$30,000,000


                          [DELCATH SYSTEMS, INC. LOGO]



                              DELCATH SYSTEMS, INC.

                 COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES,
                       WARRANTS TO PURCHASE COMMON STOCK,
                      WARRANTS TO PURCHASE PREFERRED STOCK,
                      WARRANTS TO PURCHASE DEBT SECURITIES,
                          STOCK PURCHASE CONTRACTS AND
                              STOCK PURCHASE UNITS

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

We will provide the specific terms of these securities in supplements to this
prospectus. The prospectus supplements may also add, update or change
information contained in this prospectus. You should read this prospectus and
any supplements carefully before you invest. This prospectus may not be used to
offer and sell securities unless accompanied by a prospectus supplement.

Our common stock is listed on the NASDAQ Capital Market and the Boston Stock
Exchange under the symbol "DCTH." The closing sale price of our common stock, as
reported on the NASDAQ Capital Market on May 23, 2007 was $3.90.

We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you purchase any of our securities.

This prospectus may not be used to offer and sell securities unless accompanied
by a prospectus supplement.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 4.

         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

We may offer the securities in amounts, at prices and on terms determined at the
time of offering. We may sell the securities directly to you, through agents we
select, or through underwriters and dealers we select. If we use agents,
underwriters, or dealers to sell the securities, we will name them and describe
their compensation in a prospectus supplement.


                   The date of this prospectus is June 7, 2007



                              ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-3 that we filed
with the Securities and Exchange Commission, which we refer to as the "SEC,"
using a "shelf" registration process. Under this shelf process, we may, from
time to time, sell an indeterminate amount of any combination of the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $30,000,000. This prospectus provides you with a general description
of the securities we may offer pursuant to this prospectus. Each time we sell
securities, we will provide one or more prospectus supplements that will contain
specific information about the terms of that offering. This prospectus does not
contain all of the information included in the registration statement. For a
more complete understanding of the offering of the securities, you should refer
to the registration statement relating to this prospectus, including its
exhibits. A prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
accompanying prospectus supplement, including the risk factors, together with
the additional information described under the heading "Where You Can Find More
Information."

You should rely only on the information incorporated by reference or provided in
this prospectus and any accompanying prospectus supplement. We have not
authorized any dealer, salesman or other person to provide you with additional
or different information. This prospectus and any accompanying prospectus
supplement are not an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which they relate and are not an offer
to sell or the solicitation of an offer to buy securities in any jurisdiction to
any person to whom it is unlawful to make an offer or solicitation in that
jurisdiction. You should not assume that the information in this prospectus or
any accompanying prospectus supplement or in any document incorporated by
reference in this prospectus or any accompanying prospectus supplement is
accurate as of any date other than the date of the document containing the
information.

Unless the context requires otherwise or unless otherwise noted, all references
in this prospectus or any accompanying prospectus supplement to "Company," "we,"
"us" or "our" are to Delcath Systems, Inc. and its subsidiaries.

                       WHERE YOU CAN FIND MORE INFORMATION

We are a reporting company and file annual, quarterly and current reports, proxy
statements and other information with the SEC. Our SEC filings (File No.
1-16133) are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You can
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the Public Reference Rooms.

Our common stock is listed on the NASDAQ Capital Market and the Boston Stock
Exchange under the symbol "DCTH." Our reports, proxy statements and other
information also may be read and copied at the NASDAQ Stock Exchange at One
Liberty Plaza, 165 Broadway, New York, NY 10006.

The SEC allows us to "incorporate by reference" the information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
(other than information deemed to have been furnished to, and not filed in
accordance with, SEC rules) until we sell all of the securities or until we
terminate this offering:


     o   Annual Report on Form 10-K for the year ended December 31, 2006 filed
         with the SEC on March 16, 2007;

     o   Current Report on Form 8-K filed with the SEC on April 2, 2007;

     o   Current Report on Form 8-K filed with the SEC on April 16, 2007;

     o   Current Report on Form 8-K filed with the SEC on April 20, 2007;

     o   Definitive proxy statement relating to our 2007 annual meeting of
         stockholders filed with the SEC May 1, 2007;

     o   Current Report on Form 8-K filed with the SEC on May 4, 2007;

     o   Quarterly Report on Form 10-Q filed with the SEC on May 10, 2007;

     o   Annual Report on Form 10-K/A for the year ended December 31, 2006,
         filed with the SEC on May 16, 2007;

     o   Current Report on Form 8-K filed with the SEC on May 17, 2007; and

     o   The description of our common stock contained under the caption
         "Description of Our Capital Stock and Other Securities - Units" in the
         Prospectus included in our registration statement on Form SB-2
         (Registration No.: 333-101661), declared effective on May 15, 2003.


                                       1


You may request a copy of these filings at no cost, by writing or telephoning us
at the following address or telephone number:

Delcath Systems, Inc.
1100 Summer Street
Stamford, Connecticut 06905
Attn: Paul Feinstein
(203) 323-8668

                              DELCATH SYSTEMS, INC.

BACKGROUND

Delcath Systems, Inc. ("Delcath," the "Company," "we" or "us") was incorporated
under Delaware law in 1988. We are a development stage company with a platform
technology that isolates specific organs and body regions from the body's
general circulatory system in order to administer high dose chemotherapy and
other therapeutic agents directly to a diseased organ or body region. The first
application being investigated for our system uses the Delcath technology to
isolate the liver from the general circulatory system for the treatment of
tumors of the liver. High doses of chemotherapy are delivered directly to tumors
in the liver while protecting the patient from the toxicities that would
normally result from systemic exposure to the administered chemotherapeutic
drug. These higher doses could be potentially lethal to the patient if
administered systemically. One of our trials is in the final phase III United
States Food and Drug Administration (the "FDA") approval process. However, the
Delcath system is not currently approved for marketing by the FDA, and it cannot
be marketed in the United States without FDA pre-market approval. As mentioned,
we are in the process of conducting a Phase III clinical trial designed to
secure marketing approval in the United States and possibly in foreign markets
for use of the Delcath system with the chemotherapy agent Melphalan, for the
treatment of malignant melanoma that has spread to the liver. We are also
testing the Delcath system with Melphalan against hepatocellular, neuroendocrine
and adenocarcinoma; cancers that have spread to the liver in Phase II clinical
trials. Additionally, we plan to conduct pre-clinical and clinical trials on the
use of the Delcath system with other chemotherapy agents used to treat liver
cancer.

STRATEGY

Our objectives are to establish the use of the Delcath system as the standard
technique for delivering chemotherapy agents to the liver and expand the Delcath
technology so that it may be used in the treatment of other liver diseases and
of cancers in other parts of the body, and to generate growth, revenues and high
returns for our shareholders through a strategy that includes the following
elements:

     o   COMPLETING CLINICAL TRIALS TO OBTAIN FDA PRE-MARKET APPROVAL FOR USE OF
         THE DELCATH SYSTEM WITH MELPHALAN TO TREAT MALIGNANT MELANOMA THAT HAS
         SPREAD TO THE LIVER. Our highest priority is completing the Phase III
         clinical trial, data preparation, statistical analysis and filing of
         necessary regulatory documents associated with an application for FDA
         pre-market approval of the commercial sale of the Delcath system in the
         United States for use in administering Melphalan in the treatment of
         melanoma that has spread to the liver. We are presently treating
         patients in trials being conducted by the National Cancer Institute and
         will seek to add clinical centers to this trial in order to speed the
         completion of the trial.

     o   OBTAINING APPROVAL TO MARKET THE DELCATH SYSTEM IN THE UNITED STATES
         FOR THE TREATMENT OF ADDITIONAL CANCERS IN THE LIVER. We are testing
         our system in the treatment of other cancers of the liver such as
         primary liver cancer, and tumors of neuroendocrine and adenocarcinoma
         origin that have spread to the liver using the drug Melphalan. In 2004,
         we commenced Phase II studies of these three cancers in the liver and
         are currently recruiting and treating patients within this trial. We
         will also continue to evaluate other promising drug candidates to use
         with our system to treat other specific tumors in the liver.

     o   EXPLORE OTHER REGIONAL THERAPY APPLICATIONS FOR THE DELCATH SYSTEM. We
         are evaluating other organs and procedures that may be well suited for
         the use of our device. Other organs or body regions that may be
         evaluated for compatibility with our catheter technology include limbs,
         lungs, pancreas, and kidneys.

     o   INVESTIGATING TREATMENT OF HEPATITIS USING ANTI-VIRAL DRUGS. In
         addition to researching the use of other chemotherapy agents with the
         Delcath system to treat a variety of cancers, we plan to research the
         use of other compounds with the Delcath system to treat other diseases
         of the liver including hepatitis. We intend to develop strategic
         alliances with a number of cancer centers. To this end, we are
         presently contacting recognized leading institutions and liver
         transplant centers that focus on regional cancer treatments. By working
         together with these institutions we intend to explore new applications
         for our technology and to help in the design and expansion of our
         clinical trials.

     o   IMPROVING OUR TECHNOLOGY. We will continue to identify improvements
         which increase potential drug dosing, simplify the procedure, shorten
         recovery times and expand the uses of the system. These changes may
         include new catheter designs, system architectures and the development
         of filters with specific affinity to newer anticancer and antiviral
         agents.


                                       2


     o   INTRODUCING THE DELCATH SYSTEM INTO FOREIGN MARKETS. We may seek to
         establish strategic relationships with domestic and foreign firms that
         have an established presence or experience in the foreign markets that
         we intend to target. Our strategy is to focus on markets that have a
         high incidence of liver disease and the public or private means to
         provide and pay for the associated medical treatments. According to the
         World Health Organization, many Asian and European countries, including
         China, Japan, Hong Kong, the Philippines, Australia, Greece, France,
         Germany, Italy and Spain, have a higher incidence of hepatitis and
         liver cancer than the United States. We may explore arrangements with
         strategic partners who have experience with obtaining the necessary
         regulatory approvals and the marketing of medical devices in those
         markets.

A more complete description of our business is contained in our Annual Reports
on Form 10-K and 10-K/A for the year ended December 31, 2006. See "Where you can
find more information" above.


                                       3


                                  RISK FACTORS

AN INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS SET FORTH IN THE DOCUMENTS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS AND IN THE SUPPLEMENTS TO THIS PROSPECTUS AND ALL
OF THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS AND IN SUPPLEMENTS TO THIS
PROSPECTUS BEFORE DECIDING TO INVEST IN OUR SECURITIES. THE RISKS DESCRIBED ARE
NOT THE ONLY ONES FACING OUR COMPANY. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US
OR WHICH WE CURRENTLY CONSIDER IMMATERIAL ALSO MAY ADVERSELY AFFECT OUR COMPANY.
IF ANY OF THE FOLLOWING RISKS AND UNCERTAINTIES ACTUALLY OCCURS, OUR BUSINESS,
FINANCIAL CONDITION OR OPERATING RESULTS MAY BE MATERIALLY AND ADVERSELY
AFFECTED. IN THIS EVENT, THE TRADING PRICE OF OUR SECURITIES MAY DECLINE AND YOU
MAY LOSE PART OR ALL OF YOUR INVESTMENT.

              RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION

IF WE ARE NOT SUCCESSFUL IN THE DEVELOPMENT AND COMMERCIALIZATION OF THE DELCATH
SYSTEM, OR IF WE ARE UNABLE TO MARKET AND SELL THE PRODUCT, WE WILL NOT GENERATE
OPERATING REVENUE OR BECOME PROFITABLE.

The Delcath system, an enabling technology for the isolation of various organs
in the body to permit the delivery of otherwise unacceptably toxic doses of
drugs, is our only product, and our entire focus has been the development and
commercialization of this product. If the Delcath system fails as a commercial
product, we have no other products to sell.

CONTINUING LOSSES MAY EXHAUST OUR CAPITAL RESOURCES. WE HAVE HAD NO REVENUE TO
DATE, A SUBSTANTIAL ACCUMULATED DEFICIT, RECURRING OPERATING LOSSES AND NEGATIVE
CASH FLOW.

We expect to incur significant and increasing losses while generating minimal
revenues over the next few years. From our inception on August 5, 1988 through
December 31, 2006, we have incurred cumulative net losses of approximately $35.3
million which were principally incurred in connection with our product
development efforts and, in 2006, legal expenses. For the year ended December
31, 2006, we incurred net losses of approximately $11.0 million.

In the past, we have funded our operations through a combination of private
placements of our securities and through the proceeds of our public offerings in
2000 and 2003. In addition, we received proceeds of approximately $5.6 million
from private placements we completed in 2004, approximately $2.2 on exercise of
warrants and options in 2004, approximately $2.5 million from a private
placement we completed in 2005, approximately $5.5 million on exercise of
warrants and options in 2005; and approximately $5.1 million on exercise of
warrants and options in 2006.

Although we may receive approximately $30,000,000 from the sale of securities
under this prospectus, there are no assurances that any such offerings will be
successful, nor can the Company estimate when, if such offerings are successful,
these offerings may close and capital will become available to the Company.
Additionally, we do not know if additional financing will be available when
needed, or if it is available, if it will be available on acceptable terms.
Insufficient funds may prevent us from implementing our business strategy. If we
continue to incur losses we may exhaust our capital resources resulting in our
being unable to complete the development and commercialization of our product.
As we incur additional losses, our accumulated deficit will further increase. As
of December 31, 2006, we had cash and cash equivalents and short term
investments of approximately $8.7 million.

IF WE ARE UNABLE TO RAISE ADDITIONAL FUNDS, OUR ABILITY TO COMPLETE THE REQUIRED
CLINICAL TRIALS WILL BE HARMED.

Before we can obtain approval to sell our product commercially, we will need
premarket approval from the FDA which, in turn, requires that we complete
clinical trials to establish the effectiveness of our system. Many of the costs
incurred in conducting clinical trials are due to uncertainties that are not
within our control, including (i) the possibility that the FDA may require
additional trials and the number of trials that may be required; (ii) the
charges payable to each current or prospective clinical test site which may be a
flat fee for a certain time period or a fee based on the number of participants
in the trial; (iii) the amount of the fee per participant which is individually
negotiated with each test site; (iv) the number of patients that may be required
to be enrolled in any particular trial; (v) the location of the test site which
can affect our other costs, including the costs of retaining a clinical research
organization and out of pocket costs such as travel; (vi) the actual number of
treatments per patient in each clinical trial; and (vii) the possible reduction
in trial costs billed to the Company where a patient's insurer agrees to cover
treatment expenses. As a result, we are unable to estimate the total costs we
will incur in completing the clinical trials. In addition, completion of the
clinical trials does not guarantee that the FDA will give us the required
approvals in a timely manner or will give them to us at all.

IF WE DO NOT RAISE ANY ADDITIONAL CAPITAL THAT MAY BE REQUIRED TO COMMERCIALIZE
THE DELCATH SYSTEM, OUR POTENTIAL TO GENERATE FUTURE REVENUES WILL BE
SIGNIFICANTLY LIMITED EVEN IF WE RECEIVE FDA PREMARKET APPROVAL.

While we have sufficient capital to conduct our operations, we believe that our
current resources will not be sufficient to complete Phase III clinical trials
using Melphalan or other clinical trials that we may pursue and will be
insufficient to fund the costs of commercializing the Delcath system, which will
be significant. In addition, although we may receive approximately $30,000,000


                                       4


from the sale of securities under this prospectus, there are no assurances that
any such offerings will be successful, nor can the Company estimate when, if
such offerings are successful, these offerings may close and capital will become
available to the Company. If we are unable to obtain additional financing as
needed, we will not be able to sell the system commercially.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING OUR GENERAL BUSINESS OPERATIONS
WILL BE HARMED.

As described above, while we have sufficient capital to conduct our operations
through the end of 2007, we require additional capital for research and
development and for additional clinical trials. Our further liquidity and
capital requirements will depend on numerous factors, including the progress of
our research and product development programs, including clinical studies; the
timing and costs of making various United Sates and foreign regulatory filings,
obtaining approvals and complying with regulations; the timing and effectiveness
of product commercialization activities, including marketing arrangements
overseas; the timing and costs involved in preparing, filing, prosecuting,
defending and enforcing intellectual property rights; and the effect of
competing technological and market developments. Although we may receive
approximately $30,000,000 from the sale of securities under this prospectus,
there are no assurances that any such offerings will be successful, nor can the
Company estimate when, if such offerings are successful, these offerings may
close and capital will become available to the Company. Additionally, we do not
know if additional financing will be available when needed, or if it is
available, if it will be available on acceptable terms. Insufficient funds may
prevent us from implementing our business strategy.

THERE ARE RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS MADE BY US AND ACTUAL
RESULTS MAY DIFFER.

Some of the information in this Form S-3 contains forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. You should
read statements that contain these words carefully because they:

     o   discuss our future expectations;

     o   contain projections of our future results of operations or of our
         financial condition; and

     o   state other "forward-looking" information.

We believe it is important to communicate our expectations. However, there may
be events in the future that we are not able to accurately predict and/or over
which we have no control. The risk factors listed in this section, other risk
factors about which we may not be aware, as well as any cautionary language in
this prospectus, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. You should be aware that the occurrence of
the events described in these risk factors could have an adverse effect on our
business, results of operations and financial condition (See Cautionary Note
Regarding Forward-Looking Statements on page 10).

              RISKS RELATED TO FDA AND FOREIGN REGULATORY APPROVAL

EVEN IF THE FDA GRANTS PREMARKET APPROVAL FOR USE OF THE DELCATH SYSTEM FOR THE
TREATMENT OF MELANOMA THAT HAS METASTASIZED TO THE LIVER WITH MELPHALAN, OUR
ABILITY TO MARKET THE DEVICE WOULD BE LIMITED TO THAT USE.

If the FDA grants premarket approval for use of the Delcath system in the
treatment of melanoma that has metastasized to the liver with Melphalan, our
ability to market the system would be limited to its use with that drug in
treating that disease. Thereafter, physicians could use the system for the
treatment of other cancers or using other drugs ("off label" use), but we could
not market it for such uses, unless we obtained separate FDA approval to market
the system for use with other drugs or to treat other diseases. The lack of
separate specific approvals would limit our ability to market our product and
could result in substantially reduced sales.

IF WE DO NOT OBTAIN FDA PREMARKET APPROVAL, WE MAY NOT BE ABLE TO EXPORT THE
DELCATH SYSTEM TO FOREIGN MARKETS, WHICH WILL LIMIT OUR SALES OPPORTUNITIES.

If the FDA does not approve our application for premarket approval for the
Delcath system, we will not be able to export the Delcath system from the United
States for marketing abroad unless approval has been obtained from one of a
number of developed nations. If we do not have such approval, we will not be
eligible to use a simplified registration process for the Delcath system in a
number of countries including the members of the European Union, Great Britain
and Australia. We have not begun to seek foreign regulatory approval and may not
be able to obtain approval from one or more countries where we would like to
sell the Delcath system. If we are unable to market the Delcath system
internationally because we are unable to obtain required approvals, our
international market opportunity will be materially limited.

BECAUSE OF OUR LIMITED EXPERIENCE, CONDUCT OF CLINICAL TRIALS AND OBTAINING FDA
PREMARKET APPROVAL COULD BE DELAYED.

We have experienced, and may continue to experience, delays in conducting and
completing required clinical trials, caused by many factors, including our
limited experience in the following areas:


                                       5


     o   arranging for clinical trials;

     o   evaluating and submitting the data gathered from clinical trials;

     o   designing trials to conform to the trial protocols authorized by the
         FDA;

     o   complying with the requirements of institutional review boards at the
         sites where the trials may be conducted; and

     o   identifying clinical test sites and sponsoring physicians.

Completion of our clinical trials will also depend on the ability of the
clinical test sites to identify patients to enroll in the clinical trials, as
the population of appropriate subjects (i.e., patients with melanoma that has
metastasized to the liver) is limited. The trials may also take longer to
complete because of difficulties we may encounter in entering into agreements
with clinical testing sites to conduct the trials. Any significant delay in
completing clinical trials or in the FDA's response to our submission, or a
requirement by the FDA for us to conduct additional trials, would delay the
commercialization of the Delcath system and our ability to generate revenues.

THIRD-PARTY REIMBURSEMENT MAY NOT BE AVAILABLE TO PURCHASERS OF THE DELCATH
SYSTEM OR MAY BE INADEQUATE, RESULTING IN LOWER SALES EVEN IF FDA PREMARKET
APPROVAL IS GRANTED.

Physicians, hospitals and other health care providers may be reluctant to
purchase our system if they do not receive substantial reimbursement for the
cost of the procedures using our products from third-party payors, including
Medicare, Medicaid and private health insurance plans.

The Delcath system is currently characterized by the FDA as an experimental
device. As such, Medicare, Medicaid and private health insurance plans will not
reimburse its use in the United States. We will not begin to seek reimbursement
by third-party payors of the cost of the Delcath system until after its use is
approved by the FDA. Each third-party payor independently determines whether and
to what extent it will reimburse for a medical procedure or product. There are
no assurances that third-party payors in the United States or abroad will agree
to cover procedures using the Delcath system. Further, third-party payors may
deny reimbursement if they determine that the Delcath system is not used in
accordance with established payor protocols regarding cost effective treatment
methods or is used for forms of cancer or with drugs not specifically approved
by the FDA.

In addition, new products are under increased scrutiny as to whether they will
be covered by the various healthcare plans and as to the level of reimbursement
that would be applicable to respective covered products and procedures. A
third-party payor may deny reimbursement for the treatment and medical costs
associated with the Delcath system, notwithstanding FDA or other regulatory
approval, if that payor determines that the Delcath system is unnecessary,
inappropriate, not cost effective, and experimental or is used for a
non-approved indication.

