SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________ to__________
-------------------
INNOVIR LABORATORIES, INC.
(Exact name of Registrant as specified in its Charter)
Commission File Number 0-21972
Delaware 13-3536290
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
510 East 73rd Street (212) 249-4703
New York, NY 10021 (Registrant's telephone number)
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [ ]
The number of shares of the Registrant's common stock outstanding as of May 8,
1996 was: 5,630,671.
Table of contents is located on page 2.
<PAGE>
INNOVIR LABORATORIES, INC.
CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements:
Condensed Balance Sheets as of March 31, 1996 and
September 30, 1995 3
Condensed Statements of Operations for the three
months and the six months ended March 31, 1996 and
1995 and for the period from September 1, 1989
(inception) to March 31, 1996 5
Condensed Statement of Stockholders' Equity for the six
months ended March 31, 1996 6
Condensed Statements of Cash Flows for the six months
ended March 31, 1996 and 1995 and for the period from
September 1, 1989 (inception) to March 31, 1996 7
Notes to Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 6. Exhibits and Reports on Form 8-K 17
<PAGE>
<TABLE>
<CAPTION>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
CONDENSED BALANCE SHEETS
(unaudited)
March 31, September 30,
1996 1995
------------- ------------
ASSETS:
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,834,240 $1,836,984
Prepaid expenses and other current assets 102,319 178,833
------------- ------------
Total current assets 2,936,559 2,015,817
Fixed assets, less accumulated depreciation and
amortization of $775,508 at March 31, 1996 and
$575,864 at September 30, 1995 1,031,730 846,344
Other assets 294,184 342,724
------------- ------------
Total assets $4,262,473 $3,204,885
============= ============
(continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
CONDENSED BALANCE SHEETS (continued)
(unaudited)
March 31, September 30,
1996 1995
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
<S> <C> <C>
Accounts payable and accrued expenses $570,012 $660,256
Accrued interest - warrantholder 10,503 13,003
Term note payable - warrantholder; current portion 125,000 62,500
Capital leases - current portion 224,957 173,627
------------- ------------
Total current liabilities 930,472 909,386
Term note payable - warrantholder; includes accrued interest 162,845 225,345
Capital leases 406,751 458,435
------------- ------------
Total liabilities 1,500,068 1,593,166
------------- ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.06; 15,000,000 shares authorized:
Class B Convertible Preferred Stock; 2,500,000 shares
designated; shares issued and outstanding - 297,000 at
March 31, 1996 and 427,500 at September 30, 1995
(liquidation value, $1,485,000 and $2,137,500 respectively) 17,820 25,650
Class C Convertible Preferred Stock; 1,000,000 shares
designated; shares issued and outstanding - 505,000 at
March 31, 1996 (liquidation value, $2,614,993) 30,300
Common stock, par value $.013; 35,000,000 shares
authorized; shares issued and outstanding - 5,468,614 at
March 31, 1996 and 3,986,339 at September 30, 1995 71,092 51,822
Additional paid-in capital 24,139,892 17,628,038
Unearned compensation (1,829,215) (177,083)
Deficit accumulated during the development stage (19,667,484) (15,916,708)
------------- ------------
Total stockholders' equity 2,762,405 1,611,719
------------- ------------
Total liabilities and stockholders' equity $4,262,473 $3,204,885
============= ============
See accompanying notes to the financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Cumulative
For the three months ended For the six months ended Since
March 31: March 31: September 1,
----------------------------- --------------------------- 1989
1996 1995 1996 1995 (inception)
----------------------------- --------------------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Interest income $44,221 $13,049 $79,673 $29,524 $326,862
----------------------------- --------------------------- -------------
Expenses:
Research and development 983,872 682,992 1,831,295 1,378,171 10,322,719
General and administrative 557,472 418,210 1,113,602 863,192 7,171,488
Compensation expense incurred in
connection with the issuance of
warrants and stock options
(non-cash charge) 530,212 808,993 881,910
Interest 38,709 24,866 76,559 50,946 1,211,067
----------------------------- --------------------------- -------------
Total expenses 2,110,265 1,126,068 3,830,449 2,292,309 19,587,184
----------------------------- --------------------------- -------------
Loss before extraordinary item (2,066,044) (1,113,019) (3,750,776) (2,262,785) (19,260,322)
Extraordinary item: loss on early
extinguishment of debt (407,162)
----------------------------- --------------------------- -------------
Net loss ($2,066,044) ($1,113,019) ($3,750,776) $2,262,785) ($19,667,484)
============================= =========================== =============
Loss per share data:
Weighted average number of common
shares outstanding 4,783,152 3,460,558 4,494,224 3,340,963
============================= ===========================
Net loss per share ($0.43) ($0.32) ($0.83) ($0.68)
============================= ===========================
See accompanying notes to the financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
For the six months ended March 31, 1996
(unaudited)
Class B Convertible Class C Convertible
Preferred Stock Preferred Stock Common Stock
Shares Amount Shares Amount Shares Amount
-------- -------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 427,500 $25,650 3,986,339 $51,822
Exercise of warrants ($.05 per share) 525,000 6,825
Sale of Class C Convertible Preferred Stock in
November and December 1995 for cash ($5.00 per
preferred share) 960,000 $57,600
Costs incurred in connection with issuances of equity securities
Issuance of warrants in November 1995 and January 1996
in connection with consulting agreements and finders'
fee arrangements
Amortization of unearned compensation
Compensation expense in connection with the issuance
of stock options
Conversions of Class B Preferred Stock into common stock (130,500) (7,830) 164,871 2,144
Conversions of Class C Preferred Stock into common stock (455,000) (27,300) 792,404 10,301
Net loss for the six months ended March 31, 1996
-------- -------- -------- -------- --------- ---------
Balance, March 31, 1996 297,000 $17,820 505,000 $30,300 5,468,614 $71,092
======== ======== ======== ======== ========= ========
<CAPTION>
See accompanying notes to the financial statements
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
For the six months ended March 31, 1996
(unaudited)
Deficit
Accumulated
Additional Unearned During the
Paid-in Compen- Development
Capital sation Stage Total
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Balance, September 30, 1995 $17,628,038 ($177,083) ($15,916,708) $1,611,719
Exercise of warrants ($.05 per share) 19,425 26,250
Sale of Class C Convertible Preferred Stock in
November and December 1995 for cash ($5.00 per
preferred share) 4,742,400 4,800,000
Costs incurred in connection with issuances of equity securities (733,781) (733,781)
Issuance of warrants in November 1995 and January 1996
in connection with consulting agreements and finders'
fee arrangements 2,443,125 (2,443,125)
Amortization of unearned compensation 790,993 790,993
Compensation expense in connection with the issuance
of stock options 18,000 18,000
Conversions of Class B Preferred Stock into common stock 5,686
Conversions of Class C Preferred Stock into common stock 16,999
Net loss for the six months ended March 31, 1996 (3,750,776) (3,750,776)
----------- ----------- ------------ ----------
Balance, March 31, 1996 $24,139,892 ($1,829,215) ($19,667,484) $2,762,405
=========== =========== ============ ==========
See accompanying notes to the financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(unaudited)
For the six months ended Cumulative
March 31 Since
-------------------------------- September 1,
1996 1995 1989
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss during development stage ($3,750,776) ($2,262,785) ($19,667,484)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 277,644 119,907 979,581
Amortization of deferred financing costs 15,100 7,692 276,250
Amortization of note payable discounts 79,947
Other non-cash expenses including compensation expense 808,993 35,000 1,428,387
Loss on early extinguishment of debt 407,162
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses and other current assets 76,514 37,653 (102,319)
(Increase) in other assets (44,560) (787) (160,925)
(Decrease) increase in accounts payable and accrued expenses (106,756) 33,271 910,141
-------------------------------- --------------
Net cash used in operating activities (2,723,841) (2,030,049) (15,849,260)
-------------------------------- --------------
Cash flows from investing activities:
Capital expenditures (291,516) (31,050) (1,203,928)
-------------------------------- --------------
Net cash used in investing activities (291,516) (31,050) (1,203,928)
-------------------------------- --------------
Cash flows from financing activities:
Proceeds from notes payable 5,755,205
Principal payments under capital lease obligations (88,905) (46,713) (232,072)
Increase in deferred financing costs (8,711) (7,500) (555,577)
Repayment of notes payable (2,597,216)
Proceeds from issuance of equity securities, less offering expenses 4,110,229 1,011,710 17,518,539
Purchase of treasury stock (1,451)
-------------------------------- --------------
Net cash provided by financing activities 4,012,613 957,497 19,887,428
-------------------------------- --------------
Net increase (decrease) in cash and cash equivalents 997,256 (1,103,602) 2,834,240
Cash and cash equivalents, beginning of period 1,836,984 1,908,983
-------------------------------- --------------
Cash and cash equivalents, end of period $2,834,240 $805,381 $2,834,240
=========== ============ ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $79,058 $53,546 $352,642
=========== ============ ==============
See accompanying notes to the financial statements
</TABLE>
<PAGE>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The condensed interim financial statements of Innovir Laboratories, Inc.
(the "Company") reflect all adjustments, consisting only of normal
recurring accruals, which are, in the opinion of the Company's management,
necessary for a fair presentation of the Company's results of operations
for the respective periods presented. Operating results for any interim
period are not necessarily indicative of results for a full year. These
notes do not include all the information required by Generally Accepted
Accounting Principles. The condensed interim financial statements should be
read in conjunction with the audited financial statements included in the
Company's annual report on Form 10-K for the fiscal year ended September
30, 1995.
2. Statements of Cash Flows - Supplemental schedule of noncash activities:
Included in accounts payable were approximately $63,000 and $81,000 of
costs incurred in connection with the Company's issuance of equity
securities, and approximately $12,000 and $8,000 of fixed assets, at March
31, 1996 and 1995, respectively.
Capital lease obligations of approximately $89,000 and $38,000 were
incurred during the six months ended March 31, 1996 and 1995, respectively,
when the Company leased new equipment.
During the six months ended March 31, 1996, the Company amended 250,000
previously issued warrants, and issued an additional 915,000 warrants, to
purchase common stock in connection with various consulting agreements and
finders' fee arrangements entered into by the Company. The fair market
value of such warrants at the date of amendment or issuance was
approximately $2,443,000.
3. In November 1995, the Company commenced a private placement of its
securities to raise equity financing (the "95 Offering"). In connection
with the 95 Offering, the Company's Board of Directors designated one
million shares of preferred stock as Class C Convertible Preferred Stock
("C Preferred Stock"). Holders of C Preferred Stock have no voting rights
and are not entitled to receive dividends. C Preferred Stockholders have a
liquidation preference, in the event of a liquidation, dissolution, or
winding down of the Company, equal to the sum of $5.00 per share (the "C
Issue Price") plus an amount equal to 10% of the C Issue Price, per annum,
for the period that has passed since their respective date of issuance. The
liquidation preference is on a parity with the Class B Convertible
Preferred Stockholders. The C Preferred Stock's conversion feature provides
for each share of C Preferred Stock to be converted into shares of the
Company's common stock at a floating rate equal to the result of dividing:
(i) the sum of the C Issue Price plus an amount equal to 10% of the C Issue
Price, per annum, for the number of days between the date of issuance, as
defined, and the date of conversion, as defined, of each share of C
Preferred Stock by (ii) the lesser of: (a) the average closing bid price of
the Company's common stock for the five trading days ending on November 17,
1995
<PAGE>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
(which was $3.4375), or (b) 85% of the average closing bid price of the
Company's common stock for the five trading days immediately preceding the
date of conversion, as defined. Each share of C Preferred Stock that
remains outstanding on November 17, 1997 will automatically be converted to
common stock in accordance with the formula above. The Company has the
right to redeem, in whole or in part, any C Preferred Stock submitted for
conversion, in cash, in accordance with a defined formula. During November
and December 1995, the Company raised approximately $4 million, after
expenses, from the sale of 960,000 shares of C Preferred Stock at $5 per
share.
In connection with the 95 Offering, the Company paid fees to a Placement
Agent and issued 139,636 warrants (the "Placement Warrants") to purchase an
equal number of shares of the Company's common stock at $3.78 per share.
The number of shares of common stock to be issued upon exercise of the
Placement Warrants may be reduced, as defined, in the event the Placement
Agent elects a cashless exercise option. The Placement Warrants are fully
vested and expire on December 1, 2000. The Placement Warrants contain
antidilution and other defined adjustment provisions.
4. In March 1995, the Company entered into a two year consulting agreement
(the "Baron Agreement") with Baron Financial Services, Inc. ("Baron"), an
affiliate of A.R. Baron & Co., Inc., the Company's underwriter and
principal market maker, to provide financial and other advisory services.
As compensation for the Baron Agreement, the Company issued to Baron
250,000 warrants (the "Baron Warrants") to purchase an equal number of
shares of common stock at $7.38 per share. The Baron Warrants expire on
March 8, 2000, and contain anti-dilution and other defined adjustment
provisions. As consideration for an extension of the term of the Baron
Agreement, during November 1995, the Company amended the Baron Warrants to
reduce the exercise price to $.05 per share and issued to Baron 100,000
additional warrants (the "New Baron Warrants") with terms and provisions
identical to the amended Baron Warrants except that the New Baron Warrants
expire on November 9, 2000. On November 20, 1995, Baron exercised all
250,000 of the amended Baron Warrants.
In addition, during January 1996, the Company entered into a second
consulting agreement with Baron. Pursuant to this agreement, Baron has
agreed to provide certain business development advice to the Company. In
consideration for these services, the Company made a $400,000 non-interest
bearing loan to Baron (the "Loan") and issued a warrant to purchase 250,000
shares of the Company's common stock at $.05 per share. (the "January Baron
Warrant"). On February 13, 1996, Baron repaid the loan and exercised the
January Baron Warrant.
The fair market value of the Baron Warrants, the amended Baron Warrants,
the New Baron Warrants and the January Baron Warrant will be recognized as
an expense as the
<PAGE>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
services are rendered. The unamortized amount (unearned compensation) has
been included as a reduction in stockholders' equity.
