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Filed pursuant to Rule 424(b)(2)
Registration No. 333-40142
PROSPECTUS
1,100,000 Shares
FUSION MEDICAL TECHNOLOGIES, INC.
Common Stock
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We have prepared this prospectus to allow the selling stockholders named in
this prospectus to sell up to 1,100,000 shares of our common stock. We will not
receive any of the proceeds from the sale of common stock by the selling
stockholders.
Our common stock is quoted on the Nasdaq National Market under the symbol
"FSON". The last reported sale price of our common stock on the Nasdaq National
Market on June 23, 2000 was $16 41/64 per share.
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Investing in the common stock involves a high degree of risk. See "Risk
Factors" beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
July 10, 2000
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FUSION MEDICAL TECHNOLOGIES, INC.
Our Company
We develop, manufacture and market proprietary surgical hemostatic sealant
products. Our current principal commercial product is FloSeal(R) Matrix
Hemostatic Sealant,or FloSeal. The innovative physical structure of FloSeal
will provide performance advantages over existing surgical hemostatic products.
The advantages should include:
. fast and effective bleeding control,
. broad surgical applicability,
. easy on-site preparation,
. ease of use,
. safe, total absorption of FloSeal by the body within six to eight weeks,
and
. shortening of surgical procedures.
In December 1999, the U.S. Food and Drug Administration, or the FDA,
approved the marketing of FloSeal in the U.S. for approximately 85% of surgical
procedures. In April 1999, a responsible agency approved FloSeal for all
surgical procedures in the European Union.
We are focusing our immediate marketing efforts on cardiac, vascular and
spinal procedures, in which we believe we will have the most effective early
market penetration. We believe these markets are the most likely candidates for
early acceptance of FloSeal by the medical community.
Our Products
Surgeons normally cannot effectively close surgical wounds and avoid serious
or possibly life-threatening complications, such as excessive blood loss,
tissue damage, infection and excessive scarring, until they are able to control
bleeding. Hemostatic products, such as FloSeal, are used to stop bleeding
during surgical procedures.
The compound constituting FloSeal and our other products and applications
under development consists of a mixture of a collagen-derived gel and thrombin,
which is a potent blood-clotting agent. Our proprietary products combine these
elements and act synergistically to stop bleeding.
FloSeal
FloSeal controls bleeding in various types of surgeries. We designed FloSeal
to complement sutures and staples and to overcome limitations of other existing
products used to control bleeding, including topical hemostats, fibrin glues
and other types of surgical sealants and adhesives.
Proceed
Proceed(TM) Hemostatic Sealant, or Proceed, is our product for the spinal
surgical market. The technology underlying Proceed is based on the FloSeal
technology. In July 1999, we entered into a collaboration agreement with Sulzer
Spine-Tech, a subsidiary of Sulzer Medica Ltd., to market and sell Proceed for
spinal and cranial surgeries in substantially all of the countries in the
world, including in the U.S. and the European Union.
Under Development
We are developing other applications and products. They include FloSeal for
ear, nose and throat procedures, the FloSeal sponge, a ready to use
configuration of FloSeal for trauma, ambulance and emergency situations, and a
femoral artery closure device, for closing femoral artery punctures following
catheterization procedures, such as balloon angioplasty or angiography.
Statements regarding the anticipated manufacturing, marketing and sale of
applications of FloSeal and other products under development are forward
looking. We are not permitted to manufacture, market or sell applications and
products without necessary regulatory approvals.
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We were incorporated in Delaware on October 14, 1992. Our principal
executive offices are located at 34175 Ardenwood Boulevard, Fremont, California
94555 and our telephone number at that address is (510) 818-4600.
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Fusion Medical Technologies(TM), Fusion(TM), FloSeal(R), Proceed(TM) and
RapiSeal(TM) are our trademarks or registered trademarks. Each tradename,
trademark or service mark of any other company appearing in this prospectus
belongs to the holder.
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RISK FACTORS
An investment in our common stock involves significant risks. You should
carefully consider the risks described below before making an investment
decision. If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. As a
result, the trading price of our common stock could decline, and you may lose
all or part of your investment. This prospectus also contains forward-looking
statements that involve risks and uncertainty.
We did not generate any revenues in 1998 and generated only modest revenues in
1999. We have a history of losses. We expect losses to continue in the future,
and we may never achieve profitability.
We have not been profitable since our inception in 1992. Through 1998, we
did not generate any revenues, other than modest revenues in 1996 and 1997 from
the sale of the RapiSeal patch, a product that we discontinued in 1997. We
generated only $254,000 of revenues in 1999 and $682,000 in the first quarter
of 2000. We incurred net losses of $10.0 million in 1997, $7.7 million in 1998,
$8.3 million in 1999 and $3.1 million in the first quarter of 2000. As of March
31, 1999, we had an accumulated deficit of $40.7 million. We expect to increase
our operating expenses to market our current commercial product, FloSeal, and
to develop other products. The amount of future net losses and the time
required to achieve profitability are highly uncertain. We do not expect to
achieve profitability before at least 2001, and we may never achieve
profitability. If we do achieve profitability in any period, we may not be able
to sustain or increase such profitability on a quarterly or annual basis.