     RISKS RELATED TO MANUFACTURING, COMMERCIALIZATION AND MARKET ACCEPTANCE
                             OF THE DELCATH SYSTEM

WE OBTAIN NECESSARY COMPONENTS FOR THE DELCATH SYSTEM FROM SOLE-SOURCE
SUPPLIERS. BECAUSE MANUFACTURERS MUST DEMONSTRATE COMPLIANCE WITH FDA
REQUIREMENTS, IF OUR PRESENT SUPPLIERS FAIL TO MEET SUCH REQUIREMENTS OR IF WE
CHANGE ANY SUPPLIER, THE SUCCESSFUL COMPLETION OF THE CLINICAL TRIALS AND/OR THE
COMMERCIALIZATION OF THE DELCATH SYSTEM COULD BE JEOPARDIZED.

We must ensure that the components of the Delcath system are manufactured in
accordance with manufacturing and performance specifications of the Delcath
system on file with the FDA and with drug and device good manufacturing practice
requirements. Many of the components of the Delcath system are manufactured by
sole source suppliers. If any of our suppliers fails to meet our needs, or if we
need to seek an alternate source of supply, we may be forced to suspend or
terminate our clinical trials. Further, if we need a new source of supply after
commercial introduction of the Delcath system, we may face long interruptions in
obtaining necessary components, which could jeopardize our ability to supply the
Delcath system to the market.

Currently the Delcath system kit is being manufactured domestically by the OEM
division of B. Braun Medical, Inc. of Germany which also supplies the other
catheters and accessories and assembles the Delcath system kit. Medtronic USA,
Inc. currently manufactures the components of the blood filtration circuit
located outside of the body, including the medical tubing through which the
patient's blood flows and various connectors and the blood filtration pump head.
The Company purchases activated charcoal filters used in the Delcath system from
a single supplier.

WE DO NOT HAVE ANY CONTRACTS WITH SUPPLIERS FOR THE MANUFACTURE OF COMPONENTS
FOR THE DELCATH SYSTEM. IF WE ARE UNABLE TO OBTAIN AN ADEQUATE SUPPLY OF THE
NECESSARY COMPONENTS, WE MAY NOT BE ABLE TIMELY TO COMPLETE OUR CLINICAL TRIALS.

We do not have any contracts with suppliers for the manufacture of components
for the Delcath system. Certain components are available from only a limited
number of sources. To date, we have only had components of the Delcath system
manufactured for us in small quantities for use in pre-clinical studies and
clinical trials. We will require significantly greater quantities to
commercialize the


                                       6


product. Notwithstanding our best efforts, we may not be able to find an
alternate source of comparable components. If we are unable to obtain adequate
supplies of components from our existing suppliers or need to switch to an
alternate supplier, commercialization of the Delcath system could be delayed.

BECAUSE OF OUR LIMITED EXPERIENCE IN MARKETING PRODUCTS AND OUR LACK OF ADEQUATE
PERSONNEL TO MARKET AND SELL PRODUCTS, WE MAY NOT BE SUCCESSFUL IN MARKETING AND
SELLING THE DELCATH SYSTEM EVEN IF WE RECEIVE FDA PREMARKET APPROVAL.

We have not previously sold, marketed or distributed any products and currently
do not have the personnel, resources, experience or other capabilities to market
the Delcath system adequately. Our success will depend upon our ability to
attract and retain skilled sales and marketing personnel or our reaching an
agreement with a third party to market our product. Competition for sales and
marketing personnel is intense, and we may not be successful in attracting or
retaining such personnel. Our inability to attract and retain skilled sales and
marketing personnel or to reach an agreement with a third party could adversely
affect our business, financial condition and results of operations.

MARKET ACCEPTANCE OF THE DELCATH SYSTEM WILL DEPEND ON SUBSTANTIAL EFFORTS AND
EXPENDITURES IN AN AREA WITH WHICH WE HAVE LIMITED EXPERIENCE.

Market acceptance of the Delcath system will depend upon a variety of factors
including whether our clinical trials demonstrate a significant reduction in the
mortality rate for the kinds of cancers treated on a cost-effective basis, our
ability to educate physicians on the use of the Delcath system and our ability
to convince healthcare payors that use of the Delcath system results in reduced
treatment costs to patients. We have only limited experience in these areas and
we may not be successful in achieving these goals. Moreover, the Delcath system
replaces treatment methods in which many hospitals have made a significant
investment. Hospitals may be unwilling to replace their existing technology in
light of their investment and experience with competing technologies. Many
doctors and hospitals are reluctant to use a new medical technology until its
value has been demonstrated. As a result, the Delcath system may not gain
significant market acceptance among physicians, hospitals, patients and
healthcare payors.

RAPID TECHNOLOGICAL DEVELOPMENTS IN TREATMENT METHODS FOR LIVER CANCER AND
COMPETITION WITH OTHER FORMS OF LIVER CANCER TREATMENTS COULD RESULT IN A SHORT
PRODUCT LIFE CYCLE FOR THE DELCATH SYSTEM.

Competition in the cancer treatment industry, particularly in the markets for
systems and devices to improve the outcome of chemotherapy treatment, is
intense. The Delcath system competes with all forms of liver cancer treatments
that are alternatives to the "gold standard" treatment of surgical resection.
Many of our competitors have substantially greater resources, especially
financial and technological. In addition, some of our competitors have
considerable experience in conducting clinical trials and other regulatory
procedures. These competitors are developing systems and devices to improve the
outcome of chemotherapy treatment for liver cancer. If these competitors develop
more effective or more affordable products or treatment methods, our
profitability will be substantially reduced and the Delcath system could have a
short product life cycle.

WE BELIEVE THAT OUR CHIEF EXECUTIVE OFFICER AND OUR CHIEF OPERATING OFFICER ARE
IMPORTANT TO OUR EFFORTS TO COMMERCIALIZE THE DELCATH SYSTEM. THE UNAVAILABILITY
OF THE SERVICES OF EITHER OF THEM COULD DELAY OUR SUCCESSFUL COMMERCIAL
INTRODUCTION OF THE DELCATH system.

The loss of the services of either our Chief Executive Officer or our Chief
Operating Officer could delay our completing the clinical trials, our obtaining
FDA premarket approval, our introducing the Delcath system commercially and our
generating revenues and profits. We do not have an employment agreement with
either of them.

         RISKS RELATED TO PATENTS, TRADE SECRETS AND PROPRIETARY RIGHTS

OUR SUCCESS DEPENDS IN LARGE PART ON OUR ABILITY TO OBTAIN PATENTS, MAINTAIN
TRADE SECRET PROTECTION AND OPERATE WITHOUT INFRINGING ON THE PROPRIETARY RIGHTS
OF THIRD PARTIES.

Because of the length of time and expense associated with bringing new medical
devices to the market, the healthcare industry has traditionally placed
considerable emphasis on patent and trade secret protection for significant new
technologies. Litigation may be necessary to enforce any patents issued or
assigned to us or to determine the scope and validity of third-party proprietary
rights. Litigation could be costly and could divert our attention from our
business. If others file patent applications with respect to inventions for
which we already have patents issued to us or have patent applications pending,
we may be forced to participate in interference proceedings declared by the
United States Patent and Trademark Office to determine priority of invention,
which could also be costly and could divert our attention from our business. If
a third party violates our intellectual property rights, we may be unable to
enforce our rights because of our limited resources. Use of our limited funds to
defend our intellectual property rights may also affect our financial condition
adversely.


                                       7


                       RISKS RELATED TO PRODUCTS LIABILITY

WE DO NOT CURRENTLY CARRY PRODUCTS LIABILITY INSURANCE AND WE MAY NOT BE ABLE TO
ACQUIRE SUFFICIENT COVERAGE IN THE FUTURE TO COVER LARGE CLAIMS.

Clinical trials, manufacturing and product sales may expose us to liability
claims from the use of the Delcath system. Though participants in clinical
trials are generally required to execute consents and waivers of liability, a
court might find such consents and waivers of liability to be ineffective or
invalid. Were such a claim asserted and even if we prevail on the merits, we
would likely incur substantial legal and related expenses. Claims for damages,
whether or not successful, could cause delays in the clinical trials and result
in the loss of physician endorsement. A successful products liability claim or
recall would have a material adverse effect on our business, financial condition
and results of operations.

                       RISKS RELATING TO OUR COMMON STOCK

OUR STOCK PRICE AND TRADING VOLUME MAY BE VOLATILE, WHICH COULD RESULT IN LOSSES
FOR OUR STOCKHOLDERS.

The equity trading markets may experience periods of volatility, which could
result in highly variable and unpredictable pricing of equity securities. The
market price of our common stock could change in ways that may or may not be
related to our business, our industry or our operating performance and financial
condition. In addition, the trading volume in our common stock may fluctuate and
cause significant price variations to occur. Some of the factors that could
negatively affect our share price or result in fluctuations in the price or
trading volume of our common stock include:

     o   actual or anticipated quarterly variations in our operating results;

     o   changes in expectations as to our future financial performance or
         changes in financial estimates, if any, of public market analysts;

     o   announcements relating to our business or the business of our
         competitors;

     o   conditions generally affecting the healthcare and cancer treatment
         industries

     o   the success of our operating strategy; and

     o   the operating and stock price performance of other comparable
         companies.

Many of these factors are beyond our control, and we cannot predict their
potential effects on the price of our common stock. If the market price of our
common stock declines significantly, you may be unable to resell your shares of
common stock at or above the public offering or other offering price. We cannot
assure you that the market price of our common stock will not fluctuate or
decline significantly, including a decline below the public offering price, in
the future. In addition, the stock markets in general can experience
considerable price and volume fluctuations.

FUTURE SALES OF OUR COMMON STOCK MAY CAUSE STOCK PRICE TO DECLINE.

There is a relatively limited public float of our common stock. Because of this,
trades of relatively small amounts of our common stock can have a
disproportionate effect on the market price for our common stock. The market
price of our common stock has historically been volatile. During the three years
ended December 31, 2006, the range of the high and low sales prices of our
common stock have ranged from a high of $6.00 (during the quarter ended June 30,
2006) to a low of $0.92 (during the quarter ended March 31, 2004).

Sales of substantial amounts of common stock or the perception that such sales
could occur, could have an adverse effect on prevailing market prices for our
common stock. In addition, the sale of these shares could impair our ability to
raise capital through the sale of additional common or preferred stock.

OUR INSIDERS BENEFICIALLY OWN A SIGNIFICANT PORTION OF OUR STOCK.

As of May 23, 2007, our executive officers, directors and affiliated persons
beneficially own approximately 13.4% of our common stock. As a result, our
executive officers, directors and affiliated persons will have significant
influence to:

     o   elect or defeat the election of our directors;

     o   amend or prevent amendment of our articles of incorporation or bylaws;

     o   effect or prevent a merger, sale of assets or other corporate
         transaction; and

     o   affect the outcome of any other matter submitted to the stockholders
         for vote.

In addition, sales of significant amounts of shares held by our directors and
executive officers, or the prospect of these sales, could adversely affect the
market price of our common stock. Management's stock ownership may discourage a
potential acquirer from


                                       8


making a tender offer or otherwise attempting to obtain control of us, which in
turn could reduce our stock price or prevent our stockholders from realizing a
premium over our stock price.

EXISTING STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE SALE OF OUR
COMMON STOCK PURSUANT TO THIS PROSPECTUS AND PURSUANT TO EFFECTIVE REGISTRATION
STATEMENTS CURRENTLY ON FILE WITH THE SEC.

