As filed with the Securities and Exchange Commission on September 30, 1999
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EP MedSystems, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 5047 22-3212190
(State of incorporation) (Primary SIC Code Number) (I.R.S. Employer
Identification Number)
100 Stierli Court
Mount Arlington, NJ 07856
(973) 398-2800
(Address and telephone number of registrant's principal executive offices)
Joseph M. Turner, Chief Financial Officer
EP MedSystems, Inc.
100 Stierli Court
Mount Arlington, NJ 07856
Telephone (973) 398-2800
(Name, address and telephone number of agent for service)
Copies to:
Steven E. Gross, Esquire
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Telephone (973) 643-7000
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Proposed maximum
Title of each class of Amount to Proposed maximum aggregate offering Amount of
securities to be registered be registered offering price per unit (1) price (1) registration fee
Common Stock, no par value 1,247,500 $3.01 $3,754,975 $1,043.88
================================ ================ ========================= ======================= ================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee based
upon the average of the high and low sales price for the common stock on
September 28,1999 on the Nasdaq National Market.
The Registrant hereby amends this Registration Statement on such date or
dates(s) 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, as amended, or until the Registration Statement
shall become effective on such date as the Commission acting pursuant to said
Section 8(A) may determine.
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the Registration Statement filed with the
Commission becomes effective. This prospectus is not an offer to sell these
securities, and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
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SUBJECT TO COMPLETION, DATED _______________, 1999
PROSPECTUS
EP MEDSYSTEMS, INC.
1,247,500 Shares of Common Stock
This Prospectus relates to 1,247,500 shares of common stock of EP
MedSystems, Inc., which may be offered from time to time by the shareholders of
EPMed listed on page 12 of this Prospectus, or by their pledgees, donees,
transferees or other successors in interest. 1,135,000 of those shares are
currently issued and outstanding and 112,500 shares are issuable upon the
exercise of outstanding options. All of the outstanding shares and the options
were previously issued by us to the selling shareholders in private
transactions. The outstanding shares and the shares issuable upon exercise of
the options are collectively referred to in this Prospectus as the "Shares."
References in this Prospectus to "EPMed," "we," "us" and "our" refer to EP
MedSystems, Inc., a New Jersey corporation.
We will receive proceeds upon the exercise of the options but will not
receive any of the proceeds from the sale of the Shares. The expenses of the
registration of the Shares under the Securities Act of 1933, as amended, and the
registration or qualification of the Shares under any applicable state
securities laws will be paid by EPMed. The aggregate proceeds to the selling
shareholders will be the price for which they sell their shares, less applicable
agents' commissions and underwriting discounts. References in this Prospectus to
the "Securities Act" refer to the Securities Act of 1933, as amended.
Our common stock is traded on the Nasdaq National Market under the symbol
"EPMD." On September 29, 1999, the last reported sale price of our common stock
was $3.06 per share.
The securities offered in this prospectus involve a high degree of risk.
See the section entitled "Risk Factors" on page 4 of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is __________________, 1999
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, must not be relied upon as having been
authorized by us. Neither the delivery of this Prospectus nor any sale made
pursuant to this Prospectus shall, under any circumstances, create any
indication that there has been no change in the affairs of EPMed since the date
of this Prospectus or that the information contained in this Prospectus is
correct as of any subsequent date. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities by anyone in any
jurisdiction in which that offer or solicitation is not authorized or in which
the person making the offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make the offer or solicitation.
TABLE OF CONTENTS
Page
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Where You Can Find More Information 2
Incorporation of Certain Documents by Reference 3
Disclosure Forward Looking Statements 3
Risk Factors 4
About EP MedSystems, Inc. 10
Use of Proceeds 12
Selling Shareholders 12
Plan of Distribution 13
Legal Matters 14
Experts 15
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the U.S. Securities and Exchange Commission a
Registration Statement on Form S-3 under the Securities Act with respect to the
common stock offered by this Prospectus. This Prospectus, filed as part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and its exhibits and schedules. For further information
regarding EPMed and the Shares, please refer to the Registration Statement. The
statements in this Prospectus are qualified in their entirety by reference to
the contents of any agreement or other document incorporated in this Prospectus
by reference. You may inspect a copy of the Registration Statement without
charge at the Commission's principal offices, and you may obtain copies of all
or any part of the Registration Statement from such office upon payment of the
fees prescribed by the Commission.
We are required by the Securities Exchange Act of 1934, as amended, to file
reports, proxy statements and other information with the Commission. These
filings may be inspected and copied (at prescribed rates) at the following
public reference facilities maintained by the Commission:
Washington, D.C.: Judiciary Plaza
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
New York, N.Y.: 7 World Trade Center, 13th Floor
New York, New York 10048
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Chicago, Il.: Citicorp Center
500 West Madison Street, Suite 1400
Chicago, Illinois 60661
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. Our reports, proxy statements and other information may
also be inspected at the offices of the National Association of Securities
Dealers, Inc. located at 1735 K Street, N.W., Washington, D.C. 20006. Further,
our filings with the Commission are also available to the public on the
Commission's web site at http://www.sec.gov. References in this Prospectus to
the "Exchange Act" shall refer to the Securities Exchange Act of 1934, as
amended.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents we have filed with the Commission are incorporated
by reference into this Prospectus:
(1) Annual Report on Form 10-KSB for the year ended December 31, 1998;
(2) Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1999
and June 30, 1999;
(3) Current Report on Form 8-K dated as of August 31, 1999 and
(4) the description of EPMed's common stock contained in our Registration
Statement on Form 8-A filed April 19, 1996.
Additionally, all documents we file with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Shares shall be deemed to be
incorporated by reference into this Prospectus and shall automatically update
and supersede this information.
We will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon such person's written or oral request, a copy of
any and all of the documents incorporated by reference in this Prospectus (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests should be directed to EP MedSystems, Inc. 100 Stierli
Court, Mount Arlington, NJ 07856, Attention: Corporate Secretary, telephone:
(973) 398-2800.
ALERT [REGISTERED TRADEMARK] and EP WorkMate [REGISTERED TRADEMARK] are
registered trademarks of EPMed. EP-3 [TRADEMARK], SilverFlex [TRADEMARK], U-View
[TRADEMARK] and ViewMate [TRADEMARK] are trademarks of EPMed.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this Prospectus or in the information
incorporated by reference in this Prospectus contain forward-looking statements.
The forward-looking statements in this Prospectus reflect our current views
concerning future events and financial performance. These forward-looking
statements are subject to risks and uncertainties that include the lack of
significant revenues, a history of losses, the possible inability to complete
our technologies, significant competition, the uncertainty of proprietary rights
and trading risks of low- priced stocks that could cause our actual results to
differ materially from our historical and anticipated results. In this
Prospectus, the words "anticipates," "believes," "plans," "expects," "intends,"
"future" and similar expressions identify such forward-looking statements. You
are cautioned to consider the specific risk factors contained in the section
entitled "Risk Factors." They apply only as of the date of this Prospectus. We
have no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that may occur in the future. All subsequent
written and oral forward-looking statements attributed to EPMed or persons
acting on our behalf are expressly qualified in their entirety by this section.
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RISK FACTORS
You should carefully consider the following risk factors before making an
investment decision. There may be other risks and uncertainties that we don't
know of or that we don't consider material at this time. If these risks occur,
our business, financial condition and results of operations will suffer.
