AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 2003
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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
JEANNETTE C. KOONCE, ESQUIRE
VENABLE, BAETJER, HOWARD & CIVILETTI, LLP
1201 NEW YORK AVENUE, NW, SUITE 1000
WASHINGTON, DC 20005
(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. [ ] ______
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
PROPOSED
AMOUNT MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AGGREGATE PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) PER UNIT PRICE FEE
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Common stock, par value $0.01 per share. 11,978,045 $1.07 (3) $12,816,508 $1,037
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Common Stock, par value $0.01 per share, 6,902,113 (2) $1.07 (3) $ 7,385,211 $ 598
issuable upon exercise of Warrants......
==================================================================================================================================
(1) Pursuant to Rule 416 under the Securities Act of 1933, this registration
statement also covers an indeterminate number of additional shares of
Common Stock as may be issued as a result of adjustments to prevent
dilution by reason of any stock split, stock dividend or similar
transaction.
(2) Consists of 18,000 shares of Common Stock underlying Warrants exercisable
at $2.44 per share,18,000 shares of Common Stock underlying Warrants
exercisable at $1.25 per share, 450,000 hares of Common Stock underlying
Warrants exercisable at $1.22 per share, 2,850,914 shares of Common Stock
underlying Warrants exercisable at $1.20 per share, 700,000 shares of
Common Stock underlying Warrants exercisable at $1.17 per share, 322,470
shares of Common Stock underlying Warrants exercisable at $1.00 per share,
125,000 shares of Common Stock underlying Warrants exercisable at $0.80 per
share, 1,111,857 shares of Common Stock underlying Warrants exercisable at
$0.77 per share, 400,000 shares of Common Stock underlying Warrants
exercisable at $0.75 per share,118,000 shares of Common Stock underlying
Warrants exercisable at $0.74 per share, 125,000 shares of Common Stock
underlying Warrants exercisable at $0.65 per share, 50,000 shares of Common
Stock underlying Warrants exercisable at $0.54 per share, 25,000 shares of
Common Stock underlying Warrants exercisable at $0.50 per share, 137,872
shares of Common Stock underlying Warrants exercisable at $0.47 per share,
350,000 shares of Common Stock underlying Warrants exercisable at $0.44 per
share, and 100,000 shares of Common Stock underlying Warrants exercisable
at $0.40 per share.
(3) Calculated pursuant to Rule 457(g) and Rule 457(c) under the Securities Act
of 1933. The above calculation is based on the average of the high and low
prices of the Common Stock on The American Stock Exchange on August 27,
2003.
--------------------
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.
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 AUGUST 28, 2003
PRELIMINARY PROSPECTUS
CELSION CORPORATION
18,880,158 SHARES
COMMON STOCK
This Prospectus of Celsion Corporation, or the Company, a Delaware
corporation, relates to the offer and sale from time to time by certain selling
stockholders (the "Selling Stockholders") of up to 11,978,045 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock") that are
presently outstanding, and up 6,902,113 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 collectively as the "Shares." See
"Selling Stockholders" and "Plan of Distribution."
The Company will not receive any proceeds from sales of Shares by the
Selling Stockholders. However, the Company will receive proceeds upon exercise
of the Warrants, up to a maximum of $6,900,987 if all of the Warrants are
exercised for cash.
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, which may be the
then-prevailing market price 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 for
the account of such Selling Stockholder, less applicable commissions, discounts
and fees.
The Common Stock is traded on The American Stock Exchange under the
symbol "CLN." On August 27, 2003, the closing price of the Common Stock on The
American Stock Exchange was $1.07.
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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 8 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 August [__], 2003
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TABLE OF CONTENTS
PAGE
Where You Can Find More Information...................... 1
Cautionary Statement About Forward-Looking Statements.... 2
Summary Information About The Company.................... 3
Risk Factors............................................. 8
Use of Proceeds.......................................... 15
Resales by Selling Stockholders.......................... 16
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.
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. The file number of the reports that we file under the
Securities Exchange Act of 1934 is 000-14242.
We have filed a registration statement on Form S-3 with the SEC (File
No. [333-_________]) 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:
o Our Annual Report on Form 10-K for the fiscal year ended September
30, 2002;
o Our Quarterly Reports on Form 10-Q for the quarters ended December
31, 2001, March 31, 2003 and June 30, 2003;
o Our Current Reports on Form 8-K filed on November 12, 2002,
January 22, 2003, March 28, 2003 and July 28, 2003;
o Our Proxy Statement relating to our 2003 Annual Meeting of
Stockholders; and
o The description of our Common Stock included in our registration
statement on Form 8-A filed on May 26, 2000 (File No. 001-15911).
