DELCATH SYSTEMS INC, SB-2, 2000-06-16

DELCATH SYSTEMS INC
SB-2, 2000-06-16

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<PAGE>

As filed with the Securities and Exchange Commission on June 16, 2000
Registration No. 333-

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
DELCATH SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>

<S> <C> <C>
Delaware 541990 06-1245881
------------------------------- --------------------------- ------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

1100 Summer Street
Stamford, Connecticut 06905
(203) 323-8668
(Address, including zip code, and telephone number, including area code, of
registrant's executive offices)
----------------
M. S. KOLY
Chief Executive Officer
Delcath Systems, Inc.
1100 Summer Street
Stamford, Connecticut 06905
(203) 323-8668
(Name, address, including zip code, and telephone number, including area code
of agent for service)
----------------
Copies to:

Stephen A. Zelnick, Esq. Robert J. Mittman, Esq.
Morse, Zelnick, Rose & Lander, LLP Blank Rome Tenzer Greenblatt LLP
450 Park Avenue 405 Lexington Avenue
New York, NY 10022 New York, NY 10174
(212) 838-8040 (212) 885-5000
(212) 838-9190 (Facsimile) (212) 885-5001 (Facsimile)
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
----------------
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

================================================================================
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<TABLE>
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CALCULATION OF REGISTRATION FEE
=====================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount To Be Offering Price Per Aggregate Amount of
Securities to be Registered Registered Security(1) Offering Price(1) Registration Fee
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value(2)......... 2,300,000 $ 6.00 $13,800,000 $ 3,643.20
----------------------------------------------------------------------------------------------------------------------
Underwriter's warrants ................. 200,000 $ -0- $ -0- $ -0-(4)
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Shares issuable upon exercise of the
underwriter's warrants(3) ............. 200,000 $ 9.90(5) $ 1,980,000 $ 522.72
----------------------------------------------------------------------------------------------------------------------
Total Registration Fee .......................................................................... $ 4,165.92
======================================================================================================================
</TABLE>

(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act.
(2) Includes 300,000 shares issuable upon exercise of underwriter's
over-allotment option.
(3) Pursuant to Rule 416 under the Securities Act, there are also being
registered hereby such additional indeterminate number of shares as may
become issuable pursuant to the antidilution provisions of the warrants.

(4) No registration fee required pursuant to Rule 457(g) under the Securities
Act.
(5) Based on a warrant exercise price of 165% the proposed offering price of
the common stock.
<PAGE>

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION

DATED JUNE 16, 2000

DELCATH LOGO

2,000,000 Shares of Common Stock

$6.00 per Share

Delcath Systems, Inc. is offering 2,000,000 shares of its common stock.
This is our initial public offering and there currently is no public market for
our common stock. We expect that the initial public offering price will be
$6.00 per share. The offering price may not reflect the market price of our
shares after the offering. We anticipate that our common stock will be listed
on the Nasdaq SmallCap Market under the symbol "DCTH."

-------------------------

Investing in the common stock involves risks. See "Risk Factors" beginning
on page 6.

-------------------------

================================================================================
Public Underwriting Proceeds
Offering Discounts and to
Price Commissions Company
--------------------------------------------------------------------------------
Per Share ................... $ 6.00 $ .60 $ 5.40
--------------------------------------------------------------------------------
Total ....................... $12,000,000 $1,200,000 $10,800,000
================================================================================

-------------------------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.

We have granted the underwriter a 45-day option to purchase up to an
additional 300,000 shares to cover over-allotments. The underwriter is offering
the shares on a firm commitment basis. Whale Securities Co., L.P. expects to
deliver the shares to purchasers against payment on ________, 2000.

-------------------------

Whale Securities Co., L.P.

, 2000
<PAGE>

The Delcath System Procedure Isolating the Liver For Chemotherapy Treatment.

1. An infusion catheter is inserted into
the artery through which blood normally
flows to the liver.

2. A second catheter -- the Delcath
double balloon catheter -- is inserted
through the inferior vena cava. Blood
normally flows from the liver into the
inferior vena cava to the heart which
circulates the blood throughout the
body.

[Diagram of interior cross section 3. The balloons on the double balloon
of a human torso showing the catheter are then inflated. This prevents
liver, heart and major arteries the normal flow of blood from the liver
and veins. The Delcath System is to the heart because the inferior vena
shown with the Delcath catheters cava is blocked. through the infusion
fully inserted in place. Arrows catheter.
with numbers keyed to text at the
right trace the flow of 4. A chemotherapeutic agent is infused
chemotherapy through the liver as into the liver through the infusion
directed by 4. A chemotherapeutic catheter.
agent is infused into the liver
the Delcath system.] 5. The blood in the liver, which is now
infused with a chemotherapeutic agent,
cannot flow to the heart. Blood exits
the liver through perforations on the
double balloon catheter and flows into
this catheter out of the body.

6. Once out of the body, the infused
blood is circulated through activated
charcoal filters to remove most of the
chemotherapeutic agent.

7. The filtered blood is returned to the
patient through the jugular vein which
leads to the superior vena cava and the
heart. The heart restores the cleansed
blood to normal circulation.
5. The blood in the liver, which is now
infused with a chemotherapeutic agent,
cannot flow to the heart. Blood exits
the liver through perforations on the
double balloon catheter and flows into
this catheter out of the body.

6. Once out of the body, the infused
blood is circulated through activated
charcoal filters to remove most of the
chemotherapeutic agent.

7. The filtered blood is returned to the
patient through the jugular vein which
leads to the superior vena cava and the
heart. The heart restores the cleansed
blood to normal circulation.

<PAGE>

PROSPECTUS SUMMARY

This is a summary of the information contained in this prospectus. To
understand this offering fully, you should read the entire prospectus,
especially the risk factors.

Unless the context indicates to the contrary, all per share data and
information relating to our common stock gives effect to a one-for-2.2881
reverse stock split of our common stock which will occur immediately before the
date of this prospectus.

Unless the context indicates to the contrary, the terms "Delcath," "we,"
"us," and "our" refer to Delcath Systems, Inc.

Our Business

Delcath has developed a system to isolate the liver from the general
circulatory system and to administer chemotherapy and other therapeutic agents
directly to the liver. Using the Delcath system, blood flowing into the liver,
after being infused with chemotherapy agents, is redirected out of the
patient's body, passed through filters which remove most of the chemotherapy
agents and then returned to the patient's general circulatory system. Isolating
the liver and cleansing the blood before its return into the patient's
circulatory system protects other parts of the body from the harmful
side-effects of chemotherapy. We believe that the use of the Delcath system in
treatment of liver cancer will allow higher dosages of chemotherapy to be
administered to the liver than can be administered with conventional
intravenous delivery.

The Delcath system is not currently approved for marketing by the United
States Food and Drug Administration, and it cannot be marketed in the United
States without FDA approval. With the proceeds of this offering, we plan to
conduct Phase III clinical trials under protocols which have been approved by
the FDA and which are designed to secure FDA marketing approval for the Delcath
system in the United States. The Phase III trials will seek to demonstrate the
safety and efficacy of the Delcath system in administering the chemotherapy
agent, doxorubicin, to treat cancerous tumors that have originated in the
liver, commonly known as, primary liver cancer, and cancerous tumors from
malignant melanoma that have spread to the liver.

If the trials are successful and the FDA approves the Delcath system for
commercial sale, we will be authorized to market the Delcath system for use
with doxorubicin in the United States to treat primary liver cancer and
melanoma which has spread to the liver. We will also seek regulatory approval
to market the Delcath system for commercial sale in Asian countries, where
there is a particularly high incidence of liver cancer, as well as in Europe
and Latin America.

We believe that the Delcath system may provide cost savings in the
treatment of liver cancer to the extent that it can reduce treatment and
hospitalization costs associated with the side effects of chemotherapy.
Delivered as a disposable kit containing a series of catheters, including our
patented double balloon catheter, and a blood filtration system, the Delcath
system is designed to be minimally invasive and fit well within the techniques
currently employed by interventional radiologists. In addition, we believe that
the technology used in the Delcath system may be used with other chemotherapy
agents to treat other cancers that have spread to the liver and to treat
cancers in other parts of the body.

Our Market Opportunity

Liver cancer is the third most common form of cancer, with a worldwide
incidence of primary liver cancer estimated to be 1,000,000 new patients per
year and an estimated 1,250,000 deaths worldwide caused by all forms of liver
cancer. The American Cancer Society has projected that in the United States
there will be approximately 15,300 new cases of primary liver cancer and 47,700
new cases of malignant melanoma in 2000.

Corporate Information

We were incorporated in Delaware on August 5, 1988 under the name BGH
Medical Products. On May 7, 1990 we changed our name to Delcath Systems, Inc.
Our executive offices are located at 1100 Summer Street, Stamford, Connecticut
06905. Our telephone number at this location is (203) 323-8668.

3
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The Offering

Common stock offered by
Delcath................. 2,000,000 shares

Common stock to be outstanding
after this offering..... 5,418,732 shares

The number of shares of common stock outstanding
after this offering includes 1,907,973 shares to be
issued immediately before the closing of this
offering upon the conversion of all our outstanding
convertible preferred stock, including 851,781
shares issued in payment of accumulated dividends
as of the date of this prospectus, assuming this
offering closes on June 30, 2000;

The number of shares of common stock outstanding
after this offering does not include:

o 559,416 shares reserved for issuance upon the
exercise of options granted under our incentive
and non-incentive stock option plans,
exercisable at a weighted average exercise price
of $3.26 per share;

o 21,852 shares reserved for issuance upon the
exercise of non-plan options exercisable at a
price of $2.29 per share;

o 21,468 shares reserved for issuance upon exercise
of outstanding warrants with exercise prices of
$8.58 and $11.74 per share;

o 300,000 shares reserved for issuance upon
exercise of options available for future grant
under our 2000 stock option plan;

o 200,000 shares reserved for issuance upon
exercise of the underwriter's warrant; and

o 300,000 shares reserved for issuance in this
offering to cover over-allotments, if any, by
the underwriter.

Use of proceeds.......... We intend to use the net proceeds of this offering
for research and development, introducing our
Delcath system into foreign markets and for working
capital and general corporate purposes.

Risk factors............. An investment in the common stock is speculative
and involves a high degree of risk. You should
purchase the shares only if you can afford a
complete loss of your investment. You should
consider carefully the risks listed in the "Risk
Factors" section of this prospectus before making an
investment in our shares.

Proposed Nasdaq SmallCap
Market symbol........... DCTH

4
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Summary Financial Data

The following summary financial data as of December 31, 1999, and for the
years ended December 31, 1998 and 1999, are derived from our audited financial
statements. The summary financial data as of March 31, 2000, and for the three
months ended March 31, 1999 and 2000 are derived from our unaudited financial
statements. This information should be read in conjunction with the financial
statements, including the notes, and "Plan of Operation" appearing elsewhere in
this prospectus.

Statement of Operations Data:

<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
----------------------------- ------------------------------
1998 1999 1999 2000
-------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Total costs and expenses ............... $ 2,124,443 $ 598,126 $ (233,966) $ 215,649
Operating income (loss) ................ (2,124,443) (598,126) 233,966 (215,649)
Net income (loss) ...................... (2,049,980) (572,581) 242,947 (210,124)
Net income (loss) per share(1) ......... (2.01) (.54) .24 (.19)
Weighted average number of shares of
common stock outstanding ............. 1,021,437 1,062,605 1,030,906 1,093,333
</TABLE>

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(1) For the three months ended March 31, 1999, diluted income per share was
$.12, based on a weighted average number of shares of common stock
outstanding of 2,096,096 shares assuming the 1,093,333 potentially
dilutive shares were outstanding.

Balance Sheet Data:

The pro forma information gives effect to:

o the receipt of gross proceeds in April 2000 of $501,825 from the sale of
292,426 shares to existing stockholders and option holders in a rights
offering; and

o the payment in cash of $484,723 in accumulated preferred stock dividends
(assuming this offering closes on June 30, 2000).

The as adjusted information gives effect to:

o the pro forma adjustments and sale of the 2,000,000 shares offered by
this prospectus, the receipt of estimated net proceeds of $10,000,000
and the elimination of deferred offering costs.

<TABLE>
<CAPTION>
As of
December 31, 1999 As of March 31, 2000
------------------- ------------------------------------------
Actual Pro Forma As Adjusted
----------- ----------- --------------
<S> <C> <C> <C> <C>
Cash and cash equivalents ......... $561,078 $218,255 $235,357 $10,235,357
Total assets ...................... 600,821 400,318 417,420 10,364,717
Total liabilities ................. 112,748 122,369 122,369 122,369
Stockholders' equity .............. 488,073 277,949 295,051 10,242,348
</TABLE>

5
<PAGE>

RISK FACTORS

The shares offered by this prospectus are speculative and involve a high
degree of risk. In addition to other information in this prospectus, you should
consider carefully the following risks before making an investment decision.

Risks related to our financial condition

We have a history of losses and we expect to incur increased losses.

From our inception on August 5, 1988 through March 31, 2000, we have
incurred cumulative losses of $11,522,086, substantially all of which were
incurred in connection with our product development efforts. For the years
ended December 31, 1998 and December 31, 1999 we incurred net losses of
$2,049,980 and $572,581. We expect to continue to incur significant and
increasing losses while generating minimal revenues over the next few years.
Our future profitability will depend on our ability to successfully complete
Phase III clinical trials of our Delcath system, obtain FDA pre-marketing
approval for the system and successfully market it in the United States and
internationally.

The proceeds of this offering may not be sufficient to complete our Phase III
clinical trials and obtain FDA approval for the use of doxorubicin with our
Delcath system.

Based upon our assumptions, we expect that the net proceeds of this
offering will enable us to complete our Phase III clinical trials and obtain
FDA approval for the use of doxorubicin with our Delcath system. We cannot
assure you that the proceeds of this offering will be sufficient for these
purposes because of unanticipated delays or expenses, increased regulatory
requirements by the FDA or other factors which we cannot foresee or control. If
we do not obtain any financing that we may require, we will not be able to
complete Phase III clinical trials and obtain FDA approval for the Delcath
system which could result in the cessation of our business and the loss of your
entire investment.

We will require significant additional capital to commercialize the Delcath
system.

The proceeds of this offering will be insufficient to fund the costs of
commercializing the Delcath system. We will require significant additional
capital to fund the costs associated with widescale marketing of the Delcath
system. We have no commitments for any additional financing. If we are unable
to obtain additional financing as needed, we will not be able to sell the
system on a commercial scale and our business will be adversely impacted.

Risks related to FDA and foreign regulatory approval

If Phase III clinical trials prove unsuccessful, we will be unable to obtain
FDA marketing approval and will be unable to sell the Delcath system in the
United States.

We cannot market or sell the Delcath system in the United States without
FDA marketing approval. If Phase III clinical trials are unsuccessful, we will
be unable to provide the FDA with the clinical data required to demonstrate
that the Delcath system is safe and efficacious and to obtain approval to
market the Delcath system in the United States. If we are unable to market the
Delcath system in the United States, it is likely that our business will cease,
resulting in the loss of your entire investment.

The FDA may reject the results of our clinical trials in whole or in part,
which could result in the FDA refusing to grant marketing approval or limiting
the circumstances under which the Delcath system may be used.

Marketing approval requires a determination by the FDA that the data
developed by our clinical trials shows that the use of doxorubicin in our
system is safe and effective in the treatment of primary liver cancer and
melanoma which has spread to the liver. The FDA requires that we demonstrate,
in a statistically rigorous manner, increased patient survival times for
approval of our pre-market application. If regulatory approval is granted,
approval may require limitations on the indicated uses for which the Delcath
system may be

6
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marketed. Failure to obtain FDA approval to market the Delcath system, or
obtaining FDA approval with substantial limitations on its indicated uses,
would have a material adverse effect on our business, financial condition and
results of operations, and could result in the cessation of our business and
the loss of your entire investment.

If we do not obtain FDA marketing approval, we may not be able to sell the
Delcath System in foreign markets.

If we do not obtain FDA marketing approval because our clinical trials are
unsuccessful, we may not be able to obtain regulatory approval to market the
Delcath system in foreign markets. In the absence of FDA approval, even if we
obtain approval from foreign regulatory agencies, we will not be able to export
the Delcath system from the United States unless approval has been obtained
from one of a number of developed industrialized nations. We have not begun to
seek foreign regulatory approval and may not be able to obtain approval from
one of those designated nations. If we are unable to market the Delcath system
internationally, our market opportunity will be materially limited.

We do not expect to receive FDA approval for 24 months from the closing of this
offering.

We expect that once Phase III clinical trials begin, they will take at
least 12 months to complete. We expect to begin the clinical trials during the
fourth quarter of 2000. However, we may experience delays in beginning,
conducting and completing the trials because of delays in designing the trials
to conform to the trial protocols and the requirements of investigational
review boards at the sites where the trials will be conducted. In addition, the
rate at which the clinical trials are completed depends upon a number of
factors, including our ability to identify clinical test sites and sponsoring
physicians and the ability of the clinical test sites to identify patients to
enroll in the trials. Further, the FDA monitors the progress of the clinical
trials and may alter, suspend or terminate the trials based on the data that
has been accumulated to that point and its assessment of the relative risks and
benefits to the patients involved in the trials. Any of these factors could
result in delay in completing our trials.

After acquiring sufficient data, we believe that our collation, analysis
and submission of the trial results to the FDA will take an additional three
months. Once we submit the data from the clinical trials to the FDA, we
estimate that the FDA will respond to our submission within three months.
However, the FDA may take longer than three months to evaluate our submission
and may require that additional trials be conducted.

We have only limited experience in arranging for clinical trials and in
evaluating and submitting the data gathered from clinical trials. Further, we
cannot control when the FDA will respond to our submission. Any significant
delay in completing clinical trials or in the FDA responding to our submission
or a requirement by the FDA for us to conduct additional trials will delay the
commercialization of the Delcath system.

The success and timing of our trials will depend, in part, on the third parties
we hire to conduct, and patients which participate in, the Phase III clinical
trials.

We will rely on third-party contract research organizations, hospitals and
other research institutions to conduct the Phase III clinical trials. We are
also dependent on a sufficient number of patients agreeing to participate in
our trials. Dependence on third parties may result in delays in completing, or
the failure to complete, our clinical trials. There is risk that hospitals and
research institutions will not approve the conduct of trials at their
facilities and that contract research organizations will fail to meet their
contractual obligations or fail to meet regulatory standards in the performance
of their obligations.

The contract research organizations and physicians conducting the clinical
trials are not our employees. As a result, we have limited control over their
activities and can expect that only limited amounts of their time will be
dedicated to the clinical trials. Failure of the research organizations to
perform as expected or failure of a sufficient number of patients to volunteer
for our trials could result in a delay in completing the trials, submitting our
trial results to the FDA, obtaining FDA approval and/or commercializing the
Delcath system.

7
<PAGE>

The process of obtaining FDA approval for using the Delcath system with other
chemotherapy agents and for treatment of other diseases will require
significant additional time and financing.

The FDA approval we are currently seeking is limited to the treatment of
liver cancer patients through administration of doxorubicin with our Delcath
system. If we are granted this approval, we plan to subsequently seek
additional FDA approvals for using the Delcath system with other chemotherapy
agents for treatment of other liver cancers and with anti-viral drugs for
treatment of other diseases, such as hepatitis. In many instances, the process
of applying for and obtaining regulatory approvals involves rigorous
pre-clinical and clinical testing. The time resources and funds required for
completing necessary testing and obtaining approvals is significant, and FDA
approval may never be obtained for some medical devices or drug delivery
systems. If we fail to raise the additional capital required or enter into
strategic partnerships to finance this testing or if we fail to obtain the
required approvals, our potential growth and the expansion of our business
would likely be limited.

Even if our Delcath system is approved by the FDA, we will remain subject to
extensive regulation.

The manufacturing, assembly, labeling, marketing, distribution and
advertising of products and treatment methods like the Delcath system is
subject to extensive regulation by federal, state and local government
regulatory authorities in the United States and other countries. Even if FDA
approval is granted to our Delcath system, we will still be subject to
stringent regulations, including medical device quality system regulation and
good manufacturing practice, which include testing, design, quality control and
documentation procedures. Compliance with applicable regulatory requirements is
subject to continual review and may be monitored through periodic inspections
by the FDA. Similarly, sales of the Delcath system outside of the United States
are also subject to manufacturing standards promulgated by the International
Standards Organization. In addition, if Delcath assumes responsibility for
assembly of its system, those activities will be subject to regulation and
control under the Occupational Safety and Health Act. Discovery of previously
unknown problems with a product, manufacturer or facility, or failure to comply
with regulatory requirements, may result in restrictions on a product or a
manufacturer, including substantial fines, suspensions of marketing approval
and refusal to grant approval to new products, injunctions, seizures, recalls
of products, operating restrictions, civil penalties and criminal charges
against us.

Third-party reimbursement may not be available to purchasers of the Delcath
system, or may be inadequate, which would hamper our sales efforts.

Our ability to commercialize the Delcath system in the United States and
in foreign markets, if regulatory approval of the system is obtained, will
depend, in part, on the extent to which third-party reimbursement for the cost
of the Delcath system will be available to purchasers. Physicians, hospitals
and other health care providers may be reluctant to purchase our products if
they do not receive substantial reimbursement for the cost of the procedures
using our products from third-party payors, including Medicare, Medicaid and
private health insurance plans.

Because the Delcath system currently is characterized by the FDA as an
experimental device, its use is not reimbursable in the United States. We will
not begin to seek to have third-party payors reimburse the use of the Delcath
system until after its use is approved by the FDA. Each third-party payor
independently determines whether and to what extent to reimburse for a medical
procedure or product. We cannot assure you that third-party payors in the
United States or abroad will cover procedures using the Delcath system.
Further, third-party payors may deny reimbursement if they determine that the
Delcath system was not used in accordance with established payor protocols
regarding cost effective treatment methods, or was used for forms of cancer or
with drugs not specifically approved by the FDA.

Risks related to manufacturing, commercialization and market acceptance of the
Delcath system.

Because manufacturers must demonstrate compliance with specifications by the
FDA, if we change any manufacturer, the completion of the clinical trials
and/or the commercialization of the Delcath system would likely be delayed.

