<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 22, 1999
REGISTRATION NO. 333-83105
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SABRATEK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3700639
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8111 NORTH ST. LOUIS AVENUE, SKOKIE, ILLINOIS 60076
(847) 720-2400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
K. SHAN PADDA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SABRATEK CORPORATION
8111 NORTH ST. LOUIS AVENUE, SKOKIE, ILLINOIS 60076
(847) 720-2400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
SCOTT HODES, ESQ.
DAVID S. GUIN, ESQ.
ROSS & HARDIES
150 NORTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60601
(312) 558-1000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any 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, 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. [ ]
<PAGE> 2
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each Class of Amount to be Registered Proposed Maximum Amount of Registration Fee
Securities to be Registered Aggregate Offering
Price (1)
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<S> <C> <C> <C>
Common Stock 937,500 $21,768,750 $6,052
$.01 par value
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</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for purposes of calculating the
registration fee, based on the average of the high and low trading prices
for the common stock as reported by the NASDAQ National Market on July 13,
1999.
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 Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY STATE.
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.
SUBJECT TO COMPLETION - DATED JULY 22, 1999
PROSPECTUS
937,500 SHARES
SABRATEK CORPORATION
COMMON STOCK
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This prospectus relates to the offer and sale of up to 937,500 shares
of common stock from time to time by Ralin Medical, Inc. and EGS Securities
Corp. Both Ralin and EGS will be selling stockholders offering shares of our
common stock by means of this prospectus.
Ralin acquired the shares of common stock offered by this prospectus as
part of a transaction in which we purchased LifeWatch, Inc., which was a
wholly-owned subsidiary of Ralin. In that transaction, Ralin received 900,000
shares of our common stock as partial consideration for LifeWatch. The shares of
common stock are held of record by U.S. Bank Trust National Association as
Escrow Agent under the terms of two separate escrow agreements. Ralin,
however, has the exclusive right to direct the sale of, and to vote, the shares
of common stock being offered by means of this prospectus. As part of the
transaction, we also agreed to register the sale of the 900,000 shares of common
stock by Ralin under the Securities Act of 1933, as amended. Unless there is a
purchase price adjustment, Sabratek will not receive any of the proceeds from
the sale of the shares by Ralin. See "USE OF PROCEEDS."
EGS provided us with assistance in performing due diligence concerning
the business of LifeWatch, in structuring and negotiating the acquisition and in
reviewing and preparing documentation in exchange for which we agreed to pay EGS
37,500 shares of our common stock. We have delivered to EGS all 37,500 shares of
our common stock to which EGS was entitled for providing us the services
described above. See "SELLING STOCKHOLDERS."
The shares of our common stock are quoted on the Nasdaq National Market
under the symbol "SBTK".
The shares offered by this prospectus involve a high degree of risk.
See "RISK FACTORS" beginning on Page 1.
THE DATE OF THIS PROSPECTUS IS JULY __, 1999
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
WHERE YOU CAN FIND MORE INFORMATION................................... ii
RISK FACTORS.......................................................... 1
SELLING STOCKHOLDERS.................................................. 12
USE OF PROCEEDS....................................................... 13
PLAN OF DISTRIBUTION.................................................. 13
LEGAL MATTERS......................................................... 15
EXPERTS............................................................... 15
RECENT DEVELOPMENTS................................................... 15
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.,
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room. Our SEC filings are also available to the public at the
SEC's web site at http://www.sec.gov. You may also reach us on our Internet web
site at http://www.sabratek.com.
The SEC allows us to incorporate by reference the information that we
file with the SEC, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings (File No.
1-11831) we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
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<PAGE> 5
a. our annual report on Form 10-K for the fiscal year ended
December 31, 1998;
b. our quarterly report on Form 10-Q, for the fiscal quarter
ended March 31, 1999;
c. our current report on Form 8-K, dated May 19, 1999 and filed
with the SEC on May 25, 1999;
d. our current report on Form 8-K, dated June 1, 1999 and filed
with the SEC on June 16, 1999 and any later filed amendments;
e. our current report on Form 8-K, dated June 7, 1999 and filed
with the SEC on June 16, 1999;
f. our current report on Form 8-K, dated June 29, 1999 and filed
with the SEC on July 14, 1999 and any later filed amendments;
and
g. the description of our capital stock contained in our
registration statement on Form 8-A, declared effective by the
SEC on June 21, 1996; and any amendments or reports filed for
the purpose of updating that description.
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
847-720-2400
ATTENTION: VICE PRESIDENT OF FINANCE
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. We have not authorized anyone to provide information other than the
information provided in this prospectus. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the date on the front of this document.
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RISK FACTORS
In addition to the other information in this prospectus, the risk
factors set forth below should be considered carefully by potential purchasers
of the shares being offered by this prospectus.
FORWARD-LOOKING STATEMENTS MAY GIVE RISE TO EXPECTATIONS THAT ARE NOT
FULFILLED.
We have made forward-looking statements in this prospectus (and in
certain documents that we incorporate by reference in this prospectus) which may
be affected by risks and uncertainties. We may also make written forward-looking
statements in our periodic reports to the SEC, in our press releases and other
written materials and in oral statements made by our officers, directors or
employees to third parties. Statements that are not historical facts, including
statements about our beliefs and expectations, are forward-looking statements.
These statements are based on the beliefs and assumptions of our management and
on information currently available to us. Forward-looking statements include
statements preceded by, followed by or that include the words "believes",
"expects", "anticipates", "intends", "plans", "estimates", "designed" or similar
expressions.
Because we are unable to control or predict many factors that will
determine our future performance including financial results, forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions. Our future results may differ materially from
those expressed in the forward-looking statements contained in this prospectus
and in the information incorporated by reference in this prospectus. See "WHERE
YOU CAN FIND MORE INFORMATION." We caution you that a number of important
factors could cause actual results to differ materially from those contained in
any forward-looking statement. See other "Risk Factors" in this section.
Sabratek's management believes these forward-looking statements are
reasonable. However, because these statements are based on current expectations,
you should not place undue reliance on these forward-looking statements, which
are based on current expectations. Forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update publicly any of
them in light of new information or future events.
WE MAY BE UNSUCCESSFUL AT DEVELOPING OR ACQUIRING AND INTRODUCING NEW
OR ENHANCED PRODUCTS, WHICH MAY RESULT IN A REDUCTION IN OUR REVENUE.
Our financial position and results of operations are dependent on our
ability to satisfy the increasingly sophisticated needs of our customers by
developing or acquiring and introducing new products, enhanced versions of
existing products and new complementary products. There can be no assurance that
Sabratek will be able to develop or acquire new or enhanced products. In
addition, our success in developing or acquiring and introducing new or enhanced
products may be affected by a variety of risks, which include, but may not be
limited to, the following:
o the products may require and fail to receive
regulatory clearance or approval,
o the products may be difficult or uneconomical to
manufacture or market,
o the proprietary rights of third parties may preclude
us from marketing these products,
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o scientific developments or technological advancements
may produce more desirable or technologically
advanced products,
o our competitors may market superior or more
cost-effective products and may do so on a more
timely basis,
o errors and malfunctions may be found in products
after their commercial introduction and may not be
corrected in a timely manner, and
o customers may not accept or use the products.
If Sabratek is unable to develop or acquire new or enhanced products
and successfully bring them to market, it could have a material adverse effect
on our financial position and results of operations.