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.
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, implicitly or
explicitly, 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:
o unforeseen changes in the course of research and development
activities and in clinical trials;
o possible changes in cost and timing of development and testing,
capital structure and other financial matters;
o changes in approaches to medical treatment;
o introduction of new products by others;
o possible acquisitions of other technologies, assets or businesses;
o possible actions by customers, suppliers, competitors, regulatory
authorities and others; and
o 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.
2
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. We also are working with Duke University on 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 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 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 for those patients currently seeking treatment
to be approximately $2.5 to $3.0 billion annually in the United States and $8.0
to $10.0 billion worldwide.
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
3
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[degree] C (111[degree] 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[degree] C to 45[degree] 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
submitted the last module, consisting of clinical data, on March 24, 2003. If
our BPH system meets all requirements for FDA approval and receives such
approval, we intend to begin marketing the BPH system as promptly as possible
following receipt of such approval.
4
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
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[degree] C
(115[degree] F) without damage to surrounding healthy tissues. High temperatures
maintained for eight to ten minutes can cause complete tumor necrosis
5
(death), 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 St. Joseph's Hospital Breast Center in Orange, California, Harbor
UCLA Medical Center in California, the University of Oklahoma, Comprehensive
Breast Center of Coral Springs in Coral Springs, Florida, Mroz-Baier Breast Care
Center in Memphis, Tennessee, Lynne Clark, M.D. in Tacoma, Washington, Breast
Care Specialists in Norfolk, Virginia, Carolina Surgery in Gastonia, North
Carolina, Breast Care in Las Vegas, Nevada and Bolton Breast Unit Royal in
Bolton, England. 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.
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 5 mg per kilogram
Doxorubicin concentration. This was immediately followed by heating of the tumor
to 42[degree] C (108[degree] 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.
6
In November 2001, we completed large animal toxicity studies involving
Thermodox(TM), our Doxorubicin-laden thermo-liposome at the Roswell Park Cancer
Institute, a cancer research organization in Buffalo, New York and at Dartmouth
Hitchcock Medical Center, a teaching hospital associated with Dartmouth Medical
College. In March 2002, we filed an IND application with the FDA for the use of
Thermodox(TM) in the treatment of prostate cancer using our Microfocus equipment
as the means of heat activation. The IND became effective in June 2002 and we
have had a Phase I clinical trial underway at Roswell Park and Regional Urology
in Shreveport, Louisiana since May 28, 2003.
In addition, in January 2001, we entered into a Material Transfer
Agreement, or MTA, with the National Cancer Institute, or NCI, under which we
are supplying heat-activated liposomes to enable the NCI to conduct clinical
trials on liver cancer. NCI is using 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. NCI is currently completing preclinical studies
and we hope to file an IND for the treatment of liver cancer early in 2004.
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.
ALLIED TECHNOLOGY
On July 18, 2003, we entered into an additional license agreement with
Duke, pursuant to which we have obtained exclusive rights to an advanced phased
array radio frequency (RF) heating system designed specifically for use with
chemotherapeutic drugs for the treatment of locally advanced breast cancer. The
system, developed by Duke engineers, uses RF energy to warm a woman's breast to
approximately 42[degree] C to enhance the effectiveness of liposomal
chemotherapeutic compounds. During the treatment, the breast is immersed in a
pool of distilled water, which helps distribute the heat evenly around the
breast, thus preventing skin burns and "hot spots," which often create pain.
Skin burns and hot spots have, up to now, limited the use of RF hyperthermia as
an effective means for treatment of breast cancer.
This heating system is currently being clinically evaluated at Duke. A
Phase I trial has been completed and a Phase II trial is underway. The
combination of trials was designed to demonstrate the system's ability to
enhance the combined therapeutic effect of liposomal encapsulations of
doxorubicin plus traditional paclitaxel (Taxol(R)) in the management of locally
advanced breast cancer. Results of the Phase I study, which included in 21
women, indicated that tumor growth was halted in all of women participating in
the trial and that 50% of the treated tumors were reduced in size. Eleven
percent of the trial participants had complete pathologic responses, meaning no
cancer was found in the breast tissue upon analyzing its surgical remains, and
33% of patients had complete clinical responses, meaning visible signs of the
tumor could no longer be detected. An additional 17% of trial participants were
converted from mastectomy candidates to lumpectomy candidates. Celsion intends
to work with Duke University staff to explore the potential for using this
heating system in combination with Thermodox(R) to treat breast cancer.
