Filed Pursuant to Rule 424(b)(3)
REGISTRATION NO. 333-124794
PROSPECTUS
----------------------------------------
15,000,000 Shares
AVITAR, INC.
Common Stock
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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 May 17, 2005, the closing price reported on the American Stock
Exchange was $0.09 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 3.
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.
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The date of this Prospectus is May 20, 2005
TABLE OF CONTENTS
PROSPECTUS
Page
ABOUT AVITAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FORWARD-LOOKING STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SELLING SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
STATEMENT OF INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 10
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . . . . .11
INCORPORATION OF INFORMATION WE FILE WITH THE SEC . . . . . . . . . . . . . .11
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(R), the world's first point-of-contact rapid oral fluid
screening device for drugs of abuse,
- - DRUGOMETER(TM), an instrument that automates the analysis, recording,
reporting and transmitting of results for the ORALscreen(R) drugs of abuse
tests, and
- - other ORALscreen(R)-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) 821-2440.
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 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 a working capital deficit, which was approximately $390 thousand
at September 30, 2004 and approximately $903 thousand at March 31, 2005. During
fiscal year 2005, the Company's cash requirements are expected to include
primarily the funding of operating losses, the payment of outstanding accounts
payable, the repayment of certain notes payable, the funding of operating
capital to grow the Company's drugs of abuse testing products and services, and
the continued funding for the development of its ORALscreen(R) product line. The
Company is seeking additional capital and plans to raise an additional
$8,000,000 during the remainder of Fiscal 2005. 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.
WE HAVE SUSTAINED LOSSES IN THE PAST AND WE EXPECT TO REPORT LOSSES IN THE
FUTURE; GOING CONCERN EXPLANATORY PARAGRAPH IN REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.
We have incurred substantial losses that have reduced our stockholder's 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, $6.46 million during fiscal year 2003, $2.97 million during fiscal year
2004 and $1.82 million during the first half of fiscal year 2005.
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. Economic conditions during fiscal year 2003 and 2004 and current
economic conditions have imposed significant constraints on capital raising and
have caused actual operating revenues to remain at a lower than expected level
during fiscal years 2003 and 2004 and the first half of fiscal year 2005.
As a result of the Company's recurring losses from operations and working
capital deficit, the report of its independent registered public accounting firm
relating to the financial statements for fiscal year 2004 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 (December 8,
2004, except for Note 17 for which the date is December 17, 2004).
PRINCIPAL SUPPLIER RISK
Suppliers of two key components are, in each case, the current sole source for
the Company. 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. 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.
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. Lack of
availability of any of these parts and components could result in production
delays, increased costs, or costly redesign of our products. 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.
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.
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) in the public market could depress the market
price of our common stock. As of May 10, 2005, we had approximately 157
million shares outstanding and approximately 62 million shares committed or
reserved for issuance upon exercise of options and warrants or conversion of
convertible preferred shares.
RISK OF DELISTING FROM AMEX IF AVITAR FAILS TO REGAIN COMPLIANCE WITH CONTINUED
LISTING STANDARDS
Avitar does not meet all the continued listing standards of The
American Stock Exchange (AMEX) primarily because of its accumulated losses that
have reduced shareholders' equity to a deficit. AMEX has accepted Avitar's
Compliance Plan and granted an extension to July of 2005. However, Avitar is
subject to periodic review by AMEX and its shares could be delisted if Avitar
fails to regain compliance with the continued listing standards.
WE DEPEND ON THE DRUG OF ABUSE SCREEN SYSTEMS
We intend to continue to concentrate our efforts primarily on the development of
the ORALscreen(R) 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(R) 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(R) 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.
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(R) 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.
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.
SELLING SECURITY HOLDERS
The shares of common stock offered herein include 11,718,750 shares
reserved for issuance on conversion of $750,000 Series E Convertible Preferred
Stock based upon current market conversion prices; 75,000 shares that may be
issued on exercise of outstanding warrants; 1,171,875 shares ("Interest Shares")
reserved for possible issuance on conversion of $75,000 Series E Convertible
Preferred Stock that may be issued for interest accruing at 5% over the possible
two year term of the $750,000 Series E Convertible Preferred Stock (again based
upon current market conversion prices), and another 2,034,375 shares
("Additional Conversion Shares") reserved for issuance on conversion of Series E
Convertible Preferred Stock based upon possible reduction of future market
conversion prices.
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 entities listed below. The
following table assumes that the entities listed below will sell all of the
common stock offered herein set forth opposite their respective names. However,
the entities listed below may sell only a portion or may sell none of the shares
set forth opposite their names.
In the information immediately following this table and footnotes, we
describe each selling shareholder's relationship to the Company and how each
selling shareholder acquired the shares to be sold in this offering.
