SEC Filing - Delcath Systems, Inc.

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As filed with the Securities and Exchange Commission on May 2, 2003.

Registration No. 333-101661
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 3
to

Form SB-2
Registration Statement
under
the Securities Act of 1933

DELCATH SYSTEMS, INC.
----------------------------------------

(Exact name of Registrant as specified in its charter)

Delaware 3841 06-1245881
- ---------------------------- --------------------------- -------------------

(State or Other Jurisdiction (Primary Standard Industrial (I. R. S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)

1100 Summer Street
Stamford, Connecticut 06905
(203) 323-8668
(Address, including zip code, and telephone number, including area code,
of registrant's executive offices)
----------------------------------------

M. S. KOLY
President and Chief Executive Officer
Delcath Systems, Inc.
1100 Summer Street
Stamford, Connecticut 06905
(203) 323-8668
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies of all communications, including communications sent to the agent for
service of process, should be sent to:

Paul G. Hughes, Esq. Brian C. Daughney, Esq.
Cummings & Lockwood LLC Goldstein & DiGioia, LLP
Four Stamford Plaza 45 Broadway, 11th Floor
107 Elm Street New York, NY 10006
Stamford, CT 06902 212-599-3322
203-351-4207

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as soon as
practicable after the registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box /X/

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box. / /

Proposed maximum
aggregate offering Amount of
Title of each class of securities to be registered price (1) registration fee

Units, consisting of 5 shares of common stock, par value

$0.01 per share, and 5 warrants each to $2,415,000 $318 (8)

purchase 1 share of common stock (2)
Common Stock, $0.01 par value (3)
Warrants to purchase shares of common stock (4)
Shares of common stock underlying the warrants included in
the units (5)(6)
Underwriters warrants to purchase units (7)
Units, consisting of 5 shares of common stock and 5
warrants each to purchase 1 share of common stock (5)
Common stock, $0.01 par value (3)
Warrants to purchase shares of common stock (4)
Units issuable upon exercise of the underwriters warrants (7)
Shares of common stock underlying the warrants issuable upon
exercise of the warrants underlying the underwriters
warrants (5)

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

(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act. (2) Includes units issuable upon
exercise of underwriters' over-allotment option. (3) Consists of shares of
common stock included in the units registered hereby.
(4) Consists of warrants included in the units registered hereby. The warrants
are offered as a component of the units for no additional consideration.

(5) Pursuant to Rule 416 under the Securities Act, this Registration Statement
also registers (i) any additional shares of common stock that become
issuable upon exercise of the warrants and (ii) any additional units that
become issuable upon the exercise of the underwriters warrants to purchase
units, in each by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without receipt of
consideration which results in an increase in the number of the outstanding
shares of common stock.

(6) Includes shares issuable pursuant to the exercise of the underwriters
overallotment option. (7) No registration fee required pursuant to Rule
457(g) under the Securities Act. (8) The registration fee was previously
paid when the Registration Statement was originally filed.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

CROSS REFERENCE SHEET

Showing Location in Prospectus of Information Required by Items of Form SB-2

REGISTRATION STATEMENT
ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS

1. Forepart of Registration Statement and Outside Front Cover Page Outside Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Underwriting
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Outside Front Cover Page Prospectus;
Underwriting
9. Legal Proceedings Business
10. Directors, Executive Officers, Promoters and Control Persons Management
11. Security Ownership of Certain Beneficial Owners and Principal Stockholders
Management

12. Description of Securities Description of Our Capital Stock and Other
Securities
13. Interests of Named Experts and Counsel Validity of Common Stock; Experts
14. Disclosure of Commission Position of Indemnification for Not Applicable
Securities Act Liabilities
15. Organization Within Last Five Years Not Applicable

16. Description of Business Business
17. Management's Discussion and Analysis or Plan of Operation Plan of Operation
18. Description of Property Business
19. Certain Relationships and Related Transactions Related Party Transactions
20. Market for Common Equity and Related Stockholder Matters Market for Common Equity and Related
Stockholder Matters
21. Executive Compensation Management
22. Financial Statements Index to Consolidated Financial Statements and
Financial Statement Schedule
23. Changes In and Disagreements with Accountants on Accounting and Changes In and Disagreements with
Financial Disclosure Accountants on Accounting and Financial
Disclosure

SUBJECT TO COMPLETION, DATED MAY 2, 2003.

[LOGO - DELCATH SYSTEMS, INC.]

__________ Units

This is a public offering of $2.1 million of our securities. Our
securities are being offered in units, with each unit consisting of (i) five
shares of our common stock and (ii) five 2003 Warrants each to purchase one
share of our common stock. The common stock and 2003 Warrants will trade
separately immediately following the sale of the units.

Each 2003 Warrant entitles the holder to purchase one share of our
common stock at a price of 25% of the unit offering price. The exercise price of
our 2003 Redeemable Common Stock Purchase Warrants is subject to adjustment,
including anti-dilution provisions for corporate events, such as stock splits.
Under certain circumstances, we have the right to redeem the 2003 Warrants.

There is presently no public market for the 2003 Warrants. Our common
stock is currently traded on the Nasdaq Small Cap Market under the symbol "DCTH"
and on the Boston Stock Exchange under the symbol "DCT." At May 1, 2003,
our common stock had a closing price of $1.05 per share and our 2000 Warrants
had a closing price of $0.30 per Warrant on the Nasdaq Small Cap Market. The
actual initial public offering price of the units will be based upon the market
price of our common stock and by negotiations between Roan/Meyers Associates,
L.P., as the representative of the underwriters, and us.

We have applied for listing of our 2003 Warrants on the Nasdaq Small
Cap Market and the Boston Stock Exchange under the symbols "DCTHZ" and "DCT&W,"
respectively, and the listing of the additional shares of our common stock
contained in the units. If our application for listing is not approved by the
Nasdaq Small Cap Market or the Boston Stock Exchange, the underwriters may not
proceed with the offering. We were notified by Nasdaq that, based on our
stockholders' equity at September 30, 2002, we no longer meet one criterion for
continued listing on the Nasdaq Small Cap Market. Based on the estimated net
proceeds of the offering, we expect to meet this criterion immediately following
this offering. However, if we do not raise additional capital, we will likely
fall below the minimum stockholder equity requirement during 2003.

Investing in our securities involves a high degree of risk. See "Risk
Factors" beginning on page 4 for factors you should consider before investing in
our securities.
----------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------

Per Unit Total
-------- -----
Public offering price
Underwriting discount
Proceeds, before expenses

We estimate the expenses of this offering will be approximately
$619,500, which will include a non-accountable expense allowance of 3% of the
gross proceeds of this offering payable to the representative of the
underwriters. We have granted the underwriters a 45-day option to acquire up to
an additional 15% of the units to cover over-allotments.

The underwriters expect to deliver the securities to purchasers on or
about May ___ , 2003.

ROAN/MEYERS ASSOCIATES, L.P. VIEWTRADE SECURITIES, INC.
------------------------------

The date of this prospectus is May , 2003

The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.

FOR CALIFORNIA INVESTORS
- ------------------------

This offering was approved in California on the basis of a limited
offering qualification. Investors who are residents of California must meet a
"super suitability" standard of not less than $250,000 liquid net worth
(exclusive of home, home furnishings and automobiles), plus $65,000 gross annual
income or $500,000 liquid net worth or $1,000,000 net worth (inclusive of home,
home furnishings and automobiles) or $200,000 gross annual income. We did not
have to demonstrate compliance with some or all of the merit regulations of the
California Department of Corporations, as found in Title 10, California Code of
Regulations, Rule 260.140 et seq.

Residents of the State of California will be unable to sell shares of
common stock and 2003 Warrants they purchase in this offering, and investors
residing in all other states will be unable to sell shares of common stock and
2003 Warrants they purchase in this offering to California residents, pursuant
to exemptions for secondary trading available under California Corporations Code
Section 25104(h), as such exemptions have been withheld. However, secondary
sales may be made to purchasers who meet the "super suitability" standards or
there may be other exemptions to cover private sales by the bona fide owners of
our securities for such owners' own account without advertising and without
being effected by or through a broker dealer in a public offering.

PROSPECTUS SUMMARY

The following is a summary that highlights information contained
elsewhere in this prospectus. You should read the entire prospectus, including
"Risk Factors" beginning on page 4 and our financial statements (including the
notes) carefully before making an investment decision.

Except as otherwise noted, the information contained in this prospectus
assumes that the underwriters' overallotment option is not exercised.

References in this prospectus to the "2003 Warrants" refer to the
warrants included in the units offered hereby. References in this prospectus to
the "2000 Warrants" refer to the warrants included in the units offered in our
initial public offering.

OUR BUSINESS

We have developed a drug-delivery system which is designed to isolate
the liver from the general circulatory system and to administer chemotherapy and
other therapeutic agents directly to the liver. Using the Delcath system, blood
flowing into the liver is:

o infused with the chemotherapy agents;

o redirected out of the patient's body;

o passed through filters which remove most of the
chemotherapy agents; and

o returned to the patient's general circulatory system.

Isolating the liver and filtering the blood before it is returned to
the patient's circulatory system helps protect other parts of the body from the
harmful side effects of chemotherapy agents while allowing higher dosages of
chemotherapy agents to be administered to the diseased organ. While the current
"gold standard" treatment option for liver tumors is surgery, many tumors are
inoperable due to a combination of poor patient health and/or inability to
remove the tumor because of its location. Even if a tumor is surgically removed,
in the event of a recurrence, surgery typically cannot be repeated. We believe
that the use of the Delcath system for delivering chemotherapy agents to the
liver will allow treatment of tumors in patients with poor health and inoperable
tumors and will permit multiple treatments in the event of a recurrence. We also
believe that the Delcath system may provide cost savings in the treatment of
liver cancer to the extent that it can reduce treatment and hospitalization
costs associated with the side-effects of chemotherapy agents.

The Delcath system is not currently approved for marketing by the
United States Food and Drug Administration, and it cannot be marketed in the
United States without FDA premarket approval. With the proceeds of this
offering, we plan to conduct Phase III clinical trials to demonstrate the safety
and efficacy of the Delcath system in administering the chemotherapy agent
doxorubicin to treat malignant melanoma that spreads to the liver and to fund
our Phase I clinical trials and commence Phase II clinical trials to demonstrate
the safety and efficiency of using the Delcath system to deliver the
chemotherapy agent melphalan to treat cancerous tumors in the liver.

Corporate Information

Our executive offices are located at 1100 Summer Street, Stamford,
Connecticut 06905. Our telephone number at this location is (203) 323-8668.

THE OFFERING

Securities offered units, each unit consisting
of five shares of common stock and five
2003 Warrants each to purchase one share
of our common stock.

Common stock to be outstanding after this offering shares.

Warrants and options to be outstanding after this Warrants (including the
offering 2000 Warrants and the 2003 Warrants) and
options to purchase 1,145,684 shares of
our common stock.

Term of the 2003 Warrants Five years from the closing of this
offering.

Exercise price of the 2003 Warrants $

Expiration date of the 2003 Warrants , 2008.

Redemption Commencing one year from the closing
date of this offering, our 2003 Warrants
may be redeemed at our option at a
redemption price of $0.01 per warrant
provided (i) the average closing price
of our common stock for the twenty
trading days prior to the date of notice
of redemption is at least $
price and (ii) there is then an effective
registration statement providing for the
issuance of the underlying shares of
common stock.

Nasdaq Small Cap Market symbols "DCTH" for our common stock and "DCTHZ"
for our 2003 Warrants.

Boston Stock Exchange symbols "DCT" for our common stock and "DCT&W"
for our 2003 Warrants.

SUMMARY FINANCIAL DATA

The following summary financial data for the two years ended December
31, 2002 and cumulative from inception through December 31, 2002 are derived
from our audited financial statements.

The data should be read in conjunction with the financial statements,
related notes and other financial information, "Capitalization" and "Plan of
Operation" appearing elsewhere in this prospectus.

Cumulative from
Inception
Years Ended (August 5, 1988)
December 31, to December 31,
------------ ---------------
2001 2002 2002
---- ---- ----
(in thousands)
Statement of Operations Data:
Total costs and expenses ........... $ 2,069 $ 1,897 $16,714
Operating loss ..................... (2,069) (1,897) (16,714)
Net loss attributable to common
stockholders ....................... (1,876) (1,807)
Net loss per share ................. (0.48) (0.44)
Weighted average number of shares of
common stock outstanding ........ 3,904 4,085

As of December 31, 2002

--------------------------------
Actual As Adjusted(1)
------ --------------
(in thousands)

Balance Sheet Data:
Cash and cash equivalents ............. $1,064 $2,678
Certificate of deposit ................ 370 370
Total assets .......................... 1,812 3,188
Total liabilities ..................... 175 85
Stockholders' equity .................. 1,637 3,103
- ----------------------------

(1) The as adjusted amounts assume net proceeds of $1,480,500 (excluding
proceeds from any exercise of the overallotment option) from the sale of the
units offered hereby.

RISK FACTORS

You should consider carefully the following factors, as well as the
other information set forth in this prospectus, prior to making an investment in
the units. If any of the following risks and uncertainties actually occur, our
business, financial condition or operating results may be materially and
adversely affected. In this event, the trading price of our common stock or the
2003 Warrants, as applicable, may decline and you may lose part or all of your
investment.

RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION

The following factors relate to risks that are material to our business
and financial condition. If any of the possible events we describe below turns
out to be the case, our business may be adversely affected and we may be forced
to cease or curtail our operations which may result in the loss of your entire
investment.

Our entire focus has been the development and commercialization of the
Delcath system.

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

Continuing losses may exhaust our capital resources. We have no revenue
to date, substantial accumulated deficit, recurring operating losses
and negative cash flow.

We expect to incur significant and increasing losses while generating
minimal revenues over the next few years. From our inception on August 5, 1988
through December 31, 2002, we have incurred cumulative losses of $16 million
which were principally incurred in connection with our product development
efforts. For the years ended December 31, 2001 and December 31, 2002, we
incurred net losses of $1.9 million and $1.8 million, respectively.

We have funded our operations through a combination of private
placements of our securities and through the proceeds of our initial public
offering which public offering was completed in October, 2000. The net proceeds
of our initial public offering were approximately $5.4 million. In our most
recent placement, completed in April 2002, we received proceeds of approximately
$267,000 through the sale of 243,181 shares and warrants to purchase 20,265
shares. Please see a detailed discussion of our various sales of securities
described in Note 2 to our financial statements.

If we continue to incur losses we may exhaust our capital resources,
including those raised in this offering. As of December 31, 2002, we had cash
and cash equivalents and short term investments of $1.43 million.

The proceeds of this offering may not be sufficient to complete our
planned clinical trials and our efforts to raise additional financing
may be unsuccessful.

The proceeds of this offering may not be sufficient to enable us to
complete our Phase III clinical trials and obtain FDA pre-marketing approval for
the use of doxorubicin with our Delcath system because of unanticipated delays
or expenses, increased regulatory requirements by the FDA or other factors which
we cannot foresee or control. If we do not obtain any financing that we may
require, we will not be able to complete Phase III clinical trials or obtain FDA
pre-marketing approval for the use of doxorubicin with the Delcath system. Our
ability to complete the Phase III clinical trials could be lessened to the
extent we devote assets to clinical trials using melphalan with the Delcath
system.

If we do not raise any additional capital required to commercialize the
Delcath system, our potential to generate future revenues will be
significantly limited even if we receive FDA pre-marketing approval.

The proceeds of this offering may not be sufficient to complete Phase
III clinical trials using doxorubicin and will be insufficient to fund the costs
of commercializing the Delcath system which will be significant. We have no
commitments for any additional financing. If we are unable to obtain additional
financing as needed, we will not be able to sell the system commercially.

RISKS RELATED TO FDA AND FOREIGN REGULATORY APPROVAL

The following factors relate to risks that are material to obtaining
FDA and foreign regulatory approval. If any of the events we describe below
turns out to be the case, our business may be adversely affected and we may be
forced to cease or curtail our operations which may result in the loss of your
entire investment.

If the FDA refuses to grant premarket approval or limits the
circumstances under which the Delcath system may be used, our ability
to market the Delcath system will be greatly reduced.

Premarket approval requires a determination by the FDA that the data
developed by our clinical trials show that the use of doxorubicin in our system
is safe and effective in the treatment of primary liver cancer and melanoma
which has spread to the liver. The FDA requires that we demonstrate, for each of
primary liver cancer and metastatic melanoma, in a statistically rigorous
manner, increased patient survival times before it will approve our application
for premarket approval . Even if regulatory approval is granted, the approval
may limit the uses for which the Delcath system may be marketed. If we fail to
obtain FDA premarket approval, we will not be able to market the Delcath system.
Additionally, if we obtain FDA premarket approval with substantial limitations
on uses of the Delcath system, this would greatly reduce the market for the
system.

If we do not obtain FDA premarket approval, we may not be able to
export the Delcath system to foreign markets, which will limit our
sales opportunities.

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

Because of our limited experience, conduct of Phase III clinical trials
and obtaining FDA premarket approval could be delayed.

We have experienced and may continue to experience delays in beginning,
conducting and completing the trials, caused by many factors, including our lack
of experience in arranging for clinical trials and in evaluating and submitting
the data gathered from clinical trials, in designing trials to conform to the
trial protocols authorized by the FDA, in complying with the requirements of
institutional review boards at the sites where the trials will be conducted and
in identifying clinical test sites and sponsoring physicians. Completion of our
clinical trials will also depend on the ability of the clinical test sites to
identify patients to enroll in the clinical trials. The trials may also take
longer to complete because of difficulties we may encounter in entering into
agreements with clinical testing sites to conduct the trials. Any significant
delay in completing clinical trials or in the FDA's responding to our submission
or a requirement by the FDA for us to conduct additional trials would delay the
commercialization of the Delcath system and our ability to generate revenues.

Third-party reimbursement may not be available to purchasers of the
Delcath system or may be inadequate.

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

Because the Delcath system currently is characterized by the FDA as an
experimental device, Medicare, Medicaid and private health insurance plans will
not reimburse its use in the United States. We will not begin to seek to have
third-party payors reimburse the cost of the Delcath system until after its use
is approved by the FDA. Each third-party payor independently determines whether
and to what extent it will reimburse for a medical procedure or product.
Third-party payors in the United States or abroad may decide not to cover
procedures using the Delcath system. Further, third-party payors may deny
reimbursement if they determine that the Delcath system is not used in
accordance with established payor protocols regarding cost effective treatment
methods or is used for forms of cancer or with drugs not specifically approved
by the FDA.

New products are under increased scrutiny as to whether or not they
will be covered by the various healthcare plans and the level of reimbursement
which will be applicable to respective covered products and procedures. A third-

party payor may deny reimbursement for the treatment and medical costs
associated with the Delcath system, notwithstanding FDA or other regulatory
approval, if that payor determines that the Delcath system is unnecessary,
inappropriate, not cost effective, experimental or is used for a non-approved
indication.

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

We obtain necessary components for the Delcath system from sole-source
suppliers. Because manufacturers must demonstrate compliance with FDA
requirements, if our present suppliers fail to meet such requirements
or if we change any supplier, the successful completion of the clinical
trials and/or the commercialization of the Delcath system could be
jeopardized.

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

We do not have any contracts with suppliers for the manufacture of
components for the Delcath system. If we are unable to obtain an
adequate supply of the necessary components, we may not be able timely
to complete our clinical trials.

We do not have any contracts with suppliers for the manufacture of
components for the Delcath system. Certain components are available from only a
limited number of sources. To date, we have only had components of the Delcath
system manufactured for us in small quantities for use in pre-clinical studies
and clinical trials. We will require significantly greater quantities to
commercialize the product. If we are unable to obtain adequate supplies of
components from our existing suppliers or need to switch to an alternate
supplier, commercialization of the Delcath system could be delayed.

Because of our limited experience in marketing products and our lack of
adequate personnel to market and sell products, we may not be
successful in marketing and selling the Delcath system even if we
receive FDA premarket approval.

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

Market acceptance of the Delcath system will depend on substantial
efforts and expenditures in an area with which we have limited
experience.

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

Rapid technological developments in treatment methods for liver cancer
and competition with other forms of liver cancer treatments could
result in a short product life cycle for the Delcath system.

Competition in the cancer treatment industry, particularly in the
markets for systems and devices to improve the outcome of chemotherapy
treatment, is intense. The Delcath system competes with all forms of liver
cancer treatments that are alternatives to the "gold standard" treatment of
surgical resection. Many of our competitiors have substantially

greater resources, especially financial and technological. In addition, some of
our competitors have considerable experience in conduction clinical trials and
other regulatory procedures. These competitors are developing systems and
devices to improve the outcome of chemotherapy treatment for liver cancer. If
these competitors develop more effective or more affordable products or
treatment methods, our profitability will be substantially reduced and the
Delcath system could have a short product life cycle.

RISKS RELATED TO PATENTS, TRADE SECRETS AND PROPRIETARY RIGHTS

Our success depends in large part on our ability to obtain patents,
maintain trade secret protection and operate without infringing on the
proprietary rights of third parties.

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

RISKS RELATED TO PRODUCTS LIABILITY

We do not currently carry products liability insurance and we may not
be able to acquire sufficient coverage in the future to cover large
claims.

Clinical trials, manufacturing and product sales may expose us to
liability claims from the use of the Delcath system. Though participants in
clinical trials are generally required to execute consents and waivers of
liability, they may still be able to assert products liability claims against
us. Claims for damages, whether or not successful, could cause delays in the
clinical trials and result in the loss of physician endorsement. We do not
currently carry products liability insurance and we may not be able to acquire
products liability insurance at sufficient coverage levels or at an acceptable
cost. A successful products liability claim or recall would have a material
adverse effect on our business, financial condition and results of operations.

RISKS RELATED TO AN INVESTMENT IN OUR COMMON STOCK AND THIS OFFERING

The following factors relate to risks that are material to an
investment in our common stock. Any of these factors could result in lowering
the market value of our common stock and our 2003 Warrants.

There is a limited public float of our common stock and, at this time,
no public market for our 2003 Warrants. Because of this, trades of
relatively small amounts of our common stock can have a
disproportionate effect on the market price for our common stock. The
market price of our common stock may be volatile.

Of our outstanding common stock, approximately two-thirds can be
considered to be in the public float. The term "public float" refers to shares
freely and actively tradeable on the Nasdaq Small Cap Market and/or the Boston
Stock Exchange and not owned by officers, directors or affiliates, as such term
is defined under the Securities Act. Because of the relatively small public
float and the limited trading volume of our common stock, purchases and sales of
relatively small amounts of our common stock can have a disproportionate effect
on the market price for our common stock. As a result, the market price of our
common stock can be volatile.

The number of shares eligible for future sale may cause the market
price of our common stock to be below the level it otherwise would.

The potential for sales of substantial amounts of our common stock, or
"equity overhang," could adversely affect the market price of our common stock.
Upon completion of this offering, shares of our common stock will be
outstanding. Of these shares, shares sold in this offering or sold in
our public offering in 2000 will be freely tradable without restriction or
further registration under the Securities Act, except for shares held or
purchased by

persons considered to be our "affiliates" or acting as "underwriters," as those
terms are defined under the Securities Act. The remaining 1,597,521 shares of
our common stock outstanding and held by existing stockholders will be
considered "restricted securities" under the Securities Act and eligible for
sale in compliance with Rule 144. Rule 144 provides volume and manner of sale
restrictions and holding periods, which expire after the holder of our common
stock ceases to meet the definitions of affiliate or underwriter.

In addition, we may issue substantial amounts of common stock upon
exercise of the 2000 Warrants, the 2003 Warrants or options outstanding under
our stock option plans.

Sales of substantial amounts of common stock following this offering,
or the perception that such sales could occur, could have an adverse effect on
prevailing market prices for our common stock and the 2003 Warrants.

Anti-takeover provisions in our certificate of incorporation and
by-laws and under Delaware law and our stockholders rights agreement
may reduce the likelihood of a potential change of control.

Provisions of our certificate of incorporation, by-laws and Delaware
law may have the effect of discouraging, delaying or preventing a change in
control of us or unsolicited acquisition proposals that a stockholder might
consider favorable. These include provisions:

o providing for a classified board and permitting the removal
of a director only for cause;

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

o subjecting us to the provisions of Section 203 of the
Delaware General Corporate Law, which provides that a
Delaware corporation may not engage in any of a broad range
of business combinations with a person or entity who owns
15% or more of the outstanding voting stock of a company for
a period of three years from the date the person or entity
became an interested stockholder unless (a) prior to such
time our board of directors approved either the business
combination or the transaction which resulted in the
stockholder's becoming an interested stockholder or (b) upon
consummation of the transaction which resulted in the
stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the
transaction commenced or (c) at or subsequent to such time
the business combination is approved by the board of
directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of
the outstanding voting stock not owned by the interested
stockholder.

Furthermore, our board of directors has the authority to issue shares
of preferred stock in one or more series and to fix the rights and preferences
of the shares of any such series without stockholder approval. Any series of
preferred stock is likely to be senior to the common stock with respect to
dividends, liquidation rights and, possibly, voting rights. Our board's ability
to issue preferred stock may have the effect of discouraging unsolicited
acquisition proposals, thus adversely affecting the market price of our common
stock and the 2003 Warrants.

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

Roan/Meyers Associates, L.P. has limited public offering experience
which could affect the price of our common stock after this offering.

We have been advised by Roan/Meyers Associates, L.P., the
representative of the underwriters, that it has not acted as lead underwriter in
any firm commitment public offering in the last three years. This limited public
offering experience could affect the subsequent development of a trading market
of our common stock and the 2003 Warrants. You should consider this lack of
public offering experience in deciding whether to buy our securities in this
offering. To obtain detailed information regarding Roan/Meyers Associates, L.P.
(or any underwriter), you should contact your state regulator or visit the
website of the National Association of Securities Dealers, Inc. at
"www.nasdr.com."

Our stockholders' equity is less than the amount prescribed for
continued listing on the Nasdaq Small Cap Market. If we do not regain
compliance with the continued listing standards, our stock may be
delisted and we may not receive listing approval for the 2003 Warrants.

As of December 31, 2002, we no longer meet the minimum stockholders'
equity requirement prescribed for continued listing on the Nasdaq Small Cap
Market. In order to regain compliance, our stockholders' equity must be at least
$2.5 million. By letter, Nasdaq agreed to continue listing our common stock
until March 28, 2003 notwithstanding that our stockholders' equity is below the
minimum required. We have received no further formal extension.

In order to receive approval to list the 2003 Warrants on the Nasdaq
Small Cap Market, we are required to be in compliance with the continued listing
standards for the Nasdaq Small Cap Market with respect to our common stock. We
are also required to maintain: (i) a minimum bid price of $1.00 per share, (ii)
a certain public float, (iii) a certain number of round lot shareholders and
(iv) one of the following: a net income from continuing operations (in latest
fiscal year or two of the three last fiscal years) of at least $500,000, a
market value of listed securities of at least $35 million or a stockholders'
equity of at least $2.5 million. We currently are in compliance with the minimum
bid price, public float and number of round lot holders requirements. Because we
are a development stage company, we do not meet the net income requirement. We
also do not meet the market value of listed securities requirement. In the event
we are unable to obtain approval for listing on the Nasdaq Small Cap Market, we
will likely have to apply for listing on the Nasdaq Over the Counter Bulletin
Board or the Nasdaq Bulletin Board Exchange in order to maintain a public market
for the trading of our common stock and the 2003 Warrants. In the event that the
Nasdaq Small Cap Market does not allow the listing of the 2003 Warrants or
determines to delist our common stock, the underwriters may not proceed with the
offering.

Our exercise of our right to redeem the 2003 Warrants will prevent the
holders from realizing any additional benefit from any increase in the
price of our common stock.

Commencing one year from the closing date of this offering, we may
redeem the 2003 Warrants at a redemption price of $0.01 per warrant provided (i)
the average closing price of our common stock for the twenty trading days prior
to the date of notice of redemption is at least $ and (ii) there is
an effective registration statement providing for the issuance of the underlying
shares of common stock. Notice of our election to redeem the 2003 Warrants would
force holders, in order to avoid accepting the redemption price of $0.01 per
warrant, either to exercise the warrants by paying the exercise price or sell
the warrants in the market. A holder of the 2003 Warrants would be forced to
choose between these two actions at a time when they might otherwise wish to
continue to hold the 2003 Warrants.

A current prospectus and state blue sky registration may be required to
exercise the 2003 Warrants.

A holder of the 2003 Warrants will be able to exercise the warrants
only if the shares of our common stock issuable upon the exercise of the 2003
Warrants are registered for sale under the Securities Act of 1933 and a current
prospectus is available for delivery. In addition, the shares of common stock
issuable upon the exercise of the 2003 Warrants must, if required, be registered
or otherwise qualified for sale under the securities laws of the state in which
the holder of the 2003 Warrants resides.

The Nasdaq Small Cap Market may delist our securities.

Upon closing of this offering, we expect to meet the minimum
stockholders' equity requirement to maintain listing on the Nasdaq Small Cap
Market. However, it is likely that as of June 30, 2003, we may no longer meet
the minimum stockholders' equity requirement. In that event and absent
additional financing, we would expect that our common stock would likely be
delisted from the Nasdaq Small Cap Market. As a result of such delisting, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, our securities.

If our common stock is delisted from the Nasdaq Small Cap Market, we
may be subject to the risks relating to penny stocks.