Manufacturers of the components of the Delcath system must demonstrate to
the FDA that these components are manufactured in accordance with manufacturing
and performance specifications for the

8
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Delcath system on file with the FDA. In the case of the double balloon
catheter, in particular, this process can be time consuming. Many of the
components of the Delcath system are manufactured by sole-source suppliers. The
completion of the clinical trials and/or the commercialization of the Delcath
system will likely be delayed if it becomes necessary for us to change any
manufacturer.

We may not be able to obtain adequate supplies of components for the Delcath
system.

We do not have any contracts with suppliers for the manufacture of
components for the Delcath system. To date, we have only had components of the
Delcath system manufactured for us in small quantities for use in pre-clinical
studies and clinical trials. We will require greater quantities for the Phase
III clinical trials and significantly greater quantities to commercialize the
product. If we are unable to obtain adequate supplies of components from our
existing suppliers, or need to switch to an alternate supplier, the completion
of our clinical trials and commercialization of the Delcath system could be
delayed.

If we are unable to successfully develop and commercialize the Delcath system,
we will not generate significant revenues.

The Delcath system for the administration of chemotherapy agents to a
liver isolated by the system is the only product we are seeking to
commercialize in the foreseeable future. Accordingly, our future financial
performance will depend upon the successful and timely completion of clinical
trials, commercial introduction and consumer acceptance of the Delcath system.
If we do not successfully commercialize this system we will not generate
significant revenues and our business will cease. We do not expect to begin the
commercial sale of the Delcath system for at least 24 months, if ever.

We may not be successful in commercializing the Delcath system because we lack
sales, marketing and distribution experience and will be dependent upon third
parties to market the Delcath system in foreign markets.

We have not previously sold, marketed or distributed any products and
currently do not have the personnel, resources, experience or other
capabilities to adequately market the Delcath system. We intend to directly
market and sell the Delcath system in the United States through a direct sales
force. As a result, our success will depend upon our ability to attract and
retain skilled sales and marketing personnel. Competition for such personnel is
intense, and we cannot assure you that we will be successful in attracting or
retaining such personnel. Our inability to attract and retain skilled sales and
marketing personnel could materially adversely affect our business, financial
condition and results of operations.

If we enter foreign markets, we intend to do so through marketing
agreements with third parties. Any revenues we receive from the sale of the
Delcath system in foreign markets will depend upon the efforts of these parties
and may be less than we would otherwise receive if we marketed the product
through our own sales force.

We cannot assure you that we will be able to establish in-house marketing,
sales and distribution capabilities or relationships with third parties to
effectively fulfill these functions in foreign markets. Our failure to
establish marketing capabilities or to enter into marketing arrangements with
third parties would have a material adverse effect on our business, financial
condition and results of operations.

There may be low demand for the Delcath system.

The Delcath system may not gain significant market acceptance among
physicians, patients and healthcare payors. Market acceptance of the Delcath
system will depend upon:

o the ability of our clinical trials to demonstrate a significant reduction
in the mortality rate for the kinds of cancers treated at a cost effective
price;

o our ability to educate physicians on the use of the system and its
benefits compared to other treatment alternatives; and

9
<PAGE>

o our ability to convince healthcare payors that use of the Delcath system
results in reduced treatment costs of patients.

This will require substantial efforts and expenditures. We only have limited
experience in these areas and we cannot assure you that we will be successful
in achieving these goals. Moreover, the Delcath system replaces treatment
methods in which many hospitals have made a significant investment. Hospitals
may be unwilling to replace their existing technology in light of their
investment and experience with competing technologies. Many doctors and
hospitals are reluctant to use a new medical technology until its value has
been demonstrated. The lack of acceptance of the Delcath system by the
healthcare market would have a material adverse effect on our business,
financial condition and results of operations.

The Delcath system may be rendered obsolete and noncompetitive by technological
change.

Technological developments are expected to continue at a rapid pace in
both industry and academia which could result in a short product life cycle for
our Delcath system. The healthcare industry is characterized by extensive
research efforts, rapid technological progress and intense competition from
numerous organizations, including biotechnology firms and academic
institutions. There is continuous research in the medical community on
different ways to treat or prevent cancer. Specifically, many large
pharmaceutical companies and research institutions are developing systems and
devices to improve the outcome of chemotherapy treatment for cancer. Some are
developing chemotherapy agents with reduced toxicity, which may make them more
desirable treatment alternatives than doxorubicin. Some pharmaceutical
companies are also developing products to reduce the toxicity and side effects
of chemotherapy treatment. In addition, gene therapy, vaccines, use of radio
frequency waves and other minimally invasive procedures are currently being
developed as alternatives to chemotherapy.

We may not be able to compete in the market for liver cancer treatments because
of the numerous treatment alternatives and the strength of our competitors.

The Delcath system competes with all forms of liver cancer treatments
which are alternatives to resection, or surgical removal, of the tumor,
including intravenous chemotherapy treatment, radiation, targeted chemotherapy
delivery through implanted infusion pumps and radio frequency waves. Many of
our competitors have substantially greater financial, technological, research
and development, marketing and personnel resources. In addition, some of our
competitors have considerable experience in conducting clinical trials and
other regulatory approval procedures. As a result, our competitors may develop
more efficacious or more affordable products or treatment methods, or achieve
earlier product development, patent protection, regulatory approval or product
commercialization than we do.

Other risks relating to business.

We rely heavily on our key personnel.

Our success will depend largely on the continuing efforts of Samuel
Herschkowitz, our Chief Technical Officer, M.S. Koly, our Chief Executive
Officer and other key personnel. Our business may be adversely affected if the
services of our key personnel become unavailable to us. While we have obtained
a key-man life insurance policy on the life of each of Dr. Herschkowitz and Mr.
Koly in the amount of $2,000,000, this amount may not be sufficient to offset
the loss of their services.

We may be unable to successfully manage our business when, if ever, we commence
the commercial sale of the Delcath system.

To date, we have been engaged in research and development activities.
When, if ever, we commence the commercial sale of the Delcath system, our
internal information systems, procedures and controls may not be adequate to
support our operations. Commercial sale of the system will also impose
significant added responsibilities on our senior management, and we cannot
assure you that they will successfully manage such added responsibilities. In
addition, we may need to recruit and integrate into our management structure
additional senior level managers and executives and we may not be successful at
doing so.

10
<PAGE>

Because of our limited resources we may be unable to enforce our intellectual
property rights.

Our success depends significantly on our ability to protect our
proprietary rights to the technologies used in our product, and we may be
unable to do so. If a third party violates our intellectual property rights, we
may be unable to enforce our rights because of our limited resources. Third
parties may copy or obtain and use our proprietary technologies, ideas,
know-how and other proprietary information without authorization, design around
our existing patents or independently develop technologies similar or superior
to our technologies. In addition, the confidentiality and non-competition
agreements between us and our key employees, distributors, consultants, labs,
institutions, researchers conducting trials and manufacturers may not provide
meaningful protection of our proprietary technologies or other intellectual
property if unauthorized use or disclosure occurs.

We may be found to infringe on patents issued to others or need to acquire
licenses under patents belonging to others.

Our commercial success will depend, in part, on our ability to avoid
infringing patents issued to others. If we are determined to be infringing on
any third party patents, we could be required to pay substantial damages, alter
our products or processes, obtain licenses under patents belonging to others or
curtail our activities. We may not be able to obtain required licenses or alter
our products or processes on acceptable terms or at all. The medical device
industry is characterized by a substantial amount of litigation over patent and
other intellectual property rights. Determining whether a product infringes a
patent involves complex legal and factual issues, and the outcome of patent
litigation actions is often uncertain.

We are uninsured against product liability claims and may be unable to obtain
insurance coverage.

Clinical trials, manufacturing, marketing and product sales may expose us
to liability claims from the use of the Delcath system. Though participants in
clinical trials are generally required to execute consents and waivers of
liability they may still be able to assert product liability claims against us.
Claims for damages, whether or not successful, could cause delays in the
clinical trials and result in the loss of physician endorsement. We do not
currently carry product liability insurance and we may not be able to acquire
product liability insurance at sufficient coverage levels or at an acceptable
cost. If we are unable to obtain sufficient insurance coverage at an acceptable
cost, we may not be able to commercialize the Delcath system. A successful
product liability claim or recall would have a material adverse effect on our
business, financial condition and results of operations.

Risks related to this offering, our share price and corporate control

The offering price of our common stock was arbitrarily determined and,
therefore, may not be indicative of their value.

The initial public offering price of our common stock has been arbitrarily
determined by negotiation between us and the underwriter and is not necessarily
related to our assets, book value or potential earnings or any other recognized
criteria of value. Additionally, the initial public offering price of our
common stock may not be indicative of the prices that may prevail in the public
market.

Your investment will be subject to immediate and substantial dilution.

Following this offering the net tangible book value of a share of common
stock will be $1.89 and you will have paid $6.00 per share. As a result, you
will experience immediate and substantial dilution of $4.11 per share, or
68.5%, between the net tangible book value per share of common stock after this
offering and the initial public offering price per share. This dilution is due
to the fact that our earlier investors paid less than the initial public
offering price when they purchased their shares of common stock and because we
have incurred losses since our inception.

A public market for our shares of common stock may not develop or be sustained.

Before this offering, there has been no public trading market for our
shares of common stock. We cannot assure you that a regular trading market for
our common stock will develop after this offering or that, if

11
<PAGE>

developed, it will be sustained. We will apply to list our shares on the Nasdaq
SmallCap Market. Although we believe we meet the initial listing criteria, we
cannot assure you that in the future we will be able to meet the criteria for
continued listing. If, in the future, our shares of common stock are not listed
on Nasdaq and the trading price of our shares of common stock was to fall below
$5.00 per share, trading in our common stock would become subject to the
Securities and Exchange Commission's penny stock rules, which could severely
limit the market liquidity of our shares of common stock and the ability of
purchasers in this offering to sell their shares of common stock in the
secondary market.

The number of shares eligible for future sale and the existence of registration
rights could depress the market for shares of our common stock.

Sales of a substantial number of our shares of common stock in the public
market, or the perception that these sales may occur, could adversely affect
the market price of our common stock. This could also impair our ability to
raise additional capital through the sale of our equity securities. After this
offering, we will have approximately 5,418,732 shares of common stock
outstanding or approximately 5,718,732 shares if the underwriter exercises its
over-allotment option in full. The shares sold in this offering will be freely
tradable. All of the remaining shares are restricted securities as that term is
defined under Rule 144. However, approximately 2,010,574 of these will be
immediately eligible for sale and 138,952 shares will become eligible for sale
in the public market 90 days after the date of this prospectus, subject to the
contractual limitations described in "Shares Eligible for Future Sale."

We have granted registration rights to the underwriter for the shares of
common stock issuable upon exercise of the underwriter's warrants. These
registration rights are discussed in the "Description of Securities" and
"Shares Eligible for Future Sale" sections of this prospectus. We cannot
predict the effect, if any, that sales of these additional securities or the
availability of these additional securities for sale will have on the market
prices prevailing from time to time.

After this offering we will continue to be controlled by existing stockholders.

Upon completion of this offering, the officers, directors and principal
stockholders listed under "Principal Stockholders" will beneficially own
approximately 39.2% of our outstanding common stock, and 37.3% if the
underwriter's over-allotment option is exercised in full. Consequently, such
persons, as a group, will be able to control the outcome of all matters
submitted for stockholder action, including the election of members to our
board of directors and the approval of significant change-in-control
transactions. Therefore, they will effectively control our management and
affairs. This may have the effect of delaying or preventing a change in
control.

Our charter documents contain provisions which may discourage takeover
attempts.

Our restated certificate of incorporation divides the board of directors
into three classes. Approximately one third of the members of the board of
directors are elected at each annual meeting of stockholders. This may have the
effect of delaying, deferring, or discouraging changes in control of Delcath.
In addition, our board of directors has the authority, after the offering, to
issue up to 10,000,000 shares of preferred stock and to determine the price,
rights, preferences, privileges and restrictions, including voting and
conversion rights of those shares, without any further vote or action by our
common stockholders, except as may be required by law or applicable rules of
Nasdaq. The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire a majority of our outstanding voting
stock.

12
<PAGE>

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance, objectives,
expectations and intentions. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "plans,"
anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of these terms or other comparable terminology. These statements
involve known and unknown risks, unknown certainties and other factors,
including the risks outlined under "Risk Factors," that may cause our or our
industry's actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements. You should not place undue reliance on forward-looking statements
in this prospectus which speak only as of the date they are made.

13
<PAGE>

USE OF PROCEEDS

The net proceeds to Delcath from the sale of shares being offered by this
prospectus, after deducting the underwriting discount and estimated expenses of
this offering, are estimated to be $10,000,000.

We expect to use these net proceeds approximately as follows:

<TABLE>
<CAPTION>
Approximate
Approximate Percentage
Application of Net Proceeds Dollar Amount of Net Proceeds
--------------------------- --------------- ----------------
<S> <C> <C>
Research and development:
Phase III clinical trials using the Delcath system with doxorubicin ..... $ 6,500,000 65.0%
Research and development stage clinical trials for other chemotherapy
Agents ................................................................ 600,000 6.0
Reduce the cost of the Delcath filtration system ........................ 400,000 4.0
Introduce the Delcath system into foreign markets ........................ 500,000 5.0
Working capital and general corporate purposes ........................... 2,000,000 20.0
------------ -----
Total ................................................................ $ 10,000,000 100.0%
============ =====
</TABLE>

Phase III clinical trials using the Delcath system with doxorubicin. These
costs represent:

o The costs of (i) recruiting medical centers to conduct the trials and
patients to participate in the trials and (ii) treating patients,
including the costs of the Delcath system and payments for unreimbursed
medical expenses for patients receiving treatment with the system. We
estimate that the average costs to treat a patient will be under $20,000,
and we expect to treat up to 274 patients.

o Approximately $950,000 for the fees and expenses of the clinical research
organization which we anticipate hiring to conduct the trials, collect and
process the data and prepare and file a pre-market approval application
and approximately $550,000 for associated overhead, including the costs of
additional personnel and consultants.

Research and development stage clinical trials for other chemotherapy
agents. This amount represents the costs of conducting research and development
stage clinical trials for the use of other chemotherapy agents with the Delcath
system for the treatment of liver cancer. These costs represent the costs of
non-animal testing, animal testing, testing with humans, monitoring the testing
and collecting and processing data. Additional financing will be required to
conduct Phase II and III clinical trials.

Reduce the cost of the Delcath filtration system. This amount represents
the costs to design, develop and test a filter which will cost less than the
third-party filter currently used in the Delcath system and include the
salaries of an engineer and technician.

Introduce the Delcath system into foreign markets. These costs represent
the salaries of five employees to be hired, travel and promotional material to
establish alliances with leading hospitals in countries being targeted and
enlist their support in obtaining regulatory approval in their territories and
to establish strategic partnerships with domestic and/or foreign marketing
firms.

Working capital and general corporate purposes. These costs include
general and administrative costs, including the salaries of our executive
officers. Pending the above uses, the net proceeds of this offering will be
invested in short-term, interest-bearing, investment-grade securities.

Over-allotment option. If the underwriter exercises the over-allotment
option in full, we will realize additional net proceeds of $1,566,000, which
will be added to working capital purposes.

14
<PAGE>

The above allocation represents our best estimate of the allocation of the
net proceeds of this offering based upon the current status of our business. We
based this estimate on assumptions, including that the Delcath system will have
obtained FDA marketing approval within 24 months from the closing of this
offering. If any of these factors change, we may find it necessary to
reallocate a portion of the proceeds within the above described categories or
use portions of the proceeds for other purposes. Our estimates may prove to be
inaccurate, new programs or activities may be undertaken which will require
considerable additional expenditures or unforeseen expenses may occur.

Based upon our current plans and assumptions relating to our business
plan, we anticipate that the net proceeds of this offering will satisfy our
capital requirements for at least 12 months following the closing of this
offering. If our plans change or our assumptions prove to be inaccurate, we may
need to seek additional financing sooner than currently anticipated or curtail
our operations. We cannot assure you that the proceeds of this offering will be
sufficient to fund our clinical trials with respect to the use of the Delcath
system with doxorubicin to treat liver cancer. We also cannot assure you that
additional financing will become available if needed.

We will invest proceeds not immediately required for the purposes
described above principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term
interest-bearing investments.

15
<PAGE>

DILUTION

The difference between the initial public offering price per share and the
net tangible book value per share of common stock after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share is determined by dividing total tangible assets less total
liabilities by the number of outstanding shares of common stock.

At March 31, 2000, we had a net tangible book value of $225,246 or $.21
per share. At March 31, 2000, our net tangible book value would have been
$242,348 or $.07 per share after giving pro forma effect to:

o the conversion of all outstanding shares of our convertible preferred
stock into 1,056,192 shares of common stock;

o the payment of $1,454,170 of estimated accumulated dividends assuming
this offering closes on June 30, 2000 through the issuance of 851,781
shares of common stock and the payment of $484,723 of estimated
accumulated dividends in cash;

o the issuance in April 2000 of 292,426 shares to existing stockholders
for $501,825; and

o the issuance of 125,000 shares to Morse, Zelnick, Rose and Lander LLP for
legal services, at the date of this prospectus.

After also giving effect to the sale of the 2,000,000 shares being offered
at an initial public offering price of $6.00 per share and after deducting
estimated underwriting discounts and expenses of this offering, our adjusted
net tangible book value at March 31, 2000 would have been $10,242,348 or $1.89
per share, representing an immediate increase in net tangible book value of
$1.82 per share to the existing stockholders and an immediate dilution of $4.11
or 68.5% per share to new investors.

The following table illustrates the above information with respect to
dilution to new investors on a per share basis:

<S> <C> <C>
Initial public offering price ................................................ $ 6.00
Pro forma net tangible book value at March 31, 2000 ......................... $ .07
Increase in pro forma net tangible book value attributable to new investors.. 1.82
------
Adjusted pro forma net tangible book value after offering .................... 1.89
-------
Dilution to new investors .................................................... $ 4.11
=======
</TABLE>

The following table sets forth, on a pro forma basis as of March 31, 2000,
with respect to our existing stockholders and new investors, a comparison of
the number of shares of common stock we issued, the percentage ownership of
those shares, the total consideration paid, the percentage of total
consideration paid and the average price per share.

Shares Purchased Total Consideration Average
----------------------- -------------------------- Price Per
Number Percent Amount Percent Share
----------- --------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders ......... 3,418,732 63.1% $10,566,686 46.8% $ 3.09
New investors ................. 2,000,000 36.9 12,000,000 53.2 6.00
--------- ----- ----------- -----
Total ...................... 5,418,732 100.0% $22,566,686 100.0%
========= ===== =========== =====
</TABLE>

The above table assumes no exercise of the underwriter's over-allotment
option. If the underwriter exercises the over-allotment option in full, we
estimate that the new investors will have paid $13,800,000 for the 2,300,000
shares of common stock being offered, representing approximately 56.6% of the
total consideration for 40.2% of the total number of shares of common stock
outstanding. In addition, the above table does not give effect to the shares
issuable upon exercise of outstanding options and warrants. To the extent that
any of these options or warrants are exercised, there will be further dilution
to the new investors.

16
<PAGE>

DIVIDEND POLICY

We have never declared or paid any dividends to the holders of our common
stock and we do not expect to pay cash dividends in the foreseeable future. We
currently intend to retain all earnings for use in connection with the
expansion of our business and for general corporate purposes. Our board of
directors will have the sole discretion in determining whether to declare and
pay dividends in the future. The declaration of dividends will depend on our
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by our board of directors. Our ability to pay
cash dividends in the future could be limited or prohibited by regulatory
requirements and the terms of financing agreements that we may enter into or by
the terms of any preferred stock that we may authorize and issue.

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000:

o on an actual basis;

o on a pro forma basis to reflect:

o the issuance of 1,056,192 shares upon conversion of all of our
preferred stock;

o the issuance of 851,781 shares as payment of $969,447 of estimated
accumulated dividends on our preferred stock as of the date of this
prospectus, assuming the offering closes on June 30, 2000;

o the payment of $484,723 for the remaining accumulated dividends on our
preferred stock as of the date of this prospectus, assuming the offering
closes on June 30, 2000;

o the issuance of 292,426 shares to existing stockholders in April 2000
for proceeds of $501,825; and

o the issuance of 125,000 shares to Morse, Zelnick, Rose and Lander LLP
for legal services, at the date of this prospectus; and

o on an as adjusted basis to give effect to the pro forma adjustments and
to the sale of shares, at an assumed initial public offering price of
$6.00 per share, after deducting the underwriting discounts and estimated
offering expenses payable by us.

The following table excludes from the common stock outstanding 602,736
shares of common stock reserved for issuance upon exercise of outstanding
options and warrants.

<TABLE>
<CAPTION>
March 31, 2000
----------------------------------------------------
Actual Pro Forma As Adjusted
---------------- ---------------- ----------------
<S> <C> <C> <C>
Long-term debt ................................................ $ 0 $ 0 $ 0
------------- ------------- -------------
Stockholders' equity:
Class A convertible preferred stock, par value $.01; 5,000,000
shares authorized, 2,000,000 issued and outstanding
(actual); no shares issued or outstanding (pro forma and as
adjusted) .................................................. 20,000 -- --
Class B convertible preferred stock, par value $.01; 5,000,000
shares authorized, 416,675 shares issued and outstanding
(actual); no shares issued or outstanding (pro forma and as
adjusted) .................................................. 4,167 -- --
Common stock, par value $.01; 15,000,000 shares authorized,
1,093,333 shares issued and outstanding (actual); 3,418,732
and 5,418,732 shares issued and outstanding (pro forma and
as adjusted) ............................................... 10,933 34,187 54,187
Additional paid-in capital ................................... 11,764,935 13,237,120 23,164,417
Accumulated deficit .......................................... (11,522,086) (12,976,256) (12,976,256)
------------- ------------- -------------
Total stockholders' equity ................................. $ 277,949 $ 295,051 $ 10,242,348
------------- ------------- -------------
Total capitalization ...................................... $ 277,949 $ 295,051 $ 10,242,348
============= ============= =============

</TABLE>

17
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction
with Management's "Plan of Operation" included elsewhere in this prospectus.
The operating data for each of the years in the two-year period ended December
31, 1999 and for the period from inception through December 31, 1999, and the
balance sheet data at December 31, 1999, are derived from our financial
statements which have been audited by KPMG LLP, independent accountants, and
are included in this prospectus. The operating data for the three month periods
ended March 31, 1999 and 2000 and for the period from inception through March
31, 2000 and the balance sheet data as at March 31, 2000 are derived from our
unaudited financial statements. The unaudited financial statements have been
prepared on substantially the same basis as the audited financial statements
and, in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
results of operations for these periods. Historical results are not necessarily
indicative of the results to be expected in the future, and the results of
interim periods are not necessarily indicative of results for the entire year.