Common Shares Common Shares
Beneficially Owned Beneficially Owned
Prior to the Number of After the Offering
Offering (1) Shares to
______________________ be Sold ________________________
Number Percent in the Number of Percent
of Shares of Class Offering Shares of Class
-------- -------- --------- ------- --------
Cornell Capital
Partners, L.P. 10,628,700 (2) 4.99% 11,793,750 (3) 989,673 (4) * %
Dividend (5%) Shares 0 0% 1,171,875 (5) 0 * %
Additional
Conversion Shares 0 0% 2,034,375 (6) 0
- -------------------------------------------------------------------------------------------------------------
Grand Total 10,628,700 4.99% 15,000,000 989,673 * %
- -----------------
(1) Shares beneficially held as of April 30, 2005 to the knowledge of the
Company.
(2) Includes (a) 11,718,750 shares underlying $750,000 Series E Convertible
Preferred Stock (based upon current market conversion prices) and (b) warrants
to purchase 75,000 shares, but limited to 4.99% as discussed below. Avitar
committed to issue the $750,000 Series E Convertible Preferred Stock and
warrants to purchase 75,000 shares to Cornell Capital Partners, L.P. pursuant to
a Securities Purchase Agreement delivered on April 19, 2005 as part of a private
placement in exchange for total gross proceeds of $750,000 ($375,000 paid on
April 19, 2005 and $375,000 paid on May 9, 2005). The Series E Convertible
Preferred Stock are convertible into common stock at the lesser of $0.08 per
share and 80% of the average of the three (3) lowest closing bid prices for the
ten (10) trading days immediately prior to the notice of conversion, subject to
adjustments and automatically convert on the second anniversary date, April 19,
2007, together with dividends at 5% per annum that may be paid by issuance of
stock ; but all limited to issuance of shares of no more than 4.99% beneficial
ownership pursuant to the Securities Purchase Agreement between the Company and
Cornell Capital Partners, L.P.
(3) Includes (a) 11,718,750 shares underlying $750,000 shares of Series E
Convertible Preferred Stock (based upon current market conversion prices)
convertible into common stock at the lesser of $0.08 per share and 80% of the
average of the three (3) lowest closing bid prices for the ten (10) trading days
immediately prior to the notice of conversion, and (b) 75,000 warrants. The
warrants are exercisable at $0.084 per share.
(4) Shares of common stock issued to Cornell Capital Partners, L.P. as fees in
connection with a Standby Equity Distribution Agreement ("SEDA") entered into
with the Company as of February 1, 2005, but terminated on April 19, 2005. As
discussed in more detail below, these shares would be returned to the Company
under certain circumstances, but would be retained by Cornell Capital Partners,
L.P. if a new SEDA on identical terms were entered into within a specified 90
day period.
(5) "Dividend Shares" reserved for possible issuance on conversion of $75,000
shares of Series E Convertible Preferred Stock that may be issued for dividends
accruing at 5% over the possible two year term of the $750,000 Series E
Convertible Preferred Stock (again based upon current market conversion prices).
(6) "Additional Conversion Shares" reserved for issuance on conversion of Series
E Convertible Preferred Stock based upon possible reduction of future market
conversion prices.
* Less than one percent (1%).
Description of Relationship of Cornell Capital Partners, L.P. with Avitar
The following information concerns (i) each selling shareholder's relationship
to Avitar and (ii) how each selling shareholder acquired the shares to be sold
in this offering. None of the selling shareholders have held a position or
office, or had any other material relationship, with the Company, except as
follows:
SHARES ACQUIRED IN FINANCING TRANSACTIONS WITH AVITAR
- - CORNELL CAPITAL PARTNERS, LP. Cornell Capital Partners, LP is the investor
under the Securities Purchase Agreement and a holder of the Series E
Convertible Preferred Stock and related Warrants. Yorkville Advisors, LLC
is the general partner of Cornell Capital Partners. As general partner,
Yorkville Advisors, LLC controls and makes all investment decisions for
Cornell Capital Partners. Mark Angelo, the managing member of Yorkville
Advisors, makes the investment decisions on behalf of and controls
Yorkville Advisors. Cornell Capital Partners acquired all shares being
registered in this offering in financing transactions with Avitar. Those
transactions are explained below:
- - SECURITIES PURCHASE AGREEMENT. On April 19, 2005, we entered into a
Securities Purchase Agreement with Cornell Capital Partners. Pursuant to
the Securities Purchase Agreement, we issued $750,000 of the Company's
Series E Convertible Preferred Stock and Warrants to purchase 75,000 shares
of the Company's common stock in exchange for gross proceeds of $750,000,
of which $375,000 was paid in the first closing and a second tranche of
$375,000 was paid on May 9, 2005. The $750,000 Series E Convertible
Preferred Stock are convertible into common stock at the lesser of $0.08
per share or 80% of the average of the three (3) lowest closing bid prices
for the ten (10) trading days immediately prior to the notice of
conversion, subject to adjustments and limitations, and the Warrants are
exercisable at $0.084 per share.
