As filed with the Securities and Exchange Commission on July 24 , 2003
REGISTRATION NO. 333_ 106025
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
--------------------
POST EFFECTIVE AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
AVITAR, INC.
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(Exact name of registrant as specified in its charter)
Delaware 06-1174053
--------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
65 DAN ROAD
CANTON, MA 02021
(781) 821-2440
------------------------------------------------------------------
(Address, including zip code and telephone number,
including area code, of registrant's principal
executive offices)
PETER P. PHILDIUS
CHIEF EXECUTIVE OFFICER
AVITAR, INC.
65 DAN ROAD
CANTON, MA 02021
(781) 821-2440
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with copies to:
EUGENE M. CRONIN, ESQ.
DOLGENOS NEWMAN & CRONIN LLP
96 SPRING STREET
NEW YORK, NEW YORK 10012
(212) 925-2800
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
<TABLE>
<CAPTION>
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CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed
Each Class Maximum Maximum
of Security Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) Per Unit Price Fee (2)
----------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Common stock,
par value $.001
per share 19,189,967 $0.24 $4,605,582 $405.00
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act, this registration statement
also covers such additional shares as may hereafter be offered or issued to
prevent dilution resulting from stock splits, stock dividends, recapitalizations
or certain other capital adjustments as provided in relevant Notes and Warrants.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended.
The above calculation is based on the average of the high and low prices of the
common stock reported on the American Stock Exchange on June 5, 2003.
The registration fee was paid on June 11, 2003.
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PROSPECTUS
----------------------------------------
19,189,967 Shares
AVITAR, INC.
Common Stock
----------------------------
All of the shares of common stock offered in this Prospectus are being
offered by the selling security holders in transactions as described in the plan
of distribution. The Company will not receive any of the proceeds from the sales
(other than purchase prices received upon the exercise of currently outstanding
warrants, the underlying shares of which are being registered for sale
hereunder).
Our common stock is traded on the American Stock Exchange under the symbol
"AVR." On June 5, 2003, the closing price reported on the American Stock
Exchange was $0.23 per share.
THIS INVESTMENT IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities. They have not
determined if this Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
----------------------------------
The date of this Prospectus is July 24, 2003
TABLE OF CONTENTS
PROSPECTUS
Page
ABOUT AVITAR . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RECENT DEVELOPMENTS CONCERNING GOODWILL AND
OTHER INTANGIBLE ASSETS. . . . . . . . . . . . . . . . . . . . .11
FORWARD-LOOKING STATEMENTS. . . . . . . . . . . . . . . . . . . . 11
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . 12
SELLING SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . . . 12
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . 14
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
STATEMENT OF INDEMNIFICATION . . . . . . . . . . . . . . . . . . .16
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . 16
INCORPORATION OF INFORMATION WE FILE WITH THE SEC . . . . . . . . 17
ABOUT AVITAR
Avitar, Inc., headquartered in Canton, Massachusetts, develops,
manufactures and markets innovative medical devices based on core technologies
in oral fluid diagnostics and customized polyurethane applications. The Company
markets a unique portfolio of substance abuse testing products and services that
include:
- ORALscreen(TM), the world's first point-of-contact rapid oral fluid
screening devise for drugs of abuse,
- ORALscreenOSR(TM), an instrument that automates the analysis, recording,
reporting and transmitting of results for the ORALscreen drugs of abuse
tests, and
- other ORALscreen-related products and several other specialized tests for
drugs of abuse.
Avitar also markets an oral fluid collection system for DNA testing as well
as a proprietary line of polyurethane-based high tech medical devices.
The location of our principal executive offices is 65 Dan Road, Canton,
Massachusetts 02021; telephone: (781) 821-2400.
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider the
risks described below and the other information contained in this Prospectus
before deciding to invest in shares of our common stock.
The Company may not have sufficient cash for its current operations.
The Company has a working capital deficit, which was approximately $1.73
million at March 31, 2003. For the balance of fiscal year 2003, the Company's
cash requirements are expected to include primarily the funding of operating
losses, the payment of outstanding accounts payable and the repayment of certain
notes payable. The Company is seeking additional capital and needs to raise
$1,000,000 immediately with plans to raise an additional $3,000,000 during the
remainder of 2003. However, there can be no assurance that these financings will
be achieved. If these financings were achieved, the Company would be able to
fund current operations until profitability or cash flow breakeven, but only if
its projected sales are achieved. Thereafter it will need additional funds for
operations, product expansion and debt repayment.
In the event of unforeseen circumstances affecting the economy and/or the
Company, this cash flow projection may be proven inaccurate, and the Company
will need additional funds for current operations as well as for its outstanding
obligations sooner than currently anticipated. The Company can give no assurance
that sources of funds will be available to fund its operations and other
obligations. If financing is unavailable, it may default on its obligations,
curtail operations or cease business altogether.