Additionally, this Prospectus contains forward-looking statements that involve
uncertainties. EPMed's actual results may be significantly less favorable than
those forward-looking statements. This section discusses factors that can cause
those differences.
WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT FUTURE LOSSES.
We commenced operations in 1993 and have incurred substantial operating
losses in each following year. As of December 31, 1998, our accumulated deficit
was approximately $14.4 million. Our present product sales revenues do not cover
our operating expenses, which were approximately $9.2 million in 1997 and $12.1
million in 1998 (which includes a $1.4 million write-down of an investment) will
exceed those for 1998 and will not be covered by our 1999 sales revenues.
Further, we expect that our future operating expenses will continue to increase.
Accordingly, we may continue to incur operating losses.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS.
If our present projections and expectations of revenues and expenses change
materially, our existing and future capital resources may be insufficient to
meet our capital needs. If this occurs, we will have to raise additional funds
through public or private financings of equity, debt or both. Adequate funds for
our operations, from financial markets or other sources, may not be available
when needed. If this occurs, we may be required to delay or terminate research
and development programs, curtail capital expenditures and reduce business
development and other operating activities.
CLINICAL TESTING OF OUR PRODUCTS IS REQUIRED.
The FDA requires that we conduct clinical trials of the ALERT System to
demonstrate its safety and efficacy. We have commenced, but not completed,
clinical trials of the ALERT System at fifteen (15) hospitals in the United
States, the maximum number of hospitals approved by the FDA, including Duke
University Medical Center, the Medical Center of the University of Alabama at
Birmingham, Baylor University, Indiana University and the University of
California at San Francisco. We anticipate completing the ALERT System clinical
trials during calendar year 1999. At the conclusion of the clinical trials, we
plan to file with the FDA for approval to market the ALERT System in the United
States.
The ALERT System may not prove to be safe and effective in clinical trials.
Additionally, the results of the clinical trials may identify significant
technical obstacles that must be overcome in order to obtain regulatory and
reimbursement approvals. If the ALERT System does not prove to be safe and
effective in clinical trials our business and financial condition will be
materially adversely affected.
OUR SUCCESS DEPENDS ON DEVELOPING AND COMMERCIALIZING THE ALERT SYSTEM.
Our long-term success depends on the success of the ALERT System. The ALERT
System has not been approved by the FDA and cannot be sold commercially in the
United States without FDA approval. FDA approval is based upon, among other
things, the results of clinical trials that demonstrate the safety and
effectiveness of the device. We may not be able to obtain FDA approval on a
timely basis or at all. Further, FDA approval could include significant
limitations on the uses for which the ALERT System may be marketed.
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If the ALERT System is approved, its commercial success will depend upon
acceptance by physicians. Physician acceptance will depend upon, among other
things, substantial, favorable clinical experience, advantages over alternative
treatments, cost effectiveness, and favorable reimbursement policies of third
party payors such as insurance companies, Medicare and other governmental
programs.
Profitability of the ALERT System will depend on our ability to manufacture
the system efficiently in commercial quantities. We have only manufactured the
components of the ALERT System in limited quantities. We may not be able to
attain efficient manufacturing. Further, we will also be dependent on
sub-contractors for certain key components of the ALERT System.
Our failure to obtain FDA approval, market acceptance, manufacturing
efficiency and reliable sub- contractors will materially adversely affect our
business and financial condition.
OUR SUCCESS DEPENDS ON CONTINUED MARKET ACCEPTANCE OF THE EP WORKMATE.
Our ability to increase over-all revenues over the next several years will
depend on the continued acceptance by electrophysiologists of the EP WorkMate
computerized monitoring and analysis workstation. The EP WorkMate accounted for
a significant percentage of our product sales in the year ended December 31,
1998 and is expected to account for a significant portion of our 1999 revenues.
Because the EP WorkMate has a list price of approximately $129,000 with an
integrated EP-3[TRADEMARK] Stimulator, each sale of an EP WorkMate represents a
relatively large percentage of our quarterly net sales. We cannot be sure that
the EP WorkMate's present level of market acceptance and sales can be
maintained.
OUR BUSINESS AND FINANCIAL CONDITION ARE SUBJECT TO VARIOUS RISKS AND
UNCERTAINTIES ARISING FROM DOMESTIC AND INTERNATIONAL LAWS AND REGULATIONS.
UNITED STATES. In the United States, the development, testing, manufacture,
labeling, marketing, promotion and sale of medical devices is regulated
principally by the FDA under the Federal Food, Drug, and Cosmetic Act. The FDA
has broad discretion in enforcing compliance with that statute and its
regulations. Noncompliance can result in fines, injunctions, civil penalties,
recall or seizure of products, total or partial suspension of production,
failure to grant premarket clearance or premarket approval for devices,
withdrawal of marketing approvals and criminal prosecution.
The process for obtaining FDA approval for a new medical device is usually
long, complex and expensive. For example, the process for the ALERT System has,
to date, taken two (2) years and is expected to take up to another year.
In addition to obtaining FDA approval for a new medical device, our ability
to continue to commercially sell our products, including the EP WorkMate and
EP-3 Stimulator, is subject to continuing FDA oversight of the on-going design,
manufacturing, packaging, labeling, storage and quality of our medical devices.
Failure to comply with the applicable FDA standards and requirements can result
in fines, injunctions, civil penalties, recalls or seizures of products, total
or partial suspensions of products, withdrawals of marketing approvals and
criminal prosecution.
Our EP WorkMate, EP-3 Stimulator and many of our catheter related products
have received FDA approval. We hope to file with the FDA for pre-market approval
of the ALERT System in the later portion of this year. The FDA has not yet
reviewed the ALERT System clinical trials, and will review them only after it
accepts the pre-market approval application. If the application is not accepted
for filing by the FDA, or if the FDA does not approve the ALERT System, we could
be required to either re-do all or a substantial portion of the ALERT System
clinical trials or abandon the ALERT System. This would have a severe adverse
financial impact on our ability to continue our business.
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INTERNATIONAL. In order for us to market our products in Europe and certain
other foreign jurisdictions, we must obtain required regulatory approvals and
clearances and otherwise comply with extensive regulations regarding safety and
manufacturing processes and quality. These regulations, including the
requirements for approvals or clearance to market and the time required for
regulatory review, vary from country to country. The time required to obtain
approval by a foreign country may be longer or shorter than that required for
FDA approval and the requirements may differ. Many foreign countries generally
permit studies involving humans for medical devices earlier in the product
development cycle than is permitted by regulation in the U.S. Other countries,
such as Japan, have standards similar to those of the FDA. We may not be able to
obtain regulatory approvals in such countries or we may be required to incur
significant costs in obtaining or maintaining our foreign regulatory approvals.
Delays in the receipt of approvals to market our products or failure to maintain
these approvals could have a material adverse impact on our business and
financial condition.
Foreign countries also often have extensive regulations regarding safety,
manufacturing processes and quality that differ from those in the United States
and must be met in order to continue sale of a product within the country.
Presently, we are permitted to sell our products, including the ALERT
System, in countries that are members of the European Union and the European
Free Trade Association. We cannot be sure that we will be successful in
maintaining that permission.
OUR SUCCESS WILL DEPEND IN PART ON OUR ABILITY TO KEEP PACE WITH TECHNOLOGICAL
AND MARKETPLACE CHANGES.
