64111 New York, New York 10017
(816) 960-1333 (212) 299-8600
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Approximate date of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the follow box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: |_|
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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Information contained may herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities not be sold nor may offers
to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Information contained may herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities not be sold nor may offers
to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
Subject to Completion, Dated August 17, 1998
526,559 Shares
AVAX TECHNOLOGIES, INC.
Common Stock
This Prospectus relates to the offer (the "Offering") by the securityholders
named herein under the caption "Selling Securityholders" (collectively, the
"Selling Securityholders") for sale to the public of the following securities of
AVAX Technologies, Inc. (the "Company"): (i) 228,348 shares of the Company's
common stock, par value $.004 per share (the "Common Stock"); (ii) 260,874
shares of Common Stock issuable upon conversion of currently outstanding shares
of Series B Convertible Preferred Stock, par value $.01 per share, of the
Company ("Series B Preferred Stock"); and (iii) 37,337 shares of Common Stock
issuable upon (a) the conversion of shares of Series B Preferred Stock of the
Company issuable upon exercise of the warrants issued to designees of the
placement agent of an offering of Series B Preferred Stock (the "Series B
Placement Warrants") and (b) exercise of warrants issued to the designees of the
placement agent for certain bridge financing transactions of the Company
described herein (the "Bridge Placement Warrants," and together with the Series
B Placement Warrants, the "Placement Warrants"). The number of shares of Common
Stock issuable upon conversion of the Series B Preferred Stock and upon exercise
of the Placement Warrants is subject to adjustment in certain events. This
Prospectus relates to the shares of Common Stock remaining to be sold by the
Selling Securityholders in an offering which commenced on July 7, 1997 for an
aggregate of 7,047,788 shares of Common Stock by various holders of securities
of the Company.
The Company will not receive any proceeds from the sale of shares of Common
Stock. The Company is not expected to receive any proceeds from the exercise of
the Placement Warrants since the Placement Warrants may be exercised pursuant to
a cashless exercise provision. In the event that the Placement Warrants are
exercised for cash, the Company intends to use such net cash proceeds (after
estimated expenses of this Offering of approximately $785,000) for general
working capital purposes. Proceeds, if any, from the exercise for cash of all
the Placement Warrants, before deduction of estimated expenses of this Offering,
would be approximately $2,841,000. Whether, how and to what extent any of the
Placement Warrants will be exercised, and whether the Placement Warrants are
exercised for cash or not, cannot be predicted by the Company.
The Selling Securityholders have advised the Company that they may from time to
time, without limitation or notice to the Company, directly to purchasers or
through underwriters, brokers, dealers or agents, sell all or a portion of the
securities offered hereby in negotiated transactions or in one or more
transactions in the market at the price prevailing at the time of sale. In
connection with such sales, the Selling Securityholders and any participating
broker may be deemed to be "underwriters" of the Common Stock within the meaning
of the Securities Act of 1933. The Company will receive no proceeds from the
sale of such securities. It is anticipated that usual and customary brokerage
fees will be paid by the Selling Securityholders in all open market
transactions. The Company will pay all other expenses of this Offering. See
"Plan of Distribution."
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The Company has informed the Selling Securityholders that the anti-manipulation
provisions of Regulation M promulgated under the Securities Exchange Act of 1934
may apply to the sales of their shares offered hereby. The Company also has
advised the Selling Securityholders of the requirement for delivery of this
Prospectus in connection with any sale of the shares offered hereby.
The Company is in the research and development stage, has not had any operating
revenues, and at June 30, 1998, had an accumulated deficit of approximately
$10,479,881. The Company is continuing to incur losses and expects to incur
significantly increasing additional losses for the foreseeable future.
The Common Stock is listed for quotation on the Nasdaq SmallCap Market under the
symbol "AVXT". The last reported sale price of the Common Stock on the Nasdaq
SmallCap Market on August 14, 1998, was $2.00 per share. There can be no
assurance that an active trading market in the Company's securities will develop
or be sustained. See "Risk Factors" and "Plan of Distribution".
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
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THE COMMON STOCK HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is __________, 1998
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FORWARD-LOOKING STATEMENTS
Certain written and oral statements made or incorporated by reference by the
Company or its representatives in this Prospectus, other reports and filings
with the Securities and Exchange Commission (the "Commission"), press releases,
conferences or otherwise, are "forward looking statements", within the meaning
of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements include, without limitation, any statement
that may predict, forecast, indicate, or imply future results, performance or
achievements, and may contain the words "estimate", "project", "intend",
"forecast", "anticipate", "plan", "planning", "expect", "believe", "will", "will
likely", "should", "could", "would", "may" or words or expressions of similar
meaning. In addition, except for historical matters, certain other statements
set forth or incorporated by reference in this Prospectus and elsewhere by the
Company from time to time, including, without limitation, the Company's research
and development programs, the possible filing of Investigational New Drug
Applications or marketing applications for M-Vax(TM), O-Vax(TM), or any other
products that the Company may develop, the seeking of joint development or
licensing arrangements with pharmaceutical companies, the research and
development of particular compounds and technologies for particular indications
and the period of time for which the Company's existing resources will enable
the Company to fund its operations and to meet the continuing listing
requirements for the quotation of its securities on the Nasdaq SmallCap Market
and the possibility of contracting with other parties additional licenses to
develop, manufacture and market commercially viable products, are
forward-looking statements within the meaning of the PSLRA. Such forward-looking
statements are based upon the Company's current belief as to the outcome,
occurrence and timing of future events or current expectations and plans based
upon, among other things, assumptions made by, and information currently
available to management, including management's own knowledge and assessment of
the Company's industry, competition and current regulatory environment. All such
statements involve significant risks and uncertainties. Many important factors
affect the Company's ability to achieve the stated outcomes and to successfully
develop and commercialize its product candidates, including, among other things,
the ability to obtain substantial additional funds, obtain and maintain all
necessary patents or licenses, to demonstrate the safety and efficacy of product
candidates at each state of development, to meet applicable regulatory standards
and receive required regulatory approvals, to meet obligations and required
milestones under its license agreements, to be capable of producing drug
candidates in commercial quantities at reasonable costs, to compete successfully
against other products and to market products in a profitable manner. Although
the Company believes that its assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there also can be no assurance that the statements included or
incorporated by reference in this Report and elsewhere will prove to be
accurate. In addition, such risks and uncertainties included herein and
elsewhere are not exhaustive. Other sections of this Prospectus and the
Company's other filings with the Commission from time to time, may include
additional factors which could impact adversely upon the Company's business and
other financial performance. Moreover, the Company operates in a very
competitive and rapidly changing environment. New risk factors emerge from time
to time and it is not possible for management to predict all such risk factors,
nor can it assess the impact of all such factors on the Company's business or
the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking
statements. Accordingly, in light of the significant uncertainties inherent in
these statements included herein, the inclusion of such information should not
be regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved; in fact, actual results
could differ materially from those contemplated by such forward-looking
statements. Given these risks, uncertainties and limitations, investors should
not rely upon forward-looking statements as a predictor of actual results. The
Company does not undertake any obligation to release publicly any revisions to
these forward-looking statements or to reflect the occurrence of unanticipated
events.
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AVAILABLE INFORMATION
The Company is a "reporting company" as such term is employed in the Securities
Exchange Act of 1934 (the "Exchange Act") and accordingly files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). All such reports, proxy statements and other information may
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, New York, New York 10048.
Copies of such material can be obtained upon written request addressed to the
Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a site on the World Wide
Web at http://www.sec.gov that contains reports, proxy and other information
regarding registrants that file electronically with the Commission.
This Prospectus constitutes a part of a Registration Statement on Form S-3,
including the Registration Statement on Form SB-2 filed by the Company with the
Commission (together with all amendments and exhibits thereto being herein
referred to as the "Registration Statement") under the Securities Act of 1933
(the "Act"). This Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the securities offered hereby. The statements contained in this
Prospectus as to the contents of any contract or any other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference. The Company is
a "small business issuer" as such term is defined in Rule 405 promulgated under
the Act.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, all of which are previously filed with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference into this
Prospectus:
1. The Company's Annual Report on Form 10-KSB for the year ended December
31, 1997, as filed with the Commission on March 16, 1998;
2. The Company's Quarterly Report on Form 10-QSB for the three months
ended June 30, 1998, as filed with the Commission on August 14, 1998;
3. The Company's Quarterly Report on Form 10-QSB for the three months
ended March 31, 1998, as filed with the Commission on May 14, 1998;
4. The Company's Proxy Statement, as filed with the Commission on April 28,
1998;
5. The Company's Reports on Form 8-K, as filed with the Commission on
January 28, 1998, February 19, 1998, March 11, 1998, March 31, 1998,
April 2, 1998, April 14, 1998, May 19, 1998, May 29, 1998, June 10,
1998, June 18, 1998, June 24, 1998, June 29, 1998, July 13, 1998, July
24, 1998 and July 27, 1998; and
6. The description of the Common Stock of the Company contained in its
Registration Statement on Form 8-A filed on April 4, 1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
to which this Prospectus relates (this "Offering") shall be deemed to be
incorporated by reference into this Prospectus and to be part of this Prospectus
from the date of filing thereof.
Any statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus and the
Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement.
The Company will provide without charge to each person to whom a Prospectus is
delivered, upon written or oral request of such person, a copy of any of the
information that was incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). The address and
telephone number to which such request is to be directed are: Erika Rich, Office
Manager, AVAX Technologies, Inc., 4520 Main Street, Suite 930, Kansas City, MO
64111, telephone (816) 960-1333.
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PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by reference to the more detailed information and the financial
statements and notes thereto appearing elsewhere in this Prospectus, including,
without limitation, the information under "Risk Factors," or incorporated herein
by reference, and, accordingly, should be read in conjunction therewith.
Prospective investors are also cautioned to review the information under the
heading "Forward-Looking Statements" on the insider cover page of this
Prospectus.
COMPANY SUMMARY
AVAX(TM) Technologies, Inc. ("AVAX" or the "Company"), is a development stage
biopharmaceutical company which intends to acquire rights to, and to develop,
technologies and products for the treatment of cancer and other life-threatening
diseases. The Company initially intends to focus its efforts primarily on the
development of immunotherapies and chemotherapies for cancer. Immunotherapy is a
rapidly developing segment of the cancer therapeutic market.
In 1995, the Company licensed (the "TJU License") from Thomas Jefferson
University ("TJU") an issued U.S. patent and certain U.S. and foreign patent
applications covering a cancer vaccine containing a cancer patient's own
modified tumor cells, and a method for making and using such a vaccine. This
technology 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. This technology has emerged from research conducted at TJU and
primarily involves the removal of a patient's own tumor cells, modifying them
with a small molecule known as a hapten, and reintroducing the product back into
the patient. The approach is based on the premise that a patient's immune
response to a strongly immunogenic, hapten-modified tumor antigen may be
followed by the development of an immune response to the unmodified tumor
antigen, somewhat analogous to the phenomenon of drug-induced autoimmune
disease.
The Company's initial AC Vaccine(TM), M-Vax(TM), has been undergoing
physician-sponsored human clinical trials based on an experimental protocol at
TJU as an outpatient, post-surgical, adjunct therapy for the treatment of
melanoma, and is believed by the Company to be the first therapeutic cancer
vaccine to show a substantial increase in the survival rate for patients with
stage 3 melanoma. In such ongoing clinical trials at TJU, over 300 melanoma
patients have been treated post-surgically on an outpatient basis with M-Vax. In
62 patients with stage 3 melanoma in protocols in which there has been
sufficient time for long-term follow-up, the five-year survival rate is
approximately 60%. This compares with the historical and control group stage 3
survival rate of approximately 20%, and the survival rate for treatment with
high dose alpha interferon of approximately 32% in stage 3 patients whom the
Company believes to be comparable to those treated with M-Vax. In patients over
50 years old treated with M-Vax, the five-year survival rate was approximately
71%. In the over 300 patients treated in studies, the Company believes that only
relatively minor side effects, such as mild transient nausea and soreness and
swelling at the site of the application of the M-Vax vaccine, have been
witnessed to date.
David Berd, M.D., Professor of Medicine and Clinical Oncologist at TJU and the
inventor of the AC Vaccine technology, has conducted the ongoing clinical trials
at TJU pursuant to an FDA-approved, physician-sponsored Investigational New Drug
Application ("IND"). The Company has met with the FDA to discuss the clinical
results obtained with M-Vax, the use of such results in support of the
submission of a Company-sponsored IND to the FDA, and to review its proposed
development plan. Following such meeting, the Company reviewed with the FDA a
proposed pivotal registration protocol and the Company's plans to submit a
Company-sponsored IND to support multi-center pivotal registration trials. The
Company-sponsored IND was submitted to the FDA and has become effective to allow
the Company to proceed with a large multi-center adequate and well-controlled
clinical trial intended to support a biologics license application. Depending
upon the results of such clinical trials, it is the Company's intention to use
the results of these Company-sponsored clinical trials, along with the results
of the clinical trials conducted at TJU, as the basis for filing an application
for FDA approval to market M-Vax. The Company also may pursue a similar
regulatory approval and commercialization strategy for M-Vax in Australia,
Canada, Mexico and certain other countries through corporate partnering
strategies, although such strategies have not yet been finalized or initiated.
4
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Denial of any regulatory approvals or any significant delays in obtaining any of
the same would have a material adverse effect on the Company.