5. In November 1995, the Company entered into consulting agreements with two
investment banking companies (the "Investment Agreements") to provide
financial and other advisory services through November 1997. In
consideration for these services, the Company issued warrants (the
"Investment Warrants") to purchase 500,000 shares of the Company's common
stock at per share prices of $2.80 or $3.00. The number of shares issuable
to one investment company upon the exercise of their warrants is subject to
reduction, as defined, in the event the investment company elects a
cashless exercise option. The Investment Warrants vest at various dates
over the next twelve months and expire on November 9, 2000. The Investment
Warrants contain antidilution provisions, as defined. In addition, as
consideration for the extension of the term of one Investment Agreement,
during January 1996, the Company issued to the investment banking company
warrants (the "New Investment Warrants") to purchase 25,000 shares of the
Company's common stock at $.05 per share. During February and March 1996,
all of the New Investment Warrants were exercised.
In connection with the Investment Agreements, the Company, as finders'
fees, issued 40,000 warrants (the "Finders' Warrants") to two individuals.
Each Finders' Warrant entitles the holder to purchase an equal number of
shares of the Company's common stock at per share prices of $2.80 or $3.00.
The number of shares issuable to one individual upon the exercise of their
warrants is subject to reduction, as defined, in the event the individual
elects a cashless exercise option. The Finders' Warrants vest at various
dates over the next six months and expire on November 9, 2000. The Finders'
Warrants contain antidilution provisions, as defined. One of the recipients
of the Finders' Warrants is an insurance broker for the Company, who is
also a shareholder and warrantholder.
The fair market value of the Investment Warrants and the Finders' Warrants
will be recognized as an expense over the life of the related consulting
agreements. The unamortized amount (unearned compensation) has been
included as a reduction in stockholders' equity.
6. The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("FAS 123") in October 1995. FAS 123 requires companies to estimate the
fair value of common stock, stock options, or other equity instruments
("Equity Instruments") issued to employees using pricing models which take
into account various factors such as current price of the common stock,
volatility and expected life of the Equity Instrument. FAS 123 permits
companies to either provide pro forma note disclosure or adjust operating
results for the amortization of the estimated value of the Equity
Instrument, as compensation expense, over the vesting period of the Equity
<PAGE>
INNOVIR LABORATORIES, INC.
(a development stage enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
Instrument. The Company has elected to provide pro forma note disclosure
which will appear in its financial statements for the year ending September
30, 1997 and, therefore, there will be no effect on the Company's financial
position or results of operations.
7. As part of the Company's private placement in November 1995, the Company
sold 90,000 shares of C Preferred Stock to an investor. On February 1,
1996, the investor delivered to the Company a notice (the "Notice of
Conversion") requesting that the Company convert 60,000 shares of C
Preferred Stock into 147,594 shares of the Company's common stock, in
accordance with the formula as defined by the C Preferred Stock. The
Company declined to comply with the Notice of Conversion on the grounds,
among others, that the Company believed the investor was seeking to deliver
the shares of common stock to be obtained upon such conversion to cover a
short position in direct violation of the subscription agreement with the
Company executed by the investor at the time it acquired the C Preferred
Stock. On February 28, 1996, the Company was named as a defendant in an
action filed by the investor alleging that the Company wrongfully refused
to honor the investor's Notice of Conversion, demanding conversion of the C
Preferred Stock held by the investor and seeking damages which the investor
alleges may be in excess of $1,000,000. On March 20, 1996, the Company and
the investor agreed that the Company would honor the Notice of Conversion
and a second notice of conversion for the remaining 30,000 shares of C
Preferred Stock held by the investor and convert all 90,000 shares of C
Preferred Stock into 192,557 shares of common stock, 54,000 shares of which
would be held in escrow pending further agreement between the parties or a
final adjudication of the investor's claim. In accordance with a
stipulation and order entered by the court on that date, the Company
delivered to the plaintiff 138,557 shares of common stock and delivered
into escrow 54,000 shares of common stock. On April 10, 1996, the Company
filed an answer to the investor's complaint, denying liability, asserting
affirmative defenses and asserting a counterclaim for damages suffered as a
result of the investor's actions. The investor is moving for summary
judgment, and the Company is preparing its response. The ultimate
resolution of this matter cannot presently be determined. Accordingly, no
provision for any liability that may result upon the resolution of this
matter has been made in the accompanying financial statements.
8. Certain reclassifications have been made to the financial statements for
1995 and the cumulative period since September 1, 1989 (inception) to March
31, 1996 in order to conform with the current period's presentation.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward looking statements which involve risks and
uncertainties. Such statements are subject to certain factors which may cause
the Company's plans to differ. Factors that may cause such differences include,
but are not limited to, the progress of the Company's research and development
programs, the Company's ability to obtain additional funds, the Company's
ability to compete successfully, the Company's ability to attract and retain
qualified personnel, the Company's ability to successfully enter into
collaborations with third parties, the Company's ability to enter into and
progress in clinical trials, the time and costs involved in obtaining regulatory
approvals, the costs involved in obtaining and enforcing patents and any
necessary licenses, the ability of the Company to establish development and
commercialization relationships, the cost of manufacturing, and those other
risks discussed under the heading "Risk Factors" included in the Company's
Post-Effective Amendment No. 3 to Form S-1 Registration Statement (Reg. No.
33-63142).
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto contained herein.
RESULTS OF OPERATIONS
Since its inception, substantially all of the Company's resources have been
applied to research and development, patent and licensing matters and other
general and administrative matters. The Company has no commercially viable
products and does not anticipate having any for several years.
The independent accountant's report on the Company's financial statements for
the year ended September 30, 1995, included in Form 10-K, contains explanatory
language with regard to substantial doubt about the Company's ability to
continue as a going concern.
THREE MONTHS ENDED MARCH 31, 1996 VS. MARCH 31, 1995
The Company has had no operating revenues to date and has sustained net losses
of $2,066,044 and $1,113,019 for the three months ended March 31, 1996 and 1995,
respectively. The increase in losses, period to period, primarily reflects the
increased levels of research and development and general and administrative
expenses, and an increase in non-cash consulting fee expense with respect to
financial and business development advice. In the future, the Company intends to
increase its research and development activities, and accordingly, its rate of
operating expenditures and losses. The Company expects losses to continue for
the foreseeable future.
Interest income increased from $13,049 in 1995 to $44,221 in 1996, an increase
of $31,172 or 239%, resulting primarily from earnings on the cash proceeds
received during November and December 1995 from the Company's private placement
of Class C Convertible Preferred Stock.
Research and development costs increased from $682,992 in 1995 to $983,872 in
1996, an increase of $300,880 or 44%. This increase was principally due to
hiring additional research staff, more sophisticated experiments involving
higher usage levels of reagents and laboratory supplies in 1996, additional
depreciation expense resulting from equipment purchased during 1995 and 1996,
rental charges from expanded facilities in 1995 to increase the Company's level
of research activities, the start of animal trials for Hepatitis B Virus in
1996, and increased collaborative research.
General and administrative costs increased from $418,210 in 1995 to $557,472 in
1996, an increase of $139,262 or 33%. This increase is due to increased
promotional efforts and other stockholder related expenses, legal fees incurred
in 1996 relating to litigation with a shareholder (see Note 7 to the Condensed
Financial Statements included herein), additional expenses incurred to protect
intellectual property and higher insurance premiums.
The Company has entered into consulting agreements with two investment banking
companies and Baron Financial Services, Inc., an affiliate of A.R. Baron & Co.
Inc., the Company's underwriter and principal market maker, to provide financial
<PAGE>
and other advisory services. As compensation for these agreements, the Company
issued warrants to purchase an equal number of shares of the Company's common
stock. The fair market value of these warrants is being recognized as an expense
as the services are rendered to the Company. Compensation expense incurred in
connection with the issuance of warrants and stock options of $530,212 in 1996
primarily results from expense recognition relating to these consulting
agreements.
Interest expense increased from $24,866 in 1995 to $38,709 in 1996, an increase
of $13,843 or 56%. This increase was due to new equipment financed under various
leasing arrangements.
SIX MONTHS ENDED MARCH 31, 1996 VS. MARCH 31, 1995
The Company has had no operating revenues to date and has sustained net losses
of $3,750,776 and $2,262,785 for the six months ended March 31, 1996 and 1995,
respectively. The increase in losses, period to period, primarily reflects the
increased levels of research and development and general and administrative
expenses, and an increase in non-cash consulting fee expense with respect to
financial and business development advice. In the future, the Company intends to
increase its research and development activities, and accordingly, its rate of
operating expenditures and losses. The Company expects losses to continue for
the foreseeable future.
Interest income increased from $29,524 in 1995 to $79,673 in 1996, an increase
of $50,149 or 170%, resulting primarily from earnings on the cash proceeds
received during November and December 1995 from the Company's private placement
of Class C Convertible Preferred Stock.
Research and development costs increased from $1,378,171 in 1995 to $1,831,295
in 1996, an increase of $453,124 or 33%. This increase was principally due to
hiring additional research staff, more sophisticated experiments involving
higher usage levels of reagents and laboratory supplies in 1996, additional
depreciation expense resulting from equipment purchased during 1995 and 1996,
rental charges from expanded facilities in 1995 to increase the Company's level
of research activities, the start of animal trials for Hepatitis B Virus in 1996
and increased collaborative research.
General and administrative costs increased from $863,192 in 1995 to $1,113,602
in 1996, an increase of $250,410 or 29%. This increase is due to increased
promotional efforts and other stockholder related expenses, legal fees incurred
in 1996 relating to litigation with a shareholder (see Note 7 to the Condensed
Financial Statements included herein), additional expenses incurred to protect
intellectual property and higher insurance premiums.
The Company has entered into consulting agreements with two investment banking
companies and Baron Financial Services, Inc., an affiliate of A.R. Baron & Co.
Inc., the Company's underwriter and principal market maker, to provide financial
and other advisory services. As compensation for these agreements, the Company
issued warrants to purchase an equal number of shares of the Company's common
stock. The fair market value of these warrants is being recognized as an expense
as the services are rendered to the Company. Compensation expense incurred in
connection with the issuance of warrants and stock options of $808,993 in 1996
primarily results from expense recognition relating to these consulting
agreements. Interest expense increased from $50,946 in 1995 to $76,559 in 1996,
<PAGE>
an increase of $25,613 or 50%. This increase was due to new equipment financed
under various leasing arrangements.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had cash and cash equivalents of $2,834,240 as
compared to $1,836,984 at September 30, 1995. The Company had working capital of
$2,006,087 at March 31, 1996, as compared to working capital of $1,106,431 at
September 30, 1995. The increased cash and working capital positions were a
result of the proceeds received from the private placement completed in December
1995, offset by the Company's operations for the six months ended March 31,
1996. The Company has funded its operations to date primarily from the proceeds
received from the issuance of securities to private and public investors.
In August 1995, the Company filed a registration statement on Form S-4 with the
Securities and Exchange Commission (the "SEC") providing for the solicitation of
an offer (the "offer") to exercise all outstanding Class A Warrants. Such offer
is to issue up to one Class B Warrant (the exact amount to be determined based
upon current market conditions) to each holder of a Class A Warrant of the
Company who exercises such Class A Warrant, in accordance with its terms, to
purchase shares of the Company's common stock, $.013 par value per share, during
the offer period. There are approximately 1.8 million Class A Warrants
outstanding; if all such warrantholders accept the offer, the Company would
issue approximately 1.8 million shares of common stock and up to 1.8 million
Class B Warrants, and realize gross proceeds of approximately $7.4 million.
While the Company has not withdrawn such registration statement, the Company
does not currently intend to proceed with such offering.
In November and December 1995, the Company completed a private placement of its
securities to raise equity financing (the "95 Offering"); the 95 Offering was
conducted pursuant to the provisions of Regulation S as promulgated under the
Securities Act of 1933, as amended. In connection with the 95 Offering, the
Company sold 960,000 shares of its Class C Convertible Preferred Stock ("C
Preferred Stock") and raised approximately $4 million, after expenses, from such
sale. Holders of C Preferred Stock have no voting rights and are not entitled to
receive dividends. C Preferred Stockholders have a liquidation preference, in
the event of a liquidation, dissolution, or winding down of the Company, equal
to the sum of $5.00 per share (the "C Issue Price") plus an amount equal to 10%
of the C Issue Price, per annum, for the period that has passed since the dates
of issuance to such stockholders. The liquidation preference is on a parity with
the holders of Class B Convertible Preferred Stock. The C Preferred Stock's
conversion feature provides for each share of C Preferred Stock to be converted
into shares of the Company's common stock at a floating rate equal to the result
of dividing: (i) the sum of the C Issue Price plus an amount equal to 10% of the
C Issue Price, per annum, for the number of days between the date of issuance,
as defined, and the date of conversion, as defined, of each share of C Preferred
Stock by (ii) the lesser of: (a) the average closing bid price of the Company's
common stock for the five trading days ending on November 17, 1995 (the "Fixed
Conversion Price") (which was $3.4375), or (b) 85% of the average closing bid
price of the Company's common stock for the five trading days immediately
preceding the date of conversion, as defined. Each share of C Preferred Stock
that remains outstanding on November 17, 1997 will automatically be converted to
common stock in accordance with the formula above. The Company has the right to
redeem, in whole or in part, any C Preferred Stock submitted for conversion,
<PAGE>
in cash, in accordance with a defined formula. As of March 31, 1996, based on a
conversion price at such date of $3.4375, the Company has reserved approximately
764,000 shares of Common Stock for issuance upon conversion of the issued and
outstanding C Preferred Stock; in the event the price of the Company's Common
Stock decreases, the number of shares held in reserve with respect to the C
Preferred Stock would increase.
On January 26, 1996, the Company and Baron Financial Services, Inc. entered into
an agreement pursuant to which Baron Financial Services, Inc will provide
certain business development services to the Company. As consideration for these
services, the Company made an interest free loan of $400,000 to Baron Financial
Services, Inc. and issued to Baron Financial Services Inc. a warrant to purchase
250,000 shares of the Company's common stock at an exercise price of $.05 per
share. On February 13, 1996, Baron Financial Services, Inc. repaid the loan and
exercised the warrant.
