Filed pursuant to Rule 424(b)(3) of the Securities Act of 1933. Relates to
Registration Statement on Form S-3 of Innovir Laboratories, Inc. (No. 333-1078).
THE THIRD SENTENCE OF THE THIRD PARAGRAPH ON THE COVER PAGE OF THE
PROSPECTUS SHOULD BE DELETED IN ITS ENTIRETY, AND THE FOLLOWING SENTENCE SHOULD
BE INSERTED IN ITS PLACE:
The Selling Securityholders may also sell Common Stock pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act"), or may
pledge shares of Common Stock to broker-dealers or other agents, including,
without limitation, Bear, Stearns Securities Corp., as collateral for margin
accounts, and such shares of Common Stock could be resold pursuant to the terms
of such accounts.
THE FIRST PARAGRAPH FOLLOWING THE HEADING "RISK FACTORS" SHOULD BE DELETED
IN ITS ENTIRETY, AND THE FOLLOWING PARAGRAPHS SHOULD BE INSERTED IN ITS PLACE ON
PAGE 8 OF THE PROSPECTUS:
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results could
differ materially from those projected in the forward-looking statements as a
result of certain of the risk factors set forth below and elsewhere in this
Prospectus.
An investment in the securities offered hereby involves a high degree of
risk, and such securities should not be purchased by persons who cannot afford
the loss of their entire investment. The following risk factors, in addition to
other matters referred to elsewhere in this Prospectus, should be carefully
considered in evaluating the Company and its business:
THE SEVENTH SENTENCE OF THE RISK FACTOR ENTITLED "DEVELOPMENT STAGE
COMPANY; ACCUMULATED DEFICIT; CONTINUING LOSSES; INDEPENDENT ACCOUNTANT'S
REPORT" SHOULD BE DELETED IN ITS ENTIRETY, AND THE FOLLOWING SENTENCE SHOULD BE
INSERTED IN ITS PLACE ON PAGE 8 OF THE PROSPECTUS:
At March 31, 1996, the Company had an accumulated deficit of $19,667,484,
and losses have continued to date thus increasing the accumulated deficit.
THE RISK FACTOR ENTITLED "SIGNIFICANT CAPITAL REQUIREMENTS; NEED FOR
ADDITIONAL FINANCING" SHOULD BE DELETED IN ITS ENTIRETY, AND THE FOLLOWING RISK
FACTOR SHOULD BE INSERTED IN ITS PLACE ON PAGE 8 OF THE PROSPECTUS:
Significant Capital Requirements; Need for Additional Financing; Imminent
Exhaustion of Funds. The development of biotechnology-based pharmaceutical
products requires the commitment of significant capital. The Company will
require additional capital to finance the completion of the development of its
proposed products, including continuing research, and the rigorous testing,
regulatory approval and marketing phases of its product development. The Company
will seek to obtain additional funds through additional public or private equity
financings, collaborative or other arrange-
<PAGE>
ments with corporate partners, and from other sources. There can be no assurance
that any such financing can be obtained on terms satisfactory to the Company, if
at all. If additional funds are not obtained when needed, the Company will be
required to curtail significantly its activities or even to cease operations. At
March 31, 1996, the Company's cash and cash equivalents equaled approximately
$2,834,000. Based upon the current level of operations, and if the Company is
unable to consummate additional financings, the Company will exhaust its cash
and cash equivalents during August 1996. The Company has no established banking
arrangements through which it can obtain debt financing. 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 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.
THE FIRST TWO SENTENCES OF THE FIRST PARAGRAPH OF THE RISK FACTOR ENTITLED
"DEPENDENCE ON PATENTS, PROPRIETARY TECHNOLOGY AND LICENSES" SHOULD BE DELETED
IN THEIR ENTIRETY, AND THE FOLLOWING SENTENCES SHOULD BE INSERTED IN THEIR PLACE
ON PAGE 9 OF THE PROSPECTUS:
Dependence on Patents, Proprietary Technology and Licenses. The Company's
success is dependent in large measure upon its ability to obtain patent
protection for its products, to maintain confidentiality of its trade secrets
and know-how and to operate without infringing upon the proprietary rights of
third parties. To date, the Company has licensed one United States Patent and
three United States Patent applications from Yale University along with
corresponding foreign applications, has obtained two United States Patents of
its own and has twelve pending patent applications in the United States, and
counterparts of certain of these applications pending or allowed in several
foreign countries. In addition, the Company has filed an "intent-to-use"
trademark application.
