<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 22, 1999
REGISTRATION NO. 333-83433
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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 juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
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. [ ]
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. [ ]
<TABLE>
<CAPTION>
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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
Securities to be Registered Aggregate Offering Fee
Price (1)
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<S> <C>
Common Stock 216,949 $ 5,938,979 $ 1,652
$.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 19,
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> 2
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
216,949 SHARES
SABRATEK CORPORATION
COMMON STOCK
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This prospectus relates to the offer and sale of up to 216,949 shares
of our common stock from time to time by the selling stockholders who are former
stockholders of GDS Technology, Inc., an Indiana Corporation. The selling
stockholders acquired the 216,949 shares of our common stock being offered by
means of this prospectus in a transaction in which we exercised an option to
acquire all of the outstanding common stock issued by GDS under the terms of a
stock option agreement, dated as of August 29, 1997. See "SELLING STOCKHOLDERS."
The purchase price was determined in accordance with the formula contained in
the stock option agreement.
In connection with our acquisition of GDS, we also agreed to register
the resale of the 216,949 shares of common stock by the selling stockholders
under the Securities Act of 1933, as amended. Unless we are entitled to
reimbursement for any damages we incur as a result of a breach of a
representation, covenant or agreement contained in the stock option agreement,
we will not receive any of the proceeds from the sale of the shares by the
selling stockholders. See "SELLING STOCKHOLDERS" and "USE OF PROCEEDS."
The shares of our common stock are quoted on the Nasdaq National Market
under the symbol "SBTK".
The shares offered by this means of prospectus involve a high degree of
risk. See "RISK FACTORS" beginning on Page 1.
THE DATE OF THIS PROSPECTUS IS JULY __, 1999
<PAGE> 3
TABLE OF CONTENTS
Page
----
WHERE YOU CAN FIND MORE INFORMATION...................................... ii
RISK FACTORS............................................................. 1
SELLING STOCKHOLDERS..................................................... 11
USE OF PROCEEDS.......................................................... 15
PLAN OF DISTRIBUTION..................................................... 15
LEGAL MATTERS ........................................................... 16
EXPERTS ................................................................. 16
RECENT DEVELOPMENTS ..................................................... 16
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:
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;
g. our current report on Form 8-K, dated July 1, 1999 and filed with
the SEC on July 16, 1999 and any later filed amendments;
h. our current report on Form 8-K, dated July 9, 1999 and filed with
the SEC on July 21, 1999 and any later
- ii -
<PAGE> 4
filed amendments;
i. 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.
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:
- the products may require and fail to receive regulatory clearance
or approval,
- the products may be difficult or uneconomical to manufacture or
market,
- the proprietary rights of third parties may preclude us from
marketing these products,
- scientific developments or technological advancements may produce
more desirable or technologically advanced products,
- our competitors may market superior or more cost-effective
products and may do so on a more timely basis,
- errors and malfunctions may be found in products after their
commercial introduction and may not be corrected in a timely
manner, and
- 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.
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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 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)
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promulgated under the Securities Exchange Act of 1934. On June 7, 1999, we were
served with an amended complaint which expanded 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 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.
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.
- 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
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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.
- 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.
- 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.
- 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.
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- 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.
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.
- 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:
- refuse to clear pending 510(k) Submissions until specified
conditions are met,
- withdraw previously cleared 510(k) Submissions,
- require notification to users regarding newly found unreasonable
risks,
- request repair, refund or replacement of faulty devices,
- shut down facilities,
- require corrective advertisements, recalls or marketing
suspension,
- impose civil penalties, and
- 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
before the assessment of civil penalties. If civil penalties are assessed,
judicial review is available.
- 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
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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.
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:
- regulatory or legislative changes pertaining to health care,
- product liability exposure,
- dependence on future product development,
- pending litigation, and
- acquisitions of companies or product lines and integration of
these companies or product lines into our operations.
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<PAGE> 11
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 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.
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:
- maintenance of existing relationships and/or the establishment of
new relationships with international distributors;
- fluctuations in exchange rates of the U.S. dollar against foreign
currencies;
- economic or political instability and domestic and foreign
governmental regulations, including export license requirements,
trade restrictions, changes in tariffs, regulatory approval for
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<PAGE> 12
marketing products or similar factors;
- uncertain or limited protection of our intellectual property
rights under the laws of 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.
