-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fch9kqz/JDVPbiCs3/DHneKi6mKUt2mZE7gPPv3TWf08xGZsoF0R+0Pbsaqn6VkK BkkgCYhsiwrSla/gZEBsbQ== 0000725058-03-000010.txt : 20030514 0000725058-03-000010.hdr.sgml : 20030514 20030514165758 ACCESSION NUMBER: 0000725058-03-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYTOGEN CORP CENTRAL INDEX KEY: 0000725058 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 222322400 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14879 FILM NUMBER: 03699862 BUSINESS ADDRESS: STREET 1: 600 COLLEGE RD EAST CN 5308 CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6099878200 MAIL ADDRESS: STREET 1: 600 COLLEGE RD EAST CN 5308 STREET 2: 600 COLLEGE RD EAST CN 5308 CITY: PRINCETON STATE: NJ ZIP: 08540 10-Q 1 cytogen_q1-2003.txt CYTOGEN 1ST QUARTER 2003 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 -------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- ------------------- Commission file number 000-14879 Cytogen Corporation ------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 22-2322400 - ------------------------------- ---------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 650 College Road East, CN 5308, Suite 3100, Princeton, NJ 08540-5308 -------------------------------------------------------------------- (Address of Principal Executive Offices and Zip Code) Registrant's Telephone Number, Including Area Code: (609) 750-8200 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No . --- --- Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No . --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at May 1, 2003 - ---------------------------- -------------------------- Common Stock, $.01 par value 8,813,832 CYTOGEN CORPORATION AND SUBSIDIARIES INDEX TO FORM 10-Q Part I. FINANCIAL INFORMATION............................................... 1 Item 1. Financial Statements................................................ 1 Consolidated Balance Sheets as of March 31, 2003 (unaudited) and December 31, 2002...................................... 1 Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002 (unaudited).................................... 2 Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002 (unaudited).................................... 3 Notes to Consolidated Financial Statements (unaudited).................. 4 Item 2. Management's Discussion And Analysis Of Financial Condition And Results of Operations................................................... 9 Item 3. Quantitative And Qualitative Disclosures About Market Risk.......... 17 Item 4. Controls and Procedures............................................. 18 Part II. OTHER INFORMATION.................................................. 19 Item 6. Exhibits And Reports On Form 8-K.................................... 19 SIGNATURES................................................................... 20 CERTIFICATIONS............................................................... 21 (i) PART I - FINANCIAL INFORMATION Item 1 - Consolidated Financial Statements CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share and per share data) (Unaudited)
March 31, December 31, 2003 2002 ---------- ------------ ASSETS: Current Assets: Cash and cash equivalents ...................................... $ 11,131 $ 14,725 Accounts receivable, net ....................................... 1,419 1,778 Inventories .................................................... 1,838 1,262 Other current assets ........................................... 1,104 643 --------- --------- Total current assets ....................................... 15,492 18,408 Property and Equipment, net ...................................... 917 1,072 Other Assets ..................................................... 1,047 414 --------- --------- $ 17,456 $ 19,894 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Current portion of long-term liabilities ....................... $ 75 $ 80 Accounts payable and accrued liabilities ....................... 4,017 4,427 Deferred revenue ............................................... 354 385 --------- --------- Total current liabilities .................................. 4,446 4,892 --------- --------- Long-Term Liabilities ............................................ 2,614 2,614 --------- --------- Deferred Revenue ................................................. 1,735 1,800 --------- --------- Stockholders' Equity: Preferred stock, $.01 par value, 5,400,000 shares authorized - Series C Junior Participating Preferred Stock, $.01 par value, 200,000 shares authorized, none issued and outstanding ....... - - Common stock, $.01 par value, 25,000,000 shares authorized, 8,764,074 and 8,758,235 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively ........ 88 88 Additional paid-in capital ..................................... 366,906 366,884 Deferred compensation .......................................... (2) (4) Accumulated deficit ............................................ (358,331) (356,380) --------- --------- Total stockholders' equity ................................. 8,661 10,588 --------- --------- $ 17,456 $ 19,894 ========= =========
The accompanying notes are an integral part of these statements. 1 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands, except per share data) (Unaudited)
Three Months Ended March 31, ---------------------------- 2003 2002 ---------- ---------- Revenues: Product related: ProstaScint ......................................... $ 1,620 $ 2,076 Others .............................................. 265 506 ------- ------- Total product sales ........................ 1,885 2,582 Quadramet royalties ................................. 449 499 ------- ------- Total product related ...................... 2,334 3,081 License and contract ................................ 143 215 ------- ------- Total revenues ............................. 2,477 3,296 ------- ------- Operating Expenses: Cost of product related revenues ...................... 910 1,054 Research and development .............................. 833 3,799 Equity loss in PSMA LLC ............................... 880 513 Selling and marketing ................................. 1,302 1,453 General and administrative ............................ 1,076 1,510 ------- ------- Total operating expenses ................... 5,001 8,329 ------- ------- Operating loss ............................. (2,524) (5,033) Interest income ......................................... 36 77 Interest expense ........................................ (47) (42) ------- ------- Loss before income taxes ................... (2,535) (4,998) Income tax benefit ...................................... (584) - ------- ------- Net loss ................................................ $(1,951) $(4,998) ======= ======= Basic and diluted net loss per share .................... $ (0.22) $ (0.62) ======= ======= Weighted average common shares outstanding............... 8,763 8,122 ======= =======
The accompanying notes are an integral part of these statements. 2 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (Unaudited)
Three Months Ended March 31, ---------------------------- 2003 2002 ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ....................................................... $ (1,951) $ (4,998) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization .......................... 163 194 Stock-based compensation expenses ...................... 5 501 Amortization of deferred revenue ....................... (96) (215) Stock-based milestone payment .......................... - 2,000 Changes in assets and liabilites: Receivables, net ..................................... 359 961 Inventories .......................................... (576) 200 Other assets ......................................... (1,102) 189 Accounts payable and accrued liabilities ............. (396) (1,380) Other liabilities .................................... 39 39 -------- -------- Net cash used in operating activities .................. (3,555) (2,509) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of equipment ............................ - 100 Purchases of property and equipment ............................ - (24) -------- -------- Net cash provided by investing activities .............. - 76 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock ......................... 5 7,991 Payment of long-term liabilities ............................... (44) (24) -------- -------- Net cash provided by (used in) financing activities .... (39) 7,967 -------- -------- Net increase (decrease) in cash and cash equivalents ........... (3,594) 5,534 Cash and cash equivalents, beginning of period ................. 14,725 11,309 -------- -------- Cash and cash equivalents, end of period ....................... $ 11,131 $ 16,843 ======== ========
