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Registration No. 333-62261
Rule 424(b)(1)(3)
UNIVEC, INC.
1,050,000 Shares of Common Stock
This Prospectus relates to 1,050,000 shares of common stock, par value
$.001 per share (the "Common Stock") of UNIVEC, Inc. (the "Company") that may be
sold by the selling securityholder named herein (the "Selling Securityholder").
See "Selling Securityholder." Of the 1,050,000 shares of Common Stock offered
hereby, 112,500 shares are issuable upon exercise of certain Common Stock
Purchase Warrants (the "Warrants") and 937,500 shares are issuable upon
conversion of shares of the Company's Series B 5% Convertible Preferred Stock,
par value $1,000 per share (the "Series B Preferred Stock"), or in lieu of cash
dividends paid on the Series B Preferred Stock.
The Selling Securityholder may sell shares of Common Stock from time to
time directly to purchasers, or through broker-dealers who may receive
compensation in the form of commissions or discounts from the Selling
Securityholder or purchasers. Sales of shares of Common Stock may be effected by
broker-dealers in ordinary brokerage transactions or block transactions on The
Nasdaq SmallCap Market, through sales to one or more dealers who may resell as
principles, in privately negotiated transactions or otherwise, at the market
price prevailing at the time of sale, a price related to such prevailing market
price or at a negotiated price. Usual and customary or specifically negotiated
brokerage fees may be paid by the Selling Securityholder in connection
therewith. To the Company's knowledge, the Selling Securityholder has not
entered into any underwriting arrangements for the sale of such securities.
The Common Stock is listed on the Nasdaq SmallCap Market under the
symbol "UNVC". On August 13, 1998, the last reported sale price of the Common
Stock on the Nasdaq SmallCap Market was $1.625 per share.
The Company will not receive any proceeds from the sale of the shares
of Common Stock by the Selling Securityholder. See "Use of Proceeds." The
Company has agreed to bear certain expenses in connection with the registration
and sale of the shares being offered by the Selling Securityholder. The Company
has agreed to indemnify the Selling Securityholder against certain liabilities,
including liabilities under the Securities Act.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. ONLY INVESTORS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT
SHOULD INVEST. FOR A DESCRIPTION OF CERTAIN RISKS REGARDING AN INVESTMENT IN THE
COMPANY, SEE "RISK FACTORS" COMMENCING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is December 11, 1998.
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company can be inspected and copied at the
Public Reference Room of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at
Seven World Trade Center, Suite 1300, New York, New York 10048 and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60611, and copies of such material
also may be obtained from the Public Reference Room of the Commission at
prescribed rates. Information concerning the operation of the Public Reference
Room of the Commission may be obtained by calling 1-800-SEC-0330. Reports, proxy
and information statements and other information regarding the Company and other
registrants that file electronically with the Commission may also be obtained
via the Commission's website (http://www.sec.gov).
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission are incorporated in this
Prospectus by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
2. The Company's Quarterly Reports on Form 10-QSB for the fiscal quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998.
3. The Company's Current Report on Form 8-K dated April 28, 1998, as amended.
4. The description of the Common Stock set forth in the Company's Registration
Statement on Form 8-A (File No. 0-22413), filed pursuant to Section 12(g)
of the Exchange Act, and any amendment or report filed for the purpose of
updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14, and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents. Any statement contained in a previously filed
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein modifies or supersedes such statement; and any statement
contained herein shall be deemed to be modified or superseded to the extent that
a statement in any document subsequently filed, which is incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents that have been
incorporated by reference in this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the documents that this Prospectus incorporates).
Requests for copies of such documents should be directed to the Company at 999
Franklin Avenue, Garden City, New York 11530, ATTN: Corporate Secretary.
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THE COMPANY
UNIVEC, Inc. (the "Company" or "UNIVEC") develops, assembles, licenses
and markets safety hypodermic syringes designed to protect the healthcare worker
and patient against cross-infection. The Company also from time to time sells
other medical devices and intends to develop other medication delivery systems.
In 1997, the Company commenced production and sales of its 1cc locking
clip syringes, which are designed to make accidental or deliberate reuse
difficult. The accidental or deliberate reuse of syringes is a frequent cause of
the spread of the human immunodeficiency ("HIV") and hepatitis viruses, as well
as other blood-borne pathogens. The Company has received 510(k) clearance from
the U.S. Food and Drug Administration (the "FDA") to market its locking clip
syringes in the United States.
