AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 2002.
REGISTRATION NO. 333-82450
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CELSION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(State or Other Jurisdiction of Incorporation or
Organization)
52-1256615
(I.R.S. Employer Identification Number)
10220-I OLD COLUMBIA ROAD
COLUMBIA, MD 21046-1705
(410) 290-5390
(Address, Including Zip Code, and Telephone Number,
Including Area Code,
of Registrant's Principal Executive Offices)
DR. AUGUSTINE Y. CHEUNG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CELSION CORPORATION
10220-I OLD COLUMBIA ROAD
COLUMBIA, MD 21046-1705
(410) 290-5390
(Name, Address, Including Zip Code, and Telephone Number,
Including
Area Code, of Agent For Service)
---------------
COPIES TO:
ANITA J. FINKELSTEIN, ESQUIRE PURVI BADIANI, ESQUIRE
VENABLE, BAETJER, HOWARD & CIVILETTI, LLP & VENABLE, BAETJER, HOWARD & CIVILETTI, LLP
1201 NEW YORK AVENUE, NW, SUITE 1000 1201 NEW YORK AVENUE, NW, SUITE 1000
WASHINGTON, DC 20005 WASHINGTON, DC 20005
(202) 962-4800 (202) 962-4800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: As soon as practicable after the effective date of this
Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the
same offering. [ ] ___________________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION OF WHICH THIS
PROSPECTUS IS A PART IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 8, 2002
PRELIMINARY PROSPECTUS
CELSION CORPORATION
33,735,821 SHARES
COMMON STOCK
This Prospectus of Celsion Corporation, a Delaware corporation, or the
Company, relates to the offer and sale from time to time by certain selling
stockholders (the "Selling Stockholders") of up to 12,550,000 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), and up
to 21,185,821 shares of Common Stock issuable upon the exercise of certain
Common Stock purchase warrants (the "Warrants"). The shares of Common Stock
offered hereby are referred to as the "Shares." See "Selling Stockholders" and
"Plan of Distribution."
The Company will not receive any proceeds from any sales of Shares by
the Selling Stockholders. However, the Company will receive proceeds upon any
exercise of Warrants, up to a maximum of $8,993,008 if all of the Warrants are
exercised.
The Selling Stockholders or pledgees, donees, transferees or other
successors in interest that receive Shares by way of gift, partnership
distribution or other non-sale transfer, may offer and sell some, all or none
of the Shares under this Prospectus. The Selling Stockholders or their
successors may determine the prices at which they will sell their Shares, at
then prevailing market prices or some other price. In connection with such
sales, the Selling Stockholders or their successors may use brokers or dealers
who may receive compensation or commissions for such sales. The Company has
agreed to bear all expenses in connection with the registration of the Shares.
However, the Selling Stockholders will pay any brokerage commissions,
discounts and fees in connection with the sale of their Shares. A Selling
Stockholder's net proceeds from the sale of Shares will be the sales price of
the Shares sold, less applicable commissions, discounts and fees.
The Common Stock is traded on The American Stock Exchange under the
symbol "CLN." On March 6, 2002, the closing price of the Common Stock on
The American Stock Exchange was $0.65.
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INVESTMENT IN THE COMPANY'S COMMON STOCK INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 10 OF
THIS PROSPECTUS BEFORE PURCHASING ANY OF THE SHARES FROM THE SELLING
STOCKHOLDERS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is [_________], 2002
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TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information......... 3
Cautionary Statement About Forward-Looking
Statements.................................. 4
Summary Information About The Company....... 5
Risk Factors................................ 10
Use of Proceeds............................. 17
Plan of Distribution........................ 18
Legal Matters............................... 19
Experts..................................... 19
We have informed the Selling Stockholders that the anti-manipulative
rules under the Securities Exchange Act of 1934, including Regulation M, may
apply to their sales of Shares in the market. We have furnished the Selling
Stockholders with a copy of these rules. We have also informed the Selling
Stockholders that they must deliver a copy of this Prospectus with any sale of
their Shares.
2
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information
with the U.S. Securities and Exchange Commission, or the SEC. You may read and
copy any document that we have filed at the SEC's Public Reference Room at 450
Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330
for further information about the operation of its public reference
facilities. Our SEC filings are also available to you free of charge at the
SEC's web site at http://www.sec.gov.
We have filed a registration statement on Form S-3 with the SEC that
covers the resale of the Shares offered hereby. This Prospectus is a part of
that registration statement, but does not include all of the information
included in the registration statement. You should refer to the registration
statement for additional information about us and the Shares. Statements that
we make in this Prospectus relating to any document filed as an exhibit to or
incorporated by reference into the registration statement may not be complete.
You should review the referenced document itself for a complete understanding
of its terms.
The SEC allows us to "incorporate by reference" certain information we
file with them, which means that we can disclose important information to you
in this Prospectus by referring you to those documents. The documents that
have been incorporated by reference are an important part of the Prospectus,
and you should be sure to review that information in order to understand the
nature of any investment by you in the Shares. In addition to previously filed
documents that are incorporated by reference, documents that we file with the
SEC after the date of this Prospectus will automatically update the
registration statement. The documents that we have previously filed and that
are incorporated by reference into this Prospectus include the following:
- Our Annual Report on Form 10-K for the fiscal year ended September
30, 2001;
- Our Proxy Statement relating to the 2002 Annual Meeting of
Stockholders;
- Our Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 2001; and
- The description of our Common Stock included in our registration
statement on Form 8-A filed on May 26, 2000.
All documents and reports filed by us pursuant to Sections 13 (a), 13
(c), 14 or 15 (d) of the Securities Exchange Act of 1934 after the date of
this Prospectus and prior to the date that the offering of Shares made hereby
is terminated automatically will be incorporated by reference into this
Prospectus. Any statement contained in a document incorporated or deemed to be
incorporated by reference into this Prospectus shall be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
in this Prospectus, or in any other subsequently filed document which also is,
or is deemed to be, incorporated by reference, modifies or supersedes that
statement. Any statement modified or superseded shall not be deemed, except as
modified or superseded, to constitute a part of this Prospectus.
We will provide you with copies of any of the documents incorporated
by reference at no charge to you. However, we will not deliver copies of any
exhibits to those documents unless the exhibit itself is specifically
incorporated by reference. If you would like a copy of any document, please
write or call us at:
Celsion Corporation
10220-I Old Columbia Road
Columbia, MD 21046-1705
Attention: Corporate Secretary
(410) 290-5390
You should only rely upon the information included in or incorporated
by reference into this Prospectus or in any Prospectus supplement that is
delivered to you. We have not authorized anyone to provide you with additional
or different information. You should not assume that the information included
in or incorporated by reference into this Prospectus or any Prospectus
supplement is accurate as of any date later than the date on the front of the
Prospectus or Prospectus supplement.
3
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Throughout this Prospectus and the other documents incorporated by
reference into this Prospectus, we make certain "forward-looking" statements.
These statements involve known and unknown risks, uncertainties and other
factors that may cause our or our industry's actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance or achievements predicted by
such forward-looking statements. Such factors include, among other things,
those listed under "Risk Factors" as well as those discussed elsewhere in this
Prospectus and the documents incorporated by reference into this Prospectus.
In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential" or "continue" or the negative of such terms
or other comparable terminology.
Forward-looking statements are only predictions and involve various
risks and uncertainties including:
- unforeseen changes in the course of research and development
activities and in clinical trials;
- possible changes in cost and timing of development and testing,
capital structure and other financial matters;
- changes in approaches to medical treatment;
- introduction of new products by others;
- possible acquisitions of other technologies, assets or businesses;
- possible actions by customers, suppliers, competitors, regulatory
authorities and others; and
- other risks detailed from time to time in the Company's reports
filed with the SEC.
Actual events or results may differ materially from those contemplated
by this Prospectus and the other documents incorporated by reference into this
Prospectus. In evaluating these statements, you should specifically consider
various factors, including those listed above and outlined under "Risk
Factors." Although we believe that our expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any forward-looking statements
after the date of this Prospectus to conform such statements to actual results
or circumstances.
4
SUMMARY INFORMATION ABOUT THE COMPANY
This summary highlights selected information contained elsewhere in
this Prospectus and incorporated into this Prospectus by reference. This
summary may not contain all of the information that may be important to you in
considering an investment in our Common Stock. You should read the entire
Prospectus, including "Risk Factors" carefully before making an investment
decision.
GENERAL
We develop medical treatment systems primarily to treat breast cancer
and a chronic prostate enlargement condition, common in older males, known as
benign prostatic hyperplasia, or BPH, using minimally invasive focused heat
technology. Also, we are working with Duke University in the development of
heat-sensitive liposome compounds for use in the delivery of chemotherapy
drugs to tumor sites, and with Sloan-Kettering on the development of
heat-activated gene therapy compounds.
BPH TREATMENT SYSTEM
BENIGN PROSTATIC HYPERPLASIA
Millions of aging men experience symptoms resulting from benign
prostatic hyperplasia, or BPH, a non-cancerous urological disease in which the
prostate enlarges and constricts the urethra. The prostate is a walnut-sized
gland surrounding the male urethra that produces seminal fluid and plays a key
role in sperm preservation and transportation. The prostate frequently
enlarges with age. As the prostate expands, it compresses or constricts the
urethra, thereby restricting the normal passage of urine. This restriction of
the urethra may require a patient to exert excessive bladder pressure to
urinate. Because the urination process is one of the body's primary means of
cleansing impurities, the inability to urinate adequately increases the
possibility of infection and bladder and kidney damage.