The accompanying notes are an integral part of these statements. 3 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Company Cytogen Corporation ("Cytogen" or the "Company") of Princeton, New Jersey is a product-driven, oncology-focused biopharmaceutical company. Cytogen markets proprietary and licensed oncology products through its in-house specialty sales force: ProstaScint(R) (a monoclonal antibody-based imaging agent used to image the extent and spread of prostate cancer) and NMP22(R) BladderChek(TM) (a point-of-care, in vitro diagnostic test for bladder cancer). Cytogen has also developed Quadramet(R), a skeletal targeting therapeutic radiopharmaceutical for the relief of bone pain in prostate and other types of cancer, for which the Company receives royalties on product sales through Berlex Laboratories, the U.S. affiliate of Schering AG Germany, which markets the product in the United States. Cytogen's pipeline comprises product candidates at various stages of clinical development, including fully human monoclonal antibodies and cancer vaccines based on PSMA (prostate specific membrane antigen) technology, which was exclusively licensed from Memorial Sloan-Kettering Cancer Center. Cytogen also conducts research in cellular signaling through its AxCell Biosciences research subsidiary in Newtown, PA. In August 2000, the Company expanded its product pipeline by entering into marketing, license and supply agreements with Advanced Magnetics, Inc. for Combidex(R), which is an investigational magnetic resonance imaging (MRI) contrast agent that assists in the differentiation of metastatic from non-metastatic lymph nodes. Cytogen holds exclusive United States marketing rights to Combidex. Advanced Magnetics is continuing its discussions with the FDA relating to outstanding issues regarding an approvable letter received from the FDA dated June 2000, in an effort to bring Combidex to market. Basis of Consolidation The consolidated financial statements include the accounts of Cytogen and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation The consolidated financial statements and notes thereto of Cytogen are unaudited and include all adjustments, which in the opinion of management, are necessary to present fairly the financial condition and results of operations as of and for the periods set forth in the Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Cash Flows. All such accounting adjustments are of a normal, recurring nature. The consolidated financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 4 10-K, as amended, filed with the Securities and Exchange Commission, which includes financial statements as of and for the year ended December 31, 2002. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full year. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks and all highly-liquid investments with a maturity of three months or less at the time of purchase. Inventories The Company's inventories are primarily related to ProstaScint and NMP22 BladderChek. Inventories are stated at the lower of cost or market using the first-in, first-out method and consisted of the following: March 31, December 31, 2003 2002 ---------- ----------- Raw materials................. $ 780,000 $ 506,000 Work-in process............... 541,000 39,000 Finished goods................ 517,000 717,000 ---------- ---------- $1,838,000 $1,262,000 ========== ========== Net Loss Per Share Basic net loss per common share is based upon the weighted average common shares outstanding during each period. Diluted net loss per common share is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive due to the Company's losses. Other Comprehensive Loss Other comprehensive loss consisted of an unrealized loss on a marketable security. For the three months ended March 31, 2002, the fair market value of that security decreased $316,000, and as a result, the comprehensive loss for the three months ended March 31, 2002 was $5,314,000. There were no marketable securities outstanding during the first quarter of 2003 and therefore no other comprehensive gains or losses. Stock-based Compensation The Company follows the intrinsic value method of accounting for stock-based employee compensation in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. The Company records deferred compensation for option grants to employees for the amount, if any, by which the market price per share exceeds the exercise price per share at the measurement date, which is generally the grant date. 5 The Company follows the disclosure provisions of SFAS 123 "Accounting for Stock-Based Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." Had compensation cost for options been recognized in the consolidated statements of operations using the fair value method of accounting, the Company's net loss and net loss per share would have been: Three Months Ended March 31, ---------------------------- 2003 2002 ---- ---- Net loss, as reported ............................ $(1,951,000) $(4,998,000) Add: Stock-based employee compensation expense included in reported net loss ...... 1,000 288,000 Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards .......... (351,000) (789,000) ----------- ----------- Pro forma net loss ............................... $(2,301,000) $(5,499,000) =========== =========== Basic and diluted net loss per share, as reported $ (0.22) $ (0.62) Pro forma basic and diluted net loss per share ... $ (0.26) $ (0.68) 2. EQUITY LOSS IN PSMA DEVELOPMENT CO. LLC: In June 1999, Cytogen entered into a joint venture with Progenics Pharmaceuticals Inc. ("Progenics"), the PSMA Development Company LLC, (the "Joint Venture"), to develop vaccine and antibody-based immunotherapeutic products utilizing Cytogen's exclusively licensed PSMA technology. The Joint Venture is owned equally by Cytogen and Progenics. The Company accounts for the Joint Venture using the equity method of accounting. Through November 2001, Progenics was obligated to fund the initial $3.0 million of the development costs. Beginning in December 2001, Cytogen began to recognize 50% of the Joint Venture's operating results in its consolidated statement of operations. The JV is expected to continue to incur losses in future years. For the three months ended March 31, 2003 and 2002, Cytogen recognized $880,000 and $513,000, respectively, of such losses. As of March 31, 2003 and December 31, 2002, the carrying value of the Company's investment in the Joint Venture was $622,000 and $1,000, respectively, which represents Cytogen's investment to date in the Joint Venture, less its cumulative share of losses, which net investment is recorded in other assets. Selected financial statement information of the Joint Venture is as follows: 6 March 31, December 31, 2003 2002 ------------ ------------ Balance Sheet Data: Cash ................................ $ 1,903,000 $ 290,000 ============ ============ Accounts payable .................... $ 676,000 $ 304,000 Capital contributions ............... 14,399,000 11,399,000 Accumulated deficit ................. (13,172,000) (11,413,000) ------------ ------------ $ 1,903,000 $ 290,000 ============ ============ For the Period Three Months Ended From June 15, 1999 ---------------------------- (inception) to 2003 2002 March 31, 2003 ------------ ------------ ------------------ Interest income............ $ - $ - $ 229,000 Total expenses ............ 1,759,000 1,027,000 13,401,000 ------------ ------------ ------------ Net loss .................. $ (1,759,000) $ (1,027,000) $(13,172,000) ============ ============ ============ 3. LITIGATION: On March 17, 2000, Cytogen was served with a complaint filed against the Company in the U.S. District Court for the District of New Jersey by M. David Goldenberg ("Goldenberg") and Immunomedics, Inc. (collectively "Plaintiffs"). The litigation claims that ProstaScint infringes a patent purportedly owned by Goldenberg and licensed to Immunomedics. The Company believes that ProstaScint does not infringe this patent, and that the patent is invalid and unenforceable. The patent sought to be enforced in the litigation has now expired; as a result, the claim even if successful would not result in an injunction barring the continued sale of ProstaScint or affect any other of Cytogen's products or technology. In addition, the Company has certain rights to indemnification against litigation and litigation expenses from the inventor of technology used in ProstaScint, which may be offset against royalty payments on sales of ProstaScint. On December 17, 2001, Cytogen filed a motion for summary judgment of non-infringement of the asserted claims of the patent-in-suit. The Plaintiffs opposed that motion and filed their own cross-motion for summary judgment of infringement. On July 3, 2002, the Court denied both parties' summary judgment motions, with leave to renew those motions after hearing expert testimony and legal argument based upon that testimony. On April 29, 2003, Cytogen's motion for summary judgment of non-infringement of all asserted claims was granted, plantiff's motion for summary judgement of infringement was denied and the case was ordered closed. On May 12, 2003, Plaintiffs filed a Notice of Appeal regarding this decision to the U.S. Court of Appeals for the Federal Circuit. 7 4. INCOME TAXES During the first quarter of 2003, the Company sold New Jersey State net operating loss and research and development credit carryforwards, which resulted in the recognition of $584,000 of income tax benefit. 