The Company believes that its 1cc difficult to reuse syringes are more
effective than competitive syringes and that they are competitively priced. The
Company also believes that it is the only company that markets a difficult to
reuse syringe with a 1cc barrel, which is ideal for dispensing accurate dosages
of medicine (e.g., allergy, immunization and insulin medicines). It is more
difficult to deliver up to a .95cc dosage accurately with a syringe barrel that
is greater than 1cc. The Company does not know of any other company that offers
a lcc aspirating syringe that can be locked. Healthcare workers need aspirating
syringes to mix medications in the syringe barrel and inject medications
intravenously. Furthermore, the Company believes that aspirating syringes are
preferred by diabetes patients and needle-exchange programs.
The Company's initial marketing efforts have been directed primarily to
international relief agencies, including the International Red Cross, UNICEF and
the World Health Organization ("WHO"), as well as to public hospitals and health
facilities in the Northeastern United States. Pursuant to programs of
international relief agencies, the Company has shipped its lcc locking clip
syringe to over 30 countries. The Company also intends to market its locking
clip syringes to (i) governments of developing countries, (ii) private hospitals
and health facilities in the Northeastern United States, and (iii) distributors
in the United States. The Company also plans to license its patents and
proprietary manufacturing processes relating to its 1cc locking clip and other
syringe designs. To stimulate demand for its safety syringes, the Company plans
to initiate promotional and educational campaigns directed at (i) public health
officers and other government officials responsible for public health policies,
(ii) doctors and administrators of healthcare facilities responsible for
treatment of HIV-AIDS and hepatitis patients, and (iii) liability insurance
companies.
The Company is a Delaware corporation, incorporated on October 7, 1996,
and the successor by merger to UNIVEC, Inc., a New York corporation,
incorporated on August 18, 1992. The executive officers of the Company are
located at 999 Franklin Avenue, Garden City, New York 11530 (telephone number
(516) 294-1000).
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RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk, including but not limited to the risk factors described below. Each
prospective investor should carefully consider the following risk factors before
making an investment decision.
This Prospectus contains certain forward-looking statements which
involve risks and uncertainties. Actual results could differ materially from
those projected in the forward-looking statements as a result of certain of the
risk factors set forth below and elsewhere in the reports incorporated by
reference in this Prospectus.
1. Continuing Losses; Accumulated Deficit; Uncertainty of
Profitability. Since inception, the Company has experienced losses, including a
net loss of approximately $1,172,000 for the year ended December 31, 1997, as
compared to a net loss of approximately $1,441,000 for the year ended December
31, 1996, and a net loss of approximately $541,000 for the fiscal quarter ended
March 31, 1998 and $711,353 for the six months ended June 30, 1998, as compared
to a net loss of approximately $682,000 for the fiscal quarter ended March 31,
1997 and $1,529,306 for the six months ended June 30, 1998. The Company expects
to continue to incur operating losses until such time as it can generate
significant sales of its locking clip syringes and adequate gross profits to
cover overhead expenses. There can be no assurance that the Company will ever
operate profitably. As of June 30, 1998, the Company had an accumulated deficit
of approximately $2,650,000. The Company's ability to operate profitably depends
upon market acceptance of its locking clip syringes, the development of an
effective sales and marketing organization, the development of new products, and
improvements to existing products and manufacturing processes. There can be no
assurance that the Company's locking clip syringes will achieve a level of
market acceptance in foreign or domestic markets to generate sufficient revenues
to become profitable. See "Risk Factors -Product Acceptance; Demand for Locking
Clip Syringes," and the Company's consolidated financial statements, including
the notes thereto, incorporated by reference into this Prospectus.
2. Limited Operating History. Although the Company was founded in
August 1992, production and sales of its 1cc locking clip syringe began in July
1997. From August 1992 to June 1997, the Company's operations consisted
primarily of the design of its patented locking clip and plunger, the design and
implementation of the equipment for production of the 1cc locking clip syringe,
the hiring of key personnel, and the sales of medical devices manufactured by
others including difficult-to-reuse syringes of an alternative design.
Accordingly, the Company has a limited operating history upon which an
evaluation of its business and prospects can be based. An investment in the
securities of the Company is subject to all of the risks involved in a newly
established business venture. Potential investors should be aware of the
problems, delays, expenses and difficulties encountered by companies at this
early stage of operations, many of which may be beyond the Company's control,
including but not limited to commencement of production, marketing and product
introduction, competition, market acceptance of the Company's difficult to reuse
syringes, and unanticipated problems and additional costs relating to the
development and testing of products. The Company's officers have limited
experience in the production and sale of medical devices. See "Risk Factors --
Limited Experience of Management in the Development, Production and Sale of
Medical Devices."