The electrophysiology market is characterized by rapidly changing
technology, new products and industry standards. Accordingly, our ability to
compete depends on our ability to develop new products and improve existing
ones.
The research and development necessary for new products and for product
refinements can take longer and require greater expenditures than expected, and
might not succeed. Moreover, our new products and product refinements might not
be accepted by physicians and patients.
OUR PATENTS AND PROPRIETARY RIGHTS MIGHT NOT PROVIDE SUBSTANTIAL PROTECTION.
Our success and ability to compete in the marketplace will depend in part
upon our ability to protect our proprietary technology and other intellectual
property. We seek patents on our important inventions, have acquired patents and
have entered into license agreements to obtain rights under selected patents of
third parties that we consider important to our business. Patents might not be
issued on our patent applications and applications for which we have acquired
licenses. Further, if those patents are issued, they may not be of sufficient
scope and strength to provide us with meaningful protection or commercial
advantage. Additionally, these patents may be challenged, invalidated or
circumvented in the future. Moreover, our competitors, many of whom have
substantial resources and have made substantial investments in competing
technologies, may presently have or may seek patents that will prevent, limit or
interfere with our ability to make, use or sell our products in the U.S. and
other countries.
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In addition to patents, we rely on a combination of trade secrets,
copyrights and trademarks to protect our intellectual property rights. For
example, our software (which is an integrated component in the EP WorkMate and
EP-3 Stimulator) is not patented and existing copyright laws offer only limited
practical protection from misappropriation. Our competitors may independently
develop substantially equivalent proprietary technology.
INTELLECTUAL PROPERTY LITIGATION COULD HARM OUR BUSINESS.
While we do not believe we are infringing any patents or other intellectual
property rights of others, litigation over infringement claims is frequent in
the medical device industry and could arise. This kind of litigation, with or
without merit, would be time consuming and costly, and could cause shipment
delays, require us to develop alternative technology or require us to enter into
costly royalty or licensing agreements. Further, if necessary licenses are not
available to us on satisfactory terms, we may not be able to redesign our
products or processes to avoid alleged infringement. Accordingly, we could be
prevented from manufacturing and selling some of our products.
Also, competitors might infringe our patents and trade secrets. Costly and
time consuming litigation may be necessary to enforce our patents and to protect
our trade secrets.
WE MIGHT BE UNABLE TO PAY ROYALTIES.
We have entered into several license agreements which require us to pay
royalties, including, in some cases, minimum annual royalties. If we do not pay
those royalties, we may lose those rights under the license agreements. The loss
of certain technology licenses could have a material adverse impact on our
business and financial condition.
WE FACE SIGNIFICANT COMPETITION.
The medical device market, particularly in the area of electrophysiology
products, is highly competitive. Many of our competitors have access to
significantly greater financial, marketing and other resources. Further, the
medical device market is characterized by rapid product development and
technological change. Our present and future products could become obsolete or
uneconomic through technological advances by one or more of our competitors. For
example, the ALERT System is a new technology that must compete with established
treatments for atrial fibrillation as well as with new treatments currently
under development by other companies. Our future success will depend on our
ability to remain competitive with other developers of medical devices and
therapies.
THIRD-PARTY REIMBURSEMENT MIGHT BE DENIED OR NOT AVAILABLE FOR SOME OF OUR
PRODUCTS.
Our products are generally purchased by physicians or hospitals. In the
U.S., third party payors are then billed for the healthcare services provided to
patients using those products. These payors include Medicare, Medicaid and
private insurers. Similar reimbursement arrangements exist in several European
countries. Third party payors may deny or limit reimbursement for our existing
products and future products such as the ALERT System. Third party payors are
increasingly challenging the prices charged for medical products and services
and are putting pressure on medical equipment suppliers to reduce prices.
Furthermore, the ALERT System might not be eligible for Medicare reimbursement
during clinical trials. The FDA places new medical devices of the type (called
Class III) that are undergoing clinical trials and are subject to the most
stringent FDA review into either Category A or Category B. Category A devices,
which are those whose safety and effectiveness have not yet been demonstrated,
are not eligible for Medicare reimbursement during clinical trials. Category B
devices, which are those whose safety and effectiveness issues have been
resolved, are eligible for Medicare reimbursement. The ALERT System is currently
classified as a Class III Category B device. However, final determination of
device classification will be made during review by the FDA of the ALERT System
pre-market approval application which might classify the ALERT System as a
Category A device. If this occurs, we will not receive any Medicare payments for
the use of the ALERT System.
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Changes in FDA regulations, Medicare regulations or in other third party
payor policies, could reduce or make either or both Medicare or other
third-party reimbursement unavailable for our existing products and, if approved
by the FDA, the ALERT System. Any of those occurrences would adversely affect
our ability to achieve profitable operations and maintain our business.
WE MIGHT NOT BE ABLE TO MAINTAIN OR EFFECTIVELY MANAGE OUR SALES FORCE.
During 1996, we began to assemble a domestic direct sales and marketing
force to sell and promote our products in the U.S. Previously, we relied on
third party distributors for all sales efforts. We might not be able to continue
to attract and retain qualified and capable individuals who can successfully
promote our products.
We are also in the process of expanding our marketing internationally and
will continue to rely on third party distributors in foreign markets. During
1997, we formed a U.S. subsidiary, with a branch based in the United Kingdom, to
increase sales in the UK, improve distributor relationships and customer service
and to assist in the introduction of the ALERT System in Europe. We have
initiated sales through a new Japanese distributor and have taken steps to
improve our distribution network in Asian markets. Some of our agreements with
third party distributors are oral, and many of our distributor agreements, both
written and oral, are terminable by distributors. The distributors might not
actively and effectively market our products, and we might not be able to
replace existing distributors if present relationships are terminated. Further,
we might not be able to make arrangements with new distributors to access new
international markets.
OUR BUSINESS COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS.
The manufacture and sale of our products involves the risk of product
liability claims. Our products are highly complex and some are, or will be, used
in relatively new medical procedures and in situations where there is a
potential risk of serious injury, adverse side effects or death. Misuse or reuse
of our catheters may increase the risk of product liability claims. We currently
maintain product liability insurance with coverage limits of $5,000,000 per
occurrence and $5,000,000 in the aggregate per year. This insurance is expensive
and may not be available to us in the future. A successful claim against or
settlement by us in excess of our insurance coverage or our inability to
maintain insurance could have a material adverse effect on our business and
financial condition.
WE HAVE LIMITED MANUFACTURING EXPERIENCE AND DEPEND ON OUTSIDE SOURCES FOR THE
MANUFACTURE OF CRITICAL COMPONENTS OF OUR PRODUCTS.
We have limited manufacturing experience in manufacturing our catheter
products, including the ALERT Catheter. Further, we have limited experience
manufacturing these products in the volume that will be necessary for us to
achieve significant commercial sales. While we have expanded our catheter
manufacturing facilities and have hired and trained additional personnel, we may
not be able to establish or maintain reliable, high-volume, cost effective
manufacturing capacity. Moreover, we may encounter difficulties in increasing
our manufacturing capacity, including problems involving production yields,
quality control and assurance, component supply shortages, shortages of
qualified personnel, compliance with FDA regulations and the need for further
regulatory approval on new manufacturing processes.
