Filed Pursuant to Rule 424(b)(3)
Registration Number 333-84849
PROSPECTUS
AVATEX CORPORATION
2,319,334 Shares of Class A Common Stock
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o The holders of our publicly-held Warrants may sell up to 2,319,334
shares of our Class A Common Stock as described in "Selling
Shareholders" beginning on page 12. These shares may be acquired
from time to time upon the exercise of our publicly-held Warrants
that we issued to certain former holders of our preferred stock in
connection with our merger with Xetava Corporation in December 1999.
o Our Class A Common Stock is traded on the Nasdaq OTC Bulletin Board
under the symbol "AVAT." On November 13, 2000, the last reported
sale price of the Class A Common Stock was $.52 per share.
INVESTING IN THESE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS
DOES NOT OFFER TO SELL OR BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS
UNLAWFUL. THE INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF NOVEMBER 15, 2000
ONLY.
---------------
The date of this prospectus is November 15, 2000.
64935.0001
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TABLE OF CONTENTS
Page
About Us............................................................... 2
Risk Factors........................................................... 3
Where You Can Find
More Information..................................................... 9
Incorporation of Certain
Documents by Reference............................................... 10
Cautionary Statements Relating to Forward-Looking Statements........... 11
Use of Proceeds........................................................ 11
Selling Shareholders................................................... 12
Plan of Distribution................................................... 13
Legal Matters.......................................................... 15
Experts................................................................ 15
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ABOUT US
We are a holding company that, along with our subsidiaries, owns
interests in other corporations and partnerships. We own 40.8% of Phar-Mor,
Inc., the owner and operator of a chain of discount retail drugstores. We also
own 41% of Chemlink Acquisition Company, LLC, and through this company and
Phar-Mor, we own approximately 38% of Chemlink Laboratories, LLC. Chemlink is
primarily engaged in the development, manufacture and distribution of
effervescent tablets and formula for consumer and business use as a cleaner,
disinfectant and sterilizer.
On December 7, 1999, we completed a merger with our wholly-owned
subsidiary, Xetava Corporation, under an Amended and Restated Agreement and Plan
of Merger. As a result of the merger, our two former series of preferred stock,
$5 Cumulative Convertible Preferred Stock and $4.20 Cumulative Exchangeable
Series A Preferred Stock, were eliminated. Holders of our former series of
preferred stock received, in exchange for their preferred stock, either our
Class A Common Stock or, alternatively, a combination of cash, 6.75% Notes due
December 7, 2002 issued by our wholly-owned subsidiary, Avatex Funding, Inc.,
warrants to purchase shares of our Class A Common Stock at $2.25 per share and a
deferred contingent cash right equal to a pro rata share of our net recovery
from certain litigation against McKesson HBOC Inc. and certain major
pharmaceutical manufacturers. Holders of our then-existing common stock
received, in exchange for their common stock, shares of Class A Common Stock on
a one-for-one basis.
As of October 11, 2000, we had outstanding 19,637,360 shares of our
Class A Common Stock and warrants to purchase 2,319,334 shares of our Class A
Common Stock, and Avatex Funding, Inc. had outstanding $26,604,153 aggregate
principal amount of 6.75% notes.
Additional information about us, including our audited financial
statements and descriptions of our business, is contained in the documents
incorporated by reference in this prospectus. See "Where You Can Find More
Information" on page 9 and "Incorporation of Documents by Reference" on page 10.
We are incorporated in the State of Delaware. Our executive offices
are located at 5910 North Central Expressway, Suite 1780, Dallas, Texas 75206
and our telephone number is (214) 365-7450.
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RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THESE RISK FACTORS TOGETHER WITH ALL OF
THE INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE
YOU DECIDE TO PURCHASE SHARES OF OUR CLASS A COMMON STOCK. THIS SECTION INCLUDES
FORWARD-LOOKING STATEMENTS.