In August 1995, the Company was granted a leasing commitment (the "Lease Line")
by a finance company which provides for up to $300,000 to finance laboratory
equipment acquisitions. The Company may utilize the Lease Line in increments
("Leases"). The Leases are for 36-month periods with a purchase option at the
end of each lease or an option to extend the lease for a one-year term. The
Company must provide security deposits of 35% of the cost of the equipment
financed. As of March 31, 1996, the Company had utilized approximately $222,000
of the Lease Line. In connection with the Lease Line, the Company issued to the
lessor a seven-year warrant to purchase 2,526 shares of Common Stock at $9.50
per share. The fair market value of such warrant on the date of issuance was
deemed to be $24,000.
Planned operations for 1996 currently contemplate expenditures for capital
assets of approximately $850,000, mainly consisting of laboratory equipment and
leasehold improvements as the Company expands into, and renovates, additional
office and laboratory space which it has leased effective in December 1995. As a
result of the Company's intention to continue increasing its research and
development activities, the Company expects that more office and laboratory
space will eventually be necessary, for which renovations may be required, and
an additional lease line may need to be negotiated. The Company will finalize
plans for such additional capital expenditures when, and if, these leasing
arrangements are consummated. However, there can be no assurance that the
Company will successfully enter into such new arrangements.
The Company expects to incur substantial expenditures in the foreseeable future
for the research and development and commercialization of its proposed products
and the upgrading of its laboratory facilities. The Company's management
believes that, based upon its current business plans, liquid assets will be
sufficient to fund its operations through July 1996. Thereafter, the Company
will require additional funds, which it is seeking to raise through public or
private equity or debt financings, collaborative or other arrangements with
corporate sources, or through other sources of financing. There can be no
assurance that such additional financing can be obtained on terms reasonable to
the Company, if at all. In the event the Company is unable to raise additional
capital, planned operations would need to be scaled back or discontinued. No
other sources of financing are currently available. In addition, the Company has
been named as a defendant in an action alleging that the Company wrongfully
declined to honor the plaintiff's notice of conversion with respect to the C
<PAGE>
Preferred Stock held by the plaintiff. The plaintiff is seeking damages which
the plaintiff alleges may be in excess of $1,000,000. While the Company believes
that the ultimate resolution of the litigation will be resolved without a
materially adverse effect on the Company's business or financial position, no
assurances can be given as to the ultimate outcome of or the costs in defending
this litigation. Such costs and monetary damages awarded to the plaintiff, if
any, would accelerate the exhaustion of the Company's cash and cash equivalents.
IMPACT OF THE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No.123, "Accounting for Stock-Based Compensation" ("FAS
123") in October 1995. FAS 123 requires companies to estimate the fair value of
common stock, stock options, or other equity instruments ("Equity Instruments")
issued to employees using pricing models which take into account various factors
such as current price of the common stock, volatility and expected life of the
Equity Instrument. FAS 123 permits companies to either provide proforma note
disclosure or adjust operating results for the amortization of the estimated
value of the Equity Instrument, as compensation expense, over the vesting period
of the Equity Instrument. The Company has elected to provide pro forma note
disclosure which will appear in its financial statements for the year ending
September 30, 1997 and therefore, there will be no effect on the Company's
financial position or results of operations.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company has been named as a defendant in an action captioned Mifal
Klita v. Innovir Laboratories, Inc., Swartz Investments, LLC f/k/a Swartz
Investments, Inc., and Registrar and Transfer Company, filed on February 28,
1996 in the Supreme Court of the State of New York in the County of New York,
alleging that the Company wrongfully refused to honor the plaintiff's notice of
conversion with respect to C Preferred Stock held by the plaintiff and seeking
damages which the plaintiff-investor alleges may be in excess of $1,000,000. On
February 1, 1996, the plaintiff, an investor in the Company's private placement
of C Preferred Stock, delivered to the Company a notice (the "Notice of
Conversion") requesting that the Company convert 60,000 shares of C Preferred
Stock into 147,594 shares of Common Stock, based upon the five-day average
closing bid price of the Common Stock immediately preceding the date of the
Notice of Conversion; at the Fixed Conversion Price, the plaintiff's C Preferred
Stock would be converted into 88,851 shares of Common Stock. The Company
declined to comply with the Notice of Conversion on the grounds, among others,
that the Company believed the plaintiff was seeking to deliver the shares of
Common Stock to be obtained upon such conversion to cover a short position in
direct violation of the subscription agreement with the Company executed by the
plaintiff at the time it acquired the C Preferred Stock. On March 20, 1996, the
Company and the plaintiff agreed that the Company would honor the Notice of
Conversion and a second notice of conversion for the remaining 30,000 shares of
C Preferred Stock held by the plaintiff and convert all 90,000 shares of C
Preferred Stock into 192,557 shares of Common Stock, 54,00 shares of which would
be held in escrow pending further agreement between the parties or a final
adjudication of the plaintiff's claim. In accordance with the stipulation and
order entered by the court, the Company delivered to the plaintiff 138,557
shares of Common Stock and delivered into escrow 54,000 shares of Common Stock.
On April 10, 1996, the Company filed an answer to the plaintiff's complaint,
denying liability, asserting affirmative defenses and asserting a counterclaim
for damages suffered as a result of plaintiff's actions. Plaintiff is moving for
summary judgment, and the Company is preparing its response. The Company intends
to vigorously defend against the claims asserted against it. While the Company
believes that the litigation will be resolved without a materially adverse
effect on the Company's business or financial position, no assurances can be
given as to the ultimate outcome of or the costs in defending this litigation.
Item 2. Changes in Securties.
In connection with the Company's private placement completed in May 1995,
the Company's Board of Directors designated 2,500,000 shares of preferred stock
as Class B Convertible Preferred Stock ("B Preferred Stock"). Holders of B
Preferred Stock have no voting rights and are entitled to receive dividends
equal to common stockholders on a per share basis as if the B Preferred Stock
had been converted into Common Stock. Holders of B Preferred Stock also have a
liquidation preference of $5.00 per share, or such greater amount as determined
by the Board of Directors, in the event of a liquidation, dissolution, or
winding up of the Company. The conversion feature of the B Preferred Stock
provides for each share of B Preferred Stock to be converted into shares of
Common Stock at a floating rate equal to the product of dividing $5.00 by 65% of
the average of the closing bid price of the Common Stock for the five days
preceding conversion, as defined. The average closing bid price per share for
the purposes of such calculation shall not be less than $5.00. An aggregate of
824,000 shares of B Preferred Stock were sold and issued in connection with this
private placement.
In connection with the Company's private placement completed in December
1995, the Company's Board of Directors designated 1,000,000 shares of preferred
stock as C Preferred Stock. Holders of C Preferred Stock have no voting rights
and are not entitled to receive dividends. Holders of C Preferred Stock also
have a liquidation preference, in the event of a liquidation, dissolution, or
winding up of the Company, equal to the sum of $5.00 per share (the "C Issue
Price") plus an amount equal to 10% of the C Issue Price, per annum, for the
period that has passed since their respective date of issuance. The conversion
feature of the C Preferred Stock provides for each share of C Preferred Stock to
be converted into shares of Common Stock at a floating rate equal to the result
of dividing: (i) the sum of $5.00 per share (the "C Issue Price") plus an amount
equal to 10% of the C Issue Price, per annum, for the number of days between the
date of issuance, as defined, and the date of conversion, as defined, of each
share of C Preferred Stock by (ii) the lesser of: (a) the average closing bid
price of the Common Stock for the five trading days ending on November 17, 1995
or (b) 85% of the average closing bid price of the Common Stock for the five
trading days immediately preceding the date of conversions, as defined. Each
share of C Preferred Stock that remains outstanding on November 17, 1997 will
automatically be converted to common stock in accordance with the formula above.
An aggregate of 960,000 shares of C Preferred Stock were sold and issued in
connection with this private placement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3.1: Certificate of Incorporation, as amended.
(b) Exhibit 11.1: Statement of Computation of Per Share Data for the three
months ended March 31, 1996 and 1995.
(c) Exhibit 11.2: Statement of Computation of Per Share Data for the six
months ended March 31, 1996 and 1995.
(d) Exhibit 27: Financial Data Schedule
(e) No reports on Form 8-K were filed during the quarter ended March 31,
1996.
All other Items of this report are inapplicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 13, 1996
INNOVIR LABORATORIES, INC.
By: /s/ ALLAN R. GOLDBERG
-----------------------------------------
Allan R. Goldberg
Chairman and Chief Executive Officer
(Principal executive officer)
By: /s/ GARY POKRASSA
-------------------------------------------------
Gary Pokrassa
Vice President - Finance
(Principal financial and accounting officer)
CERTIFICATE OF INCORPORATION
OF
INNOVIR LABORATORIES, INC.
The undersigned incorporator, in order to form a corporation under the
General Corporation Law of the State of Delaware, certifies as follows:
1. NAME. The name of the corporation is Innovir Laboratories, Inc.
(hereinafter called the "Corporation").
2. ADDRESS; REGISTERED AGENT. The address of the Corporation's
registered office is 229 South State Street, City of Dover, County of Kent,
State of Delaware; and its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
3. PURPOSES. The nature of the business and purposes to be conducted or
promoted by the Corporation are to engage in, carry on and conduct any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
4. NUMBER OF SHARES. The total number of shares of stock which the
Corporation shall have authority to issue is one thousand (1000), all of which
shall be shares of Common Stock of the par value of one cent (0.01(cent)) each.
5. NAME AND ADDRESS OF INCORPORATOR. The name and mailing address of
the incorporator are: Jay Itzkowitz, c/o Paul, Weiss, Rifkind, Wharton &
Garrison, 1285 Avenue of the Americas, New York, New York 10019.
<PAGE>
6. ELECTION OF DIRECTORS. Members of the Board of Directors may be
elected either by written ballot or by voice vote.
7. LIMITATION OF LIABILITY. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefits.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
8. INDEMNIFICATION.
8.1 The Corporation shall, to the extent not prohibited by law,
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation to procure a judgment in its favor (hereinafter a
"Proceeding"), by reason of the fact that such person, or a person of whom such
person is the legal representative, is or was a director or officer of the
Corporation, or is or was serving in any capacity at the request of the
Corporation for any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against judgments, fines, penalties,
excise taxes, amounts paid in
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<PAGE>
settlement and costs, charges and expenses (including attorneys' fees and
disbursements). Persons who are not directors or officers of the Corporation may
be similarly indemnified in respect of service to the Corporation to the extent
the Board of Directors at any time denominates such persons entitled to the
benefits of this Section 8.
8.2 The Corporation shall, from time to time, reimburse or advance
to any director or officer or other person entitled to indemnification hereunder
the funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding, PROVIDED, HOWEVER, that, if required by
the Delaware General Corporation Law, such expenses incurred by or on behalf of
any director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such director, officer or other person is not
entitled to be indemnified for such expenses.
8.3 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall not be
deemed exclusive of any other rights to which those seeking indemnification or
reimbursement or advancement of expenses may have or hereafter be entitled under
any law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
-3-
<PAGE>
8.4 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall continue
as to a person who has ceased to be a director or officer (or other person
indemnified hereunder) and shall inure to the benefit of the heirs, executors
and administrators of such person.
8.5 The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Section 8, the By-laws of the Corporation or under
Section 145 of the Delaware General Corporation Law or any other provision of
law.
8.6 The provisions of this Section 8 shall be a contract between
the Corporation, on the one hand, and each director and officer who serves in
such capacity at any time while this Section 8 is in effect and any other person
indemnified hereunder, on the other hand, pursuant to which the Corporation and
each such director, officer or other person intend to be legally bound. No
repeal or modification of this Section 8 shall affect any rights or obligations
then existing or thereafter arising with respect to any state of facts then or
theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
-4-
<PAGE>
8.7 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall be
enforceable by any person entitled to such indemnification or reimbursement or
advancement of expenses in any court of competent jurisdiction. The burden of
proving that such indemnification or reimbursement or advancement of expenses
are not appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that such indemnification or reimbursement or advancement of expenses is
proper in the circumstances nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that such person is not entitled to such indemnification or
reimbursement or advancement of expenses, shall constitute a defense to the
action or create a presumption that such person is not so entitled. Such a
person shall also be indemnified for any expenses incurred in connection with
successfully establishing his or her right to such indemnification or
reimbursement or advancement of expenses, in whole or in part, in any such
proceeding.
8.8 Any director or officer of the Corporation serving (1) another
corporation of which a majority of the shares entitled to vote in the election
of its directors is held by the Corporation, or (2) any employee benefit plan of
the Corporation or any corporation referred to in clause (1), in any capacity,
shall be deemed to be doing so at the request of the Corporation.
8.9 Any person entitled to be indemnified or to the reimbursement
or advancement of expenses as a matter of right pursuant to this Section 8 may
elect to have
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<PAGE>
the right to indemnification or reimbursement or advancement of expenses
interpreted on the basis of the applicable law in effect at the time of the
occurrence of the event or events giving rise to the applicable Proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time such indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to the Corporation,
at the time indemnification or reimbursement or advancement of expenses is
sought; PROVIDED that if no such notice is given, the right to indemnification
or reimbursement or advancement of expenses shall be determined by the law in
effect at the time indemnification or reimbursement or advancement of expenses
is sought.
9. ADOPTION, AMENDMENT AND/OR REPEAL OF BY-LAWS. The Board of
Directors may from time to time (after adoption by the undersigned of the
original by-laws of the Corporation) make, alter or repeal the by-laws of the
Corporation; provided, that any by-laws made, amended or repealed by the Board
of Directors may be amended or repealed, and any by-laws may be made, by the
stockholders of the Corporation.
IN WITNESS WHEREOF, this Certificate has been signed on this 14th day
of September, 1989.
/S/ JAY ITZKOWITZ
-----------------
Jay Itzkowitz
Incorporator
-6-
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT OF
ANY PART OF THE CAPITAL
OF
INNOVIR LABORATORIES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation")
is Innovir Laboratories, Inc.
2. The corporation has not received any payment for any of its stock.
3. The certificate of incorporation of the corporation is hereby
amended by striking out Article Four thereof and by substituting in lieu of said
Article the following new Article Four:
"NUMBER OF SHARES. The total number of
shares of stock which the Corporation shall have
authority to issue is ten thousand (10,000), all of
which shall be shares of Common Stock of the
par value of one cent ($0.01) each."
4. The amendment of the certificate of incorporation of the corporation
herein certified was duly adopted, pursuant to the provisions of Section 241 of
the General Corporation Law of the State of Delaware, by the sole incorporator,
no directors having been named in the certificate of incorporation and no
directors having been elected.