The sale of our common stock pursuant to this prospectus and pursuant to
effective registration statements currently on file with the SEC may have a
dilutive impact on our shareholders. As a result, any future net income per
share could decrease in future periods and the market price of our common stock
could decline. If our stock price decreases, then our existing shareholders
would experience greater dilution.

The perceived risk of dilution may cause our stockholders to sell their shares,
which would contribute to a decline in the price of our common stock. Moreover,
the perceived risk of dilution and the resulting downward pressure on our stock
price could encourage investors to engage in short sales of our common stock. By
increasing the number of shares offered for sale, material amounts of short
selling could further contribute to progressive price declines in our common
stock.

ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BY-LAWS AND
UNDER OUR STOCKHOLDER RIGHTS AGREEMENT MAY REDUCE THE LIKELIHOOD OF A POTENTIAL
CHANGE OF CONTROL, AND CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION
AND BY-LAWS AND OF OUR STOCKHOLDERS RIGHTS PLAN COULD MAKE IT MORE DIFFICULT FOR
THE COMPANY'S STOCKHOLDERS TO REPLACE MANAGEMENT.

Provisions of our certificate of incorporation and by-laws and our stockholders
rights agreement may have the effect of discouraging, delaying or preventing a
change in control of us or unsolicited acquisition proposals that a stockholder
might consider favorable. Certain provisions of our certificate of incorporation
and by-laws and of our stockholders rights agreement could have the effect of
making it more difficult for the Company's stockholders to replace management at
a time when a substantial number of our stockholders would favor a change in
management. These include provisions:

     o   providing for a classified board; and

     o   authorizing the board of directors to fill vacant directorships or
         increase the size of our board of directors.

Furthermore, our board of directors has the authority to issue shares of
preferred stock in one or more series and to fix the rights and preferences of
the shares of any such series without stockholder approval. Any series of
preferred stock is likely to be senior to the common stock with respect to
dividends, liquidation rights and, possibly, voting rights. Our board's ability
to issue preferred stock may have the effect of discouraging unsolicited
acquisition proposals, thus adversely affecting the market price of our common
stock and warrants.

We also have a stockholder rights agreement which could have the effect of
substantially increasing the cost of acquiring us unless our board of directors
supports the transaction even if the holders of a majority of our common stock
are in favor of the transaction.

OUR COMMON STOCK IS LISTED ON THE NASDAQ CAPITAL MARKET. IF WE FAIL TO MEET THE
REQUIREMENTS OF THE NASDAQ CAPITAL MARKET FOR CONTINUED LISTING, OUR COMMON
STOCK COULD BE DELISTED.

Our common stock is currently listed on the Nasdaq Capital Market. To keep such
listing, we are required to maintain: (i) a minimum bid price of $1.00 per
share, (ii) a certain public float, (iii) a certain number of round lot
shareholders and (iv) one of the following: a net income from continuing
operations (in the latest fiscal year or two of the three last fiscal years ) of
at least $500,000, a market value of listed securities of at least $35 million
or a stockholders' equity of at least $2.5 million. We were notified by the
Nasdaq Capital Market on one occasion that we failed to meet the minimum bid
price requirement and on two occasions that we did not meet the requirement that
we meet one of the following conditions: that the market value of our common
stock be at least $35 million; that we have stockholders' equity of not less
than $2.5 million; or that we meet certain income tests. We have since complied
with these requirements.

We are also required to maintain certain corporate governance requirements. On
April 30, 2007, we were notified by NASDAQ that due to the resignations of two
of our independent directors on April 16, 2007, we no longer comply with
NASDAQ's requirements to have a majority of independent directors on our Board
of Directors, and for our Audit Committee to have three members. We have since
complied with these requirements. However, if we fail to meet any of the other
applicable criteria, our common stock could be delisted from the NASDAQ Capital
Market.

IF OUR COMMON STOCK IS DELISTED FROM THE NASDAQ CAPITAL MARKET, WE MAY BE
SUBJECT TO THE RISKS RELATING TO PENNY STOCKS.

If our common stock were to be delisted from trading on the Nasdaq Capital
Market and the trading price of the common stock were


                                       9


below $5.00 per share on the date the common stock were delisted, trading in our
common stock would also be subject to the requirements of certain rules
promulgated under the Exchange Act. These rules require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock and impose various sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and accredited
investors, generally institutions. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from effecting
transactions in securities that are classified as penny stocks, which could
severely limit the market price and liquidity of such securities and the ability
of purchasers to sell such securities in the secondary market.

A penny stock is defined generally as any non-exchange listed equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions.

WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE. AS A RESULT,
HOLDERS OF OUR COMMON STOCK MUST RELY ON STOCK APPRECIATION FOR ANY RETURN ON
THEIR INVESTMENT.

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

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These forward-looking
statements are subject to a number of risks and uncertainties, many of which are
beyond our control, which may include statements about:

     o   our expansion and possible results from expansion,

     o   our expected growth,

     o   our capital budget and future capital requirements,

     o   the availability of funds and our ability to meet future capital needs,

     o   the realization of our deferred tax assets,

     o   our business strategy;

     o   our ability to obtain FDA approvals and other governmental permits and
         approvals;

     o   our technology and our research and development costs

     o   our financial strategy;

     o   our operating expenses, general and administrative costs

     o   our research and development costs;

     o   our future operating results; and

     o   our plans, objectives, expectations and intentions.

All of these types of statements, other than statements of historical fact
included in this prospectus, are forward-looking statements. These
forward-looking statements may be found in the "Prospectus Summary", "Risk
Factors", "Business", and other sections of the prospectus. In some cases, you
can identify forward-looking statements by terminology such as "may", "will",
"could", "should", "expect", "plan", "project", "intend", "anticipate",
"believe", "estimate", "predict", "potential", "pursue", "target", "seek",
"objective", or "continue", the negative of such terms or other comparable
terminology.

The forward-looking statements contained in this prospectus are based largely on
our expectations, which reflect estimates and assumptions made by our
management. These estimates and assumptions reflect our best judgment based on
currently known market conditions and other factors. Although we believe such
estimates and assumptions to be reasonable, they are inherently uncertain and
involve a number of risks and uncertainties that are beyond our control. In
addition, management's assumptions about future events may prove to be
inaccurate. All readers are cautioned that the forward-looking statements
contained in this prospectus are not guarantees of future performance, and we
cannot assure any reader that such statements will be realized or the
forward-looking events and circumstances will occur. Actual results may differ
materially from those anticipated or implied in the forward-looking statements
due to many factors including those listed in the "Risk Factors" section and
elsewhere in this prospectus, our expansion strategy, our ability to achieve
operating efficiencies, industry pricing and technology trends, evolving
industry standards, domestic and international regulatory matters, general
economic and business conditions, the strength and financial resources of our
competitors, our ability to find and retain skilled personnel and the political
and economic climate in which we conduct operations. All forward-looking
statements speak only as of the date of this prospectus. We do not intend to
publicly update or revise any forward-looking statements as a result of new
information, future events or otherwise. These cautionary statements qualify all
forward-looking statements attributable to us or persons acting on our behalf.


                                       10


                     RATIOS OF EARNINGS TO FIXED CHARGES AND
               EARNINGS TO FIXED CHARGES PLUS PREFERRED DIVIDENDS

We do not currently, and did not during the last five fiscal years, have any
debt or preferred stock outstanding. Accordingly, no ratios of earnings to fixed
charges, or to fixed charges and preferred dividends combined, are included
herein.

                                 USE OF PROCEEDS

The specific allocation of net proceeds of an offering of securities will be
determined at the time of the offering and will be described in an accompanying
prospectus supplement. Unless we specify otherwise in the applicable prospectus
supplement, the net proceeds we receive from the sale of the securities offered
by this prospectus and any prospectus supplement will be used for research and
development, furthering our clinical trials, FDA compliance, and general
corporate purposes, which may include providing working capital, funding capital
expenditures, and paying for possible acquisitions or the expansion of our
business.

                                    DILUTION

         We will set forth in any prospectus supplement the following
information regarding any material dilution of the equity interests of investors
purchasing securities in an offering under this prospectus:

     o   the net tangible book value per share of our equity securities before
         and after the offering;

     o   the amount of the increase in such net tangible book value per share
         attributable to the cash payments made by the purchasers in the
         offering; and

     o   the amount of the immediate dilution from the public offering price
         which will be absorbed by such purchasers.

                           THE SECURITIES WE MAY OFFER

We may from time to time offer under this prospectus, separately or together:

     o   common stock;

     o   preferred stock;

     o   unsecured senior or subordinated debt securities;

     o   warrants to purchase common stock;

     o   warrants to purchase preferred stock;

     o   warrants to purchase debt securities;

     o   stock purchase contracts to purchase common stock; and

     o   stock purchase units, each representing ownership of a stock purchase
         contract and, as security for the holder's obligation to purchase
         common stock under the stock purchase contract, either our debt
         securities or U.S. Treasury securities.

The aggregate initial offering price of the offered securities will not exceed
$30,000,000.

                        DESCRIPTION OF OUR CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

Our authorized capital stock consists of 70,000,000 shares of common stock, $.01
par value per share, and 10,000,000 shares of preferred stock, $.01 par value
per share. The following description of our common stock, preferred stock, and
certain rights associated with our common stock, together with the additional
information included in any applicable prospectus supplements, summarizes the
material terms and provisions of these types of securities, but it is not
complete. For the complete terms of our common stock and preferred stock, please
refer to our certificate of incorporation and our bylaws that are incorporated
by reference into the registration statement which includes this prospectus and,
with respect to preferred stock, any certificate of designation that we may file
with the Commission for a series of preferred stock we may designate, if any.

We will describe in a prospectus supplement the specific terms of any common
stock or preferred stock we may offer pursuant to this prospectus. If indicated
in a prospectus supplement, the terms of such common stock or preferred stock
may differ from the terms described below.


                                       11


DESCRIPTION OF COMMON STOCK

As of May 23, 2007, there were 21,386,107 shares of common stock issued and
outstanding.

Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences to which holders of any outstanding preferred
stock may be entitled, holders of common stock are entitled to receive ratably
those dividends, if any, that may be declared from time to time by our board of
directors out of funds legally available for the payment of dividends. In the
event of liquidation, dissolution or winding up of the Company, holders of our
common stock would be entitled to share pro rata in our assets remaining after
the payment of liabilities and the satisfaction of any liquidation preference
granted to holders of any outstanding shares of preferred stock. Holders of our
common stock have no preemptive or conversion rights or other subscription
rights and there are no redemption or sinking fund provisions applicable to our
common stock. The rights, preferences and privileges of the holders of common
stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that we may designate in the
future. All outstanding shares of common stock are, and the shares underlying
all options and warrants will be, duly authorized, validly issued, fully paid
and non-assessable upon our issuance of these shares.

The transfer agent and registrar for our common stock is American Stock Transfer
& Trust Company, whose address is 59 Maiden Lane, New York, NY 10038, and whose
phone number is (800) 937-5449 (toll-free).