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q regarding our strategy, future operations, financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements involve a number of risks and uncertainties and investors are cautioned not to put any undue reliance on any forward-looking statement. We cannot guarantee that we will actually achieve the plans, intentions or expectations disclosed in any such forward-looking statements. Factors that could cause actual results to differ materially, include, but are not limited to those identified in the our Annual Report on Form 10-K for the year ended December 31, 2002, as amended, under the caption "Additional Factors That May Affect Future Results". Investors are cautioned not to put undue reliance on any forward looking statement. Cautionary Statement Our actual results may differ materially from our historical results of operations and those discussed in the forward-looking statements for various reasons, including, but not limited to, our ability to: (i) access the capital markets in the near term and in the future for continued funding of our operations including existing and new projects and to maintain the listing of our common stock on the Nasdaq National Market; (ii) attract and retain personnel needed for business operations and strategic plans; (iii) carry out our business and financial plans; (iv) attract, and the ultimate success of, strategic partnering arrangements, collaborations, and acquisition candidates; (v) successfully develop and commercialize in-licensed products such as NMP22(R) BladderChek(TM), including programs designed to facilitate the use of our products, such as the Partners in Excellence or PIE Program; (vi) establish and successfully complete clinical trials where required for product approval; (vii) obtain foreign regulatory approvals for products and to establish marketing arrangements in countries where approval is obtained; (viii) demonstrate, over time, the efficacy and safety of our products; (ix) determine and implement the appropriate strategic initiative for our AxCell Biosciences subsidiary; and (x) fund development necessary for existing products and for the pursuit of new product opportunities. Additional risks that we face include, but are not limited to: (i) the risk of whether marketable and valuable products result from our development activities; (ii) the possibility that we may not be able to adequately protect our intellectual property portfolio; (iii) the degree of competition we may face from existing or new products; (iv) the risks associated with obtaining the necessary regulatory approvals; (v) the ability of Advanced Magnetics to satisfy the conditions specified by the FDA regarding approval to market Combidex(R) in the United States; (vi) shifts in the regulatory environment affecting sale of our products such as third-party payor reimbursement issues and dependence on our partners for development of certain projects; (vii) competitive products and technologies; (viii) price pressure; and (ix) other factors discussed in our press releases and from time-to-time in our other filings with the Securities and Exchange Commission. Any forward-looking statements made by us do not reflect the potential impact of any 9 future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not assume, and specifically disclaim, any obligation to update any forward-looking statements, and these statements represent our current outlook only as of the date given. The following discussion and analysis should be read in conjunction with the Financial Statements and related notes thereto contained elsewhere herein, as well as our Annual Report on Form 10-K for the year ended December 31, 2002, as amended, and from time to time in our other filings with the Securities and Exchange Commission. Significant Events in 2003 In January 2003, we provided Draximage Inc. with notice of termination for each of our License and Distribution Agreement and Product Manufacturing and Supply Agreement with respect to both of Draximage's BrachySeed I-125 and BrachySeed Pd-103 products. Effective January 24, 2003, we no longer accept or fill new orders for the BrachySeed products. In April 2003, we entered into an agreement with Draximage formally terminating each of these agreements. In April 2003, NMP22 BladderChek was awarded clearance from the FDA for use in screening patients for bladder cancer, in addition to approval gained previously for the indication of monitoring patients who have a prior diagnosis of bladder cancer. In October 2002, we entered into a five-year agreement with Matritech Inc. to be the sole distributor for Matritech's NMP22 BladderChek test to urologists and oncologists in the United States. Retention of exclusivity rights depends upon meeting certain minimum annual purchases. NMP22 Bladderchek is an in-vitro point of care diagnostic test for bladder cancer that requires only a few drops of a patient's urine. NMP22 BladderChek returns results in thirty minutes and provides urologists with a new tool to improve detection and early diagnosis when used in combination with cytoscopy, a clinical procedure for the visual identification of tumors in the bladder. We are in the early-phase of launching NMP22 BladderChek and are promoting the product to urologists in the U.S. using our in-house sales force. Results of Operations Three Months Ended March 31, 2003 and 2002 Revenues. Total revenues for the first quarter of 2003 were $2.5 million compared to $3.3 million for the same period in 2002. The decrease from the prior year period is due primarily to lower product related revenues resulting from lower ProstaScint sales and from the discontinuation of selling and marketing the brachytherapy products as of January 24, 2003 and OncoScint as of December 31, 2002. Product related revenues, which included product sales and royalties, accounted for 94% and 93% of total revenues for the first quarters of 2003 and 2002, respectively. License and contract revenues accounted for the remainder of revenues. Product related revenues for the first quarter of 2003 were $2.3 million compared to $3.1 million for the same period in 2002. Sales of ProstaScint accounted for 69% and 67% of product related revenues in the first quarters of 2003 and 2002, respectively, while Quadramet royalties accounted for 19% and 16% of product related revenues for such quarters, respectively. Sales of ProstaScint were $1.6 million for the first quarter of 2003, a decrease of $456,000 from $2.1 million in the first quarter of 2002. We believe that the 10 year-over-year decline in first quarter ProstaScint sales was largely due to changes in radiopharmacy wholesaler buying patterns. Year-over-year declines in first quarter ProstaScint sales also occurred during 2001 and 2002, while annual product sales increased during these periods, although historical performance may not be indicative of future results. We also believe future growth for ProstaScint is dependent upon, among other things, the implementation and continued research of the following: - Advances in imaging technology - Fusion imaging - an image processing technique that combines functional information from a ProstaScint scan with anatomic images provided by CT (computed tomography) or MR (magnetic resonance) scans in a digital overlay to provide information that cannot be achieved with separate imaging modalities alone, which may improve diagnostic interpretation; and - Image enhancements - improving the quality of ProstaScint images through reconstruction and attenuation-correction methods to address inherent limitations of single photon emission computed tomography (SPECT) imaging by correcting for the effects of radiation scatter and/or inherent collimator/detector blur. - New product applications - Utilization of ProstaScint scans to guide therapy ("image-guided therapy"), to enhance therapy targeting for treatments such as brachytherapy, cryotherapy and external beam radiation, such as intensity modulated radiation therapy (IMRT); and - Utilization of ProstaScint scans to guide biopsy ("image-guided biopsy"), which could be facilitated by future advances in image acquisition technology. There can be no assurance, however, that the achievement of any of the above will significantly increase the sales of ProstaScint. Other product sales include sales from NMP22 BladderChek, BrachySeed (ended January 2003) and OncoScint (ended December 2002). Sales of NMP22 BladderChek during the first quarter 2003 were $25,000. NMP22 BladderChek is one of only two immunoassay fluid tests approved by the FDA for screening patients for cancer; the other is the prostate specific antigen (PSA) test for prostate cancer. We began promoting NMP22 BladderChek to urologists in the United States in November 2002 using our in-house sales force. The NMP22 BladderChek test is currently approved for use in two clinical settings: - Monitoring - In July 2002, Matritech, Inc. received FDA approval to market the NMP22 BladderChek test for monitoring patients previously diagnosed with bladder cancer; and - Screening - In April 2003, Matritech received FDA approval to market the NMP22 BladderChek test to aid in the diagnosis of patients with bladder cancer. There can be no assurance however, as to the market acceptance of NMP22 BladderChek or whether the sale of NMP22 Bladderchek will significantly increase our revenues. 