3. Ability to Continue as a "Going Concern"; Qualified Report of
Independent Accountants. The Company's consolidated financial statements for the
year ended December 31, 1997 indicate there is substantial doubt about the
Company's ability to continue as a going concern due to recurring losses. As
discussed in Note 2 to the Company's consolidated financial statements
incorporated by reference into this Prospectus, the Company's ability to
continue as a going concern is dependent, among other things, upon
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the Company's obtaining additional working capital through long term financing
or an equity infusion and the attainment of profitable commercial operations.
4. Need for Additional Financing. The Company requires additional
financing to continue its operations and may seek to raise funds through the
sale of its securities or by other means. No assurance can be given that
additional funds will be available to the Company on acceptable terms, if at
all. Additional financing may result in dilution to existing stockholders.
Anticipated increased levels of sales (as to which there can be no assurance)
would reduce the need for additional financing. However, if funds are needed but
not available in adequate amounts from additional financing sources or from
operations, the Company may be materially and adversely affected.
5. Ability to Manage Growth. Subject to sufficient cash flow from
operations and/or additional financing, the Company contemplates a rapid
expansion of its business. If the Company were to experience significant growth
in the future, such growth would likely result in new and increased
responsibilities for management personnel and place significant strain upon the
Company's management, operating and financial systems and resources. To
accommodate such growth and compete effectively, the Company must continue to
implement and improve its operational, financial, management and information
systems, procedures and controls, and to expand, train and manage its personnel.
There can be no assurance that the Company's personnel, systems, procedures or
controls will be adequate to support the Company's future operations. Any
failure to implement and improve the Company's operational, financial,
management and information systems, procedures or controls or to expand, train
or manage employees, could materially and adversely affect the Company's
business, financial condition and results of operations.
6. Government Regulation. The manufacture and distribution of medical
devices are subject to extensive regulation by the FDA in the United States, and
in some instances, by foreign and state regulatory authorities. Approval by the
FDA and foreign government authorities is unpredictable and uncertain, and no
assurance can be given that the necessary approvals or clearances for the
Company's products will be granted on a timely basis or at all. Delays in
receipt of, or a failure to receive, such approvals or clearances, or the loss
of any previously received approvals or clearances, could have a materially
adverse effect on the business, financial condition and results of operations of
the Company. Furthermore, approvals that have been or may be granted are subject
to continual review, and later discovery of previously unknown problems may
result in product labeling restrictions or withdrawal of the product from the
market. Moreover, changes in existing requirements or adoption of new
requirements or policies could adversely affect the ability of the Company to
comply with regulatory requirements. In addition, there can be no assurance that
the Company will not be required to incur significant costs to comply with
applicable laws and regulations in the future. Failure to comply with applicable
laws or regulatory requirements could have a materially adverse effect on the
Company's business, financial position and results of operations.
FDA and State Regulation. Pursuant to the Federal Food, Drug, and
Cosmetic Act, as amended, and the regulations promulgated thereunder
(collectively, the "FDC Act"), the FDA regulates the clinical testing,
manufacture, labeling, sale, distribution and promotion of medical devices.
Before a new device can be introduced into the market, a manufacturer must
obtain FDA permission to market through either the 510(k) pre-market
notification process or the costlier, lengthier and less certain pre-market
approval ("PMA") application process. The FDA has granted the Company 510(k)
clearance to market its 1cc locking clip syringe, which has been classified as a
Class II device under the FDC Act, and accordingly, the Company may market and
sell its 1cc locking clip syringe in the United States, subject to compliance
with other applicable FDA regulatory requirements. As a Class II device,
performance standards may be developed for the 1cc locking clip syringe which
the product would then be required to meet. Furthermore,
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manufacturers of medical devices are subject to recordkeeping requirements and
required to report adverse experiences relating to the use of the device. Device
manufacturers also are required to register their establishments and list their
devices with the FDA and with certain state agencies and are subject to periodic
inspections by the FDA and certain state agencies. The FDC Act requires devices
to be manufactured in accordance with good manufacturing practices ("GMP")
regulations, which impose certain procedural and documentation requirements upon
the Company with respect to manufacturing and quality assurance activities. The
FDA conducts periodic audits and surveillance of the manufacturing, sterilizing
and packaging facilities of medical device manufacturers to determine compliance
with GMP requirements. The failure of a medical device manufacturer to be able
to show in the audit or post-market surveillance that it has adequately complied
with GMP requirements can result in penalties or enforcement proceedings being
imposed on the manufacturer. The Company's manufacturing facilities have not
been certified as satisfying GMP requirements. The Company's facilities will be
subject to extensive audits in the future pursuant to standard FDA procedure. No
assurance can be given that when the Company is audited that it will be found to
be in compliance with GMP requirements, or that if it is not found in
compliance, what penalties, enforcement procedures or compliance effort will be
levied on or required of the Company. The FDA also has the authority to request
repair, replacement or refund of the cost of any device manufactured or
distributed by the Company, and the failure to meet standards for effectiveness
and safety could require the Company to discontinue the manufacturing and/or the
marketing of its product in the United States.