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 these acquisitions, we entered
into agreements with the recipients of our common stock which obligate Sabratek
to file registration statements which will allow the 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
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<PAGE> 13
future. Future revenues and operating results may also fluctuate significantly
from quarter to quarter and will depend upon, among other factors:
- demand for our products and new product introductions,
- demand for products distributed by our competitors,
- our efforts regarding transitions to new or enhanced products,
- the timing of orders and shipments,
- the mix of sales between products,
- competition, including pricing pressures,
- the timing of regulatory filings and approvals,
- the timing of reimbursement from third-party payors, and
- 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:
- announcements of technological or medical innovations,
- the introduction of new commercial products by our competitors,
- disputes concerning patents or proprietary rights,
- positive or negative regulatory action,
- changes in regulatory or medical reimbursement policies, and
- 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.
- 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 the 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.
- 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.
- 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.
- 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
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<PAGE> 14
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.
- 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.
- Sabratek's senior executive officers may be entitled to substantial
change in control payments. These payments could have the effect of
discouraging a potential acquiror from acquiring control of
Sabratek.
SELLING STOCKHOLDERS
The 216,949 shares of common stock being offered by means of this
prospectus were originally issued to the selling stockholders on July 9, 1999 in
exchange for all of their shares of outstanding common stock issued by GDS
Technology, Inc. Sabratek acquired the common stock of GDS through the exercise
of an option to purchase the GDS stock granted under a stock option agreement,
dated as of August 29, 1997 by and among Sabratek, GDS and those GDS
shareholders who executed the stock option agreement. The purchase price was
determined in accordance with the formula contained in the stock option
agreement. As a result of our acquisition of GDS, GDS became a wholly-owned
subsidiary of Sabratek.
The former shareholders of GDS who executed the stock option agreement
agreed to indemnify us for breaches of the representations, covenants or
agreements contained in the stock option agreement. In the event that it is
determined that we are entitled to indemnification, the selling stockholders may
choose to pay us out of proceeds received from the sale of shares of our common
stock offered by means of this prospectus. See "USE OF PROCEEDS" and "PLAN OF
DISTRIBUTION." Further, in connection with our purchase of GDS, we also agreed
to register the 216,949 shares of our common stock which we issued to the
selling stockholders under the terms of a registration rights agreement.
In connection with our acquisition of GDS, we entered into three year
employment agreements with Aurora F. de Castro, Surendra K. Gupta and Mark L.
Priebe, each of whom is a senior executive of GDS and a selling stockholder of
some of the shares being offered by means of this prospectus. Under the terms of
their respective employment agreements, each employee will receive a minimum
annual salary of $150,000 and additional bonuses in the discretion of Sabratek's
Chief Executive Officer. In addition, each employment agreement provides that if
the appropriate employee's employment is terminated without cause, as that term
is defined in the employment agreement, he or she shall be entitled to all
salary, bonuses and benefits through the term of the employment agreement, so
long as the employee did not breach any provision contained in the employment
agreement relating to confidentiality or non-competition. As part of the
employment agreements, each of the employees agreed to (a) not disclose
proprietary information belonging to Sabratek or any of its subsidiaries,
including GDS, (b) not compete with Sabratek or any of its subsidiaries,
including GDS, and (c) not solicit employees or customers from Sabratek or any
of its subsidiaries, including GDS, during each employee's term of employment
and for one year after the employee's employment with Sabratek or one of its
subsidiaries ends.
The following table sets forth information about the beneficial
ownership of the selling stockholders as of July 9, 1999 as to:
- the number of shares of common stock that are beneficially held by
the selling stockholders,
- the maximum number of shares that may be offered by the selling
stockholders in this prospectus, and
- 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 the number represents.
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<PAGE> 15
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.