11 Sales of BrachySeed during the first quarter of 2003 were $240,000 and accounted for 10% of product related revenues, compared to $452,000, or 15% of product related revenues, in the first quarter of 2002. As described above, effective January 24, 2003, we no longer accept or fill new orders for the BrachySeed I-125 and BrachySeed Pd-103 products. In April 2003, we entered into an agreement with Draximage to formally terminate our agreements with Draximage with respect to these products. We discontinued selling OncoScint CR/OV(R) in December 2002 in order to focus on our other oncology products, since the market for OncoScint CR/OV for colorectal cancer diagnosis has been negatively affected by positron emission tomography or "PET" scans which have shown the same or higher sensitivity than OncoScint CR/OV. Sales of OncoScint CR/OV during the first quarter of 2002 were $54,000. Quadramet royalties for the first quarter of 2003 were $449,000, a decrease of $50,000 from $499,000 in the first quarter of 2002. Quadramet is currently marketed in the U.S. by the Company's marketing partner, Berlex Laboratories. We believe that the future growth and market penetration of Quadramet is dependent upon, among other things: - New clinical data supporting the expanded and earlier use of Quadramet in various cancers; - Novel research supporting combination uses with other therapies, such as chemotherapy and bisphophonates; - Establishing the use of Quadramet at higher doses to target and treat primary bone cancers; and - Increased marketing and sales penetration to physicians. There can be no assurance that Quadramet will achieve greater market penetration on a timely basis or result in significant revenues for Cytogen. License and contract revenues for the first quarter of 2003 were $143,000 compared to $215,000 for the same period of 2002. As a result of our adoption of Securities and Exchange Commission's Staff Accounting Bulletin No.101 ("SAB 101") in 2000, license revenues from certain up-front, non-refundable license fees previously recognized in prior years were deferred and are being amortized over the estimated performance period. In the first quarter of 2003, we recognized $96,000 of deferred license revenue compared to $215,000 for the same period in 2002. In the first quarter of 2003, we performed limited research and development services for the PSMA Development Company LLC, our joint venture with Progenics Pharmaceuticals Inc. resulting in $47,000 of contract revenue. The level of future revenues from the joint venture will be dependent upon the extent of the research and development services required by the joint venture. Operating Expenses. Total operating expenses for the first quarter of 2003 were $5.0 million compared to $8.3 million in the same quarter of 2002. The decrease from the prior year period is attributable primarily to a non-cash milestone payment of $2.0 million in 2002 related to the progress of dendritic cell prostate cancer clinical trials at Northwest Biotherapeutics, Inc. and cost-saving measures implemented in September 2002 as a result of the restructuring at our subsidiary AxCell Biosciences. 12 Cost of product related revenues for the first quarter of 2003 were $910,000 compared to $1.1 million in the same period of 2002. The decrease from the prior year period is primarily due to the lower product sales and to a reversal of $133,000 related to lower royalty expenses on the 2002 BrachySeed sales as a result of a termination agreement entered into with Draximage with respect to the BrachySeed products. Research and development expenses for the first quarter of 2003 were $833,000 compared to $3.8 million in the same period of 2002. The decrease from the prior year period is attributable primarily to a non-cash milestone payment of $2.0 million in 2002 related to the progress of dendritic cell prostate cancer clinical trials at Northwest Biotherapeutics, Inc., and cost-saving measures implemented in September 2002 as a result of the restructuring at our subsidiary AxCell Biosciences. During the first quarters of 2003 and 2002, we invested $450,000 and $1.3 million, respectively, in AxCell's signal transduction research activities. Our share in the equity loss in the PSMA Development LLC ("Joint Venture") was $880,000 during the first quarter of 2003 compared to $513,000 in the same quarter of 2002 and represented 50% of the Joint Venture's operating results. The Joint Venture is equally owned by Cytogen and Progenics. We account for the Joint Venture using the equity method of accounting. We and Progenics share equally the costs of the Joint Venture. We expect to incur significant and increasing costs in the future to fund our share of the development costs from the Joint Venture. As of May 2003, we and Progenics are in the process of negotiating the 2003 annual budget for the joint venture and have agreed that the operating budget for 2003 will be no less than the 2002 operating expenses for the Joint Venture. Selling and marketing expenses for the first quarter of 2003 were $1.3 million compared to $1.5 million in the same period of 2002. The decrease from the prior year is primarily due to the discontinuation of the selling and marketing activities related to the brachytherapy products effective January 2003. General and administrative expenses for the first quarter of 2003 were $1.1 million compared to $1.5 million in the same period of 2002. The decrease from the prior year period is due primarily to a reduction in personnel at the end of 2002 and a non-cash charge in 2002 for stock-based compensation for a key employee. Interest Income/Expense. Interest income for the first quarter of 2003 was $36,000 compared to $77,000 in the same period of 2002. The decrease from the prior year period is due to a lower average yield on investments and lower average cash balances in 2003. Interest expense for the first quarter of 2003 was $47,000 compared to $42,000 in the same period of 2002. Interest expense includes interest on outstanding debt and finance charges related to various equipment leases. Income tax benefit. During the first quarter of 2003, we sold New Jersey State net operating loss and research and development credit carryforwards, which resulted in the recognition of $584,000 income tax benefit. Assuming the State of New Jersey continues to fund this program, which is uncertain, the future amount of net operating losses and tax credits which we may sell will also depend upon the allocation among qualifying companies of an annual pool established by the State of New Jersey. We did not recognize any such benefits during the first quarter of 2002. 13 Net Loss. Net loss for the first quarter of 2003 was $2.0 million compared to $5.0 million reported in the first quarter of 2002. The net loss per share for the first quarter of 2003 was $0.22 based on weighted average common shares outstanding of 8.8 million, compared to a net loss per share of $0.62 based on the weighted average common shares outstanding of 8.1 million for the same period in 2002. Liquidity and Capital Resources Our cash and cash equivalents were $11.1 million as of March 31, 2003, compared to $14.7 million as of December 31, 2002. Cash used for operating activities for the three months ended March 31, 2003 was $3.6 million compared to $2.5 million in the same period of 2002. The increase from the prior year period is due primarily to our build-up of ProstaScint inventory in the first quarter of 2003 and to our first quarter 2003 capital contribution of $1.5 million to the PSMA Development Company LLC, our joint venture with Progenics Pharmaceuticals, Inc. Historically, our primary sources of cash have been proceeds from the issuance and sale of our stock through public offerings and private placements, product related revenues, revenues from contract research services, fees paid under license agreements and interest earned on cash and short-term investments. In January 2003, we received $584,000 relating to a sale of New Jersey State net operating losses and research and development credits. Assuming the State of New Jersey continues to fund this program, which is uncertain, the future amount of net operating losses and tax credits which we may sell will also depend upon the allocation among qualifying companies of an annual pool established by the State of New Jersey. Because the market value of our common stock held by non-affiliates of the Company is less than $75 million, we are ineligible to utilize a registration statement on Form S-3 for primary offerings in which our common stock is offered for cash on our behalf. We cannot guarantee you that the market value of our common stock held by non-affiliates will ever increase above $75 million, and as a result, that we will thereby regain eligibility to utilize a Form S-3 registration statement for such primary offerings. We have historically relied upon revenues from sales of the BrachySeed products to partially fund ongoing operations. For the three months ended March 31, 2003 and 2002, revenue from the sale of BrachySeed products was $240,000 and $452,000, respectively. In December 2002, we served notice of termination of our agreements with Draximage, and in April 2003, entered into an agreement with Draximage to formally terminate each of our License and Distribution Agreement and Product Manufacturing and Supply Agreement with respect to both the BrachySeed I-125 and BrachySeed Pd-103 products. As of January 24, 2003, we no longer accept or fill new orders for the BrachySeed products. 