PREVALENCE OF BPH
As BPH is an age-related disorder, its incidence increases with
maturation of the population. Industry estimates suggest that more than 9
million men in the United States experience BPH symptoms and that more than 26
million men are affected by BPH worldwide. As the United States population
continues to age, the prevalence of BPH can be expected to continue to
increase. It is generally estimated that approximately 50% of all men over the
age of 55 and 90% of all men over 75 will have BPH symptoms at various times.
Industry studies estimate the overall costs of BPH therapy to be at
approximately $2.5 to $3.0 billion annually in the United States and $8.0 to
$10.0 billion worldwide for those patients currently seeking treatment.
CURRENT TREATMENT ALTERNATIVES FOR BPH
Like cancerous tumors, BPH historically has been treated by surgical
intervention or by drug therapy. The primary treatment for BPH currently is
transurethral resection of the prostate, or TURP, a surgical procedure in
which the prostatic urethra and surrounding diseased tissue in the prostate
are trimmed with a telescopic knife, thereby widening the urethral channel for
urine flow. While the TURP procedure typically has been considered the most
effective treatment available for the relief of BPH symptoms, the procedure
has shortcomings. In the first instance, TURP generally requires from one to
three days of post-operative hospitalization. In addition, a significant
percentage of patients who undergo TURP encounter significant complications,
which can include painful urination, infection, retrograde ejaculation,
impotence, incontinence and excessive bleeding. Furthermore, the cost of the
TURP procedure and the related hospitalization is high, ranging from $8,000 to
$12,000. This cost does not take into account the costs of lost work time,
which could amount to several weeks, or the costs related to adverse effects
on patients' quality of life.
Other, less radical, surgical procedures, generally categorized as
"minimally invasive" ("MI") therapies, are available as alternatives to the
TURP procedure. The primary MI treatments use microwave heating ("TUMT") to
treat BPH by incinerating the obstructing portion of the prostate. TUMT
involves sedation, catheterization and high levels of heat to incinerate a
portion of the prostate. Two other MI therapies - interstitial RF therapy and
laser therapy - employ, respectively, concentrated radio frequency (RF) waves
or laser radiation to reduce prostate swelling by cauterizing tissue instead
of removing it with a surgical knife. However, these procedures require
puncture incisions in order to insert cauterizing RF or laser probes into the
affected tissue and, therefore, also involve the use of a full operating
facility and anesthesia, as well as the burning of prostate tissue by the
probes. Although these procedures result in less internal bleeding and damage
to the urethra than the TURP procedure and may decrease the adverse effects
5
and costs associated with surgery, anesthesia and post-operative tissue
recovery, they do not entirely eliminate these adverse consequences.
Finally, drug therapy has emerged as an alternative to surgery in the
last several years. There are several drugs available for BPH treatment, the
two most widely prescribed being Hytrin and Proscar. Hytrin works by relaxing
certain involuntary muscles surrounding the urethra, thereby easing urinary
flow, and Proscar is intended actually to shrink the enlarged gland. However,
industry studies have asserted that drug therapy costs $500 to $800 per year
or more, must be maintained for life and does not offer consistent relief to a
large number of BPH patients. In fact, studies have shown that 45% of patients
who begin drug therapy for BPH drop out within the first year, primarily due
to the ineffectiveness of currently available drug therapies. Also, all of the
currently available BPH drugs have appreciable side effects.
Accordingly, neither the medicinal treatments nor the surgical
alternatives available for BPH appear to provide fully satisfactory,
cost-effective treatment solutions for BPH sufferers.
CELSION BPH TREATMENT SYSTEM
We have developed a BPH treatment system - "Microwave Uretheroplasty"
- that combines our microwave thermotherapy capability with a proprietary
balloon compression technology licensed from MMTC, Inc. The system consists of
a microwave generator and conductors and a computer and computer software
programs that control the focusing and application of heat, plus a specially
designed balloon catheter and consists of two fundamental elements:
- Celsion's proprietary catheter, incorporating a balloon enlargement
device, delivers computer-controlled transurethral microwave heating
directly to the prostate at temperatures greater than 44(0) C (111(0)
F).
- Simultaneously, the balloon inflates the device and expands to press the
walls of the urethra from the inside outward as the surrounding prostate
tissue is heated.
The combined effect of this "heat plus compression" therapy is twofold: first,
the heat denatures the proteins in the wall of the urethra, causing a
stiffening of the opening created by the inflated balloon. Second, the heat
serves effectively to kill off prostate cells outside the wall of the urethra,
thereby creating sufficient space for the enlarged natural opening.
Pre-clinical animal studies have demonstrated that a natural "stent,"
or reinforced opening, in the urethra forms after the combined heat plus
compression treatment. Also, the BPH system's relatively low temperature
(43(0) C to 45(0) C) appears to be sufficient to kill prostatic cells
surrounding the urethra wall, thereby creating space for the enlargement of
the urethra opening. However, the temperature is not high enough to cause
swelling in the urethra.
Celsion's investigational minimally invasive Microwave Uretheroplasty
treatment system is designed to overcome the limitations of all three of the
current treatment systems. It is designed to be a relatively painless, rapid
procedure that delivers the efficacy of surgical treatments without
significant risks and the potential for life-altering side effects. The
potential benefits of the Microwave Uretheroplasty system include walk-in,
outpatient treatment that can be completed in less than an hour; no required
sedation; generally no post-operative catheterization; and rapid symptomatic
relief from BPH.
Ultimate FDA approval for a device such as our equipment typically
requires two phases of clinical testing. The purpose of Phase I testing is to
show feasibility and safety and involves a small group of patients. Phase II
testing may involve as many as 160 patients and is designed to show safety and
efficacy. The FDA approved an Investigational Device Exemption, or IDE, to
allow clinical testing of our BPH system in June 1998 and we completed initial
Phase I clinical feasibility human trials of the BPH system at Montefiore
Medical Center in May 1999. In the Phase I trials, the combination of
computer-controlled microwave heat and balloon catheter expansion was able to
increase peak flow rates and to provide immediate relief of symptoms caused by
BPH. In addition, we undertook an expanded Phase I study to test an
accelerated treatment protocol, which was completed in May 2000, at Montefiore
Medical Center. In July 2000, the FDA approved the commencement of
multiple-site Phase II studies to collect the safety and efficacy data
necessary for FDA premarketing approval (PMA) for commercialization. All 160
patients required to be treated under the Phase II trial were treated as of
November 29, 2001 and, as of that date, we submitted the first two of three
required modules to the FDA in support of the PMA. We expect to submit the
last module, consisting of clinical data, during the second quarter of fiscal
2002. If Phase II testing produces anticipated results and if our BPH system
meets all other requirements for FDA approval and receives such approval, we
intend to begin marketing the BPH system during the fall of 2002.
6
Based on the information we have collected to date, we believe that
our BPH system has the potential to deliver a treatment that is performed in
one hour or less on an outpatient basis, would not require post-treatment
catheterization and that would deliver symptomatic relief and an increase in
urinary flow rates promptly after the procedure is completed.
BREAST CANCER TREATMENT SYSTEM
PREVALENCE OF BREAST CANCER
Breast cancer is one of the leading causes of death among women in the
United States. According to statistics published in the American Cancer
Society's A Cancer Journal for Clinicians, there were an average of 183,000
newly diagnosed breast cancer cases in the United States in each of the years
from 1995 through 1999.
CURRENT TREATMENT FOR BREAST CANCER
Breast cancer is presently treated by mastectomy, the surgical removal
of the entire breast, or by lumpectomy, the surgical removal of the tumor and
surrounding tissue. Both procedures are often followed by radiation therapy or
chemotherapy. The more severe forms of surgical intervention can result in
disfigurement and a need for extended prosthetic and rehabilitation therapy.
In addition, heat therapy (also known as hyperthermia or
thermotherapy) is a historically recognized method of treatment of various
medical conditions, and heat therapy has been used in the past to treat
malignant tumors in conjunction with radiation and chemotherapy. As summarized
in the Fourth Edition of Radiobiology for the Radiologist, published in 1994
by J.B. Lippincott Company, in 24 independent studies on an aggregate of 2,234
tumors, treatment consisting of heat plus radiation resulted in an average
doubling of the complete response rate of tumors, compared to the use of
radiation alone. The complete response rate for this purpose means the total
absence of a treated tumor for a minimum of two years. Comparable increases in
the complete response rate were reported with the use of heat combined with
chemotherapy. In addition, it has been demonstrated on numerous occasions that
properly applied heat, alone and without the concurrent use of radiation, can
also kill cancer cells.
HEAT THERAPY IN CONJUNCTION WITH RADIATION; FIRST GENERATION CELSION
EQUIPMENT
In 1989, we obtained FDA premarketing approval for our microwave-based
Microfocus 1000 heat therapy equipment for use on surface and subsurface
tumors in conjunction with radiation therapy. Until 1995, we marketed our
Microfocus equipment for this use in 23 countries, but microwave heat therapy
was not widely accepted in the United States medical community as an effective
cancer treatment. Moreover, due to the limitations of microwave technology
available at that time, it was difficult to deliver a controlled amount of
heat to subsurface tumors without overheating surrounding healthy tissue.
NEW MICROWAVE TECHNOLOGY FROM MIT
In 1993, we began working with researchers at the Massachusetts
Institute of Technology, or MIT, who had developed, originally for the United
States Defense Department, the microwave control technology known as "Adaptive
Phased Array", or APA. This technology permits properly designed microwave
equipment to focus and concentrate energy targeted at diseased tissue areas
deep within the body and to heat them selectively, without adverse impact on
surrounding healthy tissue. In 1996, MIT granted us an exclusive worldwide
license to use this technology for medical applications and since that time we
have concentrated on developing a second generation of Microfocus equipment
capable of focusing microwave energy on specific tissue areas. We have now
incorporated the APA technology in our second-generation microwave therapy
equipment.
