<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission file number ____________
----------------------
AVAX TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3575874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4520 Main Street, Suite 930
Kansas City, Missouri 64111
(Address of principal executive offices) (Zip Code)
Registrants's telephone number, including area code: (816) 960-1333
Securities registered under Section 12 (b) of the Exchange Act: None
Securities registered under Section 12 (g) of the Exchange Act:
Common Stock, par value $.004 per share
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
As of July 28, 1998, 8,332,169 shares of the Registrant's common stock, par
value $.004 per share, were outstanding.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format: [ ] Yes [X] No
<PAGE>
AVAX TECHNOLOGIES, INC.
Table of Contents
<TABLE>
<CAPTION>
Page
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PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
BALANCE SHEETS -- As of December 31, 1997
and June 30, 1998 (unaudited)...................................................... Page 3
STATEMENTS OF OPERATIONS (unaudited) -- For the Three Months Ended June
30, 1997 and June 30, 1998; for the Six Months Ended June
30, 1997 and June 30, 1998; and for the Period from
January 12, 1990 (Incorporation) through June 30, 1998............................. Page 4
STATEMENTS OF CASH FLOWS (unaudited) -- For the Six Months Ended June
30, 1997 and June 30, 1998 and for the Period from January 12, 1990
(Incorporation) through June 30, 1998.............................................. Page 5
Notes to Financial Statements.......................................................... Page 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................. Page 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................................... Page 11
Item 2. Change in Securities................................................................... Page 11
Item 3. Defaults Upon Senior Securities........................................................ Page 11
Item 4. Submission of Matters to a Vote of Security Holders.................................... Page 11
Item 5. Other Information...................................................................... Page 11
Item 6. Exhibits and Reports on Form 8-K....................................................... Page 11
Signatures...................................................................................... Page 12
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AVAX Technologies, Inc.
(a development stage company)
Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ ------------
<S> <C> <C>
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 6,820,884 $ 1,760,372
Marketable securities 9,102,028 11,293,329
Common stock receivable from a related party 1,200,000 -
Prepaid expenses and other current assets 154,929 198,944
------------ ------------
Total current assets 17,277,841 13,252,645
Furniture and equipment, at cost 91,959 108,736
Less accumulated depreciation 14,967 24,528
------------ ------------
Net furniture and equipment 76,992 84,208
------------ ------------
Total assets $ 17,354,833 $ 13,336,853
------------ ------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 353,726 $ 360,930
Amount payable to preferred stockholders 1,150,200 -
Amount payable to Former Officer 49,800 -
------------ ------------
Total current liabilities 1,553,726 360,930
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 5,000,000, including
Series B - 300,000 shares
Series B convertible preferred stock:
Issued and outstanding shares - 204,159 and 179,661 at
December 31, 1997 and June 30, 1998, respectively (liquidation
preference - $27,561,465 and $24,254,235 at
December 31, 1997 and June 30, 1998, respectively) 2,041 1,796
Common stock, $.004 par value:
Authorized shares - 50,000,000 and 30,000,000 at December
31, 1997 and June 30, 1998, respectively
Issued and outstanding shares - 4,582,305 and 5,221,373 at
December 31, 1997 and June 30, 1998, respectively 18,329 20,885
Additional paid-in capital 23,995,640 23,993,329
Subscription receivable (432) (432)
Deferred compensation (694,324) (559,774)
Deficit accumulated during the development stage (7,520,147) (10,479,881)
------------ ------------
Total stockholders' equity 15,801,107 12,975,923
------------ ------------
Total liabilities and stockholders' equity $ 17,354,833 $ 13,336,853
------------ ------------
</TABLE>
See accompanying notes.
Page 3
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Period from
January 12, 1990
(Incorporation)
Three months ended Six months ended Through
June 30, June 30, June 30,
1997 1998 1997 1998 1998
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Gain from sale of the Product $ -- $ -- $ -- $ -- $ 1,951,000
Costs and expenses:
Research and development 590,013 1,152,779 969,782 2,110,143 6,911,428
Marketing and selling -- -- -- -- 543,646
General and administrative 769,365 577,504 1,591,878 1,228,156 6,790,300
------------- ------------- ------------- -------------- --------------
Total operating loss (1,359,378) (1,730,283) (2,561,660) (3,338,299) (12,294,374)
Other income (expense):
Interest income 264,632 170,855 544,597 378,565 2,315,018
Interest expense (41,390) -- (81,238) -- (646,293)
Other, net -- -- -- -- 145,768
------------- ------------- ------------- -------------- --------------
Total other income (expense) 223,242 170,855 463,359 378,565 1,814,493
------------- ------------- ------------- -------------- --------------
Net loss (1,136,136) (1,559,428) (2,098,301) (2,959,734) (10,479,881)
Amount payable for
liquidation preference -- -- -- -- (1,870,033)
------------- ------------- ------------- -------------- --------------
Net loss attributable to
common stockholders $ (1,136,136) $ (1,559,428) $ (2,098,301) $ (2,959,734) $ (12,349,914)
============= ============= ============= ============== ==============
Net loss per common share $ (.33) $ (.31) $ (.62) $ (.61)
============= ============= ============= ==============
Weighted average number of
shares outstanding 3,441,314 5,044,755 3,410,334 4,884,988
============= ============= ============= ==============
</TABLE>
See accompanying notes.
Page 4
<PAGE>
AVAX Technologies, Inc.