If a judgment against the Company were enforced, the Company may cease
operations.
The Company is now in default under a promissory note, which was issued to
a principal supplier for unpaid accounts payable. In May 2003, an Illinois state
court entered a judgment against the Company for approximately $193,000 pursuant
to a confession of judgment contained in that promissory note. The holder of the
judgment has indicated its intention to seek enforcement of the judgment in
Massachusetts, the state in which the Company holds the large majority of its
assets. The Company has paid approximately $140,000 of the judgment, but there
is no assurance that this judgment can be resolved.
If the supplier seeks to enforce the judgment against the Company, the
Company's financial condition will be adversely affected. If the Company is not
able to pay or otherwise resolve these obligations, it may be in default of its
other obligations for borrowed funds and the Company may cease operations.
With recently reduced personnel, the Company may not be able to operate at an
adequate level.
Current economic conditions have imposed significant constraints on capital
raising and have caused projections of operating revenues to remain at the
current lower level for the balance of Fiscal Year 2003. In response to such
economic conditions, the Company recently reduced personnel, including employees
in marketing and employees in research and development. The effect of these
recent personnel reductions on the Company's future sales and operations cannot
yet be determined at this time. In view of such reductions, the Company may not
be able to operate at an adequate level.
The Company has a substantial level of indebtedness and if it is unable to raise
new capital or generate sufficient cash from operations it will not be able to
fulfill its financial obligations.
The Company has approximately $2.5 million of debt, some of which is
classified as short term. If the Company is not able to raise new capital or to
generate enough cash from operations, it will not be able to pay the interest on
outstanding debt and repay any scheduled payments of principal. In that event
the Company may be in default and, as a consequence, it may have to refinance
some or all of the debt, obtain other sources of capital, which may not be
available at that time, or continue in default. Any refinancing or additional
capital, if available, might be on unfavorable terms in those circumstances. Any
default on the Company's financial obligations would likely force curtailment or
halting of operations or liquidation of assets.
We have sustained losses in the past and we expect to report losses in the
future; going concern qualification in report of independent certified public
accountants.
We have incurred substantial losses that have reduced our stockholders
equity and at times depleted our working capital. We funded our negative cash
flows from 1999 to date primarily by the sale of additional equity and the
placement of debt. We incurred losses of approximately $4.15 million during
fiscal year 2002 and losses of $2.7 million during the first half of fiscal year
2003.
The losses in fiscal year 2002 were incurred primarily from expenses
associated with the marketing of the new drug-testing kits and the development
of test kits for diseases. Current economic conditions have imposed significant
constraints on capital raising and have caused actual and projected operating
revenues to remain at a lower than expected level for the balance of Fiscal Year
2003. In response to such economic conditions, the Company recently reduced
personnel, including employees in marketing and employees in research and
development. The effect of these recent personnel reductions on the Company's
future sales and operations cannot yet be determined at this time.
As a result of the Company's recurring losses from operations and working
capital deficit, the report of its independent certified public accountants
relating to the financial statements for fiscal year 2002 contains an
explanatory paragraph stating substantial doubt about the Company's ability to
continue as a going concern. Such report states that the ultimate outcome of
this matter could not be determined as of the date of such report (November 26,
2002). Currently, it is anticipated that this consideration will be reflected in
the report on the financial statements for the fiscal year ended September 30,
2003.
Principal supplier risk and substantial trade debt due; default in note with
entry of judgment
One supplier of a key component is the current sole source for the Company,
and it is owed a substantial amount for past-due payables and product
development expenses, which have been evidenced by a promissory note. As
mentioned above, that promissory note is now in default and a judgment was
entered against the Company pursuant to a confession of judgment contained in
that note. The Company currently is permitted to purchase these components on a
COD basis from the supplier. If the current supplier refuses to sell components
or the Company cannot meet the COD terms, the inability to obtain components
will have an adverse effect on the business, revenues and prospects of the
Company. Although the Company has an inventory of these components, it may not
last sufficiently long while the Company finds a new supplier. The Company has
identified a new potential supplier and is in the process of evaluating and
developing the terms for dealing with this new supplier, but there can be no
assurance that this new supplier will be acceptable for the Company's purposes.
There is no assurance that a new supplier will be found for these components on
a timely basis, or at all, if the current supplier ceases to sell to the
Company.
If the supplier acts to collect on the outstanding obligations due it by
the Company and seeks to enforce the judgment entered against the Company, the
Company's financial condition will be adversely affected. If the Company is not
able to pay or otherwise resolve these obligations, it may be in default of its
other obligations for borrowed funds.
With all of our assets pledged to prior senior lenders, the Company may not be
able to borrow funds and have to curtail or cease operations.