WE ARE A HOLDING COMPANY WITH NO OPERATING ASSETS. IF WE DO NOT
GENERATE CASH FLOWS FROM OUR SUBSIDIARIES AND INVESTMENTS, WE WILL BE
UNABLE TO SATISFY OUR FUTURE OBLIGATIONS.
We are a holding company that directly or through our subsidiaries
owns interests in other corporations and partnerships, including Phar-Mor. Our
ability to meet our financial obligations as they become due, including our
guarantee obligations under the 6.75% notes, depends on the amount of cash we
have on hand and the flow of cash we receive, if any, from our subsidiaries and
investees. If we are unable to generate sufficient cash flow to service our
indebtedness, we may be forced to refinance all or a portion of our existing
debt or obtain additional financing. If we cannot refinance our debt or obtain
sufficient additional financing, we may be forced to default on our guarantee of
the 6.75% notes. This would have a material adverse effect on us, including the
possibility of requiring us to seek protection under applicable bankruptcy laws.
Any cash received from our investments may be in the form of
dividends or other distributions on our equity investments. The ability of our
subsidiaries or investees to pay dividends or make distributions to us may be
restricted by law or financing or other agreements to which these subsidiaries
or investees are subject.
We may be able to generate cash from the disposition of our
investments. However, we cannot assure you that any of our investments,
including our investment in Phar-Mor, will have substantial value or that there
will be a suitable purchaser for, or a liquid market in which to sell, any of
our investments.
WE HAVE NOT GENERATED PROFITS FROM OPERATIONS IN SEVERAL YEARS AND WE
MAY INCUR LOSSES IN THE FUTURE. THEREFORE, WE CANNOT ASSURE YOU THAT
WE WILL BE ABLE TO CONTINUE AS A GOING CONCERN.
For each of fiscal year 1997, fiscal year 1998 and fiscal year 1999,
we reported a net loss of approximately $279.4 million, $77.5 million and $6.6
million, respectively. For fiscal year 2000, we reported net income of $1.5
million, which included a gain of $8.1 million resulting from the disposal of
certain discontinued operations. We have taken steps to improve and stabilize
our financial condition since fiscal year 1997. Although we have taken these
steps, we cannot assure you that we will realize or maintain profitability in
the foreseeable future. If we continue to incur losses we may not be able to
continue as a going concern and we may be required to seek protection under
applicable bankruptcy laws.
Because we have no directly-owned cash-generating assets, our ability
to continue as a going concern depends on, among other things, our ability to:
o realize on certain of our investments;
o identify new or additional investment opportunities;
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o acquire an operating company; and
o successfully defend litigation pending or brought against our
company.
Our independent auditors have included an explanatory note in their
report on our financial statements. This note states that our historical losses
from operations and pending litigation raise substantial doubts about our
ability to continue as a going concern. Our financial statements have been
prepared, and, for the foreseeable future, are expected to continue to be
prepared, on a going concern basis that contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. Our financial statements do not reflect any adjustments that might
result ultimately from the resolution of the uncertainties related to our
business.
You should read Note R of the Notes to our Consolidated Financial
Statements included in our Annual Report on Form 10-K, as amended, for our
fiscal year ended March 31, 2000, incorporated by reference herein, for more
information.
WE HAVE A SUBSTANTIAL AMOUNT OF CONSOLIDATED DEBT AND WE WILL NEED TO
RAISE ADDITIONAL FUNDS TO FINANCE OUR CONTINUING OPERATIONS. FAILURE
TO RAISE SUCH FUNDS OR SERVICE OUR EXISTING DEBT COULD MATERIALLY
ADVERSELY AFFECT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS PROSPECTS AND PREVENT US FROM FULFILLING OUR GUARANTEE
OBLIGATIONS UNDER THE 6.75% NOTES.
We have a large amount of consolidated indebtedness. As of August 31,
2000, we had approximately $30,082,000 of consolidated indebtedness and
stockholders' equity of approximately $22,672,000. In addition, we will need to
raise significantly more capital to finance our future operations, which may be
in the form of additional indebtedness. We are permitted under the indenture
governing the 6.75% notes to incur additional debt. If we incur additional debt,
the related risks could intensify.