Foreign Regulation. The introduction of the Company's products in
foreign markets will subject the Company to foreign regulatory clearances which
may impose additional substantive costs and burdens. International sales of
medical devices are subject to the regulatory requirements of each country. The
regulatory review process varies from country to country. Many countries also
impose product standards, packaging requirements, labeling requirements and
import restrictions on devices. In addition, each country has its own tariff
regulations, duties and tax requirements. The Company's products also are
required to satisfy international manufacturing standards required by the
International Standards Organization ("ISO") for sale in certain foreign
countries. Although the Company's contract manufacturer in Portugal expects to
achieve ISO 9002 certification by the end of 1998, until the Portuguese
manufacturer obtains ISO 9002 certification, the Company could have difficulty
selling to certain export accounts, particularly in Europe. Currently, sales to
international relief agencies, the Company's primary market, are not affected by
ISO certification or other foreign regulations other than those imposed by such
agencies, with which the Company has been in compliance.
7. Product Acceptance; Demand for Locking Clip Syringes. The Company
expects to derive a significant portion of its revenues from sales of locking
clip syringes and/or licensing of its intellectual property. Despite increased
public awareness of the risks associated with conventional disposable syringes,
of the major syringe manufacturers only Becton-Dickinson and Company
("Becton-Dickinson") is manufacturing a difficult to reuse syringe for sale to
international relief agencies. Accordingly, the Company's future success and
financial performance will depend almost entirely on its ability to successfully
market its locking clip syringes. There can be no assurance that the Company's
marketing efforts will be successful or that sales of the Company's difficult to
reuse syringes will generate sufficient revenues for the Company to become
profitable. See "Risk Factors -- Government Regulation."
8. Licensing. Although the Company intends to license its patents and
proprietary manufacturing processes relating to its locking clip and other
syringe designs to established medical device manufacturers worldwide, there can
be no assurance that the Company will be successful in its licensing efforts.
9. Dependence on Certain Customers. The Company's initial marketing
efforts have been
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directed primarily to, and all of its revenues have been derived from,
international relief agencies. There can be no assurance as to whether the
international relief agencies will continue to purchase difficult-to-reuse
syringes from the Company. The failure of international relief agencies to
purchase the Company's locking clip syringes in substantial quantities would
have a materially adverse effect on the Company's business, financial condition
and results of operations.
10. Dependence on Portuguese Contract Manufacturer. The Company has
entered into a letter of understanding with a Portuguese contract manufacturer
for the production of its proprietary plungers (which satisfy tolerance limits
for assembly of its aspirating and non-aspirating syringes) and for the
assembly of the Company's 1cc locking clip syringes. The Company is the primary
customer of the Portuguese contract manufacturer. Furthermore, since the
Portuguese manufacturer has limited financial resources, it has been unable to
offer the Company credit terms for payment of components and finished syringes.
If the Portuguese manufacturer is unable or not willing to supply sufficient
quantities of components, the Company will be required to obtain alternative
sources of supply. However, there can be no assurance that the Company will be
able to obtain an alternative source of supply of components on acceptable
terms. Furthermore, even if the Company is able to obtain an alternative source
of supply of components, there can be no assurance that production of its 1cc
locking clip syringes will not be delayed. Delays resulting from the selection
of an alternate supplier to produce components could have a materially adverse
effect on the Company's business. See "Risk Factors -- Interruptions to
Production."
11. Interruptions to Production. There can be no assurance that the
Portuguese manufacturer will be able to produce sufficient quantities of
plungers or syringes to satisfy the Company's requirements. The failure of the
Portuguese manufacturer to produce components and/or 1cc locking clip syringes
could have a materially adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors -- Dependence on
Portuguese Contract Manufacturer."
To augment production of its 1cc locking clip syringe, the Company has
commenced production of its 1cc locking clip syringe at its production facility
in Mineola, New York. However, there can be no assurance that production at this
facility will not be interrupted as a result of delays in obtaining supplies of
components or in complying with FDA manufacturing requirements, including the
attainment of acceptable quality levels. The failure to timely produce 1cc
locking clip syringes would have a materially adverse effect on the Company's
business, financial condition and results of operations.
