SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarter ended March 31, 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 1-10492
EPITOPE, INC.
(Exact name of registrant as specified in its charter)
OREGON NO. 93-0779127
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8505 SW Creekside Place
Beaverton, Oregon 97008-7108
(Address of principal executive offices) (Zip code)
(503) 641-6115
(Registrant's telephone number, including area code)
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. Yes [X] No [ ]
Number of shares of Common Stock, no par value, outstanding as of March
31, 1998: 13,541,769
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE SECOND QUARTER ENDED MARCH 31, 1998
Commission File Number 1-10492
EPITOPE, INC.
Incorporated in IRS Employer
the State of Oregon Identification No. 93-0779127
8505 SW Creekside Place
Beaverton, Oregon 97008-7108
(503) 641-6115
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. Yes [X] No [ ]
Number of shares of Common Stock, no par value, outstanding as of March 31,
1998: 13,541,769
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
Page No.
--------
<S> <C>
Item 1. Condensed Financial Statements......................................... 3
Condensed Balance Sheets
at March 31, 1998 and September 30, 1997............................... 3
Condensed Statements of Operations
for the three and six months ended March 31, 1998 and 1997 ............ 4
Condensed Statements of Changes in Shareholders' Equity
for the three and six months ended March 31, 1998...................... 5
Condensed Statements of Cash Flows
for the six months ended March 31, 1998 and 1997....................... 6
Notes to Condensed Financial Statements.................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................................. 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders..................... 11
Item 5. Other Information....................................................... 11
Item 6. Exhibits and Reports on Form 8-K....................................... 12
</TABLE>
2
<PAGE>
EPITOPE, INC.
CONDENSED BALANCE SHEETS
<TABLE>
3/31/98 9/30/97
(Unaudited)
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents.............................................. $ 579,303 $ 1,934,480
Marketable securities.................................................. 5,433,811 7,141,640
Trade accounts receivable, net ........................................ 826,143 928,047
Other receivables...................................................... 129,277 128,949
Inventories (Note 2) .................................................. 1,184,451 1,324,647
Prepaid expenses ...................................................... 416,967 78,240
----------- -------------
8,569,952 11,536,003
Property and equipment, net ........................................... 948,650 1,200,988
Patents and proprietary technology, net ............................... 604,211 657,487
Other assets and deposits.............................................. 17,377 55,099
Net assets of discontinued operations (Note 3)........................... - 3,562,726
----------- -------------
$ 10,140,190 $ 17,012,303
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable ...................................................... $ 242,586 $ 110,285
Salaries, benefits and other accrued liabilities ...................... 1,710,416 1,887,825
------------ -------------
1,953,002 1,998,110
Commitments and contingencies ......................................... - -
Shareholders' equity (Note 4)
Contributed capital ................................................... 110,993,976 110,439,726
Accumulated deficit.................................................... (102,806,788) (95,425,533)
------------ -----------
8,187,188 15,014,193
$ 10,140,190 $ 17,012,303
</TABLE>
3
<PAGE>
EPITOPE, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
3/31/98 3/31/97 3/31/98 3/31/97
Revenues
<S> <C> <C> <C> <C>
Product sales .............................. $ 2,102,905 $ 2,152,208 $ 3,694,347 $ 4,511,359
Grants and contracts ....................... - 183,729 11,381 465,339
----------- ----------- ----------- -----------
2,102,905 2,335,937 3,705,728 4,976,698
Costs and expenses
Product costs .............................. 930,485 832,597 1,586,254 1,801,855
Research and development costs ............. 617,898 1,063,057 1,297,745 1,867,030
Selling, general and administrative expenses 1,372,178 1,678,648 2,690,190 3,156,345
----------- ----------- ----------- -----------
2,920,561 3,574,302 5,574,189 6,825,230
Loss from operations ....................... (817,656) (1,238,365) (1,868,461) (1,848,532)
Other income (expense), net
Interest income............................. 86,332 257,528 201,227 576,862
Interest expense............................ 257 - (7,416) -
Other, net.................................. (2,835) 16,550 (14,588) 16,488
----------- ----------- ----------- -----------
83,754 274,078 179,223 593,350
Net loss from continuing operations......... (733,902) (964,287) (1,689,238) (1,255,182)
Loss from discontinued operations........... - (9,202,195) - (13,295,714)
----------- ----------- ----------- -----------
Net loss.................................... $ (733,902) $(10,166,482) $(1,689,238) $(14,550,896)
Basic and diluted loss per share
from continuing operations......... $ (0.05) $ (0.07) $ (0.13) $ (0.09)
Basic and diluted net loss per share........ $ (0.05) $ (0.74) $ (0.13) $ (1.09)
Weighted average number of shares outstanding 13,485,951 13,714,551 13,470,003 13,404,402
</TABLE>
4
<PAGE>
EPITOPE, INC.