WE MAY BE UNABLE TO CONTINUE TO COMPETE WITH OTHER COMPANIES IN OUR
INDUSTRY THAT HAVE FINANCIAL OR OTHER ADVANTAGES.
The medical products industry is characterized by intense competition.
large competitors, including Abbott Laboratories, Alaris Medical, Inc., Baxter
International Inc., I-Flow Corp., McGaw, Inc., an indirect subsidiary of B.
Braun Melsungen Ag and Sims Deltec, Inc., a subsidiary of Smiths Industries,
PLC, among others, have significant market shares and installed bases of
products in the infusion pump and related disposable supplies industry. Many of
these competitors have substantially greater capital resources, research and
development staffs, regulatory experience, sales and marketing capabilities,
manufacturing facilities and broader product offerings than us. Moreover, we
expect that these competitors will continue to compete aggressively by offering
volume discounts based on "bundled" purchases of a broader range of medical
equipment and supplies, a tactic that we can currently only pursue on a more
limited basis. There can be no assurance that this competition will not
adversely affect our results of operations or our ability to maintain or
increase sales and market share. Currently, we derive substantially all of our
revenues from the sale of our multi-therapy infusion pumps and related
disposable supplies. Further, we expect that revenues from these products will
continue to account for a significant portion of our revenues in the future.
Therefore, if substantially increased competition or technological changes
create a decline in the demand for our infusion pumps and related disposable
supplies, we would experience materially adverse consequences in our financial
position and results of operations.
OUR LONG-TERM STRATEGY MAY BE UNATTAINABLE OR WE MAY BE UNABLE TO
SUCCESSFULLY INTEGRATE COMPANIES OR PRODUCT LINES THAT WE ACQUIRE.
While we have historically focused on the manufacture and distribution
of infusion pumps and related medical devices, our long-term strategy is to
create a virtual hospital room that can be accessed by healthcare providers
through the Internet and telecommunication ports. Eventually, it is our goal to
make our primary products, infusion pumps and related disposable supplies, a
crucial but complimentary element in our business of providing a broad spectrum
of services and products. Because our strategy is visionary and unprecedented
for us, there can be no assurance that we will be able to successfully implement
it.
There can also be no assurance that medical professionals will support
or prescribe implementation of a virtual hospital room or that if they do
support a virtual hospital room, they will direct their patients to select our
products and services. There can be no assurance that third party payors will
provide reimbursements for the products and services of our virtual hospital
room to the extent that we will be able to provide those products and services
on a profitable basis. Moreover, there can be no assurance that we will be able
to create or infiltrate a customer base
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which accepts and purchases the products and services that would be included in
a virtual hospital room.
In addition, part of our strategy includes aggressive expansion of our
operations by acquisition of entities or product lines that contribute to our
ability to create a virtual hospital room. We may use cash from our reserves to
acquire entities or product lines. If we use cash for acquisitions, we could
deplete our liquidity and cash reserves, which could have a material, adverse
effect on our financial position. Furthermore, there can be no assurance that
we will be able to successfully integrate new entities or product lines into our
operations or that we will be able to realize positive financial results from
this integration.
If we are unable to attain our long-term strategy or to successfully
integrate companies or product lines, it could have a material adverse effect on
our financial position and results of operations.
WE ARE INVOLVED IN LITIGATION WHICH MAY CAUSE SABRATEK TO PAY
SUBSTANTIAL DAMAGES AND ATTORNEYS FEES AND COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS.
Sabratek is involved in litigation with SIMS Deltec concerning patent
infringement, trade secret misappropriate, unfair competition and interference
with SIMS Deltec's customers.
In addition, Sabratek was served with a complaint on January 27, 1999
alleging that Sabratek and seven of its current and former officers violated
Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 20(a)
promulgated under the Securities Exchange Act of 1934. On June 7, 1999, we were
served with an amended complaint which expanded the allegations to include
allegations that Sabratek withheld material information about Sabratek's future
prospects and engaged in improper accounting practices. The amended complaint
also added three officers and one director as additional defendants.
Sabratek will incur substantial attorneys' fees in these litigation
matters and if these matters are ultimately determined in a manner adverse to
Sabratek, we could be liable for substantial damage awards which could have a
material adverse effect on our financial position and results of operations.
WE ARE DEPENDENT ON OBTAINING APPROVALS FROM GOVERNMENT REGULATORS.
INTRODUCTION: OVERVIEW OF REGULATORY REQUIREMENTS.
The FDA, and in some cases, state and foreign authorities regulate the
clinical testing, development, manufacture, packaging, labeling, distribution
and promotion of the medical devices and supplies that we market.
Federal regulations enforced by the FDA classifies medical devices
intended for human use into three categories, Classes I, II and III, on the
basis of the controls deemed necessary by the FDA to reasonably assure their
safety and effectiveness. Class I devices are required to comply with general
controls regarding such matters as labeling, premarket notification and
adherence to current good manufacturing practice requirements. Class II devices
are required to comply with general and special controls regarding such matters
as performance standards, postmarket surveillance, patient registries, and FDA
guidelines. Generally, Class III devices are those which must receive premarket
approval from the FDA to ensure their safety and effectiveness. Examples of
Class III devices include life-sustaining, life-supporting and implantable
devices, or new devices which have not been found substantially equivalent to
legally marketed devices. Electronic infusion devices and disposable tubing
sets, which we assemble and distribute, are classified by the FDA as Class II
medical devices.
If a new Class II medical device is substantially equivalent to a
medical device already legally marketed in the United States, and the marketed
device did not require Class III premarket approval, the FDA requirements may be
satisfied through a procedure known as a "510(k) Submission," in which the
applicant provides product information supporting its claim of substantial
equivalency. "Substantial equivalence" means that a device has the same intended
use and the same technological characteristics as the legally marketed device,
or the same intended use and different technological characteristics, provided
that it can be demonstrated that the device is as safe and effective as the
legally marketed device, and does not raise different questions regarding safety
and effectiveness.
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Commercial distribution of a device for which a 510(k) Submission is
required can begin only after the FDA issues an order finding the device to be
substantially equivalent to a legally marketed device. The FDA has recently been
requiring a more rigorous demonstration of substantial equivalence than in the
past. This may include a requirement for clinical testing of the device. The FDA
may determine that a proposed device is not substantially equivalent to a
legally marketed device, in which case a "premarket approval" will be required.
Alternatively, the FDA may require additional information before a substantial
equivalence determination can be made, in which case data from safety and
effectiveness tests, including clinical tests, may be required.
The process for preparing and obtaining FDA approval of a premarket
approval is generally much more elaborate, time-consuming and expensive than the
process of preparing and obtaining FDA clearance of a 510(k) Submission. A
premarket approval would require us, among other things, to conduct pre-clinical
and clinical trials to demonstrate the safety and effectiveness of the proposed
device. Therefore, a determination that we are not substantially equivalent or a
request for additional information could significantly delay the market
introduction of new products that fall into this category.
o THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
THE MEDIVIEW SOFTWARE, WHICH COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS.