If our common stock were to be delisted from trading on the Nasdaq
Small Cap Market and the trading price of the common stock remains below $5.00
per share on the date the common stock was delisted, trading in such securities
would also be subject to the requirements of certain rules promulgated under the
Exchange Act. These rules require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a penny stock and

impose various sales practice requirements on broker-dealers who sell penny
stocks to persons other than established customers and accredited investors,
generally institutions. The additional burdens imposed upon broker-dealers by
such requirements may discourage broker-dealers from effecting transactions in
our securities, which could severely limit the market price and liquidity of
such securities and the ability of purchasers to sell our securities in the
secondary market. A penny stock is defined generally as any non-exchange listed
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions.

California investors may not be able to resell the securities.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this prospectus, including statements of our
expectations, intentions, plans, objectives and beliefs, including those
contained in or implied by our "Plan of Operation," are "forward-looking
statements," within the meaning of Section 21E of the Securities Exchange Act of
1934, that are subject to certain events, risks and uncertainties that may be
outside our control. These forward-looking statements may be identified by the
use of words such as "expects," "anticipates," "intends," "plans" and similar
expressions. They include statements of our future plans and objectives for our
future operations and statements of future economic performance, information
regarding our expected growth, our capital budget and future capital
requirements, the availability of funds and our ability to meet future capital
needs, the realization of our deferred tax assets and the assumptions described
in this prospectus underlying such forward-looking statements. Actual results
and developments could differ materially from those expressed in or implied by
such statements due to a number of factors, including those described in the
context of such forward-looking statements, our ability to achieve operating
efficiencies, industry pricing and technology trends, evolving industry
standards, domestic and international regulatory matters, general economic and
business conditions, the strength and financial resources of our competitors,
our ability to find and retain skilled personnel, the political and economic
climate in which we conduct operations, the risks discussed in "Risk Factors"
and other risk factors described from time to time in our other documents and
reports filed with the Securities and Exchange Commission. We do not assume any
responsibility to update any of our forward-looking statements regardless of
whether factors change as a result of new information, future events or for any
other reason.

USE OF PROCEEDS

Our net proceeds from the sale of units being offered by this
prospectus, after deducting the underwriting discount and estimated expenses of
this offering, are estimated to be $1,480,500.

We expect to use these net proceeds approximately as follows:

Approximate Dollar Approximate Percentage of
Application of Net Proceeds Amount Net Proceeds
--------------------------- ------ ------------

Research and development:
Phase III clinical trials using the Delcath .... $ 964,000 65.1%
system with doxorubicin
Phase I and Phase II clinical trials using the.. 189,000 12.8%
Delcath system with melphalan

Approximate Dollar Approximate Percentage of
Application of Net Proceeds Amount Net Proceeds
--------------------------- ------ ------------

Development of alternative filter for the Delcath.. 119,000 8.0%
system
Working capital and general corporate purposes .... 208,500 14.1%
---------- ----
Total .................................... $1,480,500 100%
========== ====

Phase III clinical trials using the Delcath system with doxorubicin.
These costs represent:

o the costs of recruiting medical centers to conduct the
trials and patients to participate in the trials;

o the costs of treating patients, including the costs of the
Delcath system and payments for unreimbursed medical
expenses for patients receiving treatment with the system;

o fees and expenses of the clinical research organization and
the statistical evaluation organization which we anticipate
hiring to conduct the trials, collect and process the data
and prepare and file a premarket approval application; and

o the compensation and benefits of Delcath employees
responsible for overseeing the completion of the clinical
trials and filing a premarket approval application.

Phase I and Phase II clinical trials using the Delcath system with
melphalan. These costs represent:

o fees payable to the National Cancer Institute for the costs
of treating patients, including the costs of the Delcath
system;

o fees and expenses of the clinical research organization and
the statistical evaluation organization we anticipate hiring
to monitor the trials, collect and process the data and
prepare and file the required FDA reports in order to
receive approval to proceed with the next phase of the
clinical trials; and

o the compensation and benefits of Delcath employees
responsible for overseeing the completion of each phase of
the clinical trials and filing the required FDA report in
order to receive approval to proceed with the next phase of
the trials.

Development of alternative filter for use in the Delcath system. These
costs represent:

o the fees and expenses of a consultant to identify sources
capable of supplying an activated carbon blood filter,
including the design and production of a prototype filter;
and

o the fees of consultants to test the capability of the filter
to cleanse the blood supply of most of the infused
chemotherapy agent and to prepare reports of results to be
submitted to the FDA to obtain approval to use the new
filter with the Delcath system.

Working capital and general corporate purposes. These costs include
general and administrative costs, including the salaries of our executive
officers.

If the underwriters exercise the over-allotment option in full, we will
realize additional net proceeds of $274,050, which we expect we will use for
working capital purposes.

The above allocation represents our best estimate of the allocation of
the net proceeds of this offering based upon the current status of our business.
If any of these factors change, we may find it necessary to reallocate a portion
of the proceeds from one category to another or use portions of the proceeds for
other purposes. Our estimates may prove to be inaccurate, new programs or
activities may be undertaken which will require additional expenditures or
unforeseen expenses may occur.

Based upon our current plans and assumptions relating to our business
plan, we anticipate that the net proceeds of this offering will satisfy our
working capital requirements for at least eighteen to twenty-four months
following the closing of this offering. If our plans change or our assumptions
prove to be inaccurate, we may need to seek additional financing sooner than
currently anticipated or curtail our operations. The proceeds of this offering
may not be sufficient to fund our clinical trials with respect to the use of the
Delcath system with doxorubicin to treat liver cancer. If we need additional
financing, it may not be available or may be available only on terms that are
not favorable to us.

We will invest proceeds not immediately required for the purposes
described above principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest-bearing
investments.

USE OF PROCEEDS OF INITIAL PUBLIC OFFERING

As noted above, the effective date of our registration statement
relating to our initial public offering of our common stock was October 19,
2000. A total of 1,200,000 units were sold for $6.00 per unit consisting of one
share of common stock and one redeemable warrant to purchase one share of common
stock for $6.60 per share until October 18, 2005. The initial public offering
resulted in gross proceeds of $7.2 million, $720,000 of which was paid as the
underwriting discount. Cash expenses relating to the offering, including
non-accountable expense reimbursement to the underwriters, totaled approximately
$1.45 million. Our net proceeds were approximately $5.4 million. From the time
of receipt through December 31, 2002, the net proceeds were applied toward:

Application of Net Proceeds Approximate Amount
--------------------------- ------------------
(in thousands)

Research and development:
Phase III clinical trials using the Delcath system with doxorubicin ........ $2,009
Phase I clinical trials using the Delcath system with melphalan ............ 901
Research and development stage clinical trials for other chemotherapy agents 87
Repayment of indebtedness ..................................................... 270
Working capital and general corporate purposes ................................ 671
------
Total ......................................................................... $3,938
======

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Units consisting of our common stock and our 2000 Warrants traded on
the Nasdaq Small Cap Market under the symbol "DCTHU" from October 9, 2000, the
effective date of the registration statement under the Securities Act relating
to our initial public offering of our common stock, until October 19, 2001. In
accordance with the terms of our initial public offering, effective October 22,
2001, our common stock and our 2000 Warrants were decoupled from the units
issued October 19, 2000 and commenced separate trading. The shares of common
stock currently trade under the symbol "DCTH" and the 2000 Warrants currently
trade under the symbol "DCTHW." We do not currently meet the minimum
stockholders' equity requirement for continued listing on the Nasdaq Small Cap
Market and, as of the date hereof, our common stock could be delisted. The
following table sets forth the per share range of high and low sales prices of
the units and the common stock for the periods indicated as reported on the
Nasdaq Small Cap Market:

Unit Price Range
----------------

2001
----

High Low
---- ---
Quarter ended March 31, 2001 $5.69 $2.19
Quarter ended June 30, 2001 3.20 1.25

High Low
---- ---
Quarter ended September 30, 2001 2.92 1.26
October 1, 2001 - October 19, 2001 1.35 1.00

Common Stock Price Range
------------------------

2001
----

High Low
---- ---
Quarter ended December 31, 2001
(since October 19 only) $1.795 $0.56

2002
----

High Low
---- ---

Quarter ended March 31, 2002 $2.90 $0.94
Quarter ended June 30, 2002 1.90 0.68
Quarter ended September 30, 2002 1.11 0.63
Quarter ended December 31, 2002 2.66 0.31

2003
----

High Low
---- ---
Quarter ended March 31, 2003 $1.79 $0.94
Quarter ending June 30, 2003 $1.29 $0.95
(through April 30, 2003)

Our common stock and our 2000 Warrants are also listed on the Boston
Stock Exchange under the symbols "DCT" and "DCT/U," respectively.

As of April 14, 2003, there were approximately 82 stockholders of
record of our common stock and approximately 696 additional beneficial owners of
our common stock.

DIVIDEND POLICY

We have never paid cash dividends on our common stock and anticipate
that we will continue to retain our earnings, if any, to finance the growth of
our business. Our board of directors has the sole discretion in determining
whether to declare and pay dividends in the future. Whether we pay cash
dividends on our common stock will depend on our profitability, financial
condition, cash requirements, future prospects and other factors deemed relevant
by our board of directors. Our ability to pay cash dividends in the future could
be limited or prohibited by the terms of financing agreements that we may enter
into or by the terms of any preferred stock that we may authorize and issue.

CAPITALIZATION

The following table sets forth our capitalization as of December 31,
2002 and as adjusted for the effect of this offering including the application
of the net proceeds.

December 31, 2002
--------------------------------------
Actual As Adjusted
------ -----------
(in thousands)

Common Stock ....................... $ 41 $ 62
Additional paid-in capital ......... 19,049 20,495

December 31, 2002
--------------------------------------
Actual As Adjusted
------ -----------
(in thousands)

Accumulated deficit ................ (17,453) (17,453)
Total stockholders' equity .... 1,637 3,103
-------- --------
Total capitalization .......... $ 1,637 $ 3,103
======== ========

SELECTED FINANCIAL DATA

The following selected financial data for the two years ended December
31, 2002 and cumulative from inception through December 31, 2002 are derived
from our audited financial statements.

The data should be read in conjunction with the consolidated financial
statements, related notes and other financial information, "Capitalization" and
"Plan of Operation" appearing elsewhere in this prospectus.

Cumulative from
Inception (August 5,
Years Ended 1988)
December 31, to December 31,
2001 2002 2002
---- ---- ----

(in thousands)

Statement of Operations Data:

Total costs and expenses ........... $ 2,069 $ 1,897 $ 16,714
Operating loss ..................... (2,069) (1,897) (16,714)
Net loss attributable to common
stockholders ....................... (1,876) (1,807)
Net loss per share ................. (0.48) (0.44)
Weighted average number of shares of
common stock outstanding......... 3,904 4,085

As of December 31, 2002
-----------------------------------

Actual As Adjusted1
------ ------------
(in thousands)

Balance Sheet Data:
Cash and cash equivalents $1,064 $2,678
Certificate of deposit 370 370
Total assets 1,812 3,188
Total liabilities 175 85
Stockholders' equity 1,637 3,103
- ----------------------------

(1) The as adjusted amounts assume net proceeds of $1,480,500 (excluding
proceeds for any exercise of the overallotment option) from the sale of the
units offered hereby.

The above tables do not reflect (i) up to units issuable
in connection with the underwriters' overallotment option, (ii) up to 1,145,684
shares of common stock reserved for issuance upon exercise of stock options
issued pursuant to our stock option plans and (iii) up to shares
of common stock issuable upon exercise of warrants (including the 2003 Warrants
we plan to issue in connection with this offering).

PLAN OF OPERATION

Since our founding in 1988, we have been a development stage company
engaged primarily in developing and testing the Delcath system for the treatment
of liver cancer. A substantial portion of our historical expenses have been for
the development of our medical device, the clinical trials of our product and
the pursuit of patents worldwide, which now total nine. We expect to continue to
incur significant losses from costs for product development, clinical studies,
securing patents, regulatory activities, manufacturing and establishing a sales
and marketing organization without any significant revenues. A detailed
description of the cash used to fund historical operations is in the financial
statements and the notes thereto. Without an FDA-approved product and commercial
sales, we will continue to be dependent upon existing cash and the sale of
equity or debt to fund future activities. While the amount of future net losses
and time

required to reach profitability are uncertain, our ability to generate
significant revenue and become profitable will depend on our success in
commercializing our device.

During 2001, we initiated the clinical trial of the system for isolated
liver perfusion using the chemotherapy agent, melphalan. The Phase I clinical
trial at the National Cancer Institute marks an expansion in the potential
labeled usage for the Delcath system beyond doxorubicin, the chemotherapy agent
used in our initial clinical trials. Enrollment of new patients in the Phase I
trial continued throughout 2002.

NCI is currently preparing a clinical trial protocol for a Phase II
trial of melphalan, based on the data collected in the Phase I study. Enrollment
in this Phase II study is expected to begin during 2003. The Principal
Investigator at the NCI has informed us that he plans to publish and/or present
his findings in appropriate medical forums once treatment within Phase I of the
trial is completed.

The following tables describe the dates each phase of our clinical
trials began, the currently estimated cost to complete each phase of the
clinical trial and the amount spent as of March 31, 2003 for our trials with
each of doxorubicin and melphalan.

Doxorubicin

Estimated Additional
Phase Date Commenced Cost to Complete Amount Spent
----- -------------- ---------------- ------------
Phase I 1990 0 (2)
Phase II 1990 0 (2)
Phase III (1) $4,600,000 (3) $2,109,000
- ----------
(1) We expect the Phase III clinical trials with doxorubicin to
commence in 2003.

(2) The Phase I and II trials were conducted as a combined trial. All
costs with respect to these two trials were incurred before October 2000, the
date of our initial public offering. Prior to the initial public offering, we
did not account for our research and development expenses by project. From
inception through December 31, 1999, the period in which the Phase I and Phase
II clinical trials were conducted, approximately 73% of our expenses were
attributable to research and development. We estimate that of this amount, $7.6
million was spent on the combined Phase I and Phase II trial.

(3) The cost to complete will be significantly affected by the time
period over which the trials are conducted. In turn, the time period will be
significantly affected by the number of sites that agree to conduct the trials
and the time it takes to enroll the required number of patients in the treated
group and the control group. The FDA may also instruct us to increase the number
of patients in our trial. Therefore, the estimate is subject to change over
time.

Melphalan

Date Estimated Additional
Phase Commenced Cost to Complete Amount Spent
----- --------- ---------------- ------------
Phase I 2001 $150,000(1) $1,080,000
Phase II (2) $740,000(3) 0
Phase III (4) (4) (4)

- --------
(1) Phase I of the clinical trial will continue until the Principal
Investigator determines that he has reached the maximum tolerated dose level of
melphalan for treated patients. We currently estimate that treatments will
continue through June 30, 2003. However, this estimate is subject to change.

(2) Commencement date is pending completion of the Phase I clinical
trial and obtaining FDA approval to commence Phase II.

(3) We expect that the Phase II clinical trials will be conducted at
the National Cancer Institute. The cost to complete will be significantly
affected by the time period over which the trials are conducted. The FDA may
also instruct us to increase the number of patients in our trial. Therefore, the
estimate is subject to change over time.

(4) We cannot estimate the date of commencement or the cost to complete
Phase III of the melphalan clinical trial because we have not yet obtained
approval of our study protocol from the FDA.

We also announced that the Sydney Melanoma Unit of the University of
Sydney Sydney Cancer Centre plans to proceed with a Phase III study of our drug
delivery system for inoperable cancer in the liver, pending approval of the
hospital's Institutional Ethics Committee. Other potential sites are not as far
along as Sydney in their preparations to participate in this clinical trial.

Our management continues to speak to potential investors and investment
analysts at a series of meetings in several major U. S. cities and in Europe. On
April 3, 2002 we raised $267,500 upon completion of a private placement of
243,181 shares of common stock with an investment group.

Over the next twelve months, we expect to incur substantial expenses
related to the research and development of our technology, including Phase III
clinical trials using doxorubicin with the Delcath system and Phase I and Phase
II clinical trials using melphalan with the Delcath system. Additional funds,
when available, will be committed to pre-clinical and clinical trials for the
use of other chemotherapy agents with the Delcath system for the treatment of
liver cancer and the development of additional products and components. We will
also continue efforts to qualify additional sources of the key components of our
device, in an effort to further reduce manufacturing costs and minimize
dependency on a single source of supply.

LIQUIDITY AND CAPITAL RESOURCES

Without raising additional funds, we currently anticipate that our
available funds will be sufficient to meet our anticipated needs for working
capital and capital expenditures through at least the next twelve months. We are
not projecting any capital expenditures that will significantly affect our
liquidity during the next twelve months. Upon the closing of this offering, we
anticipate hiring an additional employee to serve as Director of Research and
Development. Our cash and cash equivalents and short term investments at
December 31, 2002 totaled $1.43 million.

Our future liquidity and capital requirements will depend on numerous
factors, including the progress of our research and product development
programs, the success or failure of our clinical studies, the timing and costs
of making various United States and foreign regulatory filings, obtaining
approvals and complying with regulations, the timing and effectiveness of
product commercialization activities, including marketing arrangements overseas,
the timing and costs involved in preparing, filing, prosecuting, defending and
enforcing intellectual property rights and the effect of competing technological
and market developments.

Our future results are subject to substantial risks and uncertainties.
We expect to require additional working capital in the future and such working
capital may not be available on acceptable terms, if at all.

FUTURE CAPITAL NEEDS, ADDITIONAL FUTURE FUNDING

Our future results are subject to substantial risks and uncertainties.
We have operated at a loss for our entire history and we may never achieve
consistent profitability. We had working capital at December 31, 2002 of $1.4
million. We expect to require additional working capital in the future, and such
working capital may not be available on acceptable terms, if at all. In
addition, we may need additional capital in the future to fully implement our
strategy as set forth herein.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
Certain accounting policies have a significant impact on amounts reported in the
financial statements. A summary of those significant accounting policies can be
found in Note 1 to our financial statements included herein. We have not adopted
any significant new accounting policies during the year ended December 31, 2002,
but have reclassified our Statements of Operations to reflect cost and expense
accounts on a functional basis for 2002 and prior.

BUSINESS

General

We were incorporated under Delaware law in 1988. We are a development
stage company, and we have developed the Delcath system to isolate the liver
from the general circulatory system and to administer chemotherapy

and other therapeutic agents directly to the liver. Since our inception, we have
raised approximately $14 million in funds (net of fundraising expenses), and we
have invested approximately $11 million of those funds in research and
development costs associated with development and testing of the Delcath system.

The Delcath system is not currently approved for marketing by the
United States Food and Drug Administration, and it cannot be marketed in the
United States without FDA premarket approval. We plan to conduct Phase III
clinical trials designed to secure premarket approval in the United States and
possibly in foreign markets for use of the Delcath system with a particular
chemotherapy agent, doxorubicin, currently used to treat malignant melanoma that
has spread to the liver. We also plan to continue our clinical trial for the use
of the Delcath system with another chemotherapy agent, melphalan, which is also
currently used to treat malignant melanoma that has spread to the liver.
Additionally, we plan to continue pre-clinical and clinical trials on the use of
the Delcath system with other chemotherapy agents used to treat liver cancer.

STRATEGY

Our objectives are to establish the use of the Delcath system as the
standard technique for delivering chemotherapy agents to the liver and to expand
the Delcath technology so that it may be used in the treatment of other liver
diseases and of cancers in other parts of the body. Our strategy includes the
following:

o Completing clinical trials to obtain FDA premarket approval
for use of the Delcath system with doxorubicin to treat
malignant melanoma that has spread to the liver. Our highest
priority is completing the Phase III clinical trials, data
preparation, statistical analysis and regulatory documents
associated with an application for premarket approval of
commercial sale of the Delcath system in the United States
for use in administering doxorubicin in the treatment of
melanoma that has spread to the liver.

o Obtaining approval to market the Delcath system in the
United States for the treatment of other forms of liver
cancer using other chemotherapy agents and treatment of
hepatitis using anti-viral drugs. In August 2001, we
commenced a Phase I clinical trial at the National Cancer
Institute using melphalan, a chemotherapy agent. In addition
to researching the use of other chemotherapy agents with the
Delcath system to treat cancer, we plan to research the use
of other compounds with the Delcath system to treat other
diseases, such as hepatitis. Our timing to begin these
studies will depend on our ability to establish strategic
alliances with pharmaceutical manufacturers or other
strategic partners in conjunction with our research into
other therapeutic compounds and to raise additional funds
for these purposes. Additional FDA premarket approval will
be required to market the Delcath system for these uses.

o Introducing the Delcath system into foreign markets. We will
seek to establish strategic relationships with domestic and
foreign firms that have a recognized presence or experience
in foreign markets that we intend to target. Our strategy is
to focus on markets that have a high incidence of liver
cancer and the means to provide and pay for

cancer treatments. According to the World Health
Organization, many Asian and European countries, including
China, Japan, Greece, Hong Kong, the Philippines, France,
Germany, Italy and Spain, have a higher incidence of liver
cancer than the United States. Additionally, Australia has
been cited as having the highest incidence of skin cancer in
the world. Given that our current Phase III clinical trials
are with a chemotherapy agent that is used to treat
malignant melanoma that has spread to the liver, upon
obtaining FDA premarket approval, we intend to target the
Australian market. We also intend to seek to enter into
arrangements with strategic partners who have experience
with obtaining regulatory approval and marketing medical
devices in those markets and are willing to bear the cost of
those activities.

THE CANCER TREATMENT MARKET

The American Cancer Society projects that about 1,334,100 Americans
will be diagnosed with cancer in 2003. According to the American Cancer
Society's "Cancer Facts and Figures 2003," cancer remains the second leading
cause of death in the United States. While researchers continue to develop
innovative new treatments for some forms of this disease, surgical resection,
chemotherapy, radiation and hormone therapy continue to be the most commonly
used treatments.

The financial burden of cancer is great for patients, their families
and society. The National Institutes of Health, in the American Cancer Society's
"Cancer Facts & Figures 2003," estimates the overall costs of cancer in the year
2002 to be $171.7 billion, including $61 billion in direct medical costs, $15.5
billion for indirect morbidity costs attributable to lost productivity due to
illness and $95.2 billion for indirect mortality costs attributable to lost
productivity due to death.

THE LIVER CANCER MARKET

Liver cancer is one of the most prevalent and lethal forms of cancer
throughout the world. There are two forms of liver cancer: primary and
metastatic. Primary liver cancer originates in the liver. Metastatic, or
secondary, liver cancer results from the spread of cancer from other places in
the body to the liver. With our initial Phase III clinical trials, we will seek
to develop data on metastatic melanoma which has spread to the liver. According
to the American Cancer Society's "Cancer Facts & Figures 2003," the five-year
survival rate for liver cancer patients, both primary and secondary, is
approximately 7%, compared to the 62% for all other forms of cancer combined. In
the liver, tumors can be surgically removed only when they are located in one of
the liver's two lobes. However, since symptoms of liver cancer often do not
appear until the disease has advanced, more than 70% of cancerous liver tumors
cannot be surgically removed at the time of diagnosis. A significant number of
patients treated for primary and metastatic liver cancer will also experience a
recurrence of their disease.

Metastatic liver cancer is characterized by microscopic pieces of other
forms of cancer that detach from the primary site and travel via the blood
stream and lymphatic system into the liver, where they grow into new tumors.
This growth often continues even after removal of the primary cancer or
cancerous organ. When cancer cells enter the liver and develop into tumors, they
tend to grow very quickly. In many cases, the patient dies not from the primary
cancer, but from the tumors in the liver; the liver becomes the "life limiting
organ." People cannot survive without a liver capable of performing its critical
biologic functions: facilitating the conversion of food into energy and
filtering toxic agents from the blood. The liver is one of the three most common
sites to which cancer may spread. Due to numerous factors, including the absence
of viable treatment options, metastatic liver cancer often causes death.

According to the 2002 World Health Report, liver cancer is the third
most common form of cancer worldwide, accounting for 616,000 deaths. The
American Cancer Society in its "Cancer Facts & Figures 2003" has projected that
in the United States there will be approximately 17,300 new cases of primary
melanoma and 54,200 new cases of metastatic melanoma.

Primary liver cancer is particularly prevalent in Southern Europe, Asia
and developing countries, where the primary risk factors for the disease are
present. These risk factors include: hepatitis-B, hepatitis-C, relatively high
levels of alcohol consumption, aflatoxin, cigarette smoking and exposure to
industrial pollutants.

CURRENT LIVER CANCER TREATMENTS

The prognosis for primary and secondary liver cancer patients is poor.
Although limited treatment options are currently available for liver cancer,
they are typically ineffective, are generally associated with significant
side-effects

and can even cause death. Traditional treatment options, discussed
in more detail below, include surgery, chemotherapy, cryosurgery, percutaneous
ethanol injection and radiation.

Surgery

While surgery is considered the "gold standard" treatment option to
address liver tumors, an estimated 75% of liver tumors are unresectable, which
means they do not qualify for surgical removal. This is most often due to the
following:

o Operative risk: limited liver function or poor patient
health threatens survival as a result of the surgery; or

o Technical feasibility: the proximity of a cancerous tumor to
a critical organ or artery or the size, location on the
liver or number of tumors makes surgery not feasible.

For the patients who qualify for surgery, there are significant
complications related to the procedure. Recurrence of tumors is common, and in
that event, surgery typically cannot be repeated.

We believe that delivery of drugs with the Delcath system may enable
surgical removal in some of the cases which are currently inoperable by reducing
the size and number of tumors sufficiently to make resection feasible. Shrinking
a tumor using chemotherapy and then removing the tumor is a procedure known as
adjuvant therapy. After resection, chemotherapy can be administered through the
Delcath system with the objective of destroying micro metastases in the liver
that may remain undetected, thus preventing or delaying any recurrence of tumor
growth.

Chemotherapy

The most prevalent form of liver cancer treatment is intravenous
chemotherapy. The effectiveness of this treatment, however, is limited by its
side effects. Generally, the higher the dosage of chemotherapy administered, the
greater its ability to kill cancer cells. However, due to the toxic nature of
chemotherapy agents, the higher the dosage administered, the greater damage
chemotherapy agents cause to healthy tissues. As a result, the dosage of
chemotherapy required to kill cancer cells can be lethal to patients.

The side effects caused by doxorubicin, the drug we are seeking to have
approved for use in the Delcath system, are representative of the side-effects
associated with many chemotherapy agents. Doxorubicin causes irreversible heart
tissue damage. Depending on dosage levels, the damage caused by doxorubicin can
be serious and lead to congestive heart failure. Doxorubicin can also cause
severe mucositis leading to ulceration of the mouth and digestive organs, damage
to a patient's immune system through destruction of bone marrow cells, as well
as acute nausea, severe vomiting, dermatological problems and hair loss. The use
of doxorubicin can be fatal even when it is administered with careful patient
monitoring.

The limited effectiveness of intravenous chemotherapy treatment and its
debilitating, often life-threatening, side-effects makes the decision to undergo
chemotherapy treatment difficult. In some instances, in an attempt to shrink
tumors, a physician may prescribe a radically high-dose of chemotherapy, despite
its side effects. In other cases, recognizing the inevitable result of liver
cancer, the physician and patient choose only to manage the patient's discomfort
from cancer with pain killers while foregoing treatment.

To address this trade-off between the efficacy of intravenous
chemotherapy treatment and its dire side effects, physicians have experimented
with techniques to isolate the liver from the general circulatory system and to
achieve a targeted delivery of chemotherapy agents to the liver. In the 1980's,
a physician developed a procedure in which he surgically diverted the blood flow
from the liver while infusing high dosages of chemotherapy agents into the
liver. A filtration circuit reduced drug concentrations before returning the
diverted blood to the patient. The treatment, however, was not embraced by the
medical community because it is highly invasive, resulting in prolonged recovery
times, long hospital stays and very high costs. Other physicians have
experimented with the delivery of chemotherapy agents to the liver by catheter,
attempting to use one or more catheters to remove chemotherapy agents before
they enter the general circulatory system. We are unaware of any system,
however, which contains the patented attributes of the Delcath design.

Cryosurgery

Cryosurgery is the destruction of cancer cells using sub-zero
temperatures in an open surgical procedure. During cryosurgery, multiple
stainless steel probes are placed into the center of the tumor and liquid
nitrogen is circulated through the end of the device, creating an ice ball.
Cryosurgery involves a cycle of treatments in which the tumor is frozen, allowed
to thaw and then refrozen.

While cryosurgery is considered to be relatively effective, we believe
adoption of this procedure has been limited because:

o It is not an option for patients who cannot tolerate an open
surgical procedure;

o It involves significant complications which are similar to
other open surgical procedures, as well as liver fracture
and hemorrhaging caused by the cycle of freezing and
thawing;

o It is associated with mortality rates estimated to be
between one and five percent; and

o It is expensive compared to other alternatives.

Percutaneous Ethanol Injection

Percutaneous ethanol injection, or PEI, involves the injection of
alcohol into the center of the tumor. The alcohol causes cells to dry out and
cellular proteins to disintegrate, ultimately leading to tumor cell death.

While PEI can be successful in treating some patients with primary
liver cancer, it is generally considered ineffective on large tumors as well as
metastatic tumors. Patients are required to receive multiple treatments, making
this option unattractive for many patients. Complications include pain and
alcohol introduction to bile ducts and major blood vessels. In addition, this
procedure can cause cancer cells to be deposited along the needle track when the
needle is withdrawn.