Operating Data:

<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1998 1999
----------------- -------------
<S> <C> <C>
Costs and expenses:
Legal, consulting and
accounting ....................... $ 574,299 $ 626,366
Stock option compensation
expense (reversal) ............... 759,229 (456,185)
Compensation and related
expenses ......................... 466,644 200,128
Other operating expenses ........... 324,271 227,817
----------- ----------
Total costs and expenses ......... 2,124,443 598,126
----------- ----------
Operating income (loss) .......... (2,124,443) (598,126)
----------- ----------
Interest income ..................... 43,470
Interest expense .................... 74,463 (17,925)
=========== ==========
Net income (loss) ................ $(2,049,980) $ (572,581)
=========== ==========
Net income (loss) per share(1) ...... $ (2.01) $ (.54)
=========== ==========
Weighted average number of
shares of common stock out-
standing ........................... 1,021,437 1,062,605
=========== ==========
</TABLE>

<PAGE>

[RESTUBBED TABLE]
<TABLE>
<CAPTION>

Cumulative from Cumulative from
Inception Three Months Ended March 31, Inception
(August 5, 1988) to ---------------------------- (August 5, 1988) to
December 31, 1999 1999 2000 March 31, 2000
--------------------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
Costs and expenses:
Legal, consulting and
accounting ....................... $ 4,517,169 $ 120,894 $ 98,273 $ 4,615,442
Stock option compensation
expense (reversal) ............... 2,520,170 (456,185) -- 2,520,170
Compensation and related
expenses ......................... 2,488,170 63,537 52,921 2,541,091
Other operating expenses ........... 2,191,276 37,788 64,455 2,255,731
------------ ----------- ---------- ------------
Total costs and expenses ......... 11,716,785 (233,966) 215,649 11,932,434
------------ ----------- ---------- ------------
Operating income (loss) .......... (11,716,785) 233,966 (215,649) (11,932,434)
------------ ----------- ---------- ------------
Interest income ..................... 537,696 8,981 5,525 543,221
Interest expense .................... (132,873) -- -- (132,873)
============ =========== ========== ============
Net income (loss) ................ $(11,311,962) $ 242,947 $ (210,124) $(11,522,086)
============ =========== ========== ============
Net income (loss) per share(1) ...... $ .24 $ $(.19)
=========== ==========
Weighted average number of
shares of common stock out-
standing ........................... 1,030,906 1,093,333
=========== ==========
</TABLE>

------------
(1) For the three months ended March 31, 1999, diluted income per share was
$.12, based on a weighted average number of shares of common stock
outstanding of 2,096,096 shares assuming the 1,093,333 potentially
dilutive shares were outstanding.

Balance Sheet Data:

As of As of
December 31, 1999 March 31, 2000
------------------- ----------------
Cash and cash equivalents ......... $561,078 $218,255
Total assets ...................... 600,821 400,318
Total liabilities ................. 112,748 122,369
Stockholders' equity .............. 488,073 277,949

18
<PAGE>

PLAN OF OPERATION
Background

We were founded in 1988 by a team of physicians. Since our inception, we
have been a development stage company engaged primarily in developing and
testing the Delcath system for the treatment of liver cancer. A substantial
portion of our historical expenses have been in support of the development and
the clinical trials of our product. To date, we have been dependent upon
venture capital financing to fund our activities. Without an FDA approved
product, we have generated minimal revenues from product sales. We have been
unprofitable to date and have had losses of $2,049,980 and $572,581 for the
years ended December 31, 1998 and 1999 and $210,124 for the three months ended
March 31, 2000. Cumulative losses from inception through March 31, 2000 were
$11,522,086. We expect to incur additional losses over the next three years and
anticipate these losses will increase significantly in this period due to
continued requirements for product development, clinical studies, regulatory
activities, manufacturing and establishment of a sales and marketing
organization. The amount of future net losses and time required to reach
profitability are uncertain. Our ability to generate significant revenue and
become profitable will depend on our success in commercializing our device.

We incurred non-cash compensation expense in connection with the grants of
options to purchase common stock to founders, employees, and directors because
those options had a weighted average exercise price below the fair value of the
common stock at the dates of the grants. This compensation expense from
inception (August 5, 1988) through December 31, 1999 totaled $2,520,170.

Liquidity and Capital Resources

We have financed our operations to date primarily through private
placements of our common and preferred stock. Through March 31, 2000, we raised
$9,314,861 through the sale of our class A preferred stock, class B preferred
stock and common stock. Cash used to fund operations from inception through
March 31, 2000 was $8,922,256. Our cash and cash equivalents totaled $218,255
at March 31, 2000, a decrease of $342,823 from December 31, 1999.

Since January 1, 1998, our principal source of cash has been the following
financing transactions:

o In January 1998, we sold 43,704 shares of common stock at a price of $11.44
per share to Johnson & Johnson Development Corporation, and received
proceeds of $500,000.

o In April 1998, we issued 10,926 shares of common stock upon exercise of
options at a price of $6.18 per share for proceeds of $67,500.

o In September 1998, we sold 4,370 shares of common stock to an individual at a
price of $13.04 per share and received proceeds of $57,000.

o In April 1999, we issued 2,913 shares of common stock upon exercise of
warrants at a price of $8.58 per share, and received proceeds of $24,998.

o In July 1999, we sold 59,514 shares of common stock at a price of $13.04 per
share and received proceeds of $776,192.

o In April 2000, we sold 292,426 shares of common stock at a price of $1.72 per
share, as part of a rights offering to our existing stockholders and option
holders, and received proceeds of $501,825.

We expect to continue to incur expenses related to the research and
development of our technology, including pre-clinical and clinical trials, and
the development of additional products. We expect to incur significant
additional operating losses over each of the next several years and expect
cumulative losses to increase significantly as we continue to expand our
research and development, clinical trials and marketing efforts. During the
next 12 months, we expect to purchase approximately $150,000 in computer,
laboratory and testing equipment, primarily for testing of a lower cost filter.
We also expect to hire additional employees in the areas of research and
development, regulatory and clinical management, marketing and administrative
functions at an estimated annual expense of $600,000. The number and timing of
such hiring will vary depending upon the success of the international marketing
efforts and progress of the clinical trials.

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Immediately prior to the closing of this offering, all of our preferred
stock will convert into shares of common stock. As part of this conversion, the
preferred stockholders will receive an estimated 851,781 shares of common stock
and $484,723 in cash in payment of accumulated dividends, assuming the offering
closes on June 30, 2000.

We believe that existing cash and cash equivalents, together with net
proceeds of approximately $10,000,000 from this offering, will be sufficient to
finance our operations for at least twelve months from the date of this
prospectus. Our future liquidity and capital requirements, however, will depend
on numerous factors, including (a) the progress of our research and product
development programs, including clinical studies, (b) the timing and costs of
various United States and foreign regulatory filings, (c) the timing and
effectiveness of product commercialization activities, including marketing
arrangements overseas, (d) the timing and costs involved in obtaining
regulatory approvals, if ever, and complying with regulatory requirements, (e)
the timing and costs involved in preparing, filing, prosecuting, defending and
enforcing intellectual property rights and (f) the effect of competing
technological and market developments. If the proceeds of this offering,
together with our currently available funds, are not sufficient to satisfy our
spending plans, we will be required to revise our capital requirements or to
seek additional funding through borrowings and/or additional sales of
securities. We cannot assure you that the proceeds of this offering will be
sufficient to fund our clinical trials with respect to the use of the Delcath
system with doxorubicin to treat liver cancer. We also cannot assure you that
additional financing will become available if needed.

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BUSINESS

Overview

Strategy

Our objective is to establish the use of the Delcath system as the
standard technique for delivering chemotherapy agents to the liver and to
expand the Delcath technology so that it may be used in the treatment of other
liver diseases and of cancers in other parts of the body. Our strategy includes
the following:

o Complete clinical trials to obtain FDA approval for use of the Delcath
system with doxorubicin to treat primary liver cancer and malignant
melanoma that has spread to the liver. Our highest priority is completing
the Phase III clinical trials, data preparation, statistical analysis and
regulatory documents associated with an application for pre-market
approval of commercial sale of the Delcath system in the United States.
FDA approval of our application will permit us to market the Delcath
system to administer doxorubicin in the treatment of primary liver cancer
and melanoma that has spread to the liver.

o Obtain approval to market the Delcath system in the United States for the
treatment of other forms of liver cancer and hepatitis using other
chemotherapy agents and treatment of hepatitis using anti-viral drugs. In
addition to researching the use of other chemotherapeutic agents with the
Delcath system to treat cancer, we plan to research the use of other
compounds with the Delcath system to treat other diseases, such as
hepatitis. Our timing to begin these studies will depend on our ability to
establish strategic alliances with pharmaceutical manufacturers or other
strategic partners in conjunction with our research into other therapeutic
compounds or raise additional funds for these purposes. FDA approval will
be required to market the Delcath system for these uses.

o Introducing the Delcath system into foreign markets. We will seek to
establish strategic relationships with domestic and foreign firms that
have recognized presence or experience in foreign markets that we intend
to target. Our strategy is to focus on markets that have a high incidence
of liver cancer and the means to provide and pay for cancer treatments.
According to the World Health Organization, many Asian and European
countries, including China, Japan, Hong Kong, the Philippines, France,
Germany, Italy and Spain have a higher incidence of liver cancer than the
United States. We intend to seek to enter into arrangements with strategic
partners who have experience with obtaining regulatory approval or
marketing medical devices in those markets.

o Reduce the cost of the Delcath system's filtration system. The filters we
currently use to detoxify blood outside the body comprise a significant
portion of the cost of the Delcath system kit. We are researching
technologies which may enable filters to be produced at a lower cost.

o Leverage our core double balloon catheter technology to expand our
product offerings to include systems for administering chemotherapy agents
in other parts of the body. Early studies have indicated that the same
principles employed in liver isolation may be applied to other organs. By

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modifying the catheter, including the spacing, size and number of the
balloons, the Delcath system initially may be adapted for use in treatment
of cancers in other areas of the body, including the limbs, kidneys,
lungs, and other organs of the abdominal cavity. Future studies may
investigate the use of the Delcath system in other organs as well.

We have not yet begun to conduct this research and do not intend to do so
until we obtain additional financing or enter strategic relationships.

The Cancer Treatment Market

The American Cancer Society projects that about 1,200,000 Americans will
be diagnosed with cancer in 2000. According to the American Cancer Society's
"Cancer Facts and Figures -- 2000", cancer remains the second leading cause of
death in the United States. While researchers continue to develop innovative
new treatments for some forms of this disease, surgical resection,
chemotherapy, radiation and hormone therapy continue to be the most commonly
used treatments.

The financial burden of cancer is great for patients, their families and
society. The National Cancer Institute, in the American Cancer Society's "Facts
and Figures," estimates the overall costs of cancer to be $107 billion,
including $37 billion in direct medical costs, $11 billion for indirect
morbidity costs (cost of lost productivity due to illness) and $59 billion for
indirect mortality costs (cost of lost productivity due to death).

The Liver Cancer Market

Liver cancer is one of the most prevalent and lethal forms of cancer
throughout the world. There are two forms of liver cancer: primary and
metastatic. Primary liver cancer originates in the liver. Secondary, or
metastatic, liver cancer results from the spread of cancer from other places in
the body to the liver. In the liver, primary tumors can be removed only when
they are located in one of the liver's two lobes, which occurs in less than 20%
of the cases of primary liver cancer. A significant number of patients treated
for primary and metastatic liver cancer will experience a recurrence of their
disease.

Metastatic liver cancer is characterized by microscopic pieces of other
forms of cancer that detach from the primary site and travel via the blood
stream and lymphatic system into the liver, where they grow into new tumors.
This growth often continues even after removal of the primary cancer or
cancerous organ. When cancer cells enter the liver and develop into tumors,
they tend to grow very quickly. In many cases, the patient dies not from the
primary cancer, but from the tumors in the liver; the liver becomes the "life
limiting organ." People cannot survive without a liver capable of performing
its critical biologic functions: facilitating the conversion of food into
energy and filtering toxic agents from the blood. The liver is one of the three
most common sites to which cancer may spread. Due to numerous factors,
including the absence of viable treatment options, metastatic liver cancer
often causes death.

According to a recent report, liver cancer is the third most common form
of cancer worldwide. The worldwide incidence of primary liver cancer is
estimated to be 1,000,000 new patients each year and there are an estimated
1,250,000 deaths worldwide caused by all forms of liver cancer. The American
Cancer Society estimates that the incidence of primary liver cancer in the
United States in 2000 is approximately 15,300 new cases and that primary liver
cancer causes 13,000 deaths each year. According to a 1999 article in the New
England Journal of Medicine, researchers reported that annual new diagnoses of
liver cancer increased from 1.4 cases per 100,000 persons in the late 1970s to
2.4 cases per 100,000 persons in the 1990s.

Liver cancer is among the most virulent forms of cancer. Approximately 94%
of patients diagnosed with primary liver cancer will die within five years and
approximately 75% will die within one year from diagnosis.

Primary liver cancer is particularly prevalent in Southern Europe, Asia
and developing countries, where the primary risk factors for the disease are
present. These risk factors include: hepatitis-B, hepatitis-C, relatively high
levels of alcohol consumption, aflatoxin, cigarette smoking and exposure to
industrial pollutants.

Our current product is designed to treat primary liver cancer and melanoma
which has spread to the liver.

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Liver Cancer Treatments

The prognosis for primary and secondary liver cancers is poor. Although
limited treatment options are currently available for liver cancer, they are
typically ineffective, are generally associated with significant side effects
and can even cause death. Traditional treatment options include surgery,
chemotherapy, cryosurgery, percutaneous ethanol injection and radiation.

Surgery

While surgery is considered the "gold standard" treatment option to
address liver tumors, more than 80% of liver cancer patients are unresectable,
which means they do not qualify for surgical removal. This is most often due to
the following:

o Operative risk: limited liver function or poor patient heath threatens
survival as a result of the surgery; or

o Technical feasibility: the proximity of a cancerous tumor to a critical
organ or artery, or the size, location on the liver or number of tumors
makes surgery not feasible.

For the few patients who qualify for surgery, there are significant
complications related to the procedure and the operative mortality rate is 2%.
Recurrence of tumors is common and in that event, surgery typically cannot be
repeated.

We believe that delivery of drugs with the Delcath system may enable
surgical resection in some of the cases which are currently inoperable by
reducing the size and number of tumors sufficiently to make resection feasible.
Shrinking a tumor using chemotherapy and then removing the tumor is a procedure
known as adjuvant therapy. After resection, chemotherapy can be administered
through the Delcath system with the objective of destroying micrometastases in
the liver that may remain undetected, thus preventing or delaying any
recurrence of tumor growth.

Chemotherapy

The most prevalent form of liver cancer treatment is intravenous
chemotherapy. The effectiveness of this treatment, however, is limited by its
side effects. Generally, the higher the dosage of chemotherapy administered,
the greater its ability to kill cancer cells. However, due to the toxic nature
of chemotherapy agents, the higher the dosage administered, the greater damage
chemotherapy agents cause to healthy tissues. As a result, the dosage of
chemotherapy required to kill cancer cells can be lethal to patients.

The side effects caused by doxorubicin, the drug we are seeking to have
approved for use in the Delcath system, is representative of the side effects
associated with many chemotherapy agents. Doxorubicin causes irreversible heart
tissue damage. Depending on dosage levels, the damage caused by doxorubicin can
be serious and lead to congestive heart failure. Doxorubicin can also cause
severe mucositis leading to ulceration of the mouth and digestive organs,
damage to a patient's immune system through destruction of bone marrow cells,
as well as acute nausea, severe vomiting, dermatological problems and hair
loss. The use of doxorubicin can be fatal even when it is administered with
careful patient monitoring.

The limited effectiveness of intravenous chemotherapy treatment and its
debilitating, often life-threatening side effects makes the decision to undergo
chemotherapy treatment difficult. In some instances, in an attempt to shrink
tumors, a physician may prescribe a radically high-dose of chemotherapy,
despite its side effects. In other cases, recognizing the inevitable result of
liver cancer, the physician and patient choose only to manage the patient's
discomfort from cancer with pain killers while foregoing treatment.

To address this trade-off between the efficacy of intravenous chemotherapy
treatment and its dire side effects, physicians have experimented with
techniques to isolate the liver from the general circulatory system and to
achieve a targeted delivery of chemotherapy agents to the liver. In the 1980s,
a physician developed a procedure in which he surgically diverted the blood
flow from the liver while infusing high dosages of chemotherapy agents into the
liver. A filtration circuit reduced drug concentrations before returning the
diverted blood to the patient. The treatment, however, was not embraced by the
medical community because it

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is highly invasive, resulting in prolonged recovery times, long hospital stays
and excessive costs. Other physicians have experimented with the delivery of
chemotherapy agents to the liver by catheter, attempting to use one or more
catheters to remove chemotherapy agents before they enter the general
circulatory system. We are unaware of any system, however, which contains the
patented attributes of the Delcath design.

Cryosurgery

Cryosurgery is the destruction of cancer cells using sub-zero temperatures
in an open surgical procedure. During cryosurgery, multiple stainless steel
probes are placed into the center of the tumor and liquid nitrogen is
circulated through the end of the device, creating an iceball. Cryosurgery
involves a cycle of treatments in which the tumor is frozen, allowed to thaw
and then refrozen.

While cryosurgery is considered to be relatively effective, we believe
adoption of this procedure has been limited because:

o It is not an option for patients who cannot tolerate an open surgical
procedure;

o It involves significant complications which are similar to other open
surgical procedures, as well as liver fracture and hemorrhaging caused by
the cycle of freezing and thawing;

o It is associated with mortality rates estimated to be between one and
five percent; and

o It is expensive compared to other alternatives.

Percutaneous Ethanol Injection

Percutaneous ethanol injection, or PEI, involves the injection of alcohol
into the center of the tumor. The alcohol causes cells to dry out and cellular
proteins to disintegrate, ultimately leading to tumor cell death.

While PEI can be successful in treating some patients with primary liver
cancer, it is generally considered ineffective on large tumors as well as
metastatic tumors. Patients are required to receive multiple treatments, making
this option unattractive for many patients. Complications include pain and
alcohol introduction to bile ducts and major blood vessels. In addition, this
procedure can cause cancer cells to be deposited along the needle tract when
the needle is withdrawn.

Radiation Therapy

Radiation therapy uses high dose x-rays to kill cancer cells. Radiation
therapy is not considered an effective means of treating liver cancer and is
rarely used for this purpose. Radiation is often used as an adjunct to other
cancer treatments.

Implanted Infusion Pumps

Implanted Infusion Pumps can be used to better target the delivery of
chemotherapy agents to the tumor. Pfizer's "Infusaid" is an implantable pump
typically used to treat colorectal cancer which has metastasized to the liver.
Infusaid, however, lacks a means of preventing the entry of chemotherapy agents
into the patient's general circulation after it passes through the liver. This
technique does not enable physicians to prescribe higher doses of chemotherapy.

Other Methods of Treatment

Still other liver cancer treatments include: liver transplants,
embolization, tumor ablation through the use of radio frequency waves and the
use of biological response modulators, monoclonal antibodies and liposomes. The
effectiveness of these treatments is limited, many have dose limiting side
effects, and none is widely used.

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The Delcath System

The Delcath system is designed to address the critical shortcomings of
conventional intravenous chemotherapy delivery. The Delcath system isolates the
liver from the general circulatory system during liver cancer treatments with
chemotherapy and then returns the blood exiting the liver to the general
circulatory system only after the chemotherapy agent has been substantially
removed by filtration outside the body. We believe that the Delcath system
allows higher chemotherapy doses to be administered to the liver than can be
administered by conventional intravenous delivery. By filtering out a
substantial portion of the chemotherapy agent before the blood is returned to
the blood stream, the heart and other organs of the body are protected from the
harmful side-effects of chemotherapy.

The Delcath system kit includes the following disposable components:

o Infusion Catheter -- a thin-walled arterial infusion catheter used to
deliver chemotherapy to the liver;

o Double Balloon Catheter -- a multi-passageway catheter used to isolate
and divert the drug-laden blood exiting the liver;

o Extracorporeal Filtration Circuit -- a blood tubing circuit incorporating
the disposable components used with a blood pump to push the isolated
blood through the system's filters and guide the cleansed blood back to
the patient;

o Filters -- activated carbon blood filters used to remove most of the
chemotherapy agent from the isolated blood after it has flowed through
the liver and before it returns to the patient's general circulation; and

o Return Catheter -- a thin-walled blood sheath used to deliver the
filtered blood from the extracorporeal filtration circuit back into one
of the major veins returning blood to the right atrium of the heart.

The double balloon catheter has one large passageway and three smaller
passageways. Each of two low-pressure balloons is inflated through one of the
three smaller passageways. Blood flows out of the liver through the large
passageway to the filtration system. A separate access port attaches to the
large passageway and is designed for sampling fluid or flushing the system. The
third smaller passageway allows blood exiting the legs and kidneys to bypass
the liver and return to the heart.

The Delcath procedure involves a series of three catheter insertions, each
of which is made through the skin. During test procedures, patients are treated
with intravenous sedation and local anesthesia at catheter insertion sites. In
some cases general anesthesia has been used. An infusion catheter is inserted
into the artery through which blood normally flows to the liver. A second
catheter -- the Delcath double balloon catheter -- is inserted through the
inferior vena cava. The balloons on the double balloon catheter are then
inflated. This procedure prevents the normal flow of blood from the liver to
the heart through the inferior vena cava because the inferior vena cava has
been blocked. A chemotherapy agent is then infused into the liver through the
infusion catheter. The infused blood is prevented from flowing to the heart,
but exits the liver through perforations on the double balloon catheter and
flows through this catheter out of the body where the infused blood is pumped
through activated charcoal filters to remove most of the chemotherapy agent.
The filtered blood is returned to the patient through the jugular vein which
leads to the superior vena cava and the heart, thus restoring the cleansed
blood to normal circulation. Infusion is administered over a period of 30
minutes. Filtration occurs during infusion and for 30 minutes afterward. The
catheters are removed and manual pressure is maintained on the catheter
puncture sites for approximately 15 minutes. The entire procedure takes
approximately two to three hours to administer.