14 Beginning in December 2001, we began to equally share the costs of the PSMA Development Company LLC, with Progenics. We expect our share of losses and funding in the joint venture to continue at an even higher level in the subsequent periods. The joint venture is funded by equal capital contributions from each of Progenics and Cytogen in accordance with an annual budget approved by the joint venture's management committee. As of May 2003, we and Progenics are in the process of negotiating the 2003 annual budget for the joint venture and have agreed that the operating budget for 2003 will be no less than the 2002 operating expenses for the joint venture. Our capital and operating requirements may change depending upon various factors, including: (i) whether we and our strategic partners achieve success in manufacturing, marketing and commercialization of our products; (ii) the amount of resources which we devote to clinical evaluations and the expansion of marketing and sales capabilities; (iii) results of clinical trials and research and development activities; and (iv) competitive and technological developments, in particular, we expect to incur significant costs for the development of our PSMA technologies. Our financial objectives are to meet our capital and operating requirements through revenues from existing products and licensing arrangements. To achieve our strategic objectives, we may enter into research and development partnerships and acquire, in-license and develop other technologies, products or services. Certain of these strategies may require payments by us in either cash or stock in addition to the costs associated with developing and marketing a product or technology. However, we believe that, if successful, such strategies may increase long-term revenues. There can be no assurance as to the success of such strategies or that resulting funds will be sufficient to meet cash requirements until product revenues are sufficient to cover operating expenses, if ever. To fund these strategic and operating activities, we may sell equity or debt securities as market conditions permit or enter into credit facilities. We have incurred negative cash flows from operations since our inception, and have expended, and expect to continue to expend in the future, substantial funds to implement our planned product development efforts, including acquisition of products and complementary technologies, research and development, clinical studies and regulatory activities, and to further our marketing and sales programs. We expect that our existing capital resources should be adequate to fund our operations and commitments into the first quarter of 2004. We cannot assure you that our business or operations will not change in a manner that would consume available resources more rapidly than anticipated. We expect that we will have additional requirements for debt or equity capital, irrespective of whether and when we reach profitability, for further product development costs, product and technology acquisition costs, and working capital. Our future capital requirements and the adequacy of available funds will depend on numerous factors, including: (i) the successful commercialization of our products; (ii) the costs associated with the acquisition of complementary products and technologies; (iii) progress in our product development efforts and the magnitude and scope of such efforts; (iv) progress with clinical trials; (v) progress with regulatory affairs activities; (vi) the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; (vii) competing technological and market developments; and (viii) the expansion of strategic alliances for the sales, marketing, 15 manufacturing and distribution of our products. To the extent that the currently available funds and revenues are insufficient to meet current or planned operating requirements, we will be required to obtain additional funds through equity or debt financing, strategic alliances with corporate partners and others, or through other sources. There can be no assurance that the financial sources described above will be available when needed or at terms commercially acceptable to us. If adequate funds are not available, we may be required to delay, further scale back or eliminate certain aspects of our operations or attempt to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates, products or potential markets. If adequate funds are not available, our business, financial condition and results of operations will be materially and adversely affected. CRITICAL ACCOUNTING POLICIES AND ESTIMATES: Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Note 1 to our Consolidated Financial Statements in this Quarterly Report on Form 10-Q and Note 1 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2002, as amended, include a summary of our significant accounting policies and methods used in the preparation of our Consolidated Financial Statements. The following is a brief discussion of the more significant accounting policies and methods used by us. The preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ materially from those estimates. Revenue Recognition We recognize revenue from the sale of our products upon shipment. We do not grant price protection to customers. Quadramet royalties are recognized when earned. The Securities and Exchange Commission has issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition", which provides guidance on the recognition of up-front, non-refundable license fees. Accordingly, we defer up-front license fees and recognize them over the estimated performance period of the related agreement, when we have continuing involvement. Since the term of the performance periods is subject to management's estimates, future revenues to be recognized could be affected by changes in such estimates. Accounts Receivable Our accounts receivable balances are net of an estimated allowance for uncollectible accounts. We continuously monitor collections and payments from our customers and maintain an allowance for uncollectible accounts based upon our historical experience and any specific customer collection issues that we have identified. While we believe our reserve estimate to be appropriate, we may find it necessary to adjust our allowance for uncollectible accounts if the future bad debt expense exceeds our estimated reserve. We are subject to concentration risks as a limited number of our customers provide a high percent of total revenues, and corresponding receivables. 16 Inventories Inventories are stated at the lower of cost or market, as determined using the first-in, first-out method, which most closely reflects the physical flow of our inventories. Our products and raw materials are subject to expiration dating. We regularly review quantities on hand to determine the need for reserves for excess and obsolete inventories based primarily on our estimated forecast of product sales. Our estimate of future product demand may prove to be inaccurate, in which case we may have understated or overstated our reserve for excess and obsolete inventories. Carrying Value of Fixed and Intangible Assets Our fixed assets and certain of our acquired rights to market our products have been recorded at cost and are being amortized on a straight-line basis over the estimated useful life of those assets. If indicators of impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, we measure the amount of such impairment by comparing the carrying value of the assets to the present value of the expected future cash flows associated with the use of the asset. Adverse changes regarding future cash flows to be received from long-lived assets could indicate that an impairment exists, and would require the write down of the carrying value of the impaired asset at that time. In October 2002, we entered into a five-year agreement with Matritech Inc. to be the sole distributor for Matritech's NMP22 BladderChek point-of-care test to urologists and oncologists in the United States. Retention of exclusivity rights depends upon meeting certain minimum annual purchases. We paid Matritech $150,000 upon the execution of the agreement, which was recorded as other assets in the accompanying consolidated balance sheet for the respective period and is being amortized over the five year estimated performance period of the agreement. We determined that we did not have any impairment regarding Matritech's license fee at March 31, 2003. Item 3. Quantitative and Qualitative Disclosures About Market Risk We do not have operations subject to risks of foreign currency fluctuations, nor do we use derivative financial instruments in our operations or investment portfolio. As of March 31, 2003, we had $2.3 million of debt outstanding with a fixed interest rate of 7%. We do not have exposure to market risks associated with changes in interest rates, as we have no variable interest rate debt outstanding. Changes in interest rates could expose us to market risk associated with a fixed interest rate debt. We do not believe that this note will have material exposure to market risks associated with interest rates. 17 Item 4 - Controls and Procedures a) Evaluation of disclosure controls and procedures. Based on their evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q, the Company's Chief Executive Officer and the Company's Vice President, Finance have concluded that the Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and are operating in an effective manner. b) Changes in internal controls. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation. 