The Company also believes that the AC Vaccine technology may have applications
in the treatment of other cancers, which may include ovarian, breast, prostate,
lung and colorectal cancers and acute myelogenous leukemia (AML). The Company
intends to fund the preclinical and initial clinical development of this
technology for at least some of these indications. Accordingly, in addition to
continuing the clinical work on M-Vax, the Company has also entered into a
sponsored research agreement with TJU relating to the development of additional
immunotherapies based on the AC Vaccine technology. For example, the Company is
treating post-surgical stage 3 patients in its Phase I/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 and has shown a positive immune
response to haptenized tumor cells in the first nine of nine patients treated,
and has also shown a positive immune response to unhaptenized tumor cells in the
first eight of nine patients treated, both as measured by a delayed type
hypersensitivity (DTH) test. Recently, the Company has received agreement from
the NCI to sponsor a Phase I/II trial in ovarian cancer which the Company
intends to begin later this year. The Company also plans to evaluate the AC
Vaccine in other cancers and to initiate similar Phase I/II clinical trials
where appropriate.
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 topoisomerase inhibitor 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 novel
anti-estrogen 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 continue to expend substantial resources on the research
and development of these compounds.
In order to contain costs, the Company may continue to use sponsored research
agreements and contract research organizations to help it develop its
technologies. At the appropriate time the Company may seek corporate partners to
provide the necessary resources and expertise for clinical development and to
manufacture, market and distribute products. In addition, the Company may seek
to explore the acquisition and subsequent development and commercialization of
additional commercially promising immunotherapy, chemotherapy and adjuvant
technologies. No assurance can be given that the Company will have the requisite
resources or that any such projects will be identified on terms favorable to the
Company, if at all.
The Company may seek to explore the acquisition and subsequent development and
commercialization of additional commercially promising immunotherapy and
adjuvant technologies. No assurance can be given that the Company will have the
requisite resources or that any such projects will be identified on terms
favorable to the Company, if at all.
The Company was incorporated in the State of New York on January 12, 1990, under
the name Nehoc, Inc. On May 29, 1992, it changed its name to Appex Technologies,
Inc. On October 22, 1992, the Company merged into Walden Laboratories, Inc.
("Walden"), a Delaware corporation, which was incorporated on September 18,
1992. On December 27, 1995, Walden sold its former leading product under
development, an over-the-counter nutritional dietary, medicinal and/or
elixorative food supplement or drug and related patents and intellectual
property to a subsidiary of Interneuron Pharmaceuticals, Inc. The Company
changed its name from Walden Laboratories, Inc., to AVAX Technologies, Inc.,
effective March 26, 1996.
The Company's principal executive office is located at 4520 Main Street, Suite
930, Kansas City, Missouri 64111. Its telephone number at that address is (816)
960-1333.
AVAX(TM), AC Vaccine(TM), M-Vax(TM) and O-Vax(TM) are trademarks of the Company.
This Prospectus also includes trademarks of other companies.
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OFFERING SUMMARY
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Common Stock Outstanding
as of July 28, 1998: 8,332,169 shares of Common Stock, including 228,348 currently outstanding shares of Common
Stock directly held by the Selling Securityholders. 1
Common Stock Offered
by Selling Securityholders: 526,559 shares of Common Stock.
Risk Factors: The securities offered hereby involve a high degree of risk. See "Risk Factors."
Nasdaq SmallCap
Market Symbol: AVXT
Use of Proceeds: The Company will not receive any proceeds from the sale of shares by the Selling Securityholders.
The Company is not expected to receive any proceeds from the exercise of the Placement Warrants
since the Placement Warrants may be exercised pursuant to a cashless exercise provision. In the
event that the Placement Warrants are exercised for cash, the Company intends to use such net cash
proceeds (after estimated offering expenses of this Offering of approximately $785,000) for general
working capital purposes. Proceeds, if any, from the exercise for cash of all the Placement
Warrants, before deduction of estimated expenses of this Offering, would be approximately
$2,841,000. Whether, how and to what extent any of the Placement Warrants will be exercised, and
whether the Placement Warrants are exercised for cash or not, cannot be predicted by the Company.
See "Use of Proceeds" and "Selling Securityholders".
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(1) Does not include (i) 4,603,158 shares of Common Stock issuable upon
conversion of currently outstanding shares of Series B Preferred
Stock, (ii) 704,814 shares of Common Stock issuable upon (a) exercise
of Bridge Placement Warrants and (b) conversion of Series B Preferred
Stock issuable upon exercise of Series B Placement Warrants, (iii)
135,000 shares of Common Stock issuable upon exercise of outstanding
stock options at a weighted exercise price of $2.58 per share under
the Company's 1992 Stock Option Plan, (iv) 1,365,000 shares of Common
Stock reserved for issuance of future options under the Company's 1992
Stock Option Plan, (v) 1,202,016 shares of Common Stock reserved for
issuance pursuant to the employment arrangements among the Company and
certain of its full-time employees, officers, directors and
consultants, and (vi) approximately 620,500 shares of Common Stock
issuable upon exercise of other warrants to purchase shares of Common
Stock.
6
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RISK FACTORS
An investment in the shares of Common Stock offered hereby is highly speculative
in nature, involves a high degree of risk and should not be purchased by persons
who cannot afford a loss of their entire investment. Each prospective investor
should consider carefully the risks inherent in and affecting both the business
of the Company and the value of the Common Stock and speculative factors
including, without limitation, the following risk factors, as well as other
information contained elsewhere in this Prospectus or incorporated by reference
before making an investment in the Common Stock.
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY
The Company has incurred substantial operating losses since its inception. As of
June 30, 1998, the Company's accumulated deficit was approximately $10,479,881.
The Company expects to incur significant 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) , O-Vax(TM)and
pre-clinical studies and clinical trials for other products that it may acquire
or develop. 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 and O-Vax products do
not currently generate revenue and the Company does not expect to achieve
revenues from these 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, O-Vax, or any other
products that it may develop.
NEED FOR ADDITIONAL FINANCING; ISSUANCE OF SECURITIES; FUTURE DILUTION
In the future, the Company will require substantial additional financing to
continue research, undertake product development and to pursue the manufacturing
and marketing of any products that it may develop. The Company anticipates that
further funds may be raised through additional debt or equity financings
conducted by the Company, or through collaborative ventures entered into between
the Company and potential corporate partners. However, there can be no assurance
that any such offering will be consummated or that the Company will otherwise be
able to obtain additional financing or that such financing, if available, can be
obtained on terms favorable or acceptable to the Company. If such offerings are
not consummated or additional financing is not otherwise available, the Company
will be required to modify its business development plans or reduce or cease
certain or all of its operations.
While the Company may seek to enter into collaborative ventures with corporate
sponsors to fund some or all of its research and development activities, as well
as to manufacture or market any products which may be successfully developed,
the Company currently does not have any such arrangements with corporate
sponsors, and there can be no assurance that the Company will be able to enter
into such ventures on favorable or acceptable terms, if at all. In addition, no
assurance can be given that the Company will be able to complete a subsequent
public offering or private placement of its securities. Failure by the Company
to enter into such collaborative ventures or to receive additional funding to
complete its proposed product development programs either through a private
placement or a public offering could have a material adverse effect on the
Company. In the event that the Company obtains any additional funding, such
financings may have a dilutive effect on the holders of the Common Stock. See
"Risk Factors--Dependence on Third Parties for Additional Funds and for
Manufacturing, Marketing and Selling."
In addition, the Company currently has an employee stock option plan under which
its officers and directors will be eligible to receive stock options exercisable
for Common Stock at exercise prices which may be lower than the current market
price of the Common Stock. Similarly, under employment arrangements with certain
full-time employees, officers, directors and consultants of the Company, the
Company has granted such employees, officers, directors and consultants options
for Common Stock at exercise prices that may be lower than the prevailing market
price of the Common Stock from time to time. Such stock option grants under the
employee stock option plan if any, and to certain of the full-time employees,
officers, directors and consultants of the Company, may dilute the value of the
Common Stock.
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DEVELOPMENT STAGE COMPANY
Although the Company was organized in January 1990, it has only conducted
limited research activities, principally through its license and research
agreements with TJU, Rutgers and Texas A&M, and has not generated any
significant revenues to date from operations. Accordingly, the Company must be
evaluated in light of the expenses, delays, uncertainties and complications
typically encountered by newly established biopharmaceutical businesses, many of
which uncertainties and complications may be beyond the Company's control. These
include, but are not limited to, unanticipated problems relating to product
development, testing, regulatory compliance, manufacturing, marketing and
competition, and additional costs and expenses that may exceed current
estimates. There can be no assurance that the Company will successfully develop
and commercialize any products, generate any revenues or ever achieve profitable
operations.
TECHNOLOGICAL UNCERTAINTY AND EARLY STAGE OF PRODUCT DEVELOPMENT
The technologies and products which the Company intends to develop are in the
early stages of research and development, require significant further research,
development and testing and are subject to the risks of failure inherent in the
development of products based on innovative or novel technologies. These risks
include, but are not limited to, the possibility that any or all of the
Company's proposed products will be found to be ineffective or unsafe, that the
products once developed, although effective, are uneconomical to market, that
third parties hold proprietary rights that preclude the Company from marketing
such products or that third parties market a superior or equivalent product and
that the Company will be unable to secure a meaningful patent position for such
products. See "Risk Factors--Uncertainty Regarding Patents and Proprietary
Rights; TJU Patent Re-issuance Application." The results of initial pre-clinical
and clinical testing of the Company's current and proposed products under
development are neither necessarily predictive of results that will be obtained
from subsequent or more extensive pre-clinical and clinical testing nor
necessarily acceptable to the United States Food and Drug Administration (the
"FDA") or other similar agencies to support applications for marketing permits.
The Company's agreements with (i) TJU, its licensor for the AC Vaccine
technology, (ii) Rutgers, its licensor for certain anti-cancer and
anti-infective technology and (iii) Texas A&M, its licensor for certain
anti-cancer technology, do not contain any representations by the licensors as
to the safety or efficacy of the inventions or discoveries covered thereby. The
Company is unable to predict whether the research and development activities it
is funding will result in any commercially viable products or applications.
Further, due to the extended testing required before marketing clearance can be
obtained from the FDA or other similar agencies, the Company is not able to
predict with any certainty, when, if ever, it will be able to commercialize any
of its proposed products.
The market for biotechnology in general, and for cancer immunotherapies, such as
the AC Vaccine technology and other possible future products, in particular, are
characterized by rapidly changing technology, evolving industry standards and
frequent new product introductions. The Company's future success will depend
upon its ability to develop and commercialize its existing product and to
develop new products. There can be no assurance that the Company will
successfully complete the development of its existing product or of any future
product or that the Company's current or future products will achieve market
acceptance. Any delay or failure of M-Vax, O-Vax, or any future product which
the Company may develop, in achieving market acceptance would materially and
adversely affect the Company's business. In addition, there can be no assurance
that products or technologies developed by others will not materially render the
Company's existing or future products or technologies non-competitive or
obsolete.
This Prospectus includes estimates by the Company of the number of patients with
a particular type of cancer or other diseases, the number of patients who were
administered a particular vaccine or drug and the number of patients who
received or might have been candidates for a particular type of treatment. There
can be no assurance that such estimates accurately reflect the true market or
the extent to which any of the Company's products, if successfully developed,
will actually be used by patients. Furthermore, even if patient use occurs,
there can be no assurance that the Company's sales of its products for such uses
will be profitable. Failure of the Company to successfully develop, obtain
regulatory approval for, introduce and market M-Vax, O-Vax and any possible
future products would have a material adverse effect on the Company.
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GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL
The proposed products of the Company will be subject to very stringent federal,
state and local government regulations, including, without limitation, the
Federal Food, Drug and Cosmetic Act, and its state and local counterparts.
Similar regulatory frameworks exist in other countries where the Company may
consider marketing its products. To date, TJU and Dr. David Berd, the inventor
of the AC Vaccine technology, have conducted the ongoing clinical trials at TJU
pursuant to an FDA-approved physician sponsored Investigational New Drug
Application ("IND"). The Company met earlier with the FDA to discuss the
clinical results obtained with M-Vax and the use of such results in support of
the submission of a Company-sponsored IND to the FDA, which has now been
activated by the FDA. The Company has met with the FDA to review its proposed
development program, which includes multi-center pivotal registration trials for
M-Vax. Prior to marketing M-Vax, O-Vax, or any other possible product the
Company may develop, such product must undergo an extensive regulatory approval
process. Any denials or delays in obtaining requisite approvals would be likely
to have a material adverse effect on the Company.
The regulatory process includes extensive pre-clinical and clinical testing of
any product to establish its safety and efficacy. This testing can take many
years and require the expenditure of substantial capital and other resources. In
the U.S., clinical trials are stringently regulated by the FDA, and the FDA may
suspend clinical trials at any time if it determines that patients are being
exposed to an unreasonable health risk, or for certain other reasons. Delays or
denials of marketing approval are encountered regularly due to the submission of
unacceptable or incomplete data as deemed by the FDA or other similar regulatory
agency, or due to regulatory policy for product approvals. In addition, new
government regulations may be established that could delay or prevent regulatory
approval of the Company's products under development. These delays may be
encountered both domestically and abroad. There is no assurance that even after
clinical testing, regulatory approval will ever be obtained. If regulatory
approval is obtained, the uses for which any products may be marketed will be
limited to specific indications. Following regulatory approval, if any, a
marketed product and its manufacturer are subject to continual regulatory review
and periodic inspections. In the U.S., the Company would be required to comply
with FDA requirements for manufacturing, labeling, advertising, record keeping
and reporting of adverse experiences and other information. In addition, the
Company would be required to comply with federal and state health care
anti-kickback laws and other health care fraud and abuse laws that pertain to
the marketing of pharmaceuticals. Failure to comply with regulatory requirements
could subject the Company to administrative or judicial enforcement actions,
including but not limited to product seizures, injunctions, civil penalties,
criminal prosecution, refusals to approve new products or withdrawal of existing
approvals, as well as increased product liability exposure, any of which could
have a material adverse effect on the Company. Development and marketing of the
Company's products outside the U.S. will be subject to foreign regulatory
requirements governing clinical trials, marketing approval, manufacturing and
pricing. Failure to comply with these requirements could result in enforcement
actions or penalties or could delay introduction of the Company's products in
certain countries.