Radiation Therapy

Radiation therapy uses high dose x-rays to kill cancer cells. Radiation
therapy is not considered an effective means of treating liver cancer and is
rarely used for this purpose. Radiation is often used as an adjunct to other
treatments for liver cancer .

Implanted Infusion Pumps

Implanted infusion pumps can be used to better target the delivery of
chemotherapy agents to the tumor. Arrow International markets an implantable
pump typically used to treat colorectal cancer which has metastasized to the
liver. This pump, however, lacks a means of preventing the entry of chemotherapy
agents into the patient's general circulation after it passes through the liver.
This technique does not enable physicians to prescribe higher doses of
chemotherapy.

Other Methods of Treatment

Still other liver cancer treatments include liver transplants,
embolization, removal of tumors through the use of radio frequency waves and the
use of biological response modulators, monoclonal antibodies and liposomes. The
effectiveness of these treatments is limited, many have dose limiting
side-effects and none is widely used.

TREATMENT WITH THE DELCATH SYSTEM

The Delcath system is designed to address the critical shortcomings of
conventional intravenous chemotherapy delivery. The Delcath system isolates the
liver from the general circulatory system during liver cancer treatments with
chemotherapy agents and then returns the blood exiting the liver to the general
circulatory system only after the chemotherapy agent has been substantially
removed by filtration outside the body. We believe that the protection from the
side-effects of chemotherapy to other parts of the body that is provided by the
Delcath system allows for higher chemotherapy doses to the liver than can be
administered by conventional intravenous delivery. By filtering out a
substantial portion of the chemotherapy agent before the blood is returned to
the blood stream, other organs of the body receive less exposure than the liver
to the chemotherapy agent. Therefore, these organs are less likely to suffer
from the harmful side-effects of chemotherapy, including the cumulative harmful
effect that doxorubicin has on the heart muscle.

The Delcath system kit includes the following disposable components
that we purchase from third-party suppliers:

o Infusion catheter -- a thin-walled arterial infusion
catheter used to deliver chemotherapy to the liver;

o Double balloon catheter -- a multi-passageway catheter used
to isolate and divert the drug-laden blood exiting the
liver;

o Extracorporeal filtration circuit -- a blood tubing circuit
incorporating the disposable components used with a blood
pump to push the isolated blood through the system's filters
and guide the cleansed blood back to the patient;

o Filters -- activated carbon blood filters used to remove
most of the chemotherapy agent from the isolated blood after
it has flowed through the liver and before it returns to the
patient's general circulation; and

o Return catheter -- a thin-walled blood sheath used to
deliver the filtered blood from the extracorporeal
filtration circuit back into one of the major veins
returning blood to the right atrium of the heart.

The double balloon catheter has one large passageway and three smaller
passageways. Each of two low-pressure balloons is inflated through one of the
three smaller passageways. Blood flows out of the liver through the large
passageway to the filtration system. A separate access port attaches to the
large passageway and is designed for sampling fluid or flushing the system. The
third smaller passageway allows blood exiting the legs and kidneys to bypass the
liver and return to the heart.

The Delcath system involves a series of three catheter insertions, each
of which is made through the skin. During test procedures, patients are treated
with intravenous sedation and local anesthesia at catheter insertion sites. In
some cases general anesthesia has been used. An infusion catheter is inserted
into the artery through which blood normally flows to the liver. A second
catheter -- the Delcath double balloon catheter -- is inserted through the
inferior vena cava, a major vessel of the heart . The balloons on the double
balloon catheter are then inflated. This procedure prevents the normal flow of
blood from the liver to the heart through the inferior vena cava because the
inferior vena cava has been blocked. A chemotherapy agent is then infused into
the liver through the infusion catheter. The infused blood is prevented from
flowing to the heart, but leaves the liver through perforations on the double
balloon catheter and flows through this catheter out of the body where the
infused blood is pumped through activated charcoal filters to remove most of the
chemotherapy agent. The filtered blood is returned to the patient through the
jugular vein which leads to the superior vena cava, another major vessel of the
heart, thus restoring the cleansed blood to normal circulation. Infusion is
administered over a period of thirty minutes. Filtration occurs during infusion
and for thirty minutes afterward. The catheters are removed and manual pressure
is maintained on the catheter puncture sites for approximately fifteen minutes.
The entire procedure takes approximately two to three hours to administer.

During Phase I and Phase II clinical trials, patients remained in the
hospital overnight for observation after undergoing treatment with the Delcath
system. Once physicians become familiar with using the Delcath system, we expect
the procedure to be performed on an outpatient basis, with the patient resuming
normal activities the day after the procedure is performed. We expect a patient
to undergo an average of four treatments, one every three weeks. A new Delcath
system kit is used for each treatment.

Integral to our research and development efforts is our program of
clinical research with prominent researchers and physicians that is being
conducted presently at The National Cancer Institute and was previously
conducted at Yale University, M.D. Anderson Cancer Center and Wright Patterson
Air Force Base.

OUR PHASE III CLINICAL TRIALS

Phase III clinical trials are a prerequisite for FDA approval of
Delcath's premarket approval application. During these trials, administration of
doxorubicin through the Delcath system must be proven to be safe and effective
for the treatment of liver cancer. The FDA requires us to demonstrate that
delivering doxorubicin using the Delcath system results in patient survival
times that are longer than those obtained from administering chemotherapy agents
intravenously.

We have conducted Phase I and II clinical trials at three United States
medical centers under investigational device and investigational new drug
exemptions granted by the FDA. The trials were designed to demonstrate the
system's "functionality," or its ability to administer to and extract from the
liver approved and marketed chemotherapy agents. Forty-four patients
participated in the trials. Twenty-one of these test subjects had primary liver
cancer or melanoma which had spread to the liver and were treated with
doxorubicin. The remaining twenty-three test subjects suffered from other forms
of liver cancer and/or were treated with another chemotherapy agent, 5-FU. These
trials demonstrated that the Delcath system was capable of extracting
approximately 70% to 85% of the chemotherapy agent administered to the liver. We
believe that this supports our hypothesis that the Delcath system permits the
delivery of higher dosages of chemotherapy agents to the cancer site while at
the same time minimizing damage to healthy tissue.

We believe the results of the clinical trials we have conducted
indicate that the Delcath system delivered:

o more chemotherapy agent to the tumor site; and

o less chemotherapy agent to the general circulation than
delivered by administration of the same dose by intravenous
means.

In addition, clinicians involved in the Phase I and Phase II clinical
trials observed:

o reduction in tumor size; and

o the safety of the system at higher dosage levels of
chemotherapy than those used in conventional intravenous
chemotherapy delivery.

Though not demonstrated in a statistically significant manner because
of the limited number of patients tested, clinicians observed survival times of
patients treated with the Delcath system which exceeded those that would
generally be expected in patients receiving chemotherapy treatment through
conventional intravenous means of delivery.

Based on the results of our Phase I and Phase II clinical trials, we
submitted to the FDA our application for premarket approval of the Delcath
system as a medical device. In response to our application, the FDA classified
the Delcath system as a drug delivery system which requires us to obtain
approval of new labeling for the drug being used in the clinical trials. The
application to change the labeling must be filed by a drug manufacturer holding
an existing new drug application or an abbreviated new drug application. We have
reached a preliminary oral understanding with a drug manufacturer holding an
existing license for doxorubicin to submit an application to the FDA supporting
the new labeling based on data from the Phase III clinical trial. The premarket
approval application must demonstrate the clinical utility of a particular drug
when administered through the Delcath system. To do so, we must demonstrate, in
a statistically significant manner, that administering doxorubicin with the
Delcath system results in survival times of patients that are longer than those
obtained from administering doxorubicin intravenously.

With a substantial portion of the proceeds that we receive from this
offering, we intend to conduct Phase III clinical trials designed to demonstrate
that administering doxorubicin with the Delcath system to treat malignant
melanoma that has spread to the liver results in patient survival times that are
longer than those obtained from administering chemotherapy agents intravenously.

In December 1999, the FDA approved our protocols for conducting the
Phase III clinical trials.

We expect the Phase III clinical trials to be conducted at several
medical centers such as the NCI and the Sydney Cancer Centre and to involve a
minimum of 122 test subjects who will be treated for malignant melanoma that has
spread to the liver. Half of these test subjects will be treated with
doxorubicin administered using the Delcath system and the other half, the
control group, will be treated with either of two specified chemotherapy agents
delivered intravenously. Trials will commence upon approval of a budget by the
respective institutions. Once a budget is approved, the trials will commence at
that institution. We expect that trials will begin in 2003. However, our
timetable is subject to uncertainty and we cannot assure you that we can meet
our planned schedule. We do not know whether all of the medical centers we have
identified will be available to conduct the clinical trials when we are in a
position to have them commence or that we will be ready to commence the trials
within any particular time period.

We intend to hire a contract research organization ("CRO") to conduct
these trials. The CRO represents the clinical trial sponsor. They ensure that
the principal investigator follows the established protocol and collects the
clinical data. We have not begun negotiations with a CRO and we cannot assure
you that we will be able to engage a CRO on

acceptable terms and conditions in a timely manner or at all. The CRO and
principal investigators conducting the clinical trials are not our employees. As
a result, we have limited control over their activities and can expect that only
limited amounts of their time will be dedicated to our clinical trials. They may
fail to meet their contractual obligations or fail to meet regulatory standards
in the performance of their obligations, and we may not be able to prevent or
correct their failures. Failure of the CRO to perform as expected or required,
including failure of the principal investigators to enroll a sufficient number
of patients for our trials, could result in the failure of the clinical trials
and the failure to obtain FDA premarket approval. We believe that we will
acquire sufficient data to seek FDA premarket approval of the Delcath system
within twelve to eighteen months of the last patient enrolled but it may take
substantially longer.

We do not know how long the FDA may take to evaluate our submission,
and they may require that additional trials be conducted or may not grant
approval.

The FDA premarket approval we are currently seeking is limited to
administration of doxorubicin with the Delcath system to treat patients
suffering from metastatic melanoma which has spread to the liver. If we are
granted this approval, we plan to seek additional FDA premarket approvals for
using the Delcath system with other chemotherapy agents for treatment of other
liver cancers and with anti-viral drugs for treatment of other diseases, such as
hepatitis, as

well as supplemental new drug application approval for each drug used with the
Delcath system. In many instances, the process of applying for and obtaining
regulatory approvals involves rigorous pre-clinical and clinical testing. The
time, resources and funds required for completing necessary testing and
obtaining approvals is significant, and FDA premarket approval may never be
obtained for some medical devices or drug delivery systems. If we fail to raise
the additional capital required or enter into strategic partnerships to finance
this testing or if we fail to obtain the required approvals, our potential
growth and the expansion of our business would likely be limited.

OUR CLINICAL TRIAL AND AGREEMENT WITH THE NATIONAL CANCER INSTITUTE

In June 2001, the Company announced that The National Institutes of
Health/The National Cancer Institute approved a clinical study protocol for
administering escalating doses of another chemotherapy agent, melphalan, through
the Delcath system to patients with unresectable cancer of the liver.

The Phase I clinical trial conducted at The National Cancer Institute
("NCI") began in September 2001 and involved a total of 24 patients, all
experiencing metastatic liver cancer. The goal of a Phase I clinical trial is to
determine the maximum tolerated dose of melphalan that can be administered
before it becomes toxic to the patient's system.

This clinical trial, which will also include a Phase II study, is
subject to the terms and conditions of the Cooperative Research and Development
Agreement (the "CRADA") between us and NCI. We obtained FDA approval to conduct
the Phase I clinical trial; however, further FDA approval is necessary to
conduct Phase II studies. The goal of a Phase II clinical trial is to determine
various factors such as the appropriate dosage, the timing of each dose and the
efficacy of the proposed dose. We cannot estimate how long it will be until we
receive FDA approval to commence the Phase II study. The scope of the study is:

o To develop a Delcath system-based Phase I treatment protocol
for the regional therapy of organs using escalating doses of
melphalan delivered through the utilization of the Delcath
system; and

o To develop Delcath system-based Phase II treatment protocols
as a follow-up to Phase I studies. The Phase II study will
involve patients with specific histologies (diseases) who
have unresectable cancers confined to the liver using the
maximum tolerated dose of melphalan administered using the
Delcath system.

The patients will be treated with up to four series of infusions based
upon toxicity and response to treatment. The Phase II study is expected to begin
shortly after completion of the Phase I study and to take twelve to eighteen
months.

The CRADA commits NCI to perform the research necessary under the Phase
I and Phase II protocols approved by the FDA with Delcath acting as the sponsor
and NCI providing the principal investigator. Delcath will provide funding to
NCI in the amount of $918,750 payable in quarterly installments over the
five-year term of the agreement unless the CRADA is terminated early. The CRADA
can be terminated at any time by either party. In the event of an early
termination, we would be responsible for unfunded costs incurred prior to the
termination date and all reasonable termination costs. The term of the agreement
is intended to allow for what the parties expect to be the potential

maximum amount of time necessary to complete and evaluate Phase I and Phase II
trials. An amendment to the CRADA would be necessary if the parties decide to
initiate additional clinical trials using other chemotherapy agents. We are
using money raised in our initial public offering and will use a portion of the
net proceeds this offering to fund this project. If the results of the Phase I
and Phase II trials are successful, we will probably need additional capital to
pay for the expenses associated with a Phase III clinical trial.

RESEARCH FOR HEPATITIS TREATMENT

Another disease that attacks the liver is viral hepatitis. The
incidence of viral hepatitis in the United States and worldwide is increasing.
The long-range effects of some forms of hepatitis can include massive death of
liver cells, chronic active hepatitis, cirrhosis and hepatoma. The current
treatment for viral hepatitis is limited and includes long-term injections of
interferon alpha, which is similar to chemotherapy in its toxicity and dosage
limitations. We plan to seek a strategic partner to conduct clinical trials to
determine the feasibility of using the Delcath system to administer anti-viral
drugs, including interferon alpha, in the treatment of viral hepatitis. We have
not entered into any arrangements, understandings or agreements with potential
strategic partners.

SALES AND MARKETING

We intend to focus our marketing efforts on the sixty-one NCI
designated Cancer Centers in the United States recognized by NCI, beginning with
the hospitals participating in the Phase III clinical trials, as well as key
foreign institutions including the Sydney Melanoma Unit of the University of
Sydney Sydney Cancer Centre. We will focus these efforts on two distinct groups
of medical specialists in these comprehensive cancer centers:

o oncologists who have primary responsibility for the patient;
and

o interventional radiologists who are members of the hospital
staff and work with catheter-based systems.

Upon diagnosis of cancer, a patient is usually referred to a medical
oncologist. This physician generally provides palliative treatments
(non-curative) and refers the patient to a surgical oncologist if surgery
appears to be an option. Both medical and surgical oncologists will be included
in our target market. Generally, oncologists do not position catheters. This is
done either by an interventional radiologist or a surgeon.

We plan to hire a marketing director at such time as we receive an
indication from the FDA that approval of the Delcath system is forthcoming and
then hire a sales manager and four sales representatives to market the system in
the United States.

In addition, if we can establish foreign testing and marketing
relationships, we plan to utilize one or more corporate partners to market
products outside the United States. We believe distribution or corporate
partnering arrangements will be cost effective, will be implemented more quickly
than a direct sales force established by us in such countries and will enable us
to capitalize on local marketing expertise in the countries we target.

Since we plan to sell the Delcath system to a large number of hospitals
and physician practices, we do not expect to be dependent upon one or a few
customers.

Market acceptance of the Delcath system will depend upon:

o the ability of our clinical trials to demonstrate against
the control group a statistically measurable increase in
life expectancy for the kinds of cancers treated at a cost
effective price;

o our ability to educate physicians on the use of the system
and its benefits compared to other treatment alternatives;
and

o our ability to convince healthcare payors that use of the
Delcath system results in reduced treatment costs of
patients.

This will require substantial efforts and expenditures.

NISSHO AGREEMENT

In December 1996, we entered into an agreement with Nissho Corporation,
a large manufacturer and distributor of medical devices and pharmaceuticals
based in Osaka, Japan which grants to Nissho the exclusive right to distribute
the Delcath system in Japan, China, Korea, Hong Kong and Taiwan until December
31, 2004. Nissho, at that time, invested $1,000,000 in Delcath.

Products covered by the agreement include the Delcath system for the
treatment of cancer in the liver and the lower extremities, as well as new
products that may be added by mutual agreement. Nissho is required to purchase
products from Delcath in connection with clinical trials and for resale in its
market at prices to be determined by mutual agreement. Nissho has agreed, in its
territory, not to engage in the business of manufacturing, distributing or
selling systems similar to the Delcath system for the liver or other organs or
body regions.

THIRD-PARTY REIMBURSEMENT

Because the Delcath system is characterized by the FDA as an
experimental device, its use is not now reimbursable in the United States. We
will not seek to have third-party payors, such as Medicare, Medicaid and private
health insurance plans, reimburse the cost of the Delcath system until after its
use is approved by the FDA.

We believe that the Delcath system will provide significant cost
savings in that it should reduce treatment and hospitalization costs associated
with the side-effects of chemotherapy. Our planned wholesale price to the
hospitals for the Delcath system kit is approximately $4,000. A patient normally
undergoes four treatments with the Delcath system, each requiring a new system
kit. Each treatment with the Delcath system, including the cost of the treatment
kit, has an estimated cost of approximately $12,000, resulting in a total
estimated treatment cost of approximately $48,000. This compares to a total
estimated cost of conventional aggressive chemotherapy treatment of
approximately $160,000 to $180,000, which includes the hospitalization and
treatment costs associated with the side-effects of the systemic delivery of
chemotherapy agents.

MANUFACTURING

We plan to utilize contract manufacturers to manufacture the components
of the Delcath system. In order to maintain quality control, we plan to perform
final assembly and packaging in our own facility. If we undertake these
operations, our facility will be required to comply with the FDA's good
manufacturing practice ("GMP") and quality system requirements ("QSR"). If we
sell the Delcath system in some foreign markets, our facility will also need ISO
9000 approval from the European Union which is a required approval that European
manufacturers must obtain from the International Organization for
Standardization.

The double balloon catheter is being manufactured domestically by the
Burron OEM division of B. Braun Medical, Inc. of Germany. The double balloon
catheter must be manufactured in accordance with manufacturing and performance
specifications that are on file with the FDA. Burron has demonstrated that the
components it manufactures meet these specifications. Burron must also meet FDA
GMP and QSR requirements. Burron's manufacturing facility is ISO 9000 approved,
which will allow the use of the catheter in European markets. B. Braun has
experience in obtaining regulatory approval for medical products in European
markets and has indicated informally that it will assist us in this process. We
have not entered into a written agreement with Burron to manufacture the
catheter either for the clinical trials or for commercial sale.

Medtronic USA, Inc. manufactures the components of the blood filtration
circuit located outside of the body, including the medical tubing through which
a patient's blood flows and various connectors, as well as the blood filtration
pump head. Medtronic is a manufacturer of components used for extracorporeal
blood circulation during cardiac surgery. The components manufactured by
Medtronic have been cleared by the FDA for other applications and can,
therefore, be sourced off the shelf. These components, however, must comply with
manufacturing and performance specifications for the Delcath system that are on
file with the FDA. Medtronic has demonstrated that the components it
manufactures meet these specifications. Medtronic must also meet the FDA GMP and
QSR requirements. Medtronic's manufacturing facility is also ISO 9000 approved
and, thus, the components it manufactures may be used in European markets.

Currently, we purchase the activated charcoal filters used in the
Delcath system from Asahi Medical Products of Japan. Asahi has informed us that
it will discontinue manufacturing these filters in the near future. We have
ordered a final shipment of filters from Asahi which we expect will be
sufficient to meet our needs for the next twelve months.

However, as part of our application process with the FDA, we obtained
approval to utilize filters from any manufacturer that falls within certain
performance parameters and meets the specifications on file with the FDA.
Therefore, we are currently actively seeking an alternative filter manufacturer
that is capable of providing us with the quality of filters that are required to
meet the specifications on file with the FDA in the quantity that we will
require to conduct future clinical trials and to market the Delcath system
commercially. We have already identified one potential supplier in the United
States. Any supplier must also meet the FDA GMP and QSR requirements.

COMPETITION

The healthcare industry is characterized by extensive research efforts,
rapid technological progress and intense competition from numerous
organizations, including biotechnology firms and academic institutions.
Competition in the cancer treatment industry, and specifically the markets for
systems and devices to improve the outcome of chemotherapy treatment for cancer,
is intense. We believe that the primary competitive factors for products
addressing cancer include safety, efficacy, ease of use, reliability and price.
We also believe that physician relationships, especially relationships with
leaders in the interventional radiology and oncology communities, are important
competitive factors.

The Delcath system competes with all forms of liver cancer treatments
that are alternatives to resection including radiation, intravenous chemotherapy
and chemotherapy through implanted infusion pumps, liver transplants,
embolization, cryosurgery, radiowave ablation and the use of biological response
modulators, monoclonal antibodies and liposomes. Many of Delcath's competitors
have substantially greater financial, technological, research and development,
marketing and personnel resources. In addition, some of our competitors have
considerable experience in conducting clinical trials and other regulatory
approval procedures. Our competitors may develop more effective or more
affordable products or treatment methods, or achieve earlier product development
or patent protection, in which case our chances to achieve meaningful revenues
or profitability will be substantially reduced.

Many large pharmaceutical companies and research institutions are
developing systems and devices to improve the outcome of chemotherapy treatment
for cancer. Arrow International currently markets an implantable infusion pump,
which has been successful in facilitating regional drug delivery. However,
Arrow's pump lacks a means of preventing the entry of these agents into the
patient's general circulation after they pass through the liver. Other
companies, including Merck & Co., Inc., are developing various chemotherapy
agents with reduced toxicity, while other companies are developing products to
reduce the toxicity and side-effects of chemotherapy treatment. In addition,
gene therapy, vaccines and other minimally invasive procedures are currently
being developed as alternatives to chemotherapy.

Technological developments are expected to continue at a rapid pace in
both industry and academia which could result in a short product life cycle for
our Delcath system.

GOVERNMENT REGULATION

General. The manufacture and sale of medical devices and drugs are
subject to extensive governmental regulation in the United States and in other
countries. The Delcath system is regulated in the United States as a drug
delivery system by the FDA under the Federal Food, Drug, and Cosmetic Act. As
such, it requires approval by the FDA of a premarket approval application prior
to commercial distribution.

Doxorubicin, the drug that we are initially seeking to have approved
for delivery by the Delcath system, is a widely used chemotherapy agent that has
an approved new drug application from the FDA. Melphalan, the drug that will be
administered through the Delcath system in the NCI-sponsored study, is a
chemotherapy agent that also has new drug application approval from the FDA.
Like all approved drugs, the approved labeling includes indications for use,
method of action, dosing, side-effects and contraindications. Because the
Delcath system delivers doxorubicin through a mode of administration and at a
dose strength that differs from those currently approved, approval for revised
labeling of doxorubicin and melphalan products permitting their use with the
Delcath system must be obtained. The supplemental new drug application to change
the labeling must be filed by a drug manufacturer holding an existing approved
new drug application or an abbreviated approved new drug application. We are
currently in discussions with a drug manufacturer who holds an existing approved
new drug application for doxorubicin for the manufacturer to submit a
supplemental new drug application supporting the new labeling, assuming data
from the Phase III clinical trial is favorable. We are also currently in
discussions with the drug manufacturers that hold an approved new drug
application or an approved abbreviated new drug application and plan actively to
solicit one of them to file an application for new labeling with the FDA for
melphalan.

Under the Federal Food, Drug, and Cosmetic Act, the FDA regulates the
preclinical and clinical testing, design, manufacture, labeling, distribution,
sales, marketing, postmarket reporting, advertising and promotion of medical
devices and drugs in the United States. Noncompliance with applicable
requirements could result in different sanctions such as:

o suspension or withdrawal of clearances or approvals;

o total or partial suspension of production, distribution,
sales and marketing;

o fines;

o injunctions;

o civil penalties;

o recall or seizure of products; and

o criminal prosecution of a company and its officers and
employees.

Our contract manufacturers are also subject to numerous federal, state
and local laws and regulations relating to such matters as GMP requirements,
safe working conditions, environmental protection, fire hazard control and
disposal of hazardous or potentially hazardous substances.

Medical Devices. The Delcath system is a Class III medical device.
Class III medical devices are those which are subject to the most stringent
regulatory controls because insufficient information exists to assure safety and
efficacy solely through general or special controls such as labeling
requirements, mandatory performance standards and post-market surveillance. FDA
premarket approval is required for Class III medical devices. It is subject to
the most stringent controls applied by the FDA to assure reasonable safety and
effectiveness. An application for premarket approval must be supported by data
concerning the device and its components, including the manufacturing and
labeling of the device and the results of animal and laboratory testing and
human clinical trials. The conduct of clinical trials is subject to FDA
regulations and to continuing oversight by institutional review boards at
hospitals and research centers where the trials are conducted and by the FDA.
These regulations include required reporting of adverse events from use of the
device during the trials. Before commencing clinical trials, we obtained an
investigational device exemption providing for the initiation of clinical
trials. We also obtained approval of our investigational plan, including the
proposed protocols and informed consent statement that patients sign before
undergoing treatment with the Delcath system, by the institutional review boards
at the sites where the trials were conducted. Under the Federal Food, Drug, and
Cosmetic Act, clinical studies for "significant risk" Class III devices require
obtaining such approval by institutional review boards and the filing with the
FDA of an investigational device exemption at least thirty days before
initiation of the studies.

Given the short life expectancy of patients suffering from metastatic
melanoma of the liver, we believe the FDA will review our premarket approval
application expeditiously. However, approval of the Delcath system may take
longer if the FDA requests substantial additional information or clarification,
or if any major amendments to the application are filed. In addition, the FDA is
likely to refer this matter to an advisory committee of experts to obtain views
about the Delcath system. This process is referred to as a "panel review," and
could delay the approval of the Delcath system. The FDA will usually inspect the
applicant's manufacturing facility to ensure compliance with quality systems
regulations prior to approval of an application. The FDA also may conduct
bioresearch monitoring inspections of the clinical trial sites and the applicant
to ensure data integrity and that the studies were conducted in compliance with
the applicable FDA regulations.

If the FDA's evaluations of the application, clinical study sites and
manufacturing facilities are favorable, the FDA will issue either an approval
letter or an "approvable letter" containing a number of conditions that must be
met in order to secure approval of an application. If and when those conditions
have been fulfilled to the satisfaction of the FDA, the agency will issue an
order approving the application, authorizing commercial marketing of the device
under specified conditions of use. If the FDA's evaluation of the application,
the clinical study sites or the manufacturing facilities is not favorable, the
FDA will deny approval of the application or issue a "not approvable letter."
The FDA may also determine that additional preclinical testing or human clinical
trials are necessary before approval, or that post-approval studies must be
conducted.

The FDA's regulations require agency approval of a supplement to a
premarket approval application for changes to a device if they affect the safety
and effectiveness of the device, including new indications for use; labeling
changes; changes in the manufacture of the device; the use of a different
facility or establishment to manufacture, process or package the device; changes
in vendors supplying components for the device; changes in manufacturing methods
or quality control systems; and changes in performance or design specifications.
Changes in manufacturing procedures or methods may be implemented and the device
distributed thirty days after the FDA is provided with notice of these changes
unless the FDA advises the premarket approval application holder within thirty
days of receipt of the notice that the notice is inadequate or that premarket
approval of an application supplement is required.

Approved medical devices remain subject to extensive regulation.
Advertising and promotional activities are subject to regulation by the FDA and
by the Federal Trade Commission. Other applicable requirements include the FDA's
medical device reporting regulations, which require that we provide information
to the FDA on deaths or serious injuries that may have been caused or
contributed to by the use of marketed devices, as well as product malfunctions
that would likely cause or contribute to a death or serious injury if the
malfunction were to recur. If safety or efficacy problems occur after the
product reaches the market, the FDA may take steps to prevent or limit further
marketing of the product. Additionally, the FDA actively enforces regulations
prohibiting marketing or promoting of devices for indications or uses that have
not been approved by the FDA. Further, the Federal Food, Drug, and Cosmetic Act
authorizes the FDA to impose postmarket surveillance requirements with respect
to a Class III device which is reasonably likely to have a serious adverse
health consequence or which is intended to be implanted in the human body for
more than one year or to be a life sustaining or life supporting device used
outside a hospital or ambulatory treatment center.

The Federal Food, Drug, and Cosmetic Act regulates a device
manufacturer's design control, quality control and manufacturing procedures by
requiring the manufacturer to demonstrate and maintain compliance with quality
systems regulations including good manufacturing practices and other
requirements. These regulations require, among other things, that:

o design controls, covering initial design and design changes
be in place;

o the manufacturing process be regulated, controlled and
documented by the use of written procedures; and

o the ability to produce devices which meet the manufacturer's
specifications be validated by extensive and detailed
testing of every aspect of the process.

The FDA monitors compliance with quality systems regulations, including
good manufacturing practice requirements, by conducting periodic inspections of
manufacturing facilities. If violations of the applicable regulations are found
during FDA inspections, the FDA will notify the manufacturer of such violations
and the FDA, administratively or through court enforcement action, can prohibit
further manufacturing, distribution, sales and marketing of the device until the
violations are cured. If violations are not cured within a reasonable length of
time after the FDA provides notification of such violations, the FDA is
authorized to withdraw approval of the premarket approval application.