This large amount of indebtedness could, for example:
o make it more difficult for us and Avatex Funding to satisfy
our obligations under the 6.75% notes or other indebtedness
and, if we fail to comply with the requirements of the
indebtedness, could result in an event of default which, if
not cured, could accelerate the payment of all or a portion of
principal and interest relating to such debt;
o limit our ability to obtain additional financing for working
capital, capital expenditures, acquisitions and other general
corporate activities;
o limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
o detract from our ability to successfully withstand a downturn
in our business, the business of our investees or the economy
generally; and
o place us at a competitive disadvantage against other less
leveraged competitors.
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IF THERE IS A DEFAULT ON THE 6.75% NOTES AND THE NOTEHOLDERS ELECT TO
FORECLOSE ON THE PHAR-MOR COMMON STOCK PLEDGED TO SECURE THE 6.75%
NOTES ISSUED BY AVATEX FUNDING, INC., OUR WHOLLY-OWNED SUBSIDIARY, WE
COULD LOSE OUR MOST SIGNIFICANT ASSET.
In connection with the issuance of the 6.75% notes, we transferred
3,571,533 shares of Phar-Mor common stock that we owned at the time to Avatex
Funding. Avatex Funding in turn pledged these shares as collateral to secure its
obligations under the 6.75% notes. If there is an event of default on the 6.75%
notes and the 6.75% noteholders elect to foreclose on these shares in accordance
with the indenture and related security agreement, the proceeds from a
foreclosure sale of these shares would be distributed to first satisfy our
guarantee obligations under the indenture and the 6.75% notes. Accordingly, as a
result of the pledge of these shares, we may lose our most significant asset,
our shares of Phar-Mor common stock.
As of June 30, 2000, the book value of these pledged shares
represented 19% of the book value of our total assets. Based on the closing
price of Phar-Mor common stock on the Nasdaq OTC Bulletin Board of $1.1875 per
share on October 11, 2000, these pledged shares had a market value of
$4,241,195. In addition, upon the satisfaction of all our obligations under the
promissory note that we issued to the trustee for the bankruptcy estates of
FoxMeyer Corporation and FoxMeyer Drug Company, we are required to cause an
additional 1,132,500 shares of Phar-Mor common stock, currently pledged to
secure the FoxMeyer note, to be pledged to further secure the 6.75% notes. As of
June 30, 2000, the book value of the 3,571,533 shares pledged to secure the
6.75% notes and the 1,132,500 shares pledged to secure the FoxMeyer note equaled
25.1% of the book value of our total assets. Based on the closing price of
Phar-Mor common stock on the Nasdaq OTC Bulletin Board of $1.1875 per share on
October 11, 2000, these pledged shares had a market value of $5,586,035. As of
November 13, 2000, we also own 492,500 shares of Phar-Mor common stock free of
any pledge or encumbrance.
WE ARE SUBJECT TO SEVERAL LAWSUITS. AN UNFAVORABLE OUTCOME IN ANY OR
ALL OF THESE LAWSUITS COULD HAVE A MATERIAL ADVERSE EFFECT ON US, THE
VALUE OF OUR CLASS A COMMON STOCK AND OUR ABILITY TO SATISFY OUR
GUARANTEE OBLIGATIONS UNDER THE 6.75% NOTES, AND YOU COULD LOSE SOME
OR ALL OF YOUR INVESTMENT.