We received 510(k) clearance to begin marketing our 3030
Stationary Pump in the United States in May, 1992. We received 510(k) clearance
for our disposable tubing sets for use with the 3030 Stationary Pump in March,
1995. In July, 1994, the FDA cleared the 510(k) Submission for our 6060
Ambulatory Pump and disposable tubing sets for use with our 6060 Ambulatory
Pump. In June, 1996, we received 510(k) clearance for our MediVIEW software
system for use with the 3030 Stationary Pump. We believe that our original
510(k) clearance for our 6060 Ambulatory Pump covers the use of 6060 Ambulatory
Pump in conjunction with the MediVIEW software system. However, there can be no
assurance that the FDA would agree with our determination. If in the future the
FDA concluded that the MediVIEW software system for use with the 6060 Ambulatory
Pump required a new 510(k) Submission, the FDA could prohibit us from marketing
the MediVIEW software system for this use until we file a new 510(k) Submission
and obtain clearance from the FDA. The FDA could also take regulatory action
against us for any prior distribution of the MediVIEW software system with the
6060 Ambulatory Pump.
o THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
THE PUMPMASTER, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.
The PumpMaster is a hardware and software system designed to
perform diagnostic tests on our infusion pumps. We have determined that the
PumpMaster does not qualify for regulation as a medical device. However, there
can be no assurance that the FDA will agree with our determination in this
regard. If the FDA were to determine that the PumpMaster is a medical device, it
could suspend our commercial distribution of the PumpMaster until a 510(k)
Submission covering the PumpMaster has been filed and cleared by the FDA and
other medical device regulatory requirements have been met. The FDA could also
take regulatory action against us based on our prior distribution of the
uncleared product.
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o THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
ANY AND ALL ENHANCEMENTS WE HAVE MADE, OR MAKE, TO OUR
PRODUCTS.
A new 510(k) Submission must be filed when, among other
things, there is a major change or modification in the intended use of the
device, or a change or modification, including product enhancements, to a
legally marketed device that could significantly affect its safety or
effectiveness. A device manufacturer is responsible for making the initial
determination as to whether a proposed change to a cleared device or to its
intended use necessitates the filing of a new 510(k) Submission.
We have made some enhancements to our currently marketed
products without filing 510(k) Submissions. There can be no assurance that the
FDA would agree with our determinations that these enhancements do not require a
510(k) Submission and would not require 510(k) clearance before further
distribution. Likewise, if we determine that any modifications that we may make
to our cleared devices in the future do not require a new 510(k) Submission,
there can be no assurance that the FDA would agree with our determinations and
would not require a new 510(k) Submission for any future modifications made to a
cleared device.
If the FDA requires us to file a new 510(k) Submission for any
modification to the device, we may be prohibited from marketing the device as
modified until it obtains clearance from the FDA. There can be no assurance that
we will obtain 510(k) clearance on a timely basis, if at all, for any device
modification for which we file a future 510(k) Submission. If 510(k) clearance
is granted, there can be no assurance that it will not contain significant
limitations in the form of warnings, precautions or contraindications with
respect to conditions of use.
o THERE CAN BE NO ASSURANCE THAT WE WILL RECEIVE FDA CLEARANCE
FOR ANY NEW PRODUCTS WE MANUFACTURE.
We intend to develop new products in the future. Our new
products, including new applications for existing products, may qualify as
devices that require FDA 510(k) clearance or premarket approval. There can be no
assurance that any required 510(k) clearance or premarket approval of any of our
future products or new applications will be forthcoming in a timely manner, if
at all, or that the FDA's clearance or premarket approval of future products or
new applications will not contain significant limitations in the form of
warnings, precautions or contraindications with respect to conditions of use. If
in the future the FDA concludes that current, modified or new products marketed
by us require that the products be relabeled, require previously unobtained
510(k) clearance, require new drug approval, or require other regulatory
approval, the FDA could prohibit us from manufacturing and/or distributing these
products until we make the necessary submissions and obtain any required
clearances or approvals. The FDA could also take regulatory action against us
for the marketing of these products before obtaining these clearances or
approvals.
o THE FDA COULD DETERMINE THAT OUR MANUFACTURING PRACTICES ARE
SEVERELY INADEQUATE AND, AS A RESULT, ORDER SUSPENSION OF OUR
FACILITIES; THIS DETERMINATION WOULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS.
Device manufacturers are required to register their
establishments and list their devices with the FDA, and are subject to periodic
inspections by the FDA and state agencies. Devices must be manufactured in
compliance with current good manufacturing practices under the Quality System
Regulation. We believe that our manufacturing and quality assurance procedures
substantially conform to the requirements of the Quality System Regulation.
However, there can be no assurance that the FDA would concur with our
determination in this regard or that we will be able to maintain substantial
compliance with the Quality System Regulation.
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In addition, the Medical Device Reporting regulation obligates
us to inform the FDA whenever information reasonably suggests that one of our
devices may have caused or contributed to a death or serious injury, or that one
of our devices has malfunctioned and, if the malfunction were to recur, the
device would be likely to cause or contribute to a death or serious injury.
There can be no assurance that the FDA would agree with our determinations as to
whether particular incidents meet the threshold for Medical Device Reporting.
o WE MAY FAIL TO COMPLY WITH LABELING AND PACKAGING
REQUIREMENTS.
Labeling and packaging activities are regulated by the FDA and
may be regulated by the Federal Trade Commission. The FDA actively enforces
statutes and regulations prohibiting marketing of products for unapproved or
uncleared uses.
If, as a result of FDA inspections, Medical Device Reporting
reports or information derived from any other source, the FDA believes we are
not in compliance with the applicable statutory law or regulations, the FDA can:
o refuse to clear pending 510(k) Submissions until
specified conditions are met,
o withdraw previously cleared 510(k) Submissions,
o require notification to users regarding newly found
unreasonable risks,
o request repair, refund or replacement of faulty
devices,
o shut down facilities,
o require corrective advertisements, recalls or
marketing suspension,
o impose civil penalties, and
o institute legal proceedings to detain or seize
products, enjoin future violations, or seek criminal
penalties against us, our officers or employees.
Civil penalties for violations may be assessed by the FDA in lieu of or
in addition to instituting legal action. Civil penalties may range up to $15,000
per violation, and a maximum of $1,000,000 per proceeding. Civil penalties may
not be imposed for good manufacturing practice violations, unless the violations
involve a significant or knowing departure from federal regulations or a risk to
public health. The FDA provides manufacturers with an opportunity to be heard
prior to the assessment of civil penalties. If civil penalties are assessed,
judicial review is available.
o WE MAY BE UNABLE TO FULLY COMPLY WITH INTERNATIONAL REGULATORY
REQUIREMENTS.
We export, or intend to export, our 510(k)-cleared products to
Europe, Japan and other foreign countries. Exports of products that have market
clearance from the FDA in the United States do not require FDA authorization for
export. However, foreign countries often require, among other things, an FDA
Certificate to Foreign Government verifying that the product complies with
specified requirements. To obtain a Certificate to Foreign Government, Sabratek
must certify to the FDA that these foreign requirements have been met. The FDA
may refuse to issue a Certificate to Foreign Government if significant
outstanding good manufacturing practice violations exist.
International sales of medical devices are regulated by each
country in which the products are sold. The regulatory review process varies
from country to country. Many countries also impose product standards, packaging
and labeling requirements, and import restrictions on devices. In addition, each
country has its own tariff regulations, duties and tax requirements. We plan to
use our distributors to assist us in obtaining any necessary foreign
governmental and regulatory approvals. We have received approval to market our
products in Japan as well as in the European community, and we currently sell
our products in Japan and the European community. However, there can be no
assurance that we will be able to obtain all necessary approvals in the future.