THE FIRST TWO PARAGRAPHS OF THE RISK FACTOR ENTITLED "DEPENDENCE ON KEY
PERSONNEL; POSSIBLE CONFLICTS OF INTEREST" SHOULD BE DELETED IN THEIR ENTIRETY,
AND THE FOLLOWING PARAGRAPHS SHOULD BE INSERTED IN THEIR PLACE ON PAGE 12 OF THE
PROSPECTUS:
Dependence on Key Personnel; Possible Conflicts of Interest. The Company is
dependent upon the services of Dr. Allan R. Goldberg, who serves as the
Company's Chairman of the Board and Chief Executive Officer. The loss to the
Company of the services of Dr. Goldberg would have a material adverse effect
upon the Company. Dr. Goldberg's employment agreement with the Company, which
was renewed in March 1996, expires March 31, 1998.
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<PAGE>
The Company is also dependent on the part-time services of two key
consultants, Dr. Sidney Altman, who is employed by Yale University, and Dr. Hugh
D. Robertson, who is employed by Cornell University and who also is Chairman of
the SAB and a director of the Company. The loss to the Company of the services
of either Dr. Altman or Dr. Robertson would have a material adverse effect on
the Company. Dr. Altman's consulting agreement, which was renewed in March 1994,
expires in March 1998. Dr. Robertson's consulting agreement, which was renewed
in March 1996, expires in March 2000.
THE FOLLOWING RISK FACTOR SHOULD BE INSERTED ON PAGE 12 OF THE PROSPECTUS
IMMEDIATELY FOLLOWING THE RISK FACTOR ENTITLED "DEPENDENCE ON KEY PERSONNEL;
POSSIBLE CONFLICTS OF INTEREST":
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 he 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,
54,000 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. The plaintiff has filed a motion for summary judgment which the Company
has opposed; the matter is presently awaiting decision by the court. 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
-3-
<PAGE>
financial position, no assurances can be given as to the ultimate outcome of or
the costs in defending this litigation.
THE RISK FACTOR ENTITLED "BOOK VALUE DILUTION" SHOULD BE DELETED IN ITS
ENTIRETY, AND THE FOLLOWING RISK FACTOR SHOULD BE INSERTED IN ITS PLACE ON PAGE
13 OF THE PROSPECTUS:
Book Value Dilution. The historic net tangible book value per share of the
Company at March 31, 1996 was $0.48. Persons who receive Common Stock pursuant
to the exercise of their warrants at an exercise price which is higher than the
historic net tangible book value will experience immediate and substantial
dilution; this assumes conversion of all preferred stock then outstanding.
THE RISK FACTOR ENTITLED "CONTROL BY PRINCIPAL STOCKHOLDERS" SHOULD BE
DELETED IN ITS ENTIRETY, AND THE FOLLOWING RISK FACTOR SHOULD BE INSERTED IN ITS
PLACE ON PAGE 13 OF THE PROSPECTUS:
Control by Management and Directors. As of July 3, 1996, the current
management and directors of the Company own 568,871 shares of Common Stock, or
approximately 8.9% of the outstanding shares of Common Stock of the Company.
Accordingly, the current management and directors are in a position to influence
the Company.
THE FOLLOWING RISK FACTOR SHOULD BE INSERTED ON PAGE 14 OF THE PROSPECTUS
IMMEDIATELY FOLLOWING THE RISK FACTOR ENTITLED "UNCERTAINTY OF HEALTH CARE
REIMBURSEMENT AND POTENTIAL LEGISLATION":
Loss of Principal Market Maker. The Company has been advised that, on June
21, 1996, A.R. Baron & Co., Inc. ("A.R. Baron"), the Company's principal market
maker and the underwriter of the Company's initial public offering in August
1993, ceased its market-making operations and halted stock trading when it
became unable to satisfy required capitalization levels. The Company has been
further advised that A.R. Baron has filed for bankruptcy and continues to be the
subject of certain SEC investigations relating to its past business activities.