(a development stage company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from January
12, 1990
(Incorporation)
Six months ended June 30, To June 30,
1997 1998 1998
------------- ------------- --------------
<S> <C> <C> <C>
Operating activities
Net loss $ (2,098,301) $ (2,959,734) $ (10,479,881)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 140,132 144,111 656,432
Gain from sale of the Product - - (1,951,000)
Gain on sale of intellectual property - - (787)
Accretion of interest on common stock
receivable (81,210) - (449,000)
Accretion of interest on amount
payable to preferred stockholders
and Former Officer 81,210 - 449,000
Loss on sale or abandonment of
furniture and equipment - - 37,387
Issuance of common stock for services - - 147,000
Changes in operating assets and
liabilities:
Prepaid expenses and other
current assets (93,685) (44,015) (198,944)
Accounts payable and accrued
liabilities (3,212) 7,204 360,930
Amount payable to Former Officer - - 80,522
------------- ------------- --------------
Net cash used in operating activities (2,055,066) (2,852,434) (11,348,341)
Investing activities
Purchase of marketable securities and
short-term investments (4,000,000) (2,191,301) (18,409,801)
Proceeds from sale of short-term investments 1,954,790 - 7,116,472
Purchases of furniture and equipment (25,912) (16,777) (174,670)
Proceeds from sale of furniture and equipment
- - 4,600
Organization costs incurred - - (1,358)
------------- ------------- --------------
Net cash used in investing activities (2,071,122) (2,208,078) (11,464,757)
</TABLE>
Page 5
<PAGE>
AVAX Technologies, Inc.
(a development stage company)
Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
Period from January
12, 1990
(Incorporation)
Three months ended March 31, to March 31,
1997 1998 1998
------------- ------------- --------------
<S> <C> <C> <C>
Financing activities
Proceeds from issuance of notes payable to
related party $ - $ - $ 957,557
Principal payments on notes payable to
related party - - (797,000)
Proceeds from loans payable - - 1,389,000
Principal payments on loans payable - - (1,389,000)
Payments for fractional shares from reverse
splits and preferred stock conversions (76) - (76)
Financing costs incurred - - (90,000)
Payments received on subscription receivable 1,746 - 4,532
Proceeds received from exercise of stock
warrants - - 6,250
Net proceeds received from issuance of
preferred and common stock - - 24,492,207
------------- ------------- --------------
Net cash provided by financing activities 1,670 - 24,573,470
------------- ------------- --------------
Net increase (decrease) in cash and cash
equivalents (4,124,518) (5,060,512) 1,760,372
Cash and cash equivalents at beginning
of period 13,832,179 6,820,884 -
============= ============= ==============
Cash and cash equivalents at end of period $9,707,661 $ 1,760,372 $ 1,760,372
============= ============= ==============
Supplemental disclosure of cash flow
information
Interest paid $ - $ - $ 197,072
============= ============= ==============
</TABLE>
See accompanying notes.
Page 6
<PAGE>
AVAX Technologies, Inc.
(formerly Walden Laboratories, Inc.)
(a development stage company)
Notes to Financial Statements (Unaudited)
For the Three and Six Months ended June 30, 1997 and 1998
1. Description of Business
AVAX(TM) Technologies, Inc. (the Company) is a development stage
biopharmaceutical company.
In November 1995, the Company sold its leading product under development, an
over-the-counter nutritional, dietary, medicinal and/or elixorative food
supplement or drug and all of the related patents and other intellectual
property (the Product).
Also in November 1995, the Company entered into a license agreement with the
Thomas Jefferson University (TJU) to develop, commercially manufacture and sell
products embodying immunotherapeutic vaccines for the treatment of malignant
melanoma and other cancers (the Invention).
In December 1996, the Company entered into a license agreement with Rutgers, The
State University of New Jersey and the University of Medicine and Dentistry
(collectively, Rutgers) to develop, commercially manufacture and sell products
embodying a series of compounds for the treatment of cancer and infectious
diseases (the Rutgers Compounds).
In February 1997, the Company entered into a license agreement with The Texas
A&M University System (Texas A&M) to develop, commercially manufacture and sell
products embodying a series of compounds for the treatment of cancer (the Texas
A&M Compounds).
The Company's business is subject to significant risks consistent with
biotechnology companies that are developing products for human therapeutic use.
These risks include, but are not limited to, uncertainties regarding research
and development, access to capital, obtaining and enforcing patents, receiving
regulatory approval, and competition with other biotechnology and pharmaceutical
companies. The Company plans to continue to finance its operations with a
combination of equity and debt financing and, in the longer term, revenues from
product sales, if any. However, there can be no assurance that it will
successfully develop any product or, if it does, that the product will generate
any or sufficient revenues.
2. Basis of Presentation
The accompanying financial statements have been prepared by the Company without
audit, in accordance with GAAP for interim financial information and with the
rules and regulations of the Securities and Exchange Commission (the
"Commission"). Certain information and footnote disclosure normally included in
the Company's audited annual financial statements has been condensed or omitted
in the Company's interim financial statements. In the opinion of the Company,
these financial statements contain all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation. The results of
operations for the three month periods ended June 30, 1997 and 1998 may not
necessarily be indicative of the results of operations expected for the full
year, except that the Company expects to incur a significant loss for the year
ended December 31, 1998.
The accompanying financial statements and the related notes should be read in
conjunction with the Company's audited financial statements for the years ended
December 31, 1997 and 1996 included in the Company's Registration Statement on
Form SB-2, Registration No. 333-09349.
Page 7
<PAGE>
3. Net Loss per Common Share
In 1997, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No.
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share exclude any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously required fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where appropriate, restated to
conform to the SFAS No. 128 requirements.