Failure of the Company to obtain and maintain regulatory approval of its
proposed products, processes or facilities would have a material adverse effect
on the business, financial condition and results of operations of the Company.
In addition, many academic institutions and companies doing research in the
field of cancer immunotherapy are using a variety of approaches and
technologies. Any adverse results obtained by such researchers in pre-clinical
or clinical studies, even if not directly or indirectly related to the Company's
potential products or approaches, could adversely affect the regulatory
environment for immunotherapy or other biotechnology products generally, and
possibly lead to delays in the approval process for the Company's potential
products.
DEPENDENCE ON OTHERS FOR CLINICAL DEVELOPMENT OF, AND REGULATORY APPROVALS
FOR, MANUFACTURING AND MARKETING OF PHARMACEUTICAL PRODUCTS
The Company anticipates that it may in the future seek to enter into
collaborative agreements with pharmaceutical, or other biotechnology companies,
for the development of, clinical testing of, seeking of regulatory approval for,
and manufacturing, marketing and commercialization of, certain of its products.
The Company may in the future grant to its collaborative partners, if any,
rights to license and commercialize any pharmaceutical products developed under
these collaborative agreements and such rights would limit the Company's
flexibility in considering alternatives for the commercialization of such
products. Under such agreements, the Company may rely on such collaborative
partners to conduct research efforts and clinical trials on, obtain regulatory
approvals for, manufacture, market and commercialize certain of the Company's
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products. Although the Company believes that such collaborative partners might
have an economic motivation to commercialize the pharmaceutical products which
they may license, the amount and timing of resources devoted to these activities
generally will be controlled by each such individual partner. There can be no
assurance that the Company will be successful in establishing any collaborative
arrangements, or that, if established, such future partners will be successful
in commercializing products or that the Company will derive any revenues from
such arrangements. Although the Company intends to pursue such collaborative
arrangements in the future, there are no specific arrangements, proposals, plans
or understandings with respect to any such collaborative arrangements.
DEPENDENCE ON THIRD PARTIES FOR ADDITIONAL FUNDS AND FOR MANUFACTURING,
MARKETING AND SELLING
The Company currently does not have the resources to commercially manufacture,
directly market or sell M-Vax, O-Vax, or any products it may develop in the
future. Accordingly, the Company may be dependent on corporate partners or other
entities for, and may have only limited control over, commercial scale
manufacturing, marketing and selling of its products. The inability of the
Company to acquire such third party manufacturing, distribution, marketing and
selling arrangements for the Company's anticipated products will have a material
adverse effect on the Company's business. There can be no assurance that the
Company will be able to enter into any arrangements for the manufacturing,
marketing and selling of its products. While the Company is in the process of
establishing commercial scale manufacturing facilities, such endeavor will
require substantial additional funds, the hiring and retention of significant
additional personnel and compliance with extensive regulations applicable to
such a facility. There can be no assurance that the Company will be able to
successfully establish such a facility, hire such personnel or successfully
manufacture products for sale at competitive prices.
DEPENDENCE ON LICENSES AND SPONSORED RESEARCH AGREEMENTS
The Company relies heavily on third parties for a variety of functions,
including certain functions relating to research and development. As of July 28,
1998, the Company had only seven full-time employees. The Company is party to
several license and research agreements which place substantial responsibility
on the Company's licensors for research and clinical development of its products
and technologies.
In particular, the Company is dependent upon the TJU License as the basis of its
proprietary AC Vaccine technology and is dependent upon a sponsored research
agreement with TJU for research and development efforts in connection therewith.
Pursuant to the TJU License, the Company is obligated to pay an up-front license
fee, to use due diligence in developing and bringing products to market and to
make certain payments upon the achievement of certain milestones. The Company is
also obligated to make royalty payments on the sales, if any, of products
resulting from such licensed technology and, is responsible for the costs of
filing and prosecuting patent applications and maintaining issued patents. In
addition, the Company is required to invest a minimum amount per year in the AC
Vaccine technology as well as sponsored research at TJU. The Company is
similarly dependent upon the Rutgers License and Texas A&M License for certain
of its technology, and has financial and other obligations thereunder (and under
its related sponsored research agreements with each of Rutgers and Texas A&M)
which are similar to those under the TJU agreements.
As the Company currently does not have laboratory facilities, the Company's
research and development activities are intended to be conducted by universities
or other institutions pursuant to sponsored research agreements. The sponsored
research agreement entered into by the Company, TJU and Dr. Berd generally
requires periodic payments by the Company to TJU on a quarterly basis.
There are similar types of obligations under the Rutgers License and Texas A&M
License.
If the Company does not meet its financial, development, or other obligations in
a timely manner under its license agreements or related sponsored research
agreements, the Company could lose the rights to its proprietary technology or
the right to have its licensors and others conduct its research and development
efforts, any of which could have a material adverse effect on the Company. TJU
has the right to terminate the R&D agreement on 30 days' written notice if it
becomes unable for any reason to complete the Study.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS; TJU PATENT RE-ISSUANCE
APPLICATION
The biotechnology industry places importance on obtaining patent and trade
secret protection for new technologies, products and processes. Also,
particularly in the case of biological therapies, additional protection may be
afforded by the regulatory approval process. The success of the Company will
depend in substantial part on its ability, on the ability of its current
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licensors and on the ability of its potential future licensors, if any, to
obtain patents, defend such patents, maintain trade secrets, obtain regulatory
approvals and operate without infringing upon the proprietary rights of others,
both in the United States and in foreign countries. The patent position of firms
relying upon biotechnology is highly uncertain and involves complex legal and
factual questions. To date there has emerged no consistent policy regarding the
breadth of claims allowed in biotechnology patents or the degree of protection
afforded under such patents.
More specifically, the Company relies on TJU's issued patent for its proprietary
patent rights in and to the AC Vaccine technology and may rely on certain United
States patents and pending patent applications, as well as a pending foreign
Patent Cooperation Treaty ("PCT") application, relating to various aspects of
its present and future products and processes. The patent application and
issuance process can be expected to take several years and could entail
considerable expense to the Company, as it may be responsible for such costs
under the terms of any technology agreements. There can be no assurance that
patents will issue as a result of any applications or that existing patents and
any patents resulting from such applications, will be sufficiently broad to
afford protection against competitors with similar technology. In addition,
there can be no assurance that any issued patents will be enforceable and will
not be subject to reexamination or reissue, or challenged, invalidated, or
circumvented. There can be no assurance that the rights granted thereunder will
provide competitive advantages to the Company. The commercial success of the
Company will also depend upon avoiding infringement of patents issued to
competitors. A United States patent application is maintained under conditions
of confidentiality while the application is pending, so the Company cannot
determine the inventions being claimed in pending patent applications filed by
third parties. As a result, the Company cannot be certain that its scientists
were the first to make inventions covered by its patents and patent
applications.
In the event a third party has filed a patent application relating to an
invention claimed in a Company patent application, the Company or its licensor
may be required to participate in an interference proceeding in the United
States Patent and Trademark Office to determine priority of the invention, which
could result in substantial uncertainties and cost for the Company, even if the
eventual outcome is favorable to the Company. An adverse outcome could subject
the Company to significant liabilities to third parties and require the Company
to license disputed rights from third parties at an undeterminable cost or to
cease using the technology. In addition to patent litigation and interferences,
a third party may at some time seek to have a patent of the Company reexamined
in the Patent Office on the basis of prior art. The Company, or a licensor of
the Company, may also at some time seek reexamination, or reissue, of a Company
patent.
The Company has recently submitted an application for reissue for the purpose of
strengthening the TJU patent in light of a prior art reference which may have a
material adverse impact on the patent. The prior art reference relates to the
publication, slightly more than one year prior to the filing of the patent, of
an abstract for an oral presentation given by the inventor of the AC Vaccine
technology. Although the Company believes that there is a sound basis for this
reissue application, there can be no assurance that a patent will issue from the
application, or that any such patent will be enforceable and will not be
challenged, invalidated, or circumvented. In connection with the application for
re-issuance, the Company may seek to have the patent's claims modified to
reconcile such claims with the prior art reference. There can be no assurance
that the validity or enforceability of the Company's patents and its
applications, if issued, would be upheld by a court. In the absence of an
enforceable patent, the Company may rely upon significant regulatory barriers to
competition.
While no patent that could be potentially infringed by manufacture, use or sale
of the Company's product candidates has come to the attention of the Company,
the Company's product candidates are still in the development stage, and neither
their formulations nor their method of manufacture have been finalized. Thus,
there can be no assurance that the manufacture, use or sale of the Company's
product candidates will not infringe patent rights of others. The Company may be
unable to avoid infringement of any such patents and may have to seek a license,
defend an infringement action, or challenge the validity of the patents in
court. There can be no assurance that a license will be available to the
Company, if at all, upon terms and conditions acceptable to the Company or that
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the Company will prevail in any patent litigation. Litigation may be necessary
to defend or enforce the Company's patent and license rights or to determine the
scope and validity of others' proprietary rights. Defense and enforcement of
patent claims can be expensive and time consuming, even in those instances in
which the outcome is favorable to the Company, and can result in the diversion
of substantial resources from the Company's other activities. There can be no
assurance that the Company will have sufficient resources to pursue such
litigation. If the Company does not obtain a license under any such patents, is
found liable for infringement, or is not able to have them declared invalid, the
Company may be liable for significant money damages, may encounter significant
delays in bringing products to market, or may be precluded from participating in
the manufacture, use or sale of products or methods of treatment covered by such
patents, any of which could have a material adverse effect on the Company's
business, results of operation and financial condition.
In its product development activities, the Company relies substantially on
certain technologies which are not patentable or proprietary and are therefore
available to the Company's competitors. The Company also relies on certain
proprietary trade secrets and know-how which may or may not be patentable, or
which the Company may choose to keep secret and not file as a patent. Further,
the Company may also rely upon certain regulatory barriers to prevent
competitors from using the Company's technologies. Although the Company has
taken steps to protect its unpatented trade secrets and know-how, in part
through the use of confidentiality agreements with its employees, consultants
and certain of its contractors, there can be no assurance that these agreements
will not be breached, that the Company would have adequate remedies for any
breach or that the Company's trade secrets will not otherwise become known or be
independently developed or discovered by competitors. If the Company's
employees, scientific consultants or collaborators develop inventions or
processes independently that may be applicable to the Company's product
candidates, disputes may arise about ownership of propriety rights to those
inventions and processes. Such inventions and processes will not necessarily
become the Company's property, but may remain the property of those persons or
their employers. Protracted and costly litigation could be necessary to enforce
and determine the scope of the Company's proprietary rights. Failure to obtain
or maintain patent and trade secret protection, for any reason, could have a
material adverse effect on the Company. Certain of the Company's patents are
directed to inventions developed within academic institutions (from which the
Company earlier acquired rights to such patents) with funds from United States
government agencies. As a result of these arrangements, the United States
government may have rights in certain inventions developed during the course of
the performance of federally funded projects as required by law or agreements
with the funding agency. Several bills affecting patent rights have been
introduced in the United States Congress. These bills address various aspects of
patent law, including publication, patent term, re-examination, subject matter
and enforceability. It is not certain whether any of these bills will be enacted
into law or what form new laws may take. Accordingly, the effect of legislative
change on the Company's intellectual property rights is uncertain.
CONDUCTING BUSINESS ABROAD
To the extent the Company conducts business outside the United States, it
intends to do so through licenses, joint ventures or other contractual
arrangements for the development, manufacturing and marketing of its products.
No assurance can be given that the Company will be able to establish foreign
operations successfully through such a plan, or that foreign applications will
avoid opposition and be approved. No assurance can be given that the foreign
coverage will be available or that the manufacturing and marketing of its
products through such licenses, joint ventures other arrangements will be
commercially successful. The Company might also have greater difficulty
obtaining proprietary protection for its products and technologies outside the
United States and enforcing its rights in foreign courts.
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For clinical investigation and marketing outside the United States, the Company
also is subject to foreign regulatory requirements governing human clinical
trials and marketing approval for drugs. The requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary widely for
European countries both within and outside the European Union ("EU"). Outside
the United States, the Company's ability to market a product is contingent upon
receiving a marketing authorization from the appropriate regulatory authority.
At present, foreign marketing authorizations are applied for at a national
level, although with the EU certain registration procedures are available to
companies wishing to market their products in more than one EU member state. If
the regulatory authority is satisfied that adequate evidence of safety, quality
and efficacy has been presented, a marketing authorization will be granted. The
system for obtaining marketing authorizations within the EU registration system
is a dual one in which certain products, such as biotechnology and high
technology products and those containing new active substances, will have access
to a central regulatory system that provides registration throughout the entire
EU. Other products will be registered by national authorities in individual EU
member states, operating on a principle of mutual recognition. This foreign
regulatory approval process includes, at least, all of the risks associated with
FDA approval set forth above. The Company could possibly have greater difficulty
in obtaining any such approvals and also might find it more difficult to protect
its intellectual property abroad.
DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS
The Company is highly dependent upon its officers and directors, as well as its
Scientific Advisory Board members, consultants and collaborating scientists.
Except for its seven full-time employees, each of the Company's officers,
directors, advisors and consultants devotes only a portion of his or her time to
the Company's business and for the most part are involved with other
substantially full-time activities. The loss of certain of these individuals,
including, without limitation, Jeffrey M. Jonas, M.D., the Company's President
and Chief Executive Officer, could have a material adverse effect on the Company
unless the Company could promptly hire qualified replacements. The Company
maintains a key-man life insurance policy on Dr. Jonas in the amount of only $3
million. Although the Company has entered into letters of employment with many
of its full-time employees, officers and consultants, such letters of employment
do not contain provisions which would prevent any of them from resigning at any
time.