During Phase I and II clinical trials, patients remained in the hospital
overnight for observation after undergoing treatment with the Delcath system.
Once physicians become familiar with using the Delcath system, we expect the
procedure to be performed on an outpatient basis, with the patient resuming
normal activities the day after the procedure is performed. We expect a patient
to undergo an average of four treatments, one every three weeks. A new Delcath
system kit is used for each treatment.

Integral to our research and development efforts is our program of
clinical research with prominent researchers and physicians conducted at Yale
University, M.D. Anderson Cancer Center, and the Robert Wood Johnson Medical
School/Cancer Institute of New Jersey.

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Our Phase III Clinical Trials

Phase III human clinical trials are a prerequisite for FDA approval of
Delcath's pre-marketing application. During these trials, administration of
doxorubicin through the Delcath system must be proven to be safe and effective
for the treatment of liver cancer. The FDA requires us to demonstrate that
delivering doxorubicin using the Delcath system results in patient survival
times that are longer than those obtained from administering chemotherapy
agents intravenously.

We have conducted Phase I and II human clinical trials at three United
States medical centers under investigational device and investigational new
drug exemptions granted by the FDA. The trials were designed to demonstrate the
system's "functionality," or its ability to administer to and extract from the
liver approved and marketed chemotherapy agents. Forty-four patients
participated in the trials. Twenty-one of these test subjects had primary liver
cancer or melanoma which had spread to the liver and were treated with
doxorubicin. The remaining 23 test subjects suffered from other forms of liver
cancer, and/or were treated with another chemotherapy agent, 5-FU. These trials
demonstrated that the Delcath system was capable of extracting approximately
70% to 85% of the chemotherapy agent administered to the liver.

We believe the results of the clinical trials we have conducted indicate
that the Delcath system delivered (a) more chemotherapy agent to the tumor
site, and (b) less chemotherapy agent to the general circulation than delivered
by administration of the same dose by intravenous means. The Delcath system
permits the delivery of higher dosages of chemotherapy agents to the cancer
site.

In addition, clinicians involved in the Phase I and Phase II clinical
trials observed (a) reduction in tumor size and (b) the safety of the system at
higher dosage levels of chemotherapy than those used in conventional
intravenous chemotherapy delivery. Further, though not demonstrated in a
statistically significant manner because of the limited number of patients,
clinicians observed survival times of patients treated with the Delcath system
which exceeded those that would generally be expected in patients receiving
chemotherapy treatment through conventional intravenous means of delivery.

The following table illustrates the survival periods of patients treated
with the Delcath system since their diagnosis:

Survival Time Since Diagnosis (Months) Percentage
6 4
12 33
18 22
24 11
30 18
36 8
42 0
48 0
>48 4

Based on the results of our clinical trials, we submitted to the FDA our
application for pre-market approval of the Delcath system as a medical device.
In response to our application, the FDA classified the Delcath system as a drug
delivery system and requires us to obtain approval of a new drug application,
or a supplemental new drug application, for the chemotherapy agent being
administered by the Delcath system.

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These applications must demonstrate the efficacy of a particular drug when
administered through the Delcath system. To do so, we must demonstrate, in a
statistically meaningful manner, that administering chemotherapy agents with
the Delcath system results in survival times of patients that are longer than
those obtained from administering chemotherapy agents intravenously.

With a substantial portion of the proceeds from this offering, we intend
to conduct Phase III human clinical trials designed to demonstrate that
administering doxorubicin with the Delcath system to treat primary liver cancer
and malignant melanoma that has spread to the liver results in patient survival
times that are longer than those obtained from administering chemotherapy
agents intravenously.

In December 1999, the FDA approved the protocols for conducting the Phase
III clinical trials.

We expect the Phase III clinical trials to be conducted in at least 10
medical centers and to involve approximately 274 test subjects, of which 124
will be treated for primary liver cancer and 150 will be treated for malignant
melanoma that has spread to the liver. Half of these test subjects will be
treated with doxorubicin administered using the Delcath system and half, the
control group, will be treated with chemotherapy agents delivered
intravenously. We have identified and approached a number of medical centers
that have expressed an interest in conducting the clinical trials. We expect
that within 90 days after the closing of this offering we will begin to enter
agreements with medical centers to conduct the clinical trials. As a result, we
expect clinical trials to begin during the fourth quarter of this year.
However, our timetable is subject to uncertainty and we cannot assure you that
we can meet our planned schedule. We cannot assure you that all of the medical
centers we have identified will be available to conduct the clinical trials
when we are in a position to have them commence or that we will be ready to
commence the trials within any particular time period.

We intend to hire a contract research firm to conduct these trials.
However, we have not begun negotiations with a contract research organization
and we cannot assure you that we will be able to engage an organization on
acceptable terms and conditions in a timely manner or at all.

We believe that we will acquire sufficient data to obtain FDA approval of
the Delcath system within 12 months of the commencement of the clinical trials.
After acquiring sufficient data, we believe that our collation, analysis and
submission of the trial results to the FDA will take an additional three
months. Given the short life expectancy of liver cancer patients, we believe
that the FDA will review our pre-market application expeditiously and will
respond to our submission within three months. The trials may take longer to
complete, however, because of difficulties we may encounter in entering into
agreements with clinical testing sites to conduct the trials and the
difficulties these sites may encounter in enrolling patients. The FDA may take
longer than three months from the date we submit our trial results before
granting marketing approval, or may not grant approval at all.

Research for Hepatitis Treatment

Another disease which attacks the liver is viral hepatitis. The incidence
of viral hepatitis in the United States and worldwide is increasing. The
long-range effects of some forms of hepatitis can include massive death of
liver cells, chronic active hepatitis, cirrhosis and hepatoma. The current
treatment for viral hepatitis is limited and includes long-term injections of
interferon alpha, which is similar to chemotherapy in its toxicity and dosage
limitations. We plan to seek a strategic partner to conduct clinical trials to
determine the feasibility of using the Delcath system to administer anti-viral
drugs, including interferon alpha, in the treatment of viral hepatitis.

Sales and Marketing

Our marketing efforts will focus on the 34 comprehensive cancer centers in
the United States recognized by the National Cancer Institute, beginning with
the hospitals participating in the Phase III clinical trials. We will focus
these efforts on two distinct groups of medical specialists in these
comprehensive cancer centers: (1) oncologists (who have primary responsibility
for the patient) and (2) interventional radiologists (members of the hospital
staff who work with catheter-based systems). Upon diagnosis of cancer, a
patient is usually

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referred to a medical oncologist. This physician generally provides palliative
treatments and refers the patient to a surgical oncologist if surgery appears
to be an option. Both medical and surgical oncologists will be included in our
target market. Generally, oncologists do not position catheters, instead
enlisting the assistance of an interventional radiologist.

We plan to hire a marketing director at such time as we receive an
indication from the FDA that approval of the Delcath system is forthcoming and
then hire a sales manager and three sales representatives to market the system
in the United States.

In addition, we plan to utilize distributors and/or one or more corporate
marketing partners to market products outside the United States. We believe
distribution or corporate partnering arrangements will be cost effective, will
be implemented more quickly than a direct sales force established by us in such
countries and will enable us to capitalize on local marketing expertise in the
countries we target.

Nissho Agreement

In December 1996, we entered into an agreement with Nissho Corporation, a
large manufacturer and distributor of medical devices and pharmaceuticals based
in Osaka, Japan which grants to Nissho the exclusive right to distribute the
Delcath system in Japan, China, Korea, Hong Kong and Taiwan until December 31,
2004. Nissho, which has previously invested $1,000,000 in Delcath, has advised
us that it expects to commence the clinical trials in Japan by the end of 2000.
Nissho may also seek to conduct clinical trials in the other countries in the
territory.

Products covered by the agreement include the Delcath system for the
treatment of cancer in the liver and the lower extremities, as well as new
products which may be added by mutual agreement. Nissho is required to purchase
products from Delcath in connection with clinical trials and for resale in its
market at prices to be determined by mutual agreement. Nissho has agreed, in
its territory, not to engage in the business of manufacturing, distributing or
selling systems similar to the Delcath system for the liver or other organs or
body regions.

Third-Party Reimbursement

Currently, because the Delcath system is characterized by the FDA as an
experimental device, its use is not reimbursable in the United States. We will
not seek to have third-party payors, such as Medicare, Medicaid and private
health insurance plans, reimburse the use of the Delcath system until after its
use is approved by the FDA. Even if approved by the FDA, these payors may
require us, as a condition to reimbursement, to provide extensive supporting
scientific, clinical and cost effectiveness data for our Delcath system to the
American Medical Association. New products are under increased scrutiny with
respect to a determination as to whether or not they will be covered by the
various healthcare plans and with respect to the level of reimbursement which
will be applicable to respective covered products and procedures. Third-party
payors may deny reimbursement for the treatment and medical costs associated
with the Delcath system, notwithstanding FDA or other regulatory approval, if
it is determined that the Delcath system is unnecessary, inappropriate, not
cost effective, experimental or for a non-approved indication. Third-party
payors currently provide reimbursement for many of the components of the
Delcath system based on established general reimbursement codes, in connection
with their use in liver perfusion and other therapies.

We believe that the Delcath system will provide significant cost savings
to the extent that it can reduce treatment and hospitalization costs associated
with the side effects of chemotherapy. Our planned wholesale price for the
Delcath system kit is $4,000. A patient normally undergoes four treatments with
the Delcath system, each requiring a new system kit. Each treatment with the
system costs approximately $12,000, resulting in a total treatment cost of
approximately $48,000. This compares to a total cost of conventional aggressive
chemotherapy treatment of approximately $160,000 to $180,000, which includes
the hospitalization and treatment costs associated with the side effects of the
systemic delivery of chemotherapy agents.

Manufacturing

We plan to utilize contract manufacturers to produce the components of the
Delcath system. In order to maintain quality control, we plan to perform final
assembly and packaging in our own facility. If we undertake these operations
our facility will be required to comply with the FDA's good manufacturing
practice regulations. If we sell the Delcath system in some foreign markets,
our facility will also need ISO 9000 approval from the European Union.

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The double balloon catheter will be manufactured domestically by the
Burron OEM division of B. Braun Medical, Inc. of Germany. The double balloon
catheter must be manufactured in accordance with manufacturing and performance
specifications that are on file with the FDA. Burron has demonstrated that the
components it manufactures meet these specifications. Burron's manufacturing
facility is ISO 9000 approved, which will allow the use of the catheter in
European markets. B. Braun has experience in obtaining regulatory approval for
medical products in European markets and has indicated informally, that it will
assist us in this process. We have not entered into a written agreement with
Burron to manufacture the catheter either for the Phase III clinical trials or
for commercial sale. To ensure sufficient supply of catheters to complete the
clinical trials, we intend to purchase our total trial requirements before
commencement of the trials.

Medtronic USA, Inc. manufactures the components of the blood filtration
circuit located outside of the body, including the medical tubing through which
a patient's blood flows and various connectors, as well as the blood filtration
pump head. Medtronic is a manufacturer of components used for extracorporeal
blood circulation during cardiac surgery. The components manufactured by
Medtronic have been cleared by the FDA for other applications and can,
therefore, be sourced off the shelf. These components, however, must comply
with manufacturing and performance specifications for the Delcath system that
are on file with the FDA. Medtronic has demonstrated that the components it
manufactures meet these specifications. Medtronic's manufacturing facility is
also ISO 9000 approved and, thus, the components it manufactures may be used in
European markets.

The activated charcoal filters used in the Delcath system are manufactured
by Asahi Medical Products of Japan. These filters have been cleared by the FDA
for other applications and can be sourced off the shelf. Asahi has demonstrated
that the filters it supplies fall within the performance parameters and meet
the specifications on file with the FDA. We have not entered into a written
agreement with Asahi to supply the filters either for the Phase III clinical
trials or for commercial sale.

Competition

Competition in the cancer treatment industry, and specifically the markets
for systems and devices to improve the outcome of chemotherapy treatment for
cancer, is intense. We believe that the primary competitive factors for
products addressing cancer include safety, efficacy, ease of use, reliability
and price. We also believe that physician relationships, especially
relationships with leaders in the interventional radiology and oncology
communities, are important competitive factors.

Delcath competes with all forms of liver cancer treatments which are
alternatives to resection including radiation, implanted infusion pumps, liver
transplants, embolization, cryosurgery, radiowave ablation and the use of
biological response modulators, monoclonal antibodies and liposomes.

Many large pharmaceutical companies and research institutions are
developing systems and devices to improve the outcome of chemotherapy treatment
for cancer. Pfizer Corporation currently markets the Infusaid Pump, which has
been successful in facilitating regional drug delivery. However, the Infusaid
Pump lacks a means of preventing the entry of these agents into the patient's
general circulation after they pass through the liver. Other companies,
including Merck & Co., Inc., are developing various chemotherapy agents with
reduced toxicity, while other companies are developing products to reduce the
toxicity and side effects of chemotherapy treatment. In addition, gene therapy,
vaccines and other minimally invasive procedures are currently being developed
as alternatives to chemotherapy.

Government Regulation

United States Food and Drug Administration

General. The manufacture and sale of medical devices and drugs are subject
to extensive governmental regulation in the U.S. and in other countries. The
Delcath system is regulated in the U.S. as a drug delivery system by the FDA
under the Federal Food, Drug and Cosmetic Act and requires approval by the FDA
of a pre-market approval application prior to commercial distribution.

29
<PAGE>

Doxorubicin, the drug that we are initially seeking to have approved for
delivery by the Delcath system, is a widely used chemotherapy agent which has
been approved by the FDA since 1974. Like all approved drugs, it has approved
label instructions which deal with such matters as indications for use, method
of action, dosing, side effects and contraindications. Because the Delcath
system delivers doxorubicin through a mode of administration and at dose levels
which differ from those currently approved, we must obtain approval for revised
labeling of a doxorubicin product providing for its use with the Delcath
system. This will require the filing of a supplemental or an original new drug
application for the administration of doxorubicin through the Delcath system.

Under the Federal, Food, Drug and Cosmetic Act, the FDA regulates the
pre-clinical and clinical testing, manufacture, labeling, distribution, sales,
marketing, advertising and promotion of medical devices and drugs in the U.S.
Noncompliance with applicable requirements, including good clinical practice
requirements, can result in the refusal of the government to grant approvals,
suspension or withdrawal of clearances or approvals, total or partial
suspension of production, distribution, sales and marketing, fines,
injunctions, civil penalties, recall or seizure of products, and criminal
prosecution of a company and its officers and employees. Our contract
manufacturers also are subject to numerous federal, state and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances.

Medical Devices. The Delcath system is a Class III medical device. It is
subject to the most stringent controls applied by the FDA to reasonably assure
safety and effectiveness. An application for pre-market approval must be
supported by data, typically including the results of animal and laboratory
testing and human clinical trials. Before commencing clinical trials, we
obtained an investigational device exemption providing for the initiation of
clinical trials. We also obtained approval of our investigational plan,
including the proposed protocols and informed consent statement that patients
signed before undergoing treatment with the Delcath system, by the
institutional review boards at the sites where the trials were conducted. Under
the Federal Food, Drug and Cosmetic Act, clinical studies for "significant
risk" Class III devices require obtaining such approval by institutional review
boards and the filing with the FDA of an investigational device exemption at
least 30 days before initiation of the studies.

Given the short life expectancy of liver cancer patients, we believe the
FDA will review our pre-market application expeditiously and respond to our
submission of the Delcath system for commercial sale within three months.
However, approval of the Delcath system may take longer if the FDA requests
substantial additional information or clarification, or if any major amendments
to the application are filed. The FDA will usually inspect the applicant's
manufacturing facility to ensure compliance with quality systems regulations
prior to approval of an application. The FDA also may conduct bioresearch
monitoring inspections of the clinical trial sites and the applicant to ensure
data integrity, and that the studies were conducted in compliance with the
applicable FDA regulations, including good clinical practice regulations.

If the FDA's evaluations of the application, clinical study sites and
manufacturing facilities are favorable, the FDA will issue either an approval
letter (order), or an "approvable letter" containing a number of conditions
that must be met in order to secure approval of an application. If and when
those conditions have been fulfilled to the satisfaction of the FDA, the agency
will issue an order approving the application, authorizing commercial marketing
of the device under specified conditions of use. If the FDA's evaluation of the
application, the clinical study sites or the manufacturing facilities are not
favorable, the FDA will deny approval of the application or issue a "not
approvable letter." The FDA may also determine that additional pre-clinical
testing or human clinical trials are necessary.

The FDA's regulations require agency approval of an application supplement
for changes to a device if they affect the safety and effectiveness of the
device, including new indications for use; labeling changes; the use of a
different facility or establishment to manufacture, process, or package the
device; changes in vendors supplying components for the device; changes in
manufacturing methods or quality control systems; and changes in performance or
design specifications. Changes in manufacturing procedures or processes may be
implemented and the device distributed 30 days after the FDA is provided with
notice of these changes unless the FDA advises the pre-market approval
application holder within 30 days of receipt of the notice that the notice is
inadequate or that preapproval of an application supplement is required.

30
<PAGE>

Approved medical devices remain subject to extensive regulation.
Advertising and promotional activities are subject to regulation by the FDA
and, in some instances, by the Federal Trade Commission. Other applicable
requirements include the FDA's medical device reporting regulations, which
require that we provide information to the FDA on deaths or serious injuries
alleged to have been associated with the use of marketed devices, as well as
product malfunctions that would likely cause or contribute to a death or
serious injury if the malfunction were to recur. If safety or efficacy problems
occur after the product reaches the market, the FDA may take steps to prevent
or limit further marketing of the product. Additionally, the FDA actively
enforces regulations prohibiting marketing or promotion of devices or drugs for
indications or uses that have not been cleared or approved by the FDA. Further,
the Food, Drug and Cosmetic Act authorizes the FDA to impose post-market
surveillance requirements with respect to a Class III device which is
reasonably likely to have a serious adverse health consequence or which is
intended to be implanted in the human body for more than one year or to be a
life sustaining or life supporting device used outside a device user facility.

The Food, Drug and Cosmetic Act regulates a device manufacturer's quality
control and manufacturing procedures by requiring the manufacturer to
demonstrate and maintain compliance with quality systems including good
manufacturing practice requirements as specified in the FDA quality systems
regulations. These regulations require, among other things, that (i) the
manufacturing process be regulated, controlled, and documented by the use of
written procedures and (ii) the ability to produce devices which meet the
manufacturer's specifications be validated by extensive and detailed testing of
every aspect of the process. The FDA monitors compliance with quality systems
regulations, including good manufacturing practice requirements, by conducting
periodic inspections of manufacturing facilities. If violations of the
applicable regulations are found during FDA inspections, the FDA will notify
the manufacturer of such violations and the FDA, administratively or through
court enforcement action, can prohibit further manufacturing, distribution,
sales and marketing of the device until the violations are cured. If violations
are not cured within a reasonable length of time after the FDA provides
notification of such violations, the FDA is authorized to withdraw approval of
the pre-market approval application.

Investigational devices that require FDA marketing approval in the United
States but have not received such approval, may be exported to countries
belonging to the European Union, European Economic Area, and to some other
specified countries, provided that the device is intended for investigational
use in accordance with the laws of the importing country; has been manufactured
in accordance with the FDA's good manufacturing practices; is labeled on the
outside of the shipping carton "for export only," is not sold or offered for
sale in the United States; and complies with the specifications of the foreign
purchaser. The export of an investigational device for investigational use to
any other country requires prior authorization from the FDA. An investigational
device may be exported for commercial use only as described below, under
"Foreign Regulation."

Drugs. We, or a manufacturer of a chemotherapy agent, must obtain FDA
approval of a supplemental or original new drug application for a chemotherapy
product providing for its use with the Delcath system before the system may be
marketed in the U.S. to deliver that agent to the liver or any other site.

Clinical trials to support the relabeling of doxorubicin to provide for
its use with the Delcath system must be conducted in accordance with the FDA's
investigational new drug regulations. Phase III trial protocols have been
approved by the FDA under the Company's investigational new drug application.
FDA regulations also require that prior to initiating the trials the sponsor of
the trials obtain investigational review board approval from each
investigational site that will conduct the trials. We have identified ten
medical centers that have expressed an interest in conducting the trials. The
investigational review boards at two of these medical centers have given their
approval to have the clinical trials conducted at their institutions. We are
seeking the approval of investigational review boards at additional medical
centers by assembling and providing them with information with respect to the
trials.

The FDA requires that, in order to obtain approval to relabel doxorubicin
for delivery using the Delcath system, we demonstrate that delivering
doxorubicin using the system results in patient survival times that are longer
than those obtained from administering chemotherapy agents intravenously.

The approved Phase III trial protocols are designed to obtain approval of
both a new drug application (or a supplemental new drug application) and a
pre-market approval application providing for the use of

31
<PAGE>

doxorubicin with the Delcath system. The trial protocols were approved by both
the FDA division that approves new drugs and the division that reviews
applications to market new devices. All of the data generated in the trials
will be submitted to both of these FDA divisions.

If we successfully complete the clinical trials, we believe the
manufacturer of doxorubicin will submit to the FDA a new drug application or
supplemental new drug application and pre-market approval to deliver
doxorubicin to the liver through the Delcath system. Under the Food, Drug and
Cosmetic Act, the Delcath system cannot be marketed until the new drug
application (or supplemental new drug application) and pre-market approval
application approvals are obtained, and then only in conformity with conditions
of use set forth in the approved labeling.

Foreign Regulation. In order for us to market our products in Asia,
Europe, Latin America and other foreign jurisdictions, we must obtain required
regulatory approvals or clearances and otherwise comply with extensive
regulations regarding safety and manufacturing processes and quality. These
regulations, including the requirements for approvals or clearances to market,
may differ from the FDA regulatory scheme. In addition, there may be foreign
regulatory barriers other than pre-market approval or clearance.

In April 1996, new FDA legislation was enacted that permits that a medical
device which requires FDA marketing approval but which has not received such
approval to be exported to any country for commercial use, provided that the
device (i) complies with the laws of that country, (ii) has valid marketing
authorization or the equivalent from the appropriate authority in any of a list
of industrialized countries including Australia, Canada, Israel, Japan, New
Zealand, Switzerland, South Africa and countries in the European Economic
Union, and (iii) meets other regulatory requirements regarding labeling,
compliance with the FDA's good manufacturing practices and notification to the
FDA.