We expect quarterly revenue and operating results to vary significantly in
future periods, which could cause our stock price to fluctuate.
Our limited operating results have varied widely in the past, and we expect
they will continue to vary significantly from quarter to quarter as we attempt
to commercially produce and establish FloSeal and our other products under
development in the market. Our quarterly results may fluctuate for many
reasons, including:
. our limited operating history,
. our dependence on FloSeal to provide future revenue, and
. our lack of experience in manufacturing and marketing FloSeal in
commercial quantities.
As a result of these fluctuations and uncertainties in our operating
results, we believe quarter-to-quarter or annual comparisons of our operating
results are not a good indication of our future performance. In addition, at
some point in the future, these fluctuations may likely cause us to perform
below the expectations of public market analysts and investors. If our results
were to fall below market expectations, the price of our common stock would
likely fall.
We cannot be certain that we will be able to manufacture FloSeal in
sufficiently high volumes at commercially reasonable costs.
We have limited experience manufacturing FloSeal or any of our other
products in the quantities necessary to achieve significant commercial sales.
We cannot be certain we will be capable of reliable, high-volume manufacturing
at commercially reasonable costs. We could encounter problems relating to:
. capacity constraints,
. production yields,
. quality control,
. shortages of qualified personnel, and
. raw materials supply.
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These problems could affect our ability to adequately increase and maintain
uninterrupted production of our products and fill customer orders on a timely
basis, in which case we may not be able to increase revenues. Furthermore, the
adverse consequences of these problems could have a disproportionately large
effect on us because the manufacturing of FloSeal is centralized in a single
facility.
In addition, our manufacturing facilities are subject to the Quality System
Regulation of the FDA, international quality standards and other regulatory
requirements. Our failure to implement and maintain our facilities in
accordance with these regulatory requirements and standards will result in a
delay or termination of production. Any delay or termination of production
would materially and adversely affect our ability to manufacture commercially
necessary volumes and our ability to generate revenue.
We may not be able to successfully market and sell FloSeal.
We depend on the success of FloSeal, our lead product and currently only
commercial source of revenue. We received the necessary regulatory approval for
the commercial sale of FloSeal in the U.S. in December 1999 and the necessary
regulatory approval for the commercial sale of FloSeal in the European Union in
April 1999. Our success, if any, will depend on the medical community's
acceptance of FloSeal and our ability to increase commercial manufacturing and
to develop an effective sales, marketing and distribution capability. We cannot
predict how quickly, if at all, the medical community will accept FloSeal.
Similarly, we cannot predict the extent to which FloSeal will be used. A
surgeon's use of FloSeal will require a change from more familiar products that
are currently available. We cannot assure you of our ability to cause such a
change. For example, we were not able to successfully market our prior product,
RapiSeal, which we discontinued in 1997. FloSeal will have to be priced
competitively and offer clinically significant advantages over other
commercially available products in order to achieve market acceptance. Even if
the market generally accepts FloSeal, surgeons may choose to use it in fewer
procedures than we project. If FloSeal does not achieve significant market
acceptance or we are unsuccessful in increasing commercial manufacturing or in
developing an effective sales, marketing and distribution capability, we may
not be able to increase our revenues while our costs will continue to rise.
Our ability to achieve significant revenue will depend on our ability to
establish effective sales, marketing and distribution capabilities.
Our ability to achieve significant revenue will depend heavily on our
success in establishing effective sales and marketing capabilities through a
combination of a direct sales force and collaboration and distribution
arrangements. We have built our own sales force to address only the cardiac and
vascular surgical markets for FloSeal in the U.S. We have only limited
experience in establishing and managing a direct sales force. We cannot be
certain we can establish and manage an effective direct sales force for
FloSeal. To the extent we rely on our direct sales force, we compete with other
companies that have greater experience and better-funded marketing and sales
operations.
We depend on distribution arrangements for sales, marketing and distribution
of FloSeal in international markets. We have a distribution arrangement with
Sulzer Spine-Tech for the worldwide distribution of Proceed, which is a
configuration of FloSeal application for the spinal and cranial surgical
markets. We have entered into distribution agreements with European regional
distributors for the distribution of FloSeal in the cardiac and vascular
surgical markets in the European Union. Our distributors may be unable to
satisfy minimum purchase agreement requirements or achieve projected sales
levels under the distribution agreements, which could result in the termination
of their agreements and a material adverse affect on our business, financial
condition and results of operations. In addition, several of our agreements
with regional distributors have one-year terms. The distributors are under no
obligation to renew these agreements. As a result, we may need to seek new
arrangements to sell and distribute FloSeal and our other products under
development or to expand our own direct sales capabilities. Securing new
partners or distributors is a time-consuming process, and there is no guarantee
that the negotiations with new distributors will result in arrangements on
commercially reasonable terms. There can be no assurance that the terms of new
arrangements will be favorable to us. In addition, there
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can be no assurance that our distributors will not distribute other products
that compete directly with FloSeal or new products developed by competitors
that may prove to be more effective or cost efficient alternatives than our
products.