SECOND GENERATION CELSION BREAST CANCER TREATMENT SYSTEM
Using the APA technology, we have developed a prototype breast cancer
treatment system intended to destroy localized breast tumors through the
application of heat alone. The system consists of a microwave generator and
conductors, a computer and computer software programs that control the
focusing, application and duration of the thermotherapy and a specially
designed patient treatment table.
In 1998, we completed pre-clinical animal testing of our prototype
system at the Massachusetts General Hospital, a teaching hospital for Harvard
Medical School in Boston, Massachusetts. Using breast tissue-equivalent
phantoms and tumors in live animals, these studies demonstrated that our
system is capable of selectively heating tumors at temperatures up to 46(0) C
115(0) F without damage to surrounding healthy tissues. High temperatures
maintained for eight to ten minutes can cause complete tumor necrosis (death),
7
leading to the death of viable cancer cells within the tumor and in its
immediate vicinity. A second prototype clinical breast cancer treatment system
at Oxford University in England was used to demonstrate successfully the
ability of our equipment to focus heat deep into animal tissue at precise
locations and in small target areas. In our view, these animal tests
demonstrate that it is possible to eliminate tumors by heat alone and without
the use of radiation. Using the pre-clinical data from Massachusetts General,
the FDA granted Celsion a supplemental premarketing approval to incorporate
the APA technology with Celsion's already approved Microfocus 1000 system. The
APA technology enhances the ability of the Microfocus 1000 system to focus
energy.
In January 1999, we received an IDE from the FDA to permit clinical
testing of our breast cancer treatment system, and also received FDA approval
to proceed with Phase I human clinical studies. In August 2000, we completed
the treatment of ten patients in the Phase I study using our breast cancer
equipment at Columbia Hospital in West Palm Beach, Florida, and at Harbor UCLA
Medical Center in Torrance, California. In the study, our equipment was
clinically tested on female breast tumors on a minimally invasive basis
through a single application of precisely controlled and targeted heat. In
December 2000, we received approval from the FDA to commence Phase II trials
for our breast cancer system.
The Phase II trials consist of two protocols - the first is designed
to ablate (kill) small breast tumors using heat alone and the second is
designed to downsize large breast cancer tumors using a combination of heat
and chemotherapy, thus allowing a surgeon to perform a lumpectomy rather than
a mastectomy, thereby preserving the affected breast. These trials are
currently under way at Columbia Hospital, in Florida, Harbor UCLA in
California and Halle Martin Luther Breast Center in Halle, Germany. We expect
to add additional sites, both within the United States and in Europe, during
the first half of 2002 and currently anticipate that we will complete the
Phase II trials by the end of calendar year 2002. If the Phase II trials are
successful, we expect to apply for the addition of a new indication of use to
the existing FDA premarketing approval for our Microfocus equipment, denoting
that the system can be used to destroy cancerous tumors and viable cancer
cells within the human breast through the application of focused microwave
heat energy alone. If testing and approvals proceed as anticipated, we expect
to begin marketing this breast cancer system before the end of 2003.
THERMO-LIPOSOMES; DUKE UNIVERSITY TECHNOLOGY
BACKGROUND
Liposomes are man-made microscopic spheres with a liquid membrane,
developed in the 1980's to encapsulate drugs for targeted delivery. Commercial
liposomes can now encapsulate chemotherapeutic drugs, enabling them to avoid
destruction by the body's immune system, and allowing them to accumulate in
tumors. However, with presently available technology, it often takes two to
four hours for commercial liposomes to release their drug contents to the
tumors, severely limiting the clinical efficacy of liposome chemotherapy
treatments.
DEVELOPMENT OF THERMO-SENSITIVE LIPOSOMES
A team of Duke University scientists has developed heat-sensitive
liposomes comprised of materials that rapidly change porosity when heated to a
specific point. As the heat-sensitive liposomes circulate within the small
arteries, arterioles, and capillaries, the drug contents of the liposomes are
released at significantly higher levels in those tissue areas which have been
heated for 30 to 60 minutes than in areas that do not receive heat. In animal
trials it has been determined that 50 times the amount of drugs carried by
heat-sensitive liposomes was deposited at a specific heated tissue site, when
compared to conventional liposomes. We have been a sponsor of this research,
which is part of a larger Duke University project to develop new
temperature-sensitive liposomes, temperature-sensitive gene promoters and
related compounds, and we are the exclusive licensee of Duke University's
heat-activated liposome technology.
Celsion's focused microwave equipment is used to provide minimally
invasive heating of cancerous tumors to trigger heat-activated liposomes
within the tumors. The heat-activated liposomes, which encapsulate
chemotherapeutic agents, are injected into the bloodstream where they remain
encapsulated until they release their drug payload inside the heated tumor. In
preliminary tumor growth delay studies conducted at Duke University,
tumor-bearing mice received a single intravenous injection of the liposome
with a 5mg per kilogram Doxorubicin concentration. This was immediately
followed by heating of the tumor to 42(0) C (108(0) F) for one hour. The
result of the study was a complete disappearance of the tumors in 11 out of 11
mice. These animals remained disease free through 60 days of the study.
8
In November 2001, we completed large animal toxicity studies involving
our Doxorubicin-laden thermo-liposome at the Roswell Park Cancer Institute, a
cancer research organization in Buffalo, New York. We expect to apply to the
Food and Drug Administration for an IND for the use of this liposome in the
treatment of prostate cancer using our Microfocus equipment as the means of
heat activation during the first quarter of calendar year 2002, and to move
forward with Phase I clinical trials thereafter.
In addition, in January 2001, we entered into a Material Transfer
Agreement, or MTA, with the National Cancer Institute, or NCI, under which we
will supply heat-activated liposomes to enable the NCI to conduct clinical
trials on liver cancer. NCI will use an RF heating device to isolate the
tumors and to heat the liver, activating Celsion's heat-activated liposomes to
kill peripheral cancer cells. Liver cancer has yet to be successfully treated
with existing treatment modalities.
Celsion and Duke University are pursuing further development work and
pre-clinical studies aimed at using the new thermo-liposome technology in
conjunction with our APA focused heat technology for a variety of
applications, including cancer chemotherapy. We view the Duke thermo-liposome
technology as a highly promising improvement in the delivery of medicines used
to combat serious diseases. For example, the drugs used to fight cancer in
chemotherapy regimens are often toxic when administered in large quantities,
and produce nausea, vomiting, and exhaustion- all side effects of the body
being poisoned. However, if such a drug can be delivered directly to a tissue
area where it is needed, as opposed to being distributed through the entire
circulatory system, the local concentration of the drug could be increased
without the side effects that accompany large systemic dosing.
In addition, in the July 1, 2000 issue of Cancer Research, a Duke
University research scientist reported on his initial use of heat to activate
gene therapy and to increase the production in animals of Interleukin-12, a
genetic protein, in order to delay tumor growth. On August 8, 2000, we entered
into an agreement with Duke University, subsequently renewed for six-month
periods, under which Celsion has the right, for a period of six months
thereafter, to negotiate an exclusive license for this technology.
PRODUCTION OF HEAT-SENSITIVE LIPOSOMES
We have established a relationship with Celator Corporation of
Vancouver, Canada to provide Quality System Regulation, or QSR (formerly Good
Manufacturing Practices, or GMP), production of our heat-activated liposome
for our recently completed large animal toxicity studies and our planned Phase
I clinical study in humans. Celator is a leading drug formulation and
discovery company that specializes in liposome drug development. Celsion will
require a large-scale liposome manufacturer at such time as it reaches Phase
II clinical trials and beyond. Toward that end, it has initiated discussions
with a major Japanese liposome manufacturer for large-scale production of the
Doxorubicin-based heat-activated liposome.
SLOAN-KETTERING / CELSION HEAT-ACTIVATED GENE THERAPY COMPOUNDS
BACKGROUND
Cancer cells have the ability to repair themselves after radiation or
chemotherapy. Thus, patients require repeated treatments to destroy
substantially all of the cancer cells. Celsion has licensed from
Sloan-Kettering Cancer Center, a biomedical innovation that promises
significant improvements in cancer therapy. Sloan-Kettering has developed
biological modifiers that inhibit cancer cells' ability to repair themselves.
Activated by focused heat, this Cancer Repair Inhibitor, or CRI, temporarily
disables the repair mechanism of cancer cells, making it possible to reduce
significantly the number of radiation/chemotherapy treatments and/or lower the
treatment dosage.
A standard approach to treating cancer is radiation therapy combined
with chemotherapy. High doses of radiation kill cancer cells or keep them from
dividing, but produce chronic or acute side effects, including fatigue,
neutropenia, anemia and leukopenia. Also, depending on the location of the
tumor, other acute side effects may occur, including diarrhea, allopecia and
various foreign ulcers. Chemotherapy presents comparable or more serious side
effects.
Oncologists are seeking ways to mitigate these side effects. In
radiation therapy, these include hyperfractionated radiation, intra-operative
radiation, three-dimensional radiation, stereotactic radiosurgery and the use
of radio-labeled monoclonal antibodies and radio sensitizers. CRI falls into
this latter category because it "sensitizes" a cancer cell for treatment by
making it more susceptible to DNA-damaging agents such as heat, chemicals or
radiation. A product of advances in the understanding of the biology of
cancer, CRI is one of a new class of "biologics" that are expected to become
part of the cancer treatment protocol.
9
THE CELSION TECHNOLOGY - CRI PLUS FOCUSED HEAT
CRI can be activated in tumors by minimally invasive focused heat in
the range of 41((0)) C (106((0)) F). This focused heat may be generated by
Celsion's Adaptive Phased Array microwave technology, which provides deep
heating without damage to surrounding healthy tissue. Having increased the
susceptibility of cancer cells to DNA-damaging agents, radiation and
chemotherapy treatment may then be administered with less frequency and/or at
lower doses than currently is possible. CRI would then deactivate and the
patient would resume normal post-treatment care.