The Series E Convertible Preferred Stock has a potential two-year term
accruing dividends at 5% per year until automatic conversion on its second
anniversary date, April 19, 2007. If Cornell Capital Partners chooses to have
interest be payable in common stock of the Company, rather than cash, this could
have a further dilutive impact on our stockholders and could cause our stock
price to decline. At maturity, the Series E Convertible Preferred Stock will
automatically convert into shares of common stock at the then market conversion
price. We are registering 11,718,750 shares of common stock under this
prospectus based on current market conversion prices under the Series E
Convertible Preferred Stock and 2,034,375 Additional Conversion Shares for
possible reductions of future market conversion prices and 1,171,875 Dividend
Shares that may be issued in lieu of cash for accrued dividends.
On April 19, 2005, prior to entering into the Securities Purchase Agreement
referred to above, the parties entered into a Termination Agreement terminating
a Standby Equity Distribution Agreement ("SEDA") and related agreements made as
of February 1, 2005. If Cornell Capital Partners does not enter into a SEDA on
identical terms within 90 days after all amounts payable under the Securities
Purchase Agreement are satisfied, Cornell Capital Partners agreed to return to
Avitar all fees received pursuant to the February 2005 SEDA.
There are certain risks related to sales by Cornell Capital Partners, L.P.
("Cornell") including:
> The shares will be issued based on a discount to market prices. As a
result, the lower the stock price around the time Cornell is issued
shares, the greater chance that Cornell receives more shares. This
could result in substantial dilution to the interests of other holders
of common stock.
> To the extent Cornell sells its common stock, the common stock price
may decrease due to the additional shares in the market. This could
allow Cornell to sell greater amounts of common stock, the sales of
which would further depress the stock price.
> The significant downward pressure on the price of the common stock as
Cornell sells material amounts of common stock could encourage short
sales by third parties. This could place further downward pressure on
the price of the common stock.
PLAN OF DISTRIBUTION
We are registering the common stock, including the common
stock underlying the warrants and the shares of preferred stock on behalf of the
selling stockholders. The common stock may be sold in one or more transactions
at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market prices, at varying prices determined at the
time of sale, or at negotiated prices. These sales may be effected at various
times in one or more of the following transactions, or in other kinds of
transactions:
- transactions on The American Stock Exchange or on any national
securities exchange or U.S. inter-dealer system of a registered
national securities association on which the common stock may be
listed or quoted at the time of sale;
- in the over-the-counter market;
- in private transactions and transactions otherwise than on these
exchanges or systems or in the over-the-counter market;
- in connection with short sales of the shares;
- by pledge to secure or in payment of debt and other obligations;
- through the writing of options, whether the options are listed on an
options exchange or otherwise;
- in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options; or
- through a combination of any of the above transactions.
The selling stockholders and their successors, including their transferees,
pledgees or donees or their successors, may sell the common stock directly to
the purchasers or through underwriters, broker-dealers or agents, who may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders or the purchasers. These discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be in
excess of those customary in the types of transactions involved.
In addition, any securities covered by this prospectus that qualify for
sale pursuant to Rule 144 under the Securities Act may be sold pursuant to Rule
144 rather than pursuant to this prospectus.
We entered into registration rights agreements for the benefit of the
selling stockholders to register the common stock under applicable federal and
state securities laws. The registration rights agreements provide for
cross-indemnification of the selling stockholders and us and our respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the common stock, including liabilities
under the Securities Act. We will pay substantially all of the expenses incurred
by the selling stockholders incident to the registration of the offering and
sale of the common stock.
The selling stockholders 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
stockholders 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.
EXPERTS
The financial statements incorporated by reference in this Registration
Statement have been audited by BDO Seidman, LLP, an independent registered
public accounting firm, to the extent and for the periods set forth in their
report (which contains an explanatory paragraph regarding the Company's ablility
to continue as a going concern) incorporated herein by reference, and are
incorporated herein in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.
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 our 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:
o Annual Report on Form 10-KSB/A-2 for the year ended September 30,
2004, and documents incorporated by reference in such report; and
o Quarterly Report on Form 10-QSB/A-1 for the quarter ended December 31,
2004; and
o Quarterly Report on Form 10-QSB/A-1 for the quarter ended March 31,
2005; and
o Current Report on Form 8-K dated February 1, 2005 reporting on Item
1.01 Entry into a Material Definitive Agreement; and
o Current Report on Form 8-K dated April 19, 2005 reporting on Item 1.01
Entry into a Material Definitive Agreement; Item 1.02 Termination of a
Material Definitive Agreement, and Item 3.02 Unregistered Sales of
Equity Securities.
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) 821-2440
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.
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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.
15,000,000 Shares
AVITAR, INC.
Common Stock
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Prospectus
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May 20, 2005
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