We may be unable to market and sell FloSeal effectively because the market for
hemostatic products is highly competitive.
The market for products that control surgical bleeding is highly
competitive. FloSeal and our other products under development compete with a
variety of products, such as topical hemostats, fibrin glues and other types of
surgical sealants and adhesives.
Competing products are manufactured and sold by several companies, including
Pharmacia & Upjohn (maker of Gelfoam), Baxter International (maker of Tisseel,
a fibrin glue product) and Johnson & Johnson. We cannot be certain that FloSeal
or our other products under development will be able to compete successfully
against these companies or any other products or companies that may enter the
marketplace.
Our major competitors have several competitive advantages over us, such as:
. greater name recognition,
. broader product lines,
. greater marketing and sales personnel resources,
. stronger distribution networks,
. greater capital resources,
. larger regulatory compliance staffs, and
. larger technological, research and development and clinical staffs and
facilities.
Our competitors may develop future products that are more effective, easier
to use or more economical than FloSeal or our other products under development.
Our competitors may also use technologies that could render our technology or
products obsolete or unable to compete. Additionally, we cannot assure you that
our marketing or other strategic partners, such as Sulzer Spine-Tech, will not
pursue parallel development of technologies or products that compete with
FloSeal or our products under development.
Smaller companies, such as Bard, CryoLife and Cohesion, may also prove to be
significant competitors, particularly through collaborative arrangements with
large companies. Academic institutions, government agencies and other public
and private research organizations also conduct research, seek patent
protection and establish collaborative arrangements for product development and
marketing. In addition, these companies and institutions compete with us in
recruiting and retaining highly qualified scientific and management personnel.
We purchase key raw materials from single suppliers, with whom we do not have
long term supply arrangements.
We currently purchase essential elements of FloSeal and sterilization
services from single suppliers. We purchase bovine hides from Spear Products
and thrombin from GenTrac, Inc. We do not have long-term supply arrangements
with these suppliers. In the event that raw materials from any of our current
single-source suppliers become unavailable for any reason, we will be required
to identify alternative suppliers. Identifying and utilizing additional or
replacement suppliers for any of the components in FloSeal may not be
accomplished quickly and could involve significant additional costs. In
addition, because the FDA approval process requires manufacturers to specify
their proposed suppliers of active ingredients and certain packaging materials
in their applications, FDA approval of any new supplier would be required if
active ingredients or the packaging materials were no longer available from the
specified supplier. The qualification of a new supplier could delay our
development and marketing efforts. Our failure to obtain any of the components
used to
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manufacture FloSeal from alternative suppliers or any delay in qualifying a new
supplier could limit our ability to manufacture FloSeal and would have a
material adverse affect on our business, financial condition and results of
operations.
We manufacture FloSeal in a single manufacturing facility, which is located in
the San Francisco Bay Area in California. A natural disaster is possible and
could result in prolonged interruption of our business.
We currently manufacture FloSeal in our Mountain View, California facility.
We plan to continue manufacturing FloSeal only in that facility until at least
the middle of 2001. After expiration of the Mountain View lease at the end of
2001, we intend to centralize all manufacturing activities at the Fremont
facility. Both facilities are located in the San Francisco Bay Area in
California, which is a seismically active area. With our manufacturing
centralized in a single facility, a natural disaster, such as an earthquake,
fire or flood, could substantially disrupt our manufacturing operations or
destroy our facilities. This could cause delays and cause us to incur
additional expenses and adversely affect our reputation with our customers and
our distributors. In addition, since the real estate market in the San
Francisco Bay Area is extremely competitive and is likely to remain
competitive, an alternative facility may not be available on commercially
reasonable terms if we suffer a catastrophic loss from a natural disaster.
If we are unable to effectively develop and commercialize new products, our
revenues may decline.
To be successful, we will need, in part, to develop, market and sell
products other than FloSeal. We are developing FloSeal for ear, nose and throat
surgeries, the FloSeal sponge and our femoral artery vascular closure device.