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WE MAY NOT BE ABLE TO OBTAIN FDA CLEARANCE TO RESUME DISTRIBUTION OF
OUR ROCAP HEPARIN PRE-FILLED FLUSH SYRINGE PRODUCT LINE, WHICH COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
On November 24, 1998, we announced that we had suspended distribution
of our Rocap pre-filled flush syringe product line. We also announced that we
would submit new 510(k) applications to the FDA for the Rocap pre-filled flush
syringe products and that new management was in place at Rocap for both
operations and regulatory affairs. We then submitted the new 510(k)
applications.
On May 28, 1999, we received FDA clearance of our 510(k) Submission
covering our pre-filled saline flush syringe products. Currently, we are
awaiting 510(k) clearance on our pre-filled heparin flush syringe products. We
will not be able to resume distribution of our heparin flush syringe products
until 510(k) Submissions are cleared. We can give no assurances as to when the
FDA clearance of our pre-filled heparin flush syringe products will be obtained.
In the event that there are substantial delays in obtaining, or we are unable to
obtain, the required FDA clearances and approvals, we could incur a material
write down of assets and our future profitability could be materially affected.
WE MAY NOT RECEIVE THE FULL BENEFITS OF OUR INTELLECTUAL PROPERTY
PROTECTIONS.
There can be no assurance that the common law, statutory and
contractual rights on which we rely to protect our intellectual property and
confidential and proprietary information will provide us with meaningful
protection. Third parties may independently develop products, techniques or
information which are substantially equivalent to the products, including
software products and/or the software components of other products, techniques
and information which we consider proprietary. Disputes regarding our
intellectual property could force us into expensive and protracted litigation or
costly agreements with third parties. An adverse determination in a judicial or
administrative proceeding or failure to reach an agreement with a third party
regarding intellectual property rights could prevent us from manufacturing and
selling products or could otherwise limit our use of such intellectual property
rights, which could have a material adverse effect on our financial position
and results of operations.
OUR CURRENT CASH RESERVES COULD BECOME INADEQUATE FOR OUR NEEDS AND WE
MAY NOT BE ABLE TO SECURE ADDITIONAL CAPITAL.
The adequacy of our current cash reserves will depend on the cash flow
generated from our operations, which could be affected by all of the Risk
Factors contained in this registration statement, as well as by the purposes for
which these cash reserves are used. In particular, the adequacy of our cash
reserves could be adversely influenced by:
o regulatory or legislative changes pertaining to health care,
o product liability exposure,
o dependence on future product development,
o pending litigation, and
o acquisitions of companies or product lines and integration of
these companies or product lines into our operations.
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<PAGE> 14
If current cash reserves become inadequate, we may need to seek
additional funds through bank facilities, or public or private debt or equity
offerings. There can be no assurance that we will be able to obtain additional
capital on favorable terms, or at all, if and when it becomes necessary. The
terms on which Sabratek obtains any necessary capital in the future could have
an adverse impact on the rights of holders of our common stock. In addition, if
we were unable to raise additional capital if and when necessary, we may be
unable to successfully complete our business strategy.
A SIGNIFICANT PORTION OF OUR REVENUES ARE DEPENDENT ON OUR CUSTOMERS'
ABILITY TO OBTAIN THIRD-PARTY REIMBURSEMENT FOR THE COST OF ACQUIRING
AND USING OUR PRODUCTS OR SERVICES.
Our products are generally purchased by health care providers and
patients, who then seek reimbursement from various government and private
third-party payors, including Medicare, Medicaid and managed care organizations.
Government and private third-party payors increasingly attempt to contain health
care costs by limiting both the extent of coverage and the reimbursement rate
for new diagnostic and therapeutic products and services. The Health Care
Financing Administration of the United States Department of Health and Human
Services ("HCFA"), which administers Medicare, and most private insurance
companies do not provide reimbursement for services that they determine to be
experimental in nature or that are not considered "reasonable and necessary" for
diagnosis or treatment. Many private insurers are influenced by HCFA actions in
making their own coverage decisions on new products or services. There can be no
assurance that third-party reimbursement for the use of our products or services
will continue to be available to our customers, that third-party reimbursement
will be available for new products or services we may introduce or that the rate
of any such reimbursement will be adequate. Disapproval of, or limitations in,
coverage by HCFA or other third-party payors could materially and adversely
affect market acceptance of our products or services, financial position and
results of operations.
IF IT IS EVER DETERMINED THAT ONE OF OUR PRODUCTS OR SERVICES CAUSED
INJURY, WE COULD INCUR SUBSTANTIAL LIABILITIES.
Manufacturers of medical devices face the possibility of substantial
liability for damages in the event that the use of their products results in
adverse effects to a patient. As a manufacturer of medical devices, we maintain
product liability insurance, but there can be no assurance that liability claims
will not exceed the limits of our coverage or that our insurance will continue
to be available on commercially reasonable terms or at all. Furthermore, we do
not maintain insurance that would provide coverage for any costs or losses
resulting from any required recall of our products due to alleged defects,
whether instituted by a regulatory agency or by us. Product liability claims
that exceed our policy limits or the costs associated with any product recall
could have a material adverse effect on our financial position and results of
operations.
In addition, as providers of consulting and utilization review
services, we maintain liability and errors and omissions insurance, but there
can be no assurance that liability claims, if any, will not exceed the limits of
our coverage or that our insurance will continue to be available on commercially
reasonable terms or at all.
As providers of consulting and utilization review services, we incur
risks of liability arising out of the services we provide. A determination that
any damage including personal injury or commercial damage resulted from use of
our services could require us to pay substantial monetary awards or damages,
which could have a material adverse effect on our financial position.
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<PAGE> 15
WE RISK BUSINESS DECLINES DUE TO OUR INTERNATIONAL OPERATIONS.
During the year ended December 31, 1998, we derived approximately 4% of
our revenues from international sales, resulting in exposure to risks which
include, but may not be limited to, the following:
o maintenance of existing relationships and/or the establishment
of new relationships with international distributors;
o fluctuations in exchange rates of the U.S. dollar against
foreign currencies;
o economic or political instability and domestic and foreign
governmental regulations, including export license
requirements, trade restrictions, changes in tariffs,
regulatory approval for marketing products or similar factors;
o uncertain or limited protection of our intellectual property
rights under the laws of certain foreign countries may not
protect our intellectual property rights to the same extent as
do the laws of the United States.
Unfavorable changes in any of these factors could reduce the demand
for, or the profitability of, our products and services in foreign markets. This
reduction could have a material adverse effect on our financial position and
results of operation.
WE DEPEND ON KEY EXECUTIVES. A LOSS OF THESE EXECUTIVES AND PERSONNEL
COULD NEGATIVELY IMPACT OUR OPERATIONS.
We are highly dependent on the members of our management team, in
particular, our Chief Executive Officer. The loss of one or more of our
management team could have a material adverse effect on us. In addition, we
believe that our future success will depend in large part on our ability to
attract and retain highly skilled managerial personnel, particularly as we
expand our activities. We face significant competition for such personnel, and
there can be no assurance that we will be successful in hiring or retaining the
personnel we require for continued growth, if any. The failure to hire and
retain such personnel could have a material adverse effect on our financial
position and results of operations.
OFFICERS AND DIRECTORS MAY CONTROL CORPORATE ACTIONS DUE TO THEIR
COMBINED OWNERSHIP OF SHARES OF SABRATEK STOCK.