We must obtain a CE mark in order for us to market and sell the Delcath
system in the European Union, except for limited use as a clinical trial
device.

Patents, Trade Secrets and Proprietary Rights

Our success depends in large part on our ability to obtain patents,
maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. Because of the length of time and expense
associated with bringing new products through development and regulatory
approval to the marketplace, the health care industry has traditionally placed
considerable importance on obtaining patent and trade secret protection for
significant new technologies, products and processes. We hold the following six
United States patents, as well as three corresponding foreign patents in
Canada, Europe and Japan:

<TABLE>
<CAPTION>
Summary Description of Patents Patent No.
------------------------------------------------------------------ ----------------
<S> <C>
Isolated perfusion method for cancer treatment U.S. #5,069,662
Isolated perfusion device -- catheter for use in isolated
perfusion in cancer treatment U.S. #5,411,479
Device and method for isolated pelvic perfusion U.S. #5,817,046
Catheter design to allow blood flow from renal veins and
limbs to bypass occluded segment of IVC U.S. #5,893,841
Balloon inside catheter to restrict blood flow or prevent
catheter from moving U.S. #5,897,533
Catheter with slideable balloon to adjust isolated segment U.S. #5,919,163

</TABLE>

We plan to vigorously enforce our intellectual property rights. In
addition, we will conduct searches and other activity relating to the
protection of existing patents and filing of new applications.

Litigation may be necessary to enforce any patents issued or assigned to
us or to determine the scope and validity of third party proprietary rights.
Litigation would be costly and divert our attention from our business.

32
<PAGE>

If others file patent applications with respect to inventions for which we
already have issued patents or have patent applications pending, we may be
forced to participate in interference proceedings declared by the United States
Patent and Trademark Office to determine priority of invention, which would
also be costly and divert our attention from our business.

In addition to patent protection, we rely on unpatented trade secrets and
proprietary technological expertise. We rely, in part, on confidentiality
agreements with our marketing partners, employees, advisors, vendors and
consultants to protect our trade secrets and proprietary technological
expertise.

Employees

As of April 30, 2000, we had five employees, four of whom are full-time.
We intend to recruit additional personnel in connection with the research,
development, manufacturing and marketing of our products. None of our employees
is represented by a union, and we believe relationships with our employees are
good. Our success will depend, in large part, upon our ability to attract and
retain qualified employees. We face competition in this regard from other
companies, research institutions and other organizations.

In addition to our full time employees, we engage the services of medical
and scientific consultants.

Facilities

We lease and occupy approximately 3,300 square feet of office space in
Stamford, Connecticut. We have occupied these facilities since 1992. Our lease
extends through December 2000 with a monthly rental of approximately $7,500. We
have prepaid our rent through December 2000. We believe that we will require
additional space in 2001, and are beginning site selection for rental property
in the same building or nearby and believe that satisfactory space is available
at commercially reasonable rates.

33
<PAGE>

MANAGEMENT

Executive officers, directors and key employees

Our executive officers and directors and their respective ages are as
follows:

<TABLE>
<CAPTION>
Name Age Positions
------------------------------------- ----- --------------------------------------------------
<S> <C> <C>
Samuel Herschkowitz, M.D. ........... 50 Chairman of the Board and Chief Technical Officer
M. S. Koly .......................... 64 Chief Executive Officer, President, Treasurer and
Director
Joseph P. Milana, CPA ............... 37 Chief Financial Officer
Jonathan A. Foltz, CFA .............. 38 Director of Operations
William I. Bergman .................. 68 Director
Frank Mancuso, Jr. .................. 41 Director
James V. Sorrentino, Ph.D. .......... 63 Director
</TABLE>

Samuel Herschkowitz, M.D. has been Chairman of the Board of Delcath since
1998 and Delcath's Chief Technical Officer since 1991. In 1987, he co-founded
Venkol Ventures L.P. and Venkol Ventures, Ltd., two affiliated venture capital
funds specializing in medical technology investments. Dr. Herschkowitz is board
certified in psychiatry and neurology. He is an assistant professor at New York
University Medical Center, and has held academic positions at Beth Israel
Hospital, Mount Sinai Medical School and Downstate Medical Center. Dr.
Herschkowitz graduated from Syracuse University and received his medical degree
from Downstate Medical Center College of Medicine.

M. S. Koly has been Chief Executive Officer and Treasurer of Delcath since
1998 and has served as a Director since 1988. From 1987 until June 1998, Mr.
Koly managed Venkol Ventures, L.P. and Venkol Ventures, Ltd., firms he
co-founded with Dr. Herschkowitz. From 1983 to 1987, Mr. Koly was president of
Madison Consulting Corporation, a firm he founded. From 1978 to 1983, Mr. Koly
was president of Becton-Dickinson Respiratory Systems. Prior to that time, he
held various senior management positions at Abbott Laboratories, Stuart
Pharmaceuticals and National Patent Development Corp. He received a B.A. from
American University and an M.B.A. in marketing and finance from Northwestern
University.

Joseph P. Milana, CPA, has been the Controller of Delcath since 1995. From
1984 to 1995, Mr. Milana was with KPMG LLP, most recently as a senior tax
manager. He received a B.B.A. in accounting and an M.S. in taxation from Pace
University, and received a CPA designation from the state of New York.

Jonathan A. Foltz, CFA, has been our Director Of Operations since 1992.
Mr. Foltz was senior associate of Venkol Ventures from 1989 to 1992. During
1988 to 1989, he provided investment and acquisition research, consulting to
corporations and brokerage firms including First Montauk Securities, Inc.,
Gilford Securities Inc., Texas American Energy Corporation and Computer
Memories Inc. He was the research director of Nicholas, Lawrence and Co., a
regional stock brokerage firm, reorganizing and managing their equity research
department. Mr. Foltz earned a B.S. in finance and computer science from Lehigh
University, an M.B.A. from the University of Connecticut and is a chartered
financial analyst.

William I. Bergman has been a director of Delcath since 1996. A retired
executive, Mr. Bergman was with Richardson-Vicks from 1956 through 1990 most
recently as Vice President-controller of North American Operations, vice
president-marketing of colds care business and Canadian operations, president
and general manager of Vicks health care division, assistant general manager of
Vicks International, and executive vice president of Richardson-Vicks Inc.
Following the acquisition of Vicks by The Procter & Gamble Company in 1986, he
became the president of Richardson-Vicks, U.S.A. and vice president of The
Procter & Gamble Company prior to retirement in 1990. He is also a director of
ZymeTx, Inc. a biotech company involved in the development of viral
diagnostics. His education includes a B.S. from Drexel University and the
advanced management program at Harvard University.

34
<PAGE>

Frank Mancuso, Jr., has been a director of Delcath since 1998. Mr. Mancuso
has been President of FGM Entertainment since 1985. In the past five years, he
has produced numerous movies and television series within his own companies and
for Paramount Pictures and MGM/United Artists. He has a B.A. from Upsala
College.

James V. Sorrentino, Ph.D., has been a director of Delcath since 1996.
Since 1992, Dr. Sorrentino has been President of Healthcare Products
Development, Inc., a clinical research organization that designs, organizes and
manages clinical trials for the pharmaceutical and biological industry. From
1974 to 1992, he held several research positions with Richardson-Vicks,
including director of over-the-counter products, Vice President & director of
research and development, and director of worldwide clinical development,
non-prescription drug products of The Procter & Gamble Company
(Richardson-Vicks). He received an A.B. in Biology, an M.S. in bacteriology,
and a Ph.D. in virology/immunology from the Catholic University of America.

We have agreed, for a period of three years from the date of this
prospectus, if so requested by the underwriter, to nominate and use our best
efforts to elect a designee of the underwriter as a director of Delcath or, at
the underwriter's option, as a non-voting advisor to our board of directors.
The underwriter has not yet exercised its right to designate a person.

Classified Board of Directors

Our board of directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board
of directors will be elected each year. These provisions, together with the
provision of our amended and restated certificate of incorporation and by-laws,
allow the board of directors to fill vacancies on or increase the size of the
board of directors, and may deter a stockholder from removing incumbent
directors and filling such vacancies with its own nominees in order to gain
control of the board. Each of our directors has been elected to serve until his
successor has been elected and duly qualified.

The directorship terms of Dr. Herschkowitz and Mr. Koly will expire at the
annual meeting of stockholders in 2002; the directorship term of Mr. Mancuso
will expire at the annual meeting of stockholders in 2001; and the directorship
terms of Dr. Sorrentino and Mr. Bergman will expire at the annual meeting of
stockholders in 2003.

We have established an audit committee and a stock option and compensation
committee.

The audit committee approves the selection of our independent accountants
and meets and interacts with the independent accountants to discuss questions
in regard to the financial reporting. In addition, the audit committee reviews
the scope and results of the audit with the independent accountants, reviews
with management and the independent accountants our annual operating results,
considers the adequacy of our internal accounting procedures and considers and
reports to the board of directors with respect to other auditing and accounting
matters, fees to be paid to our independent auditors and the performance of our
independent auditors. After this offering, the audit committee will consist of
Messrs. Bergman and Mancuso and Dr. Sorrentino.

The stock option and compensation committee reviews and recommends to the
board of directors the salaries, benefits and stock option grants of all
employees, consultants, directors and other individuals compensated by us. The
stock option and compensation committee also administers our stock option and
other employee benefits plans. The compensation committee currently consists of
Mr. Koly, Dr. Sorrentino and Mr. Bergman. Mr. Bergman currently chairs the
compensation committee.

Director Compensation

Directors who are employees of Delcath do not currently receive any
compensation for serving on the board of directors. Non-employee directors have
received compensation at the rate of $750 for each meeting of the board of
directors attended in person or participated in telephonically. Currently,
non-employee directors do not receive any compensation. A new compensation rate
for these directors will be established in our next shareholders meeting. In
addition, each non-employee director received a one-time grant in January 1999
of

35
<PAGE>

options to purchase 43,704 shares of common stock at a price of $3.89 per
share, all of which are vested. Each non-employee director received a separate
one-time grant in December 1999 of options to purchase 28,408 shares of common
stock at a price of $2.29 per share, half of which are vested, the remainder to
vest in December 2000.

Scientific Advisors and Consultants

We seek to expand the breadth of expertise and experience available to us
through the use of consultants and advisors. We coordinate these advisors,
including nineteen M.D.s and Ph.D.s to organize, conduct, and monitor clinical
and pre-clinical testing, regulatory filings and responses, product development
and manufacturing, and publication and presentation of the results of our
research. These individuals bring a broad range of competencies to our
operations. The scientific advisors are independent professionals who meet on
an individual basis with management when so requested. We seek as scientific
advisors recognized experts in relevant sciences or clinical medicine to advise
us about present and long-term scientific planning, research and development.

There is no fixed term of service for the scientific advisors. Current
members may resign or be removed at any time, and additional members may be
appointed. Members do not serve on an exclusive basis with Delcath, are not
under contract (other than with respect to confidentiality obligations) and are
not obligated to present corporate opportunities to us. To our knowledge, none
of the members is working on the development of competitive products.
Inventions or products developed by a scientific advisor who is not otherwise
affiliated with us will not become our property.

Scientific advisors who are not affiliated with us are paid a per diem fee
for their services. All members receive reimbursement for expenses incurred in
traveling to and attending meetings on behalf of Delcath.

Our scientific advisors and collaborators include the following doctors in
the fields of surgical oncology and interventional radiology:

<TABLE>
<CAPTION>
Relationship to
Name Title Specialty Delcath
------------------------ ------------------------- ------------------------ --------------------------
<S> <C> <C> <C>
Morton G. Glickman, Associate Dean, Yale Cardiovascular and Founder and
M.D. University School of Interventional stockholder
Medicine Radiology
William N. Hait, M.D., Director, The Cancer Medical Consultant and Founder and
Ph.D. Institute of New Jersey Scientific Advisor stockholder

T.S. Ravikumar, M.D. Chairman, Department Surgical Oncology Principal Investigator of
of Surgery, Montefiore the Delcath system
Medical Center
</TABLE>

Morton G. Glickman, M.D. was educated at Cornell University (B.A.) and
Washington University (M.D.). He also received an honorary M.A. from Yale. He
was a resident at the University of California. He served as the chief of neuro
and vascular radiology at San Francisco General Hospital (1969 -- 1973), and
has held numerous academic and professional appointments at Yale University
School of Medicine, currently serving as associate dean and vice chairman of
diagnostic radiology and surgery. Dr. Glickman is a founder of Delcath.

William N. Hait, M.D., Ph.D. was educated at the University of
Pennsylvania (B.A.) and The Medical College of Pennsylvania (M.D., Ph.D.). He
was a resident in internal medicine and held numerous academic and professional
appointments at Yale University School of Medicine, including chief of medical
oncology. Dr. Hait is currently director of The Cancer Institute of New Jersey.
Dr. Hait is a founder of Delcath.

T.S. Ravikumar, M.D. was educated in India at Madras University and Madras
Medical College. He was the associate director of The Cancer Institute of New
Jersey from 1993 through 1998. He also served as a resident in general surgery
at Maimonides Medical Center at S.U.N.Y. -- Downstate and was a fellow in
surgical oncology at the University of Minnesota. Dr. Ravikumar won a National
Reserve Service Award in

36
<PAGE>

surgical oncology, and served as a fellow at Brigham and Women's Hospital and
the Dana Farber Cancer Institute from 1982 through 1984. He has had a number of
academic (Harvard Medical School, Yale University School of Medicine) and
hospital appointments (Yale Comprehensive Cancer Center, Robert Wood Johnson
University Hospital).

In addition, Delcath uses the services of the following medical and
scientific consultants for technical expertise:

<TABLE>
<CAPTION>
Name Title Specialty
------------------------- --------------------------------- --------------------------------
<S> <C> <C>
Anil R. Diwan, Ph.D. Principal, Applied Biotech Filtration Consultant
Concepts
Harvey J. Ellis, C.C.P. Chief of Cardiac Perfusion, Perfusion Consultant
Bridgeport Hospital
Durmus Koch President, Bipore, Inc. Manufacturing
James H. Muchmore, M.D. Associate Professor of Surgery, Oncology and Perfusion
Tulane University School of Consultant
Medicine
Gabriela Nicolau, Ph.D. Director, Pharmacokinetics and Metabolism and Pharmacokinetics
Drug Metabolism, Innapharma
John Quiring, Ph.D. Principal, QST Consulting Biostatistician
</TABLE>

Executive Compensation

The following table sets forth all compensation earned by our Chief
Executive Officer for the years ended December 31, 1998 and 1999. No other
executive officer of Delcath earned more than $100,000 during the year ended
December 31, 1999.

Summary Compensation Table
<TABLE>
<CAPTION>
Lone-Term
Compensation
-------------
Shares of
Common Stock
Annual Compensation Underlying
------------------------------ -------------
Name Year Salary Bonus Options
------------------------------------------- ------ ----------- ------- -------------
<S> <C> <C> <C> <C>
M.S. Koly, Chief Executive
Officer, President and Treasurer ......... 1999 $101,250 $0 177,003
1998 60,000 0 --

</TABLE>

The options granted to our Chief Executive Officer in 1999 represent 52%
of the total number of options granted to employees in that year and have a
weighted average exercise price of $3.28 per share. Options to purchase 109,261
shares expire in January 2004 and options to purchase 67,742 shares expire in
December 2004.

Employment Agreements

Delcath has entered into employment agreements with M.S. Koly and Sam
Herschkowitz. Under the agreements, each officer will serve for a three-year
term, beginning on the closing of this offering, with an automatic one-year
renewal, unless either party provides notice of termination. Mr. Koly will
receive a base

37
<PAGE>

salary of $175,000 per year and Dr. Herschkowitz will receive a base salary of
$120,000 per year. Mr. Koly is required to devote his full business time to our
business and affairs, and Dr. Herschkowitz is required to devote a substantial
part of his business time to our business and affairs. In addition to his
responsibilities at Delcath, Dr. Herschkowitz lectures and instructs students
as an assistant professor at New York University on one day per week basis and
conducts a clinical medical practice prior to 8:30 a.m. in the morning and
after 6:00 p.m. in the evening.

Key-man Life Insurance

We have obtained "key-man" life insurance on each of the lives of Mr. Koly
and Dr. Herschkowitz in the amount of $2,000,000.

Stock Option Plans

On October 15, 1992, our board of directors and stockholders adopted our
1992 incentive stock option plan and our 1992 non-incentive stock option plan.
On June 15, 2000, the board of directors adopted our 2000 stock option plan. Our
2000 stock option plan will be submitted for stockholder approval at our next
annual meeting. We have reserved 299,375 shares of common stock for issuance
upon exercise of options granted from time to time under the 1992 incentive
stock option plan, 260,041 shares of common stock for issuance upon exercise of
options granted from time to time under the 1992 non-incentive stock option plan
and 300,000 shares of common stock for issuance from time to time under the 2000
stock option plan. The stock option plans are intended to assist us in securing
and retaining key employees, directors and consultants by allowing them to
participate in our ownership and growth through the grant of incentive and
non-qualified options.

Under the 1992 incentive stock option plan we may grant incentive stock
options only to key employees and employee directors. Under the 1992
non-incentive stock option plan, we may grant non-qualified options to our
employees, officers, directors, consultants, agents and independent
contractors. Under the 2000 stock option plan, we may grant incentive or
non-qualified options to our officers, employees, directors, consultants,
agents and independent contractors. The stock option plans are administered by
a committee, currently the stock option and compensation committee, appointed
by our board of directors.

Subject to the provisions of each of the stock option plans, the committee
will determine who shall receive options, the number of shares of common stock
that may be purchased under the options, the time and manner of exercise of
options and exercise prices. The term of options granted under each of the
stock option plans may not exceed ten years, or five years for an incentive
stock option granted to an optionee owning more than 10% of our voting stock.
The exercise price for incentive stock options shall be equal to or greater
than 100% of the fair market value of the shares of the common stock at the
time granted; provided that incentive stock options granted to an optionee
owning more than 10% of our voting stock shall be exercisable at a price equal
to or greater than 110% of the fair market value of the common stock on the
date of the grant. The exercise price for non-qualified options will be set by
the committee, in its discretion, but in no event shall the exercise price be
less than the fair market value of the shares of common stock on the date of
grant. Shares of common stock received upon exercise of options granted under
each of the plans will be subject to restrictions on sale or transfer.

As of the date of this prospectus, we have granted incentive stock options
to purchase 299,375 shares of common stock under our 1992 incentive stock
option plan at a weighted average price of $3.18 and non-incentive stock
options to purchase 260,041 shares of common stock under our 1992 non-incentive
stock option plan at a weighted average price of $3.36. All of these options
have been granted to our officers and directors and terminate on the fifth
anniversary of their vesting date. We will not grant any additional options
under these plans. As of the date of this prospectus, we have not granted any
options under our 2000 stock option plan.

Each of our stock option plans includes a provision that an optionholder,
upon exercise of an option, must execute a stockholder's agreement containing
provisions to be determined by Delcath at the time of such exercise.

38
<PAGE>

Limitation on Liability and Indemnification Matters

As authorized by the Delaware General Corporation Law, our certificate of
incorporation provides that none of our directors shall be personally liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability for:

o any breach of the director's duty of loyalty to Delcath or its
stockholders;

o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

o unlawful payments of dividends or unlawful stock redemptions or
repurchases; or

o any transaction from which the director derived an improper personal
benefit.

This provision limits our rights and the rights of our stockholders to recover
monetary damages against a director for breach of the fiduciary duty of care
except in the situations described above. This provision does not limit our
rights or the rights of any stockholder to seek injunctive relief or rescission
if a director breaches his duty of care. In addition, our certificate of
incorporation provides that if the Delaware General Corporation Law is amended
to further limit the liability of a director, then the liability of the
directors shall be eliminated or limited to the fullest extent permitted by
such amendment. These provisions will not alter the liability of directors
under federal securities laws.

Our certificate of incorporation further provides for the indemnification
of any and all persons who serve as our director, officer, employee or agent to
the fullest extent permitted under the Delaware General Corporation Law.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons under
the above provisions, or otherwise, we have been advised that in the opinion of
the SEC indemnification is against public policy as expressed in the Securities
Act, and is unenforceable.

We maintain a policy of insurance under which our directors and officers
are insured, subject to the limits of the policy, against certain losses
arising from claims made against our directors and officers by reason of any
acts or omissions covered under this policy in their capacities as directors or
officers, including liabilities under the Securities Act.

39
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table presents information known to us, as of the date of
this prospectus and as adjusted to reflect the sale by us of 2,000,000 shares
common stock offered under this prospectus, relating to the beneficial
ownership of common stock by: (a) each person who is known by us to be the
beneficial holder of more than 5% of our common stock; (b) each of our
directors; and (c) our directors and executive officers as a group.

We believe that all persons named in the table have sole voting and
investment power with respect to all shares beneficially owned by them, except
as noted.

A person is deemed to be the beneficial owner of securities that can be
acquired by that person within 60 days from the date of this prospectus upon
the exercise of options, warrants or convertible securities. Each beneficial
owner's percentage ownership is determined by assuming that options, warrants
or other convertible securities that are held by that person, but not those
held by any other person, and which are exercisable within 60 days of the date
of this prospectus, have been exercised and converted. The table also assumes
(a) a base of 3,418,732 shares outstanding before this offering, and (b) a base
of 5,418,732 shares outstanding immediately after this offering, before any
consideration is given to outstanding options or warrants.

The address for each listed director and officer is c/o Delcath Systems,
Inc. 1100 Summer Street, Stamford, CT 06905.

<TABLE>
<CAPTION>
Percentage of Shares
Number of Beneficially Owned
Shares ----------------------------
Beneficially Before
Name of Beneficial Owner Owned Offering After Offering
----------------------------------- ------------------ ---------- ---------------
<S> <C> <C> <C>
M.S. Koly ......................... 1,926,320(1) 54.1% 34.6%
Venkol Trust ...................... 1,760,720 51.4 32.5
Samuel Herschkowitz, M.D. ......... 337,794(2) 9.6 6.1
Frank Mancuso, Jr. ................ 127,264(3) 3.7 2.3
James V. Sorrentino, Ph.D ......... 72,767(4) 2.1 1.3
William I. Bergman ................ 66,649(5) 1.9 1.2
All directors and executive
officers as a group (six
persons) ......................... 2,283,457(6) 59.7% 39.2%
</TABLE>

------------
(1) Includes 7,609 shares of the 15,218 shares held by Venkol Inc. as nominee
for M.S. Koly, 14,859 shares held by M. Ted Koly, M.S. Koly's minor son.
143,132 shares issuable upon exercise of options and 1,757,224 shares and
3,496 shares issuable upon exercise of options held by Venkol Trust. Mr.
Koly is the trustee of Venkol Trust and is deemed the beneficial owner of
its shares. Excludes 33,871 shares issuable upon exercise of options which
become exercisable on December 7, 2000.