DESCRIPTION OF PREFERRED STOCK

The following description of preferred stock and the description of the terms of
a particular series of preferred stock that will be set forth in the related
prospectus supplement are not complete. These descriptions are qualified in
their entirety by reference to the certificate of designation relating to that
series. The rights, preferences, privileges and restrictions of the preferred
stock of each series will be fixed by the certificate of designation relating to
that series. The prospectus supplement also will contain a description of
certain United States federal income tax consequences relating to the purchase
and ownership of the series of preferred stock that is described in the
prospectus supplement.

As of May 23, 2007, there were no shares of our preferred stock issued and
outstanding. Pursuant to our certificate of incorporation, our board of
directors has the authority without further action by our stockholders to issue
up to 10 million shares of preferred stock. Our board of directors has the
authority to issue such preferred stock in one or more series and to fix the
number of shares of any series of preferred stock and to determine the
designation of any such series. The board of directors is also authorized to
determine and alter the designation, powers, rights, preferences and the
qualifications, limitations and restrictions granted to or imposed upon any
wholly unissued series of preferred stock. In addition, within the limitations
or restrictions stated in any resolution or resolutions of the board of
directors originally fixing the number of shares constituting any series, the
board of directors has the authority to increase or decrease, but not below the
number of shares of such series then outstanding, the number of shares of any
series subsequent to the issue of shares of that series. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control without further action by
our stockholders and may adversely affect the market price of, and the voting
and other rights of, the holders of our common stock.

Whenever preferred stock is to be sold pursuant to this prospectus, we will file
a prospectus supplement relating to that sale which will specify:

     o   the number of shares in the series of preferred stock;

     o   the designation for the series of preferred stock by number, letter or
         title that will distinguish the series from any other series of
         preferred stock;

     o   the dividend rate, if any, and whether dividends on that series of
         preferred stock will be cumulative, noncumulative or partially
         cumulative;

     o   the voting rights of that series of preferred stock, if any;

     o   any conversion provisions applicable to that series of preferred stock;

     o   any redemption or sinking fund provisions applicable to that series of
         preferred stock;

     o   the liquidation preference per share of that series of preferred stock;
         and


                                       12


     o   the terms of any other preferences or rights, if any, applicable to
         that series of preferred stock.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION,
SHAREHOLDER RIGHTS PLAN AND DELAWARE LAW

GENERAL. Our certificate of incorporation, our status as a corporation
incorporated under Delaware law, and our shareholder rights plan contain
provisions that are designed in part to make it more difficult and
time-consuming for a person to obtain control of our Company. The provisions of
our certificate of incorporation, certain sections of Delaware law, and
shareholder rights plan reduce the vulnerability of our Company to an
unsolicited takeover proposal. These provisions may also have an adverse effect
on the ability of stockholders to influence the governance of our Company.

In addition, because we have a significant amount of authorized but unissued
common stock and preferred stock, our board of directors may make it more
difficult or may discourage an attempt to obtain control of our Company by
issuing additional stock in our Company.

SHAREHOLDER RIGHTS PLAN. Our board implemented a shareholder rights plan on
October 30, 2001, a copy of which has been filed with the SEC, and declared a
dividend of one right ("Right") for each outstanding share of our common stock
to stockholders of record on November 14, 2001. One Right will also attach to
each share issued after November 14, 2001, but prior to the earlier of the
Distribution Date, the Redemption Date or the Final Expiration Date (as those
terms are defined in the Rights Agreement). The Rights will only become
exercisable, and transferable apart from our common stock, upon the earlier of:
(a) the close of business on the first date of public announcement that a person
or group of affiliated or associated persons ("Acquiring Person") has acquired
15% or more of the outstanding Common Stock, or (b) the tenth business day
following the commencement of, or announcement of an intention to commence, a
tender or exchange offer which would result in the beneficial ownership by a
person or group of 15% or more of the outstanding Common Stock (the earlier of
such dates being called the "Distribution Date").

On April 10, 2007, the Company announced that its Board of Directors voted
unanimously to increase the threshold level for triggering the Shareholder
Rights Plan from 15% to 20%, effective immediately.

The discussion that follows sets forth the operation of the Rights.

Until the Distribution Date, the Rights will be evidenced by the certificates
for the Common Stock and will be transferable only in connection with a transfer
of the Common Stock certificates. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Company's Common Stock
as of the close of business on the Distribution Date. The Right Certificates
alone will evidence the Rights from and after the Distribution Date.

RIGHT TO PURCHASE COMPANY STOCK. In the event a person becomes the owner of 15%
or more of the outstanding shares of Common Stock and thus becomes an Acquiring
Person (a "Flip-In Event"), the Rights not held by the Acquiring Person
"flip-in" and, instead of continuing as rights to buy one share of Common Stock,
become rights to buy from the Company shares of Common Stock having a value
equal to two times the Purchase Price of the Right. In other words, a Rights
holder (other than the Acquiring Person) may purchase Common Stock at a 50%
discount from the then current fair market value.

In the event there is insufficient Common Stock to permit exercise in full of
the Rights, the Company must issue cash, property or other securities of the
Company with an aggregate value equal to twice the Purchase Price.

Upon the occurrence of any such Flip-In Event, any Rights owned by an Acquiring
Person, its affiliates and associates and certain transferees thereof, shall
become null and void.

RIGHT TO PURCHASE ACQUIRING PERSON STOCK. In the event that a person becomes an
Acquiring Person, the Company is then merged, and the Common Stock is exchanged
or converted in the merger, then each Right (other than those formerly held by
the Acquiring Person, which became void) would "flip-over" and be exercisable
for a number of shares of Common Stock of the acquiring company having a market
value of two times the Purchase Price of the Right. In other words, a Rights
holder may purchase the acquiring company's common stock at a 50% discount from
the then current fair market value.

EXCHANGE OF RIGHTS FOR COMMON STOCK. After a Flip-In Event but before a
"flip-over" event (as described above) occurs and before an Acquiring Person
becomes the owner of 50% or more of the Common Stock, the Board may cause the
Rights (either in whole or in part) to be exchanged for shares of Common Stock
(or equivalent securities, of equal value) at a one-to-one exchange ratio or
pursuant to an equivalent cashless exercise method. Rights held by the Acquiring
Person, however, which became void upon the Flip-In Event, would not be entitled
to participate in such exchange.

REDEMPTION. The Rights may be redeemed by the Board at a redemption price of
$0.01 per Right at any time prior to the earlier of: (a) the time that a person
or a group becomes an Acquiring Person, or (b) October 30, 2011, the expiration
date of the Rights Agreement. Immediately upon redemption and without further
action and without any notice, the right to exercise the Rights will terminate
and the


                                       13


only right of the holders will be to receive the redemption price.

EXPIRATION OF RIGHTS. The Rights will expire on October 30, 2011, unless the
expiration date is extended by amendment or unless the Rights are earlier
redeemed or exchanged by the Company as described above.

AMENDMENTS OR SUPPLEMENTS. For so long as the Rights are redeemable, the terms
of the Rights may be amended or supplemented by the Board of Directors at any
time and from time to time without the consent of the holders of the Rights. At
any time when the Rights are not redeemable, the Board of Directors may amend or
supplement the terms of the Rights, provided that such amendment does not
adversely affect the interests of the holders of the Rights.

NO RIGHTS AS STOCKHOLDERS. Until a Right is exercised, the holder thereof will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.

MISCELLANEOUS. In order to prevent dilution, the Purchase Price, the number of
Common Stock or other securities or property purchasable upon exercise of each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in the Rights Agreement.

The Company is not required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights (except as may be provided for in
the Rights Agreement). In lieu of such fractional Rights, the Company will pay
to the registered holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount of cash equal to the
same fraction of the current market value of a whole Right.

The Rights have certain anti-takeover effects. The Rights will cause substantial
dilution to a person or group who attempts to acquire us without the approval of
our board of directors. Although the shareholder rights plan is not intended to
prevent acquisitions through negotiations with our board of directors, the
existence of the shareholder rights plan may nevertheless discourage a third
party from making a partial tender offer or otherwise attempting to obtain a
substantial position in our equity securities or seeking to obtain control of
the Company. To the extent any potential acquirers are deterred by our
shareholder rights plan, the plan may have the effect of preserving incumbent
directors and management in office or preventing acquisitions of the Company. As
a result, the overall effect of the Rights may be to render more difficult or
discourage any attempt to acquire us even if such acquisition may be favorable
to the interests of our stockholders.

Because our board of directors can redeem the Rights or approve certain offers,
the Rights should not interfere with any merger or other business combination
approved by our board of directors.

Additional descriptions of the rights plan may be found in the Form 8-A12B filed
with the SEC on November 14, 2001 and the Current Report on Form 8-K filed with
the SEC on April 16, 2007, which filings are incorporated herein by reference.
The description and terms of the Rights are set forth in a rights plan between
the Company and American Stock Transfer & Trust Company, as Rights Agent, which
agreement is on file with the SEC and incorporated herein by reference.

                 DESCRIPTION OF THE DEBT SECURITIES WE MAY OFFER

The following description of our debt securities sets forth the general terms
and provisions of the debt securities to which any prospectus supplement may
relate. The particular terms of the debt securities offered by any prospectus
supplement, and the extent to which the general provisions described below may
apply to any offered debt securities, will be described in the applicable
prospectus supplement. We may issue senior debt securities under an indenture
between us and a trustee. This prospectus refers to this indenture as the
"senior indenture." We may issue subordinated debt securities under an
indenture between us and a trustee. This prospectus refers to this indenture as
the "subordinated indenture." The senior indenture and the subordinated
indenture are sometimes referred to collectively as the "indentures" and each
individually as an "indenture." The indentures will be subject to, and governed
by, the Trust Indenture Act of 1939.

The following description of certain provisions of the forms of indentures does
not purport to be complete and is subject to, and is qualified by reference to,
all the provisions of the indentures. We urge you to read the indentures
applicable to a particular series of debt securities because they, and not this
description, define your rights as the holders of the debt securities. Except as
otherwise indicated, the terms of the senior indenture and the subordinated
indenture are identical.

GENERAL

The indentures may limit the aggregate principal amount of the debt securities
which we may issue and will provide that we may issue the debt securities from
time to time in one or more series. The indentures may or may not limit the
amount of our other indebtedness or the debt securities which we or our
subsidiaries may issue.


                                       14


Unless otherwise provided in the applicable prospectus supplement, the senior
debt securities will be unsecured obligations of the Company and will rank
equally with all of our other unsecured and unsubordinated indebtedness. The
subordinated debt securities will be unsecured obligations of ours, subordinated
in right of payment to the prior payment in full of all of our senior
indebtedness as described below under "Subordination of the Subordinated Debt
Securities" and in the applicable prospectus supplement.

We may grant security interests in some or substantially all of our assets,
including equipment, inventory, reserves, cash and cash equivalents, and general
intangibles to secure our debt, including debt that will not be issued pursuant
to the prospectus such as a bank revolving line of credit secured by our
reserves. As a result, any debt securities and related guarantees issued
pursuant to this prospectus may be, unless otherwise agreed to between
creditors, effectively subordinated to the secured debt to the extent of the
value of the assets that secure that debt. As of December 31, 2006, we had $0 of
secured debt outstanding.