The Company has pledged substantially all of its assets as security to
Senior Lenders for currently outstanding debt of approximately $1.5 million. If
the Company falls into default to the Senior Lenders, there likely will be no
assets available for the repayment of the outstanding Notes issued in February
2003 or any subsequent Notes. In addition, the Company has no other assets to
pledge for additional debt and requires the consent of the Senior Lenders for a
further security interest to be placed on any of the pledged assets. The Notes
are junior to the debt of the Senior Lenders and the Notes would also be junior
to the judgment on a supplier's note in the current amount of approximately
$183,000 upon domestication of such judgment in Massachusetts. The Company
anticipates that some subsequent Notes may be on the same level as the Notes
issued in February 2003 ("Pari Passu Notes"), but senior to all other debt of
the Company. As a result of the seniority of the above Notes and the Pari Passu
Notes, the Company will be limited in incurring additional debt without the
majority consent of the holders of all such Notes and the Pari Passu Notes. The
inability of the Company to borrow in the future may cause the Company to cut
back on its operations.
No assurance future capital will be available to us; additional capital will
dilute the holdings of our stockholders.
If we need additional financing, we cannot give any assurance that it will
be available, or if available, that it will be available on terms favorable to
our stockholders. If funds are not available to satisfy any of our short-term
and long-term operating requirements, we may limit or suspend our operations in
the entirety or, under certain circumstances, seek protection from creditors.
Our recent equity offerings resulted in the dilution of our then existing
stockholders. It is possible that future financings may contain terms that could
result in similar or more substantial dilution than has already been incurred by
our stockholders from the sales of equity with warrants since fiscal year 1998.
Need to increase authorized shares and shareholder approval may not be
obtained.
As of June 19, 2003, we had approximately 73 million shares outstanding and
approximately 28 million shares committed or reserved for issuance upon exercise
of options and warrants or conversion of convertible preferred shares. The
Company intends to seek shareholder approval for an increase of its authorized
shares of common stock from 100 million to not less than 200 million. If this
approval is not obtained, we may not be able to meet certain outstanding
obligations to issue shares of common stock.
A significant number of our shares are eligible for sale and their sale could
further depress the market price of our stock.
Sales of substantial amounts of our common stock (including shares issued
upon exercise of outstanding options and warrants and shares issued upon
conversion of convertible preferred shares and debt) in the public market could
depress the market price of our common stock. As of June 19, 2003, we had
approximately 73 million shares outstanding and approximately 28 million shares
committed or reserved for issuance upon exercise of options and warrants or
conversion of convertible preferred shares. After shareholder approval, the
outstanding Pari Passu Notes would be convertible into approximately 10.6
million shares and 3.8 million shares would be issued to the holders of the Pari
Passu Notes for certain agreements. In addition, the Company anticipates that up
to 10 million shares may be issued during this fiscal year and up to
approximately 11 million shares may be issuable upon conversion of Notes to be
issued in the remainder of Fiscal Year 2003.
We depend on the drug of abuse screen systems and market acceptance of those
systems is unclear.
We intend to continue to concentrate our efforts primarily on the
development of the ORALscreen drug of abuse detection systems and we will be
dependent upon the successful development and marketing of those systems to
generate revenues. Acceptance of our systems may be adversely affected by:
- costs,
- concerns related to accuracy or false positive reports,
- a cultural resistance to the use of drug of abuse screening tests,
- the effectiveness of competing drug of abuse screening tests.
Any failure to achieve greater market acceptance of our systems will have a
material adverse effect on our business, financial condition and results of
operations.
The success of competitive products could have an adverse effect on our
business.
The Drug of Abuse Testing industry is intensely competitive, although at
present we have encountered only minimal direct competition in the rapid on-site
(as opposed to laboratory) oral fluid drug testing market. The significant
competitive factors in the industry include:
- price,
- convenience,
- accuracy,
- acceptance of new technologies, - user satisfaction, and
- when applicable, government approval.
We believe our ORALscreen systems offer several distinct advantages over
the use of blood or urine samples, including net cost savings, ease of use and
non-invasiveness. However, the success of any competing alternative to the
ORALscreen systems for screening for drugs of abuse could have a material
adverse effect on our business, financial condition and results of operations.
Most of our competitors have substantially greater financial capabilities for
product development and marketing than we currently do. These financial
capabilities enable our competitors to market their systems in a more effective
manner.
Lack of availability of key system components could result in delays, increased
costs, or costly redesign of our products.
Although some of the parts and components used to manufacture our products
are available from multiple sources, we currently purchase most of our
components from single sources in an effort to obtain volume discounts. One
principal supplier of a key component is a sole supplier, which is owed
substantial amounts for past-due payables and may not continue to supply. In
addition, we are in default under a promissory note held by this supplier and a
judgment was entered pursuant to a confession of judgment contained in this
note. Lack of availability of any of these parts and components could result in
production delays, increased costs, or costly redesign of our products. We
continually evaluate ways to minimize any impact to our business from any
potential part or component shortage through inventory stockpiling and design
changes to afford opportunities for multiple sources of supply for these
essential components. Any loss of availability of an essential system component
could result in a material adverse change to our business, financial condition
and results of operations.