/S/ JAY ITZKOWITZ
-----------------
Jay Itzkowitz
Incorporator
Dated: September 22, 1989.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INNOVIR LABORATORIES, INC.
Pursuant to Section 242 of the General Corporation
Law of the State of Delaware
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation")
is Innovir Laboratories, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article 4 thereof and substituting in lieu of said
Article 4 the following new Article 4:
Article 4. NUMBER OF SHARES. The total number of shares
of stock which the Corporation shall have authority to issue
is fifty thousand (50,000), all of which shall be shares of
Common Stock of the par value of one cent ($.01) each.
3. The amendment of the Certification of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
4. The effective time of the amendment herein certified shall be upon
its filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and attested to by its Assistant
Secretary this 10th day of January, 1991.
/S/ ALLAN R. GOLDBERG
---------------------
Allan R. Goldberg
President
/S/ JAY ITZKOWITZ
-----------------
Jay Itzkowitz
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
INNOVIR LABORATORIES, INC.
Pursuant to Section 242 of the General Corporation Law
of the State of Delaware
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation")
is Innovir Laboratories, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article 4 thereof and substituting in lieu of said
Article 4 the following new Article 4:
4. (A) NUMBER OF SHARES. The aggregate number of shares of all classes
of stock which the Corporation shall have authority to issue eighty million
shares, consisting of (i) 60,000,000 shares of common stock, $.002 par value
(the "Common Stock") and (ii) 20,000,000 shares of preferred stock, $.01 par
value (the "preferred stock"), of which 300,000 shares of Series A Convertible
Preferred Stock, $.01 par value (the "Series A Convertible Preferred Stock") are
hereby authorized and designated.
-1-
<PAGE>
The preferred stock authorized by this Certificate of Incorporation may
be issued from time to time in one or more classes or series. The Board of
Directors is authorized to determine or alter any or all of the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued class of preferred stock other than the Series A Convertible Preferred
Stock, and to fix, alter or reduce (but not below the number then outstanding)
the number of shares comprising any such class and the designation thereof, or
any of them, and to provide for the rights and terms of conversion of the shares
of any such class.
The Board of Directors is hereby expressly authorized, by resolution or
resolutions, to provide, out of the unissued and undesignated shares of
preferred stock, for one or more series of preferred stock, in addition to the
Series A Convertible Preferred Stock, $.01 par value, described in this Article
4. Before any shares of any such series are issued, the Board of Directors shall
fix, and hereby is expressly empowered to fix, by resolution or resolutions, the
following provisions of the shares thereof:
(i) the designation of such series, the number of shares to
constitute such series, and the stated value thereof if different from the par
value thereof;
(ii) whether the shares of such series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the terms of such
voting rights, which may be general or limited;
(iii) the dividends, if any, payable on such series,whether any
such dividends shall be cumulative, and, if so, from what dates, the conditions
and dates upon which such
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<PAGE>
dividends shall be payable, the preference or relation which such dividends
shall bear to the dividends payable on any shares of stock of any other class or
any other series of this class;
(iv) the amount or amounts payable upon shares of such series upon
and the rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of the assets,
of the Corporation, and whether such rights shall be in preference to, or in
another relation to, the comparable rights of any other class or classes or
series of stock;
(v) whether the shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other series of this class or any
other securities and, if so, the price or prices or the rate or rates of
conversion or exchange and the method if any of adjusting the same, and any
other terms and conditions of conversion or exchange;
(vi) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payments of dividends
or the making of other distributions on the Common Stock or shares of stock of
any other class or any other series of this class;
(vii) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of this class
or of any other class; and
(viii) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions thereof. The powers, preferences and relative, participating,
optional and other special rights, of each series of preferred stock, and the
qualifications, limitations of restrictions thereof, if any, may differ
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<PAGE>
from those of any and all other series at any time outstanding. All shares of
any one series of preferred stock shall be identical in all respects with all
other shares of such series, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall
accrue and/or be cumulative.
(B) SERIES A CONVERTIBLE PREFERRED STOCK. The designations, powers,
preferences and relative participating, optional or other special rights, and
the qualifications, limitations and restrictions thereof in respect of the
Series A Convertible Preferred Stock are as follows:
(i) DIVIDENDS. The holder of each share of Series A Convertible
Preferred Stock shall be entitled to receive, before any dividends shall be
declared and paid upon or set aside for any shares of the Common Stock, when and
as declared by the Board of Directors of the Corporation, out of funds legally
available for that purpose, dividends in cash, stock or otherwise, provided that
the amount of any such dividend shall not be less than the amount per share, if
any, of any dividend declared on the Common Stock, provided further that for
such purpose, each share of Series A Convertible Preferred Stock shall be deemed
to represent that number of shares of Common Stock into which such share of
Series A Convertible Preferred Stock is then convertible, rounded to the nearest
tenth of a share. All dividends declared upon the Series A Convertible Preferred
Stock shall be declared PRO RATA per share. All payments due under this Section
(i) to any holder of shares of Series A Convertible Preferred Stock shall be
made to the nearest cent.
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(ii) RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(1) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to its stockholders, whether from capital,
surplus or earnings, shall be distributed as follows:
(a)(i) The holders of Series A Convertible Preferred Stock
shall be entitled to receive, prior and in preference to any distribution to the
holders of Common Stock, an amount equal to $2.00 (the "Original Series A
Purchase Price") for each share of Series A Convertible Preferred Stock then
outstanding, and, in addition, an amount equal to declared but unpaid dividends,
if any, on the Series A Convertible Preferred Stock. If upon liquidation,
dissolution or winding up of the Corporation the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of the Series A Convertible Preferred Stock the full amount to which
they shall be entitled under this Section B(ii)(1)(a)(i), each of the holders of
the Series A Convertible Preferred Stock shall share ratably in any distribution
of assets based on the ratio of the amount which would have been payable in
respect of the shares held by such holder upon such distribution to the total
amount which would have been payable to all such holders if all amounts payable
on or with respect to said shares were paid in full.
(ii) After setting apart or paying in full the preferential
amounts due the holders of the Series A Convertible Preferred Stock in
accordance with Section B(ii)(1)(a)(i), the remaining assets of the
Corporation available for distribution to stockholders shall be distributed
to each holder of the Common Stock the Series A
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<PAGE>
Convertible Preferred Stock, PRO RATA based on the ratio which the number
of shares of Common Stock such holder holds (or is deemed to hold) bears to
the number of shares of Common Stock held (or deemed to be held) by all
such holders. In connection therewith each holder of Series A Convertible
Preferred Stock shall be deemed to hold that number of shares of Common
Stock into which the shares of Series A Convertible Preferred Stock held by
such holder is then convertible rounded to the nearest tenth of a share.
(2) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the Corporation shall, within ten
(10) days after the date the Board of Directors approves such action, or twenty
(20) days prior to any shareholders' meeting called to approve such action, or
twenty (20) days after the commencement of any involuntary proceeding, whichever
is earlier, give each holder of shares of Series A Convertible Preferred Stock
initial written notice of the proposed action. Such initial written notice shall
describe the material terms and conditions of such proposed action, including a
description of the stock, cash and property to be received by the holders of
shares of Series A Convertible Preferred Stock upon consummation of the proposed
action and the date of delivery thereof. If any material change in the facts set
forth in the initial notice shall occur, the Corporation shall promptly give
written notice to each holder of shares of Series A Convertible Preferred Stock
of such material change.
(3) The Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation before the expiration
of thirty (30) days after the mailing of the initial notice or ten (10) days
after the mailing of any
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<PAGE>
subsequent written notice, whichever is later; provided that any such thirty
(30) day or ten (10) day period may be shortened upon the written consent of the
holders of all of the outstanding shares of Series A Convertible Preferred
Stock.
(4) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation which will involve the distribution
of assets other than cash, the Corporation shall promptly engage competent
independent appraisers to determine the value of the assets to be distributed
(it being understood that with respect to the valuation of securities pursuant
to this Section, the independence and competence of any appraiser engaged by the
Corporation shall be reasonably and promptly approved by the holders of shares
representing 51%, by voting power, of the Corporation's outstanding Series A
Convertible Preferred Stock). The corporation shall, upon receipt of such
appraiser's valuation give prompt written notice to each holder of shares of
Series A Convertible Preferred Stock of the appraiser's valuation. The
appraiser's valuation shall be applied on a consistent basis for Series A
Convertible Preferred Stock.
(iii) VOTING. Except as otherwise required by law or as set forth
herein, the shares of Series A Convertible Preferred Stock shall be voted
equally with the shares of the Corporation's Common Stock at an annual or
special meeting of stockholders of the Corporation, or may act by written
consent in the same manner as the Corporation's Common Stock, upon the following
basis: each holder of shares of Series A Convertible Preferred Stock shall be
entitled to (1) two (2) times such number of votes deriving from the Series A
Convertible Preferred Stock held by him on the record date fixed for such
meeting, or on the effective date of such written consents as shall be equal to
the largest number of
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whole shares of the Corporation's Common Stock into which all of his share of
Series A Convertible Preferred Stock are convertible immediately after the close
of business on the record date fixed for such meeting or the effective date of
such written consent until (2) the issuance and sale of another series of
convertible preferred stock of the Corporation with proceeds to the Corporation
of at least Four Million Dollars ($4,000,000), automatically and immediately
from and after which event such holder shall be entitled to such number of votes
deriving from the Series A Convertible Preferred Stock held by him on the record
date fixed for such meeting, or on the effective date of such written consent,
as shall be equal to the largest number of whole shares of Corporation's Common
Stock into which all of his shares of Series A Convertible Preferred Stock are
convertible immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent.
(iv) CONVERSION RIGHTS. (1) Each share of Series A Convertible
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the issuance of such share into fully paid and non-assessable
shares of Common Stock of the Corporation; provided, however, each share of
Series A Convertible Preferred Stock shall automatically be converted into fully
paid and non-assessable shares of Common Stock of the Corporation immediately
upon the earlier to occur of (a) the closing of a sale of the Corporation's
Common Stock in any private placement transaction with proceeds to the
Corporation of at least Twenty Million Dollars ($20,000,000) or (b) the closing
of a sale of the Corporation's Common Stock in an underwritten registered public
offering with proceeds to the Corporation of at least Twenty Million Dollars
($20,000,000). The number of shares
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<PAGE>
of Common Stock into which each share of the Series A Convertible Preferred
Stock may be converted shall be determined by dividing $2.00 by the Series A
Conversion Price (determined as hereinafter provided) in effect at the time of
the conversion.
(2) The conversion price per share of Series A Convertible
Preferred Stock (the "Series A Conversion Price") at which shares of Common
Stock shall be initially issuable upon conversion of any shares of Series A
Convertible Preferred Stock shall be $2.00, subject to adjustment as provided in
Section (v) hereof.
(3) The holder of any shares of Series A Convertible Preferred
Stock may exercise the conversion rights as to such shares or any part thereof
by delivering to the Corporation during regular business hours, at the office of
any transfer agent of the Corporation for the Series A Convertible Preferred
Stock, or at the principal office of the Corporation or at such other place as
may be designated by the Corporation, the certificate or certificates for the
shares to be converted, duly endorsed for transfer to the Corporation (if
required by it), accompanied by written notice stating that the holder elects to
convert such shares. Conversion shall be deemed to have been effected on the
date when such delivery is made, and such date is referred to herein as the
"Conversion Date". As promptly as practicable thereafter the Corporation shall
issue and deliver to or upon the written order of such holder, at such office or
other place designated by the Corporation, a certificate or certificates for the
number of full shares of Common Stock to each such holder is entitled and a
check for cash with respect to any fractional interest in a share of Common
Stock as provided in subparagraph (4) of this Section B(iv). The holder shall be
deemed to have become a stockholder of record on the applicable Conversion Date
unless the transfer books
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<PAGE>
of the Corporation are closed on the date, in which event he shall be deemed to
have become a stockholder of record on the next succeeding date on which the
transfer books are open, but the Conversion Price shall be that in effect on the
Conversion Date. Upon conversion of only a portion of the number of shares of
Series A Convertible Preferred Stock represented by a certificate surrendered
for conversion, the Corporation shall issue and deliver to or upon the written
order of the holder of the certificate so surrendered for conversion, at the
expense of the Corporation, a new certificate covering the number of shares of
Series A Convertible Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(4) No fractional shares of Common Stock or script shall be issued
upon conversion of shares of Series A Convertible Preferred Stock. If more than
one share of Series A Convertible Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series A Convertible Preferred Stock so
surrendered. Instead of any fractional shares of Common Stock which would
otherwise be issuable upon conversion of any shares of Series A Convertible
Preferred Stock, the Corporation shall pay a cash adjustment in respect of such
fractional interest equal to the then Current Market Price (as hereinafter
defined) of a share of Common Stock multiplied by such fractional interest.
For the purpose hereof, the Current Market Price at any date of
one share of Common Stock shall be deemed to be the daily closing price on the
day before the day in question. The closing price shall be the last reported
sales price [regular way] or, in case no such reported sales took place on such
day, the average of the last reported bid and
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<PAGE>
asked prices [regular way], in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading (or if the
Common Stock is not at the time listed or admitted for trading on any such
exchange, then such price shall be equal to the average of the last reported bid
and asked prices, as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") on such day, or if, on any day in
question, the security shall not be quoted on the NASDAQ, then such price shall
be equal to the last reported bid and asked prices on such day as reported by
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this Section B(iv)(4) are available
for the period required hereunder, the Current Market Price shall be determined
in good faith by the Board of Directors of the Corporation, or if such
determination cannot be made, by a nationally recognized independent investment
banking firm selected mutually by the holder of a majority in the voting power
of the Series A Convertible Preferred Stock then outstanding and the Corporation
(or, if such selection cannot be made, by a nationally recognized independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules).
(5) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of Series A Convertible Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in
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<PAGE>
which the Series A Convertible Preferred Stock so converted were registered and
no such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax, or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(6) The Corporation shall at all times reserve and keep available,
out of its authorized but unissued common stock, solely for the purpose of
effecting the conversion of the Series A Convertible Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all Series A
Convertible Preferred Stock from time to time outstanding. The Corporation shall
from time to time in accordance with the laws of the State of Delaware, increase
the authorized amount of its Common Stock if at any time the authorized number
of shares of its Common Stock remaining unissued shall not be sufficient to
permit the conversion of all of the shares of Series A Convertible Preferred
Stock at the time outstanding.