As of April 16, 1999, all officers and directors of Sabratek as a group
beneficially owned approximately 19% of the outstanding shares of Sabratek
common stock. Because of the combined voting power of the officers and
directors, these individuals acting as a group may be able to influence
Sabratek's affairs and business, including any determination with respect to a
change in control of Sabratek, future issuances of common stock or other
securities,
declaration of dividends on Sabratek common stock and the election of directors.
Such influence could have the effect of delaying, deferring or preventing a
change in control of Sabratek which could deprive Sabratek's stockholders of the
opportunity to sell their shares of common stock at prices higher than
prevailing market prices.
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<PAGE> 16
OUR ISSUANCE OF A LARGE VOLUME OF SHARES OF OUR COMMON STOCK COULD
RESULT IN A DEPRESSION OF OUR STOCK PRICE.
Since June 1, 1999, we have issued approximately 3,347,000 shares of
our common stock to acquire LifeWatch, Inc., a subsidiary of Ralin Medical,
Inc., Strategic Reimbursement Services, Inc., Unitron Medical Communications,
Inc., and GDS Technology, Inc. In connection with such acquisitions, we entered
into agreements with the recipients of our common stock which obligate Sabratek
to file registration statements which will allow such recipients to resell their
approximately 3,347,000 shares. We will file registration statements relating to
the resale of approximately 2,311,000 shares of common stock in July, 1999 and a
registration statement relating to the resale of the remaining shares no later
than December 1, 1999. The filing of the registration statements allows the
recipients to sell the shares when and if they determine it is appropriate.
Sabratek cannot predict the timing or amount of any sale which may be
made under these registration statements. Even if no sales occur, the mere
issuance and registration for resale of approximately 3,347,000 shares of our
common stock, which is approximately 25% of our currently outstanding common
stock as of July 14, 1999, could have the effect of depressing the market price
of our common stock. Moreover, the simultaneous offering for public sale of a
significant number of the approximately 3,347,000 shares would likely have the
effect of depressing the market price of our common stock.
OUR FINANCIAL RESULTS AND STOCK PRICE MAY BE AFFECTED BY QUARTERLY
FLUCTUATIONS.
Our quarterly revenues and operating results have varied significantly
in the past and may continue to do so in the future. Future revenues and
operating results may also fluctuate significantly from quarter to quarter and
will depend upon, among other factors:
o demand for our products and new product
introductions,
o demand for products distributed by our competitors,
o our efforts regarding transitions to new or enhanced
products,
o the timing of orders and shipments,
o the mix of sales between products,
o competition, including pricing pressures,
o the timing of regulatory filings and approvals,
o the timing of reimbursement from third-party payors,
and
o the timing of research and development expenditures.
OUR STOCK PRICE MAY EXPERIENCE VOLATILITY.
The securities markets have, from time to time, experienced extreme
price and volume fluctuations which often have been unrelated to the operating
performance of particular companies. The market prices of the common stock of
many publicly-held companies that provide medical devices and services have been
in the past, and are expected to be, volatile. In addition to factors such as
interest rates and economic conditions which affect stock prices generally,
some, but not all, of the factors which could result in fluctuations in our
stock price include:
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<PAGE> 17
o announcements of technological or medical
innovations,
o the introduction of new commercial products by our
competitors,
o disputes concerning patents or proprietary rights,
o positive or negative regulatory action,
o changes in regulatory or medical reimbursement
policies, and
o period-to-period fluctuations in the financial
results of the Company.
ANTI-TAKEOVER PROTECTIONS MAY MAKE IT DIFFICULT FOR A THIRD PARTY TO
ACQUIRE SABRATEK.
Sabratek's Certificate of Incorporation and Bylaws contain general
requirements which pre-condition a third-party's ability to acquire a
controlling interest in Sabratek. These requirements and pre-conditions could
limit the price that potential acquirors might be willing to pay in the future
for shares of Sabratek common stock. These provisions are explained below.
o Sabratek's Certificate of Incorporation provides that the
Board of Directors may determine and set rights, preferences,
privileges and restrictions, including voting rights, of
unissued shares of Sabratek's preferred stock and that such
shares of preferred stock may be issued without any further
vote or action by Sabratek's stockholders. The rights of the
holders of common stock will be subject to, and may be
adversely affected by, the rights of the holders of any
preferred stock that may be created and issued in the future.
In addition, stockholders do not have the right to cumulative
voting in the election of directors.
o Sabratek's Bylaws provide for a staggered board so that only
one-third of the total number of directors are replaced or
re-elected each year. The Bylaws also require the affirmative
vote of two-thirds of the Company's issued and outstanding
voting stock to remove a director. Therefore, potential
acquirors of Sabratek may face delays in replacing the
existing directors.
o Sabratek currently has approximately $85,000,000 in notes
outstanding. These notes, and the indenture which governs
them, provide that in some circumstances involving a change in
control, each holder of these notes may require Sabratek to
repurchase all or a portion of the holder's notes. This
repurchase obligation could discourage a third party from
attempting to acquire control of the Company.
o In August, 1998, Sabratek designated the relative rights and
preferences of a new Class of Series B Preferred Stock and
adopted a Shareholder Rights Plan. Sabratek's Board of
Directors declared a dividend of one right for each share of
Sabratek's common stock outstanding on September 4, 1998. Each
right gives the holder the opportunity to purchase one
one-hundredth of one share of Sabratek's new authorized Series
B Preferred Stock at a price of $150 (as adjusted from time to
time) upon the occurrences of a change of control of Sabratek.
The Rights Plan and the accompanying rights could have the
effect of delaying the ability of a potential acquiror from
acquiring control of Sabratek.
o Sabratek's Bylaws authorize Sabratek's Board to establish a
record date with respect to stockholders entitled to vote on
corporate matters by means of a written consent. This Bylaw
provision has the effect of allowing Sabratek's Board to react
to any unexpected stockholder actions and could slow the pace
of a potential acquisition.
o Sabratek's senior executive officers may be entitled to
substantial change in control payments. Such payments could
have the effect of discouraging a potential acquiror from
acquiring control of Sabratek.
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<PAGE> 18
SELLING STOCKHOLDERS
The 900,000 shares of common stock being offered by means of this
prospectus by Ralin Medical, Inc. were originally issued under a stock purchase
agreement, dated as of May 19, 1999, in which we acquired all of the issued and
outstanding shares of LifeWatch, Inc., an Illinois corporation, from Ralin
Medical, Inc. LifeWatch was a wholly-owned subsidiary of Ralin. Ralin received
900,000 shares of our common stock and $12,260,000 in cash. The aggregate
purchase price, however, is subject to adjustment depending on the proceeds
received by Ralin from its sale of the shares of our common stock offered by
means of this prospectus.
Under the terms of the stock purchase agreement and the registration
rights agreement entered into by Ralin and Sabratek, in the event that Ralin
receives more than $19 million in aggregate proceeds from sale of shares of
Sabratek common stock, Ralin must pay us any amounts it receives in excess of
$19 million, but these amounts will be adjusted for taxes. Alternatively, in the
event that Ralin receives less than $16 million from sale of these shares, we
must pay Ralin the difference between $16 million and the aggregate sales
proceeds received by Ralin. Additionally, in the event that Ralin does not sell
all of the shares offered by this prospectus within thirteen months of the
effective date of this registration statement, the unsold shares will be valued,
for purposes of computing the adjustments described in this paragraph, at the
average of the per share closing prices for Sabratek stock over a period of
twenty days prior to and including the thirteenth month anniversary date of the
effective date of this registration statement. Any payment required to be made
for an adjustment of the purchase price must be made within five (5) days of a
determination of the amount of the adjustment.