7
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 looking for 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.
THE CELSION TECHNOLOGY - CRI PLUS FOCUSED HEAT
CRI can be activated in tumors by minimally invasive focused heat in
the range of 41[degree] C (106[degree] 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 and the Company hopes to be in a
position a position to commence Phase I clinical (human) trials around 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.
8
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 $(53,546,798) at June 30, 2003, including losses of $9,751,082 for the year
ended September 30, 2002 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.
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 $9,586,000 in the
nine-month period ended June 30, 2003. As of that date, we had available a total
of approximately $5,501,000 to fund additional expenditures. In addition,
between July 1 and August 20, we received approximately $6,513,000 (net of
expenses) in a private offering of our common stock and common stock purchase
warrants and approximately $1,188,000 upon exercise of stock purchase warrants.
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
9
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.
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
10
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 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, an advanced phased array radio
frequency (RF) heating system designed specifically for use with
chemotherapeutic drugs for the treatment of locally advanced breast cancer 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.
11
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. Further, we do not carry "key man"
insurance on any of our personnel. Therefore, loss of the services of key
personnel would not be ameliorated by the receipt of the proceeds from such
insurance.
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
employees. We will be unable to manage our businesses effectively 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
12
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.
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
13
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 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 August 20, 2003, we had outstanding and
exercisable warrants and options to purchase a total of 24,041,545 shares of our
common stock at exercise prices ranging from $0.25 to $5.00 per share (and a
weighted average exercise price of approximately ($0.78 per share). In addition,
we had outstanding but unexercisable and unvested warrants and options to
purchase a total of 4,134,996 shares of our common stock at exercise prices
ranging from $0.40 to $1.36 per share. Some of the prices are below the current
market price of our common stock, which has ranged from a low of $1.03 to a high
of $1.25 over the 20 trading days ending August 20, 2003. 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 August 20, 2003 we had outstanding a total of
855 shares of Series A 10% Convertible Preferred Stock (plus 311 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 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 26
shares of Series A Preferred Stock (convertible into an additional 63,415 shares
of common stock) as of August 20, 2003.
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.
14
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 HAS BEEN, AND COULD BE, VOLATILE.
Market prices for our common stock and the securities of other
medical, high technology companies have been volatile. Our common stock has had
a high price of $1.80 and a low price of $0.34 in the 52-week period ending
August 20, 2003. 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.
OUR STOCK HISTORICALLY HAS BEEN THINLY TRADED. THEREFORE, STOCKHOLDERS
MAY NOT BE ABLE TO SELL THEIR SHARES FREELY.
While our common stock is listed on the Amex, the volume of trading
historically has been relatively light. Although trading volume has increased
recently, there can be no assurance that this increased trading volume, our
historically light trading volume, or any trading volume whatsoever will be
sustained in the future. Therefore, there can be no assurance that our
stockholders will be able to sell their shares of our common stock at the time
or at the price that they desire, or at all.
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. This preferred stock
may be issued by the Board of Directors, on such terms as it determines, without
further stockholder approval. Therefore, the Board may issue such preferred
stock on terms unfavorable to a potential bidder in the event that is opposes a
merger or acquisition. 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. We also have implemented a
stockholder rights plan and distributed rights to our stockholders. When these
rights become exercisable, these rights entitle their holders to purchase one
share of our Series C Junior Participating Preferred Stock at a price o f $4.46
per one ten-thousandth of a share of Series C Preferred Stock. If any person or
group acquires more than 15% of our common stock, the holders of rights (other
than the person or group crossing the 15% threshold) will be able to purchase,
in exchange for the $4.46 exercise price, $8.92 of our common stock or the stock
of any company into which we are merged. Because these rights may substantially
dilute stock ownership by a person or group seeking to take us over without the
approval of our Board of Directors, our rights plan could make it more difficult
for a person or group to take us over (or acquire significant ownership interest
in us) without negotiating with our Board regarding such a transaction. 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, 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.