<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>
Arun K. Agarwal 638 638 0 *
*Michael Berg 1,915 1,915 0 *
Arvind K. Bhargava 838 838 0 *
Michael A. Bueter 159 159 0 *
Michael E. Eggers 39 39 0 *
Caren R. Gay 159 159 0 *
Shashi P. Gupta 159 159 0 *
Sandra Hamel 2,534 2,234 300 *
Jacqueline S. Martin 159 159 0 *
Beth A. Montana 39 39 0 *
Mark L. Priebe 1,596 1,596 0 *
Steve M. Shantz 638 638 0 *
Jill Soens 159 159 0 *
Mary A. Van Order 159 159 0 *
Aurora F. deCastro 56,580 56,580 0 *
Surendra K. Gupta 55,781 55,781 0 *
Mary A. Sproull 23,945 23,945 0 *
Enrique Levy 7,981 7,981 0 *
Hamel & Elbert
Partnership 798 798 0 *
James R. Wise &
Victoria A. Wise as
joint tenants 798 798 0 *
M. Barbara Hoffman 798 798 0 *
Charles E. Niemier 399 399 0 *
</TABLE>
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<PAGE> 16
<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>
Lois J. Niemier 399 399 0 *
Janet Resnick 2,367 2,367 0 *
MAC Club 2,367 2,367 0 *
Piper Jaffray as
Custodian of
Anton H. Clemens,
IRA 2,367 2,367 0 *
Michael Hollendoner 2,867 2,367 500 *
Prudential Securities
C/F Gerald D
Putnam, IRA dated
7/19/91 1,578 1,578 0 *
Gerald D. Putnam &
Sharron A. Putnam,
as joint tenants 789 789 0 *
Delaware Charter
Guarantee & Trust
Co. as Trustee of
Frank D. Harrison
IRA 2,367 2,367 0 *
Robert W. Mohs,
IRA Dain Rauscher
Custodian 789 789 789 0 *
Robert W. Mohs 2,051 2,051 0 *
Charles F. Meier and
Marily Meier
as Co-Trustees
U/D/T dated
10/26/88 F/B/O
Charles F. Meier and
Marilyn Meier 2,367 2,367 0 *
Anne M. Soens and
Robert P. Soens 159 159 0 *
Vernon R. Sailor 319 319 0 *
Russell G
Ashbaugh, Jr.,
TTEE, Russell G
Ashbaugh, Jr. Trust,
dated 1/29/98 2,039 2,039 0 *
</TABLE>
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<PAGE> 17
<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>
Gordon L. Beeler &
Kathleen M. Beeler,
JTTEN 2,039 2,039 0 *
Walter E. Wells 2,039 2,039 0 *
Dennis D. Blyly 204 204 0 *
Frank K. Martin,
TTEE, Frank K
Martin Trust dated
10/19/97 3,874 3,874 0
James W. Hurley 2,039 2,039 0 *
Kelly L. Rose 2,039 2,039 0 *
Andrew W. Frech 2,039 2,039 0 *
John M. Collins 2,039 2,039 0 *
Glen J. Riegsecker 4,078 4,078 0 *
Edward P. Welter &
Willy J. Welter 4,078 4,078 0 *
Steven F. Goens 2,039 2,039 0 *
Mary Ann Burger
Eash 2,039 2,039 0 *
Allen Yoder Jr. &
Marie J. Yoder as
joint trustees 2,039 2,039 0 *
Peter M. Zacher 2,039 2,039 0 *
Constance M
Novello 680 680 0 *
Susan C. Marston
TTEE, Susan C
Marston Trust 680 680 0 *
J. Tucker Marston
TTEE, J. Tucker
Marston Trust 679 679 0 *
Hamender K
Agarwal 3,990 3,990 0 *
</TABLE>
* Less than 1% of the issued and outstanding shares of Sabratek's common
stock.
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<PAGE> 18
Note to selling stockholders table: Sabratek has relied on information
provided by the selling stockholders to determine the number of shares
of our common stock, if any, which the selling stockholders owned prior
to receiving the shares of our common stock issued to them in
connection with the acquisition of GDS Technology, Inc.
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 such shares. However, in
the event that there is a determination that we are entitled to any
indemnification due to a breach of a representation, covenant or agreement,
those selling stockholders who agreed to indemnify us may choose to pay us out
of proceeds received from the sale of shares of our common stock offered by
means of this prospectus. See "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION."
We cannot, however, predict whether any payment will be made or the amount of
any payment if it is made. To the extent that Sabratek does receive any amount
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 216,949 shares offered by means of this prospectus may be sold from
time to time by the selling stockholders. Unless we are entitled to
reimbursement for any damages we incur, we will not receive any proceeds from
this offering. See, "SELLING STOCKHOLDERS" and "USE OF PROCEEDS." We have agreed
to register the resale of these shares of our common stock by the selling
stockholders.