(7) If any shares of Common Stock to be reserved for the purpose
of conversion of shares of Series A Convertible Preferred Stock require
registration or listing with, or approval of, any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise, before such shares may be validly issued or delivered upon
conversion, the Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration listing or approval, as the case may be.
(8) All shares of Common Stock which may be issued upon conversion
of the shares of Series A Convertible Preferred Stock will upon issuance by the
Corporation
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<PAGE>
be validly issued, fully paid and non-assessable and free from all taxes, liens
and charges with respect to the issuance thereof.
(9) In case:
(a) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend,
or any other distribution, payable otherwise than in cash; or
(b) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or
purchase any shares of stock of any class or to receive any other
rights; or
(c) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another
corporation or conveyance of all or substantially all of the assets of
the Corporation to another corporation; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Corporation;
then, and in any such case, the Corporation shall cause to be mailed to the
transfer agent for the Series A Convertible Preferred Stock, and to the holders
of record of the outstanding Series A Preferred Stock, at least ten (10) days
prior to the date hereinafter specified, a notice stating the date on which (x)
are or is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization consolidation, merger,
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<PAGE>
conveyance, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
(v) ADJUSTMENT OF CONVERSION PRICES. The Conversion Price from
time to time in effect shall be subject to adjustment from time to time
as follows:
(1) STOCK SPLITS DIVIDENDS AND COMBINATIONS. In case the
Corporation shall at any time subdivide the outstanding shares of Common Stock,
or shall issue a stock dividend on its outstanding Common Stock, the Conversion
Price in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately decreased, and in case the Corporation shall
at any time combine the outstanding shares of Common Stock, the Conversion Price
in effect immediately prior to such combination shall be proportionately
increased, effective at the close of business on the date of such subdivision,
dividend or combination, as the case may be. The proportional increase or
decrease in the Conversion Price, as the case may be, shall be that amount such
that the Conversion Price in effect after such subdivision, dividend or
combination shall be an amount which would entitle the holder of Series A
Convertible Preferred Stock to obtain the number of shares of Common Stock which
he would have owned immediately following such event had he converted his Series
A Convertible Preferred Stock immediately prior to such event.
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<PAGE>
(2) The Corporation will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section B(v) and in the taking of all such action ag may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Convertible Preferred Stock against impairment.
(3) Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Section B(v), the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof, and prepare and furnish to each holder of Series A
Convertible Preferred Stock affected thereby a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Convertible Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(a) such adjustment or readjustment, (b) the Conversion Price at the time in
effect, and (c) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of his
shares.
(vi) STATUS OF CONVERTED STOCK. In case any shares of Series A
Convertible Preferred Stock shall be converted pursuant to Section B(iv) hereof,
the shares so
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<PAGE>
converted shall resume the status of authorized but unissued shares of Series A
Convertible Preferred Stock.
(vii) CHANGES AFFECTING SERIES A CONVERTIBLE PREFERRED STOCK. So long
as any shares of Series A Convertible Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval by vote or written
consent, in the manner provided by law, of the holders of at least two-thirds
(66-2/3%) of the total number of shares of Series A Convertible Preferred Stock
outstanding, voting separately as a class, (1) alter or change any or all of the
rights, preferences, privileges and restrictions granted to or imposed upon the
Series A Convertible Preferred Stock or increase or decrease the authorized
number of shares of Series A Convertible Preferred Stock; or (2) amend the
provisions of this Section B(vii); or (3) reclassify the shares of Common Stock
or any other shares of capital stock junior to the Series A Convertible
Preferred Stock into shares of capital stock, or create any new class or series
of shares of capital stock senior to or on a parity with the Series A
Convertible Preferred Stock as to voting rights, dividends or a distribution of
assets of the Corporation in liquidation; or (4) unless holders of shares
representing at least seventy percent (70%), by voting power, of the capital
stock of the Corporation entitled to vote thereon otherwise consent or approve,
sell, lease, convey, exchange, transfer or otherwise dispose of all or
substantially all of its assets (other than for the purposes of securing payment
of any contract); or (5) unless holders of shares representing at least seventy
percent (70%), by voting power, of the capital stock of the Corporation entitled
to vote thereon otherwise consent or approve, merge or consolidate with or into
any other corporation except into or with a wholly-owned subsidiary of the
Corporation; or (6) purchase or set aside any sums for
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the purchase of, or pay any dividend or make any distribution on, any shares of
stock other than Series A Convertible Preferred Stock, except for dividends or
other distributions payable on the Common Stock solely in the form of additional
shares of Common Stock and except for the purchase of shares of Common Stock
from former employees of or consultants to the Corporation who acquired such
shares directly from the Corporation, if the purchase price does not exceed the
original issue price paid by such former employee or consultant to the
Corporation for such shares and such purchase is approved by the Board of
Directors of the Corporation; or (7) voluntarily dissolve, liquidate or wind-up
or carry out any partial liquidation or dissolution or transaction in the nature
of a partial liquidation or dissolution. The Corporation shall give the holders
of the Series A Convertible Preferred Stock reasonable notice of any such event.
C. COMMON STOCK.
(i) VOTING. Except as otherwise expressly provided by law, and
subject to the voting rights provided to the holders of Series A Convertible
Preferred Stock by this Certificate of Incorporation, the Common Stock has
exclusive voting rights on all matters requiring a vote of stockholders.
(ii) OTHER RIGHTS. Each share of Common Stock issued and
outstanding shall be identical in all respects one with the other, and no
dividends shall be paid on any shares of Common Stock unless the same is paid on
all shares of Common Stock outstanding at the time of such payment. Except for
and subject to those rights expressly granted to the holders of the Series A
Convertible Preferred Stock, or except as may be
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provided by the laws of the State of New York, the holders of Common Stock shall
have exclusively all other rights of stockholders.
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation of the State of Delaware.
4. The effective time of the amendment herein certified shall be upon
its filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and attested to by its Assistant
Secretary this 16th day of April, 1992.
/S/ STEPHEN R. STREBER
----------------------
Stephen R. Streber,
President
Attest: /S/ KATHLEEN E. PICKERING
-------------------------
Kathleen E. Pickering,
Assistant Secretary
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CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
INNOVIR LABORATORIES, INC.
Pursuant to Section 242 of the General Corporation Law
of the State of Delaware
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation")
is Innovir Laboratories, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by changing the Article thereof numbered 4(A) so that, as amended, the
first paragraph of said Article 4(A) shall be and read as follows:
4. (A) NUMBER OF SHARES. The aggregate number of shares of all classes
of stock which the Corporation shall have authority to issue is eighty million
shares, consisting of (i) 60,000,000 shares of common stock, $.000125 par value
(the "Common Stock") and (ii) 20,000,000 shares of preferred stock, $.01 par
value (the "preferred stock"), of which 400,000 shares of Series A Convertible
Preferred Stock, $.01 par value (the "Series A Convertible Preferred Stock") are
hereby authorized and designated.
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<PAGE>
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
4. The effective time of the amendment herein certified shall be upon
its filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and attested to by its Assistant
Secretary this 10 day of June, 1992.
/S/ STEPHEN R. STREBER
----------------------
Stephen R. Streber,
President
Attest: /S/ KATHLEEN E. PICKERING
-------------------------
Kathleen E. Pickering,
Assistant Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
INNOVIR LABORATORIES, INC.
Pursuant to Section 242 of the General Corporation Law
of the State of Delaware
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Innovir Laboratories, Inc.
2. Article 4(B) of the Certificate of Incorporation of the Corporation is
hereby amended by (a) inserting, immediately before the final period of the
current text of Section 4(B)(iv)(9) of the Certificate of Incorporation and
immediately before the final period of the current text of Section 4(B)(vii) of
the Certificate of Incorporation, the following phrase:
"; PROVIDED, however, that in the event of any reverse stock
split and any related recapitalization or related amendment
to terms of preferred stock, such notice shall not be
required if such reverse stock split and any related
recapitalization or related amendment to terms of preferred
stock is approved by the holders of a majority of all of the
outstanding shares of the Corporation's capital stock class
for such purpose prior to February 15, 1993".
3. After giving effect to the amendment in the foregoing paragraph 2,
Article 4(A) of the Corporation's Certificate of Incorporation be amended, as
follows:
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<PAGE>
(a) to effect a plan of recapitalization by affecting a one hundred
nine and two hundred forty-five one thousandths (109.245) reverse stock
split with respect to the Corporation's Common Stock (the "Reverse Common
Stock Split"), without any change in the powers, preferences and rights and
qualifications, limitations or restrictions thereof, except as otherwise
provided herein, such that every one hundred nine and two hundred
forty-five one thousandths (109.245) shares of Common Stock outstanding or
held by the Corporation in its treasury or reserved for issuance on the
date of the filing of a Certificate of Amendment to the Corporation's
Certificate of Incorporation to effect the amendments recommended by this
Resolution (the "Effective Time"), and without further action of any kind
on the part of the Corporation or its stockholders, shall be changed and
reclassified into one share of Common Stock, $.013 par value per share,
which share shall be fully paid and nonassessable if and only if and only
to the extent such outstanding shares or shares held in treasury were fully
paid and nonassessable. Fractional shares which would otherwise result from
the foregoing amendment shall be converted upon the Effective Time into the
right to receive cash at a rate of seven cents ($.07 per share. Each stock
certificate outstanding at the Effective Time shall represent the whole
number of shares of Common Stock obtained by dividing the number of shares
of Common Stock represented by such certificate immediately prior to the
Effective Time by one hundred nine and two hundred fort-five one
thousandths (109.245) and a right to receive cash for any fractional shares
of Common Stock, if any, at the rate specified in the preceding sentence.
In order to be entitled to receive cash payments for fractional shares as
hereinabove provided, stockholders shall deliver stock certificates to the
Corporation at its principal place of business duly endorsed for transfer,
and the Corporation is hereby authorized to issue and deliver new stock
certificates for the Common Stock representing the number of shares of
Common Stock held of record of the Corporation's stockholders following the
Reverse Common Stock Split, in each case in exchange for a stock
certificate or stock certificates for shares of Common Stock issued prior
to the Reverse Common Stock Split, the execution and delivery of such
certificates by said officers to be conclusive evidence that the same was
authorized, and
(b) to amend the number of authorized shares of the Corporation's
Common Stock to fifteen million (15,000,000) shares, having given effect to
the Reverse Common Stock Split.
4. After giving effect to the amendment in the foregoing paragraph 2,
Article 4(A) of the Corporation's Certificate of Incorporation be further
amended, as follows:
(a) to effect a plan of recapitalization by affecting a one-for-six and
seven hundred seventy-six one thousandths (6.778) reverse stock split with
respect
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to the Corporation's Series A Preferred Stock (the "Reverse Preferred Stock
Split"), without any change in the powers, preferences and rights and
qualifications, limitations or restrictions thereof, except as otherwise
provided herein, such that every six and seven hundred seventy-six one
thousandths (6.774) shares of Series A Preferred Stock outstanding or held
by the Corporation in its treasury or reserved for issuance upon the
Effective Time, and without further action of any kind on the part of the
Corporation or its stockholders, shall be changed and reclassified into one
share of Series A Preferred Stock, $.06 par value per share, which share
shall be fully paid and nonassessable if and only if and only to the extent
such outstanding shares or shares held in treasury were fully paid and
nonassessable. Fractional shares which would otherwise result from the
foregoing amendment shall be converted upon the Effective Time into the
right to receive cash at a rate of one dollar and twenty-five cents ($1.25)
per share. Each stock certificate outstanding at the Effective Time shall
represent the whole number of shares of Series A Preferred Stock obtained
by dividing the number of shares of Series A Preferred Stock represented by
such certificate immediately prior to the Effective Time by six and seven
hundred seventy-six one thousandths (6.776) and a right to receive cash for
any fractional shares of Series A Preferred Stock, if any, at the rate
specified in the preceding sentence. In order to be entitled to receive
such cash payments for fractional shares as hereinabove provided,
stockholders shall deliver stock certificates to the Corporation at its
principal place of business duly endorsed for transfer, and the Corporation
is hereby authorized to issue and deliver new stock certificates for the
Series A Preferred Stock representing the number of shares of Series A
Preferred Stock held of record by the Corporation's stockholders following
the Reverse Preferred Stock Split, in each case in exchange for a stock
certificate or stock certificates for shares of Series A Preferred Stock
issued prior to the Reverse Preferred Stock Split, the execution and
delivery of such certificates by said officers to be conclusive evidence
that the same was authorized, and
(b) to increase the number of authorized shares of the Corporation's
Series A Preferred Stock to two million (2,000,000) shares, having given
effect to the Reverse Preferred Stock Split.
5. After giving effect to the amendment in the foregoing paragraph 2, in
accordance with the preceding paragraphs 3 and 4, the Certificate of
Incorporation of the Corporation is hereby amended changing the Article thereof
numbered 4(A) so that, as amended, the first paragraph of said Article 4(A)
shall be and read as follows:
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<PAGE>
"NUMBER OF SHARES. The aggregate number of shares of all classes of capital
stock which the Corporation has the authority to issue is thirty million
(30,000,000) shares, consisting of (i) fifteen million (15,000,000) shares
of Common Stock of the par value of $.013 per share and (ii) fifteen
million (15,000,000) shares of preferred stock of the par value of $.06 per
share, of which two million (2,000,000) shares of Series A Convertible
Preferred Stock, $.06 par value, are hereby authorized and designated."
6. After giving effect to the amendments in the foregoing paragraphs 2
through 5, the Certificate of Incorporation of the Corporation is hereby further
amended by deleting the Article thereof numbered 4(B) and substituting in lieu
thereof a new Article 4(B), as follows:
"4(B) SERIES A CONVERTIBLE PREFERRED STOCK.
The designations, powers, preferences, and relative participating,
optional or other rights of the Series A Convertible Preferred Stock are as
follows:
1. DESIGNATION AND AMOUNT
The shares of such class shall be designated as "Series A Convertible
Preferred Stock" (the "Series A Preferred Stock") and the number of shares
constituting the Series A Preferred Stock shall be two million (2,000,000).