The termination of A.R. Baron's operations has had a severe and adverse impact
on the value of the Company's securities. There can be no assurance that A.R.
Baron will recommence its operations or, if A.R. Baron is able to recommence its
operations, that it will maintain compliance with all capitalization
requirements.
The Company is actively seeking additional market makers for its
securities. However, there can be no assurance that the Company will be
successful in establishing such relationships.
To the extent that A.R. Baron is unable to recommence its operations,
including, without limitation, continuing to make a market in the Company's
securities, or that the Company is unable to establish one or more relationships
with other market
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<PAGE>
makers, the value of any of the Company's securities held by an investor could
be severely and adversely affected.
THE RISK FACTORS ENTITLED "FINANCIAL CONDITION OF A.R. BARON & CO., INC.
("A.R. BARON")" AND "LEGAL MATTERS CONCERNING A.R. BARON" ON PAGES 14 AND 15 OF
THE PROSPECTUS SHOULD BE DELETED IN THEIR ENTIRETY.
THE FIFTH SENTENCE OF THE RISK FACTOR ENTITLED "PREFERRED STOCK" SHOULD BE
DELETED IN ITS ENTIRETY, AND THE FOLLOWING SENTENCE SHOULD BE INSERTED IN ITS
PLACE ON PAGE 18 OF THE PROSPECTUS:
As of July 3, 1996, 297,000 shares of the Company's Class B Convertible
Preferred Stock (the "B Preferred Stock") and 320,000 shares of the Company's
Class C Convertible Preferred Stock (the "C Preferred Stock" and, together with
B Preferred Stock, the "Preferred Stock") were issued and outstanding.
THE RISK FACTOR ENTITLED "ADVERSE CONSEQUENCES ASSOCIATED WITH SUBSTANTIAL
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE; REGISTRATION RIGHTS" SHOULD BE
DELETED IN ITS ENTIRETY, AND THE FOLLOWING RISK FACTOR SHOULD BE INSERTED IN ITS
PLACE ON PAGE 18 OF THE PROSPECTUS:
Adverse Consequences Associated with Substantial Shares of Common Stock
Reserved for Issuance; Registration Rights. As of July 3, 1996, the Company has
reserved an aggregate of 9,731,480 shares of Common Stock for issuance upon the
exercises of various warrants and options and the conversion of outstanding B
Preferred Stock and C Preferred Stock, including: (i) 979,636 shares of Common
Stock for issuance upon exercise of the outstanding warrants issued to certain
consultants, (ii) a minimum of 40,000 shares of Common Stock issuable upon the
exercise of a warrant held by the New York State Science and Technology
Foundation pursuant to a note, (iii) 19,166 shares and 2,526 shares of Common
Stock issuable upon the exercise of warrants issued in connection with equipment
financings, (iv) 567,122 shares of Common Stock for issuance upon exercise of
the Class B Warrants issued in January 1995 resulting from the Bridge Warrant
Exchange offer, (v) 680,608 shares of Common Stock for issuance upon exercise of
the Class B Warrants issued in April and May 1995 as part of a private
placement, (vi) up to 1,656,625 shares issuable upon the exercise of stock
options, (vii) 456,923 shares for issuance upon conversion of the B Preferred
Stock, based on conversion at such date using the minimum price of $5.00 per
share of Common Stock, (viii) 1,132,368 shares for issuance upon conversion of
the C Preferred Stock, based on conversion at such date using a conversion price
of $1.50, (ix) 179,975 shares of Common Stock issuable upon the exercise of
certain Units contained in the Unit Purchase Option issued to A.R. Baron, the
underwriter of the Company's initial public offering, and 359,950 shares of
Common Stock issuable upon exercise of the Underwriter Warrants contained in
such Units, (x) 57,081 shares of Common Stock issuable upon the exercise of
certain Bridge Warrants and (xi) 3,599,500 shares issuable upon the exercise of
Class A and Class B Warrants. The C Preferred Stock converts into Common Stock
based upon a floating formula which, in the event the price of the Company's
Common
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<PAGE>
Stock decreases, would increase the number of shares held in reserve with
respect to the C Preferred Stock. Holders of convertible securities are likely
to exercise them when, in all likelihood, the Company could obtain additional
capital on terms more favorable than those provided by such convertible
securities. Furthermore, while the convertible securities are outstanding, they
may adversely affect the terms on which the Company could obtain additional
capital. Should a significant portion of such convertible securities be
exercised, the resulting increase in the amount of the Common Stock in the
public market may have the effect of reducing the market price thereof.