Investigational devices that require FDA premarket approval in the
United States but have not received such approval may be exported to countries
belonging to the European Union, European Economic Area and some other specified
countries, provided that the device is intended for investigational use in
accordance with the laws of the importing country, has been manufactured in
accordance with the FDA's good manufacturing practices or ISO standards, is
labeled on the outside of the shipping carton "for export only," is not sold or
offered for sale in the United States and complies with the specifications of
the foreign purchaser. The export of an investigational device for
investigational use to any other country requires prior authorization from the
FDA. An investigational device may be exported for commercial use only as
described below, under "Foreign Regulation."

Drugs. A manufacturer of a chemotherapy agent must obtain FDA approval
of a supplemental new drug application for a chemotherapy product providing for
its use with the Delcath system before the system may be marketed in the United
States to deliver that agent to the liver or any other site. The FDA-approved
labeling for both doxorubicin and melphalan does not provide for its delivery
with the Delcath system. We must partner with the holders of an approved new
drug application for doxorubicin and melphalan to make this change to the
labeling of both agents. We are seeking to partner with drug companies for this
purpose, but we have no assurance that we will find partners or that

the FDA will approve the application. If this approval is obtained, it would not
have a negative effect on the manufacturers of either doxorubicin or melphalan.
Rather, the drug manufacturer would have the opportunity to expand the use of
the drugs as a result of changing their label to include the Delcath labeling.

Phase III clinical trial protocols using doxorubicin have been approved
by the FDA under our investigational new drug application. FDA regulations also
require that prior to initiating the trials the sponsor of the trials obtain
institutional review board approval from each investigational site where the
trials will be conducted. We are seeking the approval of institutional review
boards at several medical centers by assembling and providing them with
information with respect to the trials.

The FDA requires that, in order to obtain FDA approval to relabel
doxorubicin for delivery using the Delcath system, we demonstrate that
delivering doxorubicin using the system results in patient survival times that
are longer than those obtained from administering chemotherapy agents
intravenously.

The approved Phase III clinical trial protocols are designed to obtain
FDA approval of both a supplemental new drug application for revised labeling
for the drugs and a premarket approval application providing for the use of
doxorubicin with the Delcath system. The trial protocols were approved by both
the FDA division that reviews new drugs and the division that reviews
applications to market new devices. All of the data generated in the trials will
be submitted to both of these FDA divisions. The foregoing facts will also apply
if our clinical trial using melphalan is successful in Phases I, II and III.

If we successfully complete the clinical trials with both agents, we
believe the manufacturers of doxorubicin and melphalan will submit to the FDA a
supplemental new drug application to deliver the agent to the liver through the
Delcath system. Under the Federal Food, Drug, and Cosmetic Act, the Delcath
system cannot be marketed until the supplemental new drug application and the
premarket approval application are approved, and then only in conformity with
any conditions of use set forth in the approved labeling.

Foreign Regulation. In order for Nissho or any other foreign strategic
partner to market our products in Asia, Europe, Latin America and other foreign
jurisdictions, they must obtain required regulatory approvals or clearances and
otherwise comply with extensive regulations regarding safety and manufacturing
processes and quality. These regulations, including the requirements for
approvals or clearances to market, may differ from the FDA regulatory scheme. In
addition, there may be foreign regulatory barriers other than premarket approval
or clearance.

In April 1996, legislation was enacted that permits a medical device
which requires FDA premarket approval but which has not received such approval
to be exported to any country for commercial use, provided that the device:

o complies with the laws of that country;

o has valid marketing authorization or the equivalent from the
appropriate authority in any of a list of industrialized
countries including Australia, Canada, Israel, Japan, New
Zealand, Switzerland, South Africa and countries in the
European Economic Union; and

o meets other regulatory requirements regarding labeling,
compliance with the FDA's good manufacturing practices or
ISO manufacturing standards, and notification to the FDA.

In order for us to market and sell the Delcath system in the European
Community, we must obtain a CE mark, which is the official marking required by
the European Community for all electric and electronic equipment that will be
sold anywhere in the European Union, except for limited use as a clinical trial
device. Supplemental device approvals also might be required to market and sell
the Delcath system.

PATENTS, TRADE SECRETS AND PROPRIETARY RIGHTS

Our success depends in large part on our ability to obtain patents,
maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. Because of the length of time and expense
associated with bringing new products through development and regulatory
approval to the marketplace, the health care industry has traditionally placed
considerable emphasis on obtaining patent and trade secret protection for
significant new technologies, products and processes. We hold the following six
United States patents, as well as three corresponding foreign patents in Canada,
Europe and Japan:

Summary Description of Patents Patent No.
- ------------------------------ ----------
Isolated perfusion method for cancer treatment U.S. #5,069,662
Isolated perfusion device -- catheter for use in
isolated perfusion in cancer treatment U.S. #5,411,479
Device and method for isolated pelvic perfusion U.S. #5,817,046
Catheter design to allow blood flow from renal veins
and limbs to bypass occluded segment of IVC U.S. #5,893,841
Catheter with slideable balloon to adjust isolated segment U.S. #5,919,163
Isolated perfusion method for kidney cancer U.S. #6,186,146

The Company has filed a patent application covering technology to treat
glandular cancer and other diseases within glands. This patent reflects
modifications to the design and use of the Delcath system.

We plan to enforce our intellectual property rights vigorously. In
addition, we will conduct searches and other activity relating to the protection
of existing patents and the filing of new applications.

In addition to patent protection, we rely on unpatented trade secrets
and proprietary technological expertise. We rely, in part, on confidentiality
agreements with our marketing partners, employees, advisors, vendors and
consultants to protect our trade secrets and proprietary technological
expertise. These agreements may not provide meaningful protection of our
proprietary technologies or other intellectual property if unauthorized use or
disclosure occurs.

EMPLOYEES

As of April 14, 2003, we had 5 full-time employees. Upon completion of
this offering, we intend to recruit additional personnel. None of our employees
is represented by a union and we believe relationships with our employees are
good.

In addition to our full-time employees, we engage the services of
medical and scientific consultants.

FACILITIES

We currently occupy approximately 3,600 square feet of office space at
1100 Summer Street, Stamford, Connecticut, pursuant to a lease which will expire
in 2003. We have occupied these facilities since 1992 and the space is adequate
for our current needs. If we require additional space in the future, we believe
that satisfactory space will be available at commercially reasonable rates in or
near our current facility.

The Company believes that its facilities and equipment are in good
condition and are suitable for its operations as presently conducted and for its
foreseeable future operations.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors are as follows:

Name Age Position
---- --- --------
M. S. Koly 62 President, Chief Executive Officer,
Treasurer and Director
Samuel Herschkowitz, M.D. 53 Chairman, Chief Technical Officer
and Director
Thomas S. Grogan 51 Chief Financial Officer
Mark A. Corigliano 39 Director
Daniel Isdaner 38 Director
Victor Nevins 81 Director

M. S. Koly has been our President, Chief Executive Officer and Treasurer since
1999. In 1988, Mr. Koly was elected to our board of directors. From 1987 until
June 1998, Mr. Koly managed Venkol Ventures, L.P. and Venkol Ventures, Ltd.,
firms he co-founded with Dr. Herschkowitz. From 1983 to 1987, Mr. Koly was
president of Madison Consulting Corporation, a firm he founded. From 1978 to
1983, Mr. Koly was president of Becton-Dickinson Respiratory Systems. Prior to
that time, he held various senior management positions at Abbott Laboratories,
Stuart

Pharmaceuticals and National Patent Development Corp. He received a B.A. from
American University and an M.B.A. in marketing and finance from Northwestern
University.

Samuel Herschkowitz, M.D., has been our Chief Technical Officer since 1999. In
1988, Dr. Herschkowitz was elected the Chairman of our board of directors. In
1987, he co-founded Venkol Ventures L.P. and Venkol Ventures, Ltd., two
affiliated venture capital funds specializing in medical technology investments,
which are no longer active. Dr. Herschkowitz is board certified in psychiatry
and neurology. He is an assistant professor at New York University Medical
Center, and has held academic positions at Beth Israel Hospital, Mount Sinai
Medical School and Downstate Medical Center. Dr. Herschkowitz graduated from
Syracuse University and received his medical degree from Downstate Medical
Center College of Medicine.

Thomas S. Grogan was appointed the Company's Chief Financial Officer in
September 2001. Prior to joining Delcath, Mr. Grogan was Vice President of
Business Development for The Jockey Club from 2000-2001. In 1999, he was the
Chief Financial Officer for U.S. Homecare Corporation, a publicly traded
provider of home healthcare services. From 1998-1999, he was the Chief Financial
Officer of the healthcare division of Fairchild Properties, a privately held
owner and operator of skilled nursing facilities. From 1993-1998, he was the
Chief Financial Officer of NHS National Health Services, Inc., a privately held
provider of medical services to corporations, industrial sites and corrections
institutions. He is a CPA, and holds a B.A. degree from Fordham University and
an M.B.A. degree from Cornell University.

Mark A. Corigliano was elected to our board of directors in 2001. Since 1991,
Mr. Corigliano has been Managing Director of Coast Cypress Associates, a company
that designs and implements microcomputer systems. His specialty is the design
and installation of accounting systems. Since 1993, he has also served in a
senior financial capacity as Controller and Manager of Special Projects for DC
Associates, a restaurant management organization located in New York City. Mr.
Corigliano also serves as Treasurer of Rolls Royce Owners' Club, a non-profit
organization with 8,500 members worldwide. He holds a B.S. degree in accounting
from Seton Hall University.

Daniel Isdaner was elected to our board of directors in 2001. Since 1994, Mr.
Isdaner has been the owner and director of Camp Mataponi, Inc., a children's'
summer camp located in Naples, Maine. He also serves on the board of directors
of the American Camping Association-New England Division and the Jewish
Community Center of Southern New Jersey. Mr. Isdaner holds a B.S.B.A. degree
from the Boston University School of Management.

Victor Nevins was elected to our board of directors in 2001. Since 1957, Mr.
Nevins has been Chief Executive Officer of Max Abramson Enterprises, a
medium-sized privately held conglomerate headquartered in Flushing, New York. He
also is a licensed real estate broker and, in 1962, he founded Victor Nevins
Realty. From 1968-1997, he served on the board of directors of Flushing Hospital
and Medical Center as Vice President of the Board, member of the Finance
Committee, Chairman of both the House and Grounds and Human Resources Committees
and liaison to the Medical Board. He currently is a Director and past President
of the Flushing Chamber of Commerce, a Director of the Flushing Merchants
Association, and a Director of the American Red Cross, North Shore Chapter.

CLASSIFIED BOARD OF DIRECTORS

Our board of directors is divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
board of directors will be elected each year. These provisions, together with
the provisions of our amended and restated certificate of incorporation and
by-laws, allow the board of directors to fill vacancies on or increase the size
of the board of directors, and may deter a stockholder from removing incumbent
directors and filling such vacancies with its own nominees in order to gain
control of the board.

Each of our directors has been elected to serve until his successor has
been elected and duly qualified. The directorship terms of Mr. Nevins and Mr.
Corigliano will expire at the annual meeting of stockholders in 2003, the
directorship term of Mr. Isdaner will expire at the annual meeting of
stockholders in 2004 and the directorship terms of Dr. Herschkowitz and Mr. Koly
will expire at the annual meeting of stockholders in 2005.

COMMITTEES OF THE BOARD OF DIRECTORS

We have established an audit committee and a compensation and stock
option committee.

The audit committee approves the selection of our independent
accountants and meets and interacts with the independent accountants to discuss
questions in regard to financial reporting. In addition, the audit committee
reviews the scope and results of the audit with the independent accountants,
reviews with management and the independent accountants our annual and quarterly
operating results, considers the adequacy of our internal accounting procedures
and considers and reports to the board of directors with respect to other
auditing and accounting matters. The audit committee also reviews the fees to be
paid to and the performance of our independent accountants. Currently, the
members of the audit committee are of Messrs. Corigliano and Isdaner. Messrs.
Corigliano and Isdaner satisfy the requirements for independent directors
contained in the rules governing companies listed on the Nasdaq Stock Market.

The compensation and stock option committee reviews the salaries and
benefits of all officers and stock option grants to all employees, consultants,
directors and other individuals compensated by us. The compensation and stock
option committee is empowered by the board of directors to act independently.
The compensation and stock option committee also administers our stock option
and other employee benefits plans. Currently, the members of the compensation
and stock option committee are Messrs. Nevins and Corigliano.

DIRECTOR COMPENSATION

Our current policy regarding compensation of directors provides that
directors may be paid a fixed sum for their attendance at each meeting of the
board of directors or a stated salary as a director, and each may be reimbursed
for his or her expenses. Currently, directors who are also employees do not
receive any compensation for serving on the board of directors. Non-employee
directors receive $750 for each meeting of the board of directors attended in
person or participated in telephonically. Currently, non-employee directors do
not receive any other compensation. In addition, each non-employee director that
served on our board of directors in 1999 received a one-time grant in January
1999 of options to purchase 34,505 shares of common stock at a price of $4.93
per share, all of which are vested, and received a separate one-time grant in
December 1999 of options to purchase 22,428 shares of common stock at a price of
$2.90 per share, all of which are vested. In December 2001, each non-employee
director received an option to purchase 30,000 shares of common stock at a
purchase price of $0.85 per share that vest as to 50% of the shares covered on
the first and second anniversaries of the date of grant.

On September 17, 2002, our compensation and stock option committee
granted stock options to Mr. Koly and Dr. Herschkowitz, at an exercise price
equal to $0.71 per share, the fair market value at the close of trading on that
date as reported by The Wall Street Journal. On September 17, 2002, our
compensation and stock option committee granted stock options to directors other
than Mr. Koly and Dr. Herschkowitz, at an exercise price of $0.71 per share, the
fair market value at the close of trading on that date as reported by The Wall
Street Journal. The stock options granted to the directors during 2002 are
indicated below:

Name Incentive Stock Options Non-Qualified Stock Options
---- ----------------------- ---------------------------
M. S. Koly 100,000 0
Samuel Herschkowitz, M.D. 30,000 0
Mark Corigliano 0 30,000
Daniel Isdaner 0 30,000
Victor Nevins 0 30,000

SCIENTIFIC ADVISORS AND CONSULTANTS

We seek to expand the breadth of expertise and experience available to
us through the use of consultants and advisors. We coordinate these advisors,
including nine M.D.'s and Ph.D.'s to organize, conduct and monitor clinical and
pre-clinical testing, regulatory filings and responses, product development and
manufacturing and publication and presentation of the results of our research.
These individuals bring a broad range of competencies to our operations. The
scientific advisors are independent professionals who meet on an individual
basis with management when so requested. We seek as scientific advisors
recognized experts in relevant sciences or clinical medicine to advise us about
present and long-term scientific planning, research and development.

There is no fixed term of service for the scientific advisors. Current
members may resign or be removed at any time and additional members may be
appointed. Members do not serve on an exclusive basis with Delcath, are not
under contract, other than with respect to confidentiality obligations, and are
not obligated to present corporate opportunities to

us. To our knowledge, none of the members is working on the development of
competitive products. Inventions or products developed by a scientific advisor
who is not otherwise affiliated with us will not become our property.

Scientific advisors who are not affiliated with us are paid a per diem
fee for their services. All members receive reimbursement for expenses incurred
in traveling to and attending meetings on behalf of Delcath.

Our scientific advisors and collaborators include the following doctors
in the fields of surgical oncology and interventional radiology:

Name Title Specialty Relationship to Delcath
---- ----- --------- -----------------------

Morton G. Glickman, M.D. Professor Emeritus of Cardiovascular and Founder and Stockholder
Diagnostic Radiology, Interventional Radiology
Yale University School of
Medicine
William N. Hait, M.D., Director, The Cancer Medical Consultant and Founder and Stockholder
Ph.D. Institute of New Jersey Scientific Advisor
T.S. Ravikumar, M.D. Chairman, Department of Surgical Oncology Former Principal
Surgery, Montefiore Investigator of the
Medical Center Delcath system

Morton G. Glickman, M.D. was educated at Cornell University (B.A.) and
Washington University (M.D.). He also received an honorary M.A. from Yale. He
was a resident at the University of California. He served as the Chief of Neuro
and Vascular Radiology at San Francisco General Hospital from 1969 to 1973 and
has held numerous academic and professional appointments at Yale University
School of Medicine, currently serving as associate Dean and Vice Chairman of
Diagnostic Radiology and Surgery. Dr. Glickman is a founder of Delcath.

William N. Hait, M.D., Ph.D. was educated at the University of
Pennsylvania (B.A.) and The Medical College of Pennsylvania (M.D., Ph.D.). He
was a resident in internal medicine and held numerous academic and professional
appointments at Yale University School of Medicine, including Chief of Medical
Oncology. Dr. Hait is currently director of The Cancer Institute of New Jersey.
Dr. Hait is a founder of Delcath.

T. S. Ravikumar, M.D. was educated in India at Madras University and
Madras Medical College. He is currently the Chairman of the Department of
Surgery at Montefiore Medical Center. He was the associate director of The
Cancer Institute of New Jersey from 1993 through 1998. He also served as a
resident in general surgery at Maimonides Medical Center at S.U.N.Y. --
Downstate and was a fellow in surgical oncology at the University of Minnesota.
Dr. Ravikumar won a National Reserve Service Award in surgical oncology and
served as a fellow at Brigham and Women's Hospital and the Dana Farber Cancer
Institute from 1982 through 1984. He has had a number of academic appointments,
including at Harvard Medical School, Yale University School of Medicine, and
hospital appointments, including at Yale Comprehensive Cancer Center and Robert
Wood Johnson University Hospital.

In addition, Delcath uses the services of the following medical and
scientific consultants for technical expertise:

Name Title Specialty
---- ----- ---------

Harvey J. Ellis, C.C.P. Chief of Cardiac Perfusion, Bridgeport Perfusion Consultant
Hospital

Seymour H. Fein, M.D. President, Fein & Associates Regulatory and Medical Oncology

Durmus Koch President, Bipore, Inc. Manufacturing

James H. Muchmore, M.D. Associate Professor of Surgery, Tulane Oncology and Perfusion Consultant
University School of Medicine

John Quiring, Ph.D. Principal, QST Consulting Biostatistician

OTHER KEY CONSULTANTS

Jonathan A. Foltz, CFA, 40, consults with us on identifying alternative
product sources and potential partnering opportunities. He was our Director of
Operations from 1992 until August 2001. Mr. Foltz was senior associate of Venkol
Ventures from 1989 to 1992. During 1988 to 1989, he provided investment and
acquisition research, consulting to corporations and brokerage firms including
First Montauk Securities, Inc., Gilford Securities Inc., Texas American Energy
Corporation and Computer Memories Inc. He was the research director of Nicholas,
Lawrence and Co., a regional stock brokerage firm, reorganizing and managing
their equity research department. Mr. Foltz earned a B.S. in finance and
computer science from Lehigh University, an M.B.A. from the University of
Connecticut and is a chartered financial analyst.

EXECUTIVE COMPENSATION

The following table sets forth, for the fiscal years ended December 31,
2002, 2001 and 2000, certain compensation paid by us, including salary, bonuses
and certain other compensation, to our Chief Executive Officer and all other
executive officers whose annual compensation for the year ended December 31,
2002, exceeded $100,000.

SUMMARY COMPENSATION TABLE

Securities
Name and Principal Position Year Salary Bonus ($) Underlying All Other
- --------------------------- ---- ------- --------- Options (#) Compensation
($) ----------- ------------
--- ($)

M.S. Koly
President, Chief Executive Officer and Treasurer 2002 187,500 0 100,000 0
2001 164,750 17,500 (1) 100,000 0
2000 98,200 0 102,000 0

Samuel Herschkowitz
Chairman of the Board and Chief Technical Officer 2002 136,667 0 30,000 0
2001 120,000 10,000 (1) 30,000 0
2000 20,000 0 0 0
Thomas S. Grogan
Chief Financial Officer 2002 122,500 0 30,000 0
2001 35,500 0 30,000 0

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

(1) Bonuses were declared in 2001, payable in January 2002.

Equity Compensation Plan Information

(a) (b) (c)
Number of securities
remaining available for
Number of securities to be future issuance under equity
issued upon exercise of Weighted-average exercise compensation plans
outstanding options, price of outstanding (excluding securities
warrants and rights options, warrants and rights reflected in column (a))
----------------------- ---------------------------- --------------------------

Equity compensation plans 885,684 $2.94 631,858
approved by security holders

Equity compensation plans not 0 0 0
approved by security holders

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning stock options
which were granted during 2002 to the executive officers named in the Summary
Compensation Table.

Number of Shares of
Common Stock Percent of Total Options Granted
Underlying to Employees in 2002 Exercise Price ($/Sh.) Expiration Date
Name Option (1) -------------------- ---------------------- ---------------
---- ----------

M. S. Koly 100,000 58.8% 0.71 September 2007
S. Herschkowitz 30,000 17.6% 0.71 September 2007
T. Grogan 30,000 17.6% 0.71 September 2007

(1) Options vest equally over two years on anniversary dates.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information with respect to the
executive officers named in the Summary Compensation Table concerning the
exercise of options during the year ended December 31, 2002 and unexercised
options held as of the end of fiscal 2002.

Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Shares Options at FY- FY-End ($) (1)
Received Value End Exercisable/ Exercisable/
Name Year on Exercise Realized Unexercisable Unexercisable
- ---- ---- ----------- -------- ------------- -------------

M. S. Koly 2002 0 0 291,746/150,000 52,500/146,500
S. Herschkowitz 2002 0 0 159,836/45,000 12,000/40,200
T. Grogan 2002 0 0 6,000/54,000 4,800/47,400

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

(1) Calculated based on the fair market value of $1.65 per share at the close
of trading on December 31, 2002 as reported by The Wall Street Journal,
minus the exercise price of the option.

EMPLOYMENT AGREEMENTS

On October 30, 2001 we amended the employee agreements dated April 30,
1996, with M. S. Koly and Samuel Herschkowitz, M.D. The agreements provide for a
lump-sum severance payment of one year's base salary upon notice of termination
at any time without cause. In the event of termination without cause due to a
change in control (as defined in the employment agreement), Mr. Koly is entitled
to a lump sum severance payment equal to the greater of two years' base salary
or the base salary due for the remaining term of the agreement. Mr. Koly's
amended employment agreement provides for a base salary of $225,000 per annum
and extends the term of the agreement until December 1, 2004. The amendment also
provides that in the event we close on a private placement or public offering
with gross proceeds of at least $5,000,000, a new three-year term of employment
shall commence upon the closing.

The initial term of Dr. Herschowitz's employment agreement was three
years with automatic successive one year renewal periods thereafter. In addition
to the termination provisions set forth in the employment agreement, either
party may terminate the employment agreement by providing a minimum of three
months' prior written notice. The agreement provides for a lump-sum severance
payment of one year's base salary upon notice of termination at any time without
cause. In the event of termination without cause due to a change in control (as
defined in the employment agreement), Dr. Herschowitz is entitled to a lump sum
severance payment equal to the greater of one year's base salary or the base
salary due for the remaining term of the agreement. Dr. Herschkowitz's amendment
provides for a base salary of $140,000 per annum.

STOCK OPTION PLANS

On October 15, 1992, our board of directors and stockholders adopted
our 1992 Incentive Stock Option Plan and our 1992 Non-Incentive Stock Option
Plan. On June 15, 2000, the board of directors adopted our 2000 Stock Option
Plan (the "2000 Plan"). On May 8, 2001, the board of directors adopted the 2001
Stock Option Plan (the "2001 Plan"). The 2000 Plan and the 2001 Plan were each
approved by the shareholders at the Annual Meeting of Shareholders held on June
12, 2001. On November 13, 2001, our board of directors authorized the amendment
of the 2001 Plan to give the compensation and stock option committee discretion
to issue stock options with net issuance provisions. We have reserved 236,359
shares of common stock for issuance upon exercise of options granted from time
to time under the 1992 Incentive Stock Option Plan, 207,030 shares of common
stock for issuance upon exercise of options granted from time to time under the
1992 Non-Incentive Stock Option Plan; 300,000 shares of common stock for
issuance from time to time under the 2000 Plan and 750,000 shares of common
stock for issuance from time to time under the 2001 Plan. The stock option plans
are intended to assist us in securing and retaining key employees, directors and
consultants by allowing them to participate in our ownership and growth through
the grant of incentive and non-qualified options.

Under the 1992 Incentive Stock Option Plan we may grant incentive stock
options only to employees. Under the 1992 Non-Incentive Stock Option Plan, we
may grant non-qualified options to our employees, officers, directors,
consultants, agents and independent contractors. Under the 2000 Plan and the
2001 Plan, we may grant incentive options to employees, and non-qualified
options to employees and non-employees including directors, consultants, agents
and independent contractors. The stock option plans are administered by the
compensation and stock option committee, appointed by our board of directors.

Subject to the provisions of each of the stock option plans, the
compensation and stock option committee will determine who will receive options,
the number of shares of common stock that may be purchased under the options,
the time and manner of exercise of options and exercise prices. The term of
options granted under each of the stock option plans may not exceed ten years,
or five years for an incentive stock option granted to an optionee owning more
than 10% of our voting stock. The exercise price for incentive stock options
shall be equal to or greater than 100% of the fair market value of the shares of
the common stock at the time granted; provided that incentive stock options
granted to an optionee owning more than 10% of our voting stock shall be
exercisable at a price equal to or greater than 110% of the fair market value of
the common stock on the date of the grant. The exercise price for non-qualified
options will be set by the committee, in its discretion, but in no event shall
the exercise price be less than the fair market value of the shares of common
stock on the date of grant.

As of December 31, 2002, we have granted incentive stock options to
purchase 236,359 shares of common stock under our 1992 Incentive Stock Option
Plan at a weighted average price of $4.02 and non-incentive stock options to
purchase 205,305 shares of common stock under our 1992 Non-Incentive Stock
Option Plan at a weighted average price of $4.26. All of these options were
granted to employees and directors and terminate on the fifth anniversary of
their grant date. We will not grant any additional options under these plans. As
of December 31, 2002, we have granted incentive stock options to purchase
150,600 shares of common stock under our 2000 Plan at a weighted average price
of $2.96 and non-qualified stock options to purchase 133,420 shares, net of
84,000 expired options, of common stock under our 2000 Plan at a weighted
average price of $1.65. As of December 31, 2002, we have granted incentive stock
options to purchase 330,000 shares of common stock under our 2001 Plan at a
weighted average price of $0.70 and we have granted non-qualified stock options
to purchase 90,000 shares of common stock under our 2001 Plan at a price of
$0.71.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known by us
regarding the beneficial ownership of our common stock as of April 14, 2003, for
(i) each stockholder known by us to own beneficially 5% or more of the
outstanding shares of our common stock, (ii) each executive officer and director
and (iii) all directors and executive officers as a group.

The address for each listed director and officer is c/o Delcath
Systems, Inc., 1100 Summer Street, Stamford, Connecticut 06905.

Directors, Shares Percentage of
Executive Officers Beneficially Common Shares
and 5% Stockholders: (1) Owned (2) Outstanding (3)
------------------------ --------- ---------------

M. S. Koly (4) 1,627,848 36.9%
Venkol Trust (5) 1,245,864 30.2%
Samuel Herschkowitz, M.D. (6) 178,074 4.2%
Yenom X Partners (7) 263,446 6.4%
Mark A. Corigliano (8) 28,000 *
Daniel Isdaner (9) 30,500 *
Victor Nevins (10) 37,100 *
Thomas S. Grogan (11) 6,000 *
All directors and executive officers as a group (6 1,907,522 41.2%
persons) (12)

- --------------------
* Less than 1% of total voting securities

(1) Except as otherwise noted in the footnotes to this table, each person
or entity named in the table has sole voting and investment power with respect
to all shares owned, based on the information provided to us by the persons or
entities named in the table.

(2) Shares of common stock subject to options or warrants exercisable
within 60 days of April 14, 2003 are deemed outstanding for computing the
percentage of the person or entity holding such options or warrants.

(3) Percentage of beneficial ownership is calculated on the basis of the
amount of outstanding securities (common stock) at April 14, 2003 (4,118,897
common shares) plus, for each person or entity, any securities that the person
or entity has the right to acquire within 60 days pursuant to stock options or
other rights.

(4) Mr. Koly is a director of Delcath. Includes 78,507 shares held by Mr.
Koly, 11,731 shares held by M. Ted Koly, Mr. Koly's son as to which Mr. Koly
disclaims beneficial ownership and approximately 181,000 shares held by the
Venkol Trust in which Mr. Koly has a pecuniary interest. The figure above also
includes the vested portion (291,746 shares) of stock options to purchase shares
of common stock.

(5) Mr. Koly is the trustee of Venkol Trust and is deemed the beneficial
owner of its shares because of his voting power. Mr. Koly has a pecuniary
interest in approximately 181,000 of such shares.

(6) Dr. Herschkowitz is the Chairman of the board of directors of Delcath.
The figure above includes 18,238 shares held by Dr. Herschkowitz. The figure
excludes approximately 181,000 shares held by Venkol Trust in which Dr.
Hershkowitz has a pecuniary interest. The figure also includes the vested
portion (159,836 shares) of stock options to purchase shares of common stock.

(7) The figure above represents 243,181 shares owned directly by Yenom X
Partners and 20,265 shares which could be acquired within 60 days upon exercise
of warrants.