Net loss per share is based on net loss divided by weighted average number of
shares of common stock outstanding during the respective periods, adjusted to
reflect the reverse stock splits. The weighted average number of common shares
outstanding has been calculated in accordance with Staff Accounting Bulletin 83
(SAB 83) of the Commission. SAB 83 requires that shares of common stock,
warrants and options issued one year prior to the initial filing of a
registration statement relating to an initial public offering at amounts below
the public offering price be considered outstanding for all periods presented in
the Company's registration statement. For purposes of calculating the net loss
per share, the private placement of Series B convertible preferred stock,
completed in June 1996, has been considered to be the equivalent of an initial
filing of a registration statement relating to an initial public offering, and
the initial public offering price was determined to be $3.92 per share by
assuming that the preferred stock issued was immediately converted into common
stock. Those shares of common stock, warrants and options, considered as cheap
stock in accordance with SAB 83, were considered outstanding for all periods,
prior to July 10, 1997, at which time the Company's registration statement on
Form SB-2 to register the shares sold in the private placement was declared
effective.
Prior to the first closing of a private placement on May 15, 1996, the Company
effected a 1-for-2 reverse stock split of the Company's common stock. Pursuant
to an amendment to the Company's Certificate of Incorporation dated May 7, 1997,
a second 1-for-2 reverse split of the Company's common stock was effected as of
the close of business on May 13, 1997. All outstanding share and per share
amounts included in the accompanying financial statements have been adjusted to
reflect both 1-for-2 reverse stock splits.
4. Additional Issuance of Shares
In consideration of the agreement with the Company of certain holders of Series
B Convertible Preferred Stock, par value $.01 per share ("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.
Page 8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PLAN OF OPERATION
Statements in this Form 10-QSB that are not descriptions of historical facts are
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors, including those set forth in the Company's filings under the
Securities Act of 1933 and under the Securities Exchange Act of 1934, including
under the headings "Risk Factors" and elsewhere, including, without limitation,
risks relating to the early stage of the Company and its products under
development, government regulation, dependence on third parties, patent risks,
lack of manufacturing facilities and competition. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new events, future information or otherwise.
The Company is currently engaged in the development and commercialization of
biotechnology and pharmaceutical products and technologies. In November 1995,
the Company acquired the rights to the AC Vaccine(TM) technology pursuant to the
TJU License. The Company initially intends to be engaged primarily in the
development and commercialization of the AC Vaccine technology, as well as the
potential anti-cancer and anti-infective technology licensed pursuant to the
Rutgers License and the potential anti-cancer technology licensed pursuant to
the Texas A&M License. The Company anticipates that during the next 12 months it
will conduct substantial research and development of the AC Vaccine technology,
including, without limitation, multi-center pivotal registration clinical trials
on M-Vax(TM), the Company's lead AC Vaccine technology for metastatic melanoma.
The Company also anticipates that it will expend substantial resources on the
research and development of that same technology for the treatment of other
cancers, which may include ovarian, breast, prostate, lung and colorectal cancer
and acute myelogenous leukemia (AML). For example, the Company is also 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. It is also
expected that during the next 12 months, in order to support these clinical
trial efforts, the Company will be required to expend substantial resources on
the establishment of laboratory facilities for the manufacture of its products.
In connection with the Company's strategy to acquire, develop and commercialize
other potential biotechnology products and technologies, in December 1996, the
Company acquired the exclusive worldwide rights to a series of compounds for the
potential treatment of cancer and other infectious diseases from Rutgers.
Additionally, in February 1997, the Company acquired the exclusive worldwide
rights to another series of compounds for the potential treatment of cancer from
Texas A&M. Pursuant to the Rutgers License, the Texas A&M License, and the
related sponsored research agreements with each of Rutgers and Texas A&M, the
Company intends to expend substantial resources on the research and development
of these compounds.
While there can be no assurance, the Company may acquire additional products and
technologies during the next 12 months, which may or may not be in the cancer
immunotherapy field. Should the Company acquire such additional products or
technologies, it is anticipated that such additional products or technologies
will require substantial resources for research, development and clinical
evaluation. However, there can be no assurance that the Company will be able to
obtain the additional financing necessary to acquire and develop such additional
products and technologies. In addition, there can be no assurance, that changes
in the Company's research and development plans or other changes which would or
could alter the Company's operating expenses will not require the Company to
reallocate funds among its planned activities and curtail certain planned
expenditures. In such event, the Company may need additional financing. There
can be no assurance as to the availability or the terms of any required
additional financing, when and if needed. In the event that the Company fails to
raise any funds it requires, it may be necessary for the Company to
significantly curtail its activities or cease operations.
Page 9
<PAGE>
The Company's Research and Development expenses have increased significantly
from $590,013 in the three months ended June 30, 1997 to $1,152,779 in the three
months ended June 30, 1998. The increase relates primarily to the progress made
in preparing the AC Vaccine technology for multi-center pivotal registration
clinical trials in melanoma, commencement of a proof-of-concept study in ovarian
cancer with the same technology and completion of a Class 10,000 "clean room"
laboratory for clinical manufacturing of the vaccine and ongoing expenses
related to that facility. Research and development costs have also increased due
to the licensing of the topoisomerase inhibitor compounds from Rutgers and the
licensing of the anti-estrogen compounds from Texas A&M and costs of their
ongoing development. General and administrative expenses have decreased from
$769,365 in the three months ended June 30, 1997 to $577,504 in the three months
ended June 30, 1998 due primarily to the completion of the registration of the
shares issued in the Company's 1996 private placement and the listing of such
shares on the Nasdaq Small Cap Market in early 1997 and the non-recurrence of
these costs in 1998. The Company anticipates that, over the next 12 months,
expenses will continue to increase, particularly as development proceeds with
the AC Vaccine and the Rutgers and Texas A&M Compounds and as the Company's GMP
manufacturing facility is brought on line for clinical production..