CONDENSED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (Unaudited)
<TABLE>
COMMON STOCK ACCUMULATED
SHARES DOLLARS DEFICIT TOTAL
<S> <C> <C> <C> <C>
BALANCES AT SEPTEMBER 30, 1997................ 13,454,330 $ 110,439,726 $ (95,425,533) $ 15,014,193
Common stock issued as compensation........... 6,711 24,160 - 24,160
Compensation expense for stock
option grants............................. - 113,056 - 113,056
Spin-off of Agritope, Inc. ................... - - (5,692,017) (5,692,017)
Net loss for the period....................... - - (955,336) (955,336)
---------- ------------ ------------- ------------
BALANCES AT DECEMBER 31, 1997................. 13,461,041 110,576,942 (102,072,886) 8,504,056
Common stock issued upon exercise
of options................................ 75,619 313,721 - 313,721
Common stock issued as compensation........... 5,109 35,582 - 35,582
Compensation expense for stock
option grants............................. - 67,731 - 67,731
Net loss for the period....................... - - (733,902) (733,902)
---------- ------------- -------------- ------------
BALANCES AT MARCH 31, 1998.................... 13,541,769 $ 110,993,976 $(102,806,788) $ 8,187,188
</TABLE>
5
<PAGE>
EPITOPE, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
SIX MONTHS ENDED MARCH 31 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss .............................................................. $ (1,689,238) $(14,550,896)
Adjustments to reconcile net loss
to net cash used in operating activities:
Loss from discontinued operations ..................................... - 13,295,714
Depreciation and amortization ......................................... 346,314 363,080
Decrease (increase) in accounts receivable and other receivables ...... 101,576 (58,833)
Decrease (increase) in inventories .................................... 140,196 (284,614)
Increase in prepaid expenses .......................................... (338,727) (281,372)
(Decrease) increase in accounts payable and accrued liabilities ....... (45,108) 478,482
Common stock issued as compensation for services....................... 59,742 31,172
Compensation expense for stock option grants and
deferred salary increases .......................................... 180,787 218,705
Other, net ............................................................ 8,448 9,403
------------- -------------
Net cash used in operating activities.................................. (1,236,010) (779,159)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in marketable securities ................................... (7,663,044) (13,806,816)
Proceeds from sale of marketable securities ........................... 9,373,294 19,820,785
Additions to property and equipment ................................... (40,814) (157,201)
Proceeds from sale of property and equipment........................... 37,629 -
Expenditures for patents and proprietary technology ................... (54,584) (161,919)
Investment in affiliated companies .................................... 11,871 (7,133,147)
------------- --------------
Net cash provided by (used in) investing activities.................... 1,664,352 (1,438,298)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock ................................ 313,721 48,008
Advances in connection with spin-off .................................. (2,097,240) (3,392,743)
-------------- --------------
Net cash used in financing activities.................................. (1,783,519) (3,344,735)
Net decrease in cash and cash equivalents ............................. (1,355,177) (5,562,192)
Cash and cash equivalents at beginning of period ...................... 1,934,480 5,699,263
------------- -------------
Cash and cash equivalents at end of period............................. $ 579,303 $ 137,071
</TABLE>
6
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 THE COMPANY
Epitope, Inc. (the Company or Epitope) is an Oregon corporation, which develops
and markets medical diagnostic products. Epitope's principal products, including
the OraSure oral specimen collection device, focus on the use of oral fluid to
detect HIV infection and other conditions, and are marketed primarily in the
life insurance and public health sectors.
The interim condensed financial statements included herein are unaudited;
however, in the opinion of the Company, the interim data include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results of operations for the interim periods. These
condensed financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's 1997 Annual Report on
Form 10-K. Results of operations for the periods ended March 31, 1998 are not
necessarily indicative of the results of operations expected for the full fiscal
year.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The accompanying financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated and the results of
the former Agritope, Inc. subsidiary (Agritope) have been shown as discontinued
operations in the 1997 fiscal periods reported.
<TABLE>
Inventories. Inventory components are summarized as follows: 3/31/98 9/30/97
(Unaudited)
<S> <C> <C>
Raw materials.......................................................... $ 389,875 $ 296,432
Work-in-process ....................................................... 358,157 343,585
Finished goods ........................................................ 421,964 670,175
Supplies .............................................................. 14,455 14,455
----------- -----------
$ 1,184,451 $ 1,324,647
</TABLE>
Net Loss Per Share. Net loss per share has been computed using the weighted
average number of shares of common stock outstanding during the period. Common
stock equivalents were excluded from the computation because their effect is
anti-dilutive.
NOTE 3 DISCONTINUED OPERATIONS
On December 30, 1997, the Company distributed all of its shares of Agritope
common stock to Epitope shareholders of record as of December 26, 1997. The
costs of the spin-off and Agritope's operating losses in fiscal 1998 were
accounted for in fiscal year 1997. The comparable periods in fiscal 1997
included the loss from discontinued operations of Agritope and Andrew and
Williamson Sales, Co. (A&W).
Bank Line of Credit. In connection with the acquisition of A&W, the Company
guaranteed a bank line of credit maintained by A&W. The $6.5 million revolving
line is secured by A&W's accounts receivable, inventory and equipment. The terms
of Epitope's guarantee require that it maintain certain tangible net worth
levels. The line of credit also contains various financial covenants for A&W
including minimum working capital and tangible net worth levels and maximum
debt-to-net worth ratios. In addition, the principals of A&W have each
personally guaranteed the line of credit. A&W has agreed that Epitope may
terminate its guaranty as to future advances unless A&W has obtained a new line
of credit not guaranteed by Epitope by November 1, 1998. The balance outstanding
under the line was $1,138,000 as of March 31, 1998. In April 1998, Wells Fargo
Bank N.A. extended the maturity date of the credit agreement to June 5, 1998.