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Additionally, we rely on outside sources for the manufacturing of critical
components for the ALERT Additionally, we rely on outside sources for the
manufacturing of critical components for the ALERT Companion, EP WorkMate and
EP-3 Stimulator. Any interruption in this supply from our outside sources would
have a material adverse effect on our ability to deliver our products. If an
interruption were to occur, we may not be able to reach an acceptable
arrangement with an alternative source of supply on a timely basis. Our failure
to find alternative manufacturing sources would have a material adverse effect
on our business and financial condition.
OUR RELIANCE ON INTERNATIONAL OPERATIONS EXPOSES US TO ADDITIONAL RISKS.
In 1997, we established a branch office in the United Kingdom in order to
increase sales in Europe, improve international distributor service and
relations and to aid in the introduction of the ALERT System for sale in Europe.
In 1998, approximately 11% of our sales were derived outside the U.S. Since we
expect international sales will continue to represent a significant percentage
of our total sales, we intend to continue to increase our operations outside of
the United States. Our continued reliance on international sales will subject us
to fluctuations in currency exchange rates and other risks of foreign
operations, including:
o tariff regulations;
o export license requirements;
o unexpected changes in regulatory requirements;
o extended collection periods for accounts receivable;
o potentially inadequate protections of intellectual property rights;
o local taxes;
o restrictions on repatriation of earnings; and
o economic and political instabilities.
These factors could have a materially adverse effect on our ability to
maintain and expand profitable foreign sales. Our failure to maintain and expand
profitable foreign sales would have a material adverse effect on our business
and financial condition.
OUR STOCK PRICE HAS BEEN VOLATILE AND FUTURE SALES OF SUBSTANTIAL NUMBERS OF OUR
SHARES COULD HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR SHARES.
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The market price of shares of our common stock has been volatile. The price
of our common stock may continue to fluctuate in response to a number of events
and factors, including:
o clinical trial results;
o the amount of our cash resources and our ability to obtain additional
funding;
o announcements by us or our competitors of research activities,
business developments, technological innovations or new products;
o changes in government regulation;
o disputes concerning patents or proprietary rights;
o changes in our revenues or expense levels;
o public concern regarding the safety, efficacy or other aspects of the
products or methodologies we are developing; and
o changes in recommendations by securities analysts.
Any of these events may cause the price of our shares to fall, which may
adversely affect our business and financing opportunities. In addition, the
stock market in general and the market prices for medical device companies in
particular have experienced significant volatility that often has been unrelated
to the operating performance or financial conditions of such companies. These
broad market and industry fluctuations may adversely affect the trading price of
our shares, regardless of our operating performance or prospects.
In addition, sales, or the possibility of sales, of substantial numbers of
shares of our common stock in the public market could adversely affect
prevailing market prices for shares of our common stock.
YEAR 2000 ISSUES MAY ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL CONDITION.
Many currently installed computer systems and software products cannot
distinguish 20th century dates from 21st century dates. As a result, some
computer systems and/or software will experience operating difficulties unless
they are modified or upgraded to adequately process information involving,
related to, or dependent upon the century change. In light of the potentially
broad effects of the Year 2000 on a wide range of business systems, we may be
affected. We utilize and are dependent upon data processing and other computer
hardware and software to conduct our business. We have completed an assessment
of our own computer systems and based upon this assessment, we believe our
computer systems are substantially "Year 2000 compliant;" that is, our computer
systems are capable of adequately distinguishing 21st century dates from 20th
century dates. However, we may not have identified all significant Year 2000
problems in our computer systems, and therefore may be subject to unknown risk
and expense.
Based on our internal assessment, we believe that the most likely worst
case scenario would involve our suppliers and manufacturers. We have not
determined the extent, or completed, activities to minimize the risk of the
computer systems of our suppliers and manufacturers not being Year 2000
compliant, or not becoming compliant on a timely basis. We expect to make
inquires with these suppliers through the end of 1999. Year 2000 problems could
prevent any of our suppliers from timely delivery of products or services that
we need. We currently believe that our costs to address the Year 2000 issue
relating to our suppliers will not be material. To the extent practical, we
intend to identify alternative suppliers and manufacturers in the event our
preferred suppliers cannot deliver products or services that we need on a timely
basis. Our expectations of Year 2000 costs relating to our suppliers and
manufacturers are only estimates, which were derived from numerous assumptions
of future events, including the continued availability of resources and
third-party remediation plans with regard to Year 2000 issues. These estimates
may not be correct and actual results could differ materially from these
estimates.
10
<PAGE>
ABOUT EP MEDSYSTEMS, INC.
We develop, manufacture, market and sell a line of products for the cardiac
electrophysiology market used to diagnose, monitor and treat irregular
heartbeats known as arrhythmias. We have identified the diagnosis and treatment
of atrial fibrillation as a primary focus for our ongoing development efforts.
In this regard, we have developed a new product for internal cardioversion
of atrial fibrillation known as the ALERT [REGISTERED TRADEMARK] System, which
uses a patented electrode catheter to deliver measured, variable, low energy
electrical impulses directly to the inside of the heart in order to convert
atrial fibrillation to a normal heart rhythm. This process of converting atrial
fibrillation to a normal heart rhythm is otherwise known as "cardioversion." Our
ALERT System comprises a single use proprietary electrode catheter with two
separate electrode arrays (the ALERT Catheter) and an external energy source
(the ALERT Companion). We believe that low energy internal conversion using the
ALERT System provides numerous potential advantages over high-energy external
cardioversion and drug conversion therapies including:
o fewer traumas, discomfort and risk to patients than high-energy
external cardioversion;
o higher success rates in converting patients with chronic atrial
fibrillation to normal heart rhythm than with high-energy external
cardioversion (based on initial clinical experience);
o elimination of harmful side effects associated with drug therapies;
o outpatient basis use since general anesthesia is not required;
o lower overall cost per procedure than high-energy external
cardioversion since the services of an anesthesiologist is not
required
o greater applicability for converting atrial fibrillation occurring in
the days immediately following open-heart surgery; and
o the combination of temporary pacing and blood pressure monitoring
features with cardioversion in a single multi-purpose catheter.
While the ALERT System is not yet approved for sale in the United States, it is
approved for sale in the European Community.
We also have developed and currently market an electrophysiology
workstation (the EP WorkMate [REGISTERED TRADEMARK]) and stimulator (the EP-3
[TRADEMARK] Stimulator). The EP WorkMate is a computerized electrophysiology
workstation that monitors displays and stores cardiac electrical activity and
arrhythmia data. Electrophysiology workstations are dedicated data management
systems designed specifically for use in electrophysiology procedures to view
and record procedural data, facilitate data analysis and generate customized
reports. The EP WorkMate is typically sold with an integrated EP-3 Stimulator.
We believe the EP WorkMate is differentiated from competing products by its
seamless integration with the EP-3 Stimulator, its capacity to receive and
display up to 120 channels of cardiac electrical data simultaneously, its
ability to process and simultaneously display both real time and historical
electrophysiology activity and its simple, user friendly software based on a
menu driven, point and click interface.
11
<PAGE>
Our EP-3 Stimulator is a computerized electrical pulse generator and
processor used to stimulate the heart with electrical impulses in order to
locate electrical disturbances or arrhythmias. We believe the EP-3 Stimulator is
currently the only computerized electrophysiology clinical stimulator being
marketed in the U.S. Our EP-3 Stimulator can be sold as a stand alone
electrophysiology stimulator or integrated with the EP WorkMate. We believe the
EP WorkMate, when integrated with the EP-3 Stimulator, offers the most advanced
computer tools available to the electrophysiology market.