There can be no assurance that we will be able to successfully develop these
products or, if developed, we will generate revenues or profits from these
products. For example, we were not able to successfully market our prior
product, RapiSeal, which we discontinued in 1997. Successful marketing and sale
of our products under development depends, in significant part, on our ability
to:
. complete product development in a timely fashion,
. obtain and maintain patents or other proprietary protections,
. obtain required regulatory approvals from the FDA and other regulatory
authorities,
. implement efficient, commercial-scale manufacturing processes,
. gain early entry into relevant markets,
. establish sales, marketing, distribution and development collaborations,
and
. demonstrate the efficacy and competitiveness of our products.
If new industry standards emerge that we do not anticipate or adapt to, our
products could be rendered obsolete and our revenues may decline. A number of
factors, including research and development or manufacturing difficulties,
could delay or prevent us from developing, introducing or marketing new
products. In addition, our competitors may introduce new products before we do
and achieve a competitive advantage in our targeted markets.
Significant increases in operating expenses in the future may adversely affect
our operating results and financial condition.
We plan to significantly increase our operating expenses to expand our
manufacturing, sales and marketing efforts, our customer support capability and
levels of product development. Our operating budget is based on our
expectations of future revenues and is relatively fixed in the short term. If
revenues fall below our expectations, we will not be able to quickly reduce our
spending, which would materially adversely affect our operating results and
financial condition. In addition, our revenue may fluctuate significantly due
to limited operating history and lack of experience in manufacturing and
marketing FloSeal.
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Additional funding may not be available to us or, if available, may not be
available on commercially reasonable terms.
We may need additional funding for research and product development,
obtaining regulatory approvals, increasing manufacturing capabilities,
enhancing sales and marketing capabilities, working capital needs and for other
operating and general corporate expenses. Future financing strategies may
include:
. partnering relationships with larger medical device companies,
. bank facilities, or
. debt or additional equity offerings.
We cannot be certain that funding from any source will be available to us on
commercially reasonable terms, if at all. The amount and the timing of raising
additional funds will depend primarily on our ability to generate revenues from
the sale of FloSeal. We generated only $254,000 from sales of FloSeal in the
year ended December 31, 1999 and $682,000 in the three months ended March 31,
2000. Our inability to obtain any needed additional funding on commercially
reasonable terms may force us to limit the marketing and sale of FloSeal, limit
one or more of our research and development programs or obtain financing
through arrangements that may require us to relinquish rights to certain of our
products, any of which could materially and adversely affect our operating
results or financial condition.
We may incur significant costs in maintaining compliance with regulations
governing our manufacturing operations.
We are required to maintain compliance with the good manufacturing practice
requirements of the FDA's Quality System Regulation for medical devices, as
well as regulatory authorities in the European Union. The Quality System
Regulation and the European regulatory requirements relate to product testing
and quality assurance, as well as the maintenance of records and documentation.
The FDA and the European regulatory authorities enforce their regulatory
requirements through periodic inspections. We can provide no assurance that we
will be able to maintain compliance on an on-going basis. If we or any third-
party manufacturer of our products or active ingredients do not conform to the
Quality System Regulation or the requirements of the European regulatory
authorities, we will be required to find alternative manufacturers that do
conform to the Quality System Regulation. This may be a long and costly
process. Alternative third-party manufacturers must be approved by the FDA
before they can commercially manufacture our products or active ingredients. We
may have to incur significant costs to comply with laws and regulations and our
failure to comply could lead to penalties that could have a material and
adverse affect on our operating results or financial condition.
If we fail to maintain regulatory approvals for FloSeal, our business will
suffer.
Although we have obtained regulatory approval of FloSeal in the U.S. for
almost all surgical applications and in the European Union for all surgical
applications, we continue to be subject to extensive regulatory requirements.
These regulations are wide-ranging and govern, among other things:
. product changes or modifications,
. product manufacturing,
. manufacturing quality control requirements,
. reporting requirements to regulatory agencies,
. unapproved, off-label uses, and
. product sales and distribution.
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If we fail to comply with medical device laws or regulations, we may be
fined and restricted from selling our products. If the FDA believes that we are
not complying with the law, it can:
. detain or seize our products,
. issue a recall,
. enjoin future violations, and
. assess civil and criminal penalties against us.
In addition, regulations are subject to change. We cannot predict the
effect, if any, that such changes might have on our business. Our failure to
comply with regulatory requirements could have a material adverse effect on our
business.
Our regulatory approval for the sale of FloSeal in the U.S. and the European
Union could also be rescinded. For example, one of our principal competitors
has claimed that FloSeal was improperly certified for sale in Germany as a
medical device. The competitor claimed that FloSeal should be regulated as a
drug. While no regulatory authority determined that our competitor's claim was
correct, an adverse determination could restrict our ability to market and sell
FloSeal in the U.S. or the European Union.
We may not be able to expand the international sale of our products without
further approvals.