In September 2001, scientists at Sloan-Kettering successfully
completed pre-clinical laboratory feasibility demonstrations to assess safety
and biological activity of CRI. In December 2001, a small animal feasibility
study was completed at Sloan-Kettering's Good Laboratory Practice (GLP)
facility to assist in drug formulation. Further studies with large animals to
assess toxicity effects are expected to be conducted during 2002 and 2003.
Based on the current development timeline, we expect to file an IND
application with the Food and Drug Administration by the end of calendar year
2003 and anticipate that we will be in a position to commence Phase I clinical
(human) trials before the end of calendar year 2004. At such time as we
determine safety and dosage in our preliminary studies, we expect to form
partnership(s) with one or more drug companies to scale-up manufacturing and
marketing for larger pivotal studies.
In May 2000, we entered into an exclusive worldwide agreement with
Sloan-Kettering for the commercial rights to the heat-activated gene therapy
technology developed by Sloan-Kettering.
RISK FACTORS
You should carefully consider the risks described below before making
a decision to invest in our Common Stock. You should also refer to the other
information in this Prospectus, as well as the information incorporated by
reference into this Prospectus, including our financial statements and the
related notes. The risks and uncertainties described below are not the only
ones that could affect our Company. Additional risks and uncertainties of
which we are unaware or that we currently believe are immaterial also may
become important factors affecting our business. If any one or more of the
following risks occur, our business, results of operations and financial
condition could be materially harmed. As a result, the trading price of our
Common Stock could decline, and you could lose all or part of your investment.
The terms the "Company," "we," "us" and "our" used throughout this Prospectus
all refer to Celsion Corporation.
WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND EXPECT TO CONTINUE SUCH
LOSSES FOR THE FORESEEABLE FUTURE.
Since Celsion's inception in 1982, its expenses have substantially
exceeded its revenues, resulting in continuing losses and an accumulated
deficit of $(33,605,157) at September 30, 2001, including losses of
$(4,547,215) for the year ended September 30, 2000 and $(6,923,227) for the
year ended September 30, 2001. Because we presently have no revenues and are
committed to continuing our product research, development and
commercialization programs, we will continue to experience significant
operating losses unless and until we complete the development of new products
and these products have been clinically tested, approved by the FDA and
successfully marketed. In addition, we have funded our operations for many
years primarily through the sale of the Company's securities and have limited
working capital for our product research, development, commercialization and
other activities.
WE DO NOT EXPECT TO GENERATE SIGNIFICANT REVENUE FOR THE FORESEEABLE
FUTURE.
We marketed and sold our original microwave thermotherapy products,
which produced modest revenues from 1990 to 1994, but ceased marketing these
products in 1995. We have devoted our resources in ensuing years to developing
a new generation of thermotherapy and other products, but cannot market these
products unless and until we have completed clinical testing and obtained all
necessary governmental approvals. Accordingly, we have no current source of
revenues, much less profits, to sustain our present operations, and no
revenues will be available unless and until our new products are clinically
tested, approved by the FDA and successfully marketed. We cannot guarantee
that any or all of our products will be successfully tested, approved by the
FDA or marketed, successfully or otherwise, at any time in the foreseeable
future or at all.
10
OUR MICROWAVE HEAT THERAPY TECHNOLOGY IS STILL UNDERGOING CLINICAL
TESTING AND MAY NOT ACHIEVE SUFFICIENT ACCEPTANCE BY THE MEDICAL COMMUNITY TO
SUSTAIN OUR BUSINESS.
To date, microwave heat therapy has not been widely accepted in the
United States medical community as an effective treatment for BPH or for
cancer treatment, with or without the concurrent use of radiation. We believe
that this is primarily due to the inability of earlier technology adequately
to focus and control heat directed at specific tissue locations and to
conclusions that were drawn from a widely publicized study by the Radiation
Oncology Therapy Group that purported to show that thermotherapy in
conjunction with radiation was only marginally effective. Subsequent to the
publication of this study, the HealthCare Financing Administration, a HCFA
(now known as the Centers for Medicare and Medicaid Services, or CMS)
established a low medical reimbursement rate for all thermotherapy equipment
designed to be used in conjunction with radiation. While management believes
that our new technology is capable of overcoming the limitations of the
earlier technology, the medical community may not embrace the perceived
advantages of our "adaptive phased array," or APA, focused heat therapy
without more extensive testing and clinical experience than we will be able to
provide. To date, we have completed and submitted to the FDA only Phase I
clinical trials of our Microwave Uretheroplasty treatment system, although we
have completed patient treatments in our Phase II trials. Similarly, our new
cancer treatment technology is currently in Phase II trials. Accordingly, our
technology may not prove as effective in practice as we anticipate based on
testing to date. If further testing and clinical practice do not confirm the
safety and efficacy of our technology or, even if further testing and practice
produce positive results but the medical community does not view this new form
of heat therapy as effective and desirable, our efforts to market our new
products may fail, with material adverse consequences to our business. We
intend to petition CMS for a new reimbursement code for our breast cancer
treatment. The success of our business model depends significantly upon our
ability to petition successfully for reimbursement codes. However, we cannot
offer any assurances as to when, if ever, CMS may act on our request to
establish a reimbursement code for our breast cancer treatment system. In
addition, there can be no assurance that the reimbursement level established
for our breast cancer treatment system, if established, will be sufficient for
us to carry out our business plan effectively.
IF WE ARE NOT ABLE TO OBTAIN NECESSARY FUNDING, WE WILL NOT BE ABLE TO
COMPLETE THE DEVELOPMENT, TESTING AND COMMERCIALIZATION OF OUR TREATMENTS AND
PRODUCTS.
We will need substantial additional funding in order to complete the
development, testing and commercialization of our breast cancer treatment
system and heat-activated liposome and cancer repair inhibitor products, as
well as other potential new products. We expended approximately $6,800,000 in
the fiscal year ending September 30, 2001. As of that date, we had available a
total of approximately $2,500,000 to fund additional expenditures. In
addition, as of January 9, 2002, we had received approximately $5,620,437 in
net proceeds from a private placement of our equity securities. It is our
current intention both to increase the pace of development work on our present
products and to make a significant commitment to our heat-activated liposome
and cancer repair inhibitor research and development projects. The increase in
the scope of present development work and the commitment to these new projects
will require additional external funding, at least until we are able to begin
marketing our products and to generate sufficient cash flow from sale of those
products to support our continued operations. We do not have any committed
sources of financing and cannot offer any assurances that additional funding
will be available in a timely manner, on acceptable terms or at all.
If adequate funding is not available, we may be required to delay,
scale back or eliminate certain aspects of our operations or attempt to obtain
funds through unfavorable arrangements with partners or others that may force
us to relinquish rights to certain of our technologies, products or potential
markets or that could impose onerous financial or other terms. Furthermore, if
we cannot fund our ongoing development and other operating requirements,
particularly those associated with our obligations to conduct clinical trials
under our licensing agreements, we will be in breach of these licensing
agreements and could therefore lose our license rights, which could have
material adverse effects on our business.
OUR BUSINESS IS SUBJECT TO NUMEROUS AND EVOLVING STATE, FEDERAL AND
FOREIGN REGULATIONS AND WE MAY NOT BE ABLE TO SECURE THE GOVERNMENT APPROVALS
NEEDED TO DEVELOP AND MARKET OUR PRODUCTS.
Our research and development activities, pre-clinical tests and
clinical trials, and ultimately the manufacturing, marketing and labeling of
our products, all are subject to extensive regulation by the FDA and foreign
regulatory agencies. Pre-clinical testing and clinical trial requirements and
the regulatory approval process typically take years and require the
expenditure of substantial resources. Additional government regulation may be
established that could prevent or delay regulatory approval of our product
candidates. Delays or rejections in obtaining regulatory approvals would
adversely affect our ability to commercialize any product candidates and our
ability to generate product revenues or royalties.
11
The FDA and foreign regulatory agencies require that the safety and
efficacy of product candidates be supported through adequate and
well-controlled clinical trials. If the results of pivotal clinical trials do
not establish the safety and efficacy of our product candidates to the
satisfaction of the FDA and other foreign regulatory agencies, we will not
receive the approvals necessary to market such product candidates.
Even if regulatory approval of a product candidate is granted, the
approval may include significant limitations on the indicated uses for which
the product may be marketed. Also, manufacturing establishments in the United
States and abroad are subject to inspections and regulations by the FDA.
Medical devices must also continue to comply with the FDA's Quality System
Regulation, or QSR. Compliance with such regulations requires significant
expenditures of time and effort to ensure full technical compliance. The FDA
stringently applies regulatory standards for manufacturing.
We are also subject to recordkeeping and reporting regulations,
including FDA's mandatory Medical Device Reporting, or MDR regulation.
Labeling and promotional activities are regulated by the FDA and, in certain
instances, by the Federal Trade Commission.
Many states in which we do or in the future may do business or in
which our products may be sold impose licensing, labeling or certification
requirements that are in addition to those imposed by the FDA. There can be no
assurance that one or more states will not impose regulations or requirements
that have a material adverse effect on our ability to sell our products.
In many of the foreign countries in which we may do business or in
which our products may be sold, we will be subject to regulation by national
governments and supranational agencies as well as by local agencies affecting,
among other things, product standards, packaging requirements, labeling
requirements, import restrictions, tariff regulations, duties and tax
requirements. There can be no assurance that one or more countries or agencies
will not impose regulations or requirements that could have a material adverse
effect on our ability to sell our products.