7
<PAGE>
NOTE 4 SHAREHOLDERS' EQUITY
The costs of the spin-off and Agritope's operating losses in fiscal 1998 were
accounted for in fiscal 1997 as expenses of discontinued operations. The overall
reduction in retained earnings as a result of the spin-off was $5,692,017,
including spin-off related costs. No additional material charges are expected
related to the Agritope spin-off.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of operations and financial condition should be read in
conjunction with the Financial Statements and Notes thereto included in the
Company's 1997 Annual Report on Form 10-K and with the Financial Statements and
Notes thereto included in this Quarterly Report on Form 10-Q. Statements set
forth below about future events or performance constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by the
forward-looking statements. These factors with respect to the Company include
loss or impairment of sources of capital; ability of the Company to develop
diagnostic product distribution channels; development of competing diagnostic
products, including blood and urine-based products; market acceptance of oral
testing products; changes in federal or state law or regulations applicable to
diagnostic products or their manufacture and marketing; loss of key personnel;
and other factors as described in the Company's 1997 Annual Report on Form 10-K.
Although forward-looking statements help to provide complete information about
the Company, readers should keep in mind that forward-looking statements are
much less reliable than historical information.
RESULTS OF OPERATIONS
Revenues. Total revenues decreased by $233,000 or 10% in the current quarter as
compared with the second quarter of fiscal 1997, and by $1,271,000 or 26% in the
comparable six-month period. Revenues by product line are shown below:
<TABLE>
THREE MONTHS ENDED MARCH 31 (IN THOUSANDS, EXCEPT %) 1998 1997
DOLLARS PERCENT DOLLARS PERCENT
Product sales
<S> <C> <C> <C> <C>
Oral collection device................................. $ 1,624 77% $ 1,676 72%
Western blot HIV confirmatory test..................... 479 23 476 20
------- ---- ------- ----
2,103 100 2,152 92
Grants and contracts...................................... - - 184 8
------- ---- ------- ----
$ 2,103 100% $ 2,336 100%
SIX MONTHS ENDED MARCH 31 (IN THOUSANDS, EXCEPT %) 1998 1997
DOLLARS PERCENT DOLLARS PERCENT
Product sales
Oral collection device................................. $ 2,754 74% $ 3,576 72%
Western blot HIV confirmatory test..................... 940 25 935 19
------- ---- ------- ----
3,694 99 4,511 91
Grants and contracts...................................... 11 1 466 9
-------- ---- ------- ----
$ 3,705 100% $ 4,977 100%
</TABLE>
Sales of the Company's OraSure oral specimen collection device decreased by
$52,000 or 3% in the current quarter as compared to the second quarter in fiscal
1997, and by $822,000 or 23% in the comparable six-month period. The decrease is
attributable to inventory build-up in the first three quarters of fiscal 1997 by
major testing laboratories as insurance companies made initial decisions about
adoption of the Company's OraSure(R) device and expansion of use beyond pilot
programs. This inventory build-up resulted in reduced sales to the testing
laboratories in the most recent three fiscal quarters as the laboratories worked
down their inventory levels. By the third quarter of fiscal 1998, inventory
levels are expected to be in line with current customer requirements. As the
Company expands into the public health markets, it is anticipated that overall
sales for the remainder of the year will exceed those of the first six months.
Expectations for future sales are based primarily on forecasts by individual
customers rather than firm orders, as many of the smaller customers in the
public health market do not have contractual arrangements with the Company. The
Company's sales for OraSure products, including cotinine test devices, continue
to expand in foreign markets.
9
<PAGE>
Sales of the Company's Western blot HIV confirmatory test increased slightly in
the current quarter and six-month period as compared to the same periods in
fiscal 1997. As of March 31, 1998, the Company had firm orders for the
confirmatory HIV test totaling $600,000 scheduled for shipment before June 30,
1998.
Grant and contract revenues decreased by $184,000 or 100% in the current quarter
as compared to the second quarter of fiscal 1997, and by $454,000 or 98% in the
comparable six-month period, primarily due the termination of the Company's
Development, License and Supply Agreement with its former strategic partner,
SmithKline Beecham plc (SB). Selected research projects are continuing, directed
at developing new applications for the OraSure oral collection device with a
focus on tests needed to expand the use of the OraSure device with existing
customers in life insurance and public health markets, and to move into the area
of drugs-of-abuse testing, a market the Company has not previously served.
Gross margins on product sales were 56% and 57% of sales in the second quarter
and first six months of fiscal 1998 as compared to 61% and 60% of sales in the
comparable periods of fiscal 1997. The decline in gross margin for the first six
months was due to negative volume variances as production was decreased in order
to maintain inventory levels. The Company expects that margins will increase in
the third quarter of fiscal 1998.
Research and development costs decreased by $455,000 or 42% in the current
quarter as compared to the second quarter of fiscal 1997, and by $569,000 or 30%
in the comparable six-month period. This decrease was the result of continued
cost containment measures and a narrowing of the focus of research and
development projects to those that were judged to be commercially viable in the
shortest timeframe. Expenditures for these projects can vary significantly from
quarter to quarter as new projects are started while other projects may be
extended or completed. Research and development for oral fluid testing products
for other diseases and drugs-of-abuse continued to expand during the quarter.
Selling, general and administrative expenses decreased $306,000 or 18% in the
current quarter as compared to the second quarter of fiscal 1997, and by
$466,000 or 15% in the comparable six-month period, primarily as a result of a
reduction in compensation expense and as a result of cost containment measures.