The shares of common stock are held of record by U.S. Bank Trust
National Association as Escrow Agent under the terms of two separate escrow
agreements. Ralin, however, has the exclusive right to direct the sale of, and
to vote, the shares of common stock being offered by means of this prospectus.
L. Peter Smith, a director of Sabratek since 1992, is currently the
President and a director and stockholder of Ralin.
The 37,500 shares of common stock being offered by means of this
prospectus by EGS Securities Corp. were originally issued to EGS under a
memorandum of understanding dated March 26, 1999 and a supplement, dated as of
July 2, 1999, in which EGS agreed to assist us in performing due diligence
concerning the business of LifeWatch, in structuring and negotiating the
acquisition and in reviewing and preparing documentation. In return for such
services, Sabratek agreed to pay EGS 37,500 shares of our common stock. We have
delivered to EGS all 37,500 shares of our common stock to which EGS was entitled
for providing us the services described above.
The following table sets forth information about the beneficial
ownership of the selling stockholders as of July 9, 1999 as to:
o the number of shares of common stock that are beneficially
held by the selling stockholders,
o the maximum number of shares that may be offered by the
selling stockholders in this prospectus, and
o the number of shares of common stock that can be sold by means
of this prospectus and the percentage of our total outstanding
common stock which such number represents.
We can provide no assurance as to the number of shares that will be
held by the selling stockholders after this offering because the selling
stockholders may offer all or some part of the shares which they hold by means
of this prospectus, and because this offering is not being underwritten on a
firm commitment basis.
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<PAGE> 19
<TABLE>
<CAPTION>
Shares
Beneficially Owned
Shares Beneficially Number of After the Offering
Owned Prior to the Shares Offered --------------------
Selling Stockholder Offering Hereby Number Percentage
- -------------------- ------------------- -------------- --------------------
<S> <C> <C> <C> <C>
Ralin 900,000(1) 900,000 0 *
EGS Securities Corp. 41,000(2) 37,500 3,500 *
</TABLE>
(1) Does not include 7,913 shares of Sabratek common stock held of record by L.
Peter Smith or 56,667 shares of common stock which may be acquired by Mr.
Smith upon the exercise of outstanding options. Ralin and Mr. Smith each
disclaim beneficial ownership of any shares of Sabratek common stock which
are owned or may be acquired by the other.
(2) Does not include 25,000 shares of Sabratek common stock which may be
acquired by EGS Securities Corp. upon the exercise of outstanding options,
43,851 shares of Sabratek common stock held of record by William D.
Lautman, 54,715 shares of common stock which may be acquired by Mr. Lautman
upon the exercise of outstanding options or 58,732 shares of common stock
which may be acquired by Mr. Lautman upon the exercise of outstanding
warrants. Mr. Lautman, a director of Sabratek, is also a managing director
of EGS Securities Corp. EGS and Mr. Lautman each disclaim beneficial
ownership of any shares of Sabratek common stock which are owned or may be
acquired by the other. You should be aware that the 3,500 shares of common
stock owned by EGS after this offering are being registered for resale by
means of a separate prospectus.
* Less than 1% of the issued and outstanding shares of Sabratek's common
stock.
USE OF PROCEEDS
Other than the completion and filing of this registration statement, we
will not participate in the sale of the shares offered by means of this
prospectus. In addition because the shares of common stock being offered by
means of this prospectus are being sold by the selling stockholders, we will not
directly receive any of the proceeds from the sale of their shares.
However, in the event that there is an adjustment to the purchase price,
Ralin may be required to make a cash payment to Sabratek. See "SELLING
STOCKHOLDERS." Such cash payment, if any, shall include amounts generated by
Ralin through its sale of the shares of common stock being sold by means of this
prospectus. We cannot, however, predict whether any such payment will be made or
the amount of any such payment if it is made. To the extent that we receive any
amounts generated through the sale of shares of common stock offered by means of
this prospectus, we will use the proceeds for working capital and general
corporate purposes.
PLAN OF DISTRIBUTION
The 937,500 shares offered by means of this prospectus may be sold from
time to time by the selling stockholders. Unless we receive a cash payment from
Ralin in the event Ralin receives more than $19 million in aggregate proceeds
from the sale of shares of our common stock, we will not receive any proceeds
directly from this Offering. See, "SELLING STOCKHOLDERS" and "USE OF PROCEEDS."
We have agreed to pay all of the expenses incident to the registration, offering
and sale of these shares to the public other than commissions or discounts of
underwriters, broker-dealers or agents. We have agreed to indemnify the selling
stockholders against liabilities, including liabilities under the Securities
Act. This offering will terminate on the earlier of (i) date on which all shares
offered by this prospectus have been sold by the selling stockholder or (ii)
thirteen months after the effective date of this registration statement.
Under the terms of the registration rights agreement, upon the effective
date of this registration statement, Ralin is required to sell its shares on the
NASDAQ through a market maker or a broker mutually agreed upon by Ralin and
Sabratek. In addition, the Registration rights agreement provides that Ralin's
sale of the shares offered by means of this prospectus is, until the first year
anniversary of the effective date of this registration statement, limited in the
following manner:
o Ralin may not sell or transfer more than 100,000 shares during
the first forty-five days following the effective date of this
registration statement;
o Ralin may not sell or transfer more than 20,000 shares during
any trading day;
o Ralin may not sell or transfer more than 60,000 shares during
any calendar week;
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<PAGE> 20
o Ralin may not sell or transfer more than 180,000 shares during
any calendar month; and
o If the closing share price for Sabratek stock on any trading
day is at least $22, then the weekly and calendar month volume
limitations will not apply to the next following trading day,
provided that Ralin does not sell more than 15,000 shares on
that day.
Moreover, in the event that (a) this registration statement is not
declared effective by the SEC within seventy-five days of the effective date of
the registration rights agreement (June 1, 1999), (b) Ralin has not sold all of
the shares offered by this prospectus on the date of the thirteenth month
anniversary of the effective date of this registration statement or (c) if we
consent in writing, Ralin will have the right to sell the shares offered by this
prospectus through private sales.
The 900,000 shares of common stock offered by means of this prospectus
by Ralin are held of record by U.S. Bank Trust National Association as Escrow
Agent under the terms of two separate escrow agreements. Ralin, however, has
the exclusive right to direct the sale of, and to vote, the shares of common
stock being offered by means of this prospectus.
Any market maker or broker may receive compensation in the form of
commissions, discounts or concessions from the selling stockholder and/or
purchasers of the shares for whom those broker-dealers may act as agent, or to
whom they may sell as principal, or both. Compensation as to a particular
broker-dealer may exceed customary commissions. The selling stockholder and any
broker who act in connection with the sale of the shares under this prospectus
may be deemed to be "underwriters" within the meaning of the Securities Act.
Any commissions they receive and proceeds of any sale of shares may be deemed
to be underwriting discounts and commissions under the Securities Act.
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<PAGE> 21
LEGAL MATTERS
The legality of the shares of our common stock being offered by means of
this prospectus has been passed on for Sabratek by Ross & Hardies, Chicago,
Illinois. A member of this firm owns shares of Sabratek's common stock.