(8) Mr. Corigliano is a director of Delcath. The figure above represents
11,500 shares owned directly by him and 1,500 shares issuable upon exercise of
warrants. The figure above also includes the vested portion (15,000 shares) of
stock options to purchase shares of common stock.

(9) Mr. Isdaner is a director of Delcath. The figure above represents 8,000
shares directly owned by him or jointly with his wife and 7,500 shares issuable
upon exercise of warrants. The figure above also includes the vested portion
(15,000 shares) of stock options to purchase shares of common stock.

(10) Mr. Nevins is a director of Delcath. The figure above represents
16,100 shares owned directly by him and 4,000 shares issuable upon exercise of
warrants owned by her. The above figure also represents 1,000 shares owned
directly by his wife and 1,000 shares issuable upon the exercise of warrants.
The figure above also includes the vested portion (15,000 shares) of stock
options to purchase shares of common stock.

(11) Mr. Grogan is the Chief Financial Officer of Delcath. The figure above
represents the vested portion of stock options to purchase shares of common
stock.

(12) The number of shares beneficially owned by all directors and executive
officers as a group includes 502,582 shares of common stock issuable within 60
days of April 14, 2003 upon exercise of stock options granted to directors and
executive officers pursuant to our various stock option plans and 14,000 shares
of common stock issuable upon exercise of warrants.

RELATED PARTY TRANSACTIONS

In August and September 2000, Delcath borrowed an aggregate of $230,000
for which it issued promissory notes due on May 27, 2001. The promissory notes
bore interest at an annual rate of 22%. Of these loans, $205,000 was borrowed
from existing stockholders or relatives of existing stockholders of Delcath.
M.S. Koly, Chief Executive Officer, President and a director of Delcath, and
Mary Herschkowitz, the mother of Samuel Herschkowitz, M.D., Chairman and Chief
Technical Officer of Delcath, provided $50,000 and $40,000 of the loans,
respectively. Each of the promissory notes was timely re-paid.

We believe that each of the transactions with our officers, directors
and principal stockholders and their affiliates were on terms no less favorable
than could have been obtained from unaffiliated third parties. All future
transactions, including loans that may legally be made between us and our
officers, directors and stockholders beneficially owning 5% or more of our
outstanding voting securities, or their affiliates, will be on terms no less
favorable to us than could be obtained in arm's length transactions from
unaffiliated third parties. Further, all transactions and loans that may legally
be made and any forgiveness of indebtedness owed by any of our officers,
directors and stockholders beneficially owning 5% or more of our outstanding
voting securities, or their affiliates, to us, must be approved by a majority of
our independent directors who do not have an interest in the transactions and
who have access, at our expense, to either our legal counsel or independent
legal counsel.

DESCRIPTION OF OUR CAPITAL STOCK AND OTHER SECURITIES

Our authorized capital stock consists of 35,000,000 shares of common
stock, $0.01 par value per share and 10,000,000 shares of preferred stock, $0.01
par value per share, whose rights and designation have not yet been established.
The description in the sections below of our certificate of incorporation and
by-laws refers to our Amended and Restated Certificate of Incorporation and
Amended and Restated By-Laws, respectively. As April 14, 2003, we had 4,118,897
shares of common stock issued and outstanding and no shares of preferred stock
outstanding.

UNITS

Each unit offered consists of five shares of common stock and five 2003
Warrants each to purchase one share of common stock. The common stock and the
2003 Warrants will trade separately immediately following the sale of the units.
Immediately prior to the closing of this offering, there will be 4,118,897
shares of common stock outstanding. After giving effect to the issuance of the
shares of common stock included in the units

offered by this prospectus, assuming the underwriters do not exercise their
over-allotment option, there will be shares of common stock outstanding upon the
closing of this offering.

Holders of common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote. Holders of common stock do not have
cumulative voting rights. Therefore, holders of a majority of the shares of
common stock voting for the election of directors can elect all of the
directors. Holders of common stock are entitled to share in all dividends that
the board of directors, in its discretion, declares from legally available
funds. In any liquidation, dissolution or winding up of Delcath, each
outstanding share entitles its holder to participate pro rata in all assets that
remain after payment of liabilities and after providing for each class of stock,
if any, having preference over the common stock.

Holders of common stock have no conversion, preemptive or other
subscription rights and there are no redemption provisions applicable to the
common stock. The rights of the holders of common stock are subject to any
rights that may be fixed for holders of preferred stock, when and if any
preferred stock is issued. All outstanding shares

of common stock are, and the shares underlying all options and warrants will be,
duly authorized, validly issued, fully paid and non-assessable upon our issuance
of these shares.

WARRANTS

2003 Warrants

General. Each 2003 Warrant will entitle the holder of the 2003 Warrant
to purchase one share of common stock at a price of per share (25% of
the unit offering price), subject to adjustment, at any time up to five years
from the date of closing of this offering.

The 2003 Warrants will be issued in registered form under a warrant
agreement by and between Delcath and American Stock Transfer & Trust Company, as
warrant agent. Reference is made to the warrant agreement, which has been filed
as an exhibit to the registration statement in which this prospectus is
included, for a complete description of the terms and conditions thereof.

Redemption. We may redeem some or all of the 2003 Warrants at a price
of $0.01 per warrant, upon thirty days' notice, at any time commencing one year
from the closing date of this offering provided that the average closing bid
quotation of our common stock on all twenty trading days ending on the day on
which we give notice has been at least $ price and there is then an
effective registration statement providing for the issuance of the underlying
shares of common stock. The warrant holders shall have the right to exercise
their 2003 Warrants until the close of business on the date fixed for
redemption. Redemption of the 2003 Warrants could force the holders to exercise
the warrants and pay the exercise price at a time when it may be disadvantageous
for the holders to do so, to sell the warrants at the then current market price
when they might otherwise wish to hold the warrants or to accept the redemption
price, which is likely to be substantially less than the market value of the
warrants at the time of redemption.

Exercise. The 2003 Warrants included in the units offered hereby may be
exercised upon surrender of the warrant certificate on or prior to the
expiration date at the offices of the warrant agent, with the exercise form on
the reverse side of the warrant certificate completed and executed as indicated,
accompanied by full payment of the exercise price to the warrant agent for the
number of warrants being exercised. The warrant holders do not have the rights
or privileges of holders of common stock.

No 2003 Warrants will be exercisable unless, at the time of exercise,
Delcath has an effective registration statement under the Securities Act
covering the shares of common stock issuable upon exercise of the 2003 Warrants
and the shares have been registered or qualified or deemed to be exempt from
registration or qualification under the securities laws of the state of
residence of the holder of the warrant. We will use our best efforts to have all
the shares so registered or qualified on or before the exercise date and to
maintain a current prospectus relating thereto until the expiration of the
warrants, subject to the terms of the warrant agreement. We may not, however, be
able to have a prospectus in effect when this prospectus is no longer current.

No fractional shares will be issued upon exercise of the 2003 Warrants.
However, if a warrant holder exercises all 2003 Warrants then owned of record by
him or her, we will pay to the warrant holder, in lieu of the issuance of any
fractional share which is otherwise issuable, an amount in cash based on the
market value of the common stock on the last trading day prior to the exercise
date.

Adjustment of Exercise Price. The exercise price and number of shares
of common stock or other securities issuable on exercise of the 2003 Warrants
included in the units offered hereby are subject to adjustment in specified
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation of Delcath. However, the 2003 Warrants
are not subject to adjustment for issuances of common stock at prices below the
exercise price of the 2003 Warrants.

2000 Warrants

In accordance with the terms of our initial public offering, effective
October 22, 2001, our common stock and 2000 Warrants that constituted the units
we sold in 2000 commenced separate trading. A description of the material terms
of the 2000 Warrants is set forth below.

General. Each 2000 Warrant entitles the holder of the warrant to
purchase one share of common stock at a price of $6.60, subject to adjustment,
until October 2005.

The 2000 Warrants were issued in registered form under a warrant
agreement by and among Delcath, American Stock Transfer & Trust Company, as
warrant agent, and Whale Securities Co., L.P., the underwriter.

Redemption. We may redeem some or all of the 2000 Warrants at a price
of $0.10 per warrant, upon thirty days' notice, at any time, provided that the
closing bid quotation of our common stock on all twenty trading days ending on
the third day prior to the day on which we give notice has been at least 150% of
the then effective exercise price of the 2000 Warrants and we have received the
written consent of the underwriter for the redemption. The warrant holders shall
have the right to exercise their 2000 Warrants until the close of business on
the date fixed for redemption. Redemption of the 2000 Warrants could force the
holders to exercise the warrants and pay the exercise price at a time when it
may be disadvantageous for the holders to do so, to sell the warrants at the
then current market price when they might otherwise wish to hold the warrants or
to accept the redemption price, which is likely to be substantially less than
the market value of the warrants at the time of redemption.

Exercise. The 2000 Warrants may be exercised upon surrender of the
warrant certificate on or prior to the expiration date at the offices of the
warrant agent, with the exercise form on the reverse side of the warrant
certificate completed and executed as indicated, accompanied by full payment of
the exercise price to the warrant agent for the number of warrants being
exercised. The warrant holders do not have the rights or privileges of holders
of common stock.

No 2000 Warrant will be exercisable unless, at the time of exercise, we
have an effective registration statement under the Securities Act covering the
shares of common stock issuable upon exercise of the warrant and the shares have
been registered or qualified or deemed to be exempt from registration or
qualification under the securities laws of the state of residence of the holder
of the warrant. We will use our best efforts to have all the shares so
registered or qualified on or before the exercise date and to maintain a current
prospectus relating thereto until the expiration of the 2000 Warrants, subject
to the terms of the warrant agreement.

No fractional shares will be issued upon exercise of the 2000 Warrants.
However, if a warrant holder exercises all 2000 Warrants then owned of record by
him or her, we will pay to the warrant holder, in lieu of the issuance of any
fractional share which is otherwise issuable, an amount in cash based on the
closing price or last reported sale price of the common stock on the last
trading day prior to the exercise date.

Adjustment of Exercise Price. The exercise price and number of shares
of common stock or other securities issuable on exercise of the 2000 Warrants
are subject to adjustment in specified circumstances, including in the event of
a stock dividend, recapitalization, reorganization, merger or consolidation of
Delcath. However, the 2000 Warrants are not subject to adjustment for issuances
of common stock at prices below the exercise price of the 2000 Warrants.

PREFERRED STOCK

Under our certificate of incorporation, our board of directors is
authorized, subject to limitations prescribed by law, without further
stockholder approval, from time to time to issue up to an aggregate of
10,000,000 shares of preferred stock. The preferred stock may be issued in one
or more series. Each series may have different rights, preferences and
designations and qualifications, limitations and restrictions that may be
established by our board of directors without approval from the stockholders.
These rights, designations and preferences may include:

o the number of shares to be issued;

o dividend rights;

o the right to convert the preferred stock into a different
type of security;

o voting rights, if any, attributable to the preferred stock;

o the obligation to set aside assets for payments relating to
the preferred stock; and

o amounts to be paid upon redemption of the preferred stock or
a liquidation or bankruptcy type event.

If our board of directors decides to issue any preferred stock, that
issuance could have the effect of delaying or preventing a third-party from
taking control of us. This is because the terms of the preferred stock could be
designed to

make it prohibitively expensive for any unwanted third party to make a bid for
our shares. In addition, the issuance of preferred stock with voting or
conversion rights could adversely affect the voting power or other rights of the
holders of our common stock. We have no present plans to issue any shares of
preferred stock.

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND OUR AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION AND BY-LAWS

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. That section provides, with exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person or that person's affiliate or associate who is an owner of 15% or more
of our outstanding voting stock for a period of three years from the date that
this person became an interested stockholder unless (a) prior to such time our
board of directors approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder or (b) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced or (c) at or subsequent to such time the business combination is
approved by our board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.

Our board of directors is divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
board of directors will be elected each year. These provisions, when coupled
with the provisions of our amended and restated certificate of incorporation
authorizing the board of directors to fill vacant directorships or increase the
size of the board of directors, may deter a stockholder from removing incumbent
directors and simultaneously gaining control of the board of directors by
filling the vacancies created by that removal with its own nominees.

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

As authorized by the Delaware General Corporation Law, our certificate
of incorporation provides that none of our directors will be personally liable
to us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability for:

o any breach of the director's duty of loyalty to Delcath or
its stockholders;

o acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;

o unlawful payments of dividends or unlawful stock redemptions
or repurchases; or

o any transaction from which the director derives an improper
personal benefit.

This provision limits our rights and the rights of our stockholders to
recover monetary damages against a director for breach of the fiduciary duty
except in the situations described above. This provision does not limit our
rights or the rights of any stockholder to seek injunctive relief or rescission
if a director breaches his duty of care. In addition, our certificate of
incorporation provides that if the Delaware General Corporation Law is amended
to permit further limits on the liability of a director, then the liability of
the directors shall be eliminated or limited to the fullest extent permitted by
such amendment. These provisions do not alter the liability of directors under
federal securities laws.

Our certificate of incorporation further provides for the
indemnification of any and all persons who serve as a director, officer,
employee or agent to the fullest extent permitted under the Delaware General
Corporation Law.

We maintain a policy of insurance under which our directors and
officers are insured, subject to the limits of the policy, against certain
losses arising from claims made against our directors and officers by reason of
any acts or omissions covered under this policy in their capacities as directors
or officers, including liabilities under the Securities Act.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons under
the above provisions, or otherwise, we have been advised that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the
Securities Act and is unenforceable.

RIGHTS AGREEMENT

On October 30, 2001, we entered into a Rights Agreement with American
Stock Transfer & Trust Company (the "Rights Agreement"). The purposes of the
Rights Agreement are to deter and protect our shareholders from certain coercive
and otherwise unfair takeover tactics and to enable the board of directors to
represent effectively the interests of stockholders in the event of a takeover
attempt. The Rights Agreement does not deter negotiated mergers or business
combinations that the board of directors determines to be in the best interests
of us and our stockholders.

To implement the Rights Agreement the board of directors declared a
dividend of one common stock purchase right (a "Right") for each share of our
common stock outstanding at the close of business on November 14, 2001 (the
"Record Date") or issued by us on or after such date and prior to the earlier of
the Distribution Date, the Redemption Date or the Final Expiration Date (as such
terms are defined in the Rights Agreement). The dividend was issued on November
14, 2001 to stockholders of record on the Record Date. Each Right entitles the
registered holder to purchase from us one share of common stock at a price of
$5.00 per share, subject to adjustment (the "Purchase Price").

Rights Attached to Common Stock Initially

Common stock certificates will evidence the Rights. A notation on the
certificates will incorporate the Rights Agreement and advise the certificate
holder of the existence of the Rights. Until triggered, the Rights are
transferred only with the common stock. Common stock certificates issued after
November 14, 2001 contain a legend referencing the existence of the Rights
Agreement. The transfer of outstanding common stock prior to the occurrence of a
Distribution Date will also constitute the transfer of the Rights associated
with the common stock.

Distribution of Rights

The Rights will separate from the common stock on the Distribution
Date. The Distribution Date will be the date the Rights separate from the common
stock and will be the earlier to occur of the following two events:

o the close of business on the first day of a public
announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired
beneficial ownership of 15% or more of the outstanding
common stock; or

o ten business days following the commencement of, or
announcement of an intention to make, a tender or exchange
offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of
such outstanding common stock.

As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the common stock as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights. The Rights are not exercisable until the Distribution Date. The Rights
will expire on October 30, 2011, unless earlier redeemed or extended by the
board of directors.

Right to Purchase Company Stock

In the event a person becomes the owner of 15% or more of the
outstanding shares of common stock and thus becomes an Acquiring Person (a
"Flip-In Event"), the Rights not held by the Acquiring Person "flip-in" and,
instead of continuing as rights to buy one share of common stock, become rights
to buy from us shares of common stock having a value equal to two times the
Purchase Price under the Right. In other words, a Rights holder (other than the
Acquiring Person) may purchase common stock at a 50% discount.

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

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

Right to Purchase Acquiring Person Stock

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

Exchange of Rights for Common Stock

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

Redemption

The Rights may be redeemed by the board of directors at a redemption
price of $0.01 per Right at any time prior to the earlier of:

o the time that a person or a group becomes an Acquiring
Person, or

o October 30, 2011, the expiration date of the Rights
Agreement.

Immediately upon redemption and without further action and without any
notice, the right to exercise the Rights will terminate and the only right of
the holders will be to receive the redemption price.

Expiration of Rights

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

Amendments or Supplements

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

No Rights as Stockholders

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

Miscellaneous

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

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

Transfer Agent and Warrant Agent

The transfer agent for our common stock, the 2000 Warrants and the 2003
Warrants is American Stock Transfer & Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

After the closing of this offering, we will have shares
of common stock issued and outstanding of which the shares
included in the units offered by this prospectus will be freely tradable without
restriction or further registration under the Securities Act, except for any
shares purchased by any affiliate of us. An affiliate of us is generally a
person who has a controlling position with regard to us. Any shares purchased by
our affiliates will be subject to the resale limitations of Rule 144 promulgated
under the Securities Act.

Of the approximately remaining shares of common
stock that will be outstanding, 1,597,521 are restricted securities as that term
is defined under Rule 144.

Except for 243,181 shares, all of the restricted shares are eligible
for resale under Rule 144; provided, that shares held by affiliates are subject
to limits on volume of sales during any three-month period.

In general, under Rule 144, as currently in effect, a person or group
of persons whose shares are aggregated, who has beneficially owned restricted
shares for at least one year would be entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of:

o 1% of the then outstanding common stock; or

o the average weekly trading volume of our common stock during
the four calendar weeks preceding the sale, provided, that
public information about us as required by Rule 144 is
available and the seller complies with manner of sale
provisions and notice requirements.

The volume limitations described above, but not the one-year holding
period, also apply to sales of our non-restricted securities by our affiliates.

A person who is not an affiliate, has not been an affiliate within
three months before the sale and has beneficially owned the restricted
securities for at least two years, is entitled to sell restricted shares under
Rule 144 without regard to any of the limitations described above.

We cannot predict the effect, if any, that sales of, or the
availability for sale of, our common stock will have on the market price of our
common stock prevailing from time to time. Nevertheless, the possibility that
substantial amounts of common stock in the public market, including shares
issuable upon the exercise of outstanding warrants or options, could adversely
affect the prevailing market price of our common stock and could impair our
ability to raise capital in the future through the sale of securities.

UNDERWRITING

We and the underwriters for this offering have entered into an
underwriting agreement with respect to the units being offered. Subject to
certain conditions, each underwriter has severally agreed to purchase, and we
have agreed to sell to them, severally, the respective number of units set forth
opposite their names at the public offering price less the underwriting
discounts and commission set forth on the cover page of this prospectus below.
Roan/Meyers Associates L.P. is the representative of the underwriters.

Underwriters Number of Units
------------ ---------------
Roan/Meyers Associates, L.P. ................... ______________
ViewTrade Securities, Inc....................... ______________

Sterling Financial Investment Group, Inc........ ______________
Advanced Equities, Inc.......................... ______________

Total..................................
==============

The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the units offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The underwriters are obligated to take and pay for all of the
units offered by this prospectus if any

units are taken except for those covered by the overallotment option. These
conditions include requirements that no stop order be in effect and that no
proceedings for such purpose be instituted or threatened by the Securities and
Exchange Commission.

The representative has informed us that the underwriters propose to
offer the units directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ per unit 10% below the public offering price. Any
underwriter may allow, and such dealers may re-allow, a concession not in excess
of $ per unit to other dealers including the underwriters. The representative
may re-allocate a portion of its concession or non-accountable expense allowance
in its discretion among other members of the underwriting syndicate or selling
group.

We have granted to the underwriters an option, exercisable for 45 days
from the date of this prospectus, to purchase up to an aggregate of an
additional 15% of the total units sold at the public offering price set forth on
the cover page hereof, less underwriting discounts and commissions. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the units
offered hereby. To the extent such option is exercised, each underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional units as the number set forth next to such
underwriter's name in the preceding table bears to the total number of units set
forth next to the names of all underwriters in that table.

We have also agreed to issue to the representative a unit option
agreement granting the representative the right to purchase up to 10% of the
units sold (not including the possible exercise of the overallotment option) at
an exercise price equal to 165% of the initial offering price of the units. The
exercise price and the number of underlying securities in the warrants contained
in the representative's units are subject to adjustment upon the same terms as
contained the 2003 Warrants being sold in the units. The sale price of the unit
option is $0.001 multiplied by the number of units covered by the option. The
securities to be delivered upon exercise of the representative's warrants are
the same as the units being sold to the public in this offering; provided,
however, the exercise price of the representative's warrant received upon
exercise of its unit option agreement is equal to 165% of the exercise price of
the 2003 Warrants. These warrants are exercisable during the four-year period
beginning one year from the date of effectiveness of the registration statement
of which this prospectus forms a part. The representative's Unit Purchase Option
will be restricted from sale, transfer, assignment or hypothecation for a period
of one year from the effective date of the offering except to officers or
partners (not directors) of the underwriter and members of the selling group
and/or their officers or partners in compliance with NASD Rule 2710(c) (7) (A).

The representative's unit purchase option is not redeemable by us. In
addition, we have agreed to certain "demand and piggyback" registration rights
for the securities underlying the representative's unit purchase option. The
holder of the representative's unit purchase option can demand, on one occasion,
at anytime until five years from the effective date of the registration
statement, that we register the shares and warrants for resale under the
Securities Act. The "piggyback" registration provisions provide that we will
include the underlying shares and 2003 Warrants in any registration statement
filed by us during the five-year period commencing after the effective date with
certain exceptions.

The holder of the representative's unit purchase option will have, in
that capacity, no voting, dividend or other stockholder rights. Any profit
realized by the representative on the sale of the securities issuable upon
exercise of the representative's unit purchase option may be deemed to be
additional underwriting compensation. The securities underlying the
representative's unit purchase option are being registered in the registration
statement of which this prospectus forms a part. During the term of the
representative's unit purchase option, the holders thereof are given the
opportunity to profit from a rise in the market price of our common stock. We
may find it more difficult to raise additional equity capital while the
representative's unit purchase options are outstanding.

The 2003 Warrants are subject to redemption provided: (i) at least one
year has passed since the closing date of the offering; (ii) we provide
investors with at least 30 days' notice of redemption; (iii) the average closing
bid quotation of our common stock for the 20-day period prior to the date of
notice of redemption is at least $ and (iv) there is an effective
registration statement providing for the issuance of the underlying shares of
common stock. We have agreed, in connection with the exercise of the 2003
Warrants pursuant to solicitation following a notice of redemption from the
Company, to pay to Roan/Meyers a fee of 5% of the exercise price for each 2003
Warrant exercised; provided, however, that Roan/Meyers will not be entitled to
receive such compensation in connection with warrant exercise transactions in
which (i) the market price of our common stock at the time of exercise is lower
than the exercise price of the 2003 Warrants; (ii) the 2003 Warrants are held in
any discretionary account; (iii) disclosure of compensation arrangements is not
made, in addition to the disclosure provided in this prospectus, in documents
provided

to holders of the 2003 Warrants at the time of exercise; (iv) at the time of
exercise, the holder of the 2003 Warrant that is electing to exercise has not
confirmed in writing that Roan/Meyers solicited such exercise; or (v) the
solicitation or

exercise of the 2003 Warrants was in violation of Regulation M under the
Securities and Exchange Act of 1934. In addition, unless granted an exemption by
the Securities and Exchange Commission from Regulation M, Roan/Meyers will be
prohibited from engaging in any market making activities or solicited brokerage
activities until the later termination of such solicitation activity or the
termination by waiver or otherwise of any right Roan/Meyers may have to receive
a fee for the exercise of the 2003 Warrants following such solicitation. Such a
prohibition, while in effect, could impair the liquidity and market price of the
securities offered pursuant to this offering.

We have also previously paid to Roan/Meyers $45,000 on account of the
underwriters expenses in connection with this offering to be applied to the
non-accountable expense allowance equal to 3% of the gross proceeds of the
offering (including proceeds from the sale, if any, of the over-allotment option
securities).

REGULATION M

In order to facilitate the offering of the units, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the units. Specifically, the underwriters may sell more shares than they are
obligated to purchase under the underwriting agreement, creating a short
position. A short sale is covered if the short position is no greater than the
number of units available for purchase by the underwriters under the
over-allotment option. The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing units in the open market. In
determining the source of units to close out a covered short sale, the
underwriters will consider, among other things, the open market price of the
units compared to the price available under the over-allotment option. The
underwriters may also sell units in excess of the over-allotment option,
creating a naked short position. The underwriters must close out any naked short
position by purchasing units in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the unit in the open market after pricing that
could adversely affect investors who purchase in the offering. As an additional
means of facilitating the offering, the underwriters may bid for, and purchase,
units in the open market to stabilize the price of the units. The underwriting
syndicate may also reclaim selling concessions allowed to an underwriter or a
dealer for distributing the units in the offering, if the syndicate repurchases
previously distributed units to cover syndicate short positions or to stabilize
the price of the unit (commonly referred to as the imposition of "penalty
bids"). These activities may raise or maintain the market price of the units
offered hereby above independent market levels or prevent or retard a decline in
the market price of the units offered hereby. The underwriters are not required
to engage in these activities and may end any of these activities at any time.

We and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

DETERMINATION OF OFFERING PRICE

The initial public offering price of the units offered by this
prospectus and the exercise price of the 2003 Warrants were determined by
negotiation between us and the representative. Among the factors considered in
determining the initial public offering price of the units and the exercise
price of the warrants were:

o our history and our prospects;

o the trading price of our common stock prior to the date of
this prospectus;

o the industry in which we operate;

o the status and development prospects for our proposed
products;

o our past and present operating results;

o the previous experience of our executive officers; and

o the general condition of the securities markets at the time
of this offering.

The offering price stated on the cover page of this prospectus should
not be considered an indication of the actual value of the units. The price of
our common stock and the 2003 Warrants is subject to change as a result of
market conditions and other factors.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE

On April 12, 2002, KPMG LLP resigned as our independent auditors. The
report of KPMG on our balance sheet as of December 31, 2001 and the related
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 2001 and for the period from
August 5, 1988 (inception) to December 31, 2001 did not contain any adverse
opinion or disclaimer of opinion, nor were they modified as to uncertainty,
audit scope or accounting principles.

In connection with the audits of the periods described above, and the
subsequent interim period through April 12, 2002, there were no disagreements
between us and KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to KPMG's satisfaction, would have caused KPMG to
make reference to the subject matter of the disagreement(s) in connection with
its reports.

On April 25, 2002, we engaged Eisner LLP, formerly Richard A. Eisner &
Company, LLP, New York, New York, as our independent auditors.

LEGAL MATTERS

The validity of the common stock and the 2003 Warrants offered hereby
will be passed upon for Delcath by Cummings & Lockwood LLC, Stamford,
Connecticut, counsel for Delcath. Goldstein & DiGioia LLP, New York, New York,
has served as counsel for the underwriters.

EXPERTS

Our financial statements as of December 31, 2002 and for each of the
two years then ended and cumulative from inception (August 5, 1988) to December
31, 2002 have been included in this prospectus in reliance upon the report of
Eisner LLP, independent auditors, appearing elsewhere herein, based upon their
authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file periodic reports under the Securities Exchange Act of 1934, as
amended, that include information about us. We have also filed with the SEC in
Washington, D.C., a registration statement under the Securities Act with the
respect to the units offered by this prospectus. This prospectus does not
contain all the information set forth in the registration statement and the
exhibits and schedules thereto. For further information with respect to us and
the units, we refer you to the registration statement and the exhibits and
schedules filed therewith. The registration statement and the exhibits and
schedules forming a part thereof may be inspected without charge at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies of such materials can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further
information regarding the public reference facilities. In addition, the SEC
maintains a website that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC at
http:// www.sec.gov.

Statements made in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the registration statement, we refer you to the exhibit to the registration
statement referencing the item for a more complete description of the matter
involved, and each such statement is qualified in its entirety by reference
thereto.

DELCATH SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements as of December 31, 2002 and for each of the two
years in the period ended December 31, 2002, and cumulative from inception
(August 5, 1988) to December 31, 2002:

Page
----

Independent Auditors' Report................................................F-2

Balance Sheet as of December 31, 2002.......................................F-3

Statements of Operations for the years ended December 31, 2001
and 2002 and cumulative from inception (August 5, 1988) to
December 31, 2002...........................................................F-4

Statements of Stockholders' Equity for the years ended December
31, 2001 and 2002 and cumulative from inception (August 5,
1988) to December 31, 2002..................................................F-5

Statements of Cash Flows for the years ended December 31, 2001
and 2002 and cumulative from inception (August 5, 1988) to
December 31, 2002...........................................................F-6

Notes to Financial Statements...............................................F-7

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Delcath Systems, Inc.:

We have audited the accompanying balance sheet of Delcath Systems, Inc. (a
development stage company) as of December 31, 2002, and the related statements
of operations, stockholders' equity, and cash flows for each of the years in the
two-year period ended December 31, 2002 and for the period from August 5, 1988
(inception) to December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all
material respects, the financial position of Delcath Systems, Inc. (a
development stage company) as of December 31, 2002, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 2002 and for the period from August 5, 1988 (inception) to December
31, 2002, in conformity with accounting principles generally accepted in the
United States of America.