Year 2000 Compliance. The Company has determined that the costs of addressing
the Year 2000 issue are not material to the operations or financial condition of
the Company.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
(In thousands) 3/31/98 9/30/97
<S> <C> <C>
Cash and cash equivalents.............................................. $ 579 $ 1,934
Marketable securities.................................................. 5,434 7,142
Working capital........................................................ 6,617 9,532
</TABLE>
During the current quarter, proceeds from the sale of marketable securities
represented the primary source of funds for meeting the Company's requirements
for operations and business expansion. Trade accounts receivable increased
during the quarter by $24,000 or 3%. Other receivables decreased during the
quarter by $934,000 or 88% as Agritope repaid operating expense advances made
during the month of December as part of the spin-off agreement. The rate of cash
usage as reflected in the reduction of cash and cash equivalents decreased
significantly from $1.2 million in the first quarter to $144,000 in the second
quarter due to Agritope's repayment of operating expense advances and continued
emphasis by management on cost containment.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Vector Securities International, Inc. ("Vector Securities"), served as the
Company's financial advisor in connection with the spin-off of Agritope, Inc., a
previous proposal for issuance of targeted stock, and other matters. In partial
consideration for Vector Securities' services, the Company agreed and disclosed
at the time of the Agritope spin-off that Vector Securities would receive
warrants to purchase an aggregate of 416,667 shares of Epitope common stock,
$.01 par value per share ("Epitope Stock"), at a price equal to 110 percent of
the average closing price of Epitope stock for the five consecutive trading days
beginning on the ex dividend date for the Agritope spin-off. Pursuant to this
agreement, the Company issued to Vector Securities on May 5, 1998, warrants to
purchase 416,667 shares of Epitope Stock at a price of $5.913 per share. The
warrants expire on December 30, 2000.
The warrants were issued without registration pursuant to the exemption provided
by Section 4(2) of the Securities Act of 1933. In accordance with the terms of
the warrants, the Company will register the shares issuable upon exercise of the
warrants at Vector Securities' request.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the 1998 annual meeting of shareholders of the Company on February 17, 1998,
the following individuals were elected by the votes indicated as directors of
the Company for terms expiring at the annual meetings of shareholders for the
years shown:
<TABLE>
NOMINEE DIRECTOR CLASS TERM EXPIRES VOTES FOR VOTES WITHHELD
<S> <C> <C> <C> <C>
John W. Morgan 1 2000 12,310,850 119,127
Margaret H. Jordan 3 2001 12,314,078 115,899
Michael J. Paxton 3 2001 12,313,750 116,227
</TABLE>
The other directors whose terms of office continued after the annual meeting
are: W. Charles Armstrong, Andrew S. Goldstein, Roger L. Pringle, and G. Patrick
Sheaffer. In addition, Robert J. Zollars was elected by the remaining directors
to fill a vacancy on the board created by the retirement of R. Douglas Norby
effective following the annual meeting. Mr. Zollar's term will expire at the
annual meeting of shareholders in 1999.
ITEM 5. OTHER INFORMATION
MANAGEMENT CHANGES
As previously announced, several changes in the Company's management occurred
following the spin-off of Agritope, Inc.
Charles E. Bergeron, Vice President of Operations and Chief Financial Officer -
Epitope Medical Products, became Chief Financial Officer of the Company
following the retirement of Gilbert N. Miller in connection with the spin-off.
Mr. Bergeron joined the Company in August 1993 as President and Chief Executive
Officer of Agrimax Floral Products, Inc., then a wholly owned subsidiary.
J. Richard George, Ph.D., was named Chief Scientific Officer in January 1998 and
is now responsible for the Company's research and product development groups. He
joined the Company as Vice President of Scientific Affairs - Epitope Medical
Products in March 1995.
In January 1998, John H. Fitchen, M.D., Senior Vice President and Chief
Operating Officer, left the Company to pursue other interests.
11
<PAGE>
Edward V. Collom joined the Company on March 9, 1998, as Vice President of Sales
and Marketing. Prior to accepting his position with the Company, Mr. Collom had
responsibility for sales and marketing of forensic drug testing services and
drugs-of-abuse and on-site drug screening devices, at Pharm Chem Laboratories,
Menlo Park, California.
As noted under Item 4, Robert J. Zollars was elected to the Company's board of
directors to fill a vacancy on the board created by the retirement of R. Douglas
Norby effective following the annual meeting of shareholders. Mr. Zollars has
nearly 20 years of health care industry experience with organizations such as
Cardinal Health, Inc., Baxter International, Inc., and American Hospital Supply
Corp.
The Company's Nominating Committee is in the process of selecting a replacement
for Richard K. Donahue, who retired from the board of directors as of February
17, 1998.
PRODUCT CLEARANCES
During the quarter, the Company announced regulatory clearances received for use
of its OraSure oral specimen collection device for various applications.
The FDA granted clearance for use of OraSure with enzyme immunoassays
manufactured by STC Technologies, Inc. to test for cocaine, methamphetamines and
cannabanoids (marijuana) in January and February 1998. Management anticipates
approval for use of the OraSure device to test for opiates and phencyclidine
(PCP) in the months ahead.
The OraSure device has also been approved in Japan for cotinine testing of life
insurance applicants. Cotinine is a derivative of nicotine that indicates
whether the tested subject is a smoker. The Finance Ministry of Japan announced
in February that life insurance companies could reduce premiums on new nonsmoker
policies by as much as thirty percent.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits are listed on the attached exhibit index following the signature page
of this report.
(b) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EPITOPE, INC., an Oregon corporation
May 12, 1998 /s/ CHARLES E. BERGERON
Date Charles E. Bergeron
Chief Financial Officer
(Principal Financial Officer)
May -12, 1998 /s/ THEODORE R. GWIN
Date Theodore R. Gwin
Controller
(Principal Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
4. Warrant dated May 5, 1998, issued to Vector Securities International, Inc.
27. Financial Data Schedule
14
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (the "1933 ACT"),
AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS THE TRANSACTION
IS REGISTERED UNDER THE 1933 ACT AND APPLICABLE STATE LAW OR AN EXEMPTION FROM
REGISTRATION REQUIREMENTS IS AVAILABLE.