Additionally, we have developed an intracardiac ultrasound product line
including the ViewMate[TRADEMARK] ultrasound imaging console and
U-View[TRADEMARK] deflectable intracardiac imaging catheter. These products are
designed to improve a physician's ability to visualize inside the chambers of
the heart, including the internal anatomy of the heart. We believe the ViewMate
and U-View may play important roles as new and effective treatment options are
developed for the treatment of complex cardiac arrhythmias, including
ventricular tachyarrhythmia and atrial fibrillation. Our ultrasound products are
not yet approved for sale.
Finally, we presently market a full line of diagnostic electrophysiology
catheters for stimulation and sensing of electrical signals during
electrophysiology studies. Our diagnostic catheters are similar to others sold
within the industry. However, during March 1999, we received clearance from the
FDA for our unique flexible catheter electrode technology. This clearance allows
us to market the product in the United States. This proprietary and patented
technology known as SilverFlex[TRADEMARK] offers us the ability to manufacture
and sell catheters with numerous closely-spaced electrodes for sophisticated
mapping procedures. These electrodes are placed onto the catheter through a
unique computer-controlled deposition process, creating flexible, lightweight
electrodes without compromising the catheter handling characteristics. This
allows the physician to gain entrance into some of the most challenging
structures of the heart, limiting the risk of perforation. SilverFlex appears to
be a better alternative than metal electrode bands when numerous electrodes
and/or deflectable catheter are required for for a mapping procedure.
We were incorporated in New Jersey in January, 1993. Our principal offices
are located at 100 Stierli Court, Mount Arlington, NJ 07856, and our telephone
number is 973-398-2800.
12
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Shares by the selling
shareholders except for the exercise price of the options which proceeds we
intend to use for working capital and general corporate purposes. The net
proceeds from the sale of the Shares will be received by the selling
shareholders.
SELLING SHAREHOLDERS
The following table lists the selling shareholders and sets forth certain
information regarding their beneficial ownership of common stock as well as the
number of shares each selling shareholder or its nominee may sell pursuant to
this Prospectus. The Shares are being registered to permit public secondary
trading of the Shares which the selling shareholders may offer for resale from
time to time. The information in the table is as of the date of this Prospectus.
<TABLE>
<CAPTION>
Shares of Common Shares of Shares of Percentage
Name of Stock Owned Common Stock Common Stock to be Owned After
Selling Shareholder Before Offering (1) Being Offered Owned After Offering (2) Offering (3)
- -------------------------------------- --------------------- ---------------- ----------------------- --------------
<S> <C> <C> <C> <C>
EGS Private Healthcare Partnership, LP (15) 1,312,500 (4) 875,000 (14) 437,500 (4) 4 %
350 Park Avenue
New York, NY 10022
EGS Private Healthcare Counterpart, LP (15) 187,500 (5) 125,000 (14) 62,500 (5) 1 %
350 Park Avenue
New York, NY 10022
Darryl D. Fry (6) 75,000 (7) 50,000 (14) 25,000 (7) *
c/o EP MedSystems, Inc.
100 Stierli Court
Mount Arlington, NJ 07856
Steven E. Gross, Esq. (8) 52,500 (9) 35,000 (14) 17,500 (9) *
c/o EP MedSystems, Inc.
100 Stierli Court
Mount Arlington, NJ 07856
David W. Mortara, Ph.D. (10) 173,000 (11) 50,000 (14) 123,000 (11) 1 %
c/o EP MedSystems, Inc.
100 Stierli Court
Mount Arlington, NJ 07856
Tracey E. Young (12) 112,500 (13) 112,500 0 *
c/o Elliot Young & Associates, Inc.
65 South Main Street
Sharon, CT 06069
- --------------------------------------
* Less than 1%
</TABLE>
(1) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Exchange Act.
(2) Assumes that all of the Shares offered by each of the selling shareholders
hereunder have been sold.
13
<PAGE>
(3) Percentages are based upon the assumption that all the Shares offered by
such selling shareholder have been sold and are computed on the basis of
11,010,417 shares of common stock issued and outstanding as of September
29, 1999 together with the applicable options and/or warrants for such
selling shareholder.
(4) Includes 437,500 shares which are issuable upon the exercise of warrants.
(5) Includes 62,500 shares which are issuable upon the exercise of warrants.
(6) Mr. Fry became a director of EPMed effective as of September 22, 1999.
(7) Includes 25,000 shares which are issuable upon the exercise of warrants.
(8) Mr. Gross is a member and the Managing Partner of the law firm of Sills
Cummis Radin Tischman Epstein & Gross, P.A. which provides legal services
to us.
(9) Includes 17,500 shares which are issuable upon the exercise of warrants.
(10) Dr. Mortara has served as a director of EPMed since 1995. Dr. Mortara is
also a director, officer and shareholder of Mortara Instrument, Inc., a
privately held company from whom we purchase certain components for the EP
WorkMate and ALERT Companion.
(11) Includes 25,000 shares which are issuable upon the exercise of warrants and
48,000 shares which are issuable upon exercise of options.
(12) Elliot Young & Associates, Inc. provided consulting services to us as
partial compensation for which Ms. Young was granted options.
(13) All of these 112,500 shares are shares to be issued upon exercise of
options.
(14) The Shares offered by the selling shareholder hereunder were purchased on
September 1, 1999, in connection with a private placement of an aggregate
of 1,135,000 of our common shares. We received aggregate offering proceeds
of $3,115,575 from this private placement, based on a per share price of
$2.745. We intend to use the proceeds of the private placement for working
capital and general corporate purposes.
(15) EGS Private Healthcare Partnership, LP and EGS Private Healthcare
Counterpart, LP share common management and certain common ownership.
PLAN OF DISTRIBUTION
All of the shares offered pursuant to this Prospectus may be sold from time
to time by the selling shareholders, or by their permitted assigns or
transferees in one or more of the following transactions:
o on the Nasdaq National Market System (or any other exchange on which
the Shares may be listed);
o in the over-the-counter market;
o in negotiated transactions other than on such exchanges;
o by pledge to secure debts and other obligations;
14
<PAGE>
o in connection with the writing on non-traded and exchange-traded call
options, in hedge transactions, in covering previously established
short positions and in settlement of other transactions in
standardized or over-the-counter options; or
o in a combination of any of the above transactions.
In addition, any of the Shares that qualify for sale pursuant to Rule 144
promulgated under the Securities Act may be sold in transactions complying with
such Rule, rather than pursuant to this Prospectus. The selling shareholders may
sell their Shares at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices or at fixed
prices. The selling shareholders may use broker-dealers to sell their shares.
The broker-dealers will either receive discounts or commissions from the selling
shareholders, or they will receive commissions from purchasers of shares.
Under certain circumstances the selling shareholders and any broker-dealers
that participate in the distribution may be deemed to be "underwriters" within
the meaning of the Securities Act. Any commissions received by such
broker-dealers and any profits realized on the resale of shares may be
considered discounts and commissions under the Securities Act. The selling
shareholders may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition, we
have agreed to indemnify the selling shareholders with respect to the shares
offered pursuant to this Prospectus against certain liabilities, including
certain liabilities under the Securities Act.