Substantial regulation by government agencies.
Many of our products are subject to regulation by the Food and Drug
Administration (the "FDA") and comparable agencies in various states and foreign
countries requiring, among other things, pre-market approval or clearance of new
medical or dental devices. In November 2000, the FDA proposed regulations that,
although still not in effect, in the future may require a pre-market approval or
clearance of our ORALscreen products for sale to employers. In addition, Avitar
is subject to inspections by the FDA at all times, and may be subject to
inspections by state and foreign agencies. If the FDA believes that its legal
requirements have not been fulfilled, it has extensive enforcement powers,
including the ability to initiate action to physically seize products and/or to
enjoin their manufacture and distribution, to require recalls of certain types
of products, and to impose or seek to impose civil or criminal sanctions against
individuals or companies. Such submissions and review by the FDA could take
several years, after which there could be no assurance that approval would be
granted.
Dependence on intellectual property; no assurance as to protection of
intellectual property.
Our ability to compete effectively with other companies will depend, in
part, on our ability to maintain the proprietary nature of our technologies. We
intend to rely substantially on unpatented proprietary information and know-how,
and there can be no assurance that others will not develop such information and
know-how independently or otherwise obtain access to our technology. Similarly,
there can be no assurance that our proprietary technology will not infringe
patents or other rights owned by others. If we are unable to adequately
safeguard and exploit our methods and technologies, our ability to compete with
other companies, a majority of which have greater financial, technological,
human and other resources than the Company, our business would be materially
adversely affected.
Risk of product liability; limited insurance coverage.
The testing, marketing and sale of medical and dental products entails a
risk of product liability claims by consumers and others. Avitar has maintained
product liability insurance coverage and currently has such insurance in the
amount of up to $5,000,000. This insurance will not cover liabilities caused by
events occurring after such policy is terminated or claims made after 60 days
following termination of the policy or in respect of events excluded from
coverage. In the event of a successful suit against Avitar, lack or
insufficiency of insurance coverage would have a material adverse effect on
Avitar. Further, certain distributors of medical and dental products require
minimum product liability insurance coverage as a condition precedent to
purchasing or accepting products for distribution. Failure to satisfy such
insurance requirements could impede the ability of Avitar to achieve broad
distribution of its products, which would have a material adverse effect on
Avitar.
We are dependent on our management and key personnel to succeed.
Our principal executive officers and key personnel have extensive knowledge
of and experience with our products, the research and development efforts needed
to improve them and the development of marketing and sales programs to increase
their market penetration. The loss of the services of any of our executive
officers or other key personnel, or our failure to attract and retain other
skilled and experienced personnel, could have a material adverse effect on our
ability to manufacture, sell and market our products. Such events would probably
have a negative impact on our business and financial condition.
Barriers to takeover
The Company is governed by the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, the law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. "Business combination"
is defined to include mergers, asset sales and certain other transactions
resulting in a financial benefit to the stockholders. An "interested
stockholder" is defined as a person who, together with affiliates and
associates, owns (or within the prior three years, did own) 15% or more of a
corporation's voting stock. As a result of the application of Section 203,
potential acquirers of the Company may be discouraged from attempting to effect
an acquisition transaction with the Company, thereby possibly depriving holders
of the Company's securities of certain opportunities to sell or otherwise
dispose of such securities at above market prices pursuant to such transactions.
In addition, in the event of certain changes of control of the Company (as
defined in the Company's Equity Plan) outstanding options granted pursuant to
the Company's Equity Plan will become immediately exercisable in full. Such
acceleration of exercisability may also discourage potential acquirers of the
Company.
The market price of our stock has historically been volatile.
The volatility of our common stock imposes a greater risk of capital losses
on stockholders as compared to less volatile stocks. In addition, such
volatility makes it difficult to ascribe a stable valuation to a stockholder's
holdings of our common stock. Factors such as announcements of technological
innovations, changes in marketing, product pricing and sales strategies or new
products by our competitors, changes in domestic or foreign governmental
regulations or regulatory approval processes, developments or disputes relating
to patent or proprietary rights and public concern as to the reliability of the
OralScreen systems or drug tests in general may have a significant impact on the
market price of our common stock. Moreover, the possibility exists that the
stock market (and in particular the securities of technology companies such as
ours) could experience extreme price and volume fluctuations unrelated to
operating performance.