Our company and certain of our current and former directors and
executive officers are subject to several lawsuits. We are also subject to
various claims by, and have received various demands from, governmental agencies
relating to investigations and remedial actions to address environmental
clean-up costs and in some instances have been designated as a potentially
responsible party by the United States Environmental Protection Agency with
respect to certain of our former operating units' prior ownership of or
relationship with certain allegedly contaminated properties. We are vigorously
defending, and intend to continue to vigorously defend, ourselves in each of
these lawsuits and investigations. However, we cannot assure you that ultimately
we will be successful in defending these lawsuits or investigations, or that the
advantages of settling any or all of these lawsuits or investigations outweigh
the risk and expense of protracted investigations and litigation. An unfavorable
outcome in any or all of these lawsuits or investigations would likely have a
material impact on our financial condition, liability and results of operations
and, accordingly, could affect adversely the value of our Class A Common Stock,
Avatex Funding's ability to make principal and interest payments on the 6.75%
notes and our ability to satisfy our guarantee obligations under the 6.75%
notes. Even if all of these lawsuits and investigations are resolved in our
favor, we will have incurred considerable costs and the efforts of our
management will have been diverted significantly to defend these lawsuits and
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investigations. The incurrence of these costs and diversions of our management's
efforts, in and of themselves, also would likely have a material and adverse
effect on our financial condition and results of operations, which may have a
material adverse affect on the trading price of our Class A Common Stock, and
you could lose some or all of your investment. You should read our Annual Report
on Form 10-K, as amended, for our fiscal year ended March 31, 2000, incorporated
by reference herein, for more information regarding these lawsuits.
At June 30, 2000, we had reserves of $1.2 million for environmental
assessments, remediation activities, penalties or fines at seven sites that may
be imposed for possible non-compliance with such environmental laws or
regulations. Although we believe our reserves are adequate, we cannot assure you
that this amount will be adequate to cover such known or unknown matters.
Reserves are established when it is probable that liability for such costs will
be incurred and the amount can be reasonably estimated. The amounts of reserves
for environmental liabilities are difficult to estimate due to such factors as
the unknown extent of the remedial actions that may be required and, in the case
of sites not formerly owned by us, the unknown extent of our probable liability
in proportion to the probable liability of other parties and our ability to
successfully obtain contribution from other parties for their portion of any
such liabilities. Moreover, we may have environmental liabilities that we
cannot, in our judgment, estimate at this time and losses attributable to
remediation costs may arise at other sites. A significant deviation from our
estimated liability could have a material adverse impact on our financial
condition and results of operations.
You should read Note O of the Notes to our Consolidated Financial
Statements contained in our Annual Report on Form 10-K, as amended, for our
fiscal year ended March 31, 2000, and Note 4 of the Notes to our Consolidated
Financial Statements contained in our Quarterly Report on Form 10-Q, as amended,
for our fiscal quarter ended September 30, 2000, incorporated by reference
herein, for more information regarding these and other commitments and
contingencies.
THERE IS CURRENTLY A LIMITED TRADING MARKET FOR OUR CLASS A COMMON
STOCK. AS A RESULT, YOU MAY NOT BE ABLE TO EASILY SELL YOUR SHARES OF
CLASS A COMMON STOCK.
Prior to February 1, 1999, our predecessor common stock traded on the
New York Stock Exchange. On January 31, 1999, the New York Stock Exchange
formally delisted our common stock from trading. Our Class A Common Stock is now
quoted on Nasdaq's OTC Bulletin Board system. Our Class A Common Stock is thinly
traded, and it is more difficult to dispose of, or to obtain accurate quotations
as to the price of, our Class A Common Stock on the OTC Bulletin Board system.
In addition, because of its thin trading and low trading price, our Class A
Common Stock may be subject to extreme volatility.
The Nasdaq OTC Bulletin Board system operates as a dealer system. Any
security quoted thereon must be sponsored by a participating market maker.
Several market makers presently make a market in our Class A Common Stock.
However, market makers are not obligated to make a market in our Class A Common
Stock, and any market-making activity may be discontinued at any time without
notice. If any such market making activity is discontinued, we cannot assure you
that a liquid trading market will exist for our Class A Common Stock, or that
you will be able to execute a sale of your shares of Class A Common Stock, or
that you will be able to execute such a sale on favorable pricing terms.