Marketing of FloSeal outside of the U.S. requires compliance with local
regulatory requirements. While we have obtained regulatory approval for the
commercial sale of FloSeal as a medical device in the European Union, we have
not yet received approval in other international markets. Without approval we
will not be able to expand our international sales. In addition, if the
regulatory approval we obtained for the commercial sale of FloSeal in the
European Union is rescinded or otherwise becomes unavailable to us, we would
not be able to market and sell FloSeal in Europe Union without subsequent
regulatory approval.
Failure to obtain regulatory approval for additional configurations of FloSeal
and our other products under development could significantly harm our ability
to generate revenue.
The Center for Devices and Radiological Health, a division of the FDA,
regulates applications of FloSeal technology. Before we can market additional
configurations of FloSeal or any of our other products under development in the
U.S., we must show that our products are safe and effective. We must also
obtain approval from the FDA, which cannot be guaranteed. We may be required to
complete clinical trials and obtain approval for additional applications of
FloSeal technology before they may be marketed. The FDA may also limit the
commercial claims and uses of any of our future products.
Similar requirements or restrictions apply in the European Union and
elsewhere to the marketing and sale of additional configurations of FloSeal and
our other products under development. If we are unable to obtain regulatory
approval, our anticipated revenues would be materially and adversely affected,
as well as our results of operations and financial condition.
Our future success will depend in part on our ability to protect our
intellectual property rights. Our inability to enforce these rights could cause
us to lose sales and any competitive advantage we have.
We have four issued U.S. patents relating to FloSeal. We also have 10 issued
U.S. patents and three pending patent applications relating to our other
products under development and other technologies invented by our research
department. We also have two corresponding international patent applications
filed under the Patent Cooperative Treaty, which provides certain rights
overseas with respect to our patents. Our success depends to a significant
degree on our ability to protect and preserve our intellectual property. To
protect our intellectual property rights, we rely on the patent laws of the
U.S. and the other countries where we market and sell FloSeal or intend to
market and sell FloSeal or our other products under development. However, we
cannot be certain that the steps we have taken will prevent third parties from
using our technology without our
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authorization or independently developing technology without our authorization
or independently developing technology that is similar to ours, particularly in
those countries where the laws do not protect our proprietary rights as fully
as in the U.S. In addition, we cannot assure you that patents will issue from
our applications or that any patent will issue on technology arising from
additional research or, if patents do issue, that claims allowed will be
sufficient to protect our technologies.
The use of our technology or similar technology by others could reduce or
eliminate any competitive advantage we have developed, cause us to lose sales
and otherwise harm our business. Although we do have several issued U.S.
patents and several pending U.S. patent applications, our competitors may
already have applied for patents that, once issued, will prevail over our
patent rights or otherwise limit our ability to sell our products in the U.S.
or elsewhere. Our competitors also may attempt to design around our patents or
copy or otherwise obtain and use our proprietary technology. We may not be able
to secure registration with respect to our pending patent applications. Failure
to secure these registrations may limit our ability to protect the intellectual
property rights that these applications are intended to cover.
We may be prevented from marketing and selling FloSeal or our other products
under development if they infringe existing patents or patents that have not
yet issued.
Although we have conducted searches, there can be no assurance that FloSeal
or our products under development will not be covered by third-party patents or
other intellectual property rights. If they are, the continued development and
marketing of our products would require a license under those patents or other
intellectual property rights. There can be no assurance that required licenses
will be available to us on commercially reasonable terms, if at all. If we do
not obtain the licenses, we could encounter delays in product introductions
while we attempt to design around the third-party patents, or we could be
completely blocked from developing, manufacturing or selling products requiring
the licenses.
Moreover, since U.S. patent applications are not a matter of public record,
a patent application could currently be on file that would stand in our way of
obtaining an issued patent. Interference proceedings declared by the U.S.
Patent and Trademark Office may be necessary to determine the priority of
inventions with respect to our patent applications. Litigation or interference
proceedings could result in substantial costs to us and a diversion of
management focus, and could have a material adverse effect on our business,
financial condition and results of operations. In addition, a number of medical
device and other companies, universities and research institutions have filed
patent applications or may have been issued patents relating to compositions
and methods for surgical sealing. The issuance of any of these potentially
competing patents could materially and adversely affect our business, results
of operations and financial condition.
Claims that we infringe third-party intellectual property rights could result
in significant expenses and restrictions on our ability to sell FloSeal and our
other products under development.
We may be subject to litigation in which we would have to defend against
claims of infringement of the rights of others or to determine the scope and
validity of the intellectual property rights that may conflict with our
business. Any infringement claims could result in costly litigation, divert the
efforts of our management personnel, cause product shipment delays, require us
to enter into royalty or licensing agreements, require us to pay damages, harm
our reputation or prevent us from manufacturing, marketing or selling FloSeal
or any of our other products under development. Moreover, if we were to
discover that FloSeal or any of our products under development violated third-
party intellectual property rights, we might be unable to redesign it to avoid
violating their rights or to obtain a license to use the third-party
intellectual property on commercially reasonable terms.