The applicable prospectus supplement will describe the terms of the debt
securities offered, including:

     o   the title of the debt securities;

     o   any limit on the aggregate principal amount of the debt securities;

     o   the date or dates on which the debt securities will mature;

     o   the rate or rates at which the debt securities will bear interest, if
         any, or the method by which the rate or rates will be determined, and
         the date or dates from which the interest, if any, will accrue or the
         method by which the date or dates will be determined;

     o   the date or dates on which interest, if any, on the debt securities
         will be payable;

     o   the place or places where payments will be payable;

     o   whether any of the debt securities will be redeemable at our option,
         whether we will be obligated to redeem or purchase any of the debt
         securities pursuant to any sinking fund or analogous provision or at
         the option of any holder, and the terms of the option or obligation;

     o   the denominations the debt securities will be issued in, if other than
         denominations of $1,000 and multiples of $1,000;

     o   whether the debt securities will be convertible or exchangeable and, if
         so, the securities or rights into which the debt securities are
         convertible or exchangeable, and the terms and conditions of conversion
         or exchange;

     o   if other than the entire principal amount, the portion of the principal
         amount, or the method by which the portion will be determined, of the
         debt securities that will be payable upon declaration of acceleration
         of the maturity thereof;

     o   if other than United States dollars, the currency of payment of the
         principal of, any premium or interest on or any additional amounts with
         respect to any of the debt securities;

     o   whether the debt securities will be issued in global form and, if so,
         who the depositary will be;

     o   classification as senior or subordinated debt securities;

     o   in the case of subordinated debt securities, the degree, if any, to
         which the subordinated debt securities of the series will be senior to
         or be subordinated to other indebtedness of ours in right of payment,
         whether the other indebtedness is outstanding or not;

     o   whether the debt securities are subject to defeasance; and

     o   any other specific terms of the debt securities, including any
         additional events of default or covenants.

The debt securities may be issued as original issue discount securities, bearing
no interest or bearing interest at a rate which at the time of issuance is below
market rates, to be sold at a substantial discount below their principal amount.
Special United States federal income tax and other considerations applicable to
original issue discount securities will be described in the applicable
prospectus supplement.


                                       15


PAYMENT AND PAYING AGENTS

Unless otherwise provided in the applicable prospectus supplement, payment of
the interest on any debt securities on an interest payment date will be made to
the person in whose name the debt securities are registered at the close of
business on the regular record date for the interest.

Principal of and any premium and interest on the debt securities of a particular
series will be payable at the office of the paying agents designated by us,
except that unless otherwise provided in the applicable prospectus supplement,
interest payments may be made by check mailed to the holder. Unless otherwise
provided in the applicable prospectus supplement, the corporate trust office of
the trustee will be required to have an office in New York and will be
designated as our sole paying agent for payments with respect to debt securities
of each series. Any other paying agents initially designated by us for the debt
securities of a particular series will be named in the applicable prospectus
supplement. We will be required to maintain a paying agent in each place of
payment for the debt securities of a particular series.

All moneys paid by us to a paying agent or the trustee for the payment of the
principal of or any premium or interest on any debt securities which remains
unclaimed at the end of two years after the principal, premium or interest has
become due and payable may be repaid to us, and the holders of the debt
securities may then look only to us for payment.

FORM, EXCHANGE AND TRANSFER

The debt securities will be issued only in fully registered form, without
coupons, and, unless otherwise provided in the applicable prospectus supplement,
in minimum denominations of $1,000 and any multiple of $1,000. The debt
securities may be represented in whole or in part by one or more global debt
securities registered in the name of a depositary and, if so represented,
interests in the global debt security will be shown on, and transfers thereof
will be effected only through, records maintained by the designated depositary
and its participants.

At the option of the holder and unless otherwise provided in the applicable
prospectus supplement, the debt securities may be exchanged for other debt
securities of the same series in any authorized denominations, and of a like
aggregate principal amount and the debt securities may be presented for exchange
or for registration of transfer at the office of any transfer agent designated
by us. The transfer or exchange will be made without service charge, but we may
require payment of a sum sufficient to cover any tax or other governmental
charge.

Any transfer agent initially designated by us for any debt securities will be
named in the applicable prospectus supplement. We may at any time designate
additional transfer agents, rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts, except
that we will be required to maintain a transfer agent in each place of payment
for the debt securities.

If the debt securities of any series are to be redeemed in part, we will not be
required to:

     o   issue, register the transfer of, or exchange, the debt securities
         during a period beginning at the opening of business 15 days before the
         day of mailing of a notice of redemption of any of the debt securities
         that may be selected for redemption and ending at the close of business
         on the day of the mailing; or

     o   register the transfer of or exchange any debt security so selected for
         redemption, in whole or in part, except the unredeemed portion of any
         debt security being redeemed in part.

CONVERSION AND EXCHANGE

The terms, if any, on which debt securities of any series are convertible into
or exchangeable for common stock or other securities, property or cash, or a
combination of any of the foregoing, will be described in the applicable
prospectus supplement. These terms may include provisions as to whether
conversion or exchange is mandatory, at the option of the holder or at our
option, and may include provisions pursuant to which the securities, property or
cash to be received by the holders of the debt securities would be subject to
adjustment as described in the applicable prospectus supplement.

GLOBAL SECURITIES

The debt securities of a series may be issued in whole or in part in the form of
one or more global debt securities that will be deposited with, or on behalf of,
a depositary identified in the prospectus supplement relating to that series.

The specific terms of the depositary arrangement with respect to a series of the
debt securities will be described in the applicable prospectus supplement.


                                       16


We anticipate that the following provisions will apply to all depositary
arrangements:

         Upon the issuance of a global security, the depositary for the global
         security or its nominee will credit, on its book-entry registration and
         transfer system, the respective principal amounts of the debt
         securities represented by the global security. The accounts will be
         designated by the underwriters or agents with respect to the debt
         securities or by us if the debt securities are offered and sold
         directly by us. Ownership of beneficial interests in a global security
         will be limited to persons that may hold interests through
         participants. Ownership of beneficial interests in the global security
         will be shown on, and the transfer of that ownership will be effected
         only through, records maintained by the depositary or its nominee with
         respect to interests of participants, and on the records of
         participants with respect to interests of persons other than
         participants. The laws of some states require that certain purchasers
         of securities take physical delivery of the securities in definitive
         form. Such limits and such laws may impair the ability to transfer
         beneficial interests in a global security.

         So long as the depositary for a global security, or its nominee, is the
         registered holder of the global security, the depositary or the
         nominee, as the case may be, will be considered the sole owner and
         holder of the debt securities represented by the global security for
         all purposes. Except as described below, owners of beneficial interests
         in a global security will not be entitled to have the debt securities
         of the series represented by the global security registered in their
         names, will not receive or be entitled to receive physical delivery of
         the debt securities of that series in definitive form and will not be
         considered the owners or holders of the debt securities represented by
         the global security for any purpose under the debt securities or the
         applicable indenture.

         Principal of, and any premium and interest on, a global security will
         be made to the depositary. None of the trustee, any paying agent, the
         security registrar or us will have any responsibility or liability for
         any aspect of the records relating to, or payments made on account of,
         beneficial interests of the global security for the debt securities, or
         for maintaining, supervising or reviewing any records relating to the
         beneficial interests.

         We expect that the depositary for a series of the debt securities, upon
         receipt of any payment with respect to the debt securities, will credit
         immediately participants' accounts with payments in amounts
         proportionate to their respective beneficial interest in the principal
         amount of the global security for the debt securities as shown on the
         records of the depositary. We also expect that payments by participants
         to owners of beneficial interests in the global security held through
         the participants will be governed by standing instructions and
         customary practices, as is now the case with securities held for the
         accounts of customers registered in "street name," and will be the
         responsibility of the participants.

         Each global security authenticated will be registered in the name of
         the depositary and delivered to the depositary or its nominee or
         custodian, and each global security will constitute a single debt
         security. In addition, no global security may be exchanged, in whole or
         in part, for debt securities registered, and no transfer of a global
         security, in whole or in part, may be registered, in the name of any
         person other than the depositary or its nominee unless:

         o    the depositary has notified us that it is unwilling or unable to
              continue as depositary or has ceased to be qualified to act as
              required; or

         o    there will have occurred and be continuing an event of default
              with respect to the debt securities of a series represented by the
              global security.

Subject to the foregoing, all debt securities issued in exchange for a global
security or any portion thereof will be registered in the names as the
depositary for the global security will direct.

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

The description of the debt securities in the prospectus supplement or the
indentures may provide that we may not consolidate or amalgamate with or merge
into any person or convey, transfer or lease our properties and assets as an
entirety or substantially as an entirety to any person, and we may not permit
any person to consolidate or amalgamate with or merge into us, or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to us, unless:

     o   the person is an entity organized and existing under the laws of the
         United States of America, any state thereof or the District of Columbia
         and will expressly assume all of our obligations under the indenture
         and the debt securities;

     o   immediately after giving effect to the transaction, no event of
         default, and no event which after notice or lapse of time or both would
         become an event of default, will have occurred and be continuing; and


                                       17


     o   certain other conditions are met.

EVENTS OF DEFAULT

Each of the following constitute reasonably standard events that may be included
in any finalized indenture or prospectus supplement as constituting an event of
default under the debt securities with respect to any series of debt securities
issued:

     o   default in the payment of any interest on any debt security of that
         series when it becomes due, and the default continues for a period of
         30 days;

     o   default in the payment of the principal of or any premium on any debt
         security of that series when due;

     o   default in the deposit of any sinking fund payment, when due in respect
         of any debt security of that series;

     o   default in the performance of any covenant contained in the debt
         securities for the benefit of that series of the debt securities, and
         the default continues for a period of 90 days after written notice has
         been given as provided in the debt securities;

     o   a default under any bond, debenture, note or other evidence of our
         indebtedness of at least $10,000,000, or under any mortgage, indenture
         or instrument under which there may be issued or by which there may be
         secured or evidenced any of our indebtedness for money borrowed having
         an aggregate principal amount outstanding of at least $10,000,000,
         whether the indebtedness now exists or will hereafter be created, which
         default will have resulted in the indebtedness becoming or being
         declared due and payable prior to the date on which it would otherwise
         have become due and payable, without the indebtedness having been
         discharged, or the acceleration having been rescinded or annulled,
         within a period of 10 days after there has been given written notice as
         provided in the applicable indenture;

     o   certain events of bankruptcy, insolvency or reorganization; and

     o   any other event of default provided in or pursuant to the applicable
         indenture or debt securities with respect to the debt securities of
         that series.

If an event of default with respect to the debt securities of any series, other
than certain events of default relating to bankruptcy, insolvency or
reorganization, occurs and is continuing, then the trustee or the holders of at
least 25 percent in aggregate principal amount of the outstanding debt
securities of that series may declare the principal amount of all the debt
securities of that series (or, in the case of original issue discount
securities, the portion of the principal amount as may be specified by their
terms) to be due and payable immediately, by a notice in writing to us (and to
the trustee if given by holders). If an event of default relating to bankruptcy,
insolvency or reorganization occurs, the principal amount of all the debt
securities of that series (or, in the case of original issue discount
securities, the portion of the principal amount as may be specified by their
terms) will automatically become immediately due and payable, and without any
other action on the part of the trustee or any holder.