Competition for qualified employees among pharmaceutical and biotechnology
companies is intense, and the loss of any of such persons, or an inability to
attract, retain and motivate any additional highly skilled employees required
for the expansion of the Company's activities, could have a material adverse
effect on the Company. There can be no assurance that the Company will be able
to retain its existing personnel or to attract additional qualified employees
and such failure likely would have a material adverse effect on the Company.
LACK OF MANUFACTURING FACILITIES
In order to successfully commercialize its product candidates, the Company must
be able to manufacture its products in commercial quantities, in compliance with
regulatory requirements, at acceptable costs and in a timely manner. The
manufacture of the types of biopharmaceutical products that are likely to be
developed by the Company present several risks and difficulties. For example,
the manufacture of M-Vax, O-Vax and other compounds the Company may develop for
use in the Company's current and future products and technologies is complex,
can be difficult to scale-up when large scale production is required and can be
subject to delays, inefficiencies and poor or low yields of quality products.
The Company may also be subject to risks relating to the expense, or
unavailability of, products and compounds manufactured or sold by third parties
which are required for use on a comparative basis in clinical trials and studies
for the Company's products. There can be no assurance that the Company will be
able to procure such products and compounds at an acceptable cost or in
sufficient quantities without delays or other adverse effects upon the Company's
development programs.
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The Company currently has interim manufacturing capacity which it believes is
reasonably adequate to support the commencement of the clinical programs and
expects to expand its manufacturing staff and facilities, to establish an
additional facility or facilities and to contract with third parties to assist
it with production. There can be no assurance that the Company will be able to
obtain from third party manufacturers adequate supplies in a timely fashion for
commercialization, or that commercial quantities of any such products, if
approved for marketing, will be available from contract manufacturers at
acceptable costs. In the event the Company proceeds with establishing a
full-scale commercial manufacturing facility, the Company will require
substantial additional funds and will be required to hire and train significant
numbers of employees and comply with the extensive regulations applicable to
such a facility. There is no assurance that AVAX will be able to develop a
current Good Manufacturing Practices ("cGMP") manufacturing facility sufficient
for all clinical trials or commercial-scale manufacturing. The cost of
manufacturing certain products may make them prohibitively expensive. In
addition, in order to successfully commercialize its product candidates, the
Company may be required to reduce the cost of production, and there can be no
assurance that the Company will be able to do so.
COMPETITION
The Company's proposed cancer immunotherapy business is characterized by
intensive research efforts and intense competition. Many companies, research
institutes, hospitals and universities are working to develop products and
processes in the Company's fields of research. Most of these entities have
substantially greater financial, technical, manufacturing, marketing,
distribution and other resources than the Company and include, among others,
Schering Plough Corporation, Chiron Corporation, Bristol-Myers Squibb and
Johnson & Johnson. Certain of such companies have experience in undertaking
testing and clinical trials of new or improved products similar in nature to
that which the Company is developing. In addition, certain competitors have
already begun testing similar compounds or processes and may introduce such
products or processes before the Company. Accordingly, other companies may
succeed in developing products earlier than the Company or that are more
effective than those proposed to be developed by the Company. Further, it is
expected that competition in the Company's field will intensify. There can be no
assurance that the Company will be able to compete successfully in the future.
RISK OF PRODUCT LIABILITY
Should the Company develop and market any products, the marketing of such
products, through third-party arrangements or otherwise, may expose the Company
to product liability claims. Though the Company presently carries product
liability insurance, there can be no assurance that such insurance will protect
the Company against all claims of product liability. The Company may be required
to indemnify its licensor against certain product liability claims incurred as a
result of the products developed by the Company. The Company's licensors have
not made, and are not expected to make, any representations as to the safety or
efficacy of the inventions covered by the license or as to any products which
may be made or used under rights granted therein or thereunder. In addition, it
is possible that license and collaborative agreements which the Company may
enter into in the future may also include similar insurance requirements. There
can be no assurance that in the future adequate insurance coverage will be
available in sufficient amounts or at a reasonable cost, or that a product
liability claim or recall would not have a material adverse effect on the
Company.
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UNCERTAINTY OF PRODUCT PRICING AND REIMBURSEMENT; HEALTH CARE REFORM AND
RELATED MEASURES
The levels of revenues and profitability of pharmaceutical and/or biotechnology
products and companies may be affected by efforts of governmental and third
party payors to contain or reduce the costs of health care through various
means. For example, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control. In the United
States there have been, and the Company expects that there will continue to be,
a number of federal and state proposals to implement similar government control.
The United States Congress continually considers a number of legislative and
regulatory reforms that may affect companies engaged in the health care industry
in the United States. Pricing constraints on the Company's products, if
approved, could have a material adverse effect on the Company. Although the
Company cannot predict whether these proposals will be adopted or what effects
such proposals may have on its business, the existence and pendency of such
proposals could have a material adverse effect on the Company in general. In
addition, the Company's ability to commercialize potential pharmaceutical and/or
biotechnology products may be adversely affected to the extent that such
proposals have a material adverse effect on other companies that are prospective
collaborators with respect to any of the Company's product candidates.
In addition, in the United States and elsewhere, sales of medical products and
services are dependent in part on the availability of reimbursement to the
consumer from third party payors, such as government and private insurance
plans. Third party payors are increasingly challenging the prices charged for
medical products and services. If the Company succeeds in bringing one or more
products to the market, there can be no assurance that these products will be
considered cost effective and that reimbursement to the consumer will be
available or will be sufficient to allow the Company to sell their products on a
competitive basis. See "Risk Factors--Government Regulation; No Assurance of
Product Approval."
NO ASSURANCE OF IDENTIFICATION OF ADDITIONAL PROJECTS; CERTAIN INTERLOCKING
RELATIONSHIPS; POTENTIAL CONFLICTS OF INTEREST
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. From time to time, if and when the Company's resources allow, the
Company may explore the acquisition and subsequent development and
commercialization of additional biomedical and pharmaceutical products and
technologies. However, there can be no assurance that the Company will be able
to identify any additional products or technologies and, even if suitable
products or technologies are identified, there can be no assurance that the
Company will have sufficient resources to pursue any such products or
technologies in the foreseeable future.
One director of the Company is an officer of Paramount Capital Investments, LLC.
Paramount Capital Investments, LLC, is a merchant bank specializing in
biotechnology companies. In the regular course of its business, Paramount
Capital Investments, LLC, identifies, evaluates and pursues investment
opportunities in biomedical and pharmaceutical products, technologies and
companies. Generally, Delaware corporate law requires that any transactions
between the Company and any of its affiliates be on terms that, when taken as a
whole, are substantially as favorable to the Company as those then reasonably
obtainable from a person who is not an affiliate in an arms-length transaction.
Nevertheless, neither Paramount Capital Investments, LLC, nor any other person
is obligated pursuant to any agreement or understanding with the Company to make
any additional products or technologies available to the Company, and there can
be no assurance, and purchasers of the Common Stock should not expect, that any
biomedical or pharmaceutical product or technology identified by Paramount
Capital Investments, LLC, or any other person in the future will be made
available to the Company. In addition, certain of the officers, directors,
consultants and advisors to the Company may from time to time serve as officers,
directors, consultants or advisors to other biopharmaceutical or biotechnology
companies. There can be no assurance that such other companies will not in the
future have interests in conflict with those of the Company.
15
<PAGE>
CONTROL BY CURRENT OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS
The Company's directors, executive officers and principal stockholders
beneficially own approximately 44% of the outstanding shares of Common Stock.
Accordingly, the Company's executive officers, directors, principal stockholders
and certain of their affiliates have the ability to exert substantial influence
over the direction and policies of the Company and, if they choose to act in
concert, the election of the Company's Board of Directors and the outcome of
issues submitted to the Company's stockholders.
VOLATILITY OF STOCK PRICE
The market price of the Common Stock like that of many other development-stage
public pharmaceutical or biotechnology companies, may be highly volatile.
Factors such as announcements of technological innovations or new commercial
products by the Company or its competitors, disclosure of results of
pre-clinical and clinical testing, adverse reactions to products, governmental
regulation and approvals, developments in patent or other proprietary rights,
public or regulatory agency concerns as to the safety of any products developed
by the Company and general conditions may have a significant or adverse effect
on the market price of the Common Stock. Also, the trading price of the Common
Stock may respond to quarterly variations in operating results, announcements of
innovations or new products by the Company or its competitors and other events
or factors, including, but not limited to, the sale or attempted sale of a large
amount of such securities into the market. In addition, market fluctuations may
adversely affect the market prices of such securities.
POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
As of July 28, 1998, 8,332,169 shares of Common Stock were issued and
outstanding of which the Company believes that, other than those shares
registered in the offering to which this Prospectus relates (this "Offering"),
only 1,490,269 shares of Common Stock are "restricted securities" and under
certain circumstances may, in the future, be sold in compliance with Rule 144
under the Securities Act of 1933 (the "Act"), unless they are held by
"affiliates" of the Company as that term is used under the Act. In general,
under Rule 144 as currently in effect, subject to the satisfaction of certain
conditions and certain manner of sale and notice requirements, including the
requirement that there is adequate current public information with respect to
the Company as contemplated by Rule 144, a person (or persons whose shares are
aggregated), including persons who may be deemed an affiliate of the Company as
that term is defined under the Act, who beneficially owned restricted shares of
Common Stock for at least one year is entitled to sell, within any three-month
period, a number of shares that does not exceed (i) the greater of one percent
of the total number of outstanding shares of the same class, or (ii) the average
weekly trading volume during the four calendar weeks immediately preceding the
sale. A person who presently is not and who has not been an affiliate of the
Company for at least three months immediately preceding the sale and who has
beneficially owned the shares of Common Stock for at least two years is entitled
to sell such shares under Rule 144(k) without regard to the volume limitations
described above.
16
<PAGE>
In addition, the Company has issued and outstanding, or issuable, warrants and
options to purchase an aggregate of 3,989,993 shares of Common Stock (including
1,365,000 unissued shares of Common Stock issuable under the 1992 Stock Option
Plan and excluding 37,337 shares of Common Stock underlying the Placement
Warrants that are being registered in this Offering). Any employee, officer or
director of the Company who acquired his or her shares prior to the effective
date of the Registration Statement at a time when the Company was not subject
the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") or who holds vested options as of the effective
date of the Registration Statement, pursuant to a written compensatory plan or
contract is entitled to rely on the resale provisions of Rule 701. Rule 701
permits non-affiliates to sell their Rule 701 shares without having to comply
with the public information, holding period, volume limitation or notice
provisions of Rule 144 and permits affiliates to sell their Rule 701 shares
without having to comply with Rule 144's holding period restrictions, in each
case commencing 90 days after the effective date of the Registration Statement.
The Company also has 4,603,158 shares of Common Stock that are issuable upon
conversion of shares of Series B Convertible Preferred Stock, par value $.01 per
share ("Series B Preferred Stock"). Certain of the stockholders and holders of
shares of Common Stock issuable upon exercise of Series B Preferred Stock
(including shares of Common Stock issuable upon conversion of shares of Series B
Preferred Stock issuable upon exercise of Series B Placement Warrants), and
other warrants of the Company, have certain demand and piggyback registration
rights. The Company's current Registration Statement, to which this Prospectus
relates, pertains to the resale of up to 526,559 shares of Common Stock and the
Company may, in the future, agree to register other shares of Common Stock held
by eligible persons' including officers of the Company, on Form S-8 relating to
shares of Common Stock issuable upon exercise of such persons' stock options or
warrants, including, without limitation, under its 1992 Stock Option Plan.
Exercise of any registration rights could involve substantial expense to the
Company.
In addition, the vesting dates for the shares issuable upon exercise of the
Company's stock options are also subject to acceleration under certain
circumstances, including certain changes in control of the Company, subject to
certain exceptions.
Holders of the Company's warrants and options are likely to exercise them when,
in all likelihood, the Company could obtain additional capital on terms more
favorable than those provided by warrants and options. Further, while these
warrants and options are outstanding, the Company's ability to obtain additional
financing on favorable terms may be affected adversely by the presence of such
securities and the terms thereof. No prediction can be made as to the effect, if
any, that the availability of such shares for sale will have on the market
prices that may be quoted from time to time on the Nasdaq SmallCap Market.
Nevertheless, the possibility that substantial amounts of the Common Stock may
be sold in the public market may adversely affect the prevailing market prices
for the Common Stock and could impair the Company's ability to raise capital in
the future through the sale of equity securities. Actual sales or the prospect
of future sales of shares of the Common Stock, whether such shares are
"restricted shares" under Rule 144, or are otherwise eligible for resale without
restriction, may have a depressive effect upon the price of the Common Stock and
the market therefor.
LIMITED PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
The Common Stock is listed for quotation on the Nasdaq SmallCap Market. There
can be no assurance that there will be an active trading market for the Common
Stock during or after this Offering. The absence of an active trading market
would reduce the liquidity of an investment in the Common Stock. To the extent
that brokerage firms act as market makers, they may be a dominating influence in
any market that might develop, and the degree of participation by such firms may
significantly affect the price and liquidity of the Common Stock. These firms
may discontinue such activities at any time or from time to time. The prices at
which the Common Stock may be offered in the market will be determined by these
firms and the purchasers and sellers of the Common Stock, based in part on
market factors, and may not necessarily relate to the Company's assets, book
value, results of operations or other established and quantifiable criteria of
value. The trading price of the Common Stock, including, without limitation, any
Common Stock to be offered by the Selling Shareholders, could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcements of technological innovations or new products by the Company or its
competitors and other events or factors. In addition, the stock market has
experienced volatility that has particularly affected the market prices of
equity securities of many biotechnology companies and that often has been
unrelated to the operating performance of such companies. These broad market
fluctuations may affect adversely the market price of the Common Stock. See
"Plan of Distribution."