Failure by our customers to obtain adequate third-party reimbursement for the
procedures utilizing FloSeal could adversely affect our ability to market and
sell FloSeal and generate revenues.
Our U.S. customers generally rely on third-party insurers, such as federal
Medicare, state Medicaid and private health insurance plans, to reimburse some
or all of the cost of a procedure in which FloSeal will be
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used. We expect to sell FloSeal based on a prospective payment system. In a
prospective payment system, the cost of FloSeal would be incorporated in the
overall cost of the surgical procedures that use FloSeal instead of providing
for a separate reimbursement for our products. However, we cannot assure you
that third-party insurers will reimburse our customers for the cost of FloSeal.
Our financial success depends, in part, on our customers obtaining satisfactory
reimbursement for surgical procedures that use FloSeal. Failure by our
customers to obtain sufficient reimbursement for these procedures or adverse
changes in governmental and private insurance policies toward reimbursement for
these procedures could result in reduction or elimination of purchases of
FloSeal, which would materially and adversely affect our revenues. Since
FloSeal is priced at a premium to corresponding widely used hemostats, our
business may also be materially and adversely affected by the continuing
efforts of third-party insurers to contain or reduce healthcare costs.
International market acceptance of FloSeal and other products that we may
develop in the future is dependent, in part, on the availability of
reimbursement for the prevailing healthcare payment systems for our products or
procedures that use our products. Reimbursement and healthcare payment systems
in international markets vary significantly and include both government-
sponsored healthcare and private insurance. We intend to seek reimbursement
approvals where applicable. We cannot be certain any such approvals will be
obtained in a timely manner, if at all. Failure to receive reimbursement
approvals in the international market could materially and adversely affect our
ability to market and sell FloSeal and generate revenue.
The European fear of "mad cow disease" could adversely impact acceptance of our
products in Europe.
There is uncertainty as to the acceptance in the European Union of products
that incorporate products derived from cows. This uncertainty is due to
concerns about "mad cow disease". This disease is believed to be transmitted
from cows to humans and may cause serious illness or death. FloSeal and our
other products under development contain thrombin and gelatin derived from
bovine tissue from cows. A delay in European acceptance of FloSeal could
materially and adversely affect our ability to market and sell FloSeal and our
other products under development.
We may face product liability claims related to the use or misuse of our
products. Our insurance coverage is limited.
We face risk of product liability claims. There can be no assurance that we
will not experience losses due to product liability claims. We currently
maintain liability insurance with combined coverage limits of $3.0 million on a
claims-made basis. We cannot be certain that the size or the coverage of our
insurance is adequate. The insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms, if at all. Any claims
against us, regardless of their merit, could materially and adversely affect
our business, results of operations and financial condition due to the cost of
defending against such claims and diversion of management attention.
We may be unable to attract and retain qualified employees, who we need to be
successful.
We are highly dependent on certain members of our management and research
and development staff. The loss of any of these persons, or our inability to
recruit additional personnel necessary for our business, could substantially
impair our research and development efforts and impede our ability to develop
and commercialize our products. Recruiting and retaining qualified technical
and managerial personnel will also be critical to our success. Our business is
located in the San Francisco Bay Area in California, where demand for
experienced personnel is extremely high and is likely to remain high. As a
result, competition for and retention of personnel, particularly for employees
with technical expertise, is intense and the turnover rate for these people is
high. We may not be able to recruit and retain qualified employees on
commercially reasonable terms, which could materially and adversely affect our
ability to achieve profitability.
Insiders have substantial control over our Company and could limit your ability
to influence the outcome of key transactions.
Our directors and executive officers, as well as entities affiliated with
them, beneficially own approximately 22% of our common stock in the aggregate.
These stockholders, if acting together, would be
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able to influence significantly all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers
or other business combination transactions. This could limit your ability to
influence the outcome of the election of directors or other key transactions.
Anti-takeover provisions of our certificate of incorporation and Delaware law
may delay or prevent a potential takeover that you may consider favorable. This
may limit the price investors are willing to pay for our common stock.
Our certificate of incorporation contains provisions that could delay or
prevent a change in control of our Company that you may consider favorable.
Some of these provisions:
. authorize the issuance of preferred stock, commonly referred to as "blank
check" preferred stock, with rights senior to those of our common stock
and which can be created and issued by our board of directors without
prior stockholder approval, and
. provide for a classified board of directors.
In addition, we are governed by the provisions the Delaware corporate law
that may prohibit large stockholders, in particular those owning 15% or more of
our outstanding voting stock, from merging or combining with us. These and
other provisions in our certificate of incorporation and under Delaware law
could reduce the price that investors might be willing to pay for shares of our
common stock in the future and result in the market price being lower than it
would be without these provisions.
Our stock price is volatile and, as a result, you could lose some or all of
your money.