RECENT DEVELOPMENTS CONCERNING GOODWILL AND OTHER INTANGIBLE ASSETS
Effective October 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets, during Fiscal 2003. SFAS No. 142 requires among other
things, that companies no longer amortize goodwill, but test goodwill for
impairment at least annually. In addition, SFAS 142 requires that the Company
identify reporting units for the purpose of assessing potential future
impairments of goodwill, reassess the useful lives of other existing recognized
intangible assets, and cease amortization of intangible assets with an
indefinite useful life. An intangible asset with an indefinite useful life
should be tested for impairment in accordance with guidelines in SFAS 142. SFAS
142 is required to be applied to all goodwill and other intangible assets
regardless of when those assets were initially recognized. As of October 1,
2002, the Company's goodwill of $2,139,555 was composed of $1,901,435 associated
with the acquisition of USDTL in 1999 and $238,120 associated with the
acquisition of BJR in 2001. As a result of the transitional impairment tests,
the USDTL acquisition was determined to be impaired by an independent
evaluations which relied on present value of future cash flows contained in an
offer to purchase USDTL and market price comparisons of sales multiples for
companies engaged in a similar business to USDTL. The difference in value of
$650,000 is being reported as the cumulative effect of change in accounting
principle for the period ended March 31, 2003. No adjustment to the $238,120
balance of goodwill associated with the BJR acquisition was deemed necessary as
of March 31, 2003.
The effect on reported net loss due to the cumulative effect of change in
accounting principle and discontinuance of goodwill amortization is as follows:
<TABLE>
<CAPTION>
Six months ended March 31, Year ended September 30,
2003 2002 2002 2001
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<S> <C> <C> <C> <C>
Reported Net Loss $(2,742,604) $(1,623,591) $(4,186,066) $(6,088,976)
Cumulative effect of change in accounting
principle 650,000 - - -
Goodwill amortization - 154,996 309,992 298,200
------------- ---------- ----------- ------------
Adjusted net loss before cumulative effect
of change in accounting principle and
excluding 2002 goodwill amortization $(2,092,604) $(1,468,595) $(3,836,074) $(5,790,776)
============= ============= ============ ============
Basic and diluted earnings per share as reported $(.05) $(.04) $ (.11) $ (.26)
Cumulative effect of change in accounting
principle .01 - - -
Goodwill amortization - - .01 .01
------------ --------- ------------ ------------
Basic and diluted earnings per share before
cumulative effect of change in accounting
principle and excluding 2002 and 2001 goodwill
amortization $(.04) $(.04) $ (.10) $ (.25)
======== ======== ============ ============
</TABLE>
FORWARD-LOOKING STATEMENTS
Avitar, Inc. makes statements in this Prospectus and the documents incorporated
by reference that are considered forward-looking statements within the meaning
of the Securities Act of 1933 and the Securities Exchange Act of 1934. The
Private Securities Litigation Reform Act of 1995 contains the safe harbor
provisions that cover these forward-looking statements. We are including this
statement for purposes of complying with these safe harbor provisions. We base
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties and assumptions
including, among other things:
- continued losses and cash flow deficits;
- the continued availability of financing in the amounts, at the times
and on the terms required to support our future business;
- uncertain market acceptance of our products;
- accuracy, reliability and patent concerns regarding our products and
technology;
- competition; and
- reliance on key personnel.
Words such as "expect," "anticipate," "intend," "plan," "believe," "estimate"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Because of these risks, uncertainties
and assumptions, the forward-looking events discussed or incorporated by
reference in this document may not occur.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of common stock by
the selling security holders. The Company would receive up to approximately
$42,000 if all outstanding warrants were exercised. The Company intends to use
the proceeds, if any, to provide general working capital. However, there can be
no assurance that these outstanding warrants will be exercised.
SELLING SECURITY HOLDERS
The shares of common stock offered herein include 6,303,000 shares issued
in connection with the February 2003 placement of $955,000 in principal amount
of promissory notes, 10,611,111 shares reserved for possible issuance on
conversion of the $955,000 promissory notes, and 461,353 shares that may be
issued on exercise of outstanding warrants. and approximately 1,814,500 shares
reserved for issuance if certain registration obligations are not completed in a
timely manner.
Absent registration under the Securities Act, the shares of common stock
offered herein are subject to certain limitations on resale. The Registration
Statement of which this Prospectus forms a part has been filed in satisfaction
of certain registration rights we granted to the individuals and entities listed
below.
The following table assumes that each of the individuals and entities
listed below will sell all of the common stock offered herein set forth opposite
such individual or entity's name. However, one or more of the individuals or
entities listed below may sell only a portion or may sell none of the shares set
forth opposite such individual or entity's name.