The holders of a majority in aggregate principal amount of the outstanding debt
securities of any series may waive any event of default with respect to the debt
securities of that series and rescind a declaration of acceleration of payment
if sums sufficient to pay all amounts due other than amounts due upon
acceleration are provided to the trustee and all defaults are remedied.

If an event of default with respect to the debt securities of any series occurs
and is continuing, the trustee may proceed to protect and enforce its rights and
the rights of the holders of the debt securities of that series by the
appropriate judicial proceedings, whether to enforce any covenant or agreement
in the applicable indenture or debt security, to help in the exercise of any
power granted by the indenture or debt security, or to enforce any other proper
remedy.

The holders of a majority in aggregate principal amount of the outstanding debt
securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee, with respect to the debt
securities of such series. However, the direction by the holders must not be in
conflict with any rule of law or with the applicable indenture or debt security
and the trustee may take any other action deemed proper by the trustee which is
not inconsistent with the direction.

We will be required to deliver to the trustee annually a statement by certain of
our officers as to whether or not, to their knowledge, we are in default in the
performance of any of the terms, provisions and conditions of the applicable
indenture or debt security and, if we are in default, specifying those defaults.


                                       18


SUPPLEMENTAL INDENTURES AND WAIVERS

We and the trustee, with the consent of the holders of at least a majority in
aggregate principal amount of the outstanding debt securities of each series
affected, may enter into a supplemental indenture to add, change or modify the
applicable indenture or the rights of the holders of the debt securities of that
series; provided, however, no supplemental indenture will, without the consent
of the holder of each outstanding debt security affected:

     o   change the stated maturity of any debt securities;

     o   reduce the principal amount of or the rate of interest on the debt
         security or any premium payable upon the redemption of any debt
         securities;

     o   reduce the amount of the principal of an original issue discount
         security or any other debt security payable upon acceleration of its
         maturity;

     o   change the currency in which, any debt security or any premium or
         interest on any debt security is payable;

     o   impair the right to enforce any payment on or after the stated maturity
         of any debt security (or, in the case of redemption, on or after the
         redemption date);

     o   modify the provisions of the applicable indenture or debt securities
         with respect to the subordination of the debt securities in a manner
         adverse to the holders of that debt security;

     o   reduce the percentage in principal amount of the outstanding debt
         securities of any series, the consent of whose holders is required for
         any supplemental indenture, or for any waiver of compliance with
         certain provisions of the applicable indenture or debt securities or
         for certain defaults; or

     o   modify any of the above provisions.

We and the trustee, without the consent of any holders of a series of debt
securities, may enter into one or more supplemental indentures for any of the
following purposes:

     o   to provide for our successor and the assumption by our successor of our
         covenants under the applicable indenture or debt securities;

     o   to add to our covenants for the benefit of the holders of all or any
         series of debt securities or to surrender any right or power herein
         conferred upon us;

     o   to add any additional events of default for the benefit of the holders
         of all or any series of debt securities;

     o   to permit or facilitate the issuance of debt securities in bearer form,
         registrable or not registrable as to principal, and with or without
         interest coupons, or to permit or facilitate the issuance of debt
         securities in uncertificated form;

     o   to add, change or eliminate any provisions of the applicable indenture
         or debt securities in respect to one or more series of debt securities,
         provided that the addition, change or elimination (i) will not apply to
         any outstanding debt security or (ii) will become effective only when
         there is no debt security outstanding of series created prior to the
         execution of the supplemental indenture which is entitled to the
         benefit of that provision;

     o   to secure the debt securities;

     o   to establish the form or terms of debt securities of that series as
         provided in the applicable indenture or debt securities; or

     o   to evidence and provide for the acceptance of appointment by a
         successor trustee with respect to the debt securities of one or more
         series and to add to or change any of the provisions of this indenture
         or debt security as will be necessary to provide for or facilitate the
         administration of the trusts by more than one trustee, pursuant to the
         requirements of the applicable indenture or debt security.

The holders of at least a majority in aggregate principal amount of the
outstanding debt securities of a series may waive compliance with certain
restrictive covenants.

The holders of at least a majority in aggregate principal amount of the
outstanding debt securities of a series may waive any past default under the
applicable indenture or debt security, except a default in the payment of the
principal of or any premium or interest and some covenants or provisions of the
applicable indenture or debt security which cannot be modified or amended
without the consent of the holder of each outstanding debt security of such
series affected.


                                       19


SUBORDINATION OF THE SUBORDINATED DEBT SECURITIES

The subordinated debt securities will, to the extent set forth in the
subordinated indenture, be subordinate in right of payment to the prior payment
in full of all of our senior indebtedness. In the event of:

     o   any insolvency or bankruptcy case or proceeding, or any receivership,
         liquidation, dissolution or other winding up, reorganization or other
         similar case or proceeding in connection therewith, relative to us or
         to our creditors, as such, or to our assets, or

     o   any voluntary or involuntary liquidation, dissolution or other winding
         up of ours, whether or not involving insolvency or bankruptcy, or

     o   any assignment for the benefit of creditors or any other marshalling of
         assets and liabilities of ours,

and in any like event, the holders of our senior indebtedness will be entitled
to receive payment in full of all amounts due or to become due on or in respect
of all of our senior indebtedness, or provision will be made for the payment in
cash, before the holders of the subordinated debt securities are entitled to
receive or retain any payment on account of principal of, or any premium or
interest on, or any additional amounts with respect to, subordinated debt
securities, and to that end the holders of our senior indebtedness will be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of ours being subordinated to
the payment of subordinated debt securities, which may be payable or deliverable
in respect of subordinated debt securities in any such case, proceeding,
dissolution, liquidation or other winding up event.

By reason of such subordination, in the event of our liquidation or insolvency,
holders of our senior indebtedness and holders of other obligations of ours that
are not subordinated to our senior indebtedness may recover more than the
holders of subordinated debt securities.

Subject to the payment in full of all of our senior indebtedness, the rights of
the holders of subordinated debt securities will be subrogated to the rights of
the holders of our senior indebtedness to receive payments or distributions of
cash, property or securities of ours applicable to the senior indebtedness until
the principal of, any premium and interest on, and any additional amounts with
respect to, senior debt securities have been paid in full.

No payment of principal, including redemption and sinking fund payments, of or
any premium or interest on or any additional amounts with respect to the
subordinated debt securities may be made:

     o   if any of our senior indebtedness is not paid when due and any
         applicable grace period with respect to the default has ended and the
         default has not been cured or waived or ceased to exist; or

     o   if the maturity of any of our senior indebtedness has been accelerated
         because of a default.

The subordinated indenture will not limit or prohibit us from incurring
additional senior indebtedness, which may include indebtedness that is senior to
subordinated debt securities, but subordinate to our other obligations. The
senior debt securities will constitute senior indebtedness under the
subordinated indenture.

The term "senior indebtedness" means all indebtedness of ours outstanding at any
time, except:

     o   the subordinated debt securities;

     o   indebtedness as to which, by the terms of the instrument creating or
         evidencing the same, is subordinated to or ranks equally with the
         subordinated debt securities;

     o   indebtedness of ours to an affiliate of ours;

     o   interest accruing after the filing of a petition initiating any
         bankruptcy, insolvency or other similar proceeding unless the interest
         is an allowed claim enforceable against us in a proceeding under
         federal or state bankruptcy laws; and

     o   trade accounts payable, general and administrative expenses necessary
         to continue the day-to-day operations of the Company, joint interest
         accounts payable, delay rentals, and royalties payable pursuant to the
         Company's oil and gas lease obligations.


                                       20


The senior indebtedness will continue to be senior indebtedness and be entitled
to the benefits of the subordination provisions of any and all subordinated
indentures irrespective of any amendment, modification or waiver of any term of
the senior indebtedness.

The subordinated indenture will provide that the foregoing subordination
provisions, insofar as they relate to any particular issue of subordinated debt
securities, may be changed prior to issuance. Any such change would be described
in the related prospectus supplement.

NEW YORK LAW TO GOVERN

The indentures and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
or instruments entered into and, in each case, performed wholly in that state.

INFORMATION CONCERNING THE TRUSTEE

We may from time to time borrow from, maintain deposit accounts with and conduct
other banking transactions with the trustee and its respective affiliates in the
ordinary course of business. The trustee will be named in the applicable
prospectus supplement.

Under each indenture, the trustee may be required to transmit annual reports to
all holders regarding its eligibility and qualifications as trustee under the
applicable indenture and related matters.

    DESCRIPTION OF THE WARRANTS TO PURCHASE COMMON STOCK AND PREFERRED STOCK
                                  WE MAY OFFER

The following statements with respect to the common stock warrants and the
preferred stock warrants are summaries of, and subject to, the detailed
provisions of a stock warrant agreement to be entered into by us and a stock
warrant agent to be selected at the time of issue of either or both of the
common stock or preferred stock warrants. The stock warrant agreement may
include or incorporate by reference standard warrant provisions substantially in
the form of the Common Stock Warrant Agreement or the Preferred Stock Warrant
Agreement to be filed in an amendment to the registration statement which
includes this prospectus or filed in a current report on Form 8-K and
incorporated by reference in the registration statement which includes this
prospectus.

GENERAL

The common stock warrants and preferred stock warrants, evidenced by stock
warrant certificates, may be issued under a stock warrant agreement
independently or together with any other securities offered by any prospectus
supplement and may be attached to or separate from such other offered
securities. If stock warrants are offered, the applicable prospectus supplement
will describe the designation and terms of the stock warrants, including:

     o   the offering price, if any;

     o   the designation and terms of the common or preferred stock purchasable
         upon exercise of the stock warrants;

     o   if applicable, the date on and after which the stock warrants and the
         related offered securities will be separately transferable;

     o   the number of shares of common or preferred stock purchasable upon
         exercise of one stock warrant and the initial price at which the shares
         may be purchased upon exercise;

     o   the date on which the right to exercise the stock warrants will
         commence and expire;

     o   a discussion of certain United States Federal income tax
         considerations;

     o   the call provisions, if any;

     o   the currency, currencies or currency units in which the offering price,
         if any, and exercise price are payable;

     o   any antidilution provisions of the stock warrants; and

     o   any other terms of the stock warrants.

The shares of common or preferred stock issuable upon exercise of the stock
warrants will, when issued in accordance with the stock warrant agreement, be
fully paid and nonassessable.


                                       21


EXERCISE OF STOCK WARRANTS

Stock warrants may be exercised by surrendering the stock warrant certificate to
the stock warrant agent with the form of election to purchase on the reverse
side of the stock warrant certificate properly completed and signed and by
payment in full of the exercise price, as set forth in the applicable prospectus
supplement. The signature must be guaranteed by a bank or trust company, by a
broker or dealer which is a member of the National Association of Securities
Dealers, Inc. or by a member of a national securities exchange. Upon receipt of
the certificates, the stock warrant agent will requisition from the transfer
agent for the common stock for issuance and delivery to or upon the written
order of the exercising warrantholder, a certificate representing the number of
shares of common stock purchased. If less than all of the stock warrants
evidenced by any stock warrant certificate are exercised, the stock warrant
agent will deliver to the exercising warrantholder a new stock warrant
certificate representing the unexercised stock warrants.