The EU has a registration process that includes registration of
manufacturing facilities (known as "ISO certification") and product
certification (known as a "CE Mark"). We have obtained ISO certification for
our existing facilities. However, there is no guarantee that we will be
successful in obtaining European certifications for new facilities or for our
products, or that we will be able to maintain its existing certifications in
the future.
Foreign government regulation may delay marketing of our new products
for a considerable period of time, impose costly procedures upon its
activities and provide an advantage to larger companies that compete with it.
There can be no assurance that we will be able to obtain necessary regulatory
approvals, on a timely basis or at all, for any products that it develops. Any
delay in obtaining, or failure to obtain, necessary approvals would materially
and adversely affect the marketing of our contemplated products subject to
such approvals and, therefore, our ability to generate revenue from such
products.
Even if regulatory authorities approve our product candidates, such
products and our facilities, including facilities located outside the EU, may
be subject to ongoing testing, review and inspections by the European health
regulatory authorities. After receiving pre-marketing approval, in order to
manufacture and market any of its products, we will have to comply with
regulations and requirements governing manufacture, labeling and advertising
on an ongoing basis.
Failure to comply with applicable domestic and foreign regulatory
requirements, can result in, among other things, warning letters, fines,
injunctions and other equitable remedies, civil penalties, recall or seizure
of products, total or partial suspension of production, refusal of the
government to grant approvals, pre-market clearance or pre-market approval,
withdrawal of approvals and criminal prosecution of the Company and its
employees, all of which would have a material adverse effect on our business.
OUR BUSINESS DEPENDS ON LICENSE AGREEMENTS WITH THIRD PARTIES TO
PERMIT US TO USE PATENTED TECHNOLOGIES. THE LOSS OF ANY OF OUR RIGHTS UNDER
THESE AGREEMENTS COULD IMPAIR OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS.
Currently, we have three utility patents pending in the United States
Patent & Trademark Office. Two are directed to our Microwave Uretheroplasty
treatment for BPH and the other is directed to our breast cancer treatment
system. However, even when our pending applications mature into United States
patents, our business will still depend on license agreements that it has
entered into with third parties until the third parties' patents expire.
Our success will depend, in substantial part, on our ability to
maintain our rights under license agreements granting us rights
12
to use patented technologies. We have entered into exclusive license
agreements with MIT, for APA technology and with MMTC, a privately owned
developer of medical devices, for microwave balloon catheter technology. We
have also entered into a license agreement with Duke University, under which
we have exclusive rights to commercialize medical treatment products and
procedures based on Duke University's thermo-liposome technology and a license
agreement with Memorial Sloan-Kettering Cancer Center under which we have
rights to commercialize certain cancer repair inhibitor products. The MIT,
MMTC, Duke University and Sloan-Kettering agreements each contain license fee,
royalty and/or research support provisions, testing and regulatory milestones,
and other performance requirements that we must meet by certain deadlines. If
we were to breach these or other provisions of the license and research
agreements, we could lose our ability to use the subject technology, as well
as compensation for our efforts in developing or exploiting the technology.
Also, loss of our rights under the MIT license agreement would prevent us from
proceeding with most our current product development efforts, which are
dependent on licensed APA technology. Any such loss of rights and access to
technology would have a material adverse effect on our business.
Further, we cannot guarantee that any patent or other technology
rights licensed to us by others will not be challenged or circumvented
successfully by third parties, or that the rights granted will provide
adequate protection. We are aware of published patent applications and issued
patents belonging to others, and it is not clear whether any of these patents
or applications, or other patent applications of which it may not have any
knowledge, will require us to alter any of our potential products or
processes, pay licensing fees to others or cease certain activities.
Litigation, which could result in substantial costs, may also be necessary to
enforce any patents issued to or licensed by us or to determine the scope and
validity of others' claimed proprietary rights. We also rely on trade secrets
and confidential information that we seek to protect, in part, by
confidentiality agreements with our corporate partners, collaborators,
employees and consultants. We cannot guarantee that these agreements will not
be breached, that, even if not breached, that they are adequate to protect our
trade secrets, that we will have adequate remedies for any breach or that our
trade secrets will not otherwise become known to, or will not be discovered
independently by, competitors.
TECHNOLOGIES FOR THE TREATMENT OF CANCER ARE SUBJECT TO RAPID CHANGE
AND THE DEVELOPMENT OF TREATMENT STRATEGIES THAT ARE MORE EFFECTIVE THAN OUR
THERMOTHERAPY TECHNOLOGY COULD RENDER OUR TECHNOLOGY OBSOLETE.
Various methods for treating cancer currently are, and in the future
may be expected to be, the subject of extensive research and development. Many
possible treatments that are being researched, if successfully developed, may
not require, or may supplant, the use of our thermotherapy technology. These
alternate treatment strategies include the use of radio frequency (RF), laser
and ultrasound energy sources. The successful development and acceptance of
any one or more of these alternative forms of treatment could render our
technology obsolete as a cancer treatment method.
WE MAY NOT BE ABLE TO HIRE OR RETAIN KEY OFFICERS OR EMPLOYEES THAT WE
NEED TO IMPLEMENT ITS BUSINESS STRATEGY AND DEVELOP ITS PRODUCTS AND
BUSINESSES.
Our success depends significantly on the continued contributions of
our executive officers, scientific and technical personnel and consultants,
and on our ability to attract additional personnel as we seek to implement our
business strategy and develop our products and businesses. During our
operating history, we have assigned many essential responsibilities to a
relatively small number of individuals. However, as our business and the
demands on our key employees expand, we have been, and will continue to be,
required to recruit additional qualified employees. The competition for such
qualified personnel is intense, and the loss of services of certain key
personnel or our inability to attract additional personnel to fill critical
positions as we implement our business strategy could adversely affect our
business.
Effective October 4, 2001, Spencer J. Volk, formerly the President,
Chief Executive Officer and a director of Celsion, resigned from all of these
positions. Our Board has appointed Dr. Augustine Y. Cheung, formerly the
Chairman and Chief Scientific Officer, to serve as Celsion's President and
Chief Executive Officer and Dr. Max Link, a director since 1997, has assumed
the position of Chairman of the Board.
OUR SUCCESS WILL DEPEND IN PART ON OUR ABILITY TO GROW AND DIVERSIFY,
WHICH IN TURN WILL REQUIRE THAT WE MANAGE AND CONTROL OUR GROWTH EFFECTIVELY.
Our business strategy contemplates growth and diversification. As
manufacturing, marketing, sales, and other personnel, and expand our
manufacturing and research and development capabilities we add, our operating
expenses and capital requirements will increase. Our ability to manage growth
effectively will require that we continue to expend funds to improve our
operational, financial and management controls, reporting systems and
procedures. In addition, we must effectively expand, train and manage our
13
employees. We will be unable to effectively manage our businesses if we are
unable to alleviate the strain on resources caused by growth in a timely and
successful manner. There can be no assurance that we will be able to manage
our growth and a failure to do so could have a material adverse effect on our
business.
THE SUCCESS OF OUR PRODUCTS MAY BE HARMED IF THE GOVERNMENT, PRIVATE
HEALTH INSURERS AND OTHER THIRD- PARTY PAYORS DO NOT PROVIDE SUFFICIENT
COVERAGE OR REIMBURSEMENT.
Our ability to commercialize our thermotherapy technology successfully
will depend in part on the extent to which reimbursement for the costs of such
products and related treatments will be available from government health
administration authorities, private health insurers and other third-party
payors. The reimbursement status of newly approved medical products is subject
to significant uncertainty. We cannot guarantee that adequate third-party
insurance coverage will be available for us to establish and maintain price
levels sufficient for us to realize an appropriate return on our investment in
developing new therapies. Government, private health insurers and other
third-party payors are increasingly attempting to contain health care costs by
limiting both coverage and the level of reimbursement for new therapeutic
products approved for marketing by the FDA. Accordingly, even if coverage and
reimbursement are provided by government, private health insurers and
third-party payors for uses of our products, market acceptance of these
products would be adversely affected if the reimbursement available proves to
be unprofitable for health care providers.
WE FACE INTENSE COMPETITION AND THE FAILURE TO COMPETE EFFECTIVELY
COULD ADVERSELY AFFECT OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS.
There are many companies and other institutions engaged in research
and development of thermotherapy technologies, both for prostate disease and
cancer treatment products, that seek treatment outcomes similar to those that
we are pursuing. In addition, a number of companies and other institutions are
pursuing alternative treatment strategies through the use of microwave,
infrared, radio frequency, laser and ultrasound energy sources, all of which
appear to be in the early stages of development and testing. We believe that
the level of interest by others in investigating the potential of
thermotherapy and alternative technologies will continue and may increase.
Potential competitors engaged in all areas of prostate and cancer treatment
research in the United States and other countries include, among others, major
pharmaceutical and chemical companies, specialized technology companies, and
universities and other research institutions. Most of our competitors and
potential competitors have substantially greater financial, technical, human
and other resources, and may also have far greater experience, than do we,
both in pre-clinical testing and human clinical trials of new products and in
obtaining FDA and other regulatory approvals. One or more of these companies
or institutions could succeed in developing products or other technologies
that are more effective than the products and technologies that we have been
or are developing, or which would render our technology and products obsolete
and non-competitive. Furthermore, if we are permitted to commence commercial
sales of any of our products, we will also be competing, with respect to
manufacturing efficiency and marketing, with companies having substantially
greater resources and experience in these areas.
LEGISLATIVE AND REGULATORY CHANGES AFFECTING THE HEALTH CARE INDUSTRY
COULD ADVERSELY AFFECT OUR BUSINESS.
There have been a number of federal and state proposals during the
last few years to subject the pricing of health care goods and services to
government control and to make other changes to the United States health care
system. It is uncertain which legislative proposals, if any, will be adopted
(or when) or what actions federal, state, or private payors for health care
treatment and services may take in response to any health care reform
proposals or legislation. We cannot predict the effect health care reforms may
have on our business and we can offer no assurances that any of these reforms
will not have a material adverse effect on that business.