EPITOPE, INC.
Warrant for the Purchase of Shares of Common Stock
--------------------------------------------------
May 5, 1998
No. 98-01 416,667 Shares
FOR VALUE RECEIVED, EPITOPE, INC., an Oregon corporation (the "Company"), hereby
certifies that VECTOR SECURITIES INTERNATIONAL, INC., or permitted assigns
thereof ("Vector"), is entitled to purchase from the Company, at any time or
from time to time prior to 5:00 p.m., New York City time, on December 30, 2000
(the "Expiration Date"), 416,667 fully paid and nonassessable shares of the
common stock, $.01 par value, of the Company, including associated preferred
stock purchase rights ("Common Stock"), upon payment of the purchase price of
$5.913 per share, subject to adjustment pursuant to the terms hereof.
Hereinafter (i) the shares of Common Stock purchasable hereunder or under any
other Warrant (as hereinafter defined) are referred to as the "Warrant Shares,"
(ii) the aggregate purchase price payable hereunder for the Warrant Shares is
referred to as the "Aggregate Warrant Price," (iii) the price payable hereunder
for each of the Warrant Shares is referred to as the "Per Share Warrant Price,"
(iv) this Warrant and all warrants hereafter issued in exchange or substitution
for this Warrant or such other warrants are referred to as the "Warrants" and
(v) the holder of this Warrant is referred to as the "Holder" and the holders of
this Warrant and all other Warrants are referred to as the "Holders."
1. Exercise of Warrant
This Warrant may be exercised, in whole at any time or in part from time
to time, prior to the Expiration Date by the Holder by the surrender of this
Warrant to the Company (with the subscription form at the end hereof duly
executed) at the address set forth in Section 10 hereof, together with proper
payment of the Aggregate Warrant Price, or the proportionate part thereof if
this Warrant is exercised in part, and any applicable taxes. Payment for Warrant
Shares shall be made by cashier's check or by wire transfer of funds.
If this Warrant is exercised in part, this Warrant must be exercised for
a number of whole shares of Common Stock not less than 1,000 shares and the
Holder is entitled to receive a new Warrant covering the Warrant Shares for
which this Warrant has not been exercised. Upon such
- 1 -
<PAGE>
surrender of this Warrant, the Company will (a) issue a certificate in the name
of the Holder for the number of whole shares of the Common Stock to which the
Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of
any fractional share of the Common Stock to which the Holder shall be entitled,
pay to the Holder cash in an amount equal to the fair value of such fractional
share (determined in such reasonable manner as the Board of Directors of the
Company shall determine), and (b) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant. The Company shall not be required to issue or deliver any certificate
for shares of Common Stock or other securities upon the exercise of Warrants
evidenced by this Warrant until any applicable transfer tax and any other taxes
or governmental charges that the Company may be required by law to collect in
respect of such exercise shall have been paid, such tax being payable by the
Holder of this Warrant at the time of surrender for exercise.
Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the business day on which this
Warrant shall have been surrendered to the Company as provided in this Section
1, and at such time, the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such exercise shall be deemed to have become the holder or holders of record
thereof.
2. Reservation of Warrant Shares; Listing; Preservation of Rights
(a) The Company agrees that, prior to the expiration of this Warrant, the
Company will at all times (i) have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of
this Warrant, the shares of the Common Stock and other securities and
properties as from time to time shall be receivable upon the exercise of
this Warrant, free and clear of all restrictions on sale or transfer and
free and clear of all preemptive or similar contractual rights and (ii)
use its best efforts to keep the Warrant Shares authorized for quotation
on the National Market Tier of the Nasdaq Stock Market, or on such other
national securities exchange or market upon which the Common Stock is
then listed.
(b) The Company will not, by amendment of its articles of incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms
of this Warrant or the rights represented hereby.
3. Protection Against Certain Dilution
(a) In case the Company shall hereafter (i) declare a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number
of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its Common
Stock any shares of capital stock of the Company, the Per Share Warrant
Price and the
- 2 -
<PAGE>
number and kind of shares of Common Stock receivable upon exercise of
this Warrant in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder of
any Warrant upon the exercise hereof shall be entitled to receive the
number and kind of shares of Common Stock or other capital stock of the
Company which the Holder would have received had it exercised such
Warrant immediately prior thereto. An adjustment made pursuant to this
Section 3(a) shall become effective immediately after the record date in
the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification. If as a result of an adjustment made
pursuant to this Section 3(a), the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two
or more classes of capital stock or shares of Common Stock and other
capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price
between or among shares of such classes of capital stock or shares of
Common Stock and other capital stock.
(b) In case the Company after the date hereof (a) shall consolidate with or
merge into any other entity and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall permit any
other entity to consolidate with or merge into the Company and the
Company shall be the continuing or surviving entity but, in connection
with such consolidation or merger, the Common Stock shall be changed
into or exchanged for stock or other securities of any other entity or
cash or any other property, or (c) shall transfer all or substantially
all of its properties or assets to any other entity, or (d) shall effect
a capital reorganization or reclassification of the Common Stock or
other securities of the Company ((a) - (d) being collectively referred
to as "Transactions"), the Holder of this Warrant shall have the right
thereafter to exercise such Warrant for the kind and amount of
securities, cash or other property which the Holder would have received
or have been entitled to receive immediately after such Transaction had
this Warrant been exercised immediately prior to the effective date of
such Transaction and in any such case, if necessary, appropriate
adjustment shall be made in the application of the provisions set forth
in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in
this Section 3 shall thereafter correspondingly be made applicable, as
nearly as may be reasonable, in relation to any shares of stock or other
securities or in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The
above provisions of this Section 3(b) shall similarly apply to
successive Transactions. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations
of the Company hereunder. Notice of any such Transaction shall be given
to Holders not less than 30 days prior to said event; provided, however,
that issuance of a press release shall constitute such notice.