(2) Includes 7,609 shares of the 15,218 shares held by Venkol Inc. as nominee
for Dr. Herschkowitz, the 229,010 shares held by Venkol Trust as to which
Dr. Herschkowitz has a beneficial remainder interest and 86,316 shares
which are issuable upon exercise of options. Excludes 20,760 shares
issuable upon exercise of options which become exercisable on December 7,
2000.

(3) Includes 18,327 shares held by Venkol Trust as to which Mr. Mancuso has a
beneficial remainder interest, 57,908 shares issuable upon exercise of
options and 1,804 shares issuable upon exercise of warrants. Excludes
14,204 shares issuable upon exercise of options which become exercisable
on December 7, 2000.

(4) Includes 57,908 shares issuable upon exercise of options. Excludes 14,204
shares issuable upon exercise of options which become exercisable on
December 7, 2000.

(5) Includes 57,908 shares issuable upon exercise of options. Excludes 14,204
shares issuable upon exercise of options which become exercisable on
December 7, 2000.

(6) Includes 1,757,224 shares and 3,496 shares issuable upon exercise of
warrants held by Venkol Trust.

40
<PAGE>

CERTAIN TRANSACTIONS

From September 1997 through January 1998, we sold an aggregate of 111,446
shares of common stock for an aggregate consideration to us of $1,275,000 to 11
investors, including Johnson & Johnson Development Corporation which invested
$500,000 in this offering. As part of this offering, Venkol Ventures, L.P. and
Venkol Ventures, Ltd. purchased an aggregate of 26,223 shares of common stock
for approximately $300,000 and Mr. Mancuso, a director of Delcath, purchased
8,741 shares of common stock for $100,000. In November 1996, Venkol Ventures,
L.P. and Venkol Ventures, Ltd. transferred all of class A preferred stock of
Delcath that each owned to the Venkol Trust, which is managed by M.S. Koly, our
Chief Executive Officer and a director.

All of our preferred stockholders have agreed to convert their preferred
stock into 1,056,192 shares of common stock. The preferred stockholders have
also agreed to accept 851,781 shares of common stock as payment of $969,447 of
estimated accumulated dividends, and a cash dividend of $484,723 in payment of
the balance of the accrued dividend, assuming this offering closes on June 30,
2000. Venkol Trust holds all 2,000,000 shares of our class A preferred stock
and will receive 874,087 shares of common stock on conversion of those shares,
760,153 shares of common stock in partial payment of accumulated dividends and
a cash dividend of $484,723 in payment of the balance of the accrued dividend,
assuming this offering closes on June 30, 2000. Frank Mancuso, Jr. and Venkol
Trust own 19,608 and 117,650 shares of our class B preferred stock and will
receive 8,570 and 51,418 shares of common stock, upon conversion of those
shares, 4,312 shares and 25,872 shares of common stock in payment of $25,158
and $150,952 of accumulated dividends and cash dividends of approximately
$12,579 and $75,476, in payment of the balance of the accrued dividend,
assuming this offering closes on June 30, 2000.

In July 1999, we sold an aggregate of 59,514 shares of common stock and
three-year warrants to purchase an aggregate of 6,609 shares of common stock at
$11.74 per share for aggregate proceeds of $776,192. Mr. Mancuso made a $75,000
investment for which he received 5,750 shares of common stock and warrants to
purchase 639 shares of common stock.

In April 2000, we issued 292,426 shares of common stock to existing
security holders and their designees for proceeds of $501,825 in a rights
offering. Each of M.S. Koly, Samuel Herschkowitz, our Chairman and Chief
Technical Officer, and James Sorrentino, a director of Delcath, purchased
14,859 shares for $25,500, and William Bergman, a director of Delcath,
purchased 8,741 shares for $15,000.

DESCRIPTION OF SECURITIES

Upon the closing of this offering, the authorized capital stock of Delcath
will consist of 15,000,000 shares of common stock, $.01 par value per share,
and 10,000,000 shares of preferred stock, $.01 par value per share, whose
rights and designation have not yet been established. There will be no
preferred stock outstanding immediately after the closing of this offering. The
description in the sections below of Delcath's certificate of incorporation and
by-laws refers to Delcath's Amended and Restated Certificate of Incorporation
and Amended and Restated By-Laws, respectively, as they will be in effect upon
the closing of this offering.

Common Stock

Immediately prior to the closing of this offering, there will be 3,418,732
shares of common stock outstanding. After giving effect to the issuance of the
2,000,000 shares of common stock offered by this prospectus, assuming the
underwriters do not exercise their overallotment option, there will be
5,418,732 shares of common stock outstanding upon the closing of this offering.

Holders of common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote. Holders of common stock do not have
cumulative voting rights. Therefore, holders of a majority of the shares of
common stock voting for the election of directors can elect all of the
directors. Holders of common stock are entitled to share in all dividends that
the board of directors, in its discretion, declares from legally available
funds. In any liquidation, dissolution or winding up of Delcath, each
outstanding share entitles its holder to participate pro rata in all assets
that remain after payment of liabilities and after providing for each class of
stock, if any, having preference over the common stock.

41
<PAGE>

Holders of common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
common stock. The rights of the holders of common stock are subject to any
rights that may be fixed for holders of preferred stock, when and if any
preferred stock is issued. All outstanding shares of common stock are, and the
shares underlying all options and warrants will be, duly authorized, validly
issued, fully paid and non-assessable upon our issuance of these shares.

Preferred Stock

Under Delcath's certificate of incorporation, Delcath's board of directors
is authorized, subject to certain limitations prescribed by law, without
further stockholder approval, from time to time to issue up to an aggregate of
10,000,000 shares of preferred stock. The preferred stock may be issued in one
or more series. Each series may have different rights, preferences and
designations and qualifications, limitations and restrictions that may be
established by Delcath's board of directors without approval from the
stockholders. These rights, designations and preferences include:

o number of shares to be issued;

o dividend rights;

o right to convert the preferred stock into a different type of security;

o voting rights attributable to the preferred stock;

o right to set aside assets for payments relating to the preferred stock;
and

o prices to be paid upon redemption of the preferred stock or a bankruptcy
type event.

If Delcath's board of directors decides to issue any preferred stock, it
could have the effect of delaying or preventing another party from taking
control of Delcath. This is because the terms of the preferred stock could be
designed to make it prohibitively expensive for any unwanted third party to
make a bid for the shares of Delcath. We have no present plans to issue any new
shares of preferred stock.

Options and Warrants

We have reserved 21,852 shares of common stock for issuance upon exercise
of non-plan options. These options are exercisable at any time on or prior to
February 4, 2002 at a price of $2.29 per share. We have also reserved for
issuance 21,468 shares of common stock for issuance upon outstanding warrants
to purchase common stock at $8.58 and $11.74 per share which expire,
respectively, on January 16, 2001 and March 2, 2002. Also, the underwriters
will receive five-year warrants to purchase 200,000 shares. The exercise of any
of these options and warrants will dilute the percentage ownership of our other
stockholders.

Anti-Takeover Effects of Delaware Law and Delcath's Amended and Restated
Certificate of Incorporation and By-Laws

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. That section provides, with exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person or his affiliate or associate who is an owner of 15% or more of
the outstanding voting stock of the corporation for a period of three years
from the date that this person became an interested stockholder.

Our board of directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board
of directors will be elected each year. These provisions, when coupled with the
provisions of our amended and restated certificate of incorporation authorizing
the board of directors to fill vacant directorships or increase the size of the
board of directors, may deter a stockholder from removing incumbent directors
and simultaneously gaining control of the board of directors by filling the
vacancies created by that removal with its own nominees.

42
<PAGE>

Transfer Agent and Warrant Agent

The transfer agent for our common stock and warrants is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.

SHARES ELIGIBLE FOR FUTURE SALE

After the closing of this offering, we will have 5,418,732 shares of
common stock issued and outstanding of which the 2,000,000 shares offered by
this prospectus will be freely tradable without restriction or further
registration under the Securities Act, except for any shares purchased by any
affiliate of us. An affiliate of us is generally a person who has a controlling
position with regard to us. Any shares purchased by our affiliates will be
subject to the resale limitations of Rule 144 promulgated under the Securities
Act.

All of the approximately 3,418,732 remaining shares of common stock that
will be outstanding, are restricted securities as that term is defined under
Rule 144.

Approximately 2,010,574 of these shares are immediately eligible for sale
and the remaining 1,408,158 shares will become eligible, at various times,
beginning 90 days following the date of this prospectus, in each case, subject
to the contracted provisions below.

The holders of all of our common stock, including each of our officers,
directors and principal stockholders, have agreed not to sell or dispose of any
of the shares of common stock held by them, including in accordance with Rule
144, for a period of twelve months following the date of this prospectus
without the underwriter's prior written consent. For the second year following
the closing, our officers, directors and principal shareholders have agreed
that, without the underwriter's written consent, they will not sell any shares
of common stock during any three-month period in excess of the amount they
would be allowed to sell if they were deemed an affiliate of ours and the
shares were deemed restricted as defined under Rule 144 of the Securities Act.
This volume is the greater of: (a) 1% of the then outstanding common stock; and
(b) the average weekly trading volume of the common stock during the four
calendar weeks preceding a sale.

In general, under Rule 144, as currently in effect, beginning 90 days
after the date of this prospectus, a person or group of persons whose shares
are aggregated, who has beneficially owned restricted shares for at least one
year, including the holding period of any prior owner except an affiliate of
us, would be entitled to sell, within any three month period, a number of
shares that does not exceed the greater of:

o 1% of the then outstanding common stock; or

o The average weekly trading volume of our common stock during the four
calendar weeks preceding the sale, provided, that, public information
about us as required by Rule 144 is available and the seller complies
with manner of sale provisions and notice requirements.

The volume limitations described above, but not the one-year holding
period, also apply to sales of our non-restricted securities by affiliates of
us.

A person who is not an affiliate, has not been an affiliate within three
months before the sale and has beneficially owned the restricted securities for
at least two years, is entitled to sell the restricted shares under Rule 144
without regard to any of the limitations described above.

Before this offering, there was no public market for our common stock. We
cannot predict the effect, if any, that sales of, or the availability for sale
of, our common stock will have on the market price of our common stock
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of common stock in the public market, including shares issuable upon
the exercise of outstanding warrants or options, could adversely affect the
prevailing market price of our common stock and could impair our ability to
raise capital in the future through the sale of securities.

43
<PAGE>

UNDERWRITING

Whale Securities Co., L.P., as underwriter, has agreed, subject to the
terms and conditions contained in the underwriting agreement relating to this
offering, to purchase the 2,000,000 shares of common stock offered by us.

The underwriting agreement provides that the obligations of the
underwriter are subject to the delivery of an opinion of our counsel and to
various other conditions. The underwriter is committed to purchase and pay for
all of the shares offered by this prospectus if any of those shares are
purchased.

The underwriter has advised us that it proposes to offer our shares to the
public at the public offering price indicated on the cover page of this
prospectus. The underwriter may allow selected dealers who are members of the
National Association of Securities Dealers, Inc., known as the NASD,
concessions, not in excess of $.___ per share, of which not in excess of $.___
per share may be reallowed to other dealers who are members of the NASD.

We have granted to the underwriter an option, exercisable not later than
45 days after the date of this prospectus, to purchase up to 300,000 shares at
the public offering price indicated on the cover page of this prospectus, less
the underwriting discounts and commissions. The underwriter may exercise this
option only to cover over-allotments, if any, made in connection with the sale
of the common shares offered by this prospectus. If the underwriter exercises
its over-allotment in full, the total price to the public would be US
$13,800,000, the total underwriting discounts and commissions would be
$1,380,000 and the total proceeds to us, before payment of the expenses of this
offering, would be $12,420,000.

We have agreed to pay to the underwriter a non-accountable expense
allowance equal to 3% of the gross proceeds from the sale of the shares offered
by us, including any securities sold pursuant to the underwriter's
over-allotment option, of which $50,000 has been paid as of the date of this
prospectus. We have also agreed to pay all expenses in connection with
qualifying the shares offered under the laws of the states as the underwriter
may designate, including expenses of counsel retained for this purpose by the
underwriter. We estimate our expenses of this offering to be $2,000,000,
including the underwriter's discounts and commission, or $2,234,000 if the
underwriter's over-allotment option is completely exercised.

At the closing of this offering, we will sell to the underwriter and its
designees, for an aggregate of $100, underwriter's warrants to purchase up to
200,000 shares. The underwriter's warrants are exercisable at any time, in
whole or in part, during the five-year period commencing on the date of this
prospectus at an exercise price of $9.90 per share, 165% of the public offering
price per share. During the first year following the date of this prospectus,
the underwriter's warrants are assignable or transferable only to the officers
and partners of the underwriter and members of the selling group. During the
exercise period, the holders of the underwriter's warrants will have the
opportunity to profit from a rise in the market price of the shares, which will
dilute the interests of our stockholders. We expect that the underwriter's
warrants will be exercised when we would, in all likelihood be able to obtain
any needed capital on terms more favorable to us than those provided in the
underwriter's warrants. Any profit realized by the underwriter on the sale of
the underwriter's warrants or the underlying shares of common stock may be
deemed additional underwriting compensation. The underwriter's warrants contain
a cashless exercise provision. We have agreed that, upon the request of the
holders of the majority of the underwriter's warrants, we will, at our own
expense, on one occasion during the exercise period register the underwriter's
warrants and the shares underlying the underwriter's warrants under the
Securities Act. We have also agreed to include the underwriter's warrants and
all underlying shares in any appropriate registration statement which is filed
by us under the Securities Act during the seven years following the date of
this prospectus.

We have agreed, for a period of three years from the date of this
prospectus, if so requested by the underwriter, to nominate and use our best
efforts to elect a designee of the underwriter as a director of Delcath or, at
the underwriter's option, as a non-voting advisor to our board of directors.
Our officers, directors and current stockholders have agreed to vote their
shares in favor of the underwriter's designee. The underwriter has not yet
exercised its right to designate a person.

The holders of all of our outstanding shares of common stock, options and
warrants have agreed not to sell or dispose in another manner any of those
securities in the public markets for a period of twelve months

44
<PAGE>

form the date of this prospectus without the underwriter's prior written
consent. For the second year following the closing, our officers, directors and
principal stockholders have agreed that without the underwriter's written
consent they will not sell any shares of common stock during any three-month
period in excess of the amount they would be allowed to sell if they were
deemed an affiliate of ours and the shares were deemed restricted as defined
under Rule 144 of the Securities Act. This amount is the greater of: (a) 1% of
the then outstanding common stock; and (b) the average weekly trading volume of
the common stock during the four calendar weeks preceding the sale.

We have agreed to indemnify the underwriter against civil liabilities,
including liabilities under the Securities Act.

The underwriter has informed us that it does not expect sales of the
securities offered to discretionary accounts to exceed 1% of the shares offered
by this prospectus.

Before this offering, there has been no public market for our common
stock. Accordingly, the initial public offering price of the common stock has
been determined by negotiation between us and the underwriter and may not
necessarily be related to our asset value, net worth or other established
criteria of value. Factors considered in determining this price include our
financial condition and prospects, an assessment of our management, market
prices of similar securities of comparable publicly-traded companies, financial
and operating information of companies engaged in activities similar to our
business and the general condition of the securities market.

In connection with this offering, the underwriter may engage in passive
market making transactions in the shares on Nasdaq in accordance with Rule 103
of Regulation M promulgated under the Exchange Act.

In connection with this offering, the underwriter may engage in
transactions that stabilize, maintain or affect in another manner the price of
our common shares. These transactions may include stabilization transactions
permitted by Rule 104 of Regulation M, under which persons may bid for or
purchase shares to stabilize the market price. Specifically, the underwriter
may over-allot in connection with the offering, creating a short position in
our common shares for its own account. In addition, to cover over-allotments or
to stabilize the price of our common shares, the underwriter may bid for, and
purchase, shares in the open market. The underwriter may also reclaim selling
concessions allowed to a dealer for distributing the common shares in the
offering, if the underwriter repurchases previously distributed shares in
transactions to cover short positions, in stabilization transactions or in
another manner. Any of these activities may stabilize or maintain the market
price of our common stock above independent market levels. The underwriter is
not required to engage in these activities, and may end any of these activities
at any time.

LEGAL MATTERS

The validity of the common stock and warrants offered hereby will be
passed upon for Delcath by Morse, Zelnick, Rose & Lander, LLP, New York, New
York. Morse, Zelnick, Rose & Lander, LLP owns an aggregate 125,000 shares of
our common stock. Blank Rome Tenzer Greenblatt LLP, New York, NY, has served as
counsel to the underwriter in connection with this offering.

EXPERTS

The financial statements of Delcath Systems, Inc. as of December 31, 1999
and for each of the years in the two year period ended December 31, 1999 and
for the period from August 5, 1988 (inception) to December 31, 1999 included in
this prospectus have been so included in reliance on the report of KPMG LLP,
independent certified public accountants, given on the authority of such firm
as experts in auditing and accounting.

AVAILABLE INFORMATION

Delcath has filed with the Securities and Exchange Commission, a
registration statement on Form SB-2 (including exhibits and schedules thereto)
under the Securities Act with respect to the shares to be sold in this
offering. This prospectus which constitutes a part of the registration
statement, does not contain all the

45
<PAGE>

information set forth in the registration statement and the exhibits filed with
it, portions of which have been omitted as permitted by the rules and
regulations of the SEC. For further information with respect to Delcath and the
shares to be sold in this offering, reference is made to the registration
statement and to the exhibits filed with it. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to, are not necessarily complete. In each instance we refer you to the
copy of the contracts, agreements and or other documents filed as exhibits to
the registration statement, and these statements are deemed qualified in their
entirety by reference to the contract or document.

You may inspect, without charge, all or any portion of the registration
statement or any reports, statements or other information Delcath files at the
SEC's public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of these documents may also be obtained from the SEC's Public Reference
Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 upon payment
of the prescribed fees. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330.

In addition, registration statements and other filings made with the SEC
through its electronic data gathering, analysis and retrieval systems are
publicly available through the SEC's site located at www.sec.gov. The
registration statement, including all exhibits and schedules and amendments,
has been filed with the commission through the Electronic Data Gathering,
Analysis and Retrieval system.

On the date of this prospectus, we will become subject to the reporting
requirements of the Exchange Act and in accordance with these requirements,
will file reports, proxy statements and other information with the SEC. We
intend to furnish our stockholders with annual reports containing audited
financial statements and other periodic reports as we deem appropriate or as
may be required by law.

46
<PAGE>

Index to Financial Statements

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Independent Auditor's Report ............................................. F-2
Balance Sheets as of December 31, 1999 and March 31, 2000 (unaudited) .... F-3
Statements of Operations for each of the two-year period ended
December 31, 1999, and cumulative from inception
(August 5, 1988) to December 31, 1999, and for the three-month periods
ended March 31, 1999 and 2000 (unaudited) and cumulative
from inception (August 5, 1988) to March 31, 2000 (unaudited) ........... F-4
Statements of Stockholders' Equity for each of the years in the two-year
period ended December 31, 1999 and cumulative from
inception (August 5, 1988) to December 31, 2000 (unaudited) ............. F-5
Statements of Cash Flows for each of the years in the two-year period
ended December 31, 1999, and cumulative from
inception (August 5, 1988) to December 31, 1999, and the three-month
periods ended March 31, 1999 and 2000 (unaudited) and
cumulative from inception (August 5, 1988) to March 31, 2000
(unaudited) ............................................................. F-6
Notes to Financial Statements ............................................ F-7
</TABLE>

F-1
<PAGE>

Independent Auditors' Report

(When the reverse stock split as described in Note 2 of the accompanying
financial statements has been consummated, we will be in a position to render
the following opinion.)

/s/ KPMG LLP
---------------------

KPMG LLP

The Board of Directors
Delcath Systems, Inc.:

We have audited the accompanying balance sheet of Delcath Systems, Inc. (a
development stage enterprise) as of December 31, 1999 and the related
statements of operations, stockholders' equity, and cash flows for each of the
years in the two-year period ended December 31, 1999 and for the period from
August 5, 1988 (inception) to December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Delcath Systems, Inc. (a
development stage enterprise) as of December 31, 1999 and the results of its
operations and its cash flows for each of the years in the two-year period
ended December 31, 1999 and for the period August 5, 1988 (inception) to
December 31, 1999, in conformity with generally accepted accounting principles.