WE MAY BE SUBJECT TO SIGNIFICANT PRODUCT LIABILITY CLAIMS AND
LITIGATION.
Our business exposes us to potential product liability risks inherent
in the testing, manufacturing and marketing of human therapeutic products. We
presently have product liability insurance limited to $5,000,000 per incident.
If we were to be subject to a claim in excess of this coverage or to a claim
not covered by our insurance and the claim succeeded, we would be required to
pay the claim with our own limited resources, which could have a material
adverse effect on our business. In addition, liability or alleged liability
could harm the business by diverting the attention and resources of our
management and by damaging our reputation.
WE PRESENTLY HAVE LIMITED MARKETING AND SALES CAPABILITY AND WILL BE
REQUIRED TO DEVELOP SUCH CAPABILITIES AND TO ENTER INTO ALLIANCES WITH OTHERS
POSSESSING SUCH CAPABILITIES IN ORDER TO COMMERCIALIZE OUR PRODUCTS
SUCCESSFULLY.
14
We intend to market our Microwave Uretheroplasty treatment system
directly, at such time, if any, as it is approved for commercialization by the
FDA, and to market our breast cancer treatment system, if and when so
approved, through strategic alliances and distribution arrangements with third
parties. There can be no assurance that we will be able to establish such
sales and marketing capabilities successfully or successfully enter into
third-party marketing or distribution arrangements. We have limited experience
and capabilities in marketing, distribution and direct sales, although we
expect to attempt to recruit experienced marketing and sales personnel as we
pursue commercialization. In attracting, establishing and maintaining a
marketing and sales force or entering into third-party marketing or
distribution arrangements with other companies, we expect to incur significant
additional expense. There can be no assurance that, to the extent we enter
into any commercialization arrangements with third parties, such third parties
will establish adequate sales and distribution capabilities or be successful
in gaining market acceptance for our products and services. There also can be
no assurance that our direct sales, marketing, licensing and distribution
efforts would be successful or that revenue from such efforts would exceed
expenses.
WE DEPEND ON THIRD-PARTY SUPPLIERS TO PROVIDE US WITH COMPONENTS
REQUIRED FOR OUR PRODUCTS AND MAY NOT BE ABLE TO OBTAIN THESE COMPONENTS ON
FAVORABLE TERMS OR AT ALL.
We are not currently manufacturing any products, but are using our
facilities to assemble prototypes of the equipment for research and
development purposes. We currently purchase certain specialized microwave and
thermometry components and applicator materials and the catheter unit used for
our Microwave Uretheroplasty equipment from single or limited source suppliers
because of the small quantities involved. While we have not experienced any
significant difficulties in obtaining these components, the loss of an
important current supplier could require that we obtain a replacement
supplier, which might result in delays and additional expense in being able to
make prototype equipment available for clinical trials and other research
purposes. In addition, inasmuch as we expect to manufacture our Microwave
Uretheroscopy equipment at least for some period subsequent to FDA approval
and the commencement of commercialization, such manufacturing and
commercialization also could be delayed. In addition, in the event that we
succeed in marketing our products, we intend to use outside contractors to
supply components and the Microwave Uretheroplasty catheter, and may use such
contractors to assemble finished equipment in the future, which could cause us
to become increasingly dependent on key vendors.
WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT INTEND TO DO SO FOR
THE FORESEEABLE FUTURE.
We have never paid cash dividends and do not anticipate paying cash
dividends on our common stock or Preferred Stock in the foreseeable future.
Therefore, our stockholders cannot achieve any degree of liquidity with
respect to their shares of common stock except by selling such shares.
THE EXERCISE OR CONVERSION OF OUR OUTSTANDING OPTIONS, WARRANTS AND
CONVERTIBLE PREFERRED STOCK COULD RESULT IN SIGNIFICANT DILUTION OF OWNERSHIP
INTERESTS IN OUR COMMON STOCK OR OTHER CONVERTIBLE SECURITIES.
Options and Warrants. As of January 31, 2002, we had outstanding and
exercisable warrants and options to purchase a total of 28,532,052 shares of our
common stock at exercise prices ranging from $0.01 to $5.00 per share (and a
weighted average exercise price of approximately $0.60 per share). In addition,
we had outstanding but unexercisable and unvested warrants and options to
purchase a total of 4,207,000 shares of our common stock at exercise prices
ranging from $0.50 to $5.00 per share. Some of the prices are below the current
market price of our common stock, which has ranged from a low of $0.59 to a high
of $0.98 over the 20 trading days ending February 6, 2002. If holders choose to
exercise such warrants and options at prices below the prevailing market price
for the common stock, the resulting purchase of a substantial number of shares
of our Common would have a dilutive effect on our stockholders and could
adversely affect the market price of our issued and outstanding common stock and
convertible securities. In addition, holders of these options and warrants who
have the right to require registration of the common stock under certain
circumstances and who elect to require such registration, or who exercise their
options or warrants and then satisfy the one-year holding period and other
requirements of Rule 144 of the Securities Act of 1933, will be able to sell in
the public market shares of common stock purchased upon such exercise.
Preferred Stock. As of January 31, 2002 we had outstanding a total of
892.5 shares of Series A 10% Convertible Preferred Stock (plus 178.5 shares
representing accrued dividends). The shares of Series A Preferred Stock are
subject to exchange and conversion privileges upon the occurrence of major
events, including a public offering of our securities or our merger with a
public company. In addition, the holders of the Series A Preferred Stock are
entitled to convert their preferred shares into shares of common
15
stock at a conversion price of $0.41 per share of common stock, subject to
certain adjustments. The conversion of the Series A Preferred Stock could have
a dilutive effect on our stockholders and could adversely affect the market
price of our issued and outstanding common stock and convertible securities.
The holders of the Series A Preferred Stock also have registration rights at
such time, if any, as we undertake a registered public offering of securities.
Even without such registration, holders of the Series A Preferred Stock who
satisfy the requirements of Rule 144 of the Securities Act of 1933 will be
able to sell in the public market shares of common stock acquired upon the
conversion of Series A Preferred Stock. There also were outstanding warrants
to purchase 36 shares of Series A Preferred Stock (convertible into an
additional 87,805 shares of common stock) as of January 31, 2002.
IF THE PRICE OF OUR SHARES REMAINS LOW, WE MAY BE DELISTED BY THE
AMERICAN STOCK EXCHANGE AND BECOME SUBJECT TO SPECIAL RULES APPLICABLE TO LOW
PRICED STOCKS.
Our common stock currently trades on The American Stock Exchange (the
"Amex"). The Amex, as a matter of policy, will consider the suspension of
trading in, or removal from listing of, any stock when, in the opinion of the
Amex, (i) the financial condition and/or operating results of an issuer appear
to be unsatisfactory; (ii) it appears that the extent of public distribution
or the aggregate market value of the stock has become so reduced as to make
further dealings on the Amex inadvisable; (iii) the issuer has sold or
otherwise disposed of its principal operating assets; or (iv) the issuer has
sustained losses which are so substantial in relation to its overall
operations or its existing financial condition has become so impaired that it
appears questionable, in the opinion of the Amex, whether the issuer will be
able to continue operations and/or meet its obligations as they mature. For
example, the Amex will consider suspending dealings in or delisting the stock
of an issuer if the issuer has sustained losses from continuing operations
and/or net losses in its five most recent fiscal years. Another instance where
the Amex would consider suspension or delisting of a stock is if the stock has
been selling for a substantial period of time at a low price per share and the
issuer fails to effect a reverse split of such stock within a reasonable time
after being notified that the Amex deems such action to be appropriate. We
have sustained net losses for our last five fiscal years (and beyond) and our
common stock has been trading at relatively low prices. Therefore, our common
stock may be at risk for delisting by the Amex.
Upon any such delisting, the common stock would become subject to the
penny stock rules of the SEC, which generally are applicable to equity
securities with a price of less than $5.00 per share (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the SEC that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with bid and ask quotations for
the penny stock, the compensation of the broker-dealer and its salesperson in
the transaction and monthly account statements showing the market value of
each penny stock held in the customer's account. In addition, the penny stock
rules require that, prior to a transaction in a penny stock that is not
otherwise exempt from such rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements are likely to have a material and adverse effect
on price and the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. If our common stock were to
become subject to the penny stock rules it is likely that the price of the
common stock would decline and that our stockholders would be likely to find
it more difficult to sell their shares.
OUR STOCK PRICE COULD BE VOLATILE.
Market prices for our common stock and the securities of other
medical, high technology companies have been volatile. Factors such as
announcements of technological innovations or new products by us or by our
competitors, government regulatory action, litigation, patent or proprietary
rights developments and market conditions for medical and high technology
stocks in general can have a significant impact on the market for our common
stock.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW
COULD PREVENT OR DELAY A CHANGE IN CONTROL.
Our Certificate of Incorporation and Bylaws may discourage, delay or
prevent a merger or acquisition that a stockholder may consider favorable by
authorizing the issuance of "blank check" preferred stock. In addition, our
classified Board of Directors may discourage such transactions by increasing
the amount of time necessary to obtain majority representation on the Board.
Certain other provisions of our Bylaws and of Delaware law may also
discourage, delay or prevent a third party from acquiring or merging with us,
16
even if such action were beneficial to some, or even a majority, of our
stockholders.
USE OF PROCEEDS
The Selling Stockholders will receive all of the net proceeds from the
sale of their respective Shares; we will not receive any proceeds from these
sales. The holders of the Warrants are under no obligation to exercise them at
any time or at all.