Also, during the past 12 months, the Company hired two new employees and it
anticipates that over the next 12 months it may hire additional new employees,
particularly in connection with the establishment of facilities for the clinical
development and manufacture of the AC Vaccine products or any other technologies
which may have been, or may be, acquired. The timing and cost of hiring any
additional employees or the establishment of any such facility may vary
depending on need and currently cannot be predicted with any certainty, however,
the Company currently estimates that the establishment of its GMP manufacturing
facility in Philadelphia will necessitate approximately $1,500,000 to $2,500,000
in funding, and take approximately six-to-twelve months to complete. The initial
$150,000 in funding for such facility is expected to come from a mortgage loan
from the Philadelphia Economic Development Corporation referred to below. The
balance of such funding is expected to come from the Company's existing working
capital.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently anticipates that its current resources should be
sufficient to fund operations for approximately the next 18-24 months based upon
the Company's current operating plan. The Company does not currently expect to
be required to raise additional capital in the next 12 months, although from
time to time, depending upon its anticipated future needs, the Company may avail
itself of opportunities in the capital markets to raise additional capital if
acceptable terms may be obtained. However, since the Company's working capital
requirements will depend upon numerous factors, including, without limitation,
progress of the Company's research and development programs, preclinical and
clinical testing, timing and cost of obtaining regulatory approvals, changes in
levels of resources that the Company devotes to the development of manufacturing
and marketing capabilities, competitive and technological advances, status of
competitors, and the ability of the Company to establish collaborative
arrangements with other organizations, there can be no assurance that the
Company will be able to meets its business objectives under its current
operations plan and/or not need to raise additional capital. Since the Company
has no committed external sources of capital, and expects no product revenues
for the foreseeable future, it will likely require additional financing to fund
future operations. The Company has received authorization from the Philadelphia
Economic Development Corporation for a $150,000 Economic Stimulus Mortgage Loan,
at a fixed interest rate of 3 percent, to assist the Company in establishing its
GMP manufacturing facility in Philadelphia. The loan is subject to negotiation
and execution of definitive documentation. There can be no assurance, however,
that the Company will be able to obtain additional funds it will require for its
projects on acceptable terms, if at all. If adequate funds are not available the
Company may be required to delay, reduce the scope of or eliminate one or more
of its research or development programs; to obtain funds through arrangements
with collaborative partners or others that may require the Company to relinquish
rights to certain technologies, product candidates or products that the Company
would otherwise seek to develop or commercialize itself; or to license the
rights to such products on terms that are less favorable to the Company than
might otherwise be available.
Page 10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
One party has opposed the Company's application for a federal trademark
registration for the name AVAX. This opposition proceeding concerns the right of
the Company to obtain a federal trademark registration in the United States
Patent & Trademark Office for the name AVAX. The Company believes there is a
sound basis for denial of the opposition and allowance of its application to
register the name AVAX. The Company does not believe that an adverse outcome in
this proceeding will materially affect its business.
Except for the trademark matter discussed above, the Company is not aware of any
material pending or threatened legal proceedings.
Item 2. Changes in Securities.
(a) Upon the approval of the stockholders of the Company at the Annual Meeting
(as defined in Item 4 below), on June 3, 1998, the Company filed an amendment to
its Certificate of Incorporation to decrease the number of authorized shares of
Common Stock, par value $.004 per share ("Common Stock"), available for issuance
by the Company from 50,000,000 to 30,000,000.
(b) Upon the approval of the stockholders of the Company at the Annual Meeting,
the Company amended the Company's 1992 Stock Option Plan (the "Option Plan") to
increase the number of shares of Common Stock available for issuance under the
Option Plan from 437,500 to 1,500,000.
(c) In consideration of the agreement with the Company of certain holders of
Series B Convertible Preferred Stock, par value $.01 per share ("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.
(d) In May 1998, the Company issued warrants to purchase 80,000 shares of Common
Stock at an exercise price of $4.03 per share. Such warrants were issued in
consideration of services being rendered by a non-exclusive financial advisor to
the Company. Such warrants vest on various dates through January 1999 and are
exercisable in whole, or in part, over a five-year period. The issuance of such
warrants was deemed to be exempt from registration under the Act in reliance on
Section 4(2) thereof because such issuance did not involve a public offering. In
addition, such financial advisor represented its intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends are required to be affixed
to the warrant certificates issued in such transactions. Such financial advisor
had adequate access, through its negotiations with the Company, to information
about the Company. Moreover, such financial advisor represented to the Company,
and the Company believed, that it was sophisticated and expert in financial
matters.
(e) In June 1998, the Company issued, under its Amended and Restated 1992 Stock
Option Plan, options to purchase 75,000 shares of Common Stock at an exercise
price of $2.563 per share. Such options shall vest over a four-year period and
are exercisable in whole, or in part, over a seven-year period. The issuance of
such options was deemed to be exempt from registration under the Act in reliance
on Section 4(2) thereof because such issuance did not involve a public offering.
In addition, such optionee represented its intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends are required to be affixed
to the stock certificates issued upon exercise of such options. The optionee had
adequate access, through its negotiations with the Company, to information about
the Company. Moreover, such optionee represented to the Company, and the Company
believed, that it was sophisticated and expert in financial matters.
Page 11
<PAGE>
(f) In April 1998, the Company issued to a consultant warrants to purchase 9,375
shares of Common Stock at an exercise price of $4.00 per share. Such warrants
were to vest on or about July 15, 1998. The conditions for vesting have not been
met and the warrants were canceled in July 1998.
Item 4. Submission of Matters to a Vote of Security Holders.