May 5, 2000

F-2
<PAGE>

DELCATH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)

Balance Sheets

<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
Assets ---------------- ----------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ....................................... $ 561,078 218,255
Interest receivable ............................................. 3,326 244
Prepaid rent .................................................... -- 65,533
Prepaid insurance ............................................... 4,167 32,083
Deferred IPO costs .............................................. -- 52,703
------------- -------
Total current assets .......................................... 568,571 368,818
Furniture and fixtures, net ...................................... 8,250 7,500
Due from affiliate ............................................... 24,000 24,000
------------- -------
Total assets .................................................. $ 600,821 400,318
============= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses ........................... $ 112,748 122,369
------------- -------
Total current liabilities ..................................... 112,748 122,369
------------- -------
Commitments and contingencies (note 4)
Stockholders' equity (note 2):
Class A preferred stock, $.01 par value: 5,000,000 shares
authorized; 2,000,000 shares issued and outstanding (liqui-
dation preference of $2,216,637 at December 31, 1999) ......... 20,000 20,000
Class B preferred stock, $.01 par value: 5,000,000 shares
authorized; 416,675 shares issued and outstanding (liquida-
tion preference of $1,625,033 at December 31, 1999) ........... 4,167 4,167
Common stock, $.01 par value: 15,000,000 shares authorized;
1,093,333 shares issued and outstanding ....................... 10,933 10,933
Additional paid-in capital ...................................... 11,764,935 11,764,935
Deficit accumulated during development stage .................... (11,311,962) (11,522,086)
------------- -----------
Total stockholders' equity .................................... 488,073 277,949
------------- -----------
Total liabilities and stockholders' equity .................... $ 600,821 400,318
============= ===========

</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

DELCATH SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

Statements of Operations

<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1998 1999
----------------- -------------
<S> <C> <C>
Costs and expenses:
Legal, consulting and
accounting fees ............ $ 574,299 626,366
Stock option
compensation expense
(reversal) ................. 759,229 (456,185)
Compensation and related
expenses ................... 466,644 200,128
Other operating expenses ..... 324,271 227,817
------------- --------
Total costs and
expenses .................. 2,124,443 598,126
------------- --------
Operating income (loss) (2,124,443) (598,126)
Interest income .............. 74,463 43,470
Interest expense ............. -- (17,925)
------------- --------
Net income (loss) .......... $ (2,049,980) (572,581)
============= ========
Common share data:
Basic income (loss) per
share ...................... $ (2.01) (0.54)
============= ========
Diluted income (loss)
per share ................. ( 2.01) (0.54)
============= ========
Weighted average number
of shares of common
stock outstanding .......... 1,021,437 1,062,605
Potentially dilutive shares -- --
------------- ---------
Weighted average
number of shares of
common shares
assuming dilution ......... 1,021,437 1,062,605
============= =========

</TABLE>

<PAGE>

Cumulative Cumulative
from inception Three months ended from inception
(August 5, 1988) March 31, (August 5, 1988)
to ---------------------------- to
December 31, 1999 1999 2000 March 31, 2000
------------------- ------------- ------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Costs and expenses:
Legal, consulting and
accounting fees ............ 4,517,169 120,894 98,273 4,615,442
Stock option
compensation expense
(reversal) ................. 2,520,170 (456,185) -- 2,520,170
Compensation and related
expenses ................... 2,488,170 63,537 52,921 2,541,091
Other operating expenses ..... 2,191,276 37,788 64,455 2,255,731
--------- -------- ------ ---------
Total costs and
expenses .................. 11,716,785 (233,966) 215,649 11,932,434
---------- -------- ------- ----------
Operating income (loss) (11,716,785) 233,966 (215,649) (11,932,434)
Interest income .............. 537,696 8,981 5,525 543,221
Interest expense ............. (132,873) -- -- (132,873)
----------- -------- -------- -----------
Net income (loss) .......... (11,311,962) 242,947 (210,124) (11,522,086)
=========== ======== ======== ===========
Common share data:
Basic income (loss) per
share ...................... 0.24 (0.19)
========= ========
Diluted income (loss)
per share ................. 0.12 (0.19)
========= ========
Weighted average number
of shares of common
stock outstanding .......... 1,030,906 1,093,333
Potentially dilutive shares 1,065,190 --
---------- ---------
Weighted average
number of shares of
common shares
assuming dilution ......... 2,096,096 1,093,333
========== =========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

DELCATH SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)

Statements of Stockholders' Equity

Three months ended March 31, 2000 (unaudited) and years ended December 31, 1999
and 1998 and cumulative from inception (August 5, 1988)
to December 31, 1999 and March 31, 2000 (unaudited)

<TABLE>
<CAPTION>
Common stock $.01 par value
-----------------------------------------------------
Issued In treasury
------------------------- --------------------------
No. of No. of
shares Amount shares Amount
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Shares issued in connection with the formation of
the Company as of August 22, 1988 .................. 786,678 $ 7,867 -- --
Sale of preferred stock, August 22, 1988 ............ -- -- -- --
Shares returned as of March 9, 1990 ................. -- -- (524,451) (5,245)
Sale of stock, October 2, 1990 ...................... -- -- 21,852 219
Sale of stock, January 23, 1991 ..................... -- -- 58,924 589
Sale of stock, August 30, 1991 ...................... -- -- 1,714 17
Sale of stock, December 31, 1992 .................... -- -- 131,113 1,311
Sale of stock, July 15, 1994 ........................ -- -- 130,763 1,308
Sale of stock, December 19, 1996 .................... -- -- 50,046 500
Shares issued in connection with conversion of
short-term borrowings as of December 22, 1996 ...... 74,086 741 124,619 1,246
Sale of stock, December 31, 1997 .................... 67,742 677 -- --
Exercise of stock options ........................... 17,482 175 4,370 44
Shares issued as compensation ....................... 2,970 30 1,050 11
Amortization of compensatory stock options
granted ............................................ -- -- -- --
Forfeiture of stock options ......................... -- -- -- --
Shares issued in connection with exercise of
warrants ........................................... 27,318 273 -- --
Deficit accumulated from inception to December
31, 1997 ........................................... -- -- -- --
------- ------- -------- ------
Balance at December 31, 1997 ........................ 976,276 9,763 -- --
Sale of stock, January 16, 1998 ..................... 43,704 437 -- --
Sale of stock, September 24, 1998 ................... 4,370 44 -- --
Shares returned, April 17, 1998 ..................... (4,370) (44) -- --
Amortization of compensatory stock options
granted ............................................ -- -- -- --
Forfeiture of stock options ......................... -- -- -- --
Exercise of stock options ........................... 10,926 109 -- --
Net loss for year ended December 31, 1998 ........... -- -- -- --
------- ------- -------- ------
Balance at December 31, 1998 ........................ 1,030,906 10,309 -- --
Sale of stock, July 2, 1999 ......................... 59,514 595 -- --
Amortization of compensatory stock options
granted ............................................ -- -- -- --
Forfeiture of stock options ......................... -- -- -- --
Shares issued in connection with exercise of
warrants ........................................... 2,913 29 -- --
Net loss for year ended December 31, 1999 ........... -- -- -- --
--------- ------- -------- ------
Balance at December 31, 1999 ........................ 1,093,333 10,933 -- --
Net loss for three months ended March 31, 2000
(unaudited) ........................................ -- -- -- --
--------- ------- -------- ------
Balance at March 31, 2000 ........................... 1,093,333 $10,933 -- --
========= ======= ======== ======
</TABLE>

<PAGE>

[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Class A Class B
Common stock $.01 par value preferred stock preferred stock
--------------------------- ------------------------ --------------------
Outstanding $.01 par value $.01 par value
-------------------------- ------------------------ --------------------
No. of No. of No. of
shares Amount shares Amount shares Amount
------------- ----------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Shares issued in connection with the formation of
the Company as of August 22, 1988 .................. 786,678 $ 7,867 -- -- -- --
Sale of preferred stock, August 22, 1988 ............ -- -- 2,000,000 20,000 -- --
Shares returned as of March 9, 1990 ................. (524,451) (5,245) -- -- -- --
Sale of stock, October 2, 1990 ...................... 21,852 219 -- -- -- --
Sale of stock, January 23, 1991 ..................... 58,924 589 -- -- 416,675 4,167
Sale of stock, August 30, 1991 ...................... 1,714 17 -- -- -- --
Sale of stock, December 31, 1992 .................... 131,113 1,311 -- -- -- --
Sale of stock, July 15, 1994 ........................ 130,763 1,308 -- -- -- --
Sale of stock, December 19, 1996 .................... 50,046 500 -- -- -- --
Shares issued in connection with conversion of
short-term borrowings as of December 22, 1996 ...... 198,705 1,987 -- -- -- --
Sale of stock, December 31, 1997 .................... 67,742 677 -- -- -- --
Exercise of stock options ........................... 21,852 219 -- -- -- --
Shares issued as compensation ....................... 4,020 41 -- -- -- --
Amortization of compensatory stock options
granted ............................................ -- -- -- -- -- --
Forfeiture of stock options ......................... -- -- -- -- -- --
Shares issued in connection with exercise of
warrants ........................................... 27,318 273 -- -- -- --
Deficit accumulated from inception to December
31, 1997 ........................................... -- -- -- -- -- --
-------- -------- --------- ------ ------- -----
Balance at December 31, 1997 ........................ 976,276 9,763 2,000,000 20,000 416,675 4,167
Sale of stock, January 16, 1998 ..................... 43,704 437 -- -- -- --
Sale of stock, September 24, 1998 ................... 4,370 44 -- -- -- --
Shares returned, April 17, 1998 ..................... (4,370) (44) -- -- -- --
Amortization of compensatory stock options
granted ............................................ -- -- -- -- -- --
Forfeiture of stock options ......................... -- -- -- -- -- --
Exercise of stock options ........................... 10,926 109 -- -- -- --
Net loss for year ended December 31, 1998 ........... -- -- -- -- -- --
-------- -------- --------- ------ ------- -----
Balance at December 31, 1998 ........................ 1,030,906 10,309 2,000,000 20,000 416,675 4,167
Sale of stock, July 2, 1999 ......................... 59,514 595 -- -- -- --
Amortization of compensatory stock options
granted ............................................ -- -- -- -- -- --
Forfeiture of stock options ......................... -- -- -- -- -- --
Shares issued in connection with exercise of
warrants ........................................... 2,913 29 -- -- -- --
Net loss for year ended December 31, 1999 ........... -- -- -- -- -- --
--------- -------- --------- ------ ------- -----
Balance at December 31, 1999 ........................ 1,093,333 10,933 2,000,000 20,000 416,675 4,167
Net loss for three months ended March 31, 2000
(unaudited) ........................................ -- -- -- -- -- --
--------- -------- --------- ------ ------- -----
Balance at March 31, 2000 ........................... 1,093,333 $ 10,933 2,000,000 $20,000 416,675 $4,167
========= ======== ========= ======= ======= ======

</TABLE>

<PAGE>
[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during
paid-in development
capital stage Total
-------------- ----------------- ---------------
<S> <C> <C> <C>
Shares issued in connection with the formation of
the Company as of August 22, 1988 .................. $ (6,867) $ -- $ 1,000
Sale of preferred stock, August 22, 1988 ............ 480,000 -- 500,000
Shares returned as of March 9, 1990 ................. 5,245 -- --
Sale of stock, October 2, 1990 ...................... 24,781 -- 25,000
Sale of stock, January 23, 1991 ..................... 1,401,566 -- 1,406,322
Sale of stock, August 30, 1991 ...................... 9,984 -- 10,001
Sale of stock, December 31, 1992 .................... 1,013,693 -- 1,015,004
Sale of stock, July 15, 1994 ........................ 1,120,692 -- 1,122,000
Sale of stock, December 19, 1996 .................... 999,500 -- 1,000,000
Shares issued in connection with conversion of
short-term borrowings as of December 22, 1996 ...... 1,702,977 -- 1,704,964
Sale of stock, December 31, 1997 .................... 774,323 -- 775,000
Exercise of stock options ........................... 30,781 -- 31,000
Shares issued as compensation ....................... 34,444 -- 34,485
Amortization of compensatory stock options
granted ............................................ 2,496,347 -- 2,496,347
Forfeiture of stock options ......................... (279,220) -- (279,220)
Shares issued in connection with exercise of
warrants ........................................... 234,125 -- 234,398
Deficit accumulated from inception to December
31, 1997 ........................................... -- (8,689,401) (8,689,401)
----------- ------------- -------------
Balance at December 31, 1997 ........................ 10,042,371 (8,689,401) 1,386,900
Sale of stock, January 16, 1998 ..................... 499,563 -- 500,000
Sale of stock, September 24, 1998 ................... 56,956 -- 57,000
Shares returned, April 17, 1998 ..................... (4,956) -- (5,000)
Amortization of compensatory stock options
granted ............................................ 1,166,418 -- 1,166,418
Forfeiture of stock options ......................... (407,189) -- (407,189)
Exercise of stock options ........................... 67,391 -- 67,500
Net loss for year ended December 31, 1998 ........... -- (2,049,980) (2,049,980)
----------- ------------- -------------
Balance at December 31, 1998 ........................ 11,420,554 (10,739,381) 715,649
Sale of stock, July 2, 1999 ......................... 775,597 -- 776,192
Amortization of compensatory stock options
granted ............................................ 98,186 -- 98,186
Forfeiture of stock options ......................... (554,371) -- (554,371)
Shares issued in connection with exercise of
warrants ........................................... 24,969 -- 24,998
Net loss for year ended December 31, 1999 ........... -- (572,581) (572,581)
----------- ------------- -------------
Balance at December 31, 1999 ........................ 11,764,935 (11,311,962) 488,073
Net loss for three months ended March 31, 2000
(unaudited) ........................................ -- (210,124) (210,124)
----------- ------------- -------------
Balance at March 31, 2000 ........................... $11,764,935 $ (11,322,086) $ 277,949
=========== ============= =============
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

DELCATH SYSTEMS, INC.

(A DEVELOPMENT STAGE COMPANY)

Statement of Cash Flows

<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1998 1999
----------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................ $ (2,049,980) (572,581)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Stock option compensation expense
(reversal) ................................. 759,229 (456,185)
Stock compensation expense .................. -- --
Depreciation expense ........................ 3,000 3,000
Amortization of organization costs .......... -- --
(Increase) decrease in prepaid
expenses ................................... 7,966 867
(Increase) decrease in interest
receivable ................................. 32,932 1,797
Due from affiliate .......................... -- --
(Decrease) increase in accounts
payable and accrued expenses ............... (174,369) (69,323)
------------- --------
Net cash used in operating
activities ............................... (1,421,222) (1,092,425)
------------- ----------
Cash flows from investing activities:
Purchase of furniture and fixtures ........... -- --
Purchase of short-term investments ........... -- --
Proceeds from maturities of short-term
investments ................................. -- --
Organization costs ........................... -- --
------------- ----------
Net cash provided by (used in)
investing activities ..................... -- --
------------- ----------
Cash flows from financing activities:
Net proceeds from sale of stock and
exercise of stock options and warrants 624,500 801,190
Deposits ..................................... (304,991) --
Deferred IPO costs ........................... -- --
Proceeds from short-term borrowings .......... -- --
------------- ----------
Net cash provided by financing
activities ............................... 319,509 801,190
------------- ----------
Increase (decrease) in cash and cash
equivalents .............................. (1,101,713) (291,235)
Cash and cash equivalents at beginning of
period ....................................... 1,954,026 852,313
------------- ----------
Cash and cash equivalents at end of period $ 852,313 561,078
============= ==========
Supplemental cash flow activities:
Conversion of debt to common stock ........... $ -- --
============= ==========
Cash paid for interest ....................... $ -- 17,925
============= ==========
</TABLE>

<PAGE>

[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Cumulative Cumulative
from inception from inception
(August 5, 1988) Three months ended (August 5, 1988)
to March 31, March 31, to
December 31, 1999 1999 2000 March 31, 2000
------------------- ------------- ------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................ (11,311,962) 242,947 (210,124) (11,522,086)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Stock option compensation expense
(reversal) ................................. 2,520,171 (456,185) -- 2,520,171
Stock compensation expense .................. 34,485 -- -- 34,485
Depreciation expense ........................ 6,750 750 750 7,500
Amortization of organization costs .......... 42,165 -- -- 42,165
(Increase) decrease in prepaid
expenses ................................... (4,167) (17,883) (93,449) (97,616)
(Increase) decrease in interest
receivable ................................. (3,326) 3,257 3,082 (244)
Due from affiliate .......................... (24,000) -- -- (24,000)
(Decrease) increase in accounts
payable and accrued expenses ............... 107,748 10,851 9,621 117,369
----------- -------- -------- -----------
Net cash used in operating
activities ............................... (8,632,136) (216,263) (290,120) (8,922,256)
----------- -------- -------- -----------
Cash flows from investing activities:
Purchase of furniture and fixtures ........... (15,000) -- -- (15,000)
Purchase of short-term investments ........... (1,030,000) -- -- (1,030,000)
Proceeds from maturities of short-term
investments ................................. 1,030,000 -- -- 1,030,000
Organization costs ........................... (42,165) -- -- (42,165)
----------- -------- -------- -----------
Net cash provided by (used in)
investing activities ..................... (57,165) -- -- (57,165)
----------- -------- -------- -----------
Cash flows from financing activities:
Net proceeds from sale of stock and
exercise of stock options and warrants 7,545,415 -- -- 7,545,415
Deposits ..................................... -- -- -- --
Deferred IPO costs ........................... -- -- (52,703) (52,703)
Proceeds from short-term borrowings .......... 1,704,964 -- -- 1,704,964
----------- -------- -------- -----------
Net cash provided by financing
activities ............................... 9,250,379 -- (52,703) 9,197,676
----------- -------- -------- -----------
Increase (decrease) in cash and cash
equivalents .............................. 561,078 (216,263) (342,823) 218,255
Cash and cash equivalents at beginning of
period ....................................... -- 852,313 561,078 --
----------- -------- -------- -----------
Cash and cash equivalents at end of period 561,078 636,050 218,255 218,255
=========== ======== ======== ===========
Supplemental cash flow activities:
Conversion of debt to common stock ........... 1,704,964 -- -- 1,704,964
=========== ======== ======== ===========
Cash paid for interest ....................... 114,948 -- -- 132,873
=========== ======== ======== ===========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

DELCATH SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements

December 31, 1999 and 1998

(1) Description of Business and Summary of Significant Accounting Policies

(a) Description of Business

Delcath Systems, Inc. (the "Company") is a development stage company which
was founded in 1988 for the purpose of developing and marketing a proprietary
drug delivery system capable of introducing, and removing, high dose
chemotherapy agents to a diseased organ system while greatly inhibiting their
entry into the general circulation system. It is hoped that the procedure will
result in a meaningful treatment for cancer. In November 1989, the Company was
granted an IDE (Investigational Device Exemption) and an IND status
(Investigational New Drug) for its product by the FDA (Food and Drug
Administration).

(b) Basis of Financial Statement Presentation

The accounting and financial reporting policies of the Company conform to
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make assumptions and estimates that impact the amounts reported
in those statements. Such assumptions and estimates are subject to change in
the future as additional information becomes available or as circumstances are
modified. Actual results could differ from these estimates.

Furniture and fixtures are recorded at cost and are being depreciated over
the estimated useful lives of the assets.

(d) Income Taxes

The Company accounts for income taxes following the asset and liability
method in accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes." Under such method, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. The Company's income tax
returns are prepared on the cash basis of accounting. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years that the asset is expected to be recovered or the liability
settled.

(e) Stock Option Plan

The Company has historically accounted for its employee stock option plans
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense is recorded on the date of grant
only if the current fair market value of the underlying stock exceeds the
exercise price. Fair market values of the Company's common stock at the dates
options were granted were based on third party sales of stock at or around the
dates options were granted, or in the absence of such transactions, based on a
determination by the board of directors based on current available information.
In 1996, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation," which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows entities
to continue to apply the provisions of APB Opinion No. 25 and provide pro forma
net income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to continue
to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123 (see note 2(e)).

F-7
<PAGE>

DELCATH SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements

December 31, 1999 and 1998 -- (Continued)

(1) Description of Business and Summary of Significant Accounting Policies
-- (Continued)

(f) Earnings Per Share

Basic earnings per share is computed using the weighted average number of
shares of common stock outstanding during the period. Diluted earnings per
share reflect the dilutive effect of common stock equivalents using the
treasury stock method.

(g) Statements of Cash Flows

For purposes of the statements of cash flows, the Company considers highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents. At December 31, 1999 cash equivalents included commercial
paper of $557,000.

(h) Interim Financial Information

The financial statements and notes related thereto as of March 31, 2000
and for the three months ended March 31, 1999 and 2000 are unaudited, but in
the opinion of management, include all normal recurring adjustments necessary
for a fair presentation of financial position and results of operations. The
operating results for the interim periods are not necessarily indicative of a
full year's operations.

(2) Stockholders' Equity

The common stock and per share data for all periods gives effect to a
reverse stock split of 1 for 2.2881 shares which is to occur immediately before
the date of the Company's initial public offering described in note 5.

(a) Stock Issuances

BGH Medical Products, Inc. (name later changed to Delcath Systems, Inc.),
a Delaware corporation (BGH - Delaware), was formed on August 5, 1988. As of
August 22, 1988, BGH Medical Products, Inc., a Connecticut corporation (BGH -
Conn.), was merged into BGH -Delaware, the surviving corporation. As of the
merger date, the authorized capital stock of BGH - Conn. consisted of 5,000
shares of common stock, par value $.01 per share, of which 1,000 shares were
issued and outstanding. Upon the merger, each BGH - Conn. common share
outstanding was exchanged into 786.678 shares of BGH - Delaware common stock.
As a result of the conversion, BGH - Delaware issued 786,678 shares of common
stock at $.01 par value. The aggregate amount of the par value of all shares of
common stock issued as a result of the exchange, $7,867, was credited as the
common stock capital of BGH - Delaware, and the difference in respect to the
capital account deficiency was charged to additional paid-in capital.

On August 22, 1988, BGH - Delaware then sold in a private placement
2,000,000 shares of class A preferred stock, with a par value of $.01, to two
affiliated venture capital funds for an aggregate amount of $500,000 in cash.

On March 8, 1990, 524,451 shares of common stock were returned to the
Company as treasury stock due to relevant technology milestones not being fully
achieved within the specified time period, in accordance with provisions of a
stockholders' agreement.

Effective May 7, 1990, the Company changed its name to Delcath Systems,
Inc.

On October 2, 1990, the Company sold 21,852 shares of common stock held in
its treasury, at $.01 par value, for an aggregate amount of $25,000.

On January 23, 1991, the Company offered in a private placement shares of
common stock and/or class B preferred stock at $5.83 and $2.55 per share,
respectively, for an aggregate maximum amount of

F-8
<PAGE>

DELCATH SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements

December 31, 1999 and 1998 -- (Continued)

(2) Stockholders' Equity -- (Continued)

$2,000,000. Under the terms of the private placement, 58,924 shares of common
stock held in its treasury and 416,675 shares of class B preferred stock were
sold, yielding net proceeds to the Company of $1,406,322. The common stock and
class B preferred stock sold each has a par value of $.01, resulting in an
increase in additional paid-in capital of $1,401,566. The two affiliated
venture capital funds that owned the class A preferred stock purchased 117,650
of the class B preferred stock sold in the private placement.

On August 30, 1991, the Company sold an additional 1,714 shares of common
stock held in its treasury at $5.83 per share, yielding proceeds to the Company
of $10,001. The shares have a par value of $.01, resulting in an additional
paid-in capital amount of $9,984.

In a December 1992 private placement, the Company sold 131,113 shares of
common stock held in our treasury at $8.01 per share for a total placement of
$1,050,000 ($1,015,004 after expenses). The shares issued have a par value of
$.01, resulting in an additional paid-in capital amount of $1,048,689
($1,013,693 after expenses). The two affiliated venture capital funds that
owned the class A preferred stock purchased 34,963 of the shares of common
stock in its treasury which were sold.