We believe that various factors may cause the market price of our common
stock to fluctuate, perhaps substantially, including announcements of:
. technological innovations or regulatory approvals,
. results of clinical trials,
. new products by us or our competitors,
. developments or disputes concerning patents or proprietary rights,
. our failing to achieve certain developmental milestones,
. healthcare or reimbursement policy changes by governments or private
insurance companies,
. developments in relationships with partners or distributors, or
. a change in financial estimates or securities analysts' recommendations.
In addition, the stock markets in general, and the shares of healthcare
companies in particular, have experienced extreme price fluctuations. These
broad market and industry fluctuations may cause the market price of our common
stock to decline dramatically.
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<PAGE>
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, performance or achievements to be materially different from
any future results, performances or achievements expressed or implied by the
forward-looking statements. Forward-looking statements include statements
regarding:
. the progress of our product development programs,
. developments with respect to our regulatory approval process, and
. our expectations as to the various products that we are developing.
In many cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "would," "expects," "plans," "anticipates,"
"intends," "projects," "predicts," "potential," "believes" and similar
expressions intended to identify forward-looking statements. These statements
reflect our current views with respect to future events and are based on
assumptions and are subject to risks and uncertainties. We discuss many of
these risks in greater detail under the heading "Risk Factors." This prospectus
also contains third-party estimates regarding the size and growth of the
cardiovascular, spinal and vascular surgery markets, as well as the size of the
suture and staples market and topical hemostat market and other marketing
estimates. You should not place undue reliance on these forward-looking
statements. These forward-looking represent our estimates and assumptions only
as of the date of this prospectus. Our actual results could differ materially
from those anticipated in the forward-looking statements for the reasons
described above and elsewhere in this prospectus.
You should read this prospectus and the documents that we incorporate by
reference in this prospectus completely and with the understanding that our
actual future results may be materially different from what we expect. We may
not update these forward-looking statements, even though our situation may
change in the future. We qualify all of our forward-looking statements by these
cautionary statements.
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<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the selling
stockholders under this prospectus.
SELLING STOCKHOLDERS
We are registering all 1,100,000 shares covered by this prospectus on behalf
of the selling stockholders named in the table below. We have registered the
shares to permit the selling stockholders and their pledges, donees,
transferees or other successors-in-interest that receive their shares from
selling stockholders as a gift, partnership distribution or another non-sale
related transfer after the date of this prospectus to resell the shares when
they deem appropriate. We refer to all of these possible sellers as selling
stockholders in this prospectus.
The table below sets forth the following information with respect to each
selling stockholder as of June 7, 2000: (i) name and, if applicable, the
address of the selling stockholder; (ii) the number and percentage of total
outstanding shares of our common stock each selling stockholder beneficially
owned before this offering; (iii) the number of shares of common stock each
selling stockholder is offering; and (iv) the number and percentage of total
outstanding shares of our common stock that each selling stockholder will own
after the selling stockholder sells all of the shares in this offering. None of
the selling stockholders has had a material relationship with us within the
last the three years other than as a result of the ownership of the shares or
other of our securities. We do not know how long the selling stockholders will
hold the shares before selling them. We have no agreements, arrangements or
understandings with any of the selling stockholders regarding the sale of any
of the shares. The shares offered by this prospectus may be offered from time
to time by the selling stockholders named below.
<TABLE>
<CAPTION>
Number of Shares of Common
Shares of Stock to be
Common Stock Beneficially Owned
Beneficially Number after Sale under this
Owned before of Prospectus
Name and Address of Selling Sale under Shares ---------------------
Stockholder this Prospectus Offered Number Percentage(1)
--------------------------- --------------- ------- ------- -------------
<S> <C> <C> <C> <C>
Franklin Advisers............... 730,000 350,000 380,000 3.4%
777 Mariners Island
San Mateo, CA 94404
State of Wisconsin Investment
Board.......................... 1,638,600 750,000 888,600 7.9%
121 East Wilson Street
Madison, WI 53707
</TABLE>
--------
(1) Based on a total of 11,218,011 shares of our common stock outstanding.
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<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may sell the common stock from time to time. The
selling stockholders will act independently from us in making decisions
regarding the timing, manner and size of each sale. The selling stockholders
may make these sales on one or more exchanges, in the over-the-counter market
or otherwise, at prices and terms that are then-prevailing or at prices related
to the then-current market price, or in privately negotiated transactions. The
selling stockholders may use one or more of the following methods to sell the
common stock:
. a block trade in which the selling stockholder's broker or dealer will
attempt to sell the shares as agent, but may position and resell all or a
portion of the block as a principal to facilitate the transaction;
. a broker or dealer may purchase the common stock as a principal and then
resell the common stock for its own account pursuant to this prospectus;
. an exchange distribution in accordance with the rules of the applicable
exchange; and
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. If the plan of
distribution involves an arrangement with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, the supplement will
disclose:
. the name of each selling stockholder and of the participating broker-
dealer(s);
. the number of shares involved;
. the price at which the shares were sold;
. the commissions paid or discounts or concessions allowed to such broker-
dealer(s), where applicable;
. that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus;
and
. other facts material to the transaction.