The exercise price for the Warrants is payable in cash. If all of the
Warrants are exercised for cash, we will receive aggregate consideration of
$8,993,008. We intend to use any proceeds from exercise of the Warrants for
working capital and general corporate purposes.
RESALES BY SELLING STOCKHOLDERS
This Prospectus relates to the proposed resale by the Selling
Stockholders of the Shares, consisting of up to 12,550,000 shares of Common
Stock, and up to 21,185,821 shares of Common Stock issuable upon the exercise
of the Warrants. The following table sets forth, as of February 8, 2002,
certain information with respect to the persons for whom the Company is
registering the Shares for resale to the public. Except as indicated by
footnote below, no such person has had a material relationship or has held any
position or office, with the Company within the last three years. The Company
will not receive any of the proceeds from the sale of the Shares, but may
receive up to $8,993,008 upon the cash exercise of the Warrants.
Securities Securities
Securities Beneficially Offered Beneficially Owned
Owned Prior to Offering (1) Hereby (2) After Offering (3)
------------------------------------------------------------------------------------------------------------------------------------
Common Common
Name of Selling Stockholder Stock Warrants Stock Amount Percent
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Stephen M. Shea 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Kim R. Baker 1,100500 1,100,000 2,200,000 500 *
-----------------------------------------------------------------------------------------------------------------------------------
Arthur H. Dunkin 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Soraya Channing 233,000 50,000 100,000 183,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Bahman Teimourian 2,328,049 (4) 450,000 900,000 1,878,049 2%
-----------------------------------------------------------------------------------------------------------------------------------
Bruce B. Allen Separate Ppty Tr #1 Dtd 12/16/87 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Andrew Calapai 55,000 50,000 100,000 5,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Donald A. Chinick 50,000 50,000 100,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Robert A. Chinick 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Steven J. Chinick 50,000 50,000 100,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
John P. Christensen 300,000 300,000 600,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Jay R. Solan And Sandra L. Solan 399,000 234,000 468,000 165,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Rudolph Vaccari And Marion Vaccari 220,000 100,000 200,000 120,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Dara Farzanegan 80,000 20,000 40,000 60,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Janet Cohen 150,000 100,000 200,000 50,000 *
-----------------------------------------------------------------------------------------------------------------------------------
American Health Carefund LP 400,000 400,000 800,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Robert W. Morey 245,000 100,000 200,000 145,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Philip S. Sassower 1996 Charitable Remainder
Annuity Trust 200,000 200,000 400,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Phoenix Enterprises Family Fund LLC 200,000 200,000 400,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
George Kevorkian 284,348 284,348 568,696 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Steven Kevorkian 200,000 100,000 200,000 100,000 *
-----------------------------------------------------------------------------------------------------------------------------------
John Kevorkian 360,000 200,000 400,000 160,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Ira S. Leemon 662,600 200,000 400,000 462,600 *
-----------------------------------------------------------------------------------------------------------------------------------
Delaware Charter C/F Ira S. Leemon 107,500 100,000 200,000 7,500 *
-----------------------------------------------------------------------------------------------------------------------------------
JCLK Corporation 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Brooke C. Moore 190,800 190,000 380,000 800 *
-----------------------------------------------------------------------------------------------------------------------------------
Steven J. Lowenstein 900,000 900,000 1,800,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Rosalia Rubner 270,000 150,000 300,000 120,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Frank W. Bachinsky 150,500 100,000 200,000 50,500 *
-----------------------------------------------------------------------------------------------------------------------------------
Sun Yiu Kwong 200,000 200,000 400,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Tsang Cheuk Lau 1,000,000 1,000,000 2,000,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Yuen Pak Yiu Philip 200,000 200,000 400,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Ying Jia Huang 1,174,518 1,174,518 2,349,036 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Samuel D. Skinner And Jennifer Skinner 2000 Trust
Dtd 7/26/00 25,000 20,000 40,000 5,000 *
-----------------------------------------------------------------------------------------------------------------------------------
UBS Painewebber as IRA Custodian For Samuel D.
Skinner IRA R/O 30,000 30,000 60,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
John R. Luvisi 440,000 170,000 340,000 270,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Highpeak Holdings Ltd 81,652 81,652 163,304 0 *
-----------------------------------------------------------------------------------------------------------------------------------
David M. Spada UBS Paine Webber As Custodian For
David M. Spada IRA 514,383 (5) 100,000 200,000 414,383 *
-----------------------------------------------------------------------------------------------------------------------------------
1997 Leslie V. Barrett Revocable Trust Leslie
Barrett Ttee 50,000 50,000 100,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Marshall Senk 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
John J. Shaw 200,000 200,000 400,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Nathan Sugerman 243,000 100,000 200,000 143,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Hopkins and Cynthia A Hopkins 20,000 20,000 40,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Joseph Giamanco 200,000 200,000 400,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Christine A. Russell 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Nicholas J. Yates 50,000 50,000 100,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Charles K. Abramovitz 200,000 200,000 400,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Barry Davis Roth IRA 400,000 400,000 800,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Richard G. Sass 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
I C H Investments Limited 100,000 100,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Allan R. Lyons 190,055 150,000 300,000 40,055 *
-----------------------------------------------------------------------------------------------------------------------------------
Triton West Group Inc. 800,000 800,000 1,600,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Thomas Berton 86,868 86,868 173,736 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Michael E. Fleischer 138,614 138,614 277,228 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Westgate Enterprises III LLC 600,000 600,000 1,200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Goldpac Investment Partners Ltd 140,000 140,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive Capital Corporation 108,500 610,058 610,058 108,500 *
-----------------------------------------------------------------------------------------------------------------------------------
Guy G. Clemente 94,040 94,040 0 *
-----------------------------------------------------------------------------------------------------------------------------------
The Thornwater Company Lp 94,038 94,038 0 *
-----------------------------------------------------------------------------------------------------------------------------------
David Weinstein 68,000 68,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Michael Hansen 4,000 4,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Douglas Kaiser 20,439(6) 18,000 2,439 *
-----------------------------------------------------------------------------------------------------------------------------------
Amy Farren 2,000 2,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Frank Salvatore 22,439(6) 20,000 2,439 *
-----------------------------------------------------------------------------------------------------------------------------------
National Securities Corporation 56,000 56,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Moors And Cabot Inc. 401,236 401,236 0 *
-----------------------------------------------------------------------------------------------------------------------------------
William H. Payne III 2,500 100,310 100,310 2,500 *
-----------------------------------------------------------------------------------------------------------------------------------
Samuel D. Skinner 200,000 200,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
James D. Mccamant 40,000 44,400 44,400 40,000 *
-----------------------------------------------------------------------------------------------------------------------------------
John H. Dakin 4,000 507,918 507,918 4,000 *
-----------------------------------------------------------------------------------------------------------------------------------
George T. Horton Trust 90,000 1,581,455 1,581,455 90,000 *
-----------------------------------------------------------------------------------------------------------------------------------
John T. Horton 316,291 316,291 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Charles A. Stearns 10,000 442,808 442,808 10,000 *
-----------------------------------------------------------------------------------------------------------------------------------
Warren R. Stearns 569,324 569,324 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Anthony Riker Ltd. 3,415,943 3,415,943 0 *
-----------------------------------------------------------------------------------------------------------------------------------
Equity Communications 50,000 50,000 0 *
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
----------
(1) We have computed "beneficial ownership" in accordance Rule 13d-3(d)
promulgated by the SEC under the Securities Exchange Act of 1934 for
purposes of this table. Therefore, the table reflects a person as
having "beneficial ownership" of shares of Common Stock if such person
has the right to acquire such shares within 60 days of February 8,
2002. For purposes of computing the percentage of outstanding shares
of Common Stock held by each person or group of persons named above,
we have assumed to be outstanding any security which such person or
persons has or have the right to acquire within that 60-day period.
All of the Warrants are currently exercisable and, therefore, the
Selling Stockholders may be deemed to be the beneficial owner of the
shares of Common Stock underlying such Warrants pursuant to Rule
13d-3(d). However, securities that may be acquired within that 60-day
period are not deemed to be outstanding for purposes of computing the
percentage ownership of any other person. Notwithstanding the
foregoing, for purposes of this table, we have not, however, included
the Shares underlying warrants and registered hereby under the column
"Securities Beneficially Owned Prior to Offering--Common Stock."
Instead, the Shares are reflected under the column "Securities Offered
Hereby." Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, the Company believes,
based on information supplied by such persons, that the persons named
in this table have sole voting and investment power with respect to
all shares of Common Stock which they beneficially own.
(2) Represents the maximum number of shares of Common Stock issuable to
each Selling Stockholder upon exercise in full of Warrants issued or
issuable thereto.
(3) Assumes the eventual sale of all Shares by each Selling Stockholder.
There can be no assurance that any Selling Stockholder will sell any
or all of the Shares owned thereby or issuable thereto.
(4) Includes 878,049 shares of Common Stock issuable upon conversion of the
Company's Series A 10% Convertible Preferred Stock.
(5) Includes 292,683 shares of Common Stock issuable upon conversion of the
Company's Series A 10% Convertible Preferred Stock.
(6) Includes a warrant to purchase one share of the Company's Series A 10%
Convertible Preferred Stock, which is convertible into 2,439 shares of
Common Stock.
* Less than 1%.
17
PLAN OF DISTRIBUTION
The Selling Stockholders may, in their discretion, offer and sell
Shares from time to time on The American Stock Exchange or otherwise at prices
and on terms then prevailing at prices related to the then-current market
price, or at negotiated prices. The distribution of the Shares may be effected
from time to time in one or more transactions including, without limitation:
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- transactions involving block trades;
- purchases by a broker, dealer or underwriter as principal and
resale by that person for its own account under this Prospectus;
- put or call option transactions;
- privately negotiated transactions; or
- by any other legally available means.