- 3 -
<PAGE>
(c) Nothing in this Warrant Agreement shall be interpreted to require
adjustment in the Per Share Warrant Price upon issuance of shares under
or grant by the Company of options to employees or directors under any
stock option plan or arrangement of the Company approved by the
shareholders of the Company, or the issuance of any and all shares of
Common Stock upon exercise of such options or upon the issuance of
shares under any options, warrants, or convertible securities.
(d) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least 1% of
the then existing Per Share Warrant Price; provided, however, that any
adjustments which by reason of this Section 3(d) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment; provided further, however, that adjustments shall be
required and made in accordance with the provisions of this Section 3
(other than this Section 3(d)) not later than such time as may be
required in order to preserve the tax-free nature of a distribution to
the Holder of this Warrant or Common Stock issuable upon exercise
hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest share, as the case may be. Anything in
this Section 3 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Per Share Warrant Price, in
addition to those required by this Section 3, as it in its discretion
shall deem to be advisable in order that any stock dividend, subdivision
of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to
its shareholders shall not be taxable.
(e) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of
Warrants in accordance with this Section 3, the Company shall prepare
and retain on file a statement setting forth the Per Share Warrant Price
and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and
cause a copy of such statement to be mailed to the Holders of the
Warrants.
(f) The Company will use reasonable efforts to notify the Holders at least
twenty (20) days prior to (i) any taking by the Company of a record of
the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution or any right to subscribe for or purchase any shares of
stock or any other securities or (ii) any voluntary or involuntary
dissolution, liquidation or winding-up of the Company. Any such notice
shall include the date or expected date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and
the amount and character of such dividend, distribution or right, and
the date or expected date on which any dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for the securities or
other property deliverable upon such reorganization, dissolution,
liquidation or winding-up.
- 4 -
<PAGE>
4. Rights of Holder as Shareholder
No holder of this Warrant shall, as such, be entitled to vote, receive
dividends, or otherwise be deemed the holder of Common Stock or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof or
to give or withhold consent to any corporate action (whether upon any matter
submitted to shareholders at any meeting thereof or otherwise) including,
without limitation, giving or withholding consent to any merger,
recapitalization, issuance of stock, reclassification of stock, exchange of
stock, consolidation or conveyance, or to receive notice of meetings or other
actions affecting shareholders or to receive dividends or subscription rights or
other distributions.
5. Fully Paid Stock
The Company will take all such actions as may be necessary to assure
that the shares of the Common Stock represented by each and every certificate
for Warrant Shares delivered on the exercise of this Warrant shall, at the time
of such delivery, be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive rights, and the Company will take
all such actions as may be necessary to assure that the par value or stated
value, if any, per share of the Common Stock is at all times equal to or less
than the then Per Share Warrant Price.
6. Registration under Securities Act of 1933
(a) Demand Registration. At any time prior to December 30, 2002, upon the
request of holders of Warrants or Warrant Shares representing a majority of the
Warrant Shares issuable upon exercise of this Warrant, the Company agrees that
the Company will on two occasions file, under the 1933 Act, as amended, a
registration statement on Form S-3 or a successor form covering resale of the
Registrable Securities (as defined below) issuable upon the exercise of this
Warrant (the "Registration Statement"). The Company will use its best efforts to
cause the Registration Statement to become effective as of the soonest
practicable date following the date of filing and the Company will (i) take all
other reasonable action necessary under any federal law or regulation to permit
all Registrable Securities to be sold or otherwise disposed of, (ii) prepare and
file with the Securities and Exchange Commission such amendments and supplements
to the Registration Statement and the prospectus used in connection therewith as
may be necessary to keep the Registration Statement effective until the earlier
to occur of (x) the sale of all of the Registrable Securities purchasable
hereunder and (y) 12 consecutive months after the effective date of such
registration statement, and (iii) maintain compliance with the federal
securities laws and regulations. For purposes of this Section 6, "Registrable
Securities" means (a) any Common Stock or other securities issued or issuable
upon exercise of this Warrant and (b) any securities issued or issuable with
respect to any securities referred to in the foregoing clause by way of share
dividend or share split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable
- 5 -
<PAGE>
Securities, once issued, such securities shall cease to be Registrable
Securities when (a) a registration statement with respect to the sale of such
securities shall have become effective under the 1933 Act and such securities
shall have been disposed of in accordance with such registration statement, (b)
they shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the 1933 Act, or (c) they shall have ceased to be
outstanding.
(b) Furnishing of Prospectus. The Company shall, upon the filing of the
Registration Statement furnish to each Holder of any Registrable
Securities (and to each underwriter, if any, of such Registrable
Securities) such number of copies of prospectuses and preliminary
prospectuses in conformity with the requirements of the 1933 Act and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the
Registrable Securities; provided, however, that the obligation of the
Company to deliver copies of prospectuses or preliminary prospectuses to
Holder shall be subject to the receipt by the Company of reasonable
assurances from the Holder that the Holder will comply with the
applicable provisions of the 1933 Act and of such other securities or
blue sky laws as may be applicable in connection with any use of such
prospectuses or preliminary prospectuses.
