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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported) August 12,1996
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AVITAR, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-20316 06-1174053
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
35 Thorpe Avenue, Suite 101, Wallingford, CT 06492
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 265-3594
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Item 5. Other Events.
As previously announced, A.S. Goldmen & Co., Inc. (the
"Underwriter") and certain holders of underwriter's warrants
issued by Avitar, Inc. (formerly known as Managed Health Benefits
Corporation and referred to herein as the "Company") commenced a
court action against the Company by filing a complaint in Federal
Court for the Southern District of New York, seeking, among other
things, damages of $6,261,839.00 based upon the underwriters'
warrant agreement between the Company and Goldmen.
In August 1992, the Company and the Underwriter entered into an
Underwriting Agreement pursuant to which, in a firm commitment
offering, the Underwriter offered 1,237,000 shares of the
Company's Common Stock, $.01 par value per share (the "Common
Stock") and 1,668,000 Redeemable Warrants (the "Redeemable
Warrants"). Each Redeemable Warrant entitled the holder to
purchase one share of Common Stock at a price of $7.00 per share
commencing on August 11, 1993 until August 10, 1996 (and extended
by the Company to November 30, 1996 and was redeemable by the
Company, subject to the occurrence of certain events, at a price
of $.05 per Redeemable Warrant. The shares of Common Stock were
offered at an issuance price of $5.00 per share.
In addition to other customary compensation, the Underwriter was
permitted to purchase, for nominal consideration, Underwriter's
Warrants to purchase up to 111,200 shares of Common Stock and/or
up to 166,800 warrants (the "Underlying Warrants") to purchase
Redeemable Warrants. <FN1> The Underwriter's Warrants were
initially exercisable at a price of $8.00 per share of Common
Stock (160% of the annual public offering price) and $.40 per
Underlying Warrant (160% of the assumed public offering price of
a Redeemable Warrant).
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<FN1>The 1,237,000 shares offered in the offering included
125,000 shares to be offered by certain selling security holders
of the Company. Accordingly, the Underwriter's Warrants were in
an amount equal to 10% of the shares of Common Stock being
offered by the Company to the Public.<PAGE>
As previously reported, Avitar believes that the anti-dilution
and other provisions of the warrant agreement are unfair and
unreasonable - indeed unconscionable. The NASD Corporate Finance
Department has confirmed that the underwriter's claims based upon
such anti-dilution provisions are in violation of the National
Association of Securities Dealers Rules of Fair Practice.
Accordingly, Avitar has advised the underwriter repeatedly that
claims based upon the anti-dilution provisions are in violation
of the NASD rules.
Avitar has directed its attorneys to oppose this court action
vigorously based upon both the rule violations and otherwise.
Further, Avitar expects that NASD will enforce its rules against
the underwriter as required by the Exchange Act.
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 hereunto duly authorized.
AVITAR, INC.
(Registrant)
Date: September 30, 1996 J.C. LEATHERMAN, JR.
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J.C. LEATHERMAN, JR.,
Chief Financial Officer