At an annual meeting of the stockholders of the Company, held on June 3, 1998
(the "Annual Meeting"), the following matters were voted on by the stockholders:
(i) the election of five directors, (ii) approval of an amendment to the
Company's 1992 Stock Option Plan (the "AVAX Option Plan") to increase the number
of shares of Common Stock available for issuance under the AVAX Option Plan from
437,500 to 1,500,000, (iii) approval of an amendment to the Company's
Certificate of Incorporation to decrease the number of authorized shares of
Common Stock available for issuance by the Company from 50,000,000 to
30,000,000, and (iv) ratification of the selection of Ernst & Young, LLP, as
auditors for the fiscal year ending on December 31, 1998. The five directors
elected, who constitute the Board of Directors of the Company, are Jeffrey M.
Jonas, M.D., Edson D. de Castro, John K. A. Prendergast, Ph.D., Carl Spana,
Ph.D., and Michael S. Weiss, Esq. The following tables set forth the total
votes, with Common Stock and Series B Convertible Preferred Stock voting as a
single class:
(i) Election of Directors
<TABLE>
<CAPTION>
Affirmative Votes Negative Votes Abstentions
----------------- -------------- -----------
<S> <C> <C> <C>
Jeffrey M. Jonas, M.D. 5,165,756 0 11,300
Edson D. de Castro 5,165,756 0 11,300
John K. A. Prendergast, Ph.D. 5,165,756 0 11,300
Carl Spana, Ph.D. 5,165,756 0 11,300
Michael S. Weiss, Esq. 5,165,756 0 11,300
Broker
Affirmative Votes Negative Votes Abstentions Non-Votes
----------------- -------------- ----------- ---------
(ii) Approval of amendment to the AVAX 3,811,424 213,555 34,898 1,117,178
Option Plan
(iii) Approval of amendment to 5,158,247 14,100 4,708 0
Certificate of Incorporation
(iv) Selection of 5,172,397 0 4,658 0
Ernst & Young, LLP
</TABLE>
Page 12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
4.6 Certificate of Amendment to the Certificate of Incorporation of the
Company
4.7 The Company's Amended and Restated 1992 Stock Option Plan
11.1 Statement Concerning Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
Eight reports on Form 8-K were filed by the Company during the three months
ended June 30, 1998:
One report was filed on April 2, 1998 relating to a press release dated April 2,
1998, announcing reports from studies of haptenized cell membranes which the
Company believes further strengthen the scientific basis for the highly specific
immune-stimulating properties of M-Vax.
The second report was filed on April 14, 1998 relating to a press release dated
April 14, 1998, announcing that the Company has received authorization for a
$150,000 Economic Stimulus Mortgage Loan to assist the Company in establishing
its GMP manufacturing facility in Philadelphia.
The third report was filed on May 19, 1998, relating to a press release dated
May 19, 1998, announcing that the first documented evidence of Stage 4 malignant
melanoma lung tumor shrinkage caused solely by a vaccine was presented yesterday
at the 1998 Annual Meeting of the American Society of Clinical Oncology. The
Company's cancer technology was the first to provide scientific proof of the
principle that a vaccine alone - without concurrent use of other drugs - shrinks
melanoma tumors in the lung.
The fourth report was filed on May 29, 1998 relating to a press release dated
May 28, 1998, announcing the Company's financial results for the first quarter
ended March 31, 1998.
The fifth report was filed on June 10, 1998, relating to a press release dated
June 10, 1998, announcing that a new treatment using the Company's melanoma
vaccine resulted in a significantly better response in Stage 3 melanoma
patients.
The sixth report was filed on June 18, 1998, relating to a press release dated
June 18, 1998, announcing the issuance of a United States patent covering
anticancer technology that the Company has licensed for exclusive development
and worldwide marketing.
The seventh report was filed on June 24, 1998, relating to a press release dated
June 24, 1998, announcing the issuance of a United States patent covering
antifungal technology that the Company has licensed for exclusive development
and worldwide marketing.
The eighth report was filed on June 29, 1998, relating to a press release dated
June 29, 1998, announcing that the Gynecologic Oncology Group, funded by the
National Cancer Institute, has elected to conduct a Phase I/II clinical study of
the O-Vax(TM) vaccine in Stage 3 ovarian cancer patients.
Page 13
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AVAX Technologies, Inc.
(Registrant)
Date: August 14, 1998
/s/ Jeffrey M. Jonas, M.D.
--------------------------
Jeffrey M. Jonas, M.D.
President and Chief Executive Officer
Date: August 14, 1998
/s/ David L. Tousley
--------------------------
David L. Tousley
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 14
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AVAX TECHNOLOGIES, INC.
Pursuant to Section 242 of the
General Corporation Law of the
State of Delaware
AVAX Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), does hereby certify
as follows:
1. The name of the Corporation is AVAX Technologies, Inc.
2. The Certificate of Incorporation of the Corporation, as
heretofore amended, is hereby amended as follows:
3. Article 4(A)(1) is hereby amended as follows:
"FOURTH: (A)(1) The aggregate number of shares which the
Corporation shall have authority to issue is Thirty Five Million (35,000,000),
of which Five Million (5,000,000) shares, having a par value of $.01 per share,
shall be designated `Preferred Stock' and Thirty Million (30,000,000) shares,
having a par value of $.004 per share, shall be designated `Common Stock.'"
4. The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
5. This Certificate of Amendment and the amendment provided for
herein shall become effective at, and not until, 5:00 p.m. (New York time) on
June 3, 1998.
IN WITNESS WHEREOF, AVAX Technologies, Inc. has caused this
Certificate of Amendment to be signed this 3rd day of June, 1998.
AVAX TECHNOLOGIES, INC.
By: /s/ Jeffrey M. Jonas, M.D.
--------------------------
Name: Jeffrey M. Jonas, M.D.