Sherwood Davis & Geck ("Sherwood") has been the Company's supplier of
1cc barrels with certain sizes of hypodermic needles (e.g., .625 inch) and
plunger tips. However, the Company has instituted litigation (the "Sherwood
Litigation") against Sherwood for failure to provide components for the
manufacture of the Company's lcc syringes. There can be no assurance that
Sherwood will continue to fulfill the Company's purchase orders. To date, most
of the lcc locking clip syringes have not contained the barrels supplied by
Sherwood; however, nearly all of the Company's lcc locking clip syringes have
contained a plunger tip supplied, but not manufactured, by Sherwood. Although
smaller manufacturers have expressed an interest in supplying components, there
can be no assurance the Company can obtain adequate supplies of components for
prices and terms acceptable to it. The failure to obtain adequate supplies of
components for acceptable prices and terms could have a materially adverse
effect on the Company's business, financial condition and results of operations.
12. Limited Experience of Management in the Development, Production and
Sale of Medical Devices. The Company's management has had limited experience in
the development, production and sale of medical devices. There can be no
assurance that the Company will be able to compete successfully with the major
syringe manufacturers. See "Risk Factors -- Limited Operating History."
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13. Ability to Develop 3cc Syringe with Extendable Barrel Sleeve. The
Company intends to develop a 3cc, non-aspirating locking clip syringe for
hospitals and health clinics, and anticipates that production will commence
during 1999. In general, hospitals and health clinics use more 3cc syringes than
1cc syringes, and may not be willing to purchase the Company's 1cc locking clip
syringes until such time as the Company is able to offer 3cc syringes. However,
there can be no assurance that the 3cc designs selected for commercialization
will be accepted by hospitals and health clinics. Moreover, the Company has not
yet selected a design for the assembly equipment or an engineering firm to
construct the equipment. The Company's failure to timely select a design for the
assembly equipment or an engineering firm to construct such assembly equipment,
or the Company's inability to obtain adequate supplies of components, could
delay the production and commercial introduction of the Company's 3cc
non-aspirating syringe.
14. Uncertainty Regarding Patents and Protection of Proprietary
Technology; Risk of Future Litigation. The Company's success will depend, in
part, on the strength of its patents, as well as its ability to preserve its
trade secrets and operate without infringing the proprietary rights of others.
The Company's policy is to seek protection of its proprietary position by, among
other methods, filing United States and foreign patent applications related to
its technology, inventions and improvements that are important to the
development of its business. The Company holds three United States patents,
including a patent for its locking clip and has filed a United States patent
application for its aspirating plunger, and has filed patent applications for
its locking clip in Canada, Brazil, Mexico, certain European countries, Japan,
South Korea, China, Russia and Australia. In addition, the Company has acquired
licensed rights for a United States patent on a locking device to be used in
connection with the 3cc non-aspirating syringe that the Company plans to
develop. The Company has filed for patent protection in certain European
countries for this invention. The Company also has licensed the rights to a
patent to develop a pre-filled or unit dose syringe. This invention has U.S.
patent protection, but lacks foreign protection.
There can be no assurance that pending or future applications for
patents will mature into issued patents, or that the Company will continue to
develop its own patentable technologies. Furthermore, there can be no assurance
that any of the Company's patents or patents that may be issued in the future
will not be challenged, invalidated or circumvented in the future or that the
rights granted thereunder will provide a competitive advantage. In addition,
patent applications filed in foreign countries and patents granted in such
countries are subject to laws, rules and procedures that differ from those in
the United States. Patent protection in such countries may be different from
patent protection provided by the laws of the United States.
Patent applications in the United States are maintained in secrecy
until patents issue, and patent applications in foreign countries are maintained
in secrecy for a period after filing. Publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries and the
filing of related patent applications. Accordingly, there can be no assurance
that current and potential competitors and other third parties have not filed or
in the future will not file applications for, or have not received or in the
future will not receive, patents or obtain additional proprietary rights that
will prevent, limit or interfere with the Company's ability to make, use or sell
its products either in the United States or internationally.