Such number of shares may be increased or decreased by vote of the Board of
Directors; PROVIDED, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of such shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion
of any outstanding securities issued by the Corporation convertible into
Series A Preferred Stock.
2. DIVIDENDS.
The holders of the Series A Preferred Stock shall be entitled to
receive dividends as, if and when declared by the Board of Directors out of
funds legally available for the purpose, and only out of accumulated
earnings, at a rate per fiscal year of ten cents $.10 per share payable in
preference and priority to any payment of any dividend on the Corporation's
Common Stock, par value $.013 per share (the "Common Stock"). The right to
such dividends on the Series A Preferred Stock shall not be cumulative, and
no right shall accrue to the holders of the Series A Preferred Stock by
reason by the fact that dividends on such shares are not declared in any
fiscal year. Dividends and distributions (other than those payable solely
in Common Stock) may be paid, or declared and set aside
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<PAGE>
for payment, upon shares of Common Stock in any fiscal year only if
dividends shall have been paid, or declared and set apart for payment, on
account of all shares of Series A Preferred Stock then issued and
outstanding, at the aforesaid rate for such fiscal year.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
In the event of the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation (each such event herein referred to as a
"Liquidation"), the holders of Series A Preferred Stock shall be entitled
to have set apart for them, or to be paid out of assets of the Corporation,
before any distribution is made to or set apart for the holders of Common
Stock, an amount equal to one dollar twenty-five cents ($1.25) plus
declared but unpaid dividends, if any, per share (the "Series A Liquidation
Amount") of Series A Preferred Stock (which amount shall be subject to
equitable adjustment whenever there shall occur a stock dividend, stock
split, combination, reorganization, recapitalization, reclassification or
other similar event involving a change in the capital structure of the
Corporation), PROVIDED, however, that if the Board of Directors of the
Corporation in good faith determines that upon the occurrence of a
Liquidation the holders of the Series A Preferred Stock would be entitled
to receive an amount, determined as of the date of such Liquidation,
greater than the Series A Liquidation Amount if all of the outstanding
shares of Series A Preferred Stock were converted into shares of Common
stock as provided in Section 4 hereof, then the holders of Series A
Preferred Stock will be treated as if such shares had been converted into
shares of Common Stock upon the occurrence of such Liquidation. If, upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to
stockholders shall be insufficient to set aside for or to pay such amounts
to the holders of Series A Preferred Stock, the total amount of the
Corporation's assets which is available to be paid to stockholders of the
Corporation shall be distributed pro rata among the holders of the Series A
Preferred Stock and no distribution shall be made to or set apart for the
holders of Common Stock. If the assets of the Corporation available for
distribution to stockholders exceed such amounts, the balance of such
assets shall be paid to or set aside for payment ratably among the holders
of Common Stock.
In the event of a merger or consolidation of the Corporation with or
into another entity (whether or not the Corporation is the surviving
entity) in which the shareholders of the Corporation immediately prior to
such merger or consolidation do not have a majority voting interest
(directly or indirectly) in the surviving entity immediately after such
merger or consolidation, the consideration to be received in such merger or
consolidation by the holders of the Series A
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Preferred Stock and the Common Stock in exchange for such holdings shall be
apportioned among them as if such merger or consolidation were a
Liquidation.
4. CONVERSION.
(i). OPTIONAL CONVERSION.
Subject to the terms and conditions of this Section 4, at any time
after the issuance of the Series A Preferred Stock, the holder of each
share of Series A Preferred Stock shall have the right, at its option, to
convert any such share of Series A Preferred Stock into one fully paid and
non-assessable share of Common Stock, subject to adjustment as provided in
Paragraph C below.
Such option to convert shares of Series A Preferred Stock into shares
of Common Stock may be exercised as to all or any portion of such shares of
Series A Preferred Stock by, and only by, giving written notice to the
Corporation that the holder elects to convert a stated number of shares of
Series A Preferred Stock into Common Stock and by surrendering for such
purpose to the Corporation at its principal office the certificate
representing such shares of Series A Preferred Stock, duly endorsed or
accompanied by proper instruments of transfer. At the time of such
surrender, the persons exercising such option to convert shall be deemed to
be the holders of the shares of Common Stock issuable upon such conversion,
notwithstanding that the stock transfer books of the Corporation may then
be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to such person.
Promptly after the receipt of the written notice referred to in the
preceding paragraph and surrender of the certificate or certificates for
the share or shares of Series A Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and delivered,
to the holder, registered in the holder's name, a certificate or
certificates for the number of whole shares of Common Stock issuable upon
the conversion of such share or shares of Series A Preferred Stock. In case
the number of shares of Series A Preferred Stock represented by the
certificate or certificates surrendered for conversion pursuant to this
Section 4 exceeds the number of shares converted, the Corporation shall,
upon such conversion, execute and deliver to the holder a new certificate
or certificates for the number of shares of Series A Preferred Stock
represented by the certificate or certificates surrendered which are not to
be converted.
(ii). MANDATORY CONVERSION UPON INITIAL PUBLIC OFFERING.
Immediately upon the effectiveness of a public offering pursuant to an
effective Registration Statement under the Securities Act of 1933, as
amended,
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covering the offering and sale of common stock of the Corporation, all
outstanding shares of Series A Preferred Stock shall be converted
automatically into the number of shares of common stock into which such
shares of Series A Preferred Stock are then convertible pursuant to Section
4.A hereof as of the effectiveness of such public offering, without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or
its transfer agent for the shares of common stock.
(iii). CERTAIN PROVISIONS REGARDING CONVERSION.
No fractional shares shall be issued, and no payment in lieu thereof,
shall be issued or made upon conversion of any shares of Series A Preferred
Stock, it being agreed that upon conversion, the number of shares of Common
Stock issuable upon conversion of shares of Preferred Stock shall be
rounded to the nearest whole number.
The number of shares of Common Stock into which each share of Series A
Preferred Stock may be converted shall be subject to adjustment if the
Corporation shall after the date of issuance of the Series A Preferred
Stock split or divide the outstanding shares of Common Stock into a greater
number of shares of Common Stock or affect a reverse-split or consolidation
of the outstanding shares of Common Stock into a lesser number of shares,
or issue by way of a stock dividend on its Common Stock or reclassification
of its shares of Common Stock any shares of the Corporation. The number of
shares of Common Stock into which each share of Series A Preferred Stock
may be converted immediately prior thereto shall be adjusted so that the
holder of each share of Series A Preferred Stock thereafter surrendered for
conversion shall be entitled to receive for each share of Series A
Preferred Stock the number of shares of Common Stock which such holder
would have owned or been entitled to receive after the happening of any of
the events described above if such holder's Series A Preferred Stock had
been converted immediately prior to the happening of such event, such
adjustment to become effective concurrently with the time at which such
subdivision or combination or reclassification, as the case may be, became
effective.
5. VOTING RIGHTS.
Except as otherwise set forth herein or required by law, in all matters
submitted to a vote of the shareholders of the Corporation, the holders of
shares of Series A Preferred Stock shall vote together with the holders of
shares of Common Stock of the Corporation as one class. The holders of
shares of Series A Preferred Stock shall vote as a separate class on any
matter as to which a
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<PAGE>
separate class vote is required by law or pursuant to Section 8 hereof. In
all such votes each such share of Series A Preferred Stock shall entitle
the holder thereof to such number of votes per share on each matter put
before the stockholders of the Corporation equal to the number of shares of
Common Stock into which each share of Series A Preferred Stock is
convertible on the record date for determining stockholders eligible to
vote on such matter or, if no such record date is established, the date
immediately preceding the date such vote is taken or any written consent of
stockholders is solicited.
6. REACQUIRED SHARES.
Any shares of Series A Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of any class or series of Preferred
Stock of the Corporation in its Certificate of Incorporation, in any other
Certificate of Designations creating a series of Preferred stock or any
similar stock or as otherwise required by law.
7. COMMON STOCK RESERVED.
The Corporation shall at all times reserve and keep available out of
its authorized but unissued Common Stock the full number of shares of
Common Stock deliverable upon the conversion of all the then outstanding
shares of Series A Preferred Stock.
8. UNRESTRICTED CLASS VOTE MATTERS.
Unless there is given the approval (in writing or at a meeting duly
called for that purpose) of a majority of the outstanding shares of Series
A Preferred Stock voting as a class, the Corporation shall not: (a) amend
the Certificate of Incorporation of the Corporation if such amendment would
alter or change the powers, preferences, or special rights of the Series A
Preferred Stock so as to affect the holders thereof adversely; (b) amend
the provisions of this Section 8; or (c) reclassify the shares of Common
Stock or any other shares of capital stock junior to the Series A Preferred
Stock into shares of capital stock senior to or on a parity with the Series
A Preferred Stock as to voting rights, dividends or a distribution of
assets of the Corporation in liquidation; or (d) purchase or set aside any
sums for the purchase of, or pay any dividend or make any distribution on,
any shares of stock having dividend or liquidation priority junior to the
Series A Preferred Stock, except for dividends or together distributions
payable on the Common Stock solely in the form of additional shares of
Common Stock and
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<PAGE>
except for the purchase of shares of Common Stock issued to employees or
consultants of the Corporation if the purchase price does not exceed the
original issue price paid by such former employee or consultant to the
Corporation for such shares and such purchase is approved by the Board of
Directors of the Corporation. The holders of a majority of the aggregate
number of shares of Series A Preferred Stock outstanding may, by
affirmative vote or consent as aforesaid, agree to a change or alteration
by the Corporation in the preferences, special rights and powers of the
Series A Preferred Stock, or may waive the application thereof in any
particular instance.
7. The amendments of the Certificate of Incorporation herein certified have
been duly adopted in accordance with the provisions of Section 228 and 242 of
the General Corporation Law of the State of Delaware.
8. The effective time of the amendments herein certified, as so specified,
shall be upon its filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and Attested to by its Assistant
Secretary this 5th day of February, 1993.
/S/ CHARLES L. DIMMLER, III
---------------------------
Charles L. Dimmler, III
President
Attest: /S/ KATHLEEN PICKERING
----------------------
Kathleen Pickering
Assistant Secretary
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<PAGE>
CERTIFICATE OF DESIGNATION
OF
INNOVIR LABORATORIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Allan R. Goldberg and Kathleen E. Pickering, being respectively the
President and the Assistant Secretary of Innovir Laboratories, Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Company"), DO HEREBY CERTIFY:
That, pursuant to authority expressly vested in the Board of Directors of
the Company by the provisions of its Certificate of Incorporation, as amended,
the Board of Directors, at a meeting held on March 30, 1995, adopted the
following resolutions:
FURTHER RESOLVED, that there is hereby established a class of
preferred stock, to be designated and referred to as "Class B Convertible
Preferred Stock" (the "Class B Preferred Stock"), which shall consist of
Two Million Five Hundred Thousand (2,500,000) shares, each having a par
value of Six Cents ($.06). Such number of shares may be increased or
decreased by vote of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Class B Preferred Stock to a number
less than the number of such shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities
issued by the Company convertible into Class B Preferred Stock;
<PAGE>
FURTHER RESOLVED, that the holders of Class B Preferred Stock have pro
rata rights to dividends, equal to the holders of the Common Stock (based
upon the number of shares of Common Stock into which the Class B Preferred
Stock is convertible on the dividend record date), from funds legally
available therefor, when, as and if declared by the Board of Directors of
the Company;
FURTHER RESOLVED, that in the event of the voluntary or involuntary
liquidation, dissolution or winding up of the Company (each such event
herein referred to as a "Liquidation"), the holders of Class B Preferred
Stock shall be entitled to have set apart for them, or to be paid out of
assets of the Company, before any distribution is made to or set apart for
the holders of Common Stock, an amount equal to five dollars ($5.00) per
share and an amount equal to the accrued and unpaid dividends, if any, (the
"Class B Liquidation Amount"), of Class B Preferred Stock (which amount
shall be subject to equitable adjustment whenever there shall occur a stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital
structure of the Company), provided, however, that if the Board of
Directors of the Company in good faith determines that, upon the occurrence
of a Liquidation, the holders of the Class B Preferred Stock would be
entitled to receive an amount, determined as of the date of such
Liquidation, greater than the Class B Liquidation Amount if all of the
outstanding shares of Class B Preferred Stock were converted into shares of
Common Stock as provided in these resolutions, then the holders of Class B
Preferred Stock will be treated as if such shares had been converted into
shares of Common Stock upon the occurrence of such Liquidation.
If, upon a Liquidation, the assets of the Company available for
distribution to stockholders shall be insufficient to set aside for or to
pay such amounts to the holders of Class B Preferred Stock, the total
amount of the Company's assets which is available to be paid to
stockholders of the Company shall be distributed pro rata among the holders
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<PAGE>
of Class B Preferred Stock and any other stock with priority equivalent to
that of Class B Preferred Stock, and no distribution shall be made to or
set apart for the holders of Common Stock. If the assets of the Company
available for distribution to stockholders exceed such amounts, the balance
of such assets shall be paid to or set aside for payment ratably among the
holders of Common Stock;
FURTHER RESOLVED, that at any time after the issuance of the Class B
Preferred Stock, the holders of each share of Class B Preferred Stock shall
have the right, at their option and without the payment of any additional
consideration, to convert any such share of Class B Preferred Stock into
fully paid and non-assessable shares of Common Stock. The number of shares
or the fraction of a share of Common Stock into which each share of the
Class B Preferred Stock may be converted shall be determined by dividing
Five Dollars ($5.00) by sixty-five percent (65%) of the average of the
closing bid prices (or last sale prices) of the Common Stock (the "Five Day
Bid Price"), as reported by the Nasdaq SmallCap Market (or any other market
or exchange upon which the Common Stock may then be quoted or listed) for
the five days prior to conversion (or the last date on which such a quote
was available), provided, however, that the Five Day Bid Price shall not be
less than $5.00 per share of Common Stock.