The selling stockholders may offer the shares from time to time in the
open market, on the Nasdaq National Market, in privately negotiated
transactions, or in a combination of these methods, at market prices that
prevail at the time of sale or at privately negotiated prices. The selling
stockholders may sell these shares through one or more brokers or dealers or
directly to purchasers. These broker-dealers may receive compensation in the
form of commissions, discounts or concessions from the selling stockholders
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 stockholders and any
broker-dealers 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. Under Exchange Act rules and regulations, no distribution participant or
its affiliated purchasers (as defined in Regulation M adopted under the Exchange
Act) may simultaneously engage in market making activities with respect to the
shares for a restricted period beginning on the day proxy solicitation or
offering materials are first disseminated to security holders and ending upon
the completion of the distribution, except under limited circumstances. The
selling stockholders, their affiliated purchasers and any other person
participating in the distribution will be subject to certain provisions of the
Exchange Act and related rules and regulations. These provisions prohibit,
except under limited circumstances, the purchase and sale of any of the shares
by the selling stockholders, their affiliated purchasers and any other person
participating in the distribution during the restricted period described above.
These restrictions may affect the marketability of the shares and the ability of
any person or entity to engage in market making activities with respect to the
shares.
The selling stockholders may pledge, hypothecate or grant a security
interest in some or all of the shares of our common stock they own. In the event
of a foreclosure or event of default in connection with those pledges, the
shares may be transferred to the persons to whom the shares were pledged. If
such a transfer occurs, the transferees will be deemed to have the rights of the
selling stockholders under this plan of distribution. At the same time, the
selling stockholders will beneficially own fewer shares. The plan of
distribution for the selling stockholders' shares will otherwise remain
unchanged.
We have agreed to pay all of the expenses incident to the registration,
offering and sale of the shares to the public other than commissions or
discounts of underwriters, broker-dealers or agents. We have agreed to indemnify
the selling stockholders against certain liabilities, including certain
liabilities under the Securities Act.
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<PAGE> 19
In the event that we file a registration statement under the Securities
Act of an underwritten offering of our common stock, we may restrict the ability
of the selling stockholders to effect a public sale of the shares of common
stock being offered by means of their prospectuses during the ten business days
before, and the 90-day period beginning on, the effective date of the
registration statement, so long as the selling stockholders are given an
opportunity to participate in the underwritten offering.
This offering will terminate on the earlier of (a) the date on which
all shares offered by means of this prospectus have been sold by the selling
stockholders, (b) the date on which counsel to Sabratek renders an opinion to
the selling stockholders to the effect that all of their remaining shares of
Sabratek common stock are freely tradable in the open market without limitations
as to volume and without requirements regarding the filing of any forms or
reports with the SEC or (c) July 9, 2001, which is two years after the date of
our acquisition of GDS.
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 consolidated 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 1, 1999, Sabratek purchased all of the issued and outstanding
shares of capital stock of LifeWatch, Inc., a wholly-owned subsidiary of Ralin
Medical, Inc. LifeWatch monitors patients transtelephonically in alternate site
settings on behalf of health care providers and is the market leader in
arrhythmia monitoring. Under the terms of a stock purchase agreement dated as of
May 19, 1999, Sabratek paid Ralin $12,260,000 in cash from its existing cash
reserves and 900,000 shares of our common stock in exchange for all of the
outstanding shares capital stock of LifeWatch.
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 and 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,
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<PAGE> 20
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 we did not acquire on July 1, 1999, on terms
identical to those contained in the option agreement.
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<PAGE> 21
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 shares of common stock is delivered to
the purchaser.
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<PAGE> 22
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.
SEC registration fee..................................$ 1,652
Printing expenses.....................................$ 2,500
Legal fees and expenses...............................$15,000
Accounting fees and expenses..........................$ 5,000
Miscellaneous expenses ...............................$ 1,848
Total $26,000
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.
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,
II-1
<PAGE> 23
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.