/s/ Eisner LLP
Eisner LLP
New York, NY
February 6, 2003

F-2

DELCATH SYSTEMS, INC.

(A Development Stage Company)

Balance Sheet

December 31,
2002
-----------

Assets

Current assets:
Cash and cash equivalents ................................................. $ 1,063,650
Certificate of deposit .................................................... 370,000
Interest receivable ....................................................... 5,406
Prepaid insurance ......................................................... 96,583
------------
Total current assets .................................... 1,535,639

Furniture and fixtures, net .................................................... 13,750
Deferred costs in connection with a proposed
financing transaction ..................................................... 238,571
Due from affiliate ............................................................. 24,000
------------

Total assets ............................................ $ 1,811,960
============

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued expenses ..................................... $ 175,170
------------
Total current liabilities ............................... 175,170
------------

Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding ........................... --
Common stock, $.01 par value; 15,000,000 shares authorized;
4,146,997 shares issued and 4,118,897 outstanding ...................... 41,189
Additional paid-in capital ................................................ 19,049,406
Deficit accumulated during development stage .............................. (17,453,805)
------------

Total stockholders' equity ................................. 1,636,790
------------

Total liabilities and stockholders' equity ................. $ 1,811,960
============

See accompanying notes to financial statements

F-3

DELCATH SYSTEMS, INC.

(A Development Stage Company)

Statements of Operations

Cumulative
from inception
Year ended December 31, (August 5, 1988)
------------------ ----------------- to
2001 2002 December 31, 2002
------------------ ----------------- --------------------------

Costs and expenses:

General and administrative expenses ........ $ 953,652 $ 723,763 $ 5,303,309
Research and development costs ............. 1,115,004 1,173,275 11,410,881
------------------ ----------------- ----------------

Total costs and expenses ................ 2,068,656 1,897,038 16,714,190
------------------ ----------------- ----------------

Operating loss .......................... (2,068,656) (1,897,038) (16,714,190)

Other income (expense):
Interest income ............................ 208,220 89,992 930,463

Interest expense ........................... (15,571) -- (171,473)
------------------ ----------------- ----------------

Net loss ................................ $ (1,876,007) $ (1,807,046) $ (15,955,200)
================= ================ ================

Common share data:
Basic and diluted loss per share ........... $ (0.48) $ (0.44)
================= ================

Weighted average number of basic
and diluted common shares
outstanding .......................... 3,903,816 4,085,049
================ =================

See accompanying notes to financial statements.

F-4

DELCATH SYSTEMS, INC.
(A Development Stage Company)

Statements of Stockholders' Equity

Years ended December 31, 2002 and 2001 and
cumulative from inception (August 5, 1988) to December 31, 2002

Common stock $.01 par value Preferred Stock
-------------------------------------------------------------------------- ----------------
Issued In treasury Outstanding $.01 par value
------------------------- --------------------- ---------------------- ----------------
No. of No. of No. of No. of
shares Amount shares Amount shares Amount shares Amount
------------ -------- --------- ---------- ---------- -------- ------ ------

Shares issued in connection with the
formation of the Company as of
August 22, 1988 ............... 621,089 $ 6,211 -- $ -- 621,089 $ 6,211 -- $ --
Sale of preferred stock,
August 22, 1988 ............... -- -- -- -- -- -- -- --
Shares returned as of March 8, 1990 -- -- (414,059) (4,141) (414,059) (4,141) -- --
Sale of stock, October 2, 1990 ..... -- -- 17,252 173 17,252 173 -- --
Sale of stock, January 23, 1991 .... -- -- 46,522 465 46,522 465 -- --
Sale of stock, August 30, 1991 ..... -- -- 1,353 14 1,353 14 -- --
Sale of stock, December 31, 1992 ... -- -- 103,515 1,035 103,515 1,035 -- --
Sale of stock, July 15, 1994 ....... -- -- 103,239 1,032 103,239 1,032 -- --
Sale of stock, December 19, 1996 ... -- -- 39,512 395 39,512 395 -- --
Shares issued in connection with
conversion of short-term
borrowings as of
December 22, 1996 ............. 58,491 585 98,388 984 156,879 1,569 -- --
Sale of stock, December 31, 1997 ... 53,483 535 -- -- 53,483 535 -- --
Exercise of stock options .......... 13,802 138 3,450 35 17,252 173 -- --
Shares issued as compensation ...... 2,345 23 828 8 3,173 31 -- --
Amortization of compensatory
stock options granted ......... -- -- -- -- -- -- -- --
Forfeiture of stock options ........ -- -- -- -- -- -- -- --
Shares issued in connection with
exercise of warrants .......... 21,568 216 -- -- 21,568 216 -- --
Sale of stock, January 16, 1998 ... 34,505 345 -- -- 34,505 345 -- --
Sale of stock, September 24, 1998 .. 3,450 35 -- -- 3,450 35 -- --
Shares returned, April 17, 1998 .... (3,450) (35) -- -- (3,450) (35) -- --
Amortization of compensatory
stock options granted ......... -- -- -- -- -- -- -- --
Forfeiture of stock options ........ -- -- -- -- -- -- -- --
Exercise of stock options .......... 8,626 86 -- -- 8,626 86 -- --
Sale of stock, June 30, 1999 ....... 46,987 470 -- -- 46,987 470 -- --
Amortization of compensatory
stock options granted ......... -- -- -- -- -- -- -- --
Forfeiture of stock options ........ -- -- -- -- -- -- -- --
Shares issued in connection with
exercise of warrants .......... 2,300 23 -- -- 2,300 23 -- --
Sale of stock, April 14, 2000 ...... 230,873 2,309 -- -- 230,873 2,309 -- --
Dividends paid on preferred stock .. 690,910 6,909 -- -- 690,910 6,909 -- --
Conversion of preferred stock ...... 833,873 8,339 -- -- 833,873 8,339 -- --
Sale of stock, October 19, 2000 .... 1,200,000 12,000 -- -- 1,200,000 12,000 -- --
Shares issued as compensation
for stock sale ................ 85,000 850 -- -- 85,000 850 -- --
Stock options issued as
compensation .................. -- -- -- -- -- -- -- --
Deficit accumulated from inception
to December 31, 2000 .......... -- -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ---------- ----- ----

Balance at December 31, 2000 ....... 3,903,852 39,039 -- -- 3,903,852 39,039 -- --

Sum of fractional common shares
cancelled after year 2000
stock splits .................. (36) (1) -- -- (36) (1) -- --
Stock warrants issued as
compensation .................. -- -- -- -- -- -- -- --
Net loss for year ended
December 31, 2001 ............. -- -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ---------- -- -----
Balance at December 31, 2001 ....... 3,903,816 39,038 -- -- 3,903,816 $ 39,038 -- $ --

Sale of stock on April 3, 2002 ..... 243,181 2,432 -- -- 243,181 2,432 -- --
Repurchases of stock, November ..... -- -- (28,100) (281) (28,100) (281) -- --
and December 2002
Net loss for year ended ............ -- -- -- -- -- -- -- --
December 31, 2002 ............. -- -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ---------- -- -----
Balance at December 31, 2002 ....... 4,146,997 $ 41,470 (28,100) $ (281) 4,118,897 $ 41,189 -- $ --
============ ============ ============ ============ ============ ========== == =====

Class A Class B
preferred stock preferred stock
----------------------- ---------------------- Deficit
$.01 par value $.01 par value accumulated
----------------------- ---------------------- Additional during
No. of No. of paid-in development
shares Amount shares Amount capital stage Total
---------- ---------- ---------- ---------- ------------ ----------- -------------

Shares issued in connection with the
formation of the Company as of
August 22, 1988 ............... -- $ -- -- $ -- $ (5,211) $ -- $ 1,000
Sale of preferred stock,
August 22, 1988 ............... 2,000,000 20,000 -- -- 480,000 -- 500,000
Shares returned as of March 8, 1990 -- -- -- -- 4,141 -- --
Sale of stock, October 2, 1990 ..... -- -- -- -- 24,827 -- 25,000
Sale of stock, January 23, 1991 .... -- -- 416,675 4,167 1,401,690 -- 1,406,322
Sale of stock, August 30, 1991 ..... -- -- -- -- 9,987 -- 10,001
Sale of stock, December 31, 1992 ... -- -- -- -- 1,013,969 -- 1,015,004
Sale of stock, July 15, 1994 ....... -- -- -- -- 1,120,968 -- 1,122,000
Sale of stock, December 19, 1996 ... -- -- -- -- 999,605 -- 1,000,000
Shares issued in connection with
conversion of short-term
borrowings as of
December 22, 1996 ............. -- -- -- -- 1,703,395 -- 1,704,964
Sale of stock, December 31, 1997 ... -- -- -- -- 774,465 -- 775,000
Exercise of stock options .......... -- -- -- -- 30,827 -- 31,000
Shares issued as compensation ...... -- -- -- -- 34,454 -- 34,485
Amortization of compensatory
stock options granted ......... -- -- -- -- 2,496,347 -- 2,496,347
Forfeiture of stock options ........ -- -- -- -- (279,220) -- (279,220)
Shares issued in connection with
exercise of warrants .......... -- -- -- -- 234,182 -- 234,398
Sale of stock, January 16, 1998 ... -- -- -- -- 499,655 -- 500,000
Sale of stock, September 24, 1998 .. -- -- -- -- 56,965 -- 57,000
Shares returned, April 17, 1998 .... -- -- -- -- (4,965) -- (5,000)
Amortization of compensatory
stock options granted ......... -- -- -- -- 1,166,418 -- 1,166,418
Forfeiture of stock options ........ -- -- -- -- (407,189) -- (407,189)
Exercise of stock options .......... -- -- -- -- 67,414 -- 67,500
Sale of stock, June 30, 1999 ....... -- -- -- -- 775,722 -- 776,192
Amortization of compensatory
stock options granted ......... -- -- -- -- 98,186 -- 98,186
Forfeiture of stock options ........ -- -- -- -- (554,371) -- (554,371)
Shares issued in connection with
exercise of warrants .......... -- -- -- -- 24,975 -- 24,998
Sale of stock, April 14, 2000 ...... -- -- -- -- 499,516 -- 501,825
Dividends paid on preferred stock .. -- -- -- -- 992,161 (1,498,605) (499,535)
Conversion of preferred stock ...... (2,000,000) (20,000) (416,675) (4,167) 15,828 -- --
Sale of stock, October 19, 2000 .... -- -- -- -- 5,359,468 -- 5,371,468
Shares issued as compensation
for stock sale ................ -- -- -- -- (850) -- --
Stock options issued as
compensation .................. -- -- -- -- 3,800 -- 3,800
Deficit accumulated from inception
to December 31, 2000 .......... -- -- -- -- -- (12,272,147) (12,272,147)
------------ ------------ ----------- ------------ ------------ ------------ ------------

Balance at December 31, 2000 ....... -- -- -- -- 18,637,159 (13,770,752) 4,905,446

Sum of fractional common shares
cancelled after year 2000
stock splits .................. -- -- -- -- 1 -- --
Stock warrants issued as
compensation .................. -- -- -- -- 198,000 -- 198,000
Net loss for year ended
December 31, 2001 ............. -- -- -- -- -- (1,876,007) (1,876,007)
------------ ------------ ----------- ------------ ------------ ------------ ------------
Balance at December 31, 2001 ....... -- $ -- -- $ -- $ 18,835,160 $(15,646,759) $ 3,227,439

Sale of stock on April 3, 2002 ..... -- -- -- -- 265,068 -- 267,500
Repurchases of stock, November ..... -- -- -- -- (50,822) -- (51,103)
and December 2002
Net loss for year ended ............ -- -- -- -- -- (1,807,046) (1,807,046)
December 31, 2002 ............. -- -- -- -- -- -- --
------------ ------------ ----------- ------------ ------------ ------------ ------------
Balance at December 31, 2002 ....... -- $ -- -- $ -- $ 19,049,406 $(17,433,805) $ 1,636,790
============ ============ =========== ============ ============ ============ ============

F-5

DELCATH SYSTEMS, INC.

(A Development Stage Company)

Statements of Cash Flows

Cumulative
from inception
Year ended December 31, (August 5, 1988)
----------------------------------- to
2001 2002 December 31, 2002
---------------------------------- -----------------------------

Cash flows from operating activities:
Net loss .......................................... $ (1,876,007) $ (1,807,046) $(15,955,200)
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock option compensation expense ............. -- -- 2,520,170
Stock and warrant compensation expense
issued for consulting services .............. 198,000 -- 236,286
Depreciation expense .......................... 5,014 6,410 21,174
Amortization of organization costs ............ -- -- 42,165
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses ....... (501) (26,916) (96,583)
Decrease (increase) in interest receivable .... (20,920) 47,882 (5,406)
Due from affiliate ............................ -- -- (24,000)
(Decrease) increase in accounts
payable and accrued expenses ................ (622,835) (910) 175,170
------------ ------------ ------------
Net cash used in operating activities ..... (2,317,249) (1,780,580) (13,086,224)
------------ ------------ ------------

Cash flows from investing activities:
Purchase of furniture and fixtures ................ (13,260) (6,664) (34,924)
Purchase of short-term investments ................ (1,500,000) (370,000) (2,900,000)
Proceeds from maturities of short-term
investments ..................................... -- 1,500,000 2,530,000
Organization costs ................................ -- -- (42,165)
------------ ------------ ------------
Net cash provided by (used in)
investing activities ................ (1,513,260) 1,123,336 (447,089)
------------ ------------ ------------

Cash flows from financing activities:
Deferred costs in connection with a proposed
financing transaction ........................... -- (238,571) (238,571)
Net proceeds from sale of stock and exercise
of stock options and warrants ................... -- 267,500 13,681,208
Repurchases of outstanding common stock ........... -- (51,103) (51,103)
Dividends paid .................................... -- -- (499,535)
(Repayments of) proceeds from short-term borrowings (230,000) -- 1,704,964
------------ ------------ ------------
Net cash (used in) provided by financing
activities ................................ (230,000) (22,174) 14,596,963
------------ ------------ ------------

(Decrease) increase in cash and cash
equivalents .......................... (4,060,509) (679,418) 1,063,650

Cash and cash equivalents at beginning of period ...... 5,803,577 1,743,068 --
------------ ------------ ------------

Cash and cash equivalents at end of period ............ $ 1,743,068 $ 1,063,650 $ 1,063,650
============ ============ ============

Cash paid for interest ................................ $ 36,141 $ -- $ 171,473
============ ============ ============

Supplemental non-cash activities:
Conversion of debt to common stock ................ $ -- $ -- $ 1,704,964
============ ============ ============

Common stock issued for preferred stock dividends . $ -- $ -- $ 999,070
============ ============ ============

Conversion of preferred stock to common stock ..... $ -- $ -- $ 24,167
============ ============ ============

Common stock issued as compensation
for stock sale .................................. $ -- $ -- $ 510,000
============ ============ ============

See accompanying notes to financial statements

F-6

DELCATH SYSTEMS, INC.
Notes to Audited Financial Statements
December 31, 2001 and 2002

(1) Description of Business and Summary of Significant Accounting Policies

(a) Description of Business

Delcath Systems, Inc. (the "Company") is a development stage
company which was founded in 1988 for the purpose of developing
and marketing a proprietary drug delivery system capable of
introducing and removing high dose chemotherapy agents to a
diseased organ system while greatly inhibiting their entry into
the general circulation system. It is hoped that the procedure
will result in a meaningful treatment for cancer. In November
1989, the Company was granted an IDE (Investigational Device
Exemption) and an IND status (Investigational New Drug) for its
product by the FDA (Food and Drug Administration). The Company is
seeking to complete clinical trials in order to obtain FDA
pre-marketing approval for the use of its delivery system using
doxorubicin and melphalan, chemotherapeutic agents, to treat
malignant melanoma that has spread to the liver.

(b) Basis of Financial Statement Presentation

The accounting and financial reporting policies of the Company
conform to accounting principles generally accepted in the United
States of America. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make assumptions and estimates that impact the
amounts reported in those statements. Such assumptions and
estimates are subject to change in the future as additional
information becomes available or as circumstances are modified.
Actual results could differ from these estimates.

Furniture and fixtures are recorded at cost and are being
depreciated on a straight line basis over the estimated useful
lives of the assets of five years. Accumulated depreciation
amounted to $21,074 at December 31, 2002.

(d) Income Taxes

The Company accounts for income taxes following the asset and
liability method in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." Under such method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
The Company's income tax returns are prepared on the cash basis of
accounting. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years
that the asset is expected to be recovered or the liability
settled.

(e) Stock Option Plan

The Company has historically accounted for its employee stock
option plans in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. As such,
compensation expense is recorded on the date of grant only if the
current fair market value of the underlying stock exceeds the
exercise price. Fair market values of the Company's Common Stock
at the dates options were

F-7

granted, prior to the Company's stock becoming publicly traded,
were based on third party sales of stock at or around the dates
options were granted, or in the absence of such transactions,
based on a determination by the board of directors based on
current available information. Such cost is then recognized over
the period the recipient is required to perform services to earn
such compensation. If a stock option does not become vested
because an employee fails to fulfill an obligation, the estimate
of compensation expense recorded in previous periods is adjusted
by decreasing compensation expense in the period of forfeiture.

In 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income (loss) and pro forma earnings (loss) per
share disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS No. 123 had been applied.
The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of
SFAS No. 123.

Had compensation cost for the Company's stock option grants been
determined based on the fair value at the grant dates consistent
with the methodology of SFAS No. 123, the Company's net loss and
net loss per share for the years ended December 31, 2001 and 2002
would have been increased to the pro forma amounts indicated as
follows:

2001 2002
---- ----

Net loss $ (1,876,007) $ (1,807,046)
Stock-based employee compensation
expense included in net loss, net of
related tax effects
0 0

Stock-based employee
compensation determined under the
fair value based method, net of
related tax effects (133,263) (44,769)
--------- --------
Pro forma net loss $ (2,009,270) $ (1,851,815)
=========== ===========

Loss per share (basic and diluted):
As reported $ (0.48) $ (0.44)
Pro forma (0.51) (0.45)

The per share weighted average fair value of stock options granted
during 2001 and 2002 was $.28 and $.30, respectively, estimated on
the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for the
grants for 2001 and 2002, respectively: risk free interest rates
of 2.84% and 3.6%-4.95% respectively, and volatility of 41% and
26.7% - 36.3%, respectively, while no dividend yield and expected
lives of five years were assumed for both years.

(f) Loss Per Share

The Company follows the provisions of SFAS No. 128, "Earnings Per
Share," which requires presentation of both basic and diluted
earnings per share (EPS) on the face of the Statements of
Operations. Basic EPS excludes dilution, and is computed using the
weighted average number of common shares outstanding during the
period. The diluted EPS calculation assumes all

F-8

dilutive stock options or contracts to issue Common Stock were
exercised or converted into Common Stock at the beginning of the
period.

For the years ended December 31, 2001 and 2002, the following
potential common shares were excluded from the computation of
diluted EPS because their effects would be antidilutive:

2001 2002
---- ----

Shares issuable upon exercise of
options 902,936 1,145,684
Shares issuable upon exercise of
warrants 1,626,938 1,516,985
Common Stock purchase rights issuable
only in the event that a
non-affiliated person or group
acquires 15% of the Company's then
outstanding Common Stock 6,408,690 6,781,566
--------- ---------

Totals 8,938,564 9,444,235
========= =========

(g) Research and Development Costs

Research and development costs include the costs of materials,
personnel, outside services and applicable indirect costs incurred
in development of the Company's proprietary drug delivery system.
All such costs are charged to expenses when incurred.

(h) Statements of Cash Flows

For purposes of the statements of cash flows, the Company
considers highly liquid debt instruments with maturities of three
months or less at date of acquisition to be cash equivalents. At
December 31, 2002 cash equivalents excluded a certificate of
deposit in the amount of $370,000.

(i) Reclassifications

Reclassifications have been made to reflect cost and expense
accounts on a functional basis for 2001 and prior, which is
consistent with the Company's current presentation.

F-9

Operating costs and expenses were previously presented as follows:

Cumulative
from inception
Year ended (August 5, 1988)
December to
31, 2001 December 31, 2001
-------------- ------------------

Legal, consulting and accounting fees $ 1,034,025 $ 6,025,255
Stock option compensation expense ... -- 2,520,170
Compensation and related expenses ... 557,087 3,304,703
Other operating expenses ............ 477,544 2,967,024
----------- -----------

Total costs and expenses ....... $ 2,068,656 $14,817,152
=========== ===========

(j) Stock Splits

All share and per share amounts give retroactive effect to stock
splits effected by the Company.

(2) Stockholders' Equity

(a) Stock Issuances

BGH Medical Products, Inc. (name later changed to Delcath Systems,
Inc.), a Delaware corporation (BGH - Delaware), was formed on
August 5, 1988. As of August 22, 1988, BGH Medical Products, Inc.,
a Connecticut corporation (BGH - Conn.), was merged into BGH
-Delaware, the surviving corporation. As of the merger date, the
authorized capital stock of BGH - Conn. consisted of 5,000 shares
of common stock, par value $.01 per share, of which 1,000 shares
were issued and outstanding. Upon the merger, each BGH - Conn.
Common Share outstanding was exchanged into 621.089 BGH - Delaware
Common Shares. As a result of the conversion, BGH - Delaware
issued 621,089 shares of common stock at $.01 par value. The
aggregate amount of the par value of all Common Shares issued as a
result of the exchange, $6,211, was credited as the Common Stock
capital of BGH - Delaware, and the difference in respect to the
capital account deficiency was charged to additional paid-in
capital.

On August 22, 1988, BGH - Delaware then sold in a private
placement 2,000,000 shares of Class A Preferred Stock, with a par
value of $.01, to two affiliated venture capital funds for an
aggregate amount of $500,000 in cash.

On March 8, 1990, 414,059 shares of Common Stock were returned to
the Company by certain stockholders as treasury stock due to
relevant technology milestones not being fully achieved within the
specified time period, in accordance with provisions of a
stockholders' agreement.

Effective May 7, 1990, the Company changed its name to Delcath
Systems, Inc.

On October 2, 1990, the Company sold 17,252 shares of Common
Treasury Stock, $.01 par value, for an aggregate amount of
$25,000.

F-10

On January 23, 1991, the Company offered in a private placement
shares of Common Stock and/or Class B Preferred Stock at $7.39 and
$2.55 per share respectively for an aggregate maximum amount of
$2,000,000. Under the terms of the private placement, 46,522
shares of Common Treasury Stock and 416,675 shares of Class B
Preferred Stock were sold, yielding net proceeds to the Company of
$1,406,322. The Common Stock and Class B Preferred Stock sold each
has a par value of $.01, resulting in an increase in additional
paid-in capital of $1,401,690. The two affiliated venture capital
funds that owned the Class A Preferred Shares purchased 117,650 of
the Class B Preferred Shares sold in the private placement.

On August 30, 1991, the Company sold an additional 1,353 shares of
Common Treasury Stock at $7.39 per share, yielding proceeds to the
Company of $10,001. The shares have a par value of $.01, resulting
in an additional paid-in capital amount of $9,987.

In a December 1992 private placement, the Company sold 103,515
shares of Common Stock held in our treasury at $10.14 per share
for a total placement of $1,050,000 ($1,015,004 after expenses).
The shares issued have a par value of $.01, resulting in an
additional paid-in capital amount of $1,048,965 ($1,013,969 after
expenses). The two affiliated venture capital funds that owned the
Class A Preferred Shares purchased 27,604 of the Common Treasury
Shares sold.

Effective January 1, 1994, the Company issued 1,725 shares of
Common Treasury Stock at $1.45 per share for a total price of
$2,500 upon the exercise of stock options by an employee of the
Company.

During the first quarter of 1994, the Company increased its
authorized number of Common Shares from 5,000,000 to 15,000,000.

On July 15, 1994, the Company sold through a private placement
offering, units at a price of $51,000 per unit. Each unit
consisted of 4,693 Common Shares and 469 warrants, each of which
entitled the holder to purchase one share of Common Stock for
$10.87. In connection therewith, the Company sold twenty-two (22)
units (103,239 Common Shares and 10,324 warrants expiring August
30, 1997) for total proceeds of $1,122,000. The two affiliated
venture capital funds that owned the Class A Preferred Shares
purchased six (6) of the units sold. During August 1997, the
holders of warrants exercised 8,916 warrants to purchase 8,916
Common Shares at $10.87 each for total proceeds of $96,900. The
remaining warrants expired unexercised.

Effective January 1, 1995, the Company issued 1,725 shares of
Common Treasury Stock at $1.45 per share for a total price of
$2,500 upon the exercise of stock options by an employee of the
Company.

Effective January 1, 1996, the Company issued 828 shares of common
stock, valued at $10.87 per share for a total of $9,000, as
compensation for consulting services.

On December 19, 1996, the Company sold through a private
transaction 39,512 shares of common stock for total proceeds of
$1,000,000. In connection with the offering, the purchaser
obtained sole distribution rights for the Company's products in
Japan, Korea, China, Taiwan, and Hong Kong through December 31,
2004. No value was attributed to the distribution rights. In
addition, under certain conditions, the purchaser will be required
to buy certain products from the Company.

On April 26, 1996, the Company entered into short-term borrowing
agreements with 26 investors under which it borrowed $1,704,964
bearing interest at 10.25% per annum. Under the

F-11

terms of the agreements, on December 22, 1996, the short-term
borrowings were converted into 156,879 shares of Common Stock,
based on a conversion price of $10.87 per share, and 78,438
warrants, expiring April 25, 1999, entitling the holders to
purchase 78,438 additional shares of Common Stock at $10.87 per
share. The two affiliated venture capital funds discussed above
provided $250,000 of the short-term loan, converting that debt
into approximately 23,003 shares of Common Stock and 11,502
warrants. From April 26, 1996 through December 22, 1996, interest
of $114,948 accrued on the borrowings. Such interest was paid in
January 1997. During September 1997, the holders of warrants
exercised 1,150 warrants to purchase 1,150 Common Shares at $10.87
each for total proceeds of $12,499. During December 1997, the two
affiliated venture capital funds exercised their 11,502 warrants
to purchase 11,502 Common Shares at $10.87 each for total proceeds
of $124,999. During April 1999, the holders of warrants exercised
2,300 warrants to purchase 2,300 Common Shares at $10.87 each for
total proceeds of $24,998. The remaining warrants expired
unexercised.

In 1997, the Company issued 2,345 shares of Common Stock, valued
at $10.87 per share based on a 1996 agreement, for a total cost of
$25,485, as compensation for consulting services.

From September 1997 through December 31, 1997, the Company
received $775,000 and issued 53,483 shares of Common Stock. During
January 1998, the Company received an additional $500,000 and
issued another 34,505 shares of Common Stock. In April 1998, under
the terms of restricted stock sale agreements, the Company issued
to the purchasers of the 87,988 shares of Common Stock 11,732
three-year warrants entitling the holders to purchase 11,732
Common Shares at $10.87 per share. These warrants expired
unexercised in April 2001.

In December 1997, the holder of non-incentive stock options
exercised 13,802 options to purchase 13,802 restricted Common
Shares at $1.88 each for total proceeds of $26,000.

In April 1998, a venture capital firm exercised 8,626
non-incentive stock options to purchase 8,626 restricted Common
Shares at $7.83 each for total proceeds of $67,500.

In April 1998, in connection with the settlement of a dispute with
a former director, the Company cancelled 3,450 shares of Common
Stock previously held by the former director in return for $1.45
per share, the price originally paid by the former director.

In September 1998, the Company sold 3,450 shares of restricted
Common Stock to an individual for $16.52 per share, yielding
proceeds to the Company of $57,000.

In June 1999, the Company sold 46,987 shares of Common Stock to
individual investors for $16.52 per share and warrants entitling
the holders to purchase 5,218 Common Shares at $14.87 per share
(which warrants expired April 30, 2002), yielding proceeds to the
Company of $776,192.

In April 2000, the Company sold 230,873 Common Shares at $2.17 per
share to existing stockholders in a rights offering yielding
proceeds to the Company of $501,825.

The Company completed an initial public offering ("IPO") on
October 19, 2000 of 1,200,000 units for $6.00 per unit, each unit
consisting of one share of Common Stock and one redeemable warrant
to purchase one share of Common Stock at a price of $6.60 until
October 18, 2005. In connection with the initial public offering,
the Company received $7,200,000 before offering costs ($5,371,468
after expenses). The Company also issued to the underwriters
warrants to purchase 120,000 units for $6.60 per unit, each unit
consisting of one Common Share and one redeemable warrant to
purchase one share of Common Stock at a price of $10.50

F-12

until October 18, 2005. The Company also issued 85,000 shares of
Common Stock valued at $510,000 for legal services provided in
connection with the offering.

Also, in connection with the initial public offering, the holders
of the 2,000,000 outstanding shares of the Company's Class A
Preferred Stock and the 416,675 outstanding shares of the
Company's Class B Preferred Stock agreed to convert their shares
into Common Stock prior to the closing of the offering. Upon the
conversion of the Company's Class A Preferred Stock and the
Company's Class B Preferred Stock into 833,873 shares of Common
Stock, the holders of the Class A and Class B shares received an
aggregate of $499,535 in cash and 690,910 shares of Common Stock
valued at $990,070 in payment of declared dividends.

In December 2000, the Company issued 1,720 Common Stock options at
an exercise price of $3.31, fair valued at $2.21 per option for a
total of $3,800, and 1,720 warrants to purchase Common Stock at an
exercise price of $6.00, fair valued at $0 per warrant, as
compensation for consulting services. Both the options and
warrants expire December 1, 2005.