Under the rules and regulations of the Exchange Act, any person engaged in
the distribution or the resale of shares may not simultaneously engage in market
making activities with respect to EPMed's common stock for a period of two
business days prior to the commencement of such distribution. The selling
shareholders and any other person who participates in a distribution of the
Shares will also be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including the anti-manipulation rules of
Regulation M, which provisions may limit the timing of purchases and affect the
marketability of the shares and the ability of any person to engage in market
making activities for shares of our common stock.
We have the right to suspend use of this Prospectus under certain
circumstances for a period of not more than 120 days in any twelve month period.
We expect we would need to exercise this right if a preliminary corporate
development would exist which may materially affect our stock price and such
development has not been appropriately publicly disclosed.
At the time a particular offering of the Shares is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth the
number of shares being offered and the terms of the offering, including the
purchase price or public offering price, the name or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for shares
purchased from the selling shareholders, any discounts commissions and other
items constituting compensation from the selling shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
The selling shareholders will pay all commissions, transfer taxes and other
expenses associated with the sale of shares by them. The shares offered hereby
are being registered pursuant to contractual obligations of EPMed, and we have
paid the expenses of the preparation of this Prospectus. We have not made any
underwriting arrangements with respect to the sale of Shares.
LEGAL MATTERS
The legality of the shares offered pursuant to this prospectus has been
passed upon for us by Sills Cummis Radin Tischman Epstein & Gross, P.A., Newark,
New Jersey.
15
<PAGE>
EXPERTS
The financial statements as of December 31, 1998 and for the year then
ended, incorporated in this Prospectus by reference to the Annual Report on Form
10-KSB for the year ended December 31, 1998, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements as of December 31, 1997 and for the year then
ended, incorporated in this Prospectus by reference to the Annual Report on Form
10-KSB for the year ended December 31, 1998, have been so incorporated in
reliance on the report of Arthur Andersen LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses of the registrant in
connection with the issuance and distribution of the shares registered hereunder
(all amounts are estimated except the Commission and Nasdaq fees). Selling
commissions and fees and stock transfer taxes are payable individually by the
selling shareholders.
Securities and Exchange Commission registration fee $ 1,043.88
Nasdaq National Market Additional Shares listing fee 17,500.00
Legal fees and expenses 65,000.00
Accountants' fees and expenses 10,000.00
Total $ 93,543.88
Item 15. Indemnification of Directors and Officers
Section 14A:3-5 of the New Jersey Business Corporation Act, as amended,
(the "BCA") sets forth the extent to which a corporation may indemnify its
directors, officers and employees. More specifically, such law empowers a
corporation to indemnify a corporate agent against his or her expenses and
liabilities incurred in connection with any proceeding (other than a derivative
lawsuit) involving the corporate agent by reason of his or her being or having
been a corporate agent if (a) the corporate agent acted in good faith or in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and (b) with respect to any criminal proceeding,
the corporate agent had no reasonable cause to believe his or her conduct was
unlawful. For purposes of such law the term "corporate agent" includes any
present or former director, officer, employee or agent of the corporation, and a
person serving as a "corporate agent" at the request of the corporation for any
other enterprise, or the legal representative of any such director, officer,
trustee, employee or agent. For purposes of this section, "proceeding" means any
pending, threatened or completed civil, criminal, administrative or arbitrative
action, suit, or proceeding, and any appeal therein and any inquiry or
investigation which could lead to such action, suit or proceeding.
With respect to any derivative action, the corporation is empowered to
indemnify a corporate agent against his or her expenses (but not his or her
liabilities) incurred in connection with any proceeding involving the corporate
agent by reason of his or her being or having been a corporate agent if the
agent acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation. However, only a court
can empower a corporation to indemnify a corporate agent against expenses with
respect to any claim, issue or matter as to which the agent was adjudged liable
to the corporation.
The corporation may indemnify a corporate agent in a specific case if a
determination is made by any of the following that the applicable standard of
conduct was met: (i) the Board of Directors, or a committee thereof, acting by a
majority vote of a quorum consisting of disinterested directors; (ii) by
independent legal counsel, if there is not a quorum of disinterested directors
or if the disinterested quorum empowers counsel to make the determination; or
(iii) by the stockholders.
A corporate agent is entitled to mandatory indemnification to the extent
that the agent is successful on the merits or otherwise in any proceeding, or in
defense of any claim, issue or matter in the proceeding. If a corporation fails
or refuses to indemnify a corporate agent, whether the indemnification is
permissive or mandatory, the agent may apply to a court to grant him or her the
requested indemnification. In advance of the final disposition of a proceeding,
the Board of Directors may direct the corporation to pay an agent's expenses if
the agent agrees to repay the expenses in the event that it is ultimately
determined that he is not entitled to indemnification.
II-1
<PAGE>
Our Amended and Restated Certificate of Incorporation and Bylaws provide
that we may indemnify our directors, officers, Scientific Advisory Board
members, employees and other agents to the fullest extent permitted by New
Jersey law; provided, that such persons acted in good faith and in a manner
reasonably believed to be in EPMed's best interest, with respect to any criminal
proceeding, had no reasonable cause to believe such conduct was unlawful. We
also maintain liability insurance for our officers and directors. There can be
no assurance, however, that we will be able to maintain such insurance on
reasonable terms.
In addition, Section 14A:2-7 of the BCA provides that a New Jersey
corporation may include within its Certificate of Incorporation provisions
eliminating or limiting the personal liability of its directors and officers in
shareholder actions brought to obtain damages for alleged breaches of fiduciary
duties, as long as the alleged acts or omissions did not involve a breach of a
duty of loyalty to the corporation or its shareholders, were performed in good
faith, did not involve a knowing violation of law or result in an improper
personal benefit.
Our Amended and Restated Certificate of Incorporation and Bylaws provide
that our directors will not be personally liable to us or our shareholders for
damages for breach of any duty owed to us or our shareholders, except for
liabilities arising from any breach of duty based upon an act or omission (i) in
breach of the duty of loyalty to us, (ii) not in good faith or involving a
knowing violation of law or (iii) resulting in receipt by such director or
officer of an improper personal benefit.
II-2
<PAGE>
Item 16. Exhibits.
Exhibit Number Description
4.3 Form of Common Stock and Warrant Purchase Agreement between
EP MedSystems, Inc. and the Purchasers, dated as of August
1, 1999 (including Exhibit A: Form of Registration Rights
Agreement and Exhibit B: Form of Warrant) (filed as Exhibit
4.3 to EP MedSystems, Inc.'s Current Report on Form 8-K
dated as of August 31, 1999 and incorporated herein by
reference).
4.4 Amendment Agreement dated as of September 16, 1999 by and
among Elliot Young and Associates, Inc., Tracey E. Young and
EP MedSystems, Inc.
4.5 Stock Option Agreement dated August 31, 1995 between EP
MedSystems, Inc. and Tracey E. Young, as amended (filed as
Exhibit 10.28 to EP MedSystems, Inc.'s Registration
Statement on Form SB-2 and Pre-Effective Amendments Nos. 1
and 2 thereto and incorporated herein by reference).
4.6 Registration Rights Agreement dated as of May 24, 1996
between EP MedSystems, Inc. and Tracey E. Young (filed as
Exhibit 10.29 to EP MedSystems, Inc.'s Registration
Statement on Form SB-2 and Pre-Effective Amendments Nos. 1
and 2 thereto and incorporated herein by reference).