15
The exercise price for the Warrants is payable in cash, (except that
Warrants to purchase 1,111,857 shares at $0.77 per share are subject to
"cashless" or "net" exercise provisions). If all of the Warrants (including
those subject to "cashless" exercise) are exercised for cash, we will receive
aggregate consideration of $6,900,987. 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 11,978,045 shares of Common
Stock, and up to 6,902,113 shares of Common Stock issuable upon the exercise of
the Warrants. The following table sets forth, as of August 21, 2003 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 and, to our knowledge, based on
information provided by the Selling Stockholders, no such person is a
broker-dealer or an affiliate of a broker-dealer. The Company will not receive
any of the proceeds from the sale of the Shares, but may receive up to
$6,900,987 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
---------------------------------------------- ------------ -------------- ------------- ------------- -------------
Kim R. Baker 909,091 272,727 1,181,818 0 *
Stephen M. Shea 259,740 567,922 337,662 490,000 *
Marc R. Paul 129,870 38,961 168,831 0 *
Silver Lake Enterprises LLC 1,298,701 389,610 1,688,311 0 *
Gryphon Master Fund, LP 649,351 194,805 844,156 0 *
Nav Capital Management 50,000 15,000 65,000 0 *
Samuel D. Skinner and Jennifer Skinner
TTEES fbo Samuel D. Skinner and Jennifer 32,500 32,162 64,662 0 *
Skinner 2000 Trust Dtd 7/26/00 (4)
UBS Paine Webber as IRA Custodian for Samuel 67,500 20,250 87,750 0 *
D. Skinner IRA R/O (4)
Marshall Senk 100,000 30,000 130,000 0 *
Vincent C. Smith 324,675 97,403 422,078 0 *
Joseph Giamanco, Sr 129,870 238,961 168,831 200,000 *
Elliott International, LP 687,500 180,000 780,000 87,500 *
Elliott Associates, LP 487,500 120,000 520,000 87,500 *
Jas Securities, LLC 129,870 38,961 168,831 0 *
Maybach Capital, Inc. 64,935 19,481 84,416 0 *
Truk Opportunity Fund, LLC 64,935 19,481 84,416 0 *
Alpha Capital, Ag 649,351 194,805 844,156 0 *
Selwyn Partners LP 130,000 39,000 169,000 0 *
Ying Jia Huang 1,298,701 1,259,610 1,688,311 870,000 *
Chan Wai 400,000 120,000 520,000 0 *
Liu Chi Kong 150,000 45,000 195,000 0 *
Steve Kevorkian 129,870 138,961 168,831 100,000 *
John Kevorkian 546,584 238,961 168,831 616,714 *
George Kevorkian 316,518 323,309 168,831 470,996 *
Nu Vision Holdings, LLC 359,740 107,922 467,662 0 *
Ira Leemon 880,700 330,000 130,000 1,080,700 *
Wayne Lee (4) 1,201,405 82,000 130,000 1,153,405 *
Excalibur Limited Partnership 260,000 78,000 338,000 0 *
Arthur H. Dunkin 64,935 19,481 84,416 0 *
UBS Financial Services, Inc. 653,938 197,401 422,071 429,268 *
(Custodian For David M. Spada, IRA Acct
Cp-28131-92)
Everspring Master Fund, LP 65,000 19,500 84,500 0 *
16
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
---------------------------------------------- ------------ -------------- ------------- ------------- -------------
Alexis Korybut (4) 0 165,372 165,372 0 *
Charles D. Garcia (4) 0 165,372 165,372 0 *
Ricardo Ali Rivas (4) 0 249,452 249,452 0 *
Jaime Alfaro (4) 0 29,347 29,347 0 *
Ronald J. Zimmerer (4) 0 58,695 58,695 0 *
Goldpac Investment Partners Ltd 0 478,246 368,246 110,000 *
Moors & Cabot, Inc.(4) 60,000 316,178 39,942 336,236 *
Intercoastal Financial Services Corporation (4) 0 21,136 21,163 0 *
National Securities Corporation (4) 20,000 3,583 23,583 0 *
Mark Goldwasser (4) 0 1,250 1,250 0 *
Michael Bresner (4) 0 1,000 1,000 0 *
Brian Friedman (4) 0 750 750 0 *
Robert Daskal (4) 0 500 500 0 *
Frank Salvatore (4) 0 3,000 3,000 0 *
Douglas Kaiser (4) 0 3,000 3,000 0 *
Samuel A. Ruth (4) 0 3,800 3,800 0 *
He Yao Zong (4) 900,000 0 900,000 0 *
Madhoomatee Lowtan (4) 1,050,000 0 1,050,000 0 *
Kathy H. Liu (4) 225,000 0 225,000 0 *
David Weinstein (4) 0 30,000 30,000 0 *
Mirador Consulting Inc. 100,000 185,000 285,000 0 *
Ira Weingarten 15,000 25,000 25,000 15,000 *
Ira Mark Weingarten 50,000 0 50,000 0 *
John H. Dakin (4) 25,000 380,938 25,000 380,938 *
Steve Chizzik 50,000 100,000 150,000 0 *
Ciro Didonna 0 40,000 40,000 0 *
Broadmark Capital, LLC (4) 0 50,000 50,000 0 *
Mark Dewhirst 0 24,000 14,000 10,000 *
Claude Tihon (5) 109,997 161,000 61,000 209,997 *
Lasalle D. Leffall, Jr (6) 89,216 150,000 50,000 189,216 *
Donald S. Beard 346,000 146,872 146,872 346,000 *
Gloria Li 102,491 24,000 14,000 112,491 *
Robert A. Barnett 0 24,000 14,000 10,000 *
David Needham 0 24,000 14,000 10,000 *
Arnold Melman 0 35,470 25,470 10,000 *
Spencer J. Volk (7) 2,115,085 1,850,000 1,850,000 2,115,085 2%
Strategic Growth International, Inc. 0 350,000 350,000 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 August 20, 2003.