The Company issued the following Common Stock warrants in 2001 for
consulting services:

(1) 150,000 fully vested warrants to purchase 150,000 units at
$7.00 per unit, through January 4, 2005, each unit consisting of
one fully-paid and non-assessable share of Common Stock, and one
Common Stock purchase warrant entitling the holder to purchase one
share of Common Stock for $6.60 per share. None of these warrants
have been exercised as of December 31, 2002. Such warrants, valued
at $175,000, were recognized as an expense in the first quarter of
2001; and

(2) 150,000 warrants to purchase up to 150,000 shares of
Common Stock, through April 30, 2005, for $6.60 per share. 25,000
of such warrants vested in 2001 and the remaining 125,000 warrants
would have vested by May 2002 if the share price of the Company's
Common Stock exceeded certain share price levels above the IPO
price by May 2002. As of May 2002, none of the thresholds had been
met, and the 125,000 remaining warrants did not vest and were
forfeited. None of the 25,000 vested warrants had been exercised
as of December 31, 2002. The 25,000 vested, non-contingent
warrants have been valued at $23,000, and were recognized as an
expense in the first quarter of 2001. The expenses, as noted in
(1) and (2) above, recognized with these two warrant issues are
non-cash expenses.

The values of the above warrants were $1.17 per warrant for
warrants described in (1) above, and $ .90 per warrant for the
25,000 warrants that vested immediately described in (2) above,
and were estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average
assumptions, respectively: risk free interest rates of 4.95% and
5.9%, volatility of 26.7% and 22.9%, expected lives of four years
and four and one half years, with no dividend yield for either
issue.

In 2001, the Company cancelled a total of 36 shares of Common
Stock which represented the total of fractional shares resulting
from stock splits during September and October 2000 in connection
with the Company's initial public offering.

On October 30, 2001, the Company entered into a Rights Agreement
with American Stock Transfer & Trust Company (the "Rights
Agreement") in connection with the implementation of the Company's
stockholder rights plan (the "Rights Plan"). The purposes of the
Rights Plan are to deter, and protect the Company's shareholders
from, certain coercive and otherwise unfair takeover tactics and
to enable the Board of Directors to represent effectively the
interests of shareholders in the event of a takeover attempt. The
Rights Plan does not deter negotiated

F-13

mergers or business combinations that the Board of Directors
determines to be in the best interests of the Company and its
shareholders.

To implement the Rights Plan, the Board of Directors declared a
dividend of one Common Stock purchase right (a "Right") for each
share of Common Stock of the Company, par value $0.01 per share
(the "Common Stock") outstanding at the close of business on
November 14, 2001 (the "Record Date") or issued by the Company on
or after such date and prior to the earlier of the Distribution
Date, the Redemption Date or the Final Expiration Date (as such
terms are defined in the Rights Agreement). The rights expire
October 30, 2011. Each Right entitles the registered holder to
purchase from the Company one share of Common Stock, at a price of
$5.00 per share, subject to adjustment (the "Purchase Price"), in
the event that a person, or group announces that it has acquired,
or intends to acquire, 15% or more of the Company's outstanding
Common Stock.

On April 3, 2002, the Company received $267,500 by completing a
private placement of 243,181 shares of its Common Stock and
warrants to purchase up to 20,265 shares of Common Stock at an
exercise price of $1.32 per share that expire on April 3, 2005.

(b) Common Stock Repurchases

Pursuant to a stock repurchase plan approved in 2002 by the
Company's Board of Directors, the Company repurchased 28,100
shares of Common Stock for $51,103 during 2002. The Company has
been authorized by the Board of Directors to purchase up to seven
percent of its outstanding Common Stock.

The Company established an Incentive Stock Option Plan, a
Non-Incentive Stock Option Plan, the 2000 Stock Option Plan and
the 2001 Stock Option Plan (collectively, the "Plans") under which
stock options may be granted. Additionally, the Company has
entered into separate contracts apart from the Plans under which
options to purchase Common Stock have been granted. A stock option
grant allows the holder of the option to purchase a share of the
Company's Common Stock in the future at a stated price. The Plans
are administered by the Compensation Committee of the Board of
Directors which determines the individuals to whom the options
shall be granted as well as the terms and conditions of each
option grant, the option price and the duration of each option.

The Company's Incentive and Non-Incentive Stock Option Plans were
approved and became effective on November 1, 1992. During 2000 and
2001, respectively, the 2000 and 2001 Stock Option Plans became
effective. Options granted under the Plans vest as determined by
the Company and expire over varying terms, but not more than five
years from the date of grant. Stock option activity for the period
January 1, 2001 through December 31, 2002 is as follows:

F-14

The Plans Other Option Grants
--------------------- ---------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
Outstanding at
December 31, 2000 689,684 $ 3.82 17,252 $ 2.90

Granted during 2001 280,000 .83 -- --

Expired during 2001 (84,000) 3.31 -- --
---------- -------

Outstanding at
December 31, 2001 885,684 2.94 17,252 2.90

Granted during 2002 260,000 .71 -- --

Expired during 2002 -- (17,252) 2.90
---------- -------

Outstanding at
December 31, 2002 1,145,684 $ 2.43 -- $ --
========== =======

F-15

The following summarizes information about shares subject to option at
December 31, 2002:

Options outstanding Options exercisable
---------------------------------------------------------------------------- -------------------------------
Weighted
Weighted average Weighted
Number Range of average remaining Number average
outstanding exercise prices exercise price life in years exercisable exercise price
----------------- ------------------- ------------------ ---------------- ----------- ----------------

100,000 $ .60 $ .60 3.92 50,000 $ .60
260,000 .71 .71 4.25 .71
150,000 .85 .85 4.00 66,000 .85
30,000 1.53 1.53 3.67 7,500 1.53
172,525 2.90 2.90 2.00 172,525 2.90
164,020 3.31 3.31 2.95 164,020 3.31
269,139 4.93 4.93 1.00 269,139 4.93
------- -------

1,145,684 $ .60 - $4.93 $2.43 2.88 729,184 $3.38
========= ============= ===== ==== ======= =====

At December 31, 2001, options for 622,936 shares were exercisable
at a weighted average exercise price of $3.89 per share.

(3) Income Taxes

As of December 31, 2002, the Company had net operating loss
carryforwards for federal income tax purposes of approximately
$12,882,000 which may be available to offset future federal taxable
income, if any, through 2022. The use of net operating loss
carryforwards is subject to limitation in the event of a change in
the Company's ownership, as defined by federal income tax
regulations. The net operating loss carryforwards resulted in a
deferred tax asset of approximately $4,380,000 at December 31, 2002
($3,777,000 at December 31, 2001). Management does not expect the
Company to be taxable in the near future and established a 100%
valuation allowance against the deferred tax asset created by the net
operating loss carryforwards at December 31, 2002 and 2001. The
valuation allowance increased $603,000 during the year ended December
31, 2002 and $568,000 during the year ended December 31, 2001.

(4) Due From Affiliate

The Company sublet office space from a corporation controlled by an
officer of the Company (the "affiliate"), whose lease with the
landlord expired August 1997. Thereafter, the Company's occupancy of
the premises continued pursuant to an informal arrangement, under
which the Company remitted monthly rental payments directly to the
landlord. Rent expense incurred pursuant to this arrangement amounted
to $87,376 for 2001. The informal arrangement was replaced as of
January 1, 2002 with a lease agreement between the Company and the
landlord (see Note 6). In connection with its occupancy, the Company
paid the affiliate $24,000 which the affiliate then paid to the
landlord as a deposit on the lease.

(5) Deferred Costs in Connection with a Proposed Financing Transaction

On December 5, 2002, the Company filed with the Securities and
Exchange Commission a registration statement for the issuance of
units, each unit to consist of Common Shares and warrants to purchase
Common Shares. The Company has incurred $238,571 of costs associated

F-16

with the transaction. These costs will be netted against the proceeds
from the stock offering and charged to additional paid-in capital, or
charged to expense if the transaction is not consummated. As of
December 31, 2002, $21,705 of these costs were accrued.

(6) Rents

On April 1, 2002, the Company executed an Amendment of Lease (the
"Amendment") directly with the landlord. The Amendment is effective
January 1, 2002 and expires December 22, 2003, and can be renewed by
the Company for an additional three years. Rent expense under this
lease for the year ended December 31, 2002 was $89,082. Future
minimum rent under this lease is $91,055 for the year ending December
31, 2003. (7) Subsequent Event

On January 31, 2003, the stockholders voted to approve an amendment
to the Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock, par value $0.01 per
share, from 15 million to 35 million.

F-17

[LOGO - DELCATH SYSTEMS INC.]

TABLE OF CONTENTS

PROSPECTUS SUMMARY.......................1
THE OFFERING.............................2
SUMMARY FINANCIAL DATA...................3
RISK FACTORS.............................4

SPECIAL NOTE REGARDING
FORWARD-LOOKING
STATEMENTS.........................10
USE OF PROCEEDS.........................10
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER
MATTERS............................12
DIVIDEND POLICY.........................13
CAPITALIZATION..........................13
SELECTED FINANCIAL DATA.................14
PLAN OF OPERATION.......................15
BUSINESS................................17
MANAGEMENT..............................30
PRINCIPAL STOCKHOLDERS..................36
RELATED PARTY
TRANSACTIONS.......................38
DESCRIPTION OF OUR CAPITAL
STOCK AND OTHER
SECURITIES.........................38
SHARES ELIGIBLE FOR FUTURE
SALE...............................44
UNDERWRITING............................44
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS AND
FINANCIAL DISCLOSURE...............47
LEGAL MATTERS...........................47
EXPERTS.................................47
WHERE YOU CAN FIND MORE
INFORMATION........................47

INDEX TO FINANCIAL
STATEMENTS........................F-1

PART II

Item 25. Other Expenses of Issuance and Distribution

The following table sets forth the expenses (other than the
underwriting discounts and commissions of 10% and the representative's
non-accountable expense allowance of 3%) expected to be incurred in connection
with the issuance and distribution of the securities being registered. All of
such expenses are estimates, other than the filing fees payable to the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc.

Filing Fee - Securities and Exchange Commission ....................... $318
Filing Fee - National Association of Securities Dealers, Inc........... 845
Filing Fee - Boston Stock Exchange..................................... 12,500
Filing Fee - Nasdaq Small Cap Market................................... 26,500
Fees and Expenses of Accountants ...................................... 65,000
Fees and Expenses of Counsel .......................................... 200,000
Printing and Engraving Expenses ....................................... 20,500
Blue Sky Fees and Expenses ............................................ 10,000
Transfer Agent Fees ................................................... 5,000
Miscellaneous Expenses ................................................ 6,337
--------
Total: $346,500
========

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

ITEM 27. EXHIBITS

Exhibit No. Description
----------- -----------

1 Form of Underwriting Agreement. (incorporated by reference
to Exhibit 1 to Amendment No. 1 to Registrant's
Registration Statement on Form SB-2 (Registration No.
333-101661)).

3.1 Amended and Restated Certificate of Incorporation of
Delcath Systems, Inc. (incorporated by reference to Exhibit
3.1 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 2002 (File No. 001-16133)).
3.2 Amended and Restated By-Laws of Delcath Systems, Inc.
(incorporated by reference to Exhibit 3.2 to Amendment No.
1 to Registrant's Registration Statement on Form SB-2
(Registration No. 333-39470)).

4.1 Form of Underwriter's Unit Purchase Warrant Agreement
(incorporated by reference to Exhibit 4.1 to Amendment
No. 1 to Registrant's Registration Statement on Form SB-2
(Registration No. 333-101661)).

4.2 Specimen 2003 Warrant (incorporated by reference to Exhibit
4.2 to Amendment No. 1 to Registrant's Registration
Statement on Form SB-2 (Registration No. 333-101661)).

II-1

Exhibit No. Description
----------- -----------
November 12, 2001 (Commission File No. 001-16133)).
4.6 Form of Warrant Agreement by and between Delcath Systems,
Inc. and Whale Securities Co., L.P. (incorporated by
reference to Exhibit 4.2 to Amendment No. 5 to Registrant's
Registration Statement on Form SB-2 (Registration No.
333-39470)).
4.7 Form of Warrant Agreement by and between American Stock
Transfer & Trust Company, as warrant agent, Whale
Securities Co., L.P. and Delcath Systems, Inc.
(incorporated by reference to Exhibit 4.3 to Amendment No.
5 to Registrant's Registration Statement on Form SB-2
(Registration No. 333-39470)).
4.8 Form of Warrant Agent Agreement by and between Delcath
Systems, Inc. and American Stock Transfer & Trust Company,
as warrant agent with respect to the 2003 Warrants.

5 Opinion of Cummings & Lockwood LLC.

10.1 1992 Incentive Stock Option Plan (incorporated by reference
to Exhibit 10.1 to Registrant's Registration Statement on
Form SB-2 (Registration No. 333-39470)).
10.2 1992 Non-Incentive Stock Option Plan (incorporated by
reference to Exhibit 10.2 to Registrant's Registration
Statement on Form SB-2 (Registration No. 333-39470)).
10.3 2000 Stock Option Plan (incorporated by reference to
Exhibit 10.3 to Registrant's Registration Statement on Form
SB-2 (Registration No. 333-39470)).
10.4 2001 Stock Option Plan (incorporated by reference to
Exhibit 10.12 to Amendment No. 1 to Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 2001
(Commission File No. 001-16133)).
10.5 Employment Agreement, dated April 30, 1996, between Delcath
Systems, Inc. and M.S. Koly, as amended on April 30, 1999
(incorporated by reference to Exhibit 10.4 to Registrant's
Registration Statement on Form SB-2 (Registration No.
333-39470)).
10.6 Employment Agreement, dated April 30, 1996, between Delcath
Systems, Inc. and Samuel Herschkowitz, M.D., as amended on
April 30, 2000 (incorporated by reference to Exhibit 10.4
to Registrant's Registration Statement on Form SB-2
(Registration No. 333-39470)).
10.7 Distributorship Agreement, dated as of December 27, 1996,
by and between Delcath Systems, Inc. and Nissho Corporation
(incorporated by reference to Exhibit 10.6 to Registrant's
Registration Statement on Form SB-2 (Registration No.
333-39470)).
10.8 Consulting Services Agreement, between Delcath Systems,
Inc. and Euroland Marketing Solutions, Ltd. (incorporated
by reference to Exhibit 10.9 to the Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 2000
(Commission File No. 001-16133)).
10.9 Amendment to Key Employment Agreement, dated October 30,
2001, by and between Delcath Systems, Inc. and M. S. Koly
(incorporated by reference to Exhibit 10.10 to Registrant's
Quarterly Report on Form 10-Q for the period ended
September 30, 2001 (Commission File No. 001-16133)).
10.10 Amendment to Key Employment Agreement, dated October 30,
2001, by and between Delcath Systems, Inc. and Samuel
Herschkowitz (incorporated by reference to Exhibit 10.11
to Registrant's Quarterly Report on Form 10-Q for

II-2

Exhibit No. Description
----------- -----------
the period ended September 30, 2001 (Commission File No.
001-16133)).
23.1 Consent of Eisner LLP.
23.2 Consent of Cummings & Lockwood LLC (to be contained in
Exhibit 5 hereto).
24 Powers of Attorney (incorporated by reference to Exhibit 24
to the Registrant's Registration Statement on Form SB-2
(Registration No. 333-101661)).

II-3

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this amendment to its
registration statement to be signed on its behalf by the undersigned, in City of
Stamford, State of Connecticut on May 2, 2003.

DELCATH SYSTEMS, INC.

By: /s/ M. S. Koly
----------------------------
M. S. Koly, President

Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the following
persons in the capacities and on the date indicated.

Signature Title )
--------- ----- )
)
M.S. KOLY Chief Executive Officer )
(Principal Executive )
Officer) and Director )
)
THOMAS S. GROGAN Chief Financial Officer )
(Principal Financial )
and Accounting Officer) )
)
SAMUEL HERSCHOWITZ, M.D. Chairman and Director )
) By /s/ M. S. Koly
) --------------
MARK A. CORIGLIANO Director ) M. S. Koly
) Attorney-in-fact
DANIEL ISDANER Director )

) Date: May 2, 2003

VICTOR NEVINS Director )

EXHIBIT INDEX

Exhibit No. Description
----------- -----------

1 Form of Underwriting Agreement. (incorporated by reference
to Exhibit 1 to Amendment No. 1 to Registrant's
Registration Statement on Form SB-2 (Registration No.
333-101661)).

4.1 Form of Underwriter's Unit Warrant Agreement (incorporated
by reference to Exhibit 4.1 to Amendment No. 1 to
Registrant's Registration Statement on Form SB-2
(Registration No. 333-101661)).
4.2 Specimen 2003 Warrant (incorporated by reference to Exhibit
4.2 to Amendment No. 1 to Registrant's Registration
Statement on Form SB-2 (Registration No. 333-101661)).

4.2 Specimen 2003 Warrant.
4.3 Warrant Agreement, dated January 5, 2001, by and between
Delcath Systems, Inc. and Euroland Marketing Solutions,
Ltd. (incorporated by reference to Exhibit 4.5 to the
Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 2000 (Commission File No. 001-16133)).
4.4 Warrant No. W-2 to purchase up to 150,000 units granted to
Euroland Marketing Services, Ltd. (incorporated by
reference to Exhibit 4.6 to the Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 2000
(Commission File No. 001-16133)).
4.5 Rights Agreement, dated October 30, 2001, by and between
Delcath Systems, Inc. and American Stock Transfer & Trust
Company, as Rights Agent (incorporated by reference to
Exhibit 4.7 to Registrant's Form 8-A dated November 12,
2001 (Commission File No. 001-16133)).
4.6 Form of Warrant Agreement by and between Delcath Systems,
Inc. and Whale Securities Co., L.P. (incorporated by
reference to Exhibit 4.2 to Amendment No. 5 to Registrant's
Registration Statement on Form SB-2 (Registration No.
333-39470)).
4.7 Form of Warrant Agreement by and between American Stock
Transfer & Trust Company, as warrant agent, Whale
Securities Co., L.P. and Delcath Systems, Inc.
(incorporated by reference to Exhibit 4.3 to Amendment No.
5 to Registrant's Registration Statement on Form SB-2
(Registration No. 333-39470)).
4.8 Form of Warrant Agent Agreement by and between Delcath
Systems, Inc. and American Stock Transfer & Trust Company,
as warrant agent with respect to the 2003 Warrants.

5 Opinion of Cummings & Lockwood LLC.

Exhibit No. Description
----------- -----------
333-39470)).
10.3 2000 Stock Option Plan (incorporated by reference to
Exhibit 10.3 to Registrant's Registration Statement on Form
SB-2 (Registration No. 333-39470)).
10.4 2001 Stock Option Plan (incorporated by reference to
Exhibit 10.12 to Amendment No. 1 to Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 2001
(Commission File No. 001-16133)).
10.5 Employment Agreement, dated April 30, 1996, between Delcath
Systems, Inc. and M.S. Koly, as amended on April 30, 1999
(incorporated by reference to Exhibit 10.4 to Registrant's
Registration Statement on Form SB-2 (Registration No.
333-39470)).
10.6 Employment Agreement, dated April 30, 1996, between Delcath
Systems, Inc. and Samuel Herschkowitz, M.D., as amended on
April 30, 2000 (incorporated by reference to Exhibit 10.4
to Registrant's Registration Statement on Form SB-2
(Registration No. 333-39470)).
10.7 Distributorship Agreement, dated as of December 27, 1996,
by and between Delcath Systems, Inc. and Nissho Corporation
(incorporated by reference to Exhibit 10.6 to Registrant's
Registration Statement on Form SB-2 (Registration No.
333-39470)).
10.8 Consulting Services Agreement, between Delcath Systems,
Inc. and Euroland Marketing Solutions, Ltd. (incorporated
by reference to Exhibit 10.9 to the Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 2000
(Commission File No. 001-16133)).
10.9 Amendment to Key Employment Agreement, dated October 30,
2001, by and between Delcath Systems, Inc. and M. S. Koly
(incorporated by reference to Exhibit 10.10 to Registrant's
Quarterly Report on Form 10-Q for the period ended
September 30, 2001 (Commission File No. 001-16133)).
10.10 Amendment to Key Employment Agreement, dated October 30,
2001, by and between Delcath Systems, Inc. and Samuel
Herschkowitz (incorporated by reference to Exhibit 10.11
to Registrant's Quarterly Report on Form 10-Q for the
period ended September 30, 2001 (Commission File No.
001-16133)).
23.1 Consent of Eisner LLP.
23.2 Consent of Cummings & Lockwood LLC (to be contained in
Exhibit 5 hereto).
24 Powers of Attorney (incorporated by reference to Exhibit 24
to the Registrant's Registration Statement on Form SB-2
(Registration No. 333-101661)).

                            WARRANT AGENT AGREEMENT

                          dated as of ___________, 2003

                                     between

                              DELCATH SYSTEMS, INC.

                                       and

                     AMERICAN STOCK TRANSFER & TRUST COMPANY


     WARRANT AGENT AGREEMENT dated as of ____________, 2003, by and between
DELCATH SYSTEMS, INC., a Delaware corporation (the "Company"), and AMERICAN
STOCK TRANSFER & TRUST COMPANY, as warrant agent (hereinafter called the
"Warrant Agent").

     WHEREAS, the Company proposes to issue and sell to the public up to
_____________ units (including up to __________ units that may be issued
pursuant to a Warrant Agreement dated _______________, 2003 between the Company
and Roan/Meyers Associates, L.P. (the Representative")) (the "Units") each Unit
consisting of five shares of the common stock of the Company, par value $.01 per
share (hereinafter, together with the stock of any other class to which such
shares may hereafter have been changed, the "Common Stock"), and five Common
Stock Purchase Warrants (the "Warrants");

     WHEREAS, each Warrant will entitle the holder to purchase one share of
Common Stock;

     WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and exercise of the Warrants;

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:

     Section 1. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as warrant agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.

     Section 2. Form of Warrant. The text of the Warrants and of the form of
election to purchase Common Stock to be printed on the reverse thereof shall be





                                                                               2



substantially as set forth in Exhibit A attached hereto. Each Warrant shall
entitle the registered holder thereof to purchase one share of Common Stock at a
purchase price of ____________________ ($______) (or, in the case of Warrants
issued to the Representative, __________ ($______)), at any time commencing on
the date of issuance thereof and ending at 5:00 p.m. Eastern time, on ______,
___, 2008 (the "Warrant Exercise Period"). The Warrant Exercise Price and the
number of shares of Common Stock issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events, all as hereinafter
provided. The Warrants shall be executed on behalf of the Company by the manual
or facsimile signature of the present or any future Chief Executive Officer,
President or Vice President of the Company, attested to by the manual or
facsimile signature of the present or any future Secretary or Assistant
Secretary of the Company.

     Warrants shall be dated as of the issuance by the Warrant Agent either upon
initial issuance or upon transfer or exchange.

     In the event the aforesaid expiration dates of the Warrants fall on a
Saturday or Sunday, or on a legal holiday on which the New York Stock Exchange
is closed, then the Warrants shall expire at 5:00 p.m. Eastern time on the next
succeeding business day.

     Section 3. Countersignature and Registration. The Warrant Agent shall
maintain books for the transfer and registration of the Warrants. Upon the
initial issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the names of the respective holders thereof. The Warrants shall be
countersigned manually or by facsimile by the Warrant Agent (or by any successor
to the Warrant Agent then acting as warrant agent under this Agreement) and
shall not be valid for any purpose unless so countersigned. Warrants may,
however, be so countersigned by the Warrant Agent (or by its successor as
warrant agent) and be delivered by the Warrant Agent, notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature or delivery.

     Section 4. Transfers and Exchanges. The Warrant Agent shall transfer, from
time to time, any outstanding Warrants upon the books to be maintained by the
Warrant Agent for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer. Upon any such
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be cancelled by the Warrant Agent. Warrants so cancelled shall be
held by the Warrant Agent and released to the Company upon the termination of
the relationship between the Warrant Agent and the Company. Warrants may be
exchanged at the option of the holder thereof, when surrendered at the office of
the Warrant Agent, for another Warrant, or other Warrants of different
denominations of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock.





                                                                               3



     Section 5. Exercise of Warrants. Subject to the provisions of this
Agreement, each registered holder of Warrants shall have the right, which may be
exercised commencing at the opening of business on the first day of the Warrant
Exercise Period, to purchase from the Company (and the Company shall issue and
sell to such registered holder of Warrants) the number of fully paid and
non-assessable shares of Common Stock specified in such Warrants upon surrender
of such Warrants to the Company at the office of the Warrant Agent, with the
form of election to purchase on the reverse thereof duly filled in and signed,
and upon payment to the Warrant Agent of the Warrant Exercise Price, determined
in accordance with the provisions of Sections 9 and 10 of this Agreement, for
the number of shares of Common Stock in respect of which such Warrants are then
exercised. Payment of the Warrant Exercise Price shall be made by certified
check or bank draft to the order of the Company. Subject to Section 6, upon such
surrender of Warrants and payment of the Warrant Exercise Price, the Company
shall issue and cause to be delivered with all reasonable dispatch to or upon
the written order of the registered holder of such Warrants and in such name or
names as such registered holder may designate, a certificate or certificates for
the number of full shares of Common Stock so purchased upon the exercise of such
Warrants. Such certificate or certificates shall be deemed to have been issued,
and any person so designated to be named therein shall be deemed to have become
a holder of record of such shares of Common Stock, as of the date of the
surrender of such Warrants and payment of the Warrant Exercise Price as
aforesaid. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the registered holders thereof, either as an
entirety or from time to time for a portion of the shares specified therein and,
in the event that any Warrant is exercised in respect of fewer than all of the
shares of Common Stock specified therein at any time prior to the end of the
Warrant Exercise Period, a new Warrant or Warrants will be issued to the
registered holder for the number of shares of Common Stock specified in the
Warrant so surrendered as to which the Warrant is not exercised, and the Warrant
Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrants pursuant to the provisions of this Section and of Section
3 of this Agreement and the Company, whenever requested by the Warrant Agent,
will supply the Warrant Agent with Warrants duly executed on behalf of the
Company for such purpose. Anything in the foregoing to the contrary
notwithstanding, no Warrant will be exercisable unless at the time of exercise
the Company has filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended (the "Act"), covering the
shares of Common Stock issuable upon exercise of such Warrant which registration
statement is effective as of the time of exercise and such shares have been so
registered or qualified or deemed to be exempt under the securities laws of the
state of residence of the holder of such Warrant. The Company shall use its best
efforts to have all shares so registered or qualified on or before the date on
which the Warrants become exercisable.

     Section 6. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Common Stock issuable upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax






                                                                               4



which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for shares of Common Stock in a name other than
that of the registered holder of Warrants in respect of which such shares are
issued, and in such case neither the Company nor the Warrant Agent shall be
required to issue or deliver any certificate for shares of Common Stock or any
Warrant until the person requesting the same has paid to the Company the amount
of such tax or has established to the Company's satisfaction that such tax has
been paid.

     Section 7. Mutilated or Missing Warrants. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, the Company may, in its discretion,
issue and the Warrant Agent shall countersign and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant, or in lieu of
and in substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft or destruction and, in case of a lost, stolen or destroyed Warrant,
indemnity, if requested, also satisfactory to them. Applicants for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such reasonable charges as the Company or the Warrant Agent may prescribe.

     Section 8. Reservation of Common Stock. There have been reserved, and the
Company shall at all times keep reserved, out of the authorized and unissued
shares of Common Stock, a number of shares of Common Stock sufficient to provide
for the exercise of the rights of purchase represented by the Warrants, and the
transfer agent for the shares of Common Stock and every subsequent transfer
agent for any shares of the Common Stock issuable upon the exercise of any of
the rights of purchase aforesaid are irrevocably authorized and directed at all
times to reserve such number of authorized and unissued shares of Common Stock
as shall be required for such purpose. The Company agrees that all shares of
Common Stock issued upon exercise of the Warrants shall be, at the time of
delivery of the certificates for such shares, validly issued and outstanding,
fully paid and nonassessable and listed on any national securities exchange upon
which the other shares of Common Stock are then listed. So long as any unexpired
Warrants remain outstanding, the Company will file such post-effective
amendments to the registration statement (Form SB-2, Registration No.
333-101661) (the "Registration Statement") filed pursuant to the Act with
respect to the Warrants (or other appropriate registration statements or
post-effective amendments or supplements) as may be necessary to permit it to
deliver to each person exercising a Warrant, a prospectus meeting the
requirements of Section 10(a)(3) of the Act and otherwise complying therewith,
and will deliver such a prospectus to each such person. To the extent that
during any period it is not reasonably likely that the Warrants will be
exercised, due to market price or otherwise, the Company need not file such a
post-effective amendment during such period. The Company will keep a copy of
this Agreement on file with the transfer agent for the shares of Common Stock
and with every subsequent transfer agent for any shares of the Company's Common
Stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is irrevocably authorized to requisition from time
to time from such transfer





                                                                               5



agent stock certificates required to honor outstanding Warrants. The Company
will supply such transfer agent with duly executed stock certificates for that
purpose. All Warrants surrendered in the exercise of the rights thereby
evidenced shall be cancelled by the Warrant Agent and shall thereafter be
delivered to the Company, and such cancelled Warrants shall constitute
sufficient evidence of the number of shares of Common Stock which have been
issued upon the exercise of such Warrants. Promptly after the date of expiration
of the Warrants, the Warrant Agent shall certify to the Company the total
aggregate number of Warrants then outstanding, and thereafter no shares of
Common Stock shall be subject to reservation in respect of such Warrants which
shall have expired.