Furthermore, we cannot assure you that we will ever be able to have
our Class A Common Stock listed for trading on a more active trading market such
as the Nasdaq SmallCap Market, the Nasdaq National Market System or the New York
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Stock Exchange. As long as the only trading market for our Class A Common Stock
is the Nasdaq OTC Bulletin Board system, you may find it difficult to dispose
of, or obtain accurate quotations for the price of, these securities and, as a
consequence, you may not be able to sell your shares of Class A Common Stock on
favorable terms or at the time you would like.
WE DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR CLASS A COMMON STOCK
FOR THE FORESEEABLE FUTURE. YOU WILL NOT RECEIVE ANY PERIODIC INCOME
FROM OUR CLASS A COMMON STOCK.
We have not paid any cash dividends on our Class A Common Stock (or
our predecessor common stock) for the past several years and we do not
anticipate paying any dividends on our Class A Common Stock in the foreseeable
future. Accordingly, you should not expect to receive any periodic income from
owning shares of our Class A Common Stock. We intend to retain our earnings, if
any, for reinvestment and repayment of our consolidated indebtedness, including
to satisfy our obligations under the 6.75% notes. Therefore, any economic gain
to stockholders on our Class A Common Stock in the foreseeable future will be
from an appreciation, if any, in the price of the stock. In addition, applicable
provisions of Delaware law may affect our ability to declare and pay dividends
on our Class A Common Stock.
ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION COULD
IMPEDE OR DISCOURAGE A THIRD-PARTY ACQUISITION OF OUR COMPANY. THERE
ARE ALSO PROVISIONS IN THE INDENTURE GOVERNING THE 6.75% NOTES THAT
RESTRICT OUR ABILITY TO EFFECT A CHANGE-OF-CONTROL TRANSACTION. THIS
COULD PREVENT YOU FROM RECEIVING A PREMIUM OVER THE MARKET PRICE FOR
YOUR SHARES OF CLASS A COMMON STOCK.
We are incorporated under the laws of the State of Delaware.
Accordingly, we are subject to the anti-takeover provisions of Delaware law,
particularly Section 203 of the Delaware General Corporation Law. These
provisions impose various obstacles to the ability of a third party to acquire
control of our company, even if a change in control would be beneficial to its
existing stockholders. These Delaware law provisions, along with the provisions
described below from our certificate of incorporation and the indenture for the
6.75% notes, could impede a merger, consolidation, takeover or other business
combination involving our company or discourage a potential acquirer from making
a tender offer or otherwise attempting to obtain control of our company.
Anything which makes an acquisition of us more difficult could reduce the value
of our Class A Common Stock.
Our certificate of incorporation contains certain provisions that may
discourage other persons from attempting to acquire control of our company.
These provisions include that:
o our Board of Directors, without stockholder approval, may
designate the terms of one or more series of preferred stock
and issue shares of preferred stock;
o our Board of Directors is elected in "classes", with only
approximately one-third of our directors coming up for
election each year; and
o the approval of holders of at least 80% of our outstanding
Class A Common Stock is required to approve certain events
relating to transactions with interested persons of our
company.
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The indenture governing the 6.75% notes restricts our ability to
effect specified change-of-control transactions. These transactions include our
merger with or into another person, and the sale or disposition of all or
substantially all of our assets or more than 80% of our capital stock to another
person. The indenture will permit the occurrence of any of these
change-of-control events if:
o the person formed or surviving any merger (other than us), or
to which any sale or disposition of assets or capital stock is
made, assumes all of our obligations under the indenture and
our guarantee of the 6.75% notes;
o immediately after giving effect to any change-of-control
event, no default or event of default would exist under the
indenture; and
o the person formed or surviving any merger, or to which any
such sale or disposition of assets or capital stock is made,
has consolidated net worth immediately after any such
change-of-control event of at least our consolidated net worth
immediately preceding the change-of-control event.
A failure to comply with these restrictions would result in an event
of default under the indenture that could permit acceleration of the 6.75%
notes. If this occurs, we may be unable to pay the accelerated principal and
interest on the 6.75% notes.