THE LAST SENTENCE OF THE FIFTH PARAGRAPH FOLLOWING THE HEADING "RECENT
DEVELOPMENTS" SHOULD BE DELETED IN ITS ENTIRETY, AND THE FOLLOWING SENTENCE
SHOULD BE INSERTED IN ITS PLACE ON PAGE 21 OF THE PROSPECTUS:
Baron Financial Services, Inc. has since repaid the loan.
THE LAST PARAGRAPH FOLLOWING THE HEADING "RECENT DEVELOPMENTS" SHOULD BE
DELETED IN ITS ENTIRETY, AND THE FOLLOWING PARAGRAPH SHOULD BE INSERTED IN ITS
PLACE ON PAGE 21 OF THE PROSPECTUS:
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. See
"Risk Factors -- Legal Proceedings."
THE FOLLOWING PARAGRAPHS SHOULD BE INSERTED ON PAGE 21 OF THE PROSPECTUS
IMMEDIATELY FOLLOWING THE LAST PARAGRAPH OF THE SECTION ENTITLED "RECENT
DEVELOPMENTS":
On March 8, 1996, Dr. Bernard Canavan resigned as a member of the Company's
Board of Directors.
On May 23, 1996, Dr. Hugh D. Robertson was elected as a member of the
Company's Board of Directors.
On May 31, 1996, Dr. Julius A. Vida resigned as a member of the Company's
Board of Directors.
On June 19, 1996, Dr. Maurice R. Hilleman was elected as a member of the
Company's Board of Directors.
On June 20, 1996, Susan K. Clymer resigned as a member of the Company's
Board of Directors.
-6-
<PAGE>
The Company has been advised that, on June 21, 1996, A.R. Baron ("A.R.
Baron"), the Company's principal market maker and the underwriter of the
Company's initial public offering in August 1993, ceased its market-making
operations and halted stock trading when it became unable to satisfy required
capitalization levels. The Company has been further advised that A.R. Baron has
filed for bankruptcy and continues to be the subject of certain SEC
investigations relating to its past business activities. See "Risk Factors --
Loss of Principal Market Maker."
BARON FINANCIAL SERVICES, INC., THE FIRST NAME LISTED ON THE "SELLING
SECURITYHOLDERS" TABLE, AND THE ACCOMPANYING FOOTNOTES SHOULD BE DELETED, AND
THE FOLLOWING NAME, FOOTNOTES AND ADDITIONAL INFORMATION SHOULD BE INSERTED IN
ITS PLACE ON PAGE 23 OF THE PROSPECTUS:
Selling Security Holder: A.R. Baron & Co., Inc.(2)
Number of Shares of Common Stock Beneficially Owned: 250,000
Number of Shares of Common Stock Registered Herein: 250,000
FOOTNOTE 2 TO THE "SELLING SECURITYHOLDERS" TABLE SHALL BE DELETED IN ITS
ENTIRETY, AND THE FOLLOWING FOOTNOTE SHOULD BE INSERTED IN ITS PLACE ON PAGE 23
OF THE PROSPECTUS:
(2) The Company has been advised that, as of July 3, 1996, Number of Shares
of Common Stock Beneficially Owned by A.R. Baron & Co., Inc., is
250,000.
THE THIRD SENTENCE OF THE FIRST PARAGRAPH FOLLOWING THE HEADING "PLAN OF
DISTRIBUTION" SHOULD BE DELETED IN ITS ENTIRETY, AND THE FOLLOWING SENTENCE
SHOULD BE INSERTED IN ITS PLACE ON PAGE 24 OF THE PROSPECTUS:
The Selling Securityholders may also sell Common Stock pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act"), or may
pledge shares of Common Stock to broker-dealers or other agents, including,
without limitation, Bear, Stearns Securities Corp., as collateral for margin
accounts, and such shares of Common Stock could be resold pursuant to the terms
of such accounts.
July 11, 1996
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