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.
17
(4) The Selling Stockholder is a registered broker-dealer or an affiliate
of a registered broker-dealer.
(5) Dr. Tihon is a member of our Board of Directors.
(6) Dr. Leffall was a member of our Board of Directors until September
2002.
(7) Mr. Volk was our President, Chief Executive Officer and a member of our
Board of Directors until October 2002.
* Less than 1%.
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:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o transactions involving block trades;
o purchases by a broker, dealer or underwriter as principal and
resale by that person for its own account under this Prospectus;
o put or call option transactions;
o privately negotiated transactions; or
o 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.
18
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.
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 our counsel, Venable, Baetjer, Howard & Civiletti, LLP of Washington,
DC.
EXPERTS
Our financial statements at September 30, 2000, 2001 and 2002 and for
the years ended September 30, 2000, 2001 and 2002 are incorporated by referenced
into this Prospectus from our Annual Report on Form 10-K/A for the year ended
September 30, 2002 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........................... $ 1,635
American Stock Exchange Listing Fee............ $ 21,500
Accounting Fees and Expenses................... $ 500 *
Legal Fees and Expenses........................ $ 40,000 *
Printing and Engraving......................... $ 500 *
Miscellaneous.................................. $ 2,500 *
---------
Total....................................... $ 66,635
=========
-----
*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 May 30, 2003 as supplemented.
4.4+ Form of Warrant issued to the Placement Agents pursuant to
the PPM
4.5+ Agreement dated April 8, 2003 between the Company and
Strategic Growth International, Inc.
4.6+ Letter Agreement dated June 1, 2003 between the Company
and Goldpac Investment Partners Ltd.
4.7+ Finder's Fee Agreement dated as of June 30, 2003,between
the Company and National Securities Corporation
4.8+ Finder's Fee Agreement dated as of June 30, 2003 between
the Company and Intercoastal Financial Services
Corporation
5.1* Opinion of Venable, Baetjer, Howard & Civiletti, LLP re:
Legality
10.1+ License Agreement dated July 18, 2003 between the Company
and Duke University. (Confidential treatment requested.)
10.2+ Agreement Regarding Retirement and Resignation dated
October 4, 2001 between the Company and Spencer J. Volk.
23.1+ Consent of Stegman & Company, independent public
accountants of the Company.
23.2* Consent of Venable, Baetjer, Howard & Civiletti, LLP.
(included in Exhibit 5.1).
24.1+ Power of Attorney (included in Signature Page).
----------
+ Denotes exhibits filed herewith.
* Denotes exhibits to be filed by amendment.
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.
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(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.
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SIGNATURES
Under the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Columbia, Maryland, on the 26th day of August 2003.
CELSION CORPORATION
By: /s/Augustine Y.Cheung
-------------------------------
Augustine Y. Cheung
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Augustine Y. Cheung and John Mon
and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, or any related
registration statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
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 Y. Cheung Director, President and Chief August 26, 2003
---------------------------------- Executive Officer (Principal
Augustine Y. Cheung Executive Officer)
/s/ Anthony P. Deasey Executive Vice President--Finance August 26, 2003
---------------------------------- and Administration and Chief
Anthony P. Deasey Financial Officer (Principal
Financial and Accounting
Officer)
/s/ John Mon Vice President, Secretary, August 26, 2003
---------------------------------- Treasurer and Director
John Mon
/s/ Max E. Link Chairman of the Board of August 26, 2003
---------------------------------- Directors
Max E. Link
/s/ Gary W. Pace Director August 26, 2003
----------------------------------
Gary W. Pace
/s/ Claude Tihon Director August 26, 2003
----------------------------------
Claude Tihon
/s/ Kris Venkat Director August 26, 2003
----------------------------------
Kris Venkat
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