In effecting sales, broker-dealers engaged by the selling stockholders may
arrange for other broker-dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with broker-
dealers in connection with distributions of the shares or otherwise. In these
transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with selling stockholders. The
selling stockholders may also sell shares short and redeliver the shares to
close out such short positions. The selling stockholders may enter into options
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The selling stockholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell
the shares so loaned, or upon default, the broker-dealer may sell the pledged
shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principal, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the
sale. Broker-dealers or agents and any other participating broker-dealers or
the selling stockholders may be deemed to be "underwriters" within the meaning
of section 2(11) of the Securities Act of 1933, as amended (the "Securities
Act"), in connection with sales of the shares. Accordingly, any such
commission, discount or concession received by them and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
discounts or concessions under the Securities Act. Because selling
13
<PAGE>
stockholders may be deemed "underwriters" within the meaning of section 2(11)
of the Securities Act, the selling stockholders will be subject to the
prospectus delivery requirements of the Securities Act.
Any shares covered by this prospectus that qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than pursuant to
this prospectus.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act of 1934, as
amended (the "Exchange Act"), any person engaged in the distribution of the
shares may not simultaneously engage in market making activities with respect
to our common stock for a period of two business days prior to the commencement
of such distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions
may limit the timing of purchases and sales of shares of our common stock by
the selling stockholders. We will make copies of this prospectus available to
the selling stockholders and have informed them of the need to deliver copies
of this prospectus to purchasers at or prior to the time of any sale of the
shares.
We will bear all costs, expense and fees in connection with the registration
of the shares. The selling stockholders will bear all commissions and
discounts, if any, attributable to the sale of the shares. The selling
stockholders may agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act. We have
agreed to indemnify the selling stockholders against certain liabilities in
connection with their offering of the shares, including liabilities arising
under the Securities Act.
LEGAL MATTERS
The validity of the common stock being offered in this prospectus will be
passed upon for us by Georgopoulos Pahlavan & Prince, LLP, Menlo Park,
California.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 1999 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
14
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes a part of a registration statement on Form S-3
filed by us with the Commission under the Securities Act. This prospectus does
not contain all of the information set forth in the registration statement,
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information about our company and the shares of common
stock offered, reference is made to the registration statement. Statements
contained in this prospectus concerning the provisions of any document are not
necessarily complete, and each such statement is qualified in its entirety by
reference to the copy of such document field with the Commission.
We file annual, quarterly and special reports, proxy statements, and other
information with the Commission. You may read and copy any document we file at
the Commission's public reference facilities at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's following Regional
Offices: Suite 1400, Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661; and 13th Floor, Seven World Trade Center, New York, New York
10048. Please call the Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our Commission filings are also available to the
public at the Commission's website at http://www.sec.gov.
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you
by referring you to these documents. The information incorporated by reference
is an important part of this prospectus, and information that we file later
with the Commission will automatically update and supersede this information
and thus be deemed to be incorporated by reference into the Prospectus. We
incorporate by reference the documents listed below (and any amendments
thereto) and any future filings made with the Commission under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, until
the offering is completed.
. Annual report on Form 10-K for the fiscal year ended December 31, 1999;
. Quarterly report on Form 10-Q for the fiscal quarter ended March 31,
2000; and
. The description of our common stock contained in Forms 8-A filed on
November 5, 1997 and on April 4, 1996, as amended on June 5, 1996.
To obtain a copy of these filings at no cost, you may write or telephone us
at the following address: Chief Financial Officer, Fusion Medical Technologies,
Inc., 34175 Ardenwood, Fremont, CA 94555, telephone number (510) 818-4600.
15
<PAGE>
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You should rely on the information contained or incorporated by reference
in this prospectus. We have not authorized anyone to provide you with
different information. 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 provided by this prospectus is accurate as of any date other than
the date on the front of this prospectus.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Fusion Medical Technologies, Inc........................................... 1
Risk Factors............................................................... 2
Information Regarding Forward-Looking Statements........................... 11
Use of Proceeds............................................................ 12
Selling Stockholders....................................................... 12
Plan of Distribution....................................................... 13
Legal Matters.............................................................. 14
Experts.................................................................... 14
Where You Can Find More Information........................................ 15
Incorporation by Reference................................................. 15
</TABLE>
===============================================================================
===============================================================================
1,100,000 Shares
Fusion Medical
Technologies, Inc.
Common Stock
-----------------
PROSPECTUS
-----------------
July 10, 2000
===============================================================================