Such option to convert shares of Class B Preferred Stock into shares
of Common Stock may be exercised as to all or any portion of such shares of
Class B Preferred Stock by, and only by, giving written notice to the
Company that the holder elects to convert a stated number of shares of
Class B Preferred Stock into Common Stock and by surrendering for such
purpose to the Company at its principal office the certificate representing
such shares of Class B Preferred Stock, duly endorsed or accompanied by
proper instruments of transfer. At the time of such surrender, the persons
exercising such option to convert shall be deemed to be the holders of the
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shares of Common Stock issuable upon such conversion, notwithstanding that
the stock transfer books of the Company may then be closed or that
certificates representing such shares of Common Stock shall not then be
actually delivered to such person.
Promptly after the receipt of the written notice referred to in the
preceding paragraph and surrender of the certificate or certificates for
the share or shares of Class B Preferred Stock to be converted, the Company
shall issue and deliver, or cause to be issued and delivered, to the
holder, registered in the holder's name, a certificate or certificates for
the number of whole shares of Common Stock issuable upon the conversion of
such share or shares of Class B Preferred Stock. In case the number of
shares of Class B Preferred Stock represented by the certificate or
certificates surrendered for conversion pursuant to this resolution exceeds
the number of shares converted, the Company shall, upon such conversion,
execute and deliver to the holder a new certificate or certificates for the
number of shares of Class B Preferred Stock represented by the certificate
or certificates surrendered which are not to be converted.
No fractional shares shall be issued, and no payment in lieu thereof
shall be issued or made upon conversion of any shares of Class B Preferred
Stock, it being agreed that upon conversion, the number of shares of Common
Stock issuable upon conversion of shares of Preferred Stock shall be
rounded to the nearest whole number.
The number of shares of Common Stock into which each share of Class B
Preferred Stock may be converted shall be subject to adjustment, if
required, if the Company shall after the date of issuance of the Class B
Preferred Stock split or divide the outstanding shares of Common Stock into
a greater number of shares of Common Stock or effect a reverse-split or
consolidation of the outstanding shares of Common Stock into a lesser
number of shares, or issue by way of a stock dividend on its Common Stock
or reclassification of its shares of Common Stock any shares of the
Company. The number of shares of Common Stock into which each share
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<PAGE>
of Class B Preferred Stock may be converted immediately prior thereto shall
be adjusted so that the holder of each share of Class B Preferred Stock
thereafter surrendered for conversion shall be entitled to receive for each
share of Class B Preferred Stock the number of shares of Common Stock which
such holder would have owned or been entitled to receive after the
happening of any of the events described above if such holder's Class B
Preferred Stock had been converted immediately prior to the happening of
such event, such adjustment to become effective concurrently with the time
at which such subdivision or combination or reclassification, as the case
may be, became effective;
FURTHER RESOLVED, that the Company shall at all times reserve and keep
available out of its authorized but unissued Common Stock the full number
of shares of Common Stock deliverable upon the conversion of all the then
outstanding shares of Class B Preferred Stock;
FURTHER RESOLVED, that except as required by law, in all matters
submitted to a vote of the stockholders of the Company, the holders of
shares of Class B Preferred Stock shall have no voting rights;
FURTHER RESOLVED, that any shares of Class B Preferred Stock purchased
or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares
of preferred stock and may be reissued as part of a new series of any class
or series of preferred stock of the Company in its Certificate of
Incorporation, in any other Certificate of Designation creating a series of
preferred stock or any similar stock or as otherwise required by law;
FURTHER RESOLVED, that upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the registered holder will be
reasonably satisfactory) of the ownership and the loss, theft, destruction
or mutilation of any certificate or certificates representing one or more
shares of Class B Preferred Stock, and in the case of any such loss, theft
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<PAGE>
or destruction, upon receipt of indemnity reasonably satisfactory to the
Company (provided that if the holder is an institutional investor, its own
agreement will be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate or certificates, the Company will, at
its expense, execute and deliver, in lieu of such certificate or
certificates, a new certificate or certificates of like kind representing
the number of shares represented by such lost, stolen, destroyed or
mutilated certificate or certificates and dated the date of such lost,
stolen, destroyed or mutilated certificate or certificates;
FURTHER RESOLVED, that the officers of the Company be, and hereby are,
authorized and directed to file this Certificate of Designation, pursuant
to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, with respect to the Class B Preferred Stock provided for
by the foregoing resolutions.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
to be signed by its President and attested to by its Assistant Secretary this
31 day of March, 1995.
/s/ ALLAN R. GOLDBERG
------------------------------
Allan R. Goldberg, President
ATTEST:
/s/ KATHLEEN E. PICKERING
- - ---------------------------------
Kathleen E. Pickering
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<PAGE>
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE
QUALIFICATIONS, LIMITATIONS, RESTRICTIONS,
AND OTHER DISTINGUISHING CHARACTERISTICS OF
CLASS C CONVERTIBLE PREFERRED STOCK
OF
INNOVIR LABORATORIES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation")
is Innovir Laboratories, Inc. a Delaware corporation.
2. The articles of incorporation of the Corporation authorizes the
issuance of fifteen million (15,000,000) shares of Preferred Stock of a par
value of $.06 each, 2,500,000 of which have previously been designated as Class
B Convertible Preferred Stock, and expressly vests in the Board of Directors of
the Corporation the authority provided therein to issue any or all of the
remainder of said shares in one or more Classes and by resolution or resolutions
to establish the designation, number, full or limited voting powers, or the
denial of voting powers, preferences and relative, participating, optional, and
other special rights and the qualifications, limitations, restrictions, and
other distinguishing characteristics of each Class to be issued.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Class C issue of Preferred Stock:
RESOLVED, that 600,000 of the fifteen Million (15,000,000)
authorized shares of Preferred Stock of the Corporation shall be
designated Class C Convertible Preferred Stock, $.06 par value per
share, and shall possess the rights and privileges set forth below:
Section 1. Designation and Amount. The shares of such Class shall be
designated as "Class C Convertible Preferred Stock" (the "Class C Preferred
Stock") and the number of shares constituting the Class C Preferred Stock shall
be 600,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors; provided, that no decrease shall reduce the number of
shares of Class C Preferred Stock to a number less than the number of shares
then outstanding plus the number shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Class C
Preferred Stock.
<PAGE>
Section 2. Rank. The Class C Preferred Stock shall rank: (i) prior to
all of the Corporation's Common Stock, par value $.013 per share ("Common
Stock"); (ii) prior to any class or Class of capital stock of the Corporation
hereafter created specifically ranking by its terms junior to any Class C
Convertible Preferred Stock of whatever subdivision (collectively, with the
Common Stock, "Junior Securities"); (iii) on parity with the Corporation's Class
B Convertible Preferred Stock and with any class or Class of capital stock of
the Corporation hereafter created specifically ranking by its terms on parity
with the Class C Convertible Preferred Stock ("Parity Securities") in each case
as to distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (all such distributions being
referred to collectively as "Distributions").
Section 3. Dividends. The Class C Convertible Preferred Stock will bear
no dividends, and the holders of the Class C Preferred Stock ("Holders") shall
not be entitled to receive dividends on the Class C Preferred Stock.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the Holders of shares of
Class C Convertible Preferred Stock shall be entitled to receive, immediately
after any distributions to senior securities required by the Corporation's
Certificate of Incorporation or any certificate of designation of preferences,
and prior and in preference to any distribution to Junior Securities but in
parity with any distribution of Parity Securities, an amount per share equal to
the sum of (i) $5 for each outstanding share of Class C Convertible Preferred
Stock (the "Original Class C Issue Price") and (ii) an amount equal to 10% of
the Original Class C Issue Price per annum for the period that has passed since
the date of issuance of any Class C Preferred Stock (such amount being referred
to herein as the "Premium"). If upon the occurrence of such event, the assets
and funds thus distributed among the Holders of the Class C Preferred Stock and
Parity Securities shall be insufficient to permit the payment to such Holders of
the full preferential amounts due to the Holders of the Class C Preferred Stock
and the Parity Securities, respectively, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed among the
Holders of the Class C Preferred Stock and the Parity Securities, pro rata,
based on the respective liquidation amounts to which each such Class of stock is
entitled by the Corporation's Certificate of Incorporation and any certificate
of designation of preferences.
(b) Upon the completion of the distribution required by
subsection 4(a), if assets remain in this Corporation, they shall be distributed
to holders of Parity Securities (unless holders of Parity Securities have
received distributions pursuant to subsection (a) above) and Junior Securities
in accordance with the Corporation's Certificate of Incorporation including any
duly adopted certificate(s) of designation of preferences.
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<PAGE>
(c) A consolidation or merger of the Corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of the Corporation or the effectuation by
the Corporation of a transaction or Class of related transactions in which more
than 50% of the voting power of the Corporation is disposed of, shall not be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 4, but shall instead be treated pursuant to Section 7 hereof.
Section 5. Conversion.
The record Holders of this Class C Convertible Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a)(l) Right to Convert. The record Holder of this Class C
Convertible Preferred Stock shall be entitled, immediately following the date of
the last closing of a sale of such Class C Preferred Stock and at any time
thereafter, subject to the Company's right of redemption set forth in Section
7(a), at the option of the Holder, at the office of the Company or any transfer
agent for the Class C Convertible Preferred Stock, to convert shares of Class C
Convertible Preferred Stock held by such Holder (but only in multiples of
$50,000), into that number of restricted, fully-paid and non-assessable shares
of the $.013 par value common stock of the Company (the "Common Stock") at the
Fixed Conversion Price as set forth below. The record Holder of this Class C
Convertible Preferred Stock shall additionally be entitled to convert the shares
of Class C Convertible Preferred Stock held by such Holder at any time beginning
45 days following the date of the last closing of a sale of such Class C
Preferred Stock that occurs pursuant to the offering of the Class C Convertible
Preferred Stock by the Company (the "Last Closing"), subject to the Company's
right of redemption set forth in Section 7(a), at the option of the Holder, at
the office of the Company or any transfer agent for the Class C Preferred Stock,
into that number of unrestricted fully-paid and non-assessable shares of Common
Stock of the Company calculated in accordance with the following formula (the
"Conversion Rate") provided, however, that such record Holder remains in
compliance with Regulation S promulgated under the Securities Act of 1933, as
amended:
Number of shares issued upon conversion of one share of Class C Preferred Stock
= (.10)(N/365)(5.0) + 5.0
-----------------------
Conversion Price
where,
- N = the number of days between (exclusive of (i) below and inclusive
of (ii) below) (i) the date that, in connection with the consummation
of the initial purchase of this Class C Convertible Preferred Stock
from the Company, the escrow agent first had in its possession, prior
to 10:30 A.M., New York City time on such date (or after 10:30 A.M. on
such day, if the escrow agent is able to deposit such funds in an
-3-
<PAGE>
interest bearing account in time for such funds to accrue interest for
that day), funds representing full payment for the shares of Class C
Convertible Preferred Stock for which conversion is being elected, and
(ii) the applicable date of conversion for the shares of Class C
Convertible Preferred Stock for which conversion is being elected, and
- Conversion Price = the lesser of (x) the average Closing Bid Price,
as that term is defined below, for the 5 trading days ending on
November 17, 1995 (the "Fixed Conversion Price"), or (y) 85% of the
average Closing Bid Price, as that term is defined below, of the
Company's Common Stock for the five (5) trading days immediately
preceding the Date of Conversion, as defined below. For purposes
hereof, the term "Closing Bid Price" shall mean the closing bid price
of the Company's Common Stock as reported by NASDAQ (or, if not
reported by NASDAQ as reported by such other exchange or market where
traded) or, if actual sales price information is not available on any
such day, the Closing Bid Price on the last reported date.
(a)(2) Company's Right to Lower Fixed Conversion Price. Company shall
have the right to elect to lower the Fixed Conversion Price at any time, and as
often as it might choose. If Company is to make such an election, it shall
notify Subscriber by facsimile stating Company's decision to lower the Fixed
Conversion Price, the amount of the lower Fixed Conversion Price, and the
effective date the lower conversion price is to be effective (whether
retroactively or prospectively). Furthermore, on the same day Company transmits
via facsimile the notice to Holders it is lowering the Fixed Conversion Price,
the Company shall also send an original of said notice by over-night courier or
two day courier.
(b) Mechanics of Conversion. In order to convert Class C Convertible
Preferred Stock into full shares of Common Stock, the Holder shall (i) fax a
copy of the fully executed notice of conversion in the form attached hereto
("Notice of Conversion") to the Company at such office that he elects to convert
the same, which notice shall specify the number of shares of Class C Convertible
Preferred Stock to be converted and shall contain a calculation of the
Conversion Rate (together with a copy of the first page of each certificate to
be converted) to the Company or its designated transfer agent prior to Midnight,
New York City time (the "Conversion Notice Deadline") on the date of conversion
specified on the Notice of Conversion and (ii) surrender the original
certificate or certificates therefor, duly endorsed, and the original Notice of
Conversion by either overnight courier or 2-day courier, to the office of the
Company or of any transfer agent for the Class C Convertible Preferred Stock;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless
either the certificates evidencing such Class C Convertible Preferred Stock are
delivered to the Company or its transfer agent as provided above, or the Holder
notifies the Company or its transfer agent that such certificates have been
lost, stolen or destroyed. Upon receipt by the Company of evidence of the loss,
theft, destruction or mutilation of this a certificate of certificates ("Stock
Certificates") representing shares of Class C Convertible Preferred Stock, and
-4-
<PAGE>
(in the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of the Stock
Certificate(s), if mutilated, the Company shall execute and deliver new Stock
Certificate(s) of like tenor and date. No fractional shares of Common Stock
shall be issued upon conversion of this Class C Convertible Preferred Stock. In
lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall pay cash to such Holder in an amount equal to such fraction
multiplied by the Conversion Price then in effect. In the case of a dispute as
to the calculation of the Conversion Rate, the Company's calculation shall be
deemed conclusive absent manifest error.
The Company shall use all reasonable efforts to issue and deliver within
three (3) business days after delivery to the Company of such certificates, or
after such agreement and indemnification, to such Holder of Class C Convertible
Preferred Stock at the address of the Holder on the books of the Company, a
certificate or certificates for the number of shares of Common Stock to which
the Holder shall be entitled as aforesaid. The date on which conversion occurs
(the "Date of Conversion") shall be deemed to be the date set forth in such
Notice of Conversion, provided (i) that the advance copy of the Notice of
Conversion is faxed to the Company before midnight, New York City time, on the
Date of Conversion, and (ii) that the original Stock Certificates representing
the shares of Class C Convertible Preferred Stock to be converted are received
by the transfer agent or the Company within five business days thereafter. The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. If the original Stock
Certificates representing the Class C Convertible Preferred Stock to be
converted are not received by the transfer agent or the Company within five
business days after the Date of Conversion or if the facsimile of the Notice of
Conversion is not received by the Company or its designated transfer agent prior
to the Conversion Notice Deadline, the Notice of Conversion, at the Company's
option, may be declared null and void.