<TABLE>
<CAPTION>
Common Shares Common Shares
Beneficially Owned Beneficially Owned
Prior to the Number of After the Offering
Offering (1) Shares to(1)
___________________ be Sold ____________________
Number Percent in the Number of Percent
of Shares of Class Offering Shares of Class
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Theodore Kesten 1,711,111 2.37% 1,711,111 0 *
Hanan Haskell 1,711,111 2.37% 1,711,111 0 *
Israel Feit 2,138,889 2.97% 2,138,889 0 *
Michael M. Ades 427,778 * 427,778 0 *
Roberts & Green 2,566,667 3.56% 2,566,667 0 *
Stig Wennerstrom &
Britt-Marie Wennerstrom
JT TEN 513,333 * 513,333 0 *
Cory D. Heith 342,222 * 342,222 0 *
Stephan L. Kass 427,778 * 427,778 0 *
Kass & Jaffe
Investment Group I 427,778 * 427,778 0 *
Bruce Ferstein 427,778 * 427,778 0 *
Burton Koffman 427,778 * 427,778 0 *
Silverman Partners LLC 855,556 1.19% 855,556 0 *
Stuart Richer 855,556 1.19% 855,556 0 *
Vulcan Properties Inc. 427,778 * 427,778 0 *
Edward Gutman 855,556 1.19% 855,556 0 *
Deerwood Trust 427,778 * 427,778 0 *
Mark Goldberg 427,778 * 427,778 0 *
David Elliot Kent 1,368,889 1.90% 1,368,889 0 *
HCFP/Brenner
Securities, LLC (2) 1,034,353 1.43% 1,034,353 0 *
Penalty Shares
(pro rata to Holders)(3) 1,814,500 N/A 1,814,500 0 *
------------- ----------
Grand Total 19,189,967 19,189,967
-----------------
</TABLE>
(1) Shares held as of June 3, 2003 to the knowledge of the Company. Includes
6,303,000 shares issued in the February 2003 private placement and 10,611,111
shares underlying outstanding Notes issued in the February 2003 private
placement that may be convertible into common stock in the future.
(2)Includes warrants to purchase 461,353 shares of common stock presently
exercisable at $0.09 per share. These warrants were part of compensation to
Placement Agent for the February 2003 placement.
(3)Penalty Shares to be issued to holders if registration obligations are not
fulfilled on a timely basis in accordance with Subscription Agreements and
related instruments.
* Less than one percent.
PLAN OF DISTRIBUTION
The shares being offered by the selling stockholders or their respective
pledgees, donees, transferees or other successors in interest, may be sold from
time to time in one or more transactions (which may involve block transactions):
- on the American Stock Exchange or on such other market on which the
common stock may from time to time be trading;
- in privately-negotiated transactions;
- through the writing of options on the shares;
- short sales; or
- any combination thereof.
The sale price to the public may be:
- the market price prevailing at the time of sale;
- a price related to such prevailing market price;
- at negotiated prices; or
- such other price as the selling stockholder determines from time to
time.
This Prospectus may be used by the individuals and entities listed above
and their successors or by any broker-dealer who may participate in sales of the
common stock offered herein.
The shares may also be sold pursuant to Rule 144. Each selling stockholder
has the sole and absolute discretion not to accept any purchase offer or make
any sale of shares if the selling stockholder deems the purchase price to be
unsatisfactory at any particular time.
Each selling stockholder or the selling stockholder's respective pledgees,
donees, transferees or other successors in interest, may also sell the shares
directly to market makers acting as principals and/or broker-dealers acting as
agents for themselves or their customers. Such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholder and/or the purchasers of shares for whom such broker-dealers
may act as agents or to whom they sell as principal or both, which compensation
as to a particular broker-dealer might be in excess of customary commissions.
Market makers and block purchasers purchasing the shares will do so for their
own account and at their own risk. It is possible that a selling stockholder
will attempt to sell shares of common stock in block transactions to market
makers or other purchasers at a price per share which may be below the then
market price. No selling stockholder can assure that all or any of the shares
offered in this Prospectus will be issued to, or sold by, the selling
stockholder. The sellers of the shares offered in this Prospectus, may be deemed
"underwriters" as that term is defined under the Securities Act or the Exchange
Act, or the rules and regulations under such acts.
The selling stockholder and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchase and sales of any of the shares by, the selling
stockholder or any other such person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and certain other activities with respect to such
securities for a specified period of time prior to the commencement of such
distributions, subject to specified exceptions or exemptions. All of these
limitations may affect the marketability of the shares.
We have agreed to pay the expenses of registering the common stock offered
herein on behalf of the individuals and entities listed above, other than
broker-dealer commissions, discounts or concessions and any legal fees incurred
by the individuals and entities listed above in connection with sales of the
common stock offered herein. Avitar and the individuals and entities listed
above have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act.
EXPERTS
The financial statements incorporated in this Registration Statement by
reference to the Annual Report on Form 10-KSB for the year ended September 30,
2002 have been so incorporated in reliance on the report of BDO Seidman, LLP,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting. The auditors' report contains an explanatory
paragraph regarding the Company's ability to continue as a going concern.
LEGAL MATTERS
Certain legal matters with respect to the validity of the common stock will
be passed upon for Avitar by Dolgenos Newman & Cronin LLP, New York, New York.