17
<PAGE>
UNCERTAINTY OF LISTING ON NASDAQ SMALLCAP MARKET; MARKET ILLIQUIDITY
Although the Common Stock has been approved for initial listing and quotation on
the Nasdaq SmallCap Market, such market has recently adopted stricter continuing
listing criteria, which the Company is required to meet. Accordingly, continued
inclusion of the Common Stock on the Nasdaq SmallCap Market pursuant to the
recently adopted stricter standards requires that: (i) the Company have net
tangible assets of $2,000,000, or a market capitalization of $35 million or
more, or net income in two of the three most recent fiscal years of at least
$500,000; (ii) the Company's public float have a market value of at least $1
million and a public float of at least 500,000 shares; (iii) the minimum bid
price for the Common Stock be at least $1.00 per share; (iv) the Common Stock
have at least two active market makers and be held of record by at least 300
shareholders and (v) the Company adhere to certain corporate governance
provisions. . For purposes of determining compliance with the public float
requirements, shares of stock held by officers, directors and 10%-or-greater
stockholders are excluded. There can be no assurance that the Company and the
Common Stock will continue to satisfy the requirements for maintaining a listing
on the Nasdaq SmallCap Market.
If the Company is unable to satisfy the continuing maintenance requirements as
they may be in effect or applied from time to time, the Common Stock may be
delisted from the Nasdaq SmallCap Market. In such event, trading, if any, in the
Common Stock would thereafter probably be conducted on the OTC Bulletin Board or
in the over-the-counter market through the National Quotation Bureau (the "pink
sheets") and the Company would again be required to comply with the Nasdaq
SmallCap Market's initial listing criteria in order to have the Common Stock
re-approved for listing and quotation thereon. Consequently, the liquidity of
the Common Stock could be impaired materially and adversely, not only in the
number of securities that can be bought and sold at a given price, but also
through delays in the timing of transactions and reduction in security analysts'
and media coverage of the Company, which could result in lower prices for the
Common Stock than might otherwise be attained and could also result in a larger
spread between the bid and asked prices for the Common Stock. See "Risks of Low
Price Stock; Possible Effect of `Penny Stock' Rules on Liquidity for the Common
Stock."
RISKS OF LOW-PRICED STOCK; POSSIBLE EFFECT OF "PENNY STOCK" RULES ON LIQUIDITY
FOR THE COMMON STOCK
The Exchange Act requires additional disclosure relating to the market for penny
stocks in connection with trades in any stock defined as a penny stock. The
Securities and Exchange Commission's (the "Commission") regulations generally
define a penny stock to be any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Such exceptions include any
equity security listed on the Nasdaq SmallCap Market, subject to certain trade
reporting requirements, and any equity security issued by an issuer that has (i)
net tangible assets of at least $2 million, if such issuer has been in
continuous operation for three years, (ii) net tangible assets of at least $5
million, if such issuer has been in continuous operation for less than three
years, or (iii) average annual revenue of at least $6 million, if such issuer
has been in continuous operation for less than three years. Though the Company
believes that it currently meets the net tangible assets test, there can be no
assurance that the Company will meet the requirements of the foregoing financial
exceptions. Thus, if the price per share of the Common Stock were to be less
than $5.00 per share and the Company was unable to continue to meet the
requirements for listing on the Nasdaq SmallCap Market, failure to qualify under
one of the foregoing exceptions would require delivery, prior to any transaction
in a penny stock, of a disclosure schedule prepared by the Commission relating
to the penny stock market. Disclosure is also required to be made about sales
commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities. Finally, monthly statements are
required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stocks. In any
event, even if the Common Stock were exempt from such restrictions, they would
remain subject to Section 15(b)(6) of the Exchange Act, which gives the
Commission the authority to prohibit any person that engages in unlawful conduct
while participating in a distribution of penny stock from associating with a
broker-dealer or participating in a distribution of penny stock, if the
Commission finds that such a restriction would be in the public interest.
Accordingly, if the Common Stock is subject to the rules on penny stocks, the
market liquidity for such securities could be materially and adversely affected.
18
<PAGE>
In addition, if the Common Stock fails to meet the minimum market price, the net
tangible asset or the annual revenue tests set forth above, but is quoted on the
OTC Bulletin Board (as to which there can be no assurance), then trading in the
Common Stock would be regulated pursuant to Rules 15-g-1 through 15-g-6 and
15-g-9 promulgated under the Exchange Act for non-National Association of
Securities Dealers Automotive Quotation System and non-exchange listed
securities. Under such rules, broker-dealers who recommend such securities to
persons other than established customers and "accredited investors" must make a
special written suitability determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
this transaction. Securities are exempt from these rules if the market price of
the Common Stock is at least $5.00 per share. Consequently, such Exchange Act
rules may affect the ability of broker-dealers to make a market in such shares
and may affect the ability of holders of Common Stock to sell in the secondary
market.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
DELAWARE LAW
The Company's Certificate of Incorporation, as amended, authorizes the issuance
of up to 5,000,000 shares of preferred stock, par value $.01 per share, of which
300,000 shares are authorized for issuance as shares of Series B Preferred
Stock, of which approximately 202,275 are issued and outstanding as Series B
Preferred Stock or reserved for issuance upon the exercise of Series B Placement
Warrants as of July 28, 1998. As of July 28, 1998, the Company's Certificate of
Incorporation authorizes the issuance of "blank check" preferred stock with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue a new series of preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of the Common Stock. In
the event of issuance, the new series of preferred stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. Although the Company has no present
intention to issue any additional shares of its preferred stock, other than
those already authorized for issuance upon exercise of the Placement Warrants,
there can be no assurance that the Company will not do so in the future.
The Company is subject to Section 203 of the General Corporation Law of the
State of Delaware which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person affiliated
with or controlling or controlled by such entity or person. The foregoing
provisions could have the effect of discouraging others from making tender
offers for the Company's shares and, as a consequence, they also may inhibit
fluctuations in the market price of the Company's shares that could result from
actual or rumored takeover attempts. Such provisions also may have the effect of
preventing changes in the management of the Company.
YEAR 2000
Pursuant to the Company's Year 2000 Plan, the Company is currently evaluating
its computerized systems to assure that the transition to the Year 2000 will not
disrupt the Company's operations. The Company also intends to evaluate the
systems of its key suppliers, vendors and other collaborators. Presently, the
Company does not believe that Year 2000 compliance will result in material
investments by the Company, nor does the Company anticipate that the so-called
Year 2000 problem will have any material adverse effect on the business,
operations or financial performance of the Company. There can be no assurance,
however, that the Year 2000 problem will not adversely affect the Company and
its business, particularly in an indirect manner by virtue of any problems
encountered by third parties with whom it does business.
NO DIVIDENDS
The Company has never paid cash dividends on its capital stock and does not
anticipate paying any cash dividends for the foreseeable future.
19
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares by the Selling
Securityholders. The Company is not expected to receive any proceeds from the
exercise of the Placement Warrants since the Placement Warrants may be exercised
pursuant to a cashless exercise provision. In the event that the Placement
Warrants are exercised for cash, the Company intends to use such net cash
proceeds (after estimated offering expenses of this Offering of approximately
$785,000 for general working capital purposes. Proceeds, if any, from the
exercise for cash of all the Placement Warrants, before deduction of estimated
expenses of this Offering, would be approximately $2,841,450. Whether, how and
to what extent any of the Placement Warrants will be exercised, and whether the
Placement Warrants are exercised for cash or not, cannot be predicted by the
Company.
SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock by the Selling Securityholders as of July
28, 1998 and the Shares offered hereby by such Selling Securityholders.
<TABLE>
<CAPTION>
Shares Percentage
Shares Currently Amount to Owned after Owned after
Selling Securityholder Owned be Offered Offering Offering
- --------------------- ----------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
The Aries Domestic Fund, L.P. (1) 175,217 175,217 0 *
The Aries Fund, A Cayman Island Trust (1) 351,342 351,342 0 *
------- -------
TOTAL 526,559 526,559
======= =======
</TABLE>
- -----------
* Represents less than 1.0 %.
(1) Includes shares of Common Stock issuable upon conversion of the Series
B Preferred Stock at the reset conversion rate of $3.83 per share,
shares of Common Stock issuable upon conversion of the shares of Series
B Preferred Stock issuable upon exercise of the Series B Placement
Warrants, and shares of Common Stock issuable upon exercise of the
Bridge Placement Warrants.
Each Selling Securityholder may, but is not required to, sell all of the shares
of Common Stock shown in the column entitled "Amount of Shares to be Offered".
The Selling Securityholders and any broker-dealers that act in connection with
the sale of the Common Stock as principals may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Act and any commission received by
them and any profit on the resale of such securities as principals might be
deemed to be underwriting discounts and commissions under the Act. The Selling
Securityholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of such securities certain
liabilities, including liabilities arising under the Act. The Company will not
receive any proceeds from the sales of the Common Stock by the Selling
Securityholders, although the Company may receive proceeds from the exercise of
the Placement Warrants. Sales of the shares of Common Stock by the Selling
Securityholders, or even the potential sale of such shares, may have an adverse
effect on the market price of the Common Stock.
At the time a particular offer for Common Stock is made, as herein contemplated,
by or on behalf of the Selling Securityholder, to the extent required, a
Prospectus will be distributed by the Selling Securityholder which will set
forth the number of shares of Common Stock being offered and the terms of this
Offering, including the name or names of any underwriters, dealers or agents, if
any, and to the extent that an underwriter is involved, the purchase price paid
by any underwriter for shares purchased from the Selling Securityholder and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
The Selling Securityholders have not had any position, office or other material
relationship with the Company or any of its predecessors or affiliates within
the past three years. The Aries Domestic Fund, L.P. and The Aries Fund, A Cayman
Island Trust are private investment funds managed by Dr. Lindsay A. Rosenwald, a
substantial shareholder and former director of the Company and the sole owner of
Paramount.
20
<PAGE>
PLAN OF DISTRIBUTION
A total of 526,559 shares of Common Stock are being directly offered for sale by
the Selling Securityholders to the public. The Selling Securityholders may, but
are not required to, sell, directly or through brokers, the shares of Common
Stock in negotiated transactions or in one or more transactions in the market at
the price prevailing at the time of sale. In connection with such sales, the
Selling Securityholders and any participating broker may be deemed to be
"underwriters" of the shares of Common Stock within the meaning of the Act,
although the offering of these securities will not be underwritten by a
broker-dealer firm. Sales in the market may be made to broker-dealers making a
market in the Common Stock or other broker-dealers, and such broker-dealer, upon
their resale of such securities, may be deemed to be "Selling Securityholders"
in this Offering. The Company will not receive any of the proceeds from the sale
of the Common Stock by the Selling Securityholders. Pursuant to the terms under
which the Series B Preferred Stock and Placement Warrants were issued and sold,
the Company has agreed to indemnify the Selling Securityholders against such
liabilities as they may incur as a result of any untrue statement of a material
fact in the Registration Statement of which this Prospectus forms a part, or any
omission herein or therein to state a material fact necessary in order to make
the statements made, in the light of the circumstances under which they were
made, not misleading. Such indemnification includes liabilities that the Selling
Securityholders may incur under the Act.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Company will bear all costs and expenses of the registration under the Act
and certain state securities laws of the Common Stock and any discounts or
commissions payable with respect to sales of such securities.
From time to time, this Prospectus will be supplemented and amended as required
by the Act. During any time when a supplement or amendment is so required, after
notice from the Company, the Selling Securityholders are required to cease sales
until the Prospectus has been supplemented or amended.
The Selling Securityholders have advised the Company that they may from time to
time, without limitation or notice to the Company, directly to purchasers or
through underwriters, brokers, dealers or agents, sell all or a portion of the
securities offered hereby in negotiated transactions or in one or more
transactions in the market at the price prevailing at the time of sale. In
connection with such sales, the Selling Securityholders and any participating
broker may be deemed to be "underwriters" of the Common Stock within the meaning
of the Act. The Company will receive no proceeds from the sale of such
securities. It is anticipated that usual and customary brokerage fees will be
paid by the Selling Securityholders in all open market transactions. The Company
will pay all other expenses of this Offering.
The Company has advised the Selling Securityholders that no NASD member
participating in this Offering may receive compensation in excess of 8% of the
proceeds of the sale of such shares. In addition, the terms and arrangements of
any underwritten offering must be filed with the NASD for its review pursuant to
Section 2710 of the NASD's Corporate Financing Rules.
The Company has informed the Selling Securityholders that the anti-manipulation
provisions of Regulation M promulgated under the Exchange Act may apply to the
sales of their shares offered hereby. The Company has advised the Selling
Securityholders of the requirement for delivery of this Prospectus in connection
with any sale of the Common Stock offered hereby.
The Selling Securityholders may from time to time purchase shares of Common
Stock in the open market. The Selling Securityholders have been notified that
they should not commence any distribution of Common Stock unless they have
terminated their purchasing and bidding for Common Stock in the open market as
provided in applicable securities regulations, including, without limitation,
Regulation M.
21
<PAGE>
EXPERTS
The financial statements of AVAX Technologies, Inc. (formerly Walden
Laboratories, Inc.), at December 31, 1997 and for the years ended December 31,
1996 and 1997, appearing in this Prospectus and Registration Statement, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
LEGAL COUNSEL
Legal matters relating to the Offering will be passed upon for the Company by
Roberts, Sheridan & Kotel, a Professional Corporation, New York, New York,
counsel to the Company. Members of such firm beneficially own an aggregate of
45,899 shares of Common Stock upon the conversion of all shares of Series B
Preferred Stock owned by them.