The medical device industry in general has been characterized by
substantial competition and litigation regarding patent and other proprietary
rights. The Company intends to vigorously protect and defend its patents and
other proprietary rights relating to its proprietary technology. Litigation
alleging infringement claims against the Company (with or without merit), or
instituted by the Company to enforce patents and to protect trade secrets or
know-how owned by the Company or to determine the enforceability, scope and
validity of the proprietary rights of others, is costly and time consuming. If
any relevant claims of third-party patents are upheld as valid and enforceable
in any litigation or administrative
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proceedings, the Company could be prevented from practicing the subject matter
claimed in such patents, or would be required to obtain licenses from the patent
owners of each patent, or to redesign its products or processes to avoid
infringement. There can be no assurance that such licenses would be available
or, if available, would be available on terms acceptable to the Company or that
the Company would be successful in any attempt to redesign its products or
processes to avoid infringement. Accordingly, an adverse determination in a
judicial or administrative proceeding or failure to obtain necessary licenses
could prevent the Company from manufacturing and selling its products, which
would have a materially adverse effect on the Company's business, financial
condition and results of operations.
The Company also relies upon trade secrets, technical know-how and
continuing technological innovation to develop and maintain its competitive
position. There can be no assurance that competitors will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to the Company's proprietary technology, or that the
Company can meaningfully protect its rights in unpatented proprietary
technology.
15. Competition. The Company's principal competition is from
manufacturers of traditional disposable syringes. Becton-Dickinson, Sherwood and
Terumo Medical Corporation of Japan ("Terumo") control approximately 74%, 19%
and 5%, respectively, or a total of approximately 98%, of the worldwide syringe
market, and are substantially larger, more established and have significantly
greater financial, sales and marketing, distribution, engineering, research and
development and other resources than the Company. To the Company's knowledge,
only Becton-Dickinson and Bader & Partner Medizintechnik GmbH ("Bader"), a
German machine tool manufacturer, distribute commercially a line of difficult to
reuse syringes, none of which allow for aspiration. The Bader DestroJect syringe
and the Becton-Dickinson SOLOSHOT and UNIJECT syringes were developed originally
for WHO-UNICEF immunization programs. There can be no assurance that the major
syringe manufacturers or others will not commence production of difficult to
reuse syringes, or that the Company will be able to successfully compete in this
market.
16. Product Liability. The manufacture and sale of medical products
exposes the Company to the risk of significant damages from product liability
claims. The Company maintains product liability insurance against product
liability claims in the amount of $5 million per occurrence and $5 million in
the aggregate. There can be no assurance that the coverage limits of the
Company's insurance policies will be adequate, or that the Company will continue
to be able to maintain such insurance coverage at acceptable cost. In addition,
any successful claim against the Company in an amount exceeding its insurance
coverage could have a materially adverse effect on its business, financial
condition or results of operations. Furthermore, the Company has no recall
insurance for foreign countries or the United States. The Company intends to
apply for product recall insurance primarily for the United States market.
However there can be no assurance that such coverage can be obtained at
acceptable cost.
17. Control of the Company; Ownership of Shares by Directors and
Officers. Officers and directors of the Company beneficially own in the
aggregate 1,178,825 shares of Common Stock, or approximately 39% of the
outstanding shares of the Company's Common Stock (excluding (a) options to
purchase 4,125,000 shares of Common stock at an exercise price of $3.50 per
share which may not be exercised prior to the earliest of (i) April 24, 2006,
(ii) the attainment of certain financial performance criteria and (iii) the
occurrence of a change in control, as defined, and (b) 460,440 shares upon
conversion of outstanding shares of Series A Preferred Stock). Although these
stockholders may or may not agree on any particular matter that is the subject
of a vote of the stockholders, these stockholders may be effectively able to
control the outcome of any issues which may be subject to a vote of
stockholders, including the election of directors, proposals to increase the
authorized capital stock, or the approval of mergers,
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acquisitions, or the sale of all or substantially all of the Company's assets.
18. Dependence on Chief Executive Officer. The Company is dependent for
the conduct of its business on the experience, abilities and continued services
of Joel Schoenfeld, Chairman of the Board and Chief Executive Officer of the
Company. Joel Schoenfeld is employed by the Company pursuant to an employment
agreement which expires on March 28, 2000. The loss of the services of Joel
Schoenfeld would have a materially adverse effect on the Company.
19. Office Lease with Related Party. Dr. Alan H. Gold, the President, a
director and principal stockholder of the Company, is the president and
stockholder of the owner of the premises occupied by the Company.
20. Limitation on Director Liability. The Company's certificate of
incorporation provides that a director of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, with certain exceptions under Delaware law. This
may discourage stockholders from bringing suit against a director for breach of
fiduciary duty and may reduce the likelihood of derivative litigation brought by
stockholders on behalf of the Company against a director. In addition, the
Company's certificate of incorporation provides for mandatory indemnification of
directors and officers.