II-2
<PAGE> 24
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>
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............................. *
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.......................................... **
4.5 Registration Rights Agreement, dated as of January 22, 1999,
by and among Sabratek Corporation and the holders of common
stock, options and warrants issued by Unitron Medical
Communications, Inc............................................................... ****
4.6 Registration Rights Agreements, dated as of August 29, 1997,
by and among Sabratek Corporation and the holders of shares
of common stock issued GDS Technology, 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.................................................. +
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,
</TABLE>
II-3
<PAGE> 25
<TABLE>
<S> <C> <C>
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....................................... ++++++++
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,
</TABLE>
II-4
<PAGE> 26
<TABLE>
<S> <C> <C>
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, between Sabratek
Corporation and EGS Securities Corp............................................... ***
10.54 Option Agreement, dated as of January 22, 1999,
by and among Sabratek Corporation, Unitron
Medical Communications, Inc. and the holders
of all of the common stock, options and warrants
issued by Unitron Medical Communications, Inc..................................... ****
10.55 Employment Agreement between Strategic Reimbursement
Services, Inc. and Robert C. Gienko............................................... *****
10.56 Employment Agreement between Strategic Reimbursement
Services, Inc. and Steve Fagerman................................................. *****
10.57 Employment Agreement between Strategic Reimbursement
Services, Inc. and Kenneth Janowski............................................... *****
10.58 Employment Agreement between Strategic Reimbursement
Services, Inc. and Mark Pugh...................................................... *****
10.59 Memorandum of Understanding, dated as of March 2, 1999,
and Supplement, dated as of July 5, 1999, between Sabratek
Corporation and EGS Securities Corp............................................... *****
10.60 Stock Option Agreement, dated as of August 29, 1997,
by and among Sabratek Corporation, GDS Technology,
Inc. and holders of common stock issued by GDS
Technology, Inc................................................................... ******
10.61 Employment Agreement between Unitron Medical
Communications, Inc., d/b/a Moon Communications
and H. Jay Hill. ................................................................. *******
10.62 Separation Agreement by and among Ralph V. Frasca,
Unitron Medical Communications, Inc. and Sabratek
Corporation....................................................................... *******
10.63 Employment Agreement, dated as of July 9, 1999, by and among
Sabratek Corporation, GDS Technology, Inc.
and Aurora F. de Castro. ......................................................... #
10.64 Employment Agreement, dated as of July 9, 1999, by
and among Sabratek Corporation, GDS Technology, Inc.
</TABLE>
II-5
<PAGE> 27
<TABLE>
<S> <C> <C>
and Surendra K. Gupta. ........................................................... #
10.65 Employment Agreement, dated as of July 9, 1999, by
and among Sabratek Corporation, GDS Technology, Inc.
and Mark L. Priebe. .............................................................. #
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.
++++++ 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.
*** Incorporated by reference to Sabratek's Registration Statement on
Form S-3, filed with the SEC on July 16, 1999.
**** Incorporated by reference to Sabratek's current report on Form
8-K dated July 1, 1999 and filed with the SEC on July 16, 1999.
***** Incorporated by reference to Sabratek's Registration Statement on
Form S-3, filed with the SEC on July 19, 1999.
****** Incorporated by reference to Sabratek's current report on Form
8-K dated July 9, 1999 and filed with the SEC on July 21, 1999.
******* Incorporated by reference to Sabratek's Registration Statement on
Form S-3, filed with the SEC on July 21, 1999.
# Originally filed with the Registration Statement on Form S-3 on
July 21, 1999.
II-6
<PAGE> 28
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.
(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> 29
SIGNATURES
Under 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
Under 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 Administr
- ------------------------------------- Officer, Vice President of International
Doron C. Levitas Operations and Secretary
/s/ Francis V. Cook, M.D. * Director
- -------------------------------------
Francis V. Cook, M.D.
/s/ Mark Lampert * Director
- -------------------------------------
Mark Lampert
/s/ William D. Lautman * Director
- -------------------------------------
William D. Lautman
Director
- -------------------------------------
William Lomicka
/s/ Marvin Samson * Director
- -------------------------------------
Marvin Samson
Director
- -------------------------------------
L. Peter Smith
/s/ Edson W. Spencer, Jr. * Director
- -------------------------------------
Edson W. Spencer, Jr.
</TABLE>
* Signed pursuant to power of attorney
<PAGE> 30
SABRATEK CORPORATION
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23.1 Consent of KPMG LLP
<PAGE> 31
=================================
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 this 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.
/s/ KPMG LLP
----------------
KPMG LLP
Chicago, Illinois
July 15, 1999