OUR ABILITY TO SUCCESSFULLY REALIZE ON OUR INVESTMENTS, IMPLEMENT OUR
INVESTMENT STRATEGIES AND PROSECUTE THE MCKESSON LITIGATION DEPENDS
ON OUR ABILITY TO RETAIN OUR KEY EXECUTIVES.
Our future success depends in large part upon the abilities and
continued service of our executive officers and other key employees,
particularly our Co-Chairmen of the Board and Co-Chief Executive Officers, Abbey
J. Butler and Melvyn J. Estrin. Messrs. Butler and Estrin are involved actively
in identifying our investment opportunities and monitoring our investments and
in developing liquidation and additional investment strategies for these
investments. In addition, because of their active involvement in the sale of our
FoxMeyer group to McKesson, our ability to prosecute successfully our litigation
against McKesson and others depends in large part on the continued participation
therein of Messrs. Butler and Estrin. Our future success also depends on our
ability to retain the other members of our existing management team. Although we
have entered into employment agreements with Messrs. Butler and Estrin and
certain other members of our management team, there can be no assurance that the
services of these individuals will continue to be available to us.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Phar-Mor, Inc., our 40.8%-owned affiliate, also
files those same reports and other information with the SEC. Copies of these
reports, proxy statements and other information may be read and copied at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the SEC's regional offices located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. You may request copies of these documents by writing to
the SEC and paying a fee for the copying costs. You may also call the SEC at
1-800-SEC-0330 for further information on the operation of the Public Reference
Room. You can also access an Internet site that the SEC maintains containing
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC, including us, at www.sec.gov. Our
SEC file number is 1-8549. Phar-Mor's SEC file number is 0-27050.
We have filed with the SEC a registration statement under the
Securities Act of 1933, as amended, with respect to the shares of Class A Common
Stock offered hereby. This prospectus does not contain all of the information
contained in the registration statement and the exhibits and schedules relating
to it. For further information with respect to us and the Class A Common Stock
offered hereby, you should refer to the registration statement and the exhibits
and schedules relating to it.
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INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus. This means that we may disclose
material information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus and any
later information that we file with the SEC will automatically update and
supercede this information. We incorporate by reference the documents listed
below and any additional documents we file with the SEC until this offering of
our Class A Common Stock is terminated. This prospectus is part of a
registration statement on Form S-3 that we filed with the SEC and does not
contain all of the information set forth in the registration statement.
The following documents that we previously filed with the SEC are
incorporated by reference:
(1) our proxy statement filed with the SEC pursuant to Section
14(a) of the Securities Exchange Act of 1934, as amended, on
July 28, 2000;
(2) our Quarterly Reports on Form 10-Q for the fiscal quarters
ended June 30, 2000, as amended, and September 30, 2000;
(3) our Annual Report on Form 10-K for the fiscal year ended March
31, 2000, as amended;
(4) our Current Report on Form 8-K dated April 5, 2000;
(5) the description of our Class A Common Stock contained in our
registration statement on Form 8-A filed on October 14, 1999;
and
(6) any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until the sale
of all of the shares of our Class A Common Stock in connection
with this offering is completed.
We will provide you, upon written or oral request, with a copy of any
of these documents, at no cost. You should direct any such requests to Avatex
Corporation, 5910 North Central Expressway, Suite 1780, Dallas, Texas 75206,
Attention: Corporate Secretary. These documents are also available on our
Internet site, www.avatexcorp.com.
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CAUTIONARY STATEMENTS RELATING TO FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, which may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended, regarding our financial
condition, results of operations, cash flows, dividends, financing plans,
business strategies, budgets, capital and other expenditures, plans and
objectives of our management, markets for our stock and other matters.
Statements in this document that are not historical facts are hereby identified
as "forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward-looking statements, including, without limitation, those relating to our
future business prospects, revenues, working capital, liquidity, capital needs,
amounts on realization of assets, interest costs and income, wherever they occur
in this prospectus, are necessarily estimates reflecting the best judgment of
our senior management and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the
forward-looking statements. Such forward-looking statements should, therefore,
be considered in light of various important factors, including those set forth
in this document.