EXPERTS
The financial statements of Sabratek Corporation as of December 31, 1998
and 1997 and for each of the years in the three-year period ended December 31,
1998, have been incorporated by reference herein in reliance upon the report of
KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
RECENT DEVELOPMENTS
On May 28, 1999, Sabratek received FDA clearance of our 510(k) Submission
covering our Rocap division's pre-filled saline flush syringe products. We are
working closely with our customers and suppliers to resume production and
shipments in the shortest possible time frame.
On June 7, 1999, Sabratek was served with an amended complaint in a
proceeding filed in the United States District Court for the Northern District
of Illinois on January 27, 1999 as a purported class action. The amended
complaint expands the allegations against Sabratek to include allegations that
Sabratek withheld material information about its future prospects and engaged in
improper revenue recognition practices. The amended complaint also expanded the
number of named defendants in the proceeding by adding three additional officers
and one director of Sabratek as defendants. Sabratek is currently required to
file an answer, motion to dismiss or other responsive pleading on or before
July 28, 1999.
On June 29, 1999, we consummated a transaction in which our
newly-formed, wholly-owned subsidiary merged with an into Strategic
Reimbursement Services, Inc., an Illinois corporation. As a result of the
merger, Strategic Reimbursement Services became a wholly-owned subsidiary of
ours. Strategic Reimbursement Services provides consulting services to
healthcare providers. Under the terms of a merger agreement, dated as of
June 29, 1999, we paid the shareholders of Strategic Reimbursement Services an
aggregate purchase price of 1,636,359 shares of our common stock.
On July 1, 1999, Sabratek acquired substantially all of the issued and
outstanding shares of capital stock of Unitron Medical Communications, Inc.,
d/b/a MOON Communications. MOON Communications is a healthcare information
services company providing an array of healthcare related services to
physicians, home health agencies, payors and other participants in the
healthcare market through the Internet. Under the terms of an option agreement
dated January 22, 1999, Sabratek paid the Unitron shareholders an aggregate
purchase price of 542,926 shares of common stock in exchange for the shares of
capital stock we acquired. Sabratek is currently attempting to acquire
approximately 10,000 shares of Unitron's capital stock which it did not acquire
on July 1, 1999, on terms identical to those contained in the option agreement.
On July 9, 1999, Sabratek acquired all of the issued and outstanding
capital stock of GDS Technology, Inc. GDS develops, manufactures and markets
advanced point-of-care blood diagnostic tests and instruments. Under the terms
of an option agreement dated August 29, 1997, Sabratek paid the GDS shareholders
an aggregate purchase price of 216,949 shares of Sabratek common stock in
exchange for all of the issued and outstanding capital stock of GDS.
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<PAGE> 22
All selling stockholders that effect transactions in the shares of common
stock offered by means of this prospectus are required to deliver a copy of this
prospectus to any purchaser of such shares of common stock at or before the time
a certificate representing the share of common stock is delivered to the
purchaser.
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<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We have agreed to bear the expenses of registering the shares for the
selling stockholders under the federal and state securities laws. The following
table sets forth the costs and expenses, other than underwriting discounts and
commissions, payable by us in connection with the sale of common stock being
offered. All amounts are estimated except the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee..... ......................................................$ 6,052
Printing expenses...............................................................$ 2,500
Legal fees and expenses.........................................................$15,000
Accounting fees and expenses....................................................$ 5,000
Miscellaneous expenses..........................................................$ 5,448
Total $34,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sabratek's Amended and Restated Certificate of Incorporation provides
for indemnification to the full extent permitted by the laws of the State of
Delaware against and with respect to threatened, pending or completed actions,
suits or proceedings arising from or alleged to arise from, a party's actions or
omissions as a director, officer, employee or agent of Sabratek or of any other
corporation, partnership, joint venture, trust or other enterprise which has
served in such capacity at the request of Sabratek if the acts or omissions
occurred or were or are alleged to have occurred, while said party was a
director or officer of Sabratek; provided, however, Sabratek shall not indemnify
any director or officer in an action against Sabratek unless Sabratek shall have
consented to the action. Generally, under Delaware law, indemnification will
only be available where an officer or director can establish that he/she acted
in good faith and in a manner which was reasonably believed to be in or not
opposed to the best interests of Sabratek.
Section 145 of the Delaware Law provides that a corporation may
indemnify a director, officer, employee or agent made a party to an action by
reason of the fact that the person was a director, officer, employee or agent of
the corporation or was serving at the request of the corporation against
expenses actually incurred by the person in connection with the action if the
person acted in good faith and in a manner such person reasonably believed to be
in, or not opposed to, the best interest of the corporation with respect to any
criminal action, and had no reasonable cause to believe his conduct was
unlawful. Delaware Law does not permit a corporation to eliminate a director's
duty of care, and the provisions of Sabratek's Amended and Restated Certificate
of Incorporation have no effect on the availability of equitable remedies such
as injunction or rescission, based upon a director's breach of the duty of care.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling Sabratek under the
foregoing provisions and agreements, Sabratek has been informed that in the
opinion of the Staff of the Securities and Exchange Commission such
indemnification is against policy as expressed in the Securities Act and is
therefore unenforceable.
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<PAGE> 24
Sabratek maintains a director's and officer's liability insurance
policy which indemnifies directors and officers for specified losses arising
from a claim by reason of a wrongful act, as defined, under certain
circumstances where Sabratek does not provide indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Sabratek under the foregoing provisions or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of Sabratek in the successful defense of
any action, suit or proceeding) is asserted by a director, officer or
controlling person in connection with the securities being registered, we 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 Act and
will be governed by the final adjudication of the issue.
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<PAGE> 25
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
(a) EXHIBITS NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K
<TABLE>
<CAPTION>
Incorporation
Exhibit Page Number by reference
Number Description of Documents (if applicable) (if applicable)