NO RIGHTS AS STOCKHOLDERS

Holders of stock warrants will not be entitled, by virtue of being such holders,
to vote, to consent, to receive dividends, to receive notice as stockholders
with respect to any meeting of stockholders for the election of our directors or
any other matter, or to exercise any rights whatsoever as our stockholders.

WARRANTS OUTSTANDING

As of May 7, 2007, warrants to purchase 564,033 shares of common stock were
outstanding. These warrants have a weighted average exercise price of $3.41 per
share and expire between May 20, 2008 and November 27, 2010.

      DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES WE MAY OFFER

The following statements with respect to the debt warrants are summaries of, and
subject to, the detailed provisions of a debt warrant agreement to be entered
into by us and a debt warrant agent to be selected at the time of issue. The
debt warrant agreement may include or incorporate by reference standard warrant
provisions substantially in the form of the debt warrant agreement to be filed
in an amendment to the registration statement which includes this prospectus or
filed in a current report on Form 8-K and incorporated by reference in the
registration statement which includes this prospectus.

GENERAL

The debt warrants, evidenced by debt warrant certificates, may be issued under
the debt warrant agreement independently or together with any other securities
offered by any prospectus supplement and may be attached to or separate from
such other offered securities. If debt warrants are offered, the applicable
prospectus supplement will describe the designation and terms of the debt
warrants, including:

the offering price, if any;

     o   the designation, aggregate principal amount and terms of the debt
         securities purchasable upon exercise of the debt warrants;

     o   if applicable, the date on and after which the debt warrants and the
         related offered securities will be separately transferable;

     o   the principal amount of debt securities purchasable upon exercise of
         one debt warrant and the price at which that principal amount of debt
         securities may be purchased upon exercise;

     o   the date on which the right to exercise the debt warrants will commence
         and expire;

     o   a discussion of certain United States Federal income tax
         considerations;

     o   whether the warrants represented by the debt warrant certificates will
         be issued in registered or bearer form;

     o   the currency, currencies or currency units in which the offering price,
         if any, and exercise price are payable;

     o   any antidilution provisions of the debt warrants; and

     o   any other terms of the debt warrants.


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Debt Warrantholders will not have any of the rights of holders of debt
securities, including the right to receive the payment of principal of, any
premium or interest on, or any additional amounts with respect to, the debt
securities or to enforce any of the covenants of the debt securities or the
applicable indenture except as otherwise provided in the applicable indenture or
debt securities.

EXERCISE OF DEBT WARRANTS

Debt warrants may be exercised by surrendering the debt warrant certificate to
the debt warrant agent, with the form of election to purchase on the reverse
side of the debt warrant certificate properly completed and signed, and by
payment in full of the exercise price, as set forth in the applicable prospectus
supplement. The signature must be guaranteed by a bank or trust company, by a
broker or dealer which is a member of the National Association of Securities
Dealers, Inc. or by a member of a national securities exchange. Upon the
exercise of debt warrants, we will issue the debt securities in authorized
denominations in accordance with the instructions of the exercising
warrantholder. If less than all of the debt warrants evidenced by the debt
warrant certificate are exercised, a new debt warrant certificate will be issued
for the remaining number of debt warrants.

  DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS WE MAY OFFER

The following statements with respect to stock purchase contracts and stock
purchase units are summaries of, and subject to, the detailed provisions of a
stock purchase contract agreement or stock purchase unit agreement to be entered
into by us and a stock purchase contract agent or stock purchase unit agent to
be selected at the time of issue. The stock purchase contract agreement or stock
purchase unit agreement may include or incorporate by reference standard
provisions substantially in the form of the stock purchase contract agreement or
stock purchase unit agreement to be filed in an amendment to the registration
statement which includes this prospectus or filed in a current report on Form
8-K and incorporated by reference in the registration statement which includes
this prospectus.

We may issue stock purchase contracts, representing contracts obligating holders
to purchase from us, and obligating us to sell to the holders, a specified
number of shares of common stock or preferred stock at a future date or dates.
The price per share of common stock, or preferred stock may be fixed at the time
the stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contract agreement. Any such
formula may include anti-dilution provisions to adjust the number of shares
issuable pursuant to such stock purchase contract upon the occurrence of certain
events. The stock purchase contracts may be issued separately or as a part of
stock purchase units, consisting of a stock purchase contract and, as security
for the holder's obligations to purchase the shares of common stock or preferred
stock under the stock purchase contracts, either our senior or subordinated debt
securities or the debt obligations of third parties, including U.S. Treasury
securities.

The stock purchase contract agreements may require us to make periodic payments
to the holders of the stock purchase units or vice versa, and these payments may
be unsecured or prefunded on some basis. The stock purchase contract agreements
may require holders to secure their obligations in a specified manner and in
certain circumstances we may deliver newly issued prepaid stock purchase
contracts upon release to a holder of any collateral securing such holder's
obligations under the original stock purchase contract agreement.

The applicable prospectus supplement will describe the terms of any stock
purchase contracts or stock purchase units and, if applicable, prepaid stock
purchase contracts. The description in the prospectus supplement will not
purport to be complete and will be qualified in its entirety by reference to:

     o   the stock purchase contracts;

     o   the collateral arrangements, if applicable, relating to such stock
         purchase contracts or stock purchase units; and

     o   if applicable, the prepaid stock purchase contracts and the stock
         purchase contract agreement pursuant to which the prepaid stock
         purchase contracts will be issued.

                              PLAN OF DISTRIBUTION

Unless otherwise set forth in a prospectus supplement accompanying this
prospectus, we may sell the offered securities in any one or more of the
following ways from time to time:

     o   through agents;

     o   to or through underwriters;


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     o   through dealers;

     o   directly to purchasers; or

     o   through remarketing firms.

The prospectus supplement with respect to the offered securities will set forth
the terms of the offering of the offered securities, including:

     o   the name or names of any underwriters, dealers or agents;

     o   the purchase price of the offered securities and the proceeds to us
         from such sale;

     o   any underwriting discounts and commissions or agency fees and other
         items constituting underwriters' or agents' compensation;

     o   any initial public offering price and any discounts or concessions
         allowed or reallowed or paid to dealers; and

     o   any securities exchange on which such offered securities may be listed.

Any initial public offering price, discounts or concessions allowed or reallowed
or paid to dealers may be changed from time to time.

The distribution of the offered securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.

Offers to purchase the offered securities may be solicited by agents designated
by us from time to time. Any agent involved in the offer or sale of the offered
securities will be named, and any commissions payable by us to such agent will
be set forth, in the applicable prospectus supplement. Unless otherwise
indicated in the prospectus supplement, the agent will be acting on a reasonable
best efforts basis for the period of its appointment.

If underwriters are used in the sale of the offered securities, the offered
securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices determined by
the underwriters at the time of sale. The offered securities may be offered to
the public either through underwriting syndicates represented by managing
underwriters or directly by the managing underwriters. Unless otherwise
indicated in the applicable prospectus supplement, the underwriters are subject
to certain conditions precedent and will be obligated to purchase all the
offered securities of a series if they purchase any of the offered securities.

If a dealer is used in the sale of the offered securities, we will sell the
offered securities to the dealer as principal. The dealer may then resell the
offered securities to the public at varying prices to be determined by the
dealer at the time of resale. The name of the dealer and the terms of the
transaction will be set forth in the applicable prospectus supplement.

Offers to purchase the offered securities may be solicited directly by us and
the sale thereof may be made by us directly to institutional investors or
others. The terms of any such sales will be described in the applicable
prospectus supplement.

The offered securities may also be offered and sold by a remarketing firm in
connection with a remarketing arrangement upon their purchase. Remarketing firms
will act as principals for their own accounts or as agents for us. These
remarketing firms will offer or sell the offered securities pursuant to the
terms of the offered securities. Any remarketing firm will be identified and the
terms of its agreements, if any, with us and its compensation will be described
in the applicable prospectus supplement.

We may authorize underwriters, dealers and agents to solicit from third parties
offers to purchase the offered securities under contracts providing for payment
and delivery on future dates. The applicable prospectus supplement will describe
the material terms of these contracts, including any conditions to the
purchasers' obligations, and will include any required information about
commissions we may pay for soliciting these contracts.

In connection with the sale of the offered securities, agents, underwriters,
dealers or remarketing firms may receive compensation from us or from purchasers
of the offered securities for whom they act as agents in the form of discounts,
concessions or commissions. Underwriters may sell the offered securities to or
through dealers, and those dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from
the purchasers for whom they may act as agents. Agents, underwriters, dealers
and remarketing firms that participate in the distribution of the offered
securities, and any institutional investors or others that purchase offered
securities directly and then resell the securities, may be deemed to be
underwriters, and any discounts or commissions received by them from us and any
profit on the resale of the securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act.


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Agents, underwriters, dealers and remarketing firms may be entitled under
relevant agreements entered into with us to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act or to
contribution with respect to payments which the agents, underwriters or dealers
may be required to make.

Each series of the offered securities will be a new issue and, other than the
shares of common stock which are listed on the Nasdaq Capital Market and the
Boston Stock Exchange, will have no established trading market. Any underwriters
to whom we sell the offered securities for public offering and sale may make a
market in the securities, but such underwriters will not be obligated to do so
and may discontinue any market making at any time without notice. We may elect
to list any series of offered securities on an exchange, and in the case of
common stock, on any additional exchange, but, unless otherwise specified in the
applicable prospectus supplement, we will not be obligated to do so. We cannot
predict the liquidity of the trading market for any of the offered securities.

In connection with an offering, the underwriters may purchase and sell the
offered securities in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of offered securities than they are required to purchase in an offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the offered
securities while an offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the underwriters have repurchased offered securities sold
by or for the account of that underwriter in stabilizing or short-covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise affect
the market price of the offered securities. As a result, the price of the
offered securities may be higher than the price that otherwise might exist in
the open market. If these activities are commenced, they may be discontinued by
the underwriters at any time. These transactions may be effected on an exchange
or automated quotation system, if the offered securities are listed on that
exchange or admitted for trading on that automated quotation system, or in the
over-the-counter market or otherwise.

Underwriters, dealers, agents and remarketing firms, or their affiliates, may be
customers of, engage in transactions with, or perform services for, us and our
subsidiaries in the ordinary course of business.

                                  LEGAL MATTERS

Gersten Savage LLP, New York, New York, will pass upon the validity of the
securities for us in connection with this offering.

                                     EXPERTS

The financial statements incorporated in this prospectus by reference to the
Annual Report on Form 10-K as of and for the year ended December 31, 2006 have
been so incorporated in reliance on the report of Carlin, Charron & Rosen, LLP,
independent registered public accountants, given on the authority of said firm
as experts in auditing and accounting.


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