Our investments also face risks associated with currently unforeseen
competitive pressures; our ability and the ability of our investees' management
to develop, implement and market their products and services; and other such
risks. These other risks include decreased consumer spending, customer
concentration issues and the effects of general economic conditions.
The words "estimate," "project," "intend," "expect," "believe" and
similar expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this document.
We caution you not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. We undertake no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
USE OF PROCEEDS
The shares of Class A Common Stock are being offered solely for the
accounts of the Warrant Holders. We will not receive any proceeds from the sale
of the shares of our Class A Common Stock offered by this prospectus.
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SELLING SHAREHOLDERS
The shares of our Class A Common Stock to be offered hereby are
issuable upon the exercise of our publicly-held Warrants. Each Warrant entitles
its holder to purchase the number of shares of our Class A Common Stock listed
on its face at $2.25 per share. The Warrants may be exercised in full or in part
at any time until 5:00 p.m., New York City time, on March 7, 2005. A
Warrantholder who properly exercises a Warrant may sell his or her shares of our
Class A Common Stock obtained from such exercise hereby as a selling
shareholder. The Warrants are traded publicly on the Nasdaq OTC Bulletin Board
under the symbol "AVATW." As of November 13, 2000, the last reported sale price
of the Warrants was $0.03125 per Warrant.
The shares of Class A Common Stock offered by this prospectus are
offered for the accounts of the selling shareholders. The shares offered by this
prospectus may be offered from time to time by the selling shareholders or by
any of their pledgees, donees, transferees or other successors in interest.
The following table and the notes thereto set forth information, as
of the date of this prospectus, relating to the beneficial ownership (as defined
in Rule 13d-3 of the Exchange Act), of our equity securities by the selling
shareholders. Because the identity of the selling shareholders will not be known
until the Warrants are exercised, and because the Warrants are traded publicly,
it is not possible to identify each selling shareholder or determine specific
beneficial ownership information regarding each selling shareholder. The
following table assumes that any selling shareholder holds no other shares of
our Class A Common Stock. It is possible that, through the normal course of
trading and exercise of the Warrants, a selling shareholder may beneficially own
more shares of our Class A Common Stock than reflected in the table below.
Because the selling shareholders may sell all, a portion or none of
their shares, no estimate can be made of the aggregate number of shares that
each selling shareholder may actually sell or that each selling shareholder will
own upon completion of any offering. The amounts identified as "Number of Class
A Common Shares Beneficially Owned After the Offering" assume the selling
shareholders offer to sell and sell all shares of Class A Common Stock
underlying their Warrants, and own no other shares of our Class A Common Stock.
<TABLE>
<CAPTION>
NUMBER OF CLASS A PERCENT OF CLASS NUMBER OF CLASS A
COMMON SHARES NUMBER OF CLASS A A COMMON SHARES COMMON SHARES
BENEFICIALLY COMMON SHARES TO BE TO BE BENEFICIALLY OWNED
SELLING SHAREHOLDER OWNED REGISTERED REGISTERED(1) AFTER THE OFFERING
------------------- ----- ---------- ------------- ------------------
<S> <C> <C> <C> <C>
Warrantholders 2,319,334 2,319,334 11.81 0
</TABLE>
-------------------
(1) Based on the number of shares of Class A Common Stock outstanding on
October 11, 2000.
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<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares of our Class A Common Stock described
in this prospectus for the selling shareholders. Subject to the limitations on
the use of this prospectus described below, the "selling shareholders" also
include persons who receive shares as a gift from a selling shareholder,
commonly known as donees, and persons who receive shares from a selling
shareholder as collateral to secure a loan, commonly known as pledgees, who are
selling shares received from a named selling shareholder after the date of this
prospectus. We will pay all costs, expenses and fees in connection with the
registration of the shares offered by this prospectus. The selling shareholders,
however, will pay for any brokerage commissions and similar selling expenses, if
any, attributable to the sale of their shares. Sales of the shares may be made
by selling shareholders from time to time in one or more types of transactions,
which may include block transactions, in the over-the-counter market, in
negotiated transactions, through put or call options transactions relating to
the shares, through short sales of the shares, or a combination of these methods
of sale, at market prices prevailing at the time of sale, or at negotiated
prices. These transactions may or may not involve brokers or dealers. To the
best of our knowledge, the selling shareholders have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares and there is no underwriter or
coordinating broker acting in connection with the proposed sale of the shares by
the selling shareholders.