Title: President and Chief
Executive Officer
<PAGE>
AVAX TECHNOLOGIES, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
Pursuant to resolutions passed by the Board of Directors of AVAX Technologies,
Inc., a Delaware corporation ("Company"), subject to stockholder approval, the
Company's 1992 Stock Option Plan was amended to provide for an increase in the
number of option shares from 437,500 (after giving effect to two separate
one-for-two reverse stock splits) to 1,500,000. Such amendment was duly approved
and authorized by the stockholders of the Company at the Annual Meeting of the
Company on June 3, 1998.
1. Purposes of the Plan. The purposes of this 1992 Stock Option Plan are to
provide incentive to Employees and Consultants of the Company, to encourage
Employee proprietary interest in the Company, to encourage Employees to remain
in the employ of the Company and to attract to the Company individuals of
experience and ability.
Options granted under this Plan may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Administrator and as
reflected in the terms of the written option agreement.
2. Definitions. As used in this Plan, the following definitions shall apply:
(a) "Administrator" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" shall have the meaning set forth in Section 4(a)
below.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) below, if one is appointed.
(f) "Common Stock" shall mean the $0.004 par value Common Stock of the
Company.
(g) "Company" shall mean AVAX Technologies, Inc. (formerly WALDEN
LABORATORIES, INC. (formerly APPEX TECHNOLOGIES, INC.)), a Delaware
corporation, or any successor corporation to the Company.
(h) "Consultant" shall mean (i) any person who is engaged by the Company
or any subsidiary to render consulting services and is compensated for
such consulting services, and (ii) any director of the Company whether
compensated for such services or not; provided, however, that if the
Company registers any class of any equity security pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the term Consultant shall thereafter not include directors who are not
compensated for their services or who are paid only a director's fee by
the Company.
(i) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Administrator; provided, however,
either that such leave must be for a period of not more than ninety (90)
days or that re-employment upon the expiration of such leave must be
guaranteed by contract or by statute.
(j) "Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(k) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
<PAGE>
(i) If the Common Stock is listed on any established stock exchange or a
national market system including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the average
of the closing sales prices for such stock as quoted on such system for
the last five trading days before the date of determination (if for a
given day no sales were reported, the closing bid on that day shall be
used), as such prices are reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the average of the mean between the bid and asked prices
for the Common Stock for the last five days before the date of
determination; or
(iii) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" shall mean an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" shall mean a stock option granted pursuant to the
Plan.
(o) "Optioned Stock" shall mean the Common Stock subject to an Option.
(p) "Optionee" shall mean an Employee or Consultant who receives an
Option.
(q) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(r) "Plan" shall mean this 1992 Stock Option Plan, as amended and
restated.
(s) "Share" shall mean a share of Common Stock, adjusted in accordance
with Section 11 below.
(t) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 below, the
maximum aggregate number of shares that may be optioned and sold under the Plan
is 1,500,000 shares of Common Stock. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without having
been exercised in full, then the unpurchased Shares that were subject to the
Option shall, unless the Plan has been terminated, become available for fixture
grant under the Plan.
Notwithstanding any other provision of the Plan, shares issued under the Plan
and later repurchased by the Company shall not become available for fixture
grant or sale under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3
promulgated under the Exchange Act or any successor rule thereto, as
in effect at the time that discretion is being exercised with
respect to the Plan ("Rule 16b-3"), and by the legal requirements
relating to the administration of incentive stock option plans, if
any, of applicable securities laws and the Code (collectively, the
"Applicable Laws"), the Plan may (but need not) be administered by
different administrative bodies with respect to directors, officers
who are not directors and Employees who are neither directors nor
officers.
2
<PAGE>
(ii) Administration with respect to Directors and Officers. With
respect to grants of Options to Employees or Consultants who are
also officers or directors of the Company, the Plan shall be
administered by (A) the Board, if the Board may administer the Plan
in compliance with Rule 16b-3 as it applies to a plan intended to
qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to (I) permit the Plan to
comply with Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary plan, (II) satisfy the Applicable
Laws and (III) satisfy the requirements for employee compensation
deductibility under Section 162(m) of the Code and any applicable
rules and regulations related thereto.
(iii) Administration with respect to Other Persons. With respect to
grants of Options to Employees or Consultants who are neither
directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to
satisfy (I) the Applicable Laws and (II) the requirements for
employee compensation deductibility under Section 162(m) of the
Code and any applicable rules and regulations related thereto.
(iv) General. Once a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 4(a), such Committee shall
continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the
size of any Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in
substitution therefor, fill vacancies (however caused) and remove
all members of a Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws and, in the
case of a Committee appointed under subsection (ii), to the extent
permitted by Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary plan.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in
its discretion
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to whom
Options may from time to time be granted under the Plan;
(iii) to determine whether and to what extent Options are granted
under the Plan;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted under the Plan;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including,
but not limited to, the share price and any restriction or
limitation, or any waiver or forfeiture restrictions regarding any
Option and/or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator shall determine, in
its sole discretion); and
(vii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option
was granted.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility
(a) Options may be granted only to Employees and Consultants. Incentive
Stock Options may be granted only to Employees. An Employee or Consultant
who has been granted an Option may, if he or she is otherwise eligible,
be granted an additional Option or Options.
3
<PAGE>
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of stock for which Options are exercisable for the first
time by an Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The maximum number of shares with respect to which Options or rights
may be granted to any Employee during the course of one year is
1,000,000.
(e) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his or her right or the Company's
right to terminate his or her employment or consulting relationship at
any time, with or without cause,
6. Term of Plan. The Plan shall become effective upon the earlier to occur of
its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section 18 below. It shall continue in effect for a
term of ten (10) years unless sooner terminated under Section 13 below.