     Section 9. Warrant Exercise Price; Adjustments.

     (a) The Warrant Exercise Price shall be $_________ per share or after
adjustment, as provided in this Section, shall be such price as so adjusted.

     (b) The Warrant Exercise Price shall be subject to adjustment from time to
time as follows:

          (i) In case the Company shall at any time after the date hereof pay a
dividend in shares of Common Stock or make a distribution in shares of Common
Stock, then upon such dividend or distribution the Warrant Exercise Price in
effect immediately prior to such dividend or distribution shall forthwith be
reduced to a price determined by dividing:

               (A) an amount equal to the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution multiplied by the
Warrant Exercise Price in effect immediately prior to such dividend or
distribution, by

               (B) the total number of shares of Common Stock outstanding
immediately after such dividend or distribution.

     For the purposes of any computation to be made in accordance with the
provisions of this Section 9(b)(i), the following provisions shall be
applicable: Common Stock issuable by way of dividend or other distribution on
any stock of the Company shall be deemed to have been issued immediately after
the opening of business on the date following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution.

          (ii) In case the Company shall at any time subdivide or combine the
outstanding Common Stock, the Warrant Exercise Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the case of
combination to the nearest one cent. Any such adjustment shall become effective
at the time such subdivision or combination shall become effective.




                                                                               6



          (iii) Within a reasonable time after the close of each quarterly
fiscal period of the Company during which the Warrant Exercise Price has been
adjusted as herein provided, the Company shall:

               (A) file with the Warrant Agent a certificate signed by the Chief
Executive Officer, President or Vice President of the Company and by the Chief
Financial Officer, Principal Accounting Officer, Treasurer or Assistant
Treasurer of the Company, showing in detail the facts requiring all such
adjustments occurring during such period and the Warrant Exercise Price after
each such adjustment; and

               (B) the Warrant Agent shall have no duty with respect to any such
certificate filed with it except to keep the same on file and available for
inspection by holders of Warrants during reasonable business hours, and the
Warrant Agent may conclusively rely upon the latest certificate furnished to it
hereunder. The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of a Warrant to determine whether any facts exist
which may require any adjustment of the Warrant Exercise Price, or with respect
to the nature or extent of any adjustment of the Warrant Exercise Price when
made, or with respect to the method employed in making any such adjustment, or
with respect to the nature or extent of the property or securities deliverable
hereunder. In the absence of a certificate's having been furnished, the Warrant
Agent may conclusively rely upon the provisions of the Warrants with respect to
the Common Stock deliverable upon the exercise of the Warrants and the
applicable Warrant Exercise Price.

          (iv) Notwithstanding anything contained herein to the contrary, no
adjustment of the Warrant Exercise Price shall be made if the amount of such
adjustment shall be less than $0.02, but in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at the time and together with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount to not less than $0.02.

          (v) In the event that the number of outstanding shares of Common Stock
is increased by a stock dividend payable in Common Stock or by a subdivision of
the outstanding Common Stock, then, from and after the time at which the
adjusted Warrant Exercise Price becomes effective pursuant to this Section 9(b)
by reason of such dividend or subdivision, the number of shares of Common Stock
issuable upon the exercise of each Warrant shall be increased in proportion to
such increase in outstanding shares. In the event that the number of shares of
Common Stock outstanding is decreased by a combination of the outstanding Common
Stock, then, from and after the time at which the adjusted Warrant Exercise
Price becomes effective pursuant to this Section 9(b) by reason of such
combination, the number of shares of Common Stock issuable upon the exercise of
each Warrant shall be decreased in proportion to such decrease in the
outstanding shares of Common Stock.






                                                                               7



          (vi) In case of any reorganization or reclassification of the
outstanding Common Stock (other than a change in par value, or from par value to
no par value, or as a result of a subdivision or combination), or in case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any reclassification of the
outstanding Common Stock), or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the holder of each Warrant then outstanding shall thereafter have the
right to purchase the kind and amount of shares of Common Stock and other
securities and property receivable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock which the holder of such Warrant shall then be entitled to
purchase; such adjustments shall apply with respect to all such changes
occurring between the date of this Warrant Agreement and the date of exercise of
such Warrant.

          (vii) Subject to the provisions of this Section 9, in case the Company
shall, at any time prior to the exercise of the Warrants, make any distribution
of its assets to holders of its Common Stock as a liquidating or a partial
liquidating dividend, then the holder of Warrants who exercises its Warrants
after the record date for the determination of those holders of Common Stock
entitled to such distribution of assets as a liquidating or partial liquidating
dividend shall be entitled to receive for the Warrant Exercise Price per
Warrant, in addition to each share of Common Stock, the amount of such
distribution (or, at the option of the Company, a sum equal to the value of any
such assets at the time of such distribution as determined by the Board of
Directors of the Company in good faith) which would have been payable to such
holder had such holder been the holder of record of the Common Stock receivable
upon exercise of its Warrant on the record date for the determination of those
entitled to such distribution.

          (viii) In case of the dissolution, liquidation or winding up of the
Company, all rights under the Warrants shall terminate on a date fixed by the
Company, such date to be no earlier than ten (10) days prior to the
effectiveness of such dissolution, liquidation or winding up and not later than
five (5) days prior to such effectiveness. Notice of such termination of
purchase rights shall be given to the last registered holder of the Warrants, as
the same shall appear on the books of the Company maintained by the Warrant
Agent, by registered mail at least thirty (30) days prior to such termination
date.

          (ix) In case the Company shall, at any time prior to the expiration of
the Warrants and prior to the exercise thereof, offer to the holders of its
Common Stock any rights to subscribe for additional shares of any class of the
Company, then the Company shall give written notice thereof to the registered
holders of the Warrants not less than thirty (30) days prior to the date on
which the books of the Company are closed or a record date is fixed for the
determination of the stockholders entitled to such subscription rights. Such
notice shall specify the date as to which the books shall be closed or the
record date fixed with respect to such offer of subscription and the right of
the holders of the Warrants






                                                                               8



to participate in such offer of subscription shall terminate if the Warrant
shall not be exercised on or before the date of such closing of the books or
such record date.

          (x) Any adjustment pursuant to the aforesaid provisions of this
Section 9 shall be made on the basis of the number of shares of Common Stock
which the holder thereof would have been entitled to acquire upon the exercise
of the Warrant immediately prior to the event giving rise to such adjustment.

          (xi) Irrespective of any adjustments in the Warrant Exercise Price or
the number or kind of shares purchasable upon exercise of the Warrants, Warrants
previously or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant Agreement.

          (xii) The Company may retain a firm of independent public accountants
(who may be any such firm regularly employed by the Company) to make any
computation required under this Section 9, and any certificate setting forth
such computation signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 9.

          (xiii) If at any time, as a result of an adjustment made pursuant to
Section 9(b)(vi) above, the holder of a Warrant or Warrants shall become
entitled to purchase any securities other than shares of Common Stock,
thereafter the number of such securities so purchasable upon exercise of each
Warrant and the Warrant Exercise Price for such securities shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Sections 9(b)(ii) through (v).

     Section 10. Fractional Interest. The Warrants may only be exercised to
purchase full shares of Common Stock and the Company shall not be required to
issue fractions of shares of Common Stock on the exercise of Warrants. However,
if a Warrant holder exercises all Warrants then owned of record by it and such
exercise would result in the issuance of a fractional share, the Company will
pay to such Warrant holder, in lieu of the issuance of any fractional share
otherwise issuable, an amount of cash based on the market value of the Common
Stock of the Company on the last trading day prior to the exercise date.

     Section 11. Notices to Warrantholders.

     (a) Upon any adjustment of the Warrant Exercise Price and the number of
shares of Common Stock issuable upon exercise of a Warrant, then and in each
such case the Company shall give written notice thereof to the Warrant Agent,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of a Warrant, setting forth in
reasonable detail the method of calculation and the facts upon






                                                                               9



which such calculation is based. The Company shall also mail such notice to the
holders of the Warrants at their addresses appearing in the Warrant register.
Failure to give or mail such notice, or any defect therein, shall not affect the
validity of the adjustments.

     (b) In case at any time:

          (i) the Company shall pay dividends payable in stock upon its Common
Stock or make any distribution (other than regular cash dividends) to the
holders of its Common Stock; or

          (ii) the Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other rights;
or

          (iii) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of substantially all of its assets to, another corporation; or

          (iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;

then in any one or more of such cases, the Company shall give written notice in
the manner set forth in Section 11(a) of the date on which (A) a record shall be
taken for such dividend, distribution or subscription rights, or (B) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
notice shall be given at least thirty (30) days prior to the action in question
and not less than thirty (30) days prior to any record date in respect thereof.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any of the matters set forth in this Section 11(b).

     (c) The Company shall cause copies of all financial statements and reports,
proxy statements and other documents that are sent to its stockholders to be
sent by first-class mail, postage prepaid to each registered holder of Warrants
at his address appearing in the warrant register as of the record date for the
determination of the stockholders entitled to such documents.

     Section 12. Disposition of Proceeds on Exercise of Warrants.

          (i) The Warrant Agent shall promptly forward to the Company all monies
received by the Warrant Agent for the purchase of shares of Common Stock through
the exercise of Warrants.





                                                                              10



          (ii) The Warrant Agent shall keep copies of this Agreement available
for inspection by holders of Warrants during normal business hours.

     Section 13.       Redemption of Warrants.

     (a) The Warrants are redeemable by the Company, in whole or in part, on not
less than thirty (30) days' prior written notice at a redemption price of $0.01
per Warrant at any time commencing on _____, ___, 2004; provided that (i) the
average closing bid quotation for the Common Stock for the twenty (20) trading
days prior to the day on which the Company gives notice of redemption has been
at least $_____________ [40% of public unit offering price] and (ii) there is an
effective registration statement under the Act covering the offer and sale of
shares of Common Stock upon exercise of the Warrants. The redemption notice
shall be mailed to the holders of the Warrants at their addresses appearing in
the Warrant register. Holders of the Warrants will have exercise rights until
the close of business on the date fixed for redemption.

     (b) If at any time after notice of redemption of the Warrants is given as
provided herein, (i) the exercise of a Warrant is solicited by the
Representative at such time while the Representative is a member of the National
Association of Securities Dealers, Inc. ("NASD") and the holder exercising the
Warrant confirms in writing that the Representative solicited such exercise,
(ii) such Warrant is not held in a discretionary account, (iii) disclosure of
the compensation arrangement is made in documents provided to the holders of the
Warrants; and (iv) the solicitation of the exercise of such Warrant is not in
violation of Regulation M (as such regulation or any successor regulation or
rule may be in effect as of such time of exercise) promulgated under the
Securities Exchange Act of 1934, then the Representative shall be entitled to
receive from the Company upon exercise of each of the Warrant(s) so exercised a
fee of five percent (5%) of the aggregate exercise price of the Warrants so
exercised (the "Exercise Fee"). The procedures for payment of the Exercise Fee
are set forth in Section 13(c) below.

     (c) (1) Within five (5) days of the last day of each month commencing with
_______________, 2004, the Warrant Agent will notify the Representative of each
Warrant Certificate which has been properly completed for exercise by holders of
Warrants during the last month as to which an Exercise Fee is payable. The
Company and Warrant Agent shall determine, in their sole and absolute
discretion, whether a Warrant Certificate has been properly completed. The
Warrant Agent will provide the Representative with such information, in
connection with the exercise of each Warrant, as the Representative shall
reasonably request.

           (2) The Company hereby authorizes and instructs the Warrant
Agent to deliver to the Representative the Exercise Fee promptly after receipt
by the Warrant Agent from the Company of a check payable to the order of the
Representative in the amount of the Exercise Fee. In the event that an Exercise
Fee is paid to the Representative with respect to a Warrant which the Company or
the Warrant Agent determines is not properly





                                                                              10


completed for exercise or in respect of which the Representative is not entitled
to an Exercise Fee, the Representative will promptly return such Exercise Fee to
the Warrant Agent which shall forthwith return such fee to the Company. The
Representative and the Company may at any time, after ___________________, 2004,
and during business hours, examine the records of the Warrant Agent, including
its ledger of original Warrant certificates returned to the Warrant Agent upon
exercise of Warrants. Notwithstanding any provision to the contrary, the
provisions of paragraphs 13(b) and 13(c) may not be modified, amended or deleted
without the prior written consent of the Representative.

     Section 14. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation or company which may succeed to the corporate trust business of the
Warrant Agent by any merger or consolidation or otherwise shall be the successor
as the warrant agent hereunder without the execution or filing of any paper or
any further act on the part of any of the parties hereto, provided that such
corporation would be eligible to serve as a successor Warrant Agent under the
provisions of Section 16 of this Agreement. In case at the time such successor
to the Warrant Agent shall succeed to the agency created by this Agreement, any
of the Warrants shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrants so countersigned.

     In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrants shall have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and
deliver Warrants so countersigned. In all such cases such Warrants shall have
the full force provided in the Warrants and in this Agreement.

     Section 15. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:

     (a) The statements of fact and recitals contained herein and in the
Warrants shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrants
except as herein expressly provided.

     (b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants in this Agreement or in the Warrants
to be complied with by the Company.

     (c) The Warrant Agent may consult at any time with counsel satisfactory to
it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant in
respect of any action




                                                                              12



taken, suffered or omitted by it hereunder in good faith and in accordance with
the opinion or the advice of such counsel.

     (d) The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate or other instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.

     (e) The Company agrees to pay to the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges incurred by the Warrant Agent in the
execution of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.

     (f) The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve expenses
unless the Company or one or more registered holders of Warrants shall furnish
the Warrant Agent with reasonable security and indemnity for any costs and
expenses which may be incurred, but this provision shall not affect the power of
the Warrant Agent to take such action as the Warrant Agent may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrants or the production thereof at
any trial or other proceeding, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the registered
holders of the Warrants, as their respective rights and interests may appear.

     (g) The Warrant Agent and any stockholder, director, officer, partner or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.

     (h) The Warrant Agent shall act hereunder solely as agent and its duties
shall be determined solely by the provisions hereof.

     (i) The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or




                                                                              13



accountable for any such attorneys, agents or employees or for any loss to the
Company resulting from such neglect or misconduct, provided reasonable care had
been exercised in the selection and continued employment thereof.

     (j) Any request, direction, election, order or demand of the Company shall
be sufficiently evidenced by an instrument signed in the name of the Company by
its Chief Executive Officer, President or a Vice President or its Secretary or
an Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.

     Section 16. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company notice
in writing, and to the holders of the Warrants notice by mailing such notice to
the holders at their addresses appearing on the Warrant register, of such
resignation, specifying a date when such resignation shall take effect. The
Warrant Agent may be removed by like notice to the Warrant Agent from the
Company and the like mailing of notice to the holders of the Warrants. If the
Warrant Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after such removal or after it has been notified in writing of such resignation
or incapacity by the resigning or incapacitated Warrant Agent or after the
Company has received such notice from a registered holder of a Warrant (who
shall, with such notice, submit his Warrant for inspection by the Company), then
the registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under New York
or federal law. After appointment, the successor Warrant Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed and the former
Warrant Agent shall deliver and transfer to the successor Warrant Agent all
cancelled Warrants, records and property at the time held by it hereunder, and
execute and deliver any further assurance or conveyance necessary for the
purpose. Failure to file or mail any notice provided for in this Section,
however, or any defect therein, shall not affect the validity of the resignation
or removal of the Warrant Agent or the appointment of the successor Warrant
Agent, as the case may be.

     Section 17. Identity of Transfer Agent. Forthwith upon the appointment of
any transfer agent for the shares of Common Stock or of any subsequent transfer
agent for the shares of Common Stock or other shares of Common Stock issuable
upon the exercise of the rights of purchase represented by the Warrants, the
Company will file with the Warrant Agent a statement setting forth the name and
address of such transfer agent.






                                                                              14


     Section 18. Notices. Any notice pursuant to this Agreement to be given by
the Warrant Agent or by the registered holder of any Warrant to the Company
shall be sufficiently given if sent by first-class mail, postage prepaid,
addressed (until another is filed in writing by the Company with the Warrant
Agent) as follows:

                              Delcath Systems, Inc.
                               1100 Summer Street
                           Stamford, Connecticut 06905
                              Attention: M. S. Koly
                             Chief Executive Officer

and a copy thereof to:

                             Cummings & Lockwood LLC
                               Four Stamford Plaza
                                 107 Elm Street
                           Stamford, Connecticut 06902
                         Attention: Paul G. Hughes, Esq.

     Any notice pursuant to this Agreement to be given by the Company or by the
registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:

                     American Stock Transfer & Trust Company
                           59 Maiden Lane, Plaza Level
                            New York, New York 10038
                    Attention: Office of the General Counsel

     Section 19. Supplements and Amendments. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising hereunder which
the Company and the Warrant Agent may deem necessary or desirable and which
shall not be inconsistent with the provisions of the Warrants and which shall
not adversely affect the interest of the holders of Warrants.

     Section 20. New York Contract. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and shall be construed in accordance with the laws of New York
applicable to agreements to be performed wholly within New York.






                                                                              15


     Section 21. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.

     Section 22. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company, the Warrant Agent or the Underwriter shall
bind and inure to the benefit of their respective successors and assigns
hereunder.

                  IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.

                                        DELCATH SYSTEMS, INC.



                                        By: ______________________________
                                                 Name:
                                                 Title:

                                        AMERICAN STOCK TRANSFER & TRUST
                                        COMPANY



                                        By: ______________________________
                                                 Name:
                                                 Title:






                          2003 REDEEMABLE COMMON STOCK
                                PURCHASE WARRANTS

                              DELCATH SYSTEMS, INC.



NUMBER                                                                 WARRANTS

DSW


                                                          CUSIP ________________


THIS IS TO CERTIFY THAT





or registered assigns, is the owner of the number of warrants set forth above.
Each warrant (subject to adjustments as hereinafter referred to) entitles the
holder hereof to purchase at any time until 5:00 p.m. Eastern Time on _________,
___, 2008 one fully paid and non-assessable share of common stock (the "Common
Stock") of Delcath Systems, Inc. a Delaware corporation (the "Company") (such
shares of Common Stock being hereinafter referred to as the "Shares" or a
"Share"), upon payment of the warrant price (as hereinafter described),
provided, however, that under certain conditions set forth in the Warrant
Agreement hereinafter mentioned the number of Shares purchased upon the exercise
of a warrant may be increased or reduced and the warrant price may be adjusted.
Subject to adjustment as aforesaid, the warrant price per Share (hereinafter
called the "Warrant Price") shall be $______________ per Share. As provided in
said Warrant Agreement the Warrant Price is payable upon the exercise of the
Warrant, either in cash or by certified check or bank draft to the order of the
Company.

     Under certain conditions set forth in the Warrant Agreement, this Warrant
may be called for redemption on or after ______________________, at a redemption
price of $0.01 per Warrant upon written notice of not less than 30 days.

     Upon the exercise of this Warrant, the form of election to purchase on the
reverse hereof must be properly completed and executed. In the event that this
Warrant is exercised in respect of less than all of such Shares, a new Warrant
for the remaining number of Shares will be issued on such surrender.

     This Warrant is issued under and the rights represented hereby are subject
to the terms and provisions contained in a Warrant Agreement dated as of
___________________ by and between the Company and American Stock Transfer &
Trust Company, as Warrant Agent (the "Warrant Agent"), all terms and provisions
of which the registered holder of this Warrant, by acceptance hereof, assents
to. Reference is hereby made to said Warrant Agreement for a more complete
statement of the rights and limitations of rights of the registered holders
hereof, the rights and duties of the Warrant Agent and the rights and
obligations of the Company hereunder. Copies of said Warrant Agreement are on
file at the office of the Warrant Agent.







     The Company shall not be required upon the exercise of this Warrant to
issue fractions of Shares, but shall make adjustments therefor in cash on the
basis of the then current market value of any fractional interest as provided in
the Warrant Agreement.

     This Warrant is transferable at the office of the Warrant Agent (or of its
successor as Warrant Agent) by the registered holder hereof in person or by
attorney duly authorized in writing, but only in this manner and subject to the
limitations provided in the Warrant Agreement and upon surrender of this Warrant
and the payment of any transfer taxes. Upon any such transfer, a new Warrant, or
Warrants of different denominations, of this tenor and representing in the
aggregate the right to purchase a like number of Shares will be issued to the
transferee in exchange for this Warrant.

     This Warrant may be transferred, when surrendered at the office of the
Warrant Agent or its successor as warrant agent by the registered holder hereof
in person or by attorney duly authorized in writing, but only in the manner and
subject to the limitations provided in the Warrant Agreement and upon surrender
of this Warrant Certificate and the payment of any transfer taxes. Upon any such
transfer, a new Warrant or Warrants of different denominations of this tenor and
representing in the aggregate the right to purchase a like number of Shares
equal to this number of such Warrants.

     If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Company's Common Stock or other
securities purchasable upon exercise of the Warrants are closed for any purpose,
the Company shall not be required to make delivery of certificates for the
securities purchased upon such exercise until the date of the reopening of said
transfer books.

     The holder of this Warrant shall not be entitled to any of the rights of a
shareholder of the Company prior to the exercise hereof.

     This Warrant shall not be valid unless countersigned by the Warrant Agent.

     Witness the facsimile seal of the Company and the facsimile signatures of
its duly authorized officers.



DATED:

[SIGNATURE]                     [CORPORATE SEAL]                     [SIGNATURE]






                              DELCATH SYSTEMS, INC

                              ELECTION TO PURCHASE

      To Be Executed by the Registered Holder In Order to Exercise Warrants

To: DELCATH SYSTEMS, INC.

c/o: American Stock Transfer & Trust Company
     40 Wall Street
     New York, New York 10005

     The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant(s) for and to purchase thereunder,
________________ shares of Common Stock provided for therein and tenders
herewith payment of the purchase price in full to the order of the Company and
requests that certificates for such shares shall be issued in the name of

PLEASE INSERT SOCIAL SECURITY


OR OTHER IDENTIFYING NUMBER

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

- ----------------------------------- --------------------------------------------
                                            (Please Print or Typewrite)


and be delivered to

                     -----------------------------------------------------------
                                     (Name)


at

        ------------------------------------------------------------------------
          (Street Address)             (City)           (State)      (Zip Code)


and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.

Dated:                         Signature:
      --------------                     ---------------------------------------
                                         Note: The above signature must
                                         correspond with the name as written
                                         upon the face of this Warrant or with
                                         the name of the assignee appearing in
                                         the assignment from below in every
                                         particular without alteration or
Name:                                    enlargement or any change whatever.

     -------------------------------------
         (Please Print or Typewrite)


                                *Signature Guaranteed:


                                 -----------------------------------------------
Address:



           -------------------------------------
                          (Street)

- ------------------------------------------------
      (City)        (State)           (Zip Code)


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


                                         ---------------------------------------
                                         PLEASE INSERT SOCIAL SECURITY OR OTHER
                                         IDENTIFYING NUMBER






                                   ASSIGNMENT

For value received:__________________________________ hereby sell, assign and
transfer unto


PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
- -------------------------------


- -------------------------------  -----------------------------------------------
                                 Please Print or typewrite name and address
                                 including postal zip code of assignee


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


(____________________) Warrants represented by the within Warrant Certificate,
together with all right, title and interest therein, and do hereby irrevocably
constitute and appoint ________________________________________________________
attorney to transfer said Warrant on the books of the within named Company, with
full power of substitution in the premises,

                                          Dated:________________________________

                           Signature:___________________________________________

                    Note:  The above signature must correspond with the name as
                           written upon the face of the Warrant in every
                           particular without alteration or enlargement of any
                           change whatever.





                         *Signature Guaranteed:_________________________________

*In case of assignment or if the Common Stock issued upon exercise is to be
registered in the name of a person other than the holder, the holder's signature
must be guaranteed by a commercial bank, trust company or an NASD member firm.

                    [Letterhead of Cummings & Lockwood LLC]






May 2, 2003



The Board of Directors
Delcath Systems, Inc.
1100 Summer Street
Stamford, CT 06905

Re: Registration Statement No. 333-101661

Dear Sirs:

We have acted as special counsel to Delcath Systems, Inc., a Delaware
corporation (the "Company"), in connection with its Registration Statement on
Form SB-2 (No. 333-101661), as amended (as so amended, the "Registration
Statement"), for the public offering of Units, ("Units"), consisting of five
shares of the Company's Common Stock, par value $0.01 (the "Common Stock"), and
five 2003 Redeemable Common Stock Purchase Warrants (the "2003 Warrants"), each
to purchase one share of Common Stock. The Common Stock and the 2003 Warrants
included in the Units to be sold to the public will be issued and sold by the
Company pursuant to an Underwriting Agreement, substantially in the form filed
as an exhibit to the Registration Statement (the "Underwriting Agreement"). The
2003 Warrants will be represented by a warrant certificate, substantially in the
form filed as an exhibit to the Registration Statement (the "Warrant
Certificate"). The Registration Statement also relates to warrants (the
"Underwriter's Warrants") to be issued and sold to Roan/Meyers Associates, L.P.
(the "Representative") pursuant to an Underwriter's Unit Purchase Warrant
Agreement, substantially in the form filed as an exhibit to the Registration
Statement (the "Underwriter's Unit Warrant Agreement"), that will entitle the
Representative to purchase Units comprised of shares of Common Stock and 2003
Warrants.

The shares of Common Stock to be issued and sold pursuant to the Underwriting
Agreement are referred to as the "Public Shares." The 2003 Warrants to be issued
and sold pursuant to the Underwriting Agreement are referred to as the "Public
Warrants." The shares of Common Stock that may be issued upon exercise of the
Public Warrants or upon exercise of any 2003 Warrants that may




The Board of Directors
Delcath Systems, Inc.                    -2-                      May 2, 2003

be issued upon exercise of the Underwriter's Warrants are referred to as the
"Warrant Shares."

We have examined originals or copies, certified or otherwise identified to our
satisfaction, of the following documents: (a) the Amended and Restated
Certificate of Incorporation of the Company as amended to the date hereof in the
form filed as an exhibit to the Registration Statement; (b) the Amended and
Restated Bylaws of the Company in the form filed as an exhibit to the
Registration Statement; (c) copies of resolutions of the Board of Directors of
the Company adopted on March 27, 2003; (d) the Underwriting Agreement; (e) the
Warrant Certificate; (f) the Underwriter's Unit Warrant Agreement; and (g) such
other documents as we have considered necessary to the rendering of the opinions
expressed below.

In our examination of the foregoing, we have assumed that: (a) the statements
made therein are accurate and complete; (b) the signatures on documents and
instruments submitted to us as originals are authentic; and (c) documents
submitted to us as certified, conformed or photostatic copies of original
documents conform with the originals thereof and the originals thereof are
authentic.

In rendering the opinion set forth below, we have also assumed that upon
issuance of the Public Shares and the Warrant Shares, the total number of shares
of Common Stock issued and outstanding will not exceed the total number of
shares of Common Stock that the Company is then authorized to issue.

Based upon the foregoing, we are of the opinion that:

1.   The Public Shares, when issued and sold pursuant to the Underwriting
     Agreement at a price fixed by the Pricing Committee of the Board of
     Directors of the Company that is greater than the par value thereof, will
     be duly authorized, validly issued, fully paid and nonassessable.

2.   The Public Warrants, when issued and sold pursuant to the Underwriting
     Agreement, will be duly authorized and validly issued.

3.   The Underwriter's Warrants, when issued and sold pursuant to the
     Underwriter's Unit Warrant Agreement, will be duly authorized and validly
     issued.

4.   The 2003 Warrants issued upon exercise of the Underwriter's Warrants, when
     issued and sold upon exercise of the Underwriter's Warrants in accordance
     with the terms thereof, will be duly authorized and validly issued.

5.   The Warrant Shares, when issued and sold upon exercise of the 2003 Warrants
     in accordance with the terms thereof, will be duly authorized, validly
     issued, fully paid and nonassessable.

The foregoing opinion is limited to the General Corporation Law of the State of
Delaware, and we do not express any opinion herein concerning any other law. We
assume no obligation to supplement this opinion if any applicable law changes
after the date hereof or if we become aware of any fact that might change the
opinion expressed herein after the date hereof.




The Board of Directors
Delcath Systems, Inc.                    -3-                      May 2, 2003


This opinion is being furnished to you for filing as an exhibit to the
Registration Statement and, accordingly, may not be relied upon by or quoted in
any manner or delivered to any other person or entity without, in each instance,
our prior written consent.

We consent to the filling of this opinion as an exhibit to the Registration
Statement and to the reference to our firm appearing under the caption "Legal
Matters" in the Prospectus forming part of the Registration Statement. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.

Very truly yours,

CUMMINGS & LOCKWOOD LLC



By   /s/  PAUL G. HUGHES
     ------------------------
     A duly authorized Member

                                                                    EXHIBIT 23.1


                         Consent of Independent Auditors





     We consent to the inclusion of our report dated February 6, 2003 with
respect to our audits of the financial statements included herein and to the
reference to our firm under the heading "Experts" in the prospectus.




/s/ EISNER LLP

Eisner LLP



New York, NY
May 2, 2003