The selling shareholders may sell their shares directly to purchasers
or to or through broker-dealers, which may act as agents or principals. These
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling shareholders or the purchasers of the shares for
whom the broker-dealers may act as agents or to whom they sell as principal, or
both. The compensation as to a particular broker-dealer might be in excess of
customary commissions.
The selling shareholders may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of our Class A
Common Stock in the course of hedging the positions they assume with the selling
shareholder, including in connection with distributions of the Class A Common
Stock by the broker-dealers. The selling shareholders may enter into option or
other transactions with broker-dealers that involve the delivery of their shares
to the broker-dealers, who may then resell or otherwise transfer the shares. The
selling shareholders may also loan or pledge their shares to a broker-dealer and
the broker-dealer may sell the shares so loaned or, upon a default, may sell or
otherwise transfer the pledged shares.
The selling shareholders and any broker-dealers that act in
connection with the sale of their shares might be deemed to be "underwriters"
within the meaning of Section 2(a)(11) of the Securities Act. In that event, any
commissions received by the broker-dealers and any profit on the resale of the
shares sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act. The selling
shareholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of their shares against certain
liabilities, including liabilities arising under the Securities Act.
Because selling shareholders may be deemed to be "underwriters"
within the meaning of Section 2(a)(11) of the Securities Act, the selling
shareholders will be subject to the prospectus delivery requirements of the
Securities Act. We hereby inform the selling shareholders that the
anti-manipulative rules under the Exchange Act, including Regulation M, may
apply to their sales in the market.
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<PAGE>
Selling shareholders may also resell all or a portion of their shares
of our Class A Common Stock in open market transactions in reliance upon the
SEC's Rule 144 without delivering this prospectus, provided they meet the
criteria and conform to the requirements of that rule.
If a selling shareholder notifies us that it has entered into a
material arrangement with a broker-dealer for the sale of that selling
shareholder's shares of Class A Common Stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, we will, if required, file a supplement or an amendment to
this prospectus. Any such supplement or amendment would disclose the name of
each of those selling shareholders and of the participating broker-dealer(s),
the number of shares involved, the price at which the shares were sold, the
commissions paid or discounts or concessions allowed to the broker-dealer(s),
where applicable, that the broker-dealer(s) did not conduct any investigation to
verify the information set forth in this prospectus, and the other facts
material to the transaction. In addition, if a selling shareholder notifies us
that a donee or pledgee intends to sell more than 500 shares, we will file a
supplement to this prospectus, pursuant to SEC rules.
Sales of a substantial number of shares of our Class A Common Stock
in the public market by the selling shareholders or even the potential of such
sales could adversely affect the market price of our Class A Common Stock, which
could have a direct impact on the value of the shares being offered by the
selling shareholder.
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<PAGE>
LEGAL MATTERS
Weil, Gotshal & Manges LLP, New York, New York, has passed upon the
validity of the shares of our Class A Common Stock offered pursuant to this
prospectus.
EXPERTS
The consolidated financial statements and financial statement
schedule incorporated in this prospectus by reference to the Avatex Corporation
Annual Report on Form 10-K for the year ended March 31, 2000 have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, (which report expresses an unqualified
opinion and includes an explanatory paragraph referring to Avatex Corporation's
ability to continue as a going concern), and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of Phar-Mor, Inc. and
subsidiaries incorporated in this Avatex Corporation prospectus by reference to
the Avatex Corporation Annual Report on Form 10-K, as amended, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report, which
is also incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
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