7. Term of Option. The term of each Option shall be ten (10) years from the date
of grant thereof or such shorter term as may be provided in the Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter time as may be provided in the Stock Option
Agreement.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock
of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than one hundred ten percent
(110%) of the Fair Market Value per Share on the date of
grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than one hundred percent (100%) of the
Fair Market Value per Share on the date of grant.
(ii) In the case of any Option, the per Share exercise price shall
be no less than eighty-five percent (85%) of the Fair Market Value
per Share on the date of grant.
(b) The Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of payment.
In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other Shares which (a) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than
six months on the date of surrender, and (b) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which said Option shall be exercised;
4
<PAGE>
(iv) delivery of an irrevocable subscription agreement for the
Shares to be issued which irrevocably obligates the holder to take
and pay for the shares not more than twelve (12) months after the
date of delivery of the subscription agreement;
(v) any combination of such methods of payment; or
(vi) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Section 157 of the Delaware
General Corporation Law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
under this Plan shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Optionee, and shall be
permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment
for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment
allowable under Section 8(b) above. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment shall be made
for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11
below.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) Termination of Status as an Employee or Consultant. If an Employee or
Consultant ceases to serve as an Employee or Consultant, then he or she
may, but only within three (3) months (twelve (12) months in the case of
a Nonstatutory Stock Option) or such other shorter period as is specified
by the Administrator after the date he or she ceases to be an Employee or
Consultant of the Company (but in no event later than the date of
expiration of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination. To the extent
that he or she was not entitled to exercise the Option at the date of
such termination, or if he or she does not exercise such Option (which he
or she was entitled to exercise) within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, if an Employee or Consultant is unable to continue his or her
employment or consulting relationship with the Company as a result of his
or her total and permanent disability (as defined in Section 22(e)(3) of
the Code), then he or she may, but only within twelve (12) months from
the date of termination or such other shorter period as is specified by
the Administrator (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise
his or her Option to the extent he or she was entitled to exercise it at
the date of termination of employment or consulting. To the extent that
he or she was not entitled to exercise the Option at the date of
termination, or if he or she does not exercise such Option (which he or
she was entitled to exercise) within the time specified herein, the
Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his or her
death an Employee or Consultant of the Company and who shall have
been in Continuous Status as an Employee or Consultant since the
date of grant of the Option, the Option may be exercised, at any
time within twelve (12) months following the date of death or such
other shorter period as is specified by the Administrator (but in no
event later than the date of expiration of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in
Continuous Status as an Employee or Consultant three (3) months
after the date of death; or
5
<PAGE>
(ii) within three (3) months after the termination of Continuous
Status as an Employee or Consultant, the Option may be exercised, at
any time within three (3) months following the date of death or such
other shorter period as is specified by the Administrator (but in no
event later than the date of expiration of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act
with respect to Plan transactions.
10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution. The designation of a beneficiary
by an Optionee shall not constitute a transfer. An Option may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding, and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Administrator shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
shall terminate immediately prior to the consummation of such proposed action.
In the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless such successor corporation does not agree to assume the Option or to
substitute an equivalent option, in which case such Option shall terminate upon
the consummation of the merger.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable;
provided, however, that the following revisions or amendments shall
require approval of the stockholders of the Company in the manner
described in Section 18 of the Plan:
(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 11 above;
6
<PAGE>
(ii) any change in the designation of the class of persons eligible
to be granted Options; or
(iii) if the Company has a class of equity security registered under
Section 12 of the Exchange Act at the time of such revision or
amendment, any material increase in the benefits accruing to
participants under the Plan.
(b) Stockholder Approval. If any amendment requiring stockholder approval
under Section 13(a) above is made subsequent to the first registration of
any class of equity security by the Company under Section 12 of the
Exchange Act, then such stockholder approval shall be solicited as
described in Section 18 below.
(c) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted and such Options
shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto complies with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed.
The exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares under this Plan, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option agreements in
such form as the Administrator shall approve.
17. Annual Report to Optionees. The Board of Directors shall cause an annual
report to be sent to the Optionees not later than one hundred twenty (120) days
after the close of the fiscal year adopted by the corporation. Such report shall
be sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five
(35) days) before the annual meeting of stockholders to be held during the next
fiscal year. The annual report shall contain (i) a balance sheet as of the end
of the fiscal year, (ii) an income statement for the fiscal year, (iii) a
statement of cash flow for the fiscal year, and (iv) any report of independent
accountants or, if there is not such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long as the
shares of the Company are held by fewer than one hundred (100) holders of
record.
18. Stockholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted.
(b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required
approval of the stockholders of the Company obtained after such
registration shall be solicited substantially in accordance with Section
14(a) of the Exchange Act and the rules and regulations promulgated
thereunder.