Following conversion of shares of Class C Convertible Preferred Stock, such
shares of Class C Convertible Preferred Stock will no longer be outstanding.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the Class C
Convertible Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all then outstanding
Class C Convertible Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Class C Convertible Preferred
Stock, the Company will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(d) Automatic Conversion. Each share of Class C Preferred Stock outstanding
on November 17, 1997 automatically shall be converted into Common Stock on each
-5-
<PAGE>
date at the Conversion Price then in effect (calculated in accordance with the
formula in Section 5(a) above) and November 17, 1997 shall be deemed the Date of
Conversion with respect to such Conversion.
(e) Adjustment to Fixed Conversion Price.
(i) If, prior to the conversion of all of the Class C Convertible Preferred
Stock, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Fixed Conversion Price shall
be proportionately reduced, or if the number of outstanding shares of Common
Stock is decreased by a combination or reclassification of shares, or other
similar event, the Fixed Conversion Price shall be proportionately increased.
(ii) If, prior to the conversion of all Class C Convertible Preferred
Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Company shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Company or another entity, then the Holders of Class C
Convertible Preferred Stock shall thereafter have the right to purchase and
receive upon conversion of Class C Convertible Preferred Stock, upon the basis
and upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such shares of
stock and/or securities as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the conversion of Class C Convertible Preferred
Stock held by such Holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holders of the Class C Convertible Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Fixed Conversion Price and of the number of shares issuable upon conversion
of the Class C Convertible Preferred Stock) shall thereafter be applicable, as
nearly as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof. The Company shall not effect
any transaction described in this subsection 5(e) unless the resulting successor
or acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Holders of the Class C Convertible Preferred Stock
such shares of stock and/or securities as, in accordance with the foregoing
provisions, the Holders of the Class C Convertible Preferred Stock may be
entitled to purchase.
(iii) If any adjustment under this Section 5(e) would create a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
-6-
<PAGE>
Section 6. Redemption.
(a) Subscriber's Right to Elect to Receive Notice of Cash Redemption by
Company. Subscriber shall have the right to require Company to provide advance
notice stating whether Company will elect to redeem Subscriber's shares of Class
C Convertible Preferred Stock in cash, pursuant to Company's redemption rights
discussed in Section 7.
(b) Mechanics of Subscriber's Election Notice. Subscriber shall send
notice to Company by facsimile ("Election Notice") stating Subscriber's
intention to require Company to disclose that if Subscriber were to exercise
his, her or its right of conversion (pursuant to section 5) whether Company
would elect to redeem Subscriber's convertible Security for cash in lieu of
issuing Common Stock. Company is required to disclose to Subscriber what action
Company would take over the subsequent five day period, including the date
Company receives such Election Notice.
(c) Company's Response. Company must respond within one business day of
receipt of Subscriber's Election Notice (1) via facsimile and (2) via overnight
courier. If Company does not respond to Subscriber within one business day via
facsimile and overnight courier, Company shall be required to issue to
Subscriber Common Stock upon Subscriber's conversion within the subsequent five
day period.
Section 7. Cash Redemption by Company.
(a) Company's Right to Redeem. Subject to the requirements of Section 6
above, the Company shall have the right, in its sole discretion, upon receipt of
a Notice of Conversion pursuant to Section 5, to redeem in whole or in part any
Class C Convertible Preferred Stock submitted for conversion, immediately prior
to conversion. If the Company elects to redeem some, but not all, of the Class C
Convertible Preferred Stock submitted for conversion, the Company shall redeem
from among the Class C Convertible Preferred Stock submitted by the various
shareholders for conversion on the applicable date, a pro-rata amount from each
shareholder so submitting Class C Convertible Preferred Stock for conversion.
(b) Mechanics of Redemption. The Company shall effect each such redemption
by giving notice ("Notice of Redemption") of its election to redeem, by
facsimile within 1 business day following receipt of a Notice of Conversion from
a Holder, with a copy by 2-day courier, to (A) the Holder of Class C Convertible
Preferred Stock selected for redemption, at the address and facsimile number of
such Holder appearing in the Company's register for the Class C Convertible
Preferred Stock and (B) the Company's Transfer Agent. Such redemption notice
shall indicate the number of shares of Holder's Preferred Stock that have been
selected for redemption and the applicable redemption price. If the Notice of
Redemption is not received within the times specified above or does not meet the
conditions specified above, the Notice of Redemption shall become null and void
(unless otherwise agreed in writing by the Holder). The Company shall not be
entitled to send any notice of redemption and begin the redemption procedure
-7-
<PAGE>
unless it has (x) the full amount of the redemption price, in cash, available in
a demand or other immediately available account in a bank or similar financial
institution or (y) immediately available credit facilities, in the full amount
of the redemption price, with a bank or similar financial institution on the
date the redemption notice is sent to shareholders.
The redemption price ("Redemption Price") per share of Class C Convertible
Preferred Stock shall be calculated in accordance with the following formula:
[(.10)(N/365) (5.0) + 5.0] x Closing Bid price on the Date of Conversion
Conversion Price
For the purposes of the above formula, "N", "Closing Bid Price" and
"Conversion Price" shall have the meanings set forth in Section 5(a).
The redemption price shall be paid to the Holder of Class C Convertible
Preferred Stock redeemed within 10 business days of the delivery of the notice
of such redemption to such Holder; provided, however, that the Company shall not
be obligated to deliver any portion of such redemption price unless either the
certificates evidencing the Class C Convertible Preferred Stock redeemed are
delivered to the Company or its transfer agent as provided in Section 5(b), or
the Holder notifies the Company or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Company to indemnify the Company from any loss incurred by it in connection
with such certificates.
Section 8. Corporate Change.
The Closing Bid Price used to determine the Conversion Price shall be
appropriately adjusted to reflect, as deemed equitable and appropriate by the
Corporation, any stock dividend, stock split or share combination of the Common
Stock. In the event of a merger, reorganization, recapitalization or similar
event of or with respect to the Company (a "Corporate Change") (other than a
Corporate Change in which or substantially all of the consideration received by
the holders of the Company's equity securities upon such Corporate Change
consists of cash or assets other than securities issued by the acquiring entity
or any affiliate thereof), this Class C Convertible Preferred Stock shall be
assumed by the acquiring entity and thereafter this Class C Convertible
Preferred Stock shall be convertible into such class and type of securities as
the Holder would have received had the Holder converted this Class C Convertible
Preferred Stock immediately prior to such Corporate Change.
Section 9. Voting Rights. Except as otherwise provided by the Delaware
Business Corporation Law, the holders of the Class C Convertible Preferred Stock
shall have no voting power whatsoever, and no holder of Class C Convertible
Preferred Stock shall vote or otherwise participate in any proceeding in which
actions shall be taken by the Corporation or the shareholders thereof or be
entitled to notification as to any meeting of the Board of Directors or the
shareholders.
-8-
<PAGE>
To the extent that under Delaware law the vote of the holders of the Class
C Convertible Preferred Stock, voting separately as a class, is required to
authorize a given action of the Corporation, the affirmative vote or consent of
the holders of at least a majority of the outstanding shares of the Class C
Convertible Preferred Stock shall constitute the approval of such action by the
class. To the extent that under Delaware law the holders of the Class C
Convertible Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Class C Convertible
Preferred Stock shall be entitled to a number of votes equal to the number of
shares of Common Stock into which it is then convertible using the record date
for the taking of such vote of stockholders as the date as of which the
Conversion Price is calculated. Holders of the Class C Convertible Preferred
Stock shall be entitled to notice of all shareholder meetings or written
consents with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's by-laws and applicable statutes.
Section 10. Protective Provisions. So long as shares of Class C Convertible
Preferred Stock are outstanding, the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Class C
Convertible Preferred Stock:
(a) alter or change the rights, preferences or privileges of the shares
of Class C Convertible Preferred Stock so as to affect adversely the Class C
Convertible Preferred Stock;
(b) create any new class or Class of stock having a preference over the
Class C Convertible Preferred Stock with respect to Distributions (as defined in
Section 2 above); or
(c) do any act or thing not authorized or contemplated by this
Designation which would result in taxation of the holders of shares of the Class
C Convertible Preferred Stock under Section 305 of the Internal Revenue Code of
1986, as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
Section 11. Status of Redeemed or Converted Stock. In the event any shares
of Class C Convertible Preferred Stock shall be redeemed or converted pursuant
to Section 5 or Section 6 hereof, the shares so converted or redeemed shall be
canceled, shall return to the status of authorized but unissued Preferred Stock
of no designated Class, and shall not be issuable by the Corporation as Class C
Convertible Preferred Stock.
Section 12. Preference Rights. Nothing contained herein shall be construed
to prevent the Board of Directors of the Corporation from issuing one or more
Class of preferred stock with dividend and/or liquidation preferences equal to
the dividend and liquidation preferences of the Class C Convertible Preferred
Stock.
-9-
<PAGE>
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Class C Convertible Preferred
Stock and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics thereof shall, upon the
effective date of said Class, be deemed to be included in and be a part of the
certificate of incorporation of the Corporation pursuant to the provisions of
the Delaware Business Corporation Law.
FURTHER RESOLVED, that the officers of the Company be, and hereby are,
authorized and directed to file this Certificate of Designation pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, with respect to the Class C Convertible Preferred Stock provided for
by the foregoing resolutions.
Signed on the 21st day of November, 1995.
/s/ ALLAN R. GOLDBERG
------------------------------------
President
Attest: /s/ KATHLEEN E. PICKERING
---------------------------
Assistant Secretary
-10-
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Preferred Stock)
The undersigned hereby irrevocably elects to convert shares of Class _ Preferred
Stock, represented by stock certificate No(s). (the "Preferred Stock
Certificates") into shares of common stock ("Common Stock") of Innovir
Laboratories, Inc. (the "Company") according to the conditions of the
Certificate of Designation of Class _ Preferred Stock, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Class _ Preferred Stock shall be made in compliance with
Regulation S, pursuant to registration of the Common Stock under the Act or
pursuant to an exemption from registration under the Act.
Conversion Calculations: ------------------------------------
Date of Conversion
------------------------------------
Applicable Conversion Price
------------------------------------
Signature
------------------------------------
Name
Address:
------------------------------------
------------------------------------
* No shares of common Stock will be issued until the original preferred Stock
Certificate(s) to be converted and the Notice of conversion are received by the
company's Attorney or Transfer Agent. The original Stock Certificates
representing the Class C Preferred Stock to be converted and the Notice of
Conversion must be received by the company's Attorney or Transfer Agent by the
fifth business day following the Date of conversion, or the Notice of
Conversion, at the Company's option, may be declared null and void.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1
INNOVIR LABORATORIES, INC.
STATEMENT OF COMPUTATION OF PER SHARE DATA
For the three months ended
March 31,
-----------------------------------------------------------
1996 1995
-----------------------------------------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net loss ($2,066,044) ($2,066,044) ($1,113,019) ($1,113,019)
Reduction of net loss assuming a portion of the proceeds
from the exercise of options and warrants was used to repay
the Company's term note payable and related accrued
interest, and capital lease obligations and to invest in
short-term government securities, in accordance with the
treasury stock method 118,571 481,098
----------- ----------- ----------- ------------
Net loss ($2,066,044) ($1,947,473) ($1,113,019) ($631,921)
=========== =========== =========== ============
Weighted average number of common shares outstanding 4,783,152 4,783,152 3,460,558 3,460,558
Weighted average shares issuable upon
conversion of convertible equity securities 1,683,836
Shares issuable upon exercise of outstanding options and warrants 3,769,084 5,952,659
Shares assumed to be purchased under the treasury stock method (1,093,723) (711,752)
----------- ----------- ----------- ------------
Weighted average number of common shares used in computing per
share data 4,783,152 9,142,349 3,460,558 8,701,465
=========== =========== =========== ============
Net loss per share ($0.43) ($0.21) ($0.32) ($0.07)
=========== =========== =========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.2
INNOVIR LABORATORIES, INC.
STATEMENT OF COMPUTATION OF PER SHARE DATA
For the six months ended
March 31,
-----------------------------------------------------------
1996 1995
-----------------------------------------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net loss ($3,750,776) ($3,750,776) ($2,262,785) ($2,262,785)
Reduction of net loss assuming a portion of the proceeds
from the exercise of options and warrants was used to repay
the Company's term note payable and related accrued
interest, and capital lease obligations and to invest in
short-term government securities, in accordance with the
treasury stock method 211,604 922,250
----------- ----------- ----------- ------------
Net loss ($3,750,776) ($3,539,172) ($2,262,785) ($1,340,535)
=========== =========== =========== ============
Weighted average number of common shares outstanding 4,494,224 4,494,224 3,340,963 3,340,963
Weighted average shares issuable upon conversion of convertible
equity securities 1,344,725
Shares issuable upon exercise of outstanding options and warrants 3,432,296 6,039,577
Shares assumed to be purchased under the treasury stock method (1,093,723) (711,752)
----------- ----------- ----------- ------------
Weighted average number of common shares used in computing
per share data 4,494,224 8,177,522 3,340,963 8,668,788
=========== =========== =========== ============
Net loss per share ($0.83) ($0.43) ($0.68) ($0.15)
=========== =========== =========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 2,834,240
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,936,559
<PP&E> 1,807,238
<DEPRECIATION> 775,508
<TOTAL-ASSETS> 4,262,473
<CURRENT-LIABILITIES> 930,472
<BONDS> 0
0
48,120
<COMMON> 71,092
<OTHER-SE> 2,643,193
<TOTAL-LIABILITY-AND-EQUITY> 4,262,473
<SALES> 0
<TOTAL-REVENUES> 79,673
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,753,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,559
<INCOME-PRETAX> (3,750,776)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,750,776)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,750,776
<EPS-PRIMARY> (.83)
<EPS-DILUTED> 0
</TABLE>