5.1 Opinion of Sills Cummis Radin Tischman Epstein & Gross,
P.A., regarding the legality of the Shares.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Arthur Andersen LLP (to be filed by amendment)
23.3 Consent of Sills Cummis Radin Tischman Epstein & Gross,
P.A. (contained in Exhibit 5.1).
II-3
<PAGE>
Item 17. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that the registrant does not need to make
post-effective amendments with respect to the information set
forth in paragraphs (a) and (b) above if such information is
contained in periodic reports filed with the Commission by the
registrant under the Exchange Act and such periodic reports have
been incorporated by reference in this registration statement.
2. That, fo the purpose of determining any liability under the
Securities Act, each such post- effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold
after the termination of the offering.
4. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act that is incorporated by reference in this
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
5. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Mount Arlington, State of New Jersey, on September
29, 1999.
EP MedSystems, Inc.
By: /s/ David A. Jenkins
-------------------------
David A. Jenkins
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Date
/s/ David A. Jenkins September 29, 1999
- ---------------------------------------------------
David A. Jenkins, Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
/s/ Joseph M. Turner September 29, 1999
- ---------------------------------------------------
Joseph M. Turner, Chief Financial Officer
and Secretary (Principal Accounting Officer)
/s/ David W. Mortara, Ph.D. September 29, 1999
- ---------------------------------------------------
David W. Mortara, Ph.D.
Director
/s/ John E. Underwood September 29, 1999
- ---------------------------------------------------
John E. Underwood
Director
II-5
EXHIBIT INDEX
Exhibit Number Description
4.3 Form of Common Stock and Warrant Purchase Agreement between EP
MedSystems, Inc. and the Purchasers, dated as of August 1, 1999
(including Exhibit A: Form of Registration Rights Agreement and
Exhibit B: Form of Warrant) (filed as Exhibit 4.3 to EP MedSystems,
Inc.'s Current Report on Form 8-K dated as of August 31, 1999 and
incorporated herein by reference).
4.4 Amendment Agreement dated as of September 16, 1999 by and among
Elliot Young and Associates, Inc., Tracey E. Young and EP MedSystems,
Inc.
4.5 Stock Option Agreement dated August 31, 1995 between EP MedSystems,
Inc. and Tracey E. Young, as amended (filed as Exhibit 10.28 to EP
MedSystems, Inc.'s Registration Statement on Form SB-2 and
Pre-Effective Amendments Nos. 1 and 2 thereto and incorporated herein
by reference).
4.6 Registration Rights Agreement dated as of May 24, 1996 between EP
MedSystems, Inc. and Tracey E. Young (filed as Exhibit 10.29 to EP
MedSystems, Inc.'s Registration Statement on Form SB-2 and
Pre-Effective Amendments Nos. 1 and 2 thereto and incorporated herein
by reference).
5.1 Opinion of Sills Cummis Radin Tischman Epstein & Gross, P.A.,
regarding the legality of the Shares.
23.1 Consent of PricewaterhouseCoopers L.L.P..
23.2 Consent of Arthur Andersen LLP (to be filed be amendment)
23.3 Consent of Sills Cummis Radin Tischman Epstein & Gross, P.A.(contained
in Exhibit 5.1).
EXHIBIT 4.4
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (this "Agreement") is made as of the 16th day of
September, 1999, by and among Elliot Young & Associates, Inc., a Connecticut "S"
corporation ("EYA"), Tracey E. Young, an individual ("Young", and together with
EYA, the "Young Parties") and EP MedSystems, Inc., a New Jersey corporation
("EPMD").
WITNESSETH:
WHEREAS, EYA and EPMD entered into that certain Amended and Restated
Consulting Agreement dated as of May 24, 1996 (the "Consulting Agreement")
pursuant to Section 2(a) of which EPMD agreed to grant to EYA an option to
purchase up to 150,000 shares of EPMD common stock in consideration of
consulting services rendered by EYA ("EPMD's Section 2(a) Obligation");
WHEREAS, Young and EPMD entered into that certain Stock Option Agreement
dated as of August 31, 1995, as amended as of May 24, 1996 (the "Young Option
Agreement") pursuant to which Young was granted an option to purchase up to
150,000 shares of EPMD common stock (the "Option") which Option is exercisable
until August 31, 2000, at 5:00 p.m.;
WHEREAS, pursuant to Section 4 of the Consulting Agreement, EYA agreed that
the granting of the Option pursuant to the Young Option Agreement satisfied
EPMD's Section 2(a) Obligation;
WHEREAS, Young and EPMD entered into that certain Registration Rights
Agreement dated as of May 24, 1996 (the "Young Registration Rights Agreement"),
pursuant to which EPMD granted certain registration rights to Young with respect
to the shares of EPMD common stock underlying the Option ("EPMD's Registration
Obligations");
WHEREAS, on or before September 29, 1999, EPMD will be filing a shelf
registration with the Securities and Exchange Commission (the "SEC") on Form S-3
covering the registration under the Securities Act of 1933, as amended (the
"Act"), of certain EPMD common shares (the "Registrable Securities") to be
offered or sold on a delayed or continuous basis pursuant to Rule 415 of the Act
(the "Shelf Registration Statement"); and
WHEREAS, the parties agree (i) to reduce the shares underlying the Option
from 150,000 shares to 112,500 shares and (ii) for EPMD to register all such
112,500 underlying shares on the Shelf Registration Statement to satisfy EPMD's
Registration Obligations.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration contained herein, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Reduction of Shares Underlying the Option. Effective as of the date
hereof, the shares of EPMD common stock underlying the Option are hereby reduced
from 150,000 shares to 112,500 shares (the "Amended Option") and the Young
Option Agreement is hereby amended to account for this reduction (the "Amended
Yong Option Agreement").
2. Satisfaction of EPMD's Registration Obligation. In full satisfaction
of EPMD's Registration Obligations, EPMD shall include as Registrable Securities
in the Shelf Registration Statement the 112,500 shares of EPMD common stock
issuable upon exercise of the Amended Option pursuant to the Amended Young
Option Agreement. EPMD shall maintain the effectiveness of the Shelf
Registration Statement until such date as is the earlier of (i) the date on
which all the Registrable Securities have been sold or (ii) the date on which
all the Registrable Securities may be immediately sold without restriction and
without registration under the Act. The Young Registration Rights Agreement is
hereby amended consistent with the provisions of this Section 2.
<PAGE>
3. Release of the Young Parties to EPMD. On behalf of themselves as well
as any third parties who could claim on their behalf either through subrogation
rights or otherwise, each of the Young Parties do hereby fully and finally
release, acquit and discharge EPMD and all of EPMD's parent or subsidiary
corporations or divisions or partnerships or other affiliates as well as all of
their officers, directors, stockholders, agents or employees of and from any and
all claims, actions, suits or demands of any kind, nature or description
whatsoever whether developed or undeveloped, accrued or unaccrued, either past,
present or future, excepting only the Young Parties' rights under this
Agreement.
4. Release of EPMD to the Young Parties. On behalf of itself as well as
any third parties who could claim on its behalf either through subrogation
rights or otherwise, EPMD does hereby fully and finally release, acquit and
discharge each of the Young Parties and all of the their parent or subsidiary
corporations or divisions or partnerships or other affiliates as well as all of
their officers, directors, stockholders, agents or employees of and from any and
all claims, actions, suits or demands of any kind, nature or description
whatsoever whether developed or undeveloped, accrued or unaccrued, either past,
present or future, excepting only EPMD's rights under this Agreement.