(c) No Demand in Event of Withdrawal of Notice. No right of the Holders
under Section 6(a) shall be deemed to have been exercised if with
respect to such right: (i) the requisite notice given by Holders
pursuant to Section 6(a) is withdrawn prior to the date of filing of a
registration statement or if a registration statement filed by the
Company under the 1933 Act pursuant to Section 6(a) is withdrawn prior
to its effective date, in either case, by written notice to the Company
from Holders to be included or which are included in such registration
statement stating that such Holders have elected not to proceed with the
offering contemplated by such registration statement because (x) a
development in the Company's affairs has occurred or has become known to
such Holders subsequent to the date of the notice by the Holders to the
Company requesting registration of the Registrable Securities or the
filing of such registration statement which, in the judgment of such
Holders or the managing underwriter of the proposed public offering,
materially and adversely affects the market price of such Registrable
Securities or the distribution of such Registrable Securities or (y) a
registration statement filed by the Company pursuant to Section 6(a), in
the reasonable opinion of counsel for such Holders or the managing
underwriter of the proposed public offering, contains an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which made (other than
any such statement or omission relating to such Holders and based on
information supplied or failed to be supplied by such Holders) and the
Company has not, promptly after written notice thereof, corrected such
statement or omission in an amendment to such registration statement
filed; or (ii) a registration statement pursuant to Section 6(a) shall
have become effective under the 1933 Act and less than eighty-five
percent (85%) of the Registrable Securities included therein shall have
been sold as a result of any stop order, injunction or other order or
requirement of the Securities and Exchange Commission or other
governmental agency or court.
- 6 -
<PAGE>
(d) Expenses of Offering. The Company shall pay all expenses incurred in
connection with any registration or other action pursuant to the
provisions of this Section 6, other than underwriting discounts and
commissions, any legal, accounting, or consulting fees incurred by the
Holders and taxes relating to the Registrable Securities.
(e) No Exercise Requirement. Nothing contained in this Agreement shall be
construed as requiring a Holder to exercise its Warrants prior to the
initial filing of any registration statement or the effectiveness
thereof.
(f) Notification by Company. The Company shall use reasonable efforts to
notify each Holder of Registrable Securities covered by the Registration
Statement, at any time when a prospectus relating thereto is required to
be delivered under the 1933 Act, upon the Company's discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they were made, and at the request of any such Holder promptly prepare
and furnish to such Holder and each underwriter, if any, a reasonable
number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made.
The Holders shall not effect sales of Warrant Shares after receipt of
such notice from the Company until an amendment becomes effective or the
supplement has been filed. The Company's obligations under this Section
6(g) shall expire at such time as the Company is no longer required to
maintain the effectiveness of the Registration Statement.
(g) Compliance with SEC Rules and Regulations. The Company shall otherwise
use its best efforts to comply with all applicable rules and regulations
of the Securities and Exchange Commission and will furnish to each
Holder of Registrable Securities included in any registration statement
at least five (5) business days prior to the filing thereof a copy of
any amendment or supplement to such registration statement or prospectus
and shall not file any amendment or supplement thereof to which any such
Holder shall have reasonably objected on the grounds that such amendment
or supplement does not comply in all material respects with the
requirements of the 1933 Act or the rules or regulations thereunder.
(h) Deferral Period. If, because of a proposed material acquisition or any
other material event, (i) the Company would, in the reasonable opinion
of its counsel, be required to disclose material information which, in
the good faith judgment of the Company, would not be in the best
interests of the Company and its shareholders to disclose at that time
or
- 7 -
<PAGE>
the filing or effectiveness of a Registration Statement or of a
supplement or amendment to the prospectus pursuant to this Section 6
would impede, delay or interfere with any material financing, offer or
sale of securities, acquisition, corporate reorganization or other
transaction involving the Company or any affiliate of the Company, the
Company may defer such filing or effectiveness for a specified period of
up to 90 days after such filing or effectiveness would otherwise
ordinarily have occurred. The Company may only request deferral pursuant
to this section twice during any calendar year.
(i) Holdback Agreement. The Holder, if requested by the Company and an
underwriter of the Company's securities, shall agree not to sell or
otherwise transfer or dispose of any Warrant or Warrant Shares for a
specified period of time not to exceed 90 days after any underwritten
registration statement pursuant to which the Company proposes to sell
its securities to the public generally has become effective; provided,
however, that all executive officers and directors of the Company enter
into similar agreements. In the event the Company should make such a
request, the 12-month period mentioned in Section 6(a) shall be extended
by a number of days equal to the actual duration of the holdback period.
7. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each Holder, each of its officers and directors, its legal
counsel, and each person, if any, who controls the Holder within the
meaning of the 1933 Act against any losses, claims, damages, liabilities
(joint or several), or expenses to which they may become subject under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), or other federal or state law, insofar as such losses, claims,
damages, expenses, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (a "Violation"):
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, including any
preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or
(iii) any violation or alleged violation by the Company of the 1933
Act, the 1934 Act, any state securities law, or any rule or
regulation promulgated under the 1933 Act, the 1934 Act, or any
state securities law.