Effective January 1, 1994, the Company issued 2,185 shares of common stock
held in its treasury at $1.14 per share for a total price of $2,500 upon the
exercise of stock options by an employee of the Company.

During the first quarter of 1994, the Company increased its authorized
number of shares of common stock from 5,000,000 to 15,000,000.

On July 15, 1994, the Company sold through a private placement offering,
units at a price of $51,000 per unit. Each unit consisted of 5,944 common
shares and 594 warrants, each of which entitled the holder to purchase one
share of common stock for $8.58. In connection therewith, the Company sold
twenty-two (22) units (130,763 common shares and 13,076 warrants expiring
August 30, 1997) for total proceeds of $1,122,000. The two affiliated venture
capital funds that owned the class A preferred stock purchased six (6) of the
units sold. During August 1997, the holders of warrants exercised 11,293
warrants to purchase 11,293 shares of common stock at $8.58 each for total
proceeds of $96,900. The remaining warrants expired unexercised.

Effective January 1, 1995, the Company issued 2,185 shares of common stock
held in its treasury at $1.14 per share for a total price of $2,500 upon the
exercise of stock options by an employee of the Company.

Effective January 1, 1996, the Company issued 1,049 shares of common
stock, valued at $8.58 per share for a total of $9,000, as compensation for
consulting services.

On December 19, 1996, the Company sold through a private transaction
50,046 shares of common stock for total proceeds of $1,000,000. In connection
with the offering, the purchaser obtained sole distribution rights for the
Company's products for a limited period of time in Japan, Korea, China, Taiwan,
and Hong Kong. No value was attributed to the distribution rights. In addition,
the purchaser will be required to buy certain products from the Company.

On April 26, 1996, the Company entered into short-term borrowing
agreements with 26 investors under which it borrowed $1,704,964 bearing
interest at 10.25% per annum. Under the terms of the agreements, on December
22, 1996, the short-term borrowings were converted into 198,705 shares of
common stock, based on a conversion price of $8.58 per share, and 99,350
warrants, expiring April 25, 1999, entitling the holders to purchase 99,350
additional shares of common stock at $8.58 per share. The two affiliated
venture capital funds discussed above provided $250,000 of the short-term loan,
converting that debt into 29,136 shares and 14,568

F-9
<PAGE>

DELCATH SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements

December 31, 1999 and 1998 -- (Continued)

(2) Stockholders' Equity -- (Continued)

warrants. From April 26, 1996 through December 22, 1996, interest of $114,948
accrued on the borrowings. Such interest was paid in January 1997. During
September 1997, the holders of warrants exercised 1,457 warrants to purchase
1,457 shares of common stock at $8.58 each for total proceeds of $12,499.
During December 1997, the two affiliated venture capital funds exercised their
14,568 warrants to purchase 14,568 common shares at $8.58 each for total
proceeds of $124,999. During April 1999, the holders of warrants exercised
2,913 warrants to purchase 2,913 common shares at $8.58 each for total proceeds
of $24,998. The remaining warrants expired unexercised.

In 1997, the Company issued 2,970 shares of common stock, valued at $8.58
per share based on a 1996 agreement, for a total cost of $25,485, as
compensation for consulting services.

From September 1997, through December 31, 1997, the Company issued 67,742
shares of common stock. During January 1998, the Company received an additional
$500,000 and issued another 43,704 shares. In April 1998, under the terms of
the restricted stock sales agreements, the Company issued to the purchasers of
the 111,446 shares of common stock 14,859 three year warrants entitling the
holders to purchase 14,859 shares of common stock at $8.58 per share.

In December 1997, the holder of non-incentive stock options exercised
17,482 options to purchase 17,482 shares of common stock at $1.49 each for
total proceeds of $26,000.

At the end of December 1997, the holders of 35,545 shares of common stock
agreed to sell those shares to the two affiliated venture capital funds
discussed above at $8.58 per share. The venture capital funds deposited
$304,991 with the Company pending transfer of the shares. At the time of
transfer, the Company paid the funds to the sellers.

In April 1998, a venture capital firm exercised 10,926 non-incentive stock
options to purchase 10,926 restricted common shares at $6.18 each for total
proceeds of $67,500.

In April 1998, in connection with the settlement of a dispute with a
former director, the Company cancelled 4,370 shares of common stock previously
held by the former director in return for $1.14 per share, the price originally
paid by the former director.

In September 1998, the Company sold 4,370 shares of common stock to an
individual for $13.04 per share, yielding proceeds to the Company of $57,000.

In July 1999, the Company sold 59,514 shares of common stock to individual
investors for $13.04 per share and warrants entitling the holders to purchase
6,609 common shares at $11.74 per share (which warrants expire April 30, 2002),
yielding proceeds to the Company of $776,192.

The two affiliated venture capital firms discussed above were liquidated
in 1998 and the shares of the Company then owned by the funds were distributed
to the individual investors of the funds, or their nominee, if so directed.

(b) Voting Rights

Each holder of common stock is entitled to one vote. Each share of class A
preferred stock and each share of class B preferred stock is convertible into
shares of common stock on a one for .4370 basis, subject to antidilution
adjustments. In addition to special voting rights to elect directors to the
Board of Directors, each class A preferred stockholder is entitled to ten times
the number of votes per share of common stock into which the class A preferred
stock is convertible and each class B preferred stockholder is entitled to the
number of votes per share of Common Stock into which the class B preferred
stock is convertible.

In the event of any liquidation, dissolution or winding up of the Company,
after provision for payment of debts and other liabilities, the holders of the
class A preferred stock shall be entitled to receive, prior to any

F-10
<PAGE>

DELCATH SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements

December 31, 1999 and 1998 -- (Continued)

(2) Stockholders' Equity -- (Continued)

distribution of any of the assets or surplus funds of the Company to the
holders of class B preferred stock and common stock, an amount equal to the sum
of (a) 150% of the issue price (as adjusted for any combinations,
consolidations, stock distributions or stock dividends with respect to such
shares) plus (b) a sum equal to that amount of interest that would have accrued
if a sum equal to 150% of the issue price had been invested at a compounded
annual interest rate of 10% at the original issue date. After the satisfaction
of the class A preferred stockholders, the holders of class B preferred stock
will be entitled to a liquidation sum, in preference to the common
stockholders, of $3.90 per share. Common stockholders will be entitled to share
ratably with the class A and class B preferred stockholders (on an as-converted
basis) in the remaining assets of the Company.

(d) Dividends

The holders of class A and class B preferred stock are entitled to receive
dividends on a cumulative basis at the rate of 11% and 8%, respectively, per
share per annum as and when declared by the Board of Directors, before any
dividend or distribution is declared, set apart for, or paid upon the common
stock of the Company. As of December 31, 1999, class A preferred stock and
class B preferred stock had dividends in arrears of $624,740 ($.31 per share)
and $759,429 ($1.82 per share), respectively. Dividends declared but unpaid, at
the option of the holder, are payable in cash or may be converted into common
stock subject to antidilution adjustments. The class A dividends may be
converted at the rate of $.57 per share, while the class B dividends may be
converted at the rate of $5.83 per share.

The Company has entered into agreements with the preferred shareholders
providing that if the Company completes a public offering of its common stock
prior to September 30, 2001, the Board will, immediately prior to the offering,
declare as payable all dividends in arrears. In such event, the preferred
shareholders have agreed to accept one-third of such dividends in cash and then
immediately convert all of their outstanding preferred stock into common stock
as well as convert the balance of their declared but unpaid preferred stock
dividends into common stock at the applicable conversion price.

(e) Stock Option Plans

The Company established an Incentive Stock Option Plan and a Non-Incentive
Stock Option Plan under which stock options may be granted. Additionally, the
Company has entered into separate contracts apart from the Incentive Stock
Option Plan and the Non-Incentive Stock Option Plan under which options to
purchase common shares have been granted. A stock option granted allows the
holder of the option to purchase a share of the Company's common stock in the
future at a stated price. The Plans are administered by the Board of Directors
which determines the individuals to whom the options shall be granted as well
as the terms and conditions of each option grant, the option price and the
duration of each option.

The Company's Incentive and Non-Incentive Stock Plans were approved and
became effective on November 1, 1992. The Incentive Stock Options vest as
determined by the Company and expire over varying terms, but not more than five
years from the date of grant.

Stock option activity for the period January 1, 1998 through December 31,
1999 is as follows:

F-11
<PAGE>

DELCATH SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements

December 31, 1999 and 1998 -- (Continued)

(2) Stockholders' Equity -- (Continued)

<TABLE>
<CAPTION>
Non-Incentive and
Grants Incentive Option Plans Other Option
----------------------- ------------------------- -------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------ ---------- ------------ -------------
<S> <C> <C> <C> <C>
Outstanding at
December 31, 1997 255,020 $ 6.11 21,852 $ 2.29
Granted during 1998 21,852 6.18 -- --
Canceled during 1998 (52,445) 6.18 -- --
Expired during 1998 (119,750) 6.18 -- --
Exercised during 1998 (10,926) 6.18 -- --
-------- ------
Outstanding at
December 31, 1998 93,751 5.97 21,852 2.29
Granted during 1999 559,416 3.27 21,852 2.29
Canceled during 1999 (43,704) 5.97 -- --
Forfeited during 1999 (50,047) 5.97 -- --
Expired during 1999 -- -- (21,852) 2.29
-------- -------
Outstanding at
December 31, 1999 559,416 $ 3.26 21,852 $ 2.29
======== =======
</TABLE>

The following summarizes information about shares subject to option at
December 31, 1999:

<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------------------------------------------- -------------------------------
Weighted
Weighted average Weighted
Number Range of average remaining Number average
outstanding exercise prices exercise price life in years exercisable exercise price
------------- ----------------- ---------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
240,374 $ 2.29 $ 2.29 3.76 131,113 $ 2.29
340,894 3.89 3.89 4.00 340,894 3.89
------- ----------- ------- ---- ------- ------
581,268 $2.29-$3.89 $ 3.23 3.90 472,007 $ 3.46
======= =======
</TABLE>

The Company applies APB 25 and related interpretations in accounting for
its plans. Accordingly, stock option compensation expense/(reversal) associated
with the Incentive and Non-Incentive Stock Plans for the years ended December
31, 1998 and 1999 was $759,229 and ($456,185), respectively, net of forfeitures
of $407,189 and $554,371, respectively. Had compensation cost for the Company's
stock option grants been determined based on the fair value at the grant dates
consistent with the methodology of SFAS 123, the Company's net loss for the
years ended December 31, 1998 and 1999 would have been increased to the pro
forma amounts indicated as follows:

1998 1999
----------------- -------------
Net loss:
As reported $ (2,049,980) (572,581)
Pro forma (2,132,139) (944,303)

The per share weighted average fair value of stock options granted during
1999 and 1998 was $.73, estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
the grants for both years: no dividend yield, risk free interest rate of 5.5%,
expected lives of five years and no volatility.

F-12
<PAGE>

DELCATH SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements

December 31, 1999 and 1998 -- (Continued)

(3) Income Taxes

As of December 31, 1999, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $8,542,000 which are available
to offset future federal taxable income, if any, through 2019. The net
operating loss carryforwards resulted in a deferred tax asset of approximately
$2,904,000 at December 31, 1999. Management does not expect the Company to be
taxable in the near future and has established a 100% valuation allowance
against the deferred tax asset created by the net operating loss carryforwards.

(4) Prepaid Rent and Due From Affiliate

The Company leases office space on a month to month basis under a sublease
from an affiliate. The Company has deposited $24,000 with the affiliate as a
rent deposit and in March 2000 prepaid its rent for the period through December
31, 2000. The affiliate has in turn paid such amounts to its landlord.

(5) Initial Public Offering

In March 2000, the Company engaged an investment banker for the purpose of
issuing its stock in an initial public offering. In connection therewith, the
Company anticipates declaring and paying the preferred stock dividends as
described in note 2(d); converting all then outstanding preferred stock to
common stock as described in note 2(d) and effecting a reverse split of the
common shares of 1 for 2.2881 shares.

(6) Subsequent Events

Stock Issuances

During April 2000, the Company sold 292,426 shares at $1.72 per share to
existing stockholders in a rights offering yielding proceeds to the Company of
$501,825.

F-13
<PAGE>

================================================================================

We have not authorized any dealer, salesperson or any other person to
give any information or to represent anything not contained in this prospectus.
You must not rely on any unauthorized information. This prospectus does not an
offer to sell or buy any shares in any jurisdiction where it is unlawful.

-----------------------------------

TABLE OF CONTENTS

Page
----
Prospectus Summary ....................... 3
Risk Factors ............................. 6
Cautionary Statement regarding
Forward-Looking Statements ............ 13
Use of Proceeds .......................... 14
Dilution ................................. 16
Dividend Policy .......................... 17
Capitalization ........................... 17
Selected Financial Data .................. 18
Plan of Operation ........................ 19
Business ................................. 21
Management ............................... 34
Principal Stockholders ................... 40
Certain Transactions ..................... 41
Description of Securities ................ 41
Shares Eligible for Future Sale .......... 43
Underwriting ............................. 44
Legal Matters ............................ 45
Experts .................................. 45
Available Information .................... 45
Index to Financial Statements ............ F-1

-----------------------------------

Until ________, 2000 (25 days after the date of this prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.

================================================================================

<PAGE>

================================================================================

2,000,000 Shares

[DELCATH LOGO]

Common Stock

----------------------------------------
PROSPECTUS
----------------------------------------

Whale Securities Co., L.P.

, 2000

================================================================================
<PAGE>

PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 24. Indemnification of Directors and Officers

Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes a Delaware corporation to indemnify its officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.

Section 102(b) of the Delaware General corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit a director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may
affect a director's liability with respect to any of the following: (i)
breaches of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not made in good faith or which involve
intentional misconduct of knowing violations of law; (iii) liability for
dividends paid or stock repurchased or redeemed in violation of the Delaware
General Corporation law; or (iv) any transaction from which the director
derived an improper personal benefit. Section 102(b)(7) does not authorize any
limitation on the ability of the company or its stockholders to obtain
injunctive relief, specific performance or other equitable relief against
directors.

Article Seventh of the Registrant's Certificate of Incorporation provides
that the personal liability of the directors of the Registrant be eliminated to
the fullest extent permitted under Section 102(b) of the Delaware General
Corporation law.

Article Eighth of the Registrant's Certificate of Incorporation and the
Registrant's By-laws provides that all persons whom the Registrant is empowered
to indemnify pursuant to the provisions of Section 145 of the Delaware General
Corporation law (or any similar provision or provisions of applicable law at
the time in effect), shall be indemnified by the Registrant to the full extent
permitted thereby. The foregoing right of indemnification shall not be deemed
to be exclusive of any other rights to which those seeking indemnification may
be entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise.

Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "Securities Act") may be permitted to directors, officers
or persons controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefor unenforceable.

Reference is made to the Underwriting Agreement, the proposed form of
which is filed as Exhibit 1.1, pursuant to which the underwriter agrees to
indemnify the directors and certain officers of the Registrant and certain
other persons against certain civil liabilities.

Item 25. Other Expenses of Issuance and Distribution

The following table sets forth the expenses (other than the underwriting
discounts and commissions and the representative's non-accountable expense
allowance) expected to be incurred in connection with the issuance and
distribution of the securities being registered. All of such expenses are
estimates, other than the filing fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.

II-1
<PAGE>

<TABLE>
<S> <C>
Filing Fee - Securities and Exchange Commission ....................... $ 4,165.92
Filing Fee - National Association of Securities Dealers, Inc. ......... $ 2,078.00
Fees and Expenses of Accountants ...................................... *
Fees and Expenses of Counsel .......................................... *
Printing and Engraving Expenses ....................................... *
Blue Sky Fees and Expenses ............................................ *
Transfer and Warrant Agent Fees ....................................... *
Miscellaneous Expenses ................................................ *
------------
Total: .............................................................. $ 440,000.00
============
</TABLE>

* To be added by amendment.

Item 26. Recent Sales of Unregistered Securities

Since January 1997, the Registrant has issued securities without
registration under the Securities Act in the following transactions:

1. From September 1997 through January 1998, the Registrant issued an aggregate
of 114,446 shares of Common Stock to eleven investors, including Venkol
Ventures LP, Venkol Ventures Ltd. and a director of the Registrant for
aggregate proceeds of $1,275,000. In April 1998, the eleven investors also
received three-year warrants to purchase 14,859 shares of common stock at $8.58
per share.

2. In December 1997, the Registrant issued an aggregate of 17,482 shares of
Common Stock to an employee upon the exercise of non-incentive stock options
for aggregate proceeds of $26,000.

3. In December 1997, the Registrant issued an aggregate of 2,970 shares of
Common Stock valued at $25,485 to a consultant as compensation for consulting
services.

4. In April 1998, the Registrant issued an aggregate of 10,926 shares of common
stock to a venture capital firm upon the exercise of non-incentive stock
options for aggregate proceeds of $67,500.

5. In September 1998, the Registrant issued an aggregate of 4,370 shares of
common stock to an investor for aggregate proceeds of $57,000.

6. In April 1999, the Registrant issued an aggregate of 2,913 shares of common
stock to a venture capital firm upon the exercise of warrants for aggregate
proceeds of $24,998.

7. In July 1999, the Registrant issued an aggregate of 59,514 shares of Common
Stock and warrants entitling the holders thereof to purchase an aggregate of
6,609 shares of Common Stock to twelve investors, at $11.74 per share,
including a director of the Registrant, for aggregate proceeds of $776,192.

8. In April 2000, the Registrant issued an aggregate of 282,426 shares of
common stock to 14 security holders and their designees for aggregate proceeds
of $501,825

The sales and issuances of the Common Stock, options and warrants in each
transaction described above were deemed to be exempt from registration under
the Securities Act in reliance upon Section 4(2) of the Securities Act as
transactions not involving a public offering. The Registrant made a
determination that each of the purchasers was a sophisticated investor. The
purchasers in such private offerings represented their intention to acquire the
securities for investment only and not with a view to the distribution thereof.
Appropriate legends were affixed to the stock certificates and warrants issued
in each transaction. All purchasers had adequate access, through their
employment or other relationships, to sufficient information about the
Registrant to make an informed investment decision. None of the securities was
sold through an underwriter and, accordingly, there were no underwriting
discounts or commissions involved.

II-2
<PAGE>

Item 27. Exhibits

<TABLE>
<CAPTION>
Exhibit
No. Description
-------- ------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant
3.2 By-Laws of the Registrant
4.1 Specimen Stock Certificate*
4.2 Form of Underwriter's Warrant Agreement
5.1 Opinion of Morse, Zelnick, Rose & Lander, LLP
10.1 1992 Incentive Stock Option Plan
10.2 1992 Non-Incentive Stock Option Plan
10.3 2000 Stock Option Plan
10.4 Employment Agreement between the Registrant and M.S Koly, as amended
10.5 Employment Agreement between the Registrant and Samuel Herschkowitz, M.D., as amended
10.6 Distributorship Agreement with Nissho Corporation
23.1 Consent of KPMG LLP
23.2 Consent of Morse, Zelnick, Rose & Lander, LLP (included in Exhibit 5.1).
23.3 Consents from the following scientific advisors and consultants: Morton G. Glickman, William N.
Hait, M.D., Ph.D., T.S. Ravikumar, M.D., Anil R. Diwan, Ph.D., Harvey J. Ellis, C.C.P., Durmus
Koch, James H. Muchmore, M.D., Gabriela Nicolau, Ph.D., and John Quiring, Ph.D.
24. Power of Attorney (included in signature page).
</TABLE>

* to be filed by amendment

Item 28. Undertakings.

The undersigned Registrant hereby undertakes to:

(1) file, during any period in which it offers or sells securities, a post
effective amendment to this Registration Statement to:

(i) include any prospectus required by Section 10(a)(3) of the Securities
Act;

(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
Registration Statement; and

(iii) include any additional or changed material information on the plan
of distribution;

(2) for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(3) file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.

The undersigned Registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for the
purpose of determining any

II-3
<PAGE>

liability under the Securities Act, treat the information omitted from the form
of prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of
this Registration Statement as of the time the Securities and Exchange
Commission declares it effective; and (3) that for the purpose of determining
any liability under the Securities Act, treat each post-effective amendment
that contains a form of prospectus as a new registration statement for the
securities offered in the registration statement herein, and treat the offering
of the securities at that time as the initial bona fide offering of those
securities.

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and authorized
this Registration Statement to be signed on its behalf by the undersigned, in
the City of New York, State of New York on June 13, 2000.

DELCATH SYSTEMS, INC.

By: /s/ M. S. Koly
------------------------------------
M. S. Koly, President

ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints M. S. Koly and Stephen A. Zelnick, or any one of them,
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all pre- or post-effective amendments to this
Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any one of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities indicated on June 13, 2000.

<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ M. S. Koly
---------------------------
M. S. Koly President, Chief Executive Officer and Director

/s/ Joseph P. Milana
---------------------------
Joseph P. Milana Chief Financial Officer

/s/ Samuel Herschkowitz
---------------------------
Samuel Herschkowitz Director

/s/ William I. Bergman
---------------------------
William I. Bergman Director

/s/ Frank Mancuso, Jr.
---------------------------
Frank Mancuso, Jr. Director

/s/ James V. Sorrentino
---------------------------
James V. Sorrentino Director
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No. Description
-------- -----------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant
3.2 By-Laws of the Registrant
4.1 Specimen Stock Certificate*
4.2 Form of Underwriter's Warrant Agreement
5.1 Opinion of Morse, Zelnick, Rose & Lander, LLP
10.1 1992 Incentive Stock Option Plan
10.2 1992 Non-Incentive Stock Option Plan
10.3 2000 Stock Option Plan
10.4 Employment Agreement between the Registrant and M.S Koly, as amended
10.5 Employment Agreement between the Registrant and Samuel Herschkowitz, M.D., as amended
10.6 Distributorship Agreement with Nissho Corporation
23.1 Consent of KPMG LLP
23.2 Consent of Morse, Zelnick, Rose & Lander, LLP (included in Exhibit 5.1).
23.3 Consents from the following scientific advisors and consultants: Morton G. Glickman, William N.
Hait, M.D., Ph.D., T.S. Ravikumar, M.D., Anil R. Diwan, Ph.D., Harvey J. Ellis, C.C.P., Durmus
Koch, James H. Muchmore, M.D., Gabriela Nicolau, Ph.D., and John Quiring, Ph.D.
24. Power of Attorney (included in signature page).
</TABLE>

* to be filed by amendment