5. Representations and Warranties. The parties hereby represent and
warrant to one another that (a) each has the requisite power and authority, and
in the case of the corporate parties hereto, has the corporate power and
authority to enter into and consummate this Agreement; (b) each has the
requisite power and authority to execute, deliver and perform its obligations
under this Agreement; (c) each has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement and has duly
and properly executed and delivered it; (d) this Agreement constitutes a valid
and legally binding obligation of each party enforceable against it or him in
accordance with its terms.
6. Entire Agreement; No Waiver. This Agreement, together with the other
documents referenced herein that this Agreement affects, modifies or amends,
contain the entire agreement among the parties hereto with respect to the
subject matter hereof, and supersede all previous understandings, arrangements
and agreements in respect thereof, whether oral or written. Notwithstanding
anything herein to the contrary, the terms and conditions contained in each of
the Consulting Agreement, the Young Option Agreement and the Young Registration
Rights Agreement shall continue to apply (to the extent effective) subject to
the amendments and modifications of such terms and conditions provided for
herein. No amendment, modification or other change of this Agreement shall be
valid or binding upon a party against whom enforcement is sought unless set
forth in a document duly executed by or on behalf of such party. No consent or
waiver, express or implied, by a party to or of any breach by a party in the
performance by it or he of any of its or his obligations hereunder shall be
deemed or construed to be a consent or waiver to or of the breach in the
performance by such party of the same or any other obligation of such party
hereunder. Failure on the part of any party to complain of any act or failure to
act of any other party or to declare any other party in default, irrespective of
how long such failure continues, shall not unless otherwise herein provided to
the contrary constitute a waiver by a party of its, hers or his rights
hereunder. All consents and waivers shall be in writing.
7. Further Assurances. Without limiting the generality of any provisions
of this Agreement, each party agrees that upon request of any other party, it
shall, from time to time, do any and all other acts and things as may reasonably
be required to carry out its obligations hereunder, to consummate the
transactions contemplated hereby and to effectuate the purposes hereof.
8. Governing Law; Jurisdiction. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Jersey,
exclusive of its conflicts of laws provisions. Each of the parties hereby
submits himself or itself for the sole purpose of this Agreement and any
controversy arising hereunder to the exclusive jurisdiction of the state courts
of the State of New Jersey, and waives any objection (on the grounds of lack of
jurisdiction or forum non conveniens, or otherwise) to the exercise of such
jurisdiction over it, him or her by such court.
<PAGE>
9. Notices. All notices or other communications provided for in this
Agreement shall be deemed to have been duly given to a party if mailed by
registered or certified mail, postage prepaid, or by Federal Express or similar
overnight delivery service, or by facsimile transmission confirmed by first
class mail. All notices or other communications shall be addressed to the
parties as follows:
If to EPMD: EP MedSystems, Inc.
100 Stierli Court, Suite 107
Mount Arlington, New Jersey 07856
Attention: President
Facsimile No.: (973) 398-8636
If to a Young Party: c/o Elliot Young & Associates, Inc.
65 South Main Street
Sharon, Connecticut 06069
Attention: President
Facsimile No.: (860) 364-1510
10. Miscellaneous. All of the representations, warranties, covenants and
agreements of each of the parties contained in this Agreement shall survive
indefinitely the execution, delivery and performance of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which when taken together shall constitute
but one Agreement. It shall not be necessary that any one counterpart be signed
by the parties so long as each party shall have executed a counterpart. This
Agreement shall be for the benefit of and binding upon the parties hereto, their
respective administrators, heirs, legatees, devisees, successors, and permitted
assigns and designees. No party hereto may assign or delegate any of his or its
rights, interests, liabilities or obligations under this Agreement by operation
of law or otherwise. This Agreement is the result of negotiations among, and has
been reviewed by each of the Young Parties, EPMD and, to the extent retained,
their respective counsel. Accordingly, this Agreement shall be deemed to
constitute a joint effort of the parties and shall not be construed more
severely against any party.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the date first above written.
ELLIOT YOUNG & ASSOCIATES, INC.
By:/s/ Tracey E. Young
-------------------
Name: Tracey E. Young
Title: President
/s/ Tracey E. Young
----------------------
Tracey E. Young, individually
EP MEDSYSTEMS, INC.
By:/s/ David A. Jenkins
--------------------
Name: David A. Jenkins
Title: President
EXHIBIT 5.1
[Sills Cummis Radin Tischman Epstein & Gross, P.A. Letterhead]
September 30, 1999
EP MedSystems, Inc.
100 Stierli Court
Mt. Arlington, NJ 07856
Re: Registration Statement on Form S-3
We have acted as counsel to and for EP MedSystems, Inc., a New Jersey
corporation (the "Company") in connection with the preparation and filing of a
Registration Statement on Form S-3 dated September 30, 1999 (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), on behalf of certain selling
shareholders for the purpose of registering the resale of up to 1,247,500 shares
(the "Registered Shares") of the Company's common stock, no par value, stated
value $.001 per share (the "Common Stock"). Such total includes 1,135,000 shares
currently issued and outstanding (the "Issued and Outstanding Shares") and
112,500 shares which are issuable upon the exercise of outstanding options (the
"Options").
We have examined the Company's Amended and Restated Certificate of
Incorporation, Bylaws, as amended, resolutions of the Board of Directors of the
Company and such other documents, instruments and records as we deemed necessary
or appropriate for purposes of rendering this opinion.
In rendering this opinion, we have assumed and relied upon, without
independent investigation, other than the inquiry referred to above, (i) the
authenticity, completeness, truth and due authorization, execution and delivery
of all documents submitted to us as originals, (ii) the genuineness of all
signatures on all documents submitted to us as originals, and (iii) the
conformity to the originals of all documents submitted to us as certified or
photostatic copies.
The laws covered by the opinions expressed herein are limited to (a) the
federal statutes, judicial decisions and rules and regulations of the
governmental agencies of the United States and (b) the New Jersey Business
Corporation Act.
This opinion is given only with respect to laws and regulations presently
in effect. We assume no obligation to advise you of any changes in law or
regulation which may hereafter occur, whether the same are retroactively or
prospectively applied., or to update or supplement this letter in any fashion to
reflect any facts or circumstances which hereafter come to our attention.
Based upon and subject to the foregoing, we are of the opinion, as of the
date hereof, that (i) all of the Registered Shares have been duly authorized,
(ii) the Issued and Outstanding Shares have been validly issued and are fully
paid and nonassessable and (iii) the Registered Shares issuable upon the
exercise of the Options, when issued upon payment of the exercise price
specified in the Options, will be validly issued, fully paid and nonassessable.
We hereby consent to (i) the filing of this opinion letter as an exhibit to
the Registration Statement and (ii) to the reference under the caption "Legal
Matters" in the Prospectus contained within the Registration Statement to our
firm as the legal counsel that has passed upon the validity of the Common Stock
to be offered pursuant to the Registration Statement.
Very truly yours,
/s/ Sills Cummis Radin Tischman Epstein & Gross, P.A.
EXHIBIT 23.1
Consent of PricewaterhouseCoopers LLP
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 11, 1999 relating to the
financial statements, as of and for the year ended December 31, 1998, which
appears in the EP MedSystems Inc. Annual Report on Form 10-KSB for the year
ended December 31, 1998. We also consent to the references to us under the
headings ""Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
September 29, 1999
Florham Park, New Jersey