The Company shall reimburse each Holder and its officers, directors,
legal counsel or controlling persons for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or
- 8 -
<PAGE>
action. This indemnity agreement shall not apply to amounts paid in
settlement of any loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable to
the Holder in any case for any loss, claim, damage, liability, or action
(A) to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by or
on behalf of the Holder or such controlling person or (B) in the case of
a sale directly by the Holder (including a sale of such Warrant Shares
through any underwriter retained by the Holder or Holders to engage in a
distribution solely on behalf of the Holder or the Holders), if such
untrue statement or alleged untrue statement or omission or alleged
omission was contained in a preliminary prospectus and corrected in a
final or amended prospectus, and the Holder failed to deliver a copy of
the final or amended prospectus at or prior to the confirmation of the
sale of the Warrant Shares to the person asserting any such loss, claim,
damage or liability in any case where such delivery is required by the
1933 Act.
(b) Indemnification by Holders of Warrant Shares. Each Holder shall
severally but not jointly indemnify and hold harmless the Company, each
of its officers and directors, its legal counsel, and each person, if
any, who controls the Company within the meaning of the 1933 Act,
against any losses, claims, damages, liabilities (joint or several), or
expenses to which the Company or any such director, officer, legal
counsel, or controlling person may become subject, under the 1933 Act,
the 1934 Act, or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by or on behalf of such
Holder expressly for use in connection with such registration; and such
Holder shall reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, legal counsel, or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that
the indemnity agreement contained in this Section 7 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of such
Holder, which consent shall not be unreasonably withheld; and provided,
further, that the indemnification obligation of such Holder shall be
limited to the aggregate public offering price of the Warrant Shares
sold by such Holder pursuant to such registration.
(c) Notice, Defense and Counsel. Promptly after receipt by an indemnified
party under this Section 7 of notice of the commencement of any action
(including any governmental action), such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party
under this Section 7, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so
desires to assume and control the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and
- 9 -
<PAGE>
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any
such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified
party under this Section 7 to the extent of such prejudice, but the
omission so to deliver written notice to the indemnifying party shall
not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 7.
8. Loss etc. of Warrant
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor and denomination.
9. Amendment
These Warrants may be amended only by written mutual agreement of the
Company and the Holders of a majority of the then outstanding Warrants.
10. Communication
No notice or other communication under this Warrant shall be effective
unless, but any notice or other communication shall be effective and shall be
deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed as set forth below:
If to the Company: Epitope, Inc
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Attention: Charles E. Bergeron
Chief Financial Officer
or such other address as the Company has designated in writing to the Holder.
If to the Holder: Vector Securities International, Inc.
1751 Lake Cook Road
Deerfield, Illinois 60013
Attention: Chairman and
Chief Executive Officer
or such other address as the Holder has designated in writing to the Company.
- 10 -
<PAGE>
11. Headings
The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
12. Applicable Law
This Warrant shall be governed by and construed in accordance with the
laws of the State of Oregon without giving effect to the principles of conflicts
of laws thereof.
13. Assignment
The Holder may assign or transfer this Warrant in whole or in part by
completing and delivering to the Company the applicable document of assignment,
duly executed, in the form attached hereto. Upon any such assignment or
transfer, the term "Holder" shall be deemed to include any such assignee or
transferee of the original Holder.
14. Severability
If one or more provisions of this Warrant are held to be enforceable
under applicable law, such provision shall be excluded from this Warrant and the
balance of the warrant shall be interpreted as if such provisions were so
excluded and the balance shall be enforceable in accordance with its terms.
IN WITNESS WHEREOF, Epitope, Inc. has caused this Warrant to be signed
by its Chief Financial Officer on the date stated above.
/s/ Charles E. Bergeron
Name: Charles E. Bergeron
Title: Chief Financial Officer
ATTEST:
/s/ J. Richard George
J. Richard George, Chief Scientific Officer
- 11 -
<PAGE>
SUBSCRIPTION
------------
The undersigned, --------------------, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase ----- shares of
the Common Stock of Epitope, Inc. covered by said Warrant, and makes payment
therefor at the price per share provided by said Warrant.
Dated: ------------------------ Signature: -----------------------------
Address: -----------------------------
-----------------------------
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED -------------------- hereby sells, assigns and transfers unto
- -------------------- the foregoing Warrant and all rights evidenced thereby, and
does irrevocably constitute and appoint -------------------, attorney, to
transfer said Warrant on the books of Epitope, Inc.
Dated: ------------------------ Signature: -----------------------------
Address: -----------------------------
-----------------------------
<PAGE>
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED -------------------- hereby assigns and transfers unto
- -------------------- the right to purchase ----- shares of the Common Stock of
Epitope, Inc. by the foregoing Warrant and a proportionate part of said Warrant
and the rights evidenced hereby, and does irrevocably constitute and appoint
- ----------------, attorney, to transfer that part of said Warrant on the books
of Epitope, Inc.
Dated: ------------------------ Signature: -----------------------------
Address: -----------------------------
-----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statements included herein and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 579,303
<SECURITIES> 5,433,811
<RECEIVABLES> 997,102
<ALLOWANCES> 41,682
<INVENTORY> 1,184,451
<CURRENT-ASSETS> 8,569,952
<PP&E> 5,221,068
<DEPRECIATION> 4,272,418
<TOTAL-ASSETS> 10,140,190
<CURRENT-LIABILITIES> 1,953,002
<BONDS> 0
0
0
<COMMON> 110,993,976
<OTHER-SE> (102,806,788)
<TOTAL-LIABILITY-AND-EQUITY> 10,140,190
<SALES> 3,394,347
<TOTAL-REVENUES> 3,705,728
<CGS> 1,586,254
<TOTAL-COSTS> 5,754,189
<OTHER-EXPENSES> (179,223)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,689,238)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,689,238)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
</TABLE>