7
<PAGE>
(c) If any required approval by the stockholders of the Plan itself or of
any amendment thereto is solicited at any time otherwise than in the
manner described in Section 18(b) hereof, then the Company shall, at or
prior to the first annual meeting of stockholders held subsequent to the
later of (1) the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act or (2) the granting of
an Option hereunder to an officer or director after such registration, do
the following:
(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if
proxies to be voted with respect to approval or disapproval of the
Plan or amendment were then being solicited) by the rules and
regulations in effect under Section 14(a) of the Exchange Act at the
time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such
information is first sent or given to stockholders,
8
<PAGE>
<TABLE>
<CAPTION>
AVAX Technologies, Inc. Exhibit 11.1
Computation of Earnings (Loss) Per Share 10Q
Three Three Six Six
Month of Months O/S Weighted Months Months Months Months
Issuance For Number of Each Given Average Ended Ended Ended Ended
F/S Purposes Shares Year Shares 6/30/97 6/30/98 6/30/97 6/30/98
------------ ------ ---- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
January '90 582,500 582,500 582,500 582,500 582,500
August '91 230,000 230,000 230,000 230,000 230,000
June '92 287,098 287,098 287,098 287,098 287,098
Series A Preferred:
June '92 259,375 (a) (a) (a) (a)
July '92 59,375
Sept '92 3,125
---------
321,875
---------
July '93 7,358
November '93 1,359
---------
8,717 8,717 8,717 8,717 8,717
---------
July '94 3,750 - 3,750 3,750 3,750 3,750
April '95 (111,330)
May '95 (196,618)
September '95 402,490
November '95 1,374,728
---------
1,469,270 1,469,270 1,469,270 1,469,270 1,469,270
---------
March '96 (77,901)
May & June '96 321,875
May & June '96 129,099
June '96 500
July '96 (c) 46,875
---------
420,448 420,448 420,448 420,448 420,448
---------
June '97 (f) 371,756 61,959 30,980
July, August & Sept '97 661,901
Oct, Nov & Dec '97 402,153
---------
1,435,810 1,435,810 1,435,810
---------
Jan, Feb & March '98 285,832 285,832 214,374
April, May & June '98 353,236 176,618 88,309
June '96 9,375
Treasury Shares (96)
---------
9,279 9,279 9,375 9,279 9,375
---------
CheapWarrants (b):
January and February '96
and August '95 120,000
Treasury Shares (1,225)
---------
118,775 118,775 100,000 118,775 100,000
---------
June, July and (e)
September '92 warrants 35,337
Treasury Shares (23,348)
---------
11,989 11,989 35,337 11,989 35,337
---------
Cheap Options (d)
May '96 318,873
Treasury Shares (81,345)
---------
237,528 237,528 - 237,528 -
---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVAX Technologies, Inc. Exhibit 11
Computation of Earnings (Loss) Per Share 10Q (continued)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
6/30/97 6/30/98 6/30/97 6/30/98
------- ------- ------- -------
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted Average Shares 3,441,314 5,044,755 3,410,334 4,884,988
========== ========== ========== ==========
Net Income (Loss) Attributable to Common Stockholders (1,136,136) (1,559,428) (2,098,301) (2,959,734)
Net Income (Loss) Per Share $ (0.33) $ (0.31) $ (0.62) $ (0.61)
(a) - Not included because it would be anti-dilutive
(b) - represents bridge loan warrants (100,000) issued within one year of IPO, exercised after June '96
Also includes 20,000 bridge placement warrants issued within one year of IPO, not yet exercised, and
excludes 11,250 bridge placement warrants issued prior to June '95, not yet exercised
(20,000 + 11,250 = 31,250 total bridge placement warrants)
(c) - represents the non-cheap portion of the bridge warrants exercised in July issued prior to June '95
(9,375 + 100,000 + 46,875 = 156,250 total bridge warrants)
(d) - 252,500 options issued to Officers and an employee in September not considered cheap options since
issued subsequent to IPO and not included because it would be anti-dilutive
(e) - represents additional warrants, exercised in June '97 in cashless exercise, issued under anti-dilution
provisions within one year of IPO
(f) - includes 14,433 additional warrants, exercised in June '97 in a cashless exercise, issued under anti-dilution
provisions more than one year prior to IPO
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVAX Technologies, Inc. Exhibit 11
Computation of Supplementary Earnings (Loss) Per Share
Three Three Six Six
Month of Months O/S Weighted Months Months Months Months
Issuance For Number of Each Give Average Ended Ended Ended Ended
F/S Purposes Shares Year Shares 6/30/97 6/30/98 6/30/97 6/30/98
------------ ------ ---- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income (Loss) Attributable to Common Stockholders (1,136,136) (1,559,428) (2,098,301) (2,959,734)
Interest on Debt Repaid - - - -
Deferred Financing Cost related to Debt Repaid - - - -
Supplementary Net Income (Loss) (1,136,136) (1,559,428) (2,098,301) (2,959,734)
--------- --------- --------- ---------
Weighted Average Shares 3,441,314 5,044,755 3,410,334 4,884,988
--------- --------- --------- ---------
Additional Shares:
Conversion of Series A Preferred (f) (f) (f) (f)
Less:Series A Preferred included in primary calculation - - - -
Common Stock Equivalents sold to retire debt 320,664 320,664 320,664 320,664
--------- --------- --------- ---------
Supplementary Weighted Average Shares 3,761,978 5,365,419 3,730,998 5,205,652
--------- --------- --------- ---------
Supplementary Net Income (Loss) per share $ (0.30) $ (0.29) $ (0.56) $ (0.57)
</TABLE>
(f) - Included in weighted average shares for primary calculation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Company's Form
10-QSB for the quarter ending June 30, 1998.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1998 DEC-31-1997
<CASH> 1,760,372 6,820,884
<SECURITIES> 11,293,329 9,102,028
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 13,252,645 17,277,841
<PP&E> 108,736 91,959
<DEPRECIATION> 24,528 14,967
<TOTAL-ASSETS> 13,336,853 17,354,833
<CURRENT-LIABILITIES> 360,930 1,553,726
<BONDS> 0 0
0 0
1,796 2,041
<COMMON> 20,885 18,329
<OTHER-SE> 12,953,242 15,780,737
<TOTAL-LIABILITY-AND-EQUITY> 13,336,853 17,354,833
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 (150,602)
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,959,734) (4,266,125)
<EPS-PRIMARY> (.61) (1.14)<FN>
<EPS-DILUTED> 0 0
<FN>
(1) EPS-BASIC
</FN>
</TABLE>