18 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits: 3.1 - By-Laws of Cytogen Corporation, as amended. Filed herewith. 99.1 - Certification pursuant to 18 U.S.C. Section 1350. Filed herewith. (b) Reports on Form 8-K During the three months ended March 31, 2003, the Company filed two Current Reports on Form 8-K with the Securities and Exchange Commission. On January 17, 2003, the Company filed a Current Report on Form 8-K, under "Item 5. Other Events", on which the Company reported that the production and sale of the Palladium version of BrachySeed had been halted for an unspecified period of time. On January 24, 2003, the Company filed a Current Report on Form 8-K, under "Item 5. Other Events", on which the Company announced that it provided Draximage with notice of termination of each of its License and Distribution Agreement and Product Manufacturing and Supply Agreement with respect to both of Draximage's BrachySeed I-125 and BrachySeed PD-103 products. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CYTOGEN CORPORATION Date May 14, 2003 By: /s/ Michael D. Becker ------------------ ----------------------------------------- Michael D. Becker President and Chief Executive Officer Date May 14, 2003 By /s/ Thu A. Dang ----------------- ----------------------------------------- Thu A. Dang Vice President, Finance (Principal Financial and Accounting Officer) 20 Certification I, Michael D. Becker, President and Chief Executive Officer of Cytogen Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Cytogen Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 21 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/ Michael D. Becker -------------------------- ----------------------------------- Michael D. Becker President and Chief Executive Officer 22 Certification I, Thu A. Dang, Vice President, Finance of Cytogen Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Cytogen Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 23 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/ Thu A. Dang -------------------------- -------------------------- Thu A. Dang Vice President, Finance 24 EX-3 3 exhibit3_1by-laws2003q1.txt EXHIBIT 3.1 AMENDED BY-LAWS EXHIBIT 3.1 B Y - L A W S OF CYTOGEN CORPORATION (a Delaware corporation) (amended as of April 2003) ARTICLE I OFFICES SECTION 1. OFFICES. The corporation shall maintain its registered office in the State of Delaware at 100 West Tenth Street, City of Wilmington, County of New Castle and its resident agent at such address is The Corporation Trust Company. The Corporation may also have offices in such other places in the United States or elsewhere as the Board of Directors may, from time to time, appoint or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the election of directors and for such other business as may properly be conducted at such meeting shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors shall determine by resolution and set forth in the notice of the meeting. In the event that the Board of Directors fails to so determine the time, date and place for the annual meeting, it shall be held, beginning in 1981, at the principal office of the Corporation at 10 o'clock A.M. on the last Friday in February of each year. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders, unless otherwise prescribed by statute, may be called by the Chairman of the Board, the President or by resolution of the Board of Directors and shall be called by the President or Secretary upon the written request of not less than 50% in interest of the stockholders entitled to vote thereat. Notice of each special meeting shall be given in accordance with Section 3 of this Article II. Unless otherwise permitted by law, business transacted at any special meeting of stockholders shall be limited to the purpose stated in the notice. SECTION 3. NOTICE OF MEETINGS. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting, which shall state the place, date and time of the meeting, and, in the case of a special meeting, the purposes for which the meeting is called, shall be mailed to or delivered to each stockholder of record entitled to vote thereat. Such notice shall be given not less than ten (10) days nor more than sixty (60) days before the date of any such meeting. SECTION 4. QUORUM. Unless otherwise required by law or the Certificate of Incorporation, the holders of a majority of the issued and outstanding stock entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders. SECTION 5. VOTING. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. Upon the request of not less than 10% in interest of the stockholders entitled to vote at a meeting, voting shall be by written ballot. All elections of directors shall be decided by plurality vote. Unless otherwise required by law, these By-Laws or the Certificate of Incorporation, all other corporate action shall be decided by majority vote of the shares cast on the proposed action. SECTION 6. INSPECTORS. The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. SECTION 7. CHAIRMAN OF MEETINGS. The Chairman of the Board of Directors of the Corporation, if one is elected, or, in his absence or disability, the President of the Corporation, shall preside at all meetings of the stockholders. SECTION 8. SECRETARY OF MEETING. The Secretary of the Corporation shall act as Secretary at all meetings of the stockholders. In the absence or disability of the Secretary, the Chairman of the Board of Directors or the President shall appoint a person to act as Secretary at such meetings. SECTION 9. LISTS OF STOCKHOLDERS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of each stockholder and the number and class of shares held by each. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, at a place within the city where the meeting is to be held, 2 which shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the meeting and may be inspected by any stockholder who is present. SECTION 10. ACTION WITHOUT MEETING. Unless otherwise provided by the Certificate of Incorporation, any action required by law to be taken at any annual or special meeting of stockholders, or any action which may be taken at such meetings, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 11. ADJOURNMENT. At any meeting of stockholders of the Corporation, if less than a quorum be present, a majority of the stockholders entitled to vote thereat, present in person or by proxy, shall have the power to adjourn the meeting from time to time without notice other than announcement at the meeting until a quorum shall be present. Any business may be transacted at the adjourned meeting which might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date, as provided for in Section 5 of Article V of these By-Laws, is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. ARTICLE III BOARD OF DIRECTORS SECTION 1. POWERS. The property, business and affairs of the Corporation shall be managed and controlled by its Board of Directors. The Board shall exercise all of the powers and duties conferred by law except as provided by the Certificate of Incorporation or these By-Laws. SECTION 2. NUMBER AND TERM. The number of directors shall be fixed at no less than two nor more than eight. Within the limits specified above, the number of directors shall be fixed from time to time by the Board. The Board of Directors shall be elected by the stockholders at their annual meeting, and each director shall be elected to serve for the term of one year and until his successor shall be elected and qualify or until his earlier resignation or removal. Directors need not be stockholders. SECTION 3. RESIGNATIONS. Any director may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time is specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. SECTION 4. REMOVAL. Any director or the entire Board of Directors may be removed either for or without cause at any time by the affirmative vote of the 3 holders of a majority of the shares entitled to vote for the election of directors at any annual or special meeting of the stockholders called for that purpose. Vacancies thus created may be filled at such meeting by the affirmative vote of a majority of the stockholders entitled to vote, or, if the vacancies not so filled, by the directors as provided in Section 5 of this Article III. SECTION 5. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Except as provided in Section 4 of this Article III, vacancies occurring in any directorship and newly created directorship may be filled by a majority vote of the remaining directors then in office. Any director so chosen shall hold office for the unexpired term of his predecessor and until his successor shall be elected and qualify or until his earlier death, resignation or removal. The Board may not fill the vacancy created by removal of a director by electing the director so removed. SECTION 6. MEETINGS. The newly elected directors shall hold their first meeting to organize the Corporation, elect officers and transact any other business which may properly come before the meeting. An annual organizational meeting of the Board of Directors shall be held immediately after each annual meeting of the stockholders, or at such time and place as may be noticed for the meeting. Regular meetings of the Board may be held without notice at such places and times as shall be determined from time to time by resolution of the directors. Special meetings of the Board shall be called by the President or by the Secretary on the written request of any director with at least two days' notice to each director and shall be held at such place as may be determined by the directors or as shall be stated in the notice of the meeting. SECTION 7. QUORUM, VOTING AND ADJOURNMENT. A majority of the total number of directors or any committee thereof shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of such adjourned meeting need not be given if the time and place of such adjourned meeting are announced at the meeting so adjourned. SECTION 8. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the Board, designate one or more committees, including but not limited to an Executive Committee and an Audit Committee, each such committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee to replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and, affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority to amend the Certificate of Incorporation, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease, or exchange of all or substantially all of the Corporation's properties and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution or to amend these By-Laws. Unless a resolution of the Board expressly provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock of the Corporation. All committees of the Board shall report their Proceedings to the Board when recruited. 4 SECTION 9. ACTION WITHOUT A MEETING. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or any committee thereof consent thereto in writing. SECTION 10. COMPENSATION. The Board of Directors shall have the authority to fix the compensation of directors for their services. A director may also serve the Corporation in other capacities and receive compensation therefor. SECTION 11. TELEPHONIC MEETING. Unless otherwise restricted by the Certificate of Incorporation, members of the Board, or any committee designated by the Board, may participate in a meeting by means of conference telephone or similar communications equipment in which all persons participating in the meeting can hear each other. Participation in such telephonic meeting shall constitute the presence in person at such meeting. ARTICLE IV OFFICERS SECTION 1. The officers of the Corporation shall include a President, a Secretary and one or more subordinate officers, all of whom shall be elected by the Board of Directors and who shall hold office for a term of one year and until their successors are elected and qualify or until their earlier resignation or removal. In addition, the Board of Directors may elect a Chairman of the Board, one or more Vice Presidents, including an Executive Vice President, a Treasurer and one or more Assistant Treasurers and one or more Assistant Secretaries, who shall hold their office for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. The initial officers shall be elected at the first meeting of the Board of Directors and, thereafter, at the annual organizational meeting of the Board held after each annual meeting of the stockholders. Any number of offices may be held by the same person. SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint such other officers and agents as it deems advisable, who shall hold their office for such terms and shall exercise and perform such powers and duties as shall be determined from time to time by the Board of Directors. SECTION 3. CHAIRMAN. The Chairman of the Board of Directors shall be a member of the Board and shall preside at all meetings of the Board of Directors and of the stockholders. In addition, the Chairman of the Board shall have such powers and perform such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 4. PRESIDENT. The President shall be the Chief Executive Officer of the Corporation. He shall exercise such duties as customarily pertain to the office of President and Chief Executive Officer, and shall have general and active management of the property, business and affairs of the Corporation, subject to the supervision and control of the Board. He shall perform such other duties as prescribed from time to time by the Board or these By-Laws. 5 In the absence, disability or refusal of the Chairman of the Board to act, or the vacancy of such office, the President shall preside at all meetings of the stockholders and of the Board of Directors. Except as the Board of Directors shall otherwise authorize, the President shall execute bonds, mortgages and other contracts on behalf of the Corporation, and shall cause the seal to be affixed to any instrument requiring it and, when so affixed, the seal shall be attested by the signature of the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer. SECTION 5. VICE PRESIDENTS. Each Vice President, if any are elected, of whom one or more may be designated an Executive Vice President, shall have such powers and shall perform such duties as shall be assigned to him by the President or the Board of Directors. SECTION 6. TREASURER. The Treasurer shall have custody of the corporate funds, securities, evidences of indebtedness and other valuables of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation. He shall deposit all moneys and other valuables in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation, taking proper vouchers therefor. He shall render to the President and Board of Directors, upon their request, a report of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond for the faithful discharge of his duties in such amount and with such surety as the Board shall prescribe. The Treasurer shall have such further powers and perform such other duties incident to the office of Treasurer as from time to time assigned to him by the Board. SECTION 7. SECRETARY. The Secretary shall be the Chief Administrative Officer of the Corporation and shall: (a) cause minutes of all meetings of the stockholders and directors to be recorded and kept; (b) cause all notices required by these By-Laws or otherwise to be given properly; (c) see that the minute books, stock books, and other nonfinancial books, records and papers of the Corporation are kept properly; and (d) cause all reports, statements, returns, certificates and other documents to be prepared and filed when and as required. The Secretary shall have such further powers and perform such other duties as prescribed from time to time by the Board. SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Each Assistant Treasurer and each Assistant Secretary, if any are elected, shall be vested with all the Powers and shall perform all the duties of the Treasurer and Secretary, respectively, in the absence or disability of such officer, unless or until the Board of' Directors shall otherwise determine. In addition, Assistant Treasurers and Assistant Secretaries shall have such powers and shall perform such duties as shall be assigned to them by the Board. SECTION 9. CORPORATE FUNDS AND CHECKS. The funds of the Corporation shall be kept in such depositories as shall from time to time be prescribed by the Board of Directors. All checks or other orders for the payment of money shall be signed by the President or the Treasurer or such other person or agent as may from time to time be authorized and with such countersignature, if any, as may be required by the Board of Directors. 6 SECTION 10. CONTRACTS AND OTHER DOCUMENTS. The President or Treasurer, or such other officer or officers as may from time to time be authorized by the Board of Directors, shall have power to sign and execute on behalf of the Corporation deeds, conveyances and contracts, and any and all other documents requiring execution by the Corporation. SECTION 11. OWNERSHIP OF STOCK OF ANOTHER CORPORATION. The President or the Treasurer, or such other officer or agent as shall be authorized by the Board of Directors, shall have the power and authority, on behalf of the Corporation, to attend and to vote at any meeting of stockholders of any corporation in which the Corporation holds stock and may exercise, on behalf of the corporation, any and all of the rights and powers incident the ownership of such stock at any such meeting, including authority to execute and deliver proxies and consents on behalf of the corporation. SECTION 12. DELEGATION OF DUTIES. In the absence, disability or refusal of any officer to exercise and perform his duties, the Board of Directors may delegate to another officer such powers or duties. SECTION 13. RESIGNATION AND REMOVAL. Any officer of the Corporation may be removed from office for or without cause at any time by the Board of Directors. Any officer may resign at any time in the same manner prescribed under Section 3 of Article III of these By-laws. SECTION 14. VACANCIES. The Board of Directors shall have power to fill vacancies occurring in any office. ARTICLE V STOCK SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number and class of shares of stock in the Corporation owned by him. Any or all of the signatures on the certificate may be a facsimile. The Board of Directors shall have the power to appoint one or more transfer agents and/or registrars for the transfer or registration of certificates of stock of any class, and may require stock certificates to be countersigned or registered by one or more of such transfer agents and/or registrars. SECTION 