<S> <C> <C> <C>
3.1 Articles of Incorporation, Rights Agreement Certificate
of Designations ................................................. +
3.2 Amended and Restated By-laws .................................... ++++++++++
4.1 Indenture, dated April 14, 1998 by and between
Sabratek Corporation and LaSalle National Bank, as Trustee ...... ++++++
4.2 Rights Agreement, dated August 20, 1998 by and
between Sabratek Corporation and LaSalle National Bank,
as the Rights Agent ............................................. +++++++
4.3 Registration Rights Agreement, dated as of June 1, 1999,
by and between Sabratek Corporation and Ralin Medical, Inc....... *
4.4 Registration Rights Agreement, dated as of June 29, 1999,
by and between Sabratek Corporation and the former
shareholders of Strategic Reimbursement Services, Inc. .......... **
5.1 Opinion of Ross & Hardies........................................
10.1 Agreement with Americorp Financial, Inc. re: Leasing
Services, dated March 22, 1995 .................................. +
10.1.1 Amendment, dated September 16, 1996, to Agreement
with Americorp Financial, Inc. .................................. +++
10.2 -
10.12 Intentionally Omitted
10.13 Pump Contract with Chartwell Home
Therapies, dated November 22, 1993 .............................. +
10.14 Sales Agreement with Pharmacy Corporation
of America,dated March 17, 1995 ................................. +
</TABLE>
II-3
<PAGE> 26
<TABLE>
<S> <C> <C>
10.15 Sales & Marketing Agreement with Alpha Group,
dated November 6, 1995 ...................................... +
10.16 -
10.25 Intentionally Omitted
10.26 Amended and Restated Stock Option Plan ...................... +
10.27 Lease of Real Property located at 5601 West Howard,
Niles, Illinois, dated as of May 31, 1994 ................... +
10.27.1 Amendment, dated October 30, 1996, to Lease for
Real Property located at 5601 West Howard,
Niles, Illinois ............................................. +++
10.28 Employment Agreement for K. Shan Padda ...................... ++++++++++
10.29 Intentionally Omitted
10.30 Asset Purchase Agreement, dated February 25, 1997,
by and among Sabratek Corporation; Rocap, Inc. and
Elliott Mandell ............................................. ++
10.31 Employment Agreement for Stephen L. Holden .................. ++++++++++
10.32 Employment Agreement for Elliott Mandell .................... ++++++++++
10.33 Lease Agreement for property located at 11 Sixth
Road, Woburn, Massachusetts, dated February 1, 1997 ......... ++++
10.34 Lease Agreement for property located at 5 Constitution
Way, Woburn, Massachusetts, dated June 26, 1995 ............. ++++
10.35 Lease Agreement for property located at 1629 Prime
Court, Suite 100, Orlando, Florida, dated March 11, 1997 +++++
10.36 Lease Agreement for property located at 8350 Parkline
Blvd., Orlando Florida, dated June 18, 1998 ................. ++++++++++
</TABLE>
II-4
<PAGE> 27
<TABLE>
<S> <C> <C>
10.37 Credit Agreement, dated as of April 30, 1999, by
and between Sabratek Corporation as Borrower and
LaSalle National Bank (formerly known as LaSalle
Bank NI) as Lender ....................................... ++++++
10.38 Long Term Incentive Compensation Plan .................... +++++++++
10.39 Lease Agreement for property located 8111 North
St. Louis, Skokie, Illinois, dated May 15, 1998 .......... +++++++++
10.40 Employment Agreement for Doron C. Levitas ................ ++++++++++
10.41 Employment Agreement for Scott Skooglund ................. ++++++++++
10.42 Employment Agreement for Joseph Moser .................... ++++++++++
10.43 Employment Agreement for Vincent J. Capponi .............. ++++++++++
10.44 Employment Agreement for Tuan Bui ........................ ++++++++++
10.45 Employment Agreement for Stephan C. Beal ................. ++++++++++
10.46 Employment Agreement for Stephen L. Axel ................. ++++++++++
10.47 Intentionally Omitted
10.48 Employment Agreement for Mary Beth Blue .................. ++++++++++
10.49 Intentionally Omitted
10.50 Stock Purchase Agreement, dated as of May 19, 1999,
between Sabratek Corporation and Ralin Medical, Inc. ..... *
10.51 Agreement of Merger, dated as of June 29, 1999, by
and among Sabratek Corporation, SBTK I Acquisition
Corporation, a wholly-owned subsidiary of Sabratek
and Strategic Reimbursement Services, Inc. ............... **
10.52 Research and Development Agreement, dated as of June 30,
1999, by and between Sabratek Corporation and Systle
Corporation .............................................. #
10.53 Memorandum of Understanding, dated as of March 26,
1999, and Supplement, dated as of July 2, 1999, by and
between Sabratek Corporation and EGS Securities Corp...... #
21 List of Sabratek's Subsidiaries .......................... #
23.1 Consent of KPMG LLP ......................................
23.2 Consent of Ross & Hardies (included in exhibit 5.1) ...... #
24 Powers of Attorney (included in the signature page) ...... #
</TABLE>
+ Incorporated by reference to Sabratek's Registration
Statement on Form S-1, declared effective by the SEC on June
21, 1996 (File No. 333-3866)
++ Incorporated by reference to Sabratek's Current Report on
Form 8-K filed with the SEC on March 11, 1997. Incorporated
by reference to Sabratek's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the SEC on
March 31, 1997
+++ Incorporated by reference to Sabratek's Registration
Statement on Form S-1, declared effective by the SEC on April
4, 1997 (File No. 333-23437).
++++ Incorporated by reference to Sabratek's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 filed with the
SEC on May 15, 1997.
II-5
<PAGE> 28
++++++ Incorporated by reference to Sabratek's Registration
Statement on Form S-3 declared effective by the SEC on July
14, 1998.
+++++++ Incorporated by reference to Sabratek's Current Report on
Form 8-K filed with the SEC on August 25, 1998.
++++++++ Incorporated by reference to Sabratek's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 filed with the
SEC on August 14, 1998.
+++++++++ Incorporated by reference to Sabratek's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 filed with
the SEC on November 16, 1998.
++++++++++ Incorporated by reference to Sabratek's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 filed with
the SEC on April 9, 1999
* Incorporated by reference to Sabratek's current report on
Form 8-K dated June 1, 1999 and filed with the SEC on June
16, 1999.
** Incorporated by reference to Sabratek's current report on
Form 8-K dated June 29, 1999 and filed with the SEC on July
14, 1999.
# Originally filed with the Registration Statement on Form S-3
on July 16, 1999.
ITEM 17. UNDERTAKINGS
Sabratek hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: 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:
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-6
<PAGE> 29
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of Sabratek's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) 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.
II-7
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Sabratek
has duly caused this Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Skokie, State of Illinois,
on July 22, 1999.
SABRATEK CORPORATION
By: /s/ K. Shan Padda
-------------------------------------
K. Shan Padda
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 has been signed by the following persons on this twenty-second
day of July, 1999 in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ K. Shan Padda Chairman of the Board and Chief Executive Officer -
- ----------------------------------- Principal Executive Officer
K. Shan Padda
/s/ Stephen L. Holden President
- -----------------------------------
Stephen L. Holden
/s/ John Reilly * Senior Vice President, Chief Financial Officer and
- ----------------------------------- Treasurer - Principal Financial Officer
John Reilly
/s/ Scott Skooglund * Vice President - Finance and Assistant Secretary -
- ----------------------------------- Principal Accounting Officer
Scott Skooglund
/s/ Doron C. Levitas * Director, Vice Chairman of the Board, Chief Administrative
- ----------------------------------- Officer, Vice President of International
Doron C. Levitas Operations and Secretary
</TABLE>
<PAGE> 31
Director
- -----------------------------------
Francis V. Cook, M.D.
Director
- -----------------------------------
Mark Lampert
/s/ William D. Lautman * Director
- -----------------------------------
William D. Lautman
/s/ William H. Lomicka * Director
- -----------------------------------
William H. Lomicka
Director
- -----------------------------------
Marvin Samson
/s/ L. Peter Smith * Director
- -----------------------------------
L. Peter Smith
/s/ Edson W. Spencer, Jr. * Director
- -----------------------------------
Edson W. Spencer, Jr.
* Signed pursuant to power of attorney
<PAGE> 32
SABRATEK CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
23.1 Consent of KPMG LLP
</TABLE>
<PAGE> 33
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SABRATEK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
================================================================================
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG, LLP
The Board of Directors
Sabratek Corporation:
We consent to incorporation by reference in the registration statement
on Form S-3 of Sabratek Corporation of our report dated March 12, 1999, relating
to the consolidated balance sheets of Sabratek Corporation as of December 31,
1998 and 1997 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the years in the
three-year period ended December 31, 1998, which report appears in the December
31, 1998 Annual Report on Form 10-K of Sabratek Corporation and to the reference
to our firm under the heading "Experts" in the Registration Statement.
KPMG LLP
/s/ KPMG LLP
Chicago, Illinois
July 15, 1999