RECENT DEVELOPMENTS
In consideration of the agreement with the Company of certain holders of Series
B Preferred Stock to extend the lock-up period with respect to their shares of
Common Stock issuable upon conversion of their respective shares of Series B
Preferred Stock, such holders became subject to an additional "Reset Event",
such that the Company became obligated to issue additional shares of Common
Stock to such holders in the event that the average closing bid price of the
Common Stock for the 30 consecutive trading days immediately preceding July 10,
1998 was less than $5.175 per share (135% of the then applicable conversion
price).
The average closing bid price of the Common Stock for the 30 consecutive trading
days immediately preceding July 10, 1998 was, in fact, approximately $3.15.
Accordingly, each such holder became entitled to receive approximately 16.7
additional shares of Common Stock for each share of Series B Preferred Stock
that they owned as of July 10, 1998. As a result of the Reset Event, the Company
issued an aggregate of 3,027,164 shares of Common Stock in July for no
additional consideration to those holders of Series B Preferred Stock who had
agreed to the lock-up and had not converted their Preferred Stock to Common
Stock as of July 10, 1998.
22
<PAGE>
================================================================================
No dealer, salesman or any other person has been
authorized to give information or to make any
representations not contained in this Prospectus and,
if given or made, such information or representations
must not be relied upon as having been authorized by
the Company. This Prospectus does not constitute an
offer of any securities other than those to which it
relates or an offer to sell, or a solicitation of an
offer to sell or a solicitation of an offer to buy
any of the securities offered hereby to any person in
any jurisdiction in which such an offer or
solicitation would be unlawful. Neither the delivery
of this Prospectus nor any sales made hereunder
shall, under any circumstances, create any
implication that the information contained herein is
correct as of any time subsequent to the date hereof.
--------------------
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS........................2
AVAILABLE INFORMATION.............................3
DOCUMENTS INCORPORATED BY REFERENCE...............3
PROSPECTUS SUMMARY................................4
COMPANY SUMMARY...................................4
OFFERING SUMMARY..................................6
RISK FACTORS......................................7
USE OF PROCEEDS..................................20
SELLING SECURITYHOLDERS..........................20
PLAN OF DISTRIBUTION.............................21
EXPERTS..........................................22
LEGAL COUNSEL....................................22
RECENT DEVELOPMENTS..............................22
================================================================================
<PAGE>
_________
526,559 Shares
AVAX TECHNOLOGIES, INC.
Common Stock
____________________
PROSPECTUS
, 1998
____________________
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
securities being registered. The following table includes costs and expenses
relating to securities being registered for resale by certain selling
securityholders in an offering which commenced on July 7, 1997 for an aggregate
of 7,047,788 shares of Common Stock, all of which amounts will be paid by the
Company. All amounts are estimates except the SEC registration fee and the
Nasdaq filing fees.
SEC Registration fee $15,398.36
Nasdaq filing fee 10,000.00
NASD Corporate Financing Rule filing fee 4,966.00
Printing and engraving 150,000.00
Legal fees and expenses of the Company 450,000.00
Accounting fees and expenses 65,000.00
Blue sky fees and expenses 25,000.00
Transfer agent fees and expenses 25,000.00
Miscellaneous 39,635.64
-----------
Total $785,000.00
-----------
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("Section 145") authorizes a
court to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). Article Seven of the Company's Certificate of
Incorporation provides that the Company shall indemnify and advance expenses to
its directors ands officers to the fullest extent permitted by Section 145 of
the Delaware General Corporation Law. Article Nine of the Company's Certificate
of Incorporation provides that the liability of its directors is eliminated to
the fullest extent permitted by Section 102(b)(7) of the Delaware General
Corporation Law. Article V, Section 1 of the Company's By-Laws provides for
mandatory indemnification of its directors to the fullest extent authorized by
the Delaware General Corporation Law. Article V, Section 2 of the Company's
By-Laws provides for prepayment of expenses incurred by its directors to the
fullest extent permitted by, and only in compliance with, the Delaware General
Corporate Law. Article V, Section 6 of the Company's By-Laws provides for
permissive indemnification of its officers, employees and agents if and to the
extent authorized by the Board of Directors in compliance with the Delaware
General Corporation Law. These provisions in the Certificate of Incorporation
and the By-Laws do not eliminate the directors' fiduciary duty, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to the Company for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provisions also do not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. In addition, the Company has obtained
certain liability insurance coverage for its directors and officers.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit No. Description
------------- -------------
<S> <C>
* 4.1 Specimen of Common Stock certificate.
* 4.2 Specimen of Series B Convertible Preferred Stock certificate.
* 4.3 Form of Subscription Agreement, by and between the
Registrant and certain purchasers of Series B Preferred
Stock and Common Stock.
4.4 Form of Placement Warrant Relating to Series B Placement Warrants.
* 4.5 Form of Placement Warrant Relating to Bridge Financing
5.1 Opinion of Roberts, Sheridan & Kotel, a Professional Corporation.
23.1 Consent of Roberts, Sheridan & Kotel, a Professional
Corporation. Reference is made to Exhibit 5.1.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (included on the signature page hereof).
** 27.1 Financial Data Schedule.
</TABLE>
* Incorporated by reference and previously filed as an exhibit to the
Company's Registration Statement on Form SB-2 filed with the Commission
(File No. 333-09349).
** Incorporated by reference and previously filed as an exhibit to the
Company's Form 10-QSB Quarterly Report for the quarter ended June 30, 1998,
filed with the Commission on August 14, 1998.
II-2
<PAGE>
Item 17. Undertakings
The Company hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to include any
additional or changed material information on the plan of distribution.
(2) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the Delaware General Corporation Law, the Certificate of Incorporation or the
By-Laws of the Company, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer, or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered hereunder, the Company
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on this August 17, 1998.
AVAX TECHNOLOGIES, INC.
By: /s/ Michael S. Weiss
---------------------------------
Michael S. Weiss
Corporate Secretary and Director
POWER OF ATTORNEY
We, the undersigned officers and directors of AVAX Technologies, Inc., severally
constitute Michael S. Weiss, our true and lawful attorney-in-fact with full
power to him, to sign for us and in our names in the capacities indicated below,
the Registration Statement on Form S-3 filed herewith and any and all subsequent
amendments to said registration statement, and generally to do all such things
in our names and behalf in our capacities as officers and directors to enable
AVAX Technologies, Inc. to comply with all requirements of the Securities and
Exchange Commission.
In accordance with the requirements of the Securities Act of 1933, as amended,
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Name & Title Date
--------- ------------ -----
<S> <C> <C>
/s/ Jeffrey M. Jonas, M.D. Jeffrey M. Jonas, M.D.
-------------------------- President, Chief Executive Officer and Director August 17, 1998
/s/ David L. Tousley David L. Tousley
-------------------------- Chief Financial Officer
(Principal Financial Officer) August 17, 1998
/s/ Edson D. de Castro Edson D. de Castro
------------------------ Director August 17, 1998
/s/ John K. A. Prendergast, Ph.D. John K. A. Prendergast, Ph.D.
--------------------------------- Director August 17, 1998
/s/ Carl Spana, Ph.D. Carl Spana, Ph.D.
--------------------- Director August 17, 1998
/s/ Michael S. Weiss Michael S. Weiss
-------------------- Secretary and Director August 17, 1998
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
------------ ------------
<S> <C>
* 4.1 Specimen of Common Stock certificate.
* 4.2 Specimen of Series B Convertible Preferred Stock
certificate.
* 4.3 Form of Subscription Agreement, by and between the
Registrant and certain purchasers of Series B Preferred
Stock and Common Stock.
4.4 Form of Placement Warrant Relating to Series B Placement Warrants.
* 4.5 Form of Placement Warrant Relating to Bridge Financing
5.1 Opinion of Roberts, Sheridan & Kotel, a Professional
Corporation.
23.1 Consent of Roberts, Sheridan & Kotel, a Professional
Corporation. Reference is made to Exhibit 5.1.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (included on the signature page hereof).
** 27.1 Financial Data Schedule.
</TABLE>
* Incorporated by reference and previously filed as an exhibit to the
Company's Registration Statement on Form SB-2 filed with the Commission
(File No. 333-09349).
** Incorporated by reference and previously filed as an exhibit to the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30,
1998, filed with the Commission on August 14, 1998.
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 6
ON
FORM S-3
TO
REGISTRATION STATEMENT
ON
FORM SB-2
UNDER
THE SECURITIES ACT OF 1933
-----------
AVAX TECHNOLOGIES, INC.
================================================================================
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
AVAX TECHNOLOGIES, INC.
Warrant for the Purchase of Shares of
Preferred Stock
No. SBPW-[ ] [ ] Shares
FOR VALUE RECEIVED, AVAX TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), hereby certifies that [ ], or his permitted assigns
is entitled to purchase from the Company, at any time or from time to time
commencing on December 11, 1996 and prior to 5:00 P.M., New York City time, on
June 11, 2006, [ ] ([ ]) fully paid and non-assessable shares of the Series B
Convertible Preferred Stock, $100 stated value per share, of the Company for an
aggregate purchase price of $[ ] (computed on the basis of $110.00 per share).
(Hereinafter, (i) said Series B Convertible Preferred Stock, together with any
other equity securities which may be issued by the Company with respect thereto
(other than on conversion thereof) or in substitution therefor, is referred to
as the "Preferred Stock", (ii) the Common Stock, $.001 par value, of the
Company, into which the Preferred Stock is convertible, is referred to as the
"Common Stock", (iii) the shares of the Preferred Stock purchasable hereunder or
under any other Warrant (as hereinafter defined) are referred to as the "Warrant
Shares", (iv) the shares of Common Stock purchasable hereunder or under any
other Warrant (as hereinafter defined) following the conversion of all shares of
Preferred Stock into Common Stock and each share of Common Stock receivable upon
the conversion of the Warrant Shares receivable upon the exercise of this
Warrant are referred to as the "Conversion Shares", (v) the aggregate purchase
price payable for the Warrant Shares or the Conversion Shares, as the case may
be, hereunder is referred to as the "Aggregate Warrant Price", (vi) the price
payable (initially $110.00 per share, subject to adjustment) for each of the
Warrant Shares or the Conversion Shares, as the case may be, hereunder is
referred to as the "Per Share Warrant Price", (vii) this Warrant, all similar
Warrants issued on the date hereof and all warrants hereafter issued in exchange
or substitution for this Warrant or such similar Warrants are referred to as the
"Warrants", (viii) the holder of this Warrant is referred to as the "Holder" and
the holder of this Warrant and all other Warrants, Warrant Shares and Conversion
Shares are referred to as the "Holders" and Holders of more than fifty percent
(50%) of the outstanding Warrants, Warrant Shares and Conversion Shares are
referred to as the "Majority of the Holders") and (ix) the then Current Market
Price per share (the "Current Market Price") shall be deemed to be the last sale
price of the Common Stock on the trading day prior to such date or, in case no
such reported sales take place on such day, the average of the last reported bid
and asked prices of the Common Stock on such day, in either case on the
-1-
<PAGE>
principal national securities exchange on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on any such exchange,
the representative closing sale price of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ"), or other similar organization if NASDAQ is no longer reporting such
information, or, if the Common Stock is not reported on NASDAQ, the high per
share sale price for the Common Stock in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or if not so
available, the fair market value of the Common Stock as determined in good faith
by the Board of Directors. The then "Current Market Price Per Share of Preferred
Stock" shall equal the then Current Market Price multiplied by the then
effective "conversion rate" (as defined and used in the Certificate of
Designation for the Preferred Stock) or if the Current Market Price is not so
available, the fair market value of the Preferred Stock as determined in good
faith by agreement among the Majority of the Holders and the Company's Board of
Directors. The Aggregate Warrant Price is not subject to adjustment. The Per
Share Warrant Price is subject to adjustment as hereinafter provided; in the
event of any such adjustment, the number of Warrant Shares or Conversion Shares,
as the case may be, deliverable upon exercise of this Warrant shall be adjusted
by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
1 Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in
part from time to time, commencing on December 11, 1996 and prior to 5:00 P.M.,
New York City time, on June 11, 2006 by the Holder:
(i) by the surrender of this Warrant (with the subscription
form at the end hereof duly executed) at the address set forth in
Section 9(a) hereof, together with proper payment of the Aggregate
Warrant Price, or the proportionate part thereof if this Warrant is
exercised in part, with payment for Warrant Shares or Conversion
Shares, as the case may be, made by certified or official bank check
payable to the order of the Company; or
(ii) by the surrender of this Warrant (with the cashless
exercise form at the end hereof duly executed) (a "Cashless Exercise")
at the address set forth in Section 9(a) hereof. Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay
the Aggregate Warrant Price, or the proportionate part thereof if this
Warrant is exercised in part. In the event of a Cashless Exercise, the
Holder shall exchange its Warrant for that number of Warrant Shares or
Conversion Shares, as the case may be, subject to such Cashless
Exercise multiplied by a fraction, the numerator of which shall be the
difference between the then Current Market Price Per Share of Preferred
Stock (or the Current Market Price if exercised after the Conversion
Date (as defined below)) and the Per Share Warrant Price, and the
denominator of which shall be the then Current Market Price Per Share
of Preferred Stock (or the Current Market Price if exercised after the
Conversion Date (as defined below)). For purposes of any computation
under this Section 1(a), the then Current Market Price shall be based
on the trading day prior to the Cashless Exercise.