21. Absence of Dividends on Common Stock. Since inception, the Company
has not paid any cash dividends on its Common Stock and it does not anticipate
paying such dividends in the foreseeable future. No dividends may be declared,
set aside or paid on the Common Stock unless and until all accrued and unpaid
dividends on the outstanding shares of Series A Preferred Stock and Series B
Preferred Stock have been paid. The payment of dividends by the Company is
within the discretion of its Board of Directors and depends upon the Company's
earnings, capital requirements, financial condition and other factors deemed
relevant by the Board.
22. Authorization and Discretionary Issuance of Preferred Stock. The
Company's Restated Certificate of Incorporation authorizes the issuance of
5,000,000 shares of "blank check" preferred stock with such designations, rights
and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could decrease the amount of earnings and assets
available for distribution to holders of Common Stock and adversely affect the
relative voting power or other rights of the holders of the Company's Common
Stock. In the event of issuance, the preferred stock could be used, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. The Company is not presently committed to
issue any additional shares of its preferred stock. However, the Company may
from time to time issue additional shares of preferred stock in payment of
dividends on outstanding shares of preferred stock and in connection with
additional financing which the Company may obtain for its activities.
23. No Assurance of An Active Public Market for Common Stock; Possible
Volatility of Market Price for the Common Stock. Although the Common Stock is
quoted on The Nasdaq SmallCap Market, trading volume has been limited. There can
be no assurance that broker-dealers will act as market makers for the Common
Stock. As a result, investors will be exposed to a risk of a decline in the
market prices of the Common Stock. Moreover, the market price of the Common
Stock may be highly volatile, as has been the case with the securities of many
emerging companies. The Company's operating results and various factors
affecting the medical device industry may impact the market price of the
Company's securities to a significant degree. In addition, in recent years the
stock market has experienced a high level of price and
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<PAGE>
volume volatility, and market prices for the securities of many companies have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. There can be no assurance that the market price
of the Common Stock will not experience significant fluctuations or further
declines.
24. Possible Delisting. The Common Stock is quoted on The Nasdaq
SmallCap Market. For continued inclusion on the Nasdaq SmallCap Market, an
issuer is required, among other things, to have net tangible assets of $2
million (or alternatively, net income of $500,000 in two of the most recent
three fiscal years, or a market capitalization of $35 million), a bid price of
at least $1.00 and at least two market makers. As of June 30, 1998, the Company
satisfied the maintenance criteria for continued listing on The Nasdaq SmallCap
Market. As of such date, the Company had net tangible assets of approximately
$2,571,000. The bid price of the Company's Common Stock has exceeded $1.00 per
share. There can be no assurance that the Company will be able in the future to
satisfy the maintenance criteria for continued inclusion of the Common Stock on
The Nasdaq SmallCap Market. If the Company is unable to satisfy The Nasdaq
SmallCap maintenance criteria in the future, the Common Stock may be delisted
from trading on The Nasdaq SmallCap Market, and if delisted, trading, if any,
would thereafter be conducted in the over-the-counter market in the so-called
"pink sheets" or the NASD's "Electronic Bulletin Board," and consequently, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Company's securities.
25. Risk of Low-Priced Securities. The regulations of the Securities
and Exchange Commission promulgated under the Exchange Act require additional
disclosure relating to the market for penny stocks in connection with trades in
any stock defined as a penny stock. Commission regulations generally define a
penny stock to be an equity security that has a market price of less than $5.00
per share, subject to certain exceptions. Unless an exception is available,
those regulations require the delivery, prior to any transaction involving a
penny stock, of a disclosure schedule explaining the penny stock market and the
risks associated therewith and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally institutions). In addition, the
broker-dealer must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction, and monthly account statements showing the market value of
each penny stock held in the customer's account. Moreover, broker-dealers who
recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. If the Company's securities become subject to the regulations
applicable to penny stocks, the market liquidity for the Company's securities
could be severely affected. In such an event, the regulations on penny stocks
could limit the ability of broker-dealers to sell the Company's securities and
thus the ability of purchasers of the Company's securities to sell their
securities in the secondary market.