STATEMENT OF INDEMNIFICATION
The Company's Certificate of Incorporation, as amended, provides that a
director will not be personally liable to the Company or its stockholders for
monetary damages for the breach of his or her fiduciary duty of care as a
director, including breaches that constitute gross negligence. By its terms and
in accordance with the Delaware General Corporation Law ("DGCL"), however, this
provision does not eliminate or limit the liability of a director of the Company
(i) for breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (relating to unlawful payments of dividends or unlawful stock
repurchases or redemptions) or (iv) for any improper benefit.
This provision offers persons who serve on our board of directors
protection against awards of monetary damages resulting from breaches of their
duty of care (except as indicated above). As a result of this provision, our
ability or our stockholder's ability to successfully prosecute an action against
a director for a breach of his duty of care is limited. However, the provision
does not affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care. The SEC has taken
the position that the provision will have no effect on claims arising under
federal securities laws.
Section 145 of the Delaware law grants corporations the right to indemnify
their directors, officers, employees and agents in accordance with the
provisions therein set forth. Our By-laws provide that we shall, subject to
limited exceptions, indemnify our directors and executive officers to the
fullest extent not prohibited by the Delaware Law. Our By-laws provide further
that we shall have the power to indemnify our other officers, employees and
other agents as set forth in the Delaware law. Such indemnification rights
include reimbursement for expenses incurred by such director, executive officer,
other officer, employee or agent in advance of the final disposition of such
proceeding in accordance with the applicable provisions of the Delaware law.
We have entered into agreements with certain of our directors and officers
pursuant to which we have agreed to indemnify such directors and officers to the
fullest extent permitted under applicable law. In addition, we have purchased
insurance containing customary terms and conditions as permitted by law on
behalf of its directors and officers, which may cover liabilities under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to these provisions, or otherwise, Avitar has been advised
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. Our SEC filings are also available 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 rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
more information on the public reference rooms.
Statements made in this Prospectus concerning the contents of any contract
or other documents are not necessarily complete. With respect to each contract
or other document filed as an appendix to the Registration Statement, reference
is hereby made to that appendix for a more complete description of the matter
involved, and each such statement is hereby qualified in its entirety by such
reference.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file
with them, which means:
. incorporated documents are considered part of the Prospectus;
. we can disclose important information to you by referring you to those
documents; and
. information that we file with the SEC will automatically update and
supersede the Prospectus.
We are incorporating by reference the documents listed below which were
filed with the SEC under the Exchange Act:
. Annual Report on Form 10-KSB/A for the year ended September 30, 2002,
and documents incorporated by reference in such report;
. Quarterly Report on Form 10-QSB, filed February 14, 2003;
. Quarterly Report on Form 10-QSB, filed May 15, 2003;
. Current Report on Form 8-K, filed March 3, 2003.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of the Prospectus but before the end of
the offering:
. Reports filed under Sections 13(a) and (c) of the Exchange Act;
. Definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
. Any reports filed under Section 15(d) of the Exchange Act.
You may request a copy of these filings, at no cost, by contacting us at
the following address or phone number:
Avitar, Inc.
Attn: Mr. Jay Leatherman
Chief Financial Officer
65 Dan Road
Canton, MA 02021
Telephone:(781) 821-2400
You should rely only on the information incorporated by reference or
provided in this Prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling securityholders will
not make an offer of these shares in any state where the offer is not permitted.
You should not assume that the information in this Prospectus or any supplement
is accurate as of any date other than the date on the front of these documents.
=====================================================================
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this Prospectus. You
must not rely on any unauthorized information. If anyone provides you with
different or inconsistent information, you should not rely on it. This
Prospectus does not offer to sell any shares in any jurisdiction where it
is unlawful. The information in this Prospectus is current as of the date
shown on the cover page.
19,189,967 Shares
AVITAR, INC.
Common Stock
--------------------
Prospectus
--------------------
July 24, 2003
=====================================================================
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Avitar in connection with the
sale of the common stock being registered. All amounts are estimates except the
registration fee.
Amount to be
Paid
------------
SEC Registration Fee. . . . . . . . . . . . . . . $ 405.00
Printing and EDGAR . . . . . . . . . . . . . . . . 3,000.00
Legal Fees and Expenses . . . . . . . . . . . . . 12,000.00
Accounting Fees and Expenses. . . . . . . . . . . 2,500.00
Blue Sky Fees and Expenses. . . . . . . . . . . . . 1,000.00
Transfer Agent and Registrar Fees.. . . . . . . . 1,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . 2,500.00
----------
Total . . . . . . . . . . . . . . . . . . $ 22,405.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(the "Delaware Law") grants corporations the right to limit or eliminate the
personal liability of their directors in certain circumstances in accordance
with provisions therein set forth. Our Certificate of Incorporation contains a
provision eliminating director liability to Avitar and its stockholders for
monetary damages for breach of fiduciary duty as a director. The provision does
not, however, eliminate or limit the personal liability of a director: (i) for
any breach of such director's duty of loyalty to Avitar or its stockholders;
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) under the Delaware statutory
provision making directors personally liable, for improper payment of dividends
or improper stock purchases or redemptions; or (iv) for any transaction from
which the director derived an improper personal benefit. This provision offers
persons who serve on our Board of Directors protection against awards of
monetary damages resulting from breaches of their duty of care (except as
indicated above). As a result of this provision, our ability or a stockholder's
ability to successfully prosecute an action against a director for a breach of
his duty of care is limited. However, the provision does not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his duty of care. The SEC has taken the position
that the provision will have no effect on claims arising under federal
securities laws.