-2-
<PAGE>
(iii) if the Company, in its sole and absolute discretion,
agrees in advance, by the surrender of this Warrant (with the subscription
(promissory note) form at the end hereof duly executed) at the address set forth
in Subsection 9(a) hereof, together with the presentation of a promissory note
(the "Promissory Note") made payable to the corporation, duly executed and in
the form at the end hereof, such Promissory Note to be secured by the securities
underlying this Warrant (the "Underlying Securities"). The Company shall retain
possession of the Underlying Securities as collateral for the Company's security
interest in the Promissory Note, which security interest shall have priority
over all subsequent interests with respect to such collateral.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Preferred Stock, (or the Common
Stock following the Conversion Date) and the Holder is entitled to receive a new
Warrant covering the Warrant Shares or Conversion Shares, as the case may be,
which have not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares or Conversion Shares,
as the case may be. Upon surrender of this Warrant, the Company will (i) issue a
certificate or certificates in the name of the Holder for the largest number of
whole shares of the Preferred Stock (or the Common Stock following the
Conversion Date) to which the Holder shall be entitled and, if this Warrant is
exercised in whole, in lieu of any fractional share of the Preferred Stock (or
the Common Stock following the Conversion Date) to which the Holder shall be
entitled, pay to the Holder cash in an amount equal to the fair value of such
fractional share (determined in such reasonable manner as the Board of Directors
of the Company shall determine), and (ii) deliver the other securities and
properties receivable upon the exercise of this Warrant, or the proportionate
part thereof if this Warrant is exercised in part, pursuant to the provisions of
this Warrant; provided, however that if this Warrant is exercised pursuant to
paragraph 1(a)(iii), the Company will issue but shall not deliver such shares
until such time as the promissory note and all accrued interest thereon shall
have been paid in full.
(c) If this Warrant is exercised on or after the date on which
all shares of Preferred Stock have been converted into shares of Common Stock
(the "Conversion Date"), then this Warrant shall be exercisable only for
Conversion Shares at the then applicable Per Share Warrant Price (including any
adjustment pursuant to Section 3(f) below).
2 Reservation of Warrant Shares and Conversion Shares;
Listing. The Company agrees that, prior to the expiration of this Warrant, the
Company shall at all times (a) have authorized and in reserve, and shall keep
available, solely for issuance and delivery upon the exercise of this Warrant,
the shares of the Preferred Stock and other securities and properties as from
time to time shall be receivable upon the exercise of this Warrant, free and
clear of all restrictions on sale or transfer (other than any contractual
lock-up agreements (each a "Lock-Up Agreement") entered into by the Holder with
and for the benefit of the Company), other than under Federal or state
securities laws, and free and clear of all preemptive rights and rights of first
refusal and (b) have authorized and in reserve, and shall keep available, solely
for issuance or delivery upon conversion of the Warrant Shares or the exercise
of this Warrant for Conversion Shares, the shares of Common Stock and other
securities and properties as from time to time shall be receivable upon such
conversion, free and clear of all restrictions on sale or transfer, other than
under Federal or state securities laws, and free and clear of all preemptive
rights and rights of first refusal; and (c) if the Company hereafter lists its
Common Stock on any national securities exchange, the Nasdaq National Market or
the Nasdaq SmallCap Market, use its best efforts to keep the Conversion Shares
authorized for listing on such exchange upon notice of issuance.
-3-
<PAGE>
3 Protection Against Dilution.
(a) If, at any time or from time to time after the date of
this Warrant, the Company shall issue or distribute to the holders of shares of
Preferred Stock evidence of its indebtedness, any other securities of the
Company or any cash, property or other assets (excluding a subdivision,
combination or reclassification, or dividend or distribution payable in shares
of Preferred Stock, referred to in Section 3(b), and also excluding cash
dividends or cash distributions paid out of net profits legally available
therefor in the full amount thereof (any such non-excluded event being herein
called a "Special Dividend")), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then Current Market Price Per Share of the
Preferred Stock in effect on the record date of such issuance or distribution
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Preferred Stock and the denominator of which shall be the then Current
Market Price Per Share of the Preferred Stock in effect on the record date of
such issuance or distribution. An adjustment made pursuant to this Subsection
3(a) shall become effective immediately after the record date of any such
Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Preferred Stock, (ii)
subdivide its outstanding shares of Preferred Stock into a greater number of
shares, (iii) combine its outstanding shares of Preferred Stock into a smaller
number of shares or (iv) issue by reclassification of its Preferred Stock any
shares of capital stock of the Company (other than the Conversion Shares), the
Per Share Warrant Price shall be adjusted to be equal to a fraction, the
numerator of which shall be the Aggregate Warrant Price and the denominator of
which shall be the number of shares of Preferred Stock or other capital stock of
the Company which he would have owned immediately following such action had such
Warrant been exercised immediately prior thereto. An adjustment made pursuant to
this Subsection 3(b) shall become effective immediately after the record date in
the case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case
the Company shall hereafter issue or sell any Preferred Stock, any securities
convertible into Preferred Stock, any rights, options or warrants to purchase
Preferred Stock or any securities convertible into Preferred Stock, in each case
for a price per share or entitling the holders thereof to purchase Preferred
Stock at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the total consideration, if any, payable to the Company
upon exercise or conversion thereof (the "Total Consideration") by (ii) the
number of additional shares of Preferred Stock issued, sold or issuable upon
exercise or conversion of such securities) which is less than both the then
Current Market Price Per Share of the Preferred Stock in effect on the date of
such issuance or sale or the Per Share Warrant Price, the Per Share Warrant
Price shall be adjusted as of the date of such issuance or sale by multiplying
the Per Share Warrant Price then in effect by a fraction, the numerator of which
shall be (x) the sum of (A) the number of shares of Preferred Stock outstanding
on the record date of such issuance or sale plus (B) the Total Consideration
divided by the Current Market Price Per Share of the Preferred Stock or the
current Per Share Warrant Price, whichever is greater, and the denominator of
which shall be (y) the number of shares of Preferred Stock outstanding on the
record date of such issuance or sale plus the maximum number of additional
shares of Preferred Stock issued, sold or issuable upon exercise or conversion
of such securities.
-4-
<PAGE>
(d) No adjustment in the Per Share Warrant Price shall be
required in the case of the issuance by the Company of Preferred Stock (i)
pursuant to the exercise of any Warrant or (ii) pursuant to the exercise of any
stock options or warrants currently outstanding or securities issued after the
date hereof pursuant to any Company benefit plan.
(e) In case of any capital reorganization or reclassification,
or any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation, or
in case of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as a entirety, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Company), the Holder of this Warrant shall have the right thereafter to receive
on the exercise of this Warrant the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Section 3(e) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The Company shall require the issuer
of any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant to be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Warrants not less than thirty (30) days prior to such event. A sale of all
or substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) Upon the Conversion Date, the Per Share Warrant Price
shall be adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company which the Holder
would have owned immediately following such conversion had this Warrant been
exercised for Preferred Stock (assuming a cash exercise) immediately prior
thereto.
-5-
<PAGE>
(g) No adjustment in the Per Share Warrant Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Preferred Stock; provided, however, that any
adjustments which by reason of this Subsection 3(g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided, further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 3 (other than this Subsection
3(g)) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the Holder of this Warrant or Preferred
Stock issuable upon the exercise hereof. All calculations under this Section 3
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be. Anything in this Section 3 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Per Share Warrant
Price, in addition to those required by this Section 3, as it in its discretion
shall deem to be advisable in order that any stock dividend, subdivision of
shares or distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Company shall promptly
prepare a brief statement of the facts requiring such adjustment or modification
and the manner of computing the same and cause copies of such certificate to be
mailed to the Holders of the Warrants. The Company may, but shall not be
obligated to unless requested by a Majority of the Holders, obtain, at its
expense, a certificate of a firm of independent public accountants of recognized
standing selected by the Board of Directors (who may be the regular auditors of
the Company) setting forth the Per Share Warrant Price and the number of Warrant
Shares or Conversion Shares, as the case may be, after such adjustment or the
effect of such modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause copies
of such certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Preferred Stock or Common
Stock other than a cash distribution out of earned surplus, the Company shall
mail notice thereof to the Holders of the Warrants not less than ten (10) days
prior to the record date fixed for determining stockholders entitled to
participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Preferred Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of Preferred Stock
and other capital stock.
-6-
<PAGE>
(k) For purposes of the anti-dilution protection contained in
this Section 3, at all times following the conversion of all shares of Preferred
Stock into shares of Common Stock, the term Preferred Stock shall be read to be
Common Stock, context permitting, so that the anti-dilution provisions will
continue to protect the purchase rights represented by this Warrant after the
conversion of all the Preferred Stock into the Common Stock in accordance with
the essential intent and principles of this Section 3 (it being understood that
prior to such conversion, the anti-dilution provisions of the Preferred Stock
shall protect the Holder from dilution of the Common Stock).
(l) Upon the expiration of any rights, options, warrants or
conversion privileges with respect to the issuance of which an adjustment to the
Per Share Warrant Price had been made, if such shall not have been exercised,
the Per Share Warrant Price then in effect hereunder shall forthwith be
readjusted to such Per Share Warrant Price as would have obtained (a) had the
adjustments made upon the issuance or sale of such rights, options, warrants or
conversion privileges been made upon the basis of the issuance of only the
number of shares of Common Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of such rights, options,
warrants or conversion privileges and (b) had adjustments been made on the basis
of the Per Share Warrant Price as adjusted under clause (a) for all transactions
(which would have affected such adjusted Per Share Warrant Price) made after the
issuance or sale of such rights, options, warrants or conversion privileges.
4 Fully Paid Stock; Taxes. The Company agrees that the shares
of the Preferred Stock represented by each and every certificate for Warrant
Shares delivered on the exercise of this Warrant and the shares of Common Stock
delivered upon the conversion of the Warrant Shares or the exercise of this
Warrant following the conversion of all shares of Preferred Stock into Common
Stock, shall at the time of such delivery, be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Preferred
Stock and the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that it will pay,
when due and payable, any and all Federal and state stamp, original issue or
similar taxes which may be payable in respect of the issue of any Warrant Share,
Conversion Share or any certificate thereof to the extent required because of
the issuance by the Company of such security.
5 Registration Under Securities Act of 1933. (a) The Holder
shall, with respect to the Conversion Shares only, have the right to participate
in the registration rights granted to purchasers of Preferred Stock pursuant to
Article 5 of the subscription agreement (the "Subscription Agreement") between
such purchasers and the Company that were entered into at the time of the
initial sale of the Preferred Stock. By acceptance of this Warrant, the Holder
agrees to comply with the provisions of Article 5 of the Subscription Agreement
to the same extent as if it were a party thereto, to the extent of any
limitations with respect to such provisions.
(b) Until all Conversion Shares have been sold under a
Registration Statement or pursuant to Rule 144, the Company shall use its
reasonable best efforts to file with the Securities and Exchange Commission all
current reports and the information as may be necessary to enable the Holder to
effect sales of its shares in reliance upon Rule 144 promulgated under the Act.
-7-
<PAGE>
6 Investment Intent; Limited Transferability.
(a) The Holder represents, by accepting this Warrant, that it
understands that this Option and any securities obtainable upon exercise of this
Warrant or upon conversion of such securities have not been registered for sale
under Federal or state securities laws and are being offered and sold to the
Holder pursuant to one or more exemptions from the registration requirements of
such securities laws. In the absence of an effective registration of such
securities or an exemption therefrom, any certificates for such securities shall
bear the legend set forth on the first page hereof. The Holder understands that
it must bear the economic risk of its investment in this Warrant and any
securities obtainable upon exercise of this Warrant or upon conversion of such
securities for an indefinite period of time, as this Warrant and such securities
have not been registered under Federal or state securities laws and therefore
cannot be sold unless subsequently registered under such laws, unless an
exemption from such registration is available.
(b) The Holder, by his acceptance of its Warrant, represents
to the Company that it is acquiring this Warrant and will acquire any securities
obtainable upon exercise of this Warrant for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof in
violation of the Securities Act of 1933, as amended (the "Act"). The Holder
agrees that this Warrant and any such securities will not be sold or otherwise
transferred unless (i) a registration statement with respect to such transfer is
effective under the Act and any applicable state securities laws or (ii) such
sale or transfer is made pursuant to one or more exemptions from the Act.
(c) Each Holder agrees to be bound by the provisions of any
contractual lock-up agreements entered into by the Holder with and for the
benefit of the Company. It is acknowledged that with respect to certain Holders
who are employees of Paramount Capital, Inc., such Holders' Conversion and
Warrant Shares are subject to their respective Lock-Up Agreements until July 10,
1999.
(d) With respect to Holders that are not subject to such
contractual lock-up agreements with the Company, this Warrant may not be sold,
transferred, assigned or hypothecated until December 11, 1997, except (i) to any
firm or corporation that succeeds to all or substantially all of the business of
Paramount Capital, Inc., (ii) to any of the officers, employees, associates or
affiliated companies of Paramount Capital, Inc., or of any such successor firm,
(iii) to any NASD member participating in the Offering or any officer or
employee of any such NASD member or (iv) in the case of an individual, pursuant
to such individual's last will and testament or the laws of descent and
distribution, and is so transferable only upon the books of the Company which it
shall cause to be maintained for such purpose. The Company may treat the
registered Holder of this Warrant as he or it appears on the Company's books at
any time as the Holder for all purposes. The Company shall permit any Holder of
an Warrant or its duly authorized attorney, upon written request during ordinary
business hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrant. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and all
rights of the holder thereof shall be identical to those of the Holder.
7 Loss, etc., of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
-8-
<PAGE>
8 Warrant Holder Not Stockholder. This Warrant does not confer
upon the Holder any right to vote or to consent to or receive notice as a
stockholder of the Company, as such, in respect of any matters whatsoever, or
any other rights or liabilities as a stockholder, prior to the exercise hereof;
this Warrant does, however, require certain notices to Holders as set forth
herein.