26. Shares Eligible for Future Sale. No assurance can be given as to
the effect, if any, that future sales of Common Stock, or the availability of
shares of Common Stock for future sales, will have on the market price of the
Common Stock from time to time. Sales of substantial amounts of Common Stock
(including shares issued upon the exercise of warrants or stock options), or the
possibility of such sales, could adversely affect the market price of the Common
Stock and also impair the Company's ability to raise capital through an offering
of its equity securities in the future. The Company has 2,981,769 shares of
Common Stock outstanding, of which only 1,725,000 shares of Common Stock are
transferable without restriction under the Securities Act. The remaining shares,
issued in private transactions, are "restricted securities" (as defined in Rule
144 promulgated under the Securities Act) which may be publicly sold only if
registered under the Securities Act or if sold in accordance with an applicable
exemption from
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<PAGE>
registration, such as Rule 144. In general, under Rule 144, as currently in
effect, subject to the satisfaction of certain other conditions, a person,
including an affiliate of the Company, who has beneficially owned restricted
securities for at least one year, is entitled to sell (together with any person
with whom such individual is required to aggregate sales), within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class or, if the Common Stock
is quoted on The Nasdaq Stock Market or a national securities exchange, the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least three months
and who has beneficially owned restricted securities for at least two years is
entitled to sell such restricted shares under Rule 144 without regard to any of
the limitations described above. Officers, directors and other securityholders
of the Company owning and/or having rights to acquire in the aggregate 1,800,746
shares of Common Stock have entered into agreements not to sell or otherwise
dispose of any securities of the Company, including shares of Common Stock prior
to April 24, 1999 (the "Lock-Up Agreements"), without the prior written consent
of Maidstone Financial, Inc. ("Maidstone"), managing underwriter for the
Company's initial public offering in April 1997, which may be granted or
withheld in the sole and absolute discretion of Maidstone (which has ceased
operations as a broker-dealer); provided, however, that if prior to April 24,
1999, the Company's shares of Common Stock are subject to a tender offer and
holders of the Company's Common Stock (other than the current stockholders)
agree to tender a majority of the outstanding shares of Common Stock to the
offerror, then all stockholders subject to the Lock-Up Agreement will be
released from the restrictions imposed thereby solely for the purposes of
tendering their shares of Common Stock to the offerror pursuant to the terms of
the tender offer. Commencing in the second quarter of 1999, 1,121,054 shares of
Common Stock, will become eligible for resale pursuant to Rule 144, subject to
the volume limitations and compliance with the other provisions of Rule 144.
Furthermore, the holders of warrants (the "Underwriters' Warrants") to purchase
225,000 shares of Common Stock and 150,000 Warrants (including the securities
issuable upon exercise thereof) issued to Maidstone and the other underwriters
for the Company's initial public offering have demand and piggyback registration
rights with respect to the shares of Common Stock and Warrants issuable upon
exercise of the Underwriters' Warrants.
27. Effect of Issuance of Common Stock Upon Exercise of Warrants and
Options; Possible Issuance of Additional Options. The Company has 10,519,893
shares of Common Stock authorized but unissued and not reserved for specific
purposes and 11,167,318 shares of Common Stock unissued but reserved for
issuance (i) upon exercise of options (including options which may be granted in
the future pursuant to the Company's stock option plan), (ii) upon exercise of
outstanding warrants, (iii) upon conversion of the Company's Series A Preferred
Stock, (iv) upon conversion of the Company's Series B Preferred Stock, and (v)
in connection with a private offering of its securities. Except to the extent
applicable Nasdaq regulations require stockholder approval of transactions
involving the issuance of at least 20% of the Common Stock at less than fair
market value (other than in a public offering) or the issuance of more than
25,000 shares to officers and directors of the Company as a group (other than
pursuant to a plan approved by stockholders), authorized shares of Common Stock
may be issued without any action or approval by the Company's stockholders. The
Company may from time to time issue additional shares or securities convertible
into any such shares, and any shares of Common Stock issued would further dilute
the percentage ownership of the Company held by the public stockholders.
The exercise of warrants or options and the sale of the underlying
shares of Common Stock (or even the potential of such exercise or sale) may have
a depressive effect on the market price of the Common Stock. Moreover, the terms
upon which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of outstanding warrants and options can be
expected to exercise them, to the extent they are able, at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
more favorable to the Company than those provided in the warrants and options.
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<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from the sale of the shares of
Common Stock offered hereby.
SELLING SECURITYHOLDER
The table below sets forth, with respect to the Selling Securityholder,
based upon information available to the Company as of August 1, 1998, the number
of shares of Common Stock beneficially owned, the number of shares of Common
Stock to be sold, and the number of outstanding shares of Common Stock
beneficially owned after the sale of the shares of Common Stock offered hereby.
The Selling Securityholder has not been an officer, director or affiliate of the
Company or had any material relationship with the Company during the preceding
three years, except that the Selling Securityholder acquired from the Company
750 shares of Series B Preferred Stock and Warrants expiring August 1, 2001, to
purchase at $2.15 per share (subject to adjustment) 112,500 shares of Common