In effecting sales, broker-dealers or agents engaged by the Selling
Stockholders may arrange for other broker-dealers or agents to participate.
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the Shares owned
thereby, and the pledgees, secured parties or persons to whom such securities
have been hypothecated shall, upon foreclosure in the event of default, be
deemed to be Selling Stockholders under this Prospectus. In addition, the
Selling Stockholders may from time to time sell short the Common Stock of the
Company and, in such instances, this Prospectus may be delivered in connection
with such short sale and the Shares offered hereby may be used to cover such
short sale.
Sales of Selling Stockholders' Shares may also be made pursuant to
Rule 144 under the Securities Act of 1933, where applicable. The Selling
Stockholders' Shares may also be offered in one or more underwritten
offerings, on a firm commitment or best efforts basis. The Company will
receive no proceeds from the sale of Shares by the Selling Stockholders,
although it will receive the exercise price upon any exercise of Warrants.
To the extent required under the Securities Act of 1933, the aggregate
amount of Selling Stockholders' Common Stock being offered and the terms of
the offering, the names of any such agents, brokers, dealers or underwriters
and any applicable commission with respect to a particular offer will be set
forth in an accompanying Prospectus supplement. Any underwriters, dealers,
brokers or agents participating in the distribution of the Shares may receive
compensation in the form of underwriting discounts, concessions, commissions
or fees from a Selling Stockholder and/or purchasers of Selling Stockholders'
Shares, for whom they may act. In addition, Selling Stockholders may be deemed
to be underwriters under the Securities Act and any profits on the sale of
Shares by them may be deemed to be discounts or commissions under the
Securities Act. Selling Stockholders may have other business relationships
with the Company or its affiliates in the ordinary course of business.
From time to time each of the Selling Stockholders may transfer,
pledge, donate or assign their Shares to lenders, family members and others
and each of such persons will be deemed to be a Selling Stockholder for
purposes of this Prospectus. The number of Shares beneficially owned by those
Selling Stockholders who transfer, pledge, donate or assign Shares will
decrease as and when they take such actions. The plan of distribution for the
Shares sold hereunder will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be Selling Stockholders
hereunder.
18
Without limiting the foregoing, in connection with distributions of
the Shares, a Selling Stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the Common
Stock in the course of hedging the positions they assume with such Selling
Stockholder. A Selling Stockholder may also enter into option or other
transactions with broker-dealers that involve the delivery of Shares to the
broker-dealers, who may then resell or otherwise transfer such Shares. A
Selling Stockholder may also lend or pledge Shares to a broker-dealer and the
broker-dealer may sell the Shares so borrowed or, upon default, may sell or
otherwise transfer the pledged Shares.
Under applicable rules and regulations under the Securities Exchange
Act, any person engaged in the distribution of the Common Stock may not bid
for or purchase shares of Common Stock during a period which commences one
business day (five business days, if the Company's public float is less than
$25 million or its average daily trading volume is less than $100,000) prior
to such person's participation in the distribution, subject to exceptions for
certain passive market making activities. In addition and without limiting the
foregoing, each Selling Stockholder will be subject to applicable provisions
of the Securities Exchange Act and the rules and regulations thereunder,
including, without limitation, Regulation M, which provisions may limit the
timing of purchases and sales of shares of the Company's Common Stock by such
Selling Stockholder.
The Company is bearing all costs relating to the registration of the
Shares (other than fees and expenses, if any, of counsel or other advisors to
the Selling Stockholders). Any commissions, discounts or other fees payable to
broker-dealers in connection with any sale of the Shares will be borne by the
Selling Stockholders selling such Shares.
The Company may indemnify the Selling Stockholders in certain
circumstances, against certain liabilities, including liabilities arising
under the Securities Act of 1933.
LEGAL MATTERS
The legality of the securities in this offering has been passed upon
for us by Richards, Layton & Finger, P.A., of Wilmington, Delaware.
EXPERTS
Our financial statements at September 30, 1999, 2000 and 2001 for the
years ended September 30, 1999, 2000 and 2001 are incorporated by referenced
into this Prospectus from our Annual Report on Form 10-K for the year ended
September 30, 2001 have been audited by Stegman & Co., independent
accountants, and are so incorporated by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We estimate that our expenses to be paid in connection with the offering
(other than placement agent discounts, commissions and reasonable expense
allowances), all of which will be paid by the Company, will be as follows:
SEC Registration Fee................. $ 5,397
American Stock Exchange Listing Fee.. $17,500
Accounting Fees and Expenses......... $ 500
Legal Fees and Expenses.............. $25,000
Printing and Engraving............... $ 3,000
Miscellaneous........................ $10,000
-------
Total $61,397
=======
-----
*These are estimated amounts.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is organized under the laws of the State of Delaware. Our
Certificate of Incorporation provides that we shall indemnify our current and
former directors and officers, and may indemnify our current and former
employees and agents, against any and all liabilities and expenses incurred in
connection with their services in those capacities to the maximum extent
permitted by Delaware law.
The Delaware General Corporation Law (the "DGCL") provides that a
Delaware corporation has the power generally to indemnify its current and
former directors, officers, employees and other agents (each, a "Corporate
Agent") against expenses and liabilities (including amounts paid in
settlement) in connection with any proceeding involving such person by reason
of his being a Corporate Agent, other than a proceeding by or in the right of
the corporation, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, such person had no
reasonable cause to believe his conduct was unlawful.
In the case of an action brought by or in the right of the
corporation, indemnification of a Corporate Agent is permitted if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. However, no indemnification
is permitted in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation, unless and only to
the extent that the court in which such proceeding was brought shall determine
upon application that despite the adjudication of liability, but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to such indemnification.
To the extent that a Corporate Agent has been successful on the merits
or otherwise in the defense of such proceeding, whether or not by or in the
right of the corporation, or in the defense of any claim, issue or matter
therein, the corporation is required to indemnify such person for expenses in
connection therewith. Under the DGCL, the corporation may advance expenses
incurred by a Corporate Agent in connection with a proceeding, provided that
the Corporate Agent undertakes to repay such amount if it shall ultimately be
determined that such person is not entitled to indemnification. Our
Certificate of Incorporation requires us to advance expenses to any person
entitled to indemnification, provided that such person undertakes to repay the
advancement if it is determined in a final judicial decision from which there
is no appeal that such person is not entitled to indemnification.
The power to indemnify and advance the expenses under the DGCL does
not exclude other rights to which a Corporate Agent may be entitled to under
the Certificate of Incorporation, by laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Our Certificate of Incorporation permits us to secure insurance on
behalf of our directors, officers, employees and agents for any expense,
liability or loss incurred in such capacities, regardless of whether the
Certificate of Incorporation or Delaware law would permit indemnification
against such expense, liability or loss.
II-1
The purpose of these provisions is to assist us in retaining qualified
individuals to serve as our directors, officers, employees and agents by
limiting their exposure to personal liability for serving as such.
ITEM 16. EXHIBITS.
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------
4.1 Certificate of Incorporation of Celsion
Corporation (the "Company"), as amended
through June 5, 2001, and as in effect on
August 14, 2001 (incorporated by reference
to Exhibit 3.1 of the Quarterly Report of
the Company on Form 10-Q for the quarter
ended June 30, 2001).
4.2 By-laws of the Company, as amended,
incorporated herein by reference to Exhibit
3.2 to the Quarterly Report on Form 10-Q of
the Company for the Quarter Ended June 30,
2001.
4.3 Form of Warrant to Purchase Common Stock
pursuant to the Private Placement Memorandum
(the "PPM") of the Company dated October 11,
2001 (incorporated by reference to Exhibit
10.23 to the Annual Report on Form 10-K of
the Company for the year ended September 30,
2001).
4.4+ Form of Warrant to Purchase Units of the
Company issued to Placement Agents
pursuant to the PPM
4.5+ Letter Agreement with Goldpac Investment
Partners dated October 17, 2001
4.6+ Letter Agreement with Equity Communications
dated November 5, 2001
4.7+ Form of Settlement Warrant to Purchase Common
Stock
5.1++ Opinion of Richards, Layton & Finger, P.A.
23.1+ Consent of Stegman & Company, independent
public accountants of the Company.
23.2++ Consent of Richards, Layton & Finger, P.A.
24.1+ Power of Attorney (included in Signature Page).
----------
+ Denotes exhibits previously filed.
++ Denotes exhibits filed herewith.
II-2
ITEM 17. UNDERTAKINGS.
(A) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this registration
statement or any material change to such information in the registration
statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment to this registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(B) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(C) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Under the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Columbia,
Maryland, on the 8th day of March 2002.
CELSION CORPORATION
By: /s/ John Mon
--------------------------------
John Mon
Vice President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
------------------------------ ------------------------ ----------------
/s/ Augustine V. Cheung* Director, President and March 8, 2002
------------------------------ Chief Executive Officer
Augustine Y. Cheung (Principal Executive
Officer)
/s/ Anthony P. Deasey* Senior Vice President March 8, 2002
------------------------------ and Chief Financial
Anthony P. Deasey Officer (Principal
Financial and Accounting
Officer)
/s/ John Mon Vice President, Secretary, March 8, 2002
------------------------------ Treasurer and Director
John Mon
/s/ LaSalle D. Leffall, Jr.* Director March 8, 2002
------------------------------
LaSalle D. Leffall, Jr.
/s/ Max E. Link* Chairman of the Board of March 8, 2002
------------------------------ Directors
Max E. Link
/s/ Claude Tihon* Director March 8, 2002
------------------------------
Claude Tihon
/s/ Kris Venkat* Director March 8, 2002
------------------------------
Kris Venkat
By: /s/ John Mon
------------------
John Mon
Attorney-in-fact
II-4