2. TRANSFER OF SHARES. Shares of stock of the Corporation shall be transferable upon its books by the holders thereof, in person or by their duly authorized attorneys or legal representatives, upon surrender to the Corporation by delivery thereof to the person in charge of the stock and transfer books and ledgers. Such certificates shall be cancelled and new certificates shall thereupon be issued. A record shall be made of each transfer. Whenever any 7 transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented, both the transferor and transferee request the Corporation to do so. The Board shall have power and authority to make such rules and regulations as it may deem necessary or proper concerning the issue, transfer and registration of certificates for shares of stock of the corporation. SECTION 3. LOST CERTIFICATES. A new certificate of stock may be issued in the place of any certificate previously issued by the Corporation, alleged to have been lost, stolen, destroyed or mutilated, and the Board of Directors may, in their discretion, require the owner of such lost, stolen, destroyed or mutilated certificate, or his legal representative, to give the Corporation a bond, in such sum as the Board may direct, not exceeding double the value of the stock, in order to indemnify the Corporation against any claims that may be made against it in connection therewith. SECTION 4. STOCKHOLDERS OF RECORD. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder thereof, in fact, and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. SECTION 5. STOCKHOLDERS RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. DIVIDENDS. Subject to the provisions of the Certificate of Incorporation, the Board of Directors may at any regular or special meeting, out of funds legally available therefor, declare dividends upon the stock of the Corporation. Before the declaration of any dividend, the Board of Directors may set apart, out of any funds of the Corporation available for dividends, such sum or sums as from time to time in their discretion may be deemed proper for working capital or as a reserve fund to meet contingencies or for such other purposes as shall be deemed conducive to the interests of the Corporation. ARTICLE VI NOTICE AND WAIVER OF NOTICE SECTION 1. NOTICE. Whenever any written notice is required to be given by law, the Certificate of Incorporation or these By-Laws, such notice, if mailed, shall be deemed to be given when deposited in the United States mail, postage prepaid, addressed to the person entitled to such notice at his address as it appears on the books and records of the Corporation. Such notice may also be sent by telegram. 8 SECTION 2. WAIVER OF NOTICE. Whenever notice is required to be given by law, the Certificate of Incorporation or these By-laws, a written waiver thereof signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the stockholders, directors, or members of a committee of the Board need be specified in any written waiver of notice. ARTICLE VII AMENDMENT OF BY-LAWS SECTION 1. AMENDMENTS. These By-Laws may be amended or repealed or new By-Laws may be adopted by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board. If any By-Law regulating an impending election of directors is adopted, amended or repealed by the Board, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the By-Law(s) so adopted, amended, or repealed, together with a precise statement of the changes made. By-Laws adopted by Board of Directors may be amended or repealed by stockholders. Notwithstanding the foregoing to the contrary, the provisions of Article X hereof may not be further amended or repealed without the affirmative vote of the holders of a majority of the shares of common stock of the Corporation present and entitled to vote at a duly convened meeting of the stockholders of the Corporation. ARTICLE VIII SECTION 1. The seal of the Corporation shall be circular in form and shall have the name of the corporation on the circumference and the jurisdiction and year of incorporation in the center. SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall end on September 30 of each year, or such other twelve consecutive months as the Board of Directors may designate. ARTICLE IX INDEMNIFICATION SECTION 1. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation 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 Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. 9 SECTION 2. Each person who has or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action or inaction in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in this Section 2, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section 2 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition as authorized by the Board of Directors; provided, however, that if the Delaware General Corporation Law so requires, the payment of such expenses incurred by a director, officer, employee or agent of the Company in his or her capacity as such in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director, officer, employee or agent of the Company, to repay all amounts so advanced if it shall ultimately be determined that such director, officer, employee or agent of the Company is not entitled to be indemnified under this Section 2 or otherwise. SECTION 3. If a claim under Section 2 of this Article IX is not paid in full by the Corporation within 30 days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation 10 Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. SECTION 4. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article IX shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 5. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. ARTICLE X MISCELLANEOUS SECTION 1. STOCK OPTIONS. The Corporation may not grant any stock options, including any stock appreciation right, having an exercise price that is less than 100% of the fair market value of the underlying stock on the date of grant. Furthermore, the Corporation may not: (i) reduce the exercise price of any stock option, including any stock appreciation right, granted or to be granted under any existing stock option plan or under any stock option plan adopted after the date of these amended By-Laws; (ii) cancel and re-grant stock options at a lower exercise price (including entering into any "6 month and 1 day" cancellation and re-grant scheme), whether or not the cancelled stock options are put back into the available pool for grant; (iii) replace underwater stock options with restricted stock in an exchange, buy-back or other scheme; or (iv) replace any stock options with new stock options having a lower exercise price or accelerated vesting schedule in an exchange, buy-back or other scheme. SECTION 2. CONVERTIBLE SECURITIES. The Corporation may not sell or issue any security of the Corporation convertible, exercisable or exchangeable into shares of common stock of the Corporation, having a conversion, exercise or exchange price per share which is subject to downward adjustment based on the market price of the common stock at the time of conversion, exercise or exchange of such security into common stock (except for appropriate adjustments made to give effect to any stock splits or stock dividends). SECTION 3. SALE OF STOCK. The Corporation may not enter into: (a) any equity line or similar agreement or arrangement; or (b) any agreement to sell common stock of the Corporation (or any security convertible, exercisable or exchangeable into shares of common stock ("Common Stock Equivalent")) at a per share price (or, with respect to a Common Stock Equivalent, at a conversion, exercise or exchange price, as the case may be ("Equivalent Price")) that is fixed after the execution date of the agreement, whether or not based on any predetermined price-setting formula or calculation method. Notwithstanding the 11 foregoing, however, a price protection clause shall be permitted in an agreement for sale of Common Stock or Common Stock Equivalent, if such clause provides for an adjustment to the price per share of Common Stock or, with respect to a Common Stock Equivalent, to the Equivalent Price (provided that such price or Equivalent Price is fixed on or before the execution date of the agreement)(the "Fixed Price") in the event that the Corporation, during the period beginning on the date of the agreement and ending no later than 90 days after the closing date of the transaction, sells shares of Common Stock or Common Stock Equivalent to another investor at a price or Equivalent Price, as the case may be, below the Fixed Price. 12 EX-99 4 exhibit99_1q12003.txt EXHIBIT 99.1 CERTIFICATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Cytogen Corporation (the "Company") for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Michael D. Becker, President and Chief Executive Officer of the Company, and Thu Dang, Vice President, Finance, of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to Cytogen Corporation and will be retained by Cytogen Corporation and furnished to the Securities and Exchange Commission or its staff upon request. /s/ Michael D. Becker ----------------------------------------- Dated: May 14, 2003 Michael D. Becker President and Chief Executive Officer /s/ Thu Dang ----------------------------------------- Dated: May 14, 2003 Thu Dang Vice President, Finance -----END PRIVACY-ENHANCED MESSAGE-----