9 Communication. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 4520 Main Street, Suite 930, Kansas City,
Missouri 64111, Attn: President or such other address as the
Company has designated in writing to the Holder, or
(b) the Holder at c/o Paramount Capital Incorporated, 787
Seventh Avenue, New York, NY 10019 or other such address as the
Holder has designated in writing to the Company.
10 Headings. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
11 Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to the principles of conflicts of law thereof.
12 Amendment, Waiver, etc. Except as expressly provided
herein, neither this Warrant nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought; provided, however, that any provisions hereof may be amended, waived,
discharged or terminated upon the written consent of the Company and the
Majority of the Holders.
-9-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary this 11th day of June, 1996.
AVAX TECHNOLOGIES, INC.
By:____________________________
Name: Jeffrey M. Jonas, M.D.
Title: President
ATTEST:
Secretary
[Corporate Seal]
-10-
<PAGE>
SUBSCRIPTION (cash)
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Preferred Stock, stated value $100 per share,
of AVAX Technologies, Inc. covered by said Warrant, and makes payment therefor
in full at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
SUBSCRIPTION (promissory note)
The undersigned, __________________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase
________________ shares of the Preferred Stock, stated value $100 per share, of
AVAX Technologies, Inc. covered by said Warrant, and makes payment therefor in
full at the price per share provided by said Warrant by delivery of the attached
Promissory Note. The undersigned hereby confirms the representations and
warranties made by it in the Warrant and in the attached Promissory Note and
acknowledges that the decision to accept the Promissory Note as payment is
entirely within the sole and absolute discretion of the Company.
Dated:_______________ Signature:______________________
Address:_______________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Preferred Stock, stated value $100 per share, of
AVAX Technologies, Inc. pursuant to the Cashless Exercise provisions of the
Warrant.
Dated:_______________ Signature:____________________
Address:______________________
-11-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of AVAX
Technologies, Inc.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Preferred Stock, stated value $100 per share, of AVAX Technologies, Inc. covered
by the foregoing Warrant, and a proportionate part of said Warrant and the
rights evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of AVAX Technologies, Inc.
Dated:_______________ Signature:____________________
Address:______________________
-12-
<PAGE>
[Form]
PROMISSORY NOTE
$[ ] New York, New York
[ ]
[Warrantholder] ("Borrower"), for value received, hereby promises to pay to the
order of AVAX Technologies, Inc. (together with any such subsequent holder of
this Promissory Note (the "Note"), the "Holder") the sum of [ ]($ ) (the
"Principal Amount") on June 10, 2006 (the "Maturity Date"), payable by the
Borrower on the Maturity Date. This Note shall not bear interest, except that if
the Principal Amount hereof or any portion of such Principal Amount is not paid
when due (whether upon acceleration pursuant to Section 3 hereof or upon the
Maturity Date), then in each such case the overdue amount shall bear interest at
the rate of 4% per annum, (after, as well as before, judgment and during any
bankruptcy or insolvency proceeding) compounded annually, and all on the terms
and conditions set forth hereinafter (to the extent that the payment of such
interest shall be legally enforceable), which interest shall accrue from the
date such overdue amount was due to the date payment of such amount, including
interest thereon, has been made or duly provided for. All such interest shall be
payable on demand. "Original Issue Discount" (meaning the difference between the
issue price of this Note of $[ ] (the "Issue Price") and the Principal Amount),
during the period in which this Note remains outstanding, shall accrue at a rate
equal to the prime rate plus one and one-half percent (1.5%) per annum,
compounded on an annual bond equivalent basis using a 360-day year composed of
twelve 30-day months, commencing on the Issue Date of this Note, and cease to
accrue on the earlier of (a) the date on which the Principal Amount hereof or
any portion of such Principal Amount becomes due and payable and (b) an early
prepayment date.
Payment for all amounts due hereunder shall be made by certified check or wire
transfer of immediately available lawful funds of the United States of America
to Holder at c/o 4520 Main Street, Kansas City, MO 64111, Attn: President, or
other such address as the Holder may designate by notice to Borrower. If this
Note is prepaid in whole or in part by the tendering of the Stock (as defined
below) pursuant to Paragraph 2 below, the repayment date shall be the date on
which the Borrower delivers a notice to the Company in accordance with Paragraph
4 irrevocably stating the Borrower's intention to repay the Note by tendering
such shares. The Borrower is delivering this Note as payment of the exercise
price for the purchase of the shares of Preferred Stock, $100 stated value per
share, (the "Stock") underlying the Warrant dated June 11, 1996 (the "Warrant")
issued to the Borrower. The Note shall be secured by the Stock, which the Holder
shall retain in its possession as collateral for the Holder's security interest
in the Note, which security interest shall have priority over all subsequent
interests with respect to such collateral.
1. Prepayment; Repayment. The Borrower may at any time prepay in whole or in
part the Issue Price plus accrued Original Issue Discount to date of payment
(such amount hereafter referred to collectively as the "Accreted Principal
Amount") of this Note, without penalty or premium. All sums paid hereon shall be
applied first to accrued, unpaid Original Issue Discount on this Note and the
balance, if any, to the reduction of the Issue Price hereof. On the Maturity
Date, the entire unpaid Principal Amount of this Note shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company.
-13-
<PAGE>
2. Prepayment or Repayment by Tendering of Shares. Any prepayment or repayment
may be made by instructing the Company to withhold that number of shares of
Stock currently held by the Company as collateral for this Promissory Note in
accordance with Paragraph 1(a)(iii) of the Warrant and having a value, based
upon the Market Price (as defined in the introductory paragraph of the Warrant)
of the Common Stock, equal to the Principal Amount in the case of payment as of
and after the Maturity Date (plus premium, if any) or the entire Accreted
Principal Amount in the case of any prepayment prior to the Maturity Date. The
Company will deliver the balance of the shares not withheld pursuant to the
immediately preceding sentence of this Paragraph 2 to the Borrower at the
address set forth in Paragraph 3 below within five (5) days of the date of such
prepayment or repayment, as the case may be.
3. Events of Default. If any events specified in this
Paragraph 3 shall occur (herein individually referred to as an "Event of
Default"), the Holder of the Note may, so long as such condition exists, declare
the entire Accreted Principal Amount hereon immediately due and payable, by
notice in writing to Borrower:
3.1. Default in the payment of the principal and/or
unpaid accrued Original Issue Discount of the Note when due and payable; or
3.2. The institution by Borrower of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by Borrower to institution
of bankruptcy or insolvency proceedings against Borrower or the filing by
Borrower of a petition or answer or consent seeking reorganization or release
under the federal Bankruptcy Act, or any other applicable federal or state law,
or the consent by Borrower to the filing of any such petition or the appointment
of a receiver, liquidator, assignee, trustee or other similar official for all
or any substantial part of its property, of the taking of any action by Borrower
in furtherance of any such action; or
3.3. If, within sixty (60) days after the
commencement of an action against Borrower (and service of process in connection
therewith on Borrower) seeking any bankruptcy, insolvency, reorganization,
liquidation or similar relief under any present or future statute, law of
regulation, such action shall not have been resolved in favor of Borrower of all
orders or proceedings thereunder affecting the property of Borrower stayed, or
if the stay of any such order or proceeding shall thereafter be set aside, or
if, within sixty (60) days after the appointment without the consent or
acquiescence of Borrower of any trustee or receiver for all or any substantial
part of the property of Borrower, such appointment shall not have been vacated;
or
-14-
<PAGE>
3.4. Any violation of the Borrower's Lock-Up
Agreement (as defined in the Warrant), if any, if said event shall occur and
continue uncured for a period of 30 days after notice from the Holder that such
an event has occurred.
4. Notices. Any notice required, desired or permitted to be
given hereunder shall be in writing and shall be delivered personally, sent
certified or registered United States mail, return receipt requested or sent by
overnight courier service addressed to:
If to the Holder:
c/o AVAX Technologies, Inc.
4520 Main Street
Suite 930
Kansas City, MO 64111
Attn: President
If to Borrower:
[name and address]
Such notices shall be deemed given (i) if delivered personally, upon delivery,
(ii) if mailed as aforesaid, two (2) business days after deposit in the United
States mail and (iii) if sent by overnight courier service one (1) business day
after deposit with the courier service. Any party may change its address by
notice to the other parties.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
issued this [ ] day of [ ] 199[ ].
BORROWER:
___________________________________
Name:
Address:
<PAGE>
EXHIBIT 5.1
[Letterhead of Roberts, Sheridan & Kotel, P.C.]
August 17, 1998
AVAX Technologies, Inc.
4520 Main Street, Suite 930
Kansas City, MO 64111
AVAX Technologies, Inc.
Registration on Form SB-2
Dear Sirs:
We have acted as counsel for AVAX Technologies, Inc., a
Delaware corporation (the "Issuer"), in connection with the preparation of
Post-Effective Amendment No. 6 on Form S-3 to the Registration Statement on Form
SB-2 (the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission") on August 17, 1998, Registration Number 333-09349,
under the Securities Act of 1933 (the "Act") for the registration under the Act
of the following securities of the Issuer:
(i) 228,348 shares of common stock, par value $.004 per
share ("Common Stock");
(ii) 260,874 shares of Common Stock issuable upon conversion
of currently outstanding shares of Series B Convertible
Preferred Stock, par value of $.01 per share (the "Series B
Preferred Stock"); and
(iii) up to 37,337 shares of Common Stock issuable upon (a)
the conversion of shares of Series B Preferred Stock issuable
upon exercise of the warrants issued to the placement agent
and/or its designees relating to the offering of the Series B
Preferred Stock (the "Series B Placement Warrants") and (b)
exercise of warrants issued to the placement agent and/or its
designees for certain bridge financing transactions of the
Company (the "Bridge Placement Warrants," and together with
the Series B Placement Warrants, the "Placement Warrants").
In that connection, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of certificates of public
officials and corporate records, instruments and documents of or affecting the
Issuer, including, without limitation, (i) the Certificate of Incorporation of
the Issuer, as amended to date; (ii) the Bylaws of the Issuer, as amended to
date; (iii) resolutions adopted by the Board of Directors and Stockholders of
the Issuer; (iv) the Certificate of Designations for the Series B Preferred
Stock; (v) a form of specimen stock certificate for the Common Stock; (vi) a
form of specimen stock certificate for the Series B Preferred Stock; (vii) a
form of the Series B Placement Warrant; and (viii) a form of the Bridge
Placement Warrant. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of certificates of officers of the
Issuer, and have reviewed such questions of law and made such other inquiries,
as we have deemed necessary or appropriate for the purpose of rendering this
opinion.
In rendering our opinion, we have relied, as to matters of
fact, upon representations and warranties of the Issuer and upon such
certificates and other instruments of officers of the Issuer and public
officials as we have deemed necessary or appropriate for the purpose of
rendering this opinion, in each case without independent investigation or
verification. Additionally, without any independent investigation or
verification, we have assumed (i) the genuineness of all signatures, (ii) the
authenticity of all documents submitted to us as originals and the conformity
with the original documents of all documents submitted to us as certified,
conformed or photostatic copies, (iii) the authority of all persons signing any
document other than the officers of the Issuer, where applicable, signing in
their capacity as such, (iv) the enforceability of all the agreements we have
reviewed in accordance with their respective terms against the parties thereto,
and (v) the truth and accuracy of all matters of fact set forth in all
certificates and other instruments furnished to us.
<PAGE>
Based upon the foregoing, and subject to the limitations,
qualifications and assumptions set forth herein, we are of the opinion that:
1. The Issuer is a corporation duly incorporated and is in
good standing under the laws of the State of Delaware.
2. The 228,348 shares of Common Stock which may be sold in
accordance with the provisions of the Registration Statement have been legally
issued and are fully paid and nonassessable.
3. The 260,874 shares of Common Stock issuable upon conversion
of currently outstanding shares of Series B Preferred Stock have been duly
authorized for issuance, and when issued upon conversion of the Series B
Preferred Stock will be legally issued, fully paid and nonassessable.
4. The aggregate of up to 26,087 shares of Common Stock
issuable upon conversion of the Series B Preferred Stock after exercise of the
Series B Placement Warrants have been duly authorized for issuance, and when
issued upon conversion of the Series B Preferred Stock after exercise of the
Series B Placement Warrants, and the payment of the applicable exercise price
thereof or the use of the cashless exercise provision thereof will be legally
issued, fully paid and nonassessable.
5. The aggregate of up to 11,250 shares of Common Stock
issuable upon exercise of the Bridge Placement Warrants have been duly
authorized for issuance, and when issued upon exercise of the Bridge Placement
Warrants, and the payment of the applicable exercise price thereof or the use of
the cashless exercise provision thereof will be legally issued, fully paid and
non-assessable.
Members of this Firm are admitted to practice law only in the
State of New York and do not purport to be experts on, and are not expressing
any opinion with respect to, any laws other than the laws of the State of New
York, the General Corporation Law of the State of Delaware and the Federal laws
of the United States of America.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement and the reference to us under the heading "Legal
Counsel" in the Prospectus included in Part I of the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Roberts, Sheridan & Kotel, P.C.
<PAGE>
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
Post-Effective Amendment No. 6 on Form S-3 to the Registration Statement on
Form SB-2 (SEC File No. 333-09349) and related Prospectus of AVAX Technologies,
Inc. (formerly Walden Laboratories, Inc.) for the registration of 526,559 shares
of common stock and to the incorporation by reference therein of our report
dated January 16, 1998, with respect to the financial statements of AVAX
Technologies, Inc. included in its Annual Report on Form 10-KSB for the year
ended December 31, 1997.
Ernst & Young LLP
Kansas City, Missouri
August 14, 1998