Section 145 of the Delaware Law grants corporations the right to indemnify
their directors, officers, employees and agents in accordance with the
provisions therein set forth. Avitar's By-laws provide that the corporation
shall, subject to limited exceptions, indemnify its directors and executive
officers to the fullest extent not prohibited by the Delaware Law. Avitar's
By-laws provide further that Avitar shall have the power to indemnify its other
officers, employees and other agents as set forth in the Delaware Law. Such
indemnification rights include reimbursement for expenses incurred by such
director, executive officer, other officer, employee or agent in advance of the
final disposition of such proceeding in accordance with the applicable
provisions of the Delaware Law.
Avitar has entered into agreements with certain of its directors and
officers pursuant to which Avitar has agreed to indemnify such directors and
officers to the fullest extent permitted under applicable law. In addition,
Avitar has purchased insurance containing customary terms and conditions as
permitted by law on behalf of its directors and officers, which may cover
liabilities under the Securities Act. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
controlling persons of Avitar pursuant to these provisions, or otherwise, Avitar
has been advised that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 16. EXHIBITS
Exhibit Description
------- -----------
4.1 Form of Subscription Agreement dated February 2003 (A)
4.2 Form of Note dated February 2003 (A)
4.3 Form of Warrant issued to HCFP/Brenner Securities, LLC in February 2003
5.1 Opinion of Dolgenos Newman & Cronin LLP as to the legality of the shares
being registered.
23.1 Consent of BDO Seidman LLP, Independent Certified Public Accountants
23.3 Consent of Dolgenos Newman & Cronin LLP (Included in Exhibit 5.1)
24.1 Power of Attorney (Included on the Signature Page)
--------------------------------------------------------------------------------
(A) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Company's Quarterly Report for the fiscal period ended March 31,2003
(Commission File No. 0-20316), and incorporated herein by reference.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (a) (i) and (a) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(b) That, for the purpose of determining any liability under the Securities Act
of 1933; each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Canton, Commonwealth of Massachusetts, on July 24,
2003.
Avitar, Inc.
By: /s/ Peter P. Phildius
----------------------------------------
Peter P. Phildius
Chairman and Chief Executive Officer
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Peter P. Phildius
and Jay C. Leatherman and each of them severally, acting alone and without the
other, his true and lawful attorney-in-fact with authority to execute in the
name of each such person, and to file with the SEC, together with any exhibits
thereto and other documents therewith, any and all amendments (including without
limitation post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act, necessary or advisable to enable the registrant
to comply with the Securities Act and any rules, regulations and requirements of
the SEC in respect thereof, which amendments may make such changes in this
Registration Statement as the aforesaid attorney-in-fact deems appropriate.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
/s/ Peter P. Phildius
--------------------------------------
Peter P. Phildius
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: July 24, 2003
/s/ Douglas W. Scott
--------------------------------------
Douglas W. Scott
Chief Operating Officer and Director
Date: July 24, 2003
/s/ Neil R. Gordon
--------------------------------------
Neil R. Gordon
Director
Date: July 24, 2003
/s/ James Groth
--------------------------------------
James Groth
Director
Date: July 24, 2003
/s/ Charles R. McCarthy
--------------------------------------
Charles R. McCarthy
Director
Date: July 24, 2003
/s/ Jay C. Leatherman
--------------------------------------
Jay C. Leatherman
Controller, Secretary and Chief
Financial and Accounting Officer
(Principal Accounting and Financial Officer)
Date: July 24, 2003
EXHIBIT INDEX
Exhibit Description
------- -----------
4.1 Form of Subscription Agreement dated February 2003 (A)
4.2 Form of Note dated February 2003 (A)
4.3 Form of Warrant issued to HCFP/Brenner Securities, LLC in February 2003
5.1 Opinion of Dolgenos Newman & Cronin LLP as to the legality of the Offered
Shares being registered.
23.1 Consent of BDO Seidman LLP, Independent Certified Public Accountants
23.3 Consent of Dolgenos Newman & Cronin LLP (Included in Exhibit 5.1)
24.1 Power of Attorney (Included on the Signature Page)
--------------------------------------------------------------------------
(A) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Company's Quarterly Report for the fiscal period ended March 31,2003
(Commission File No. 0-20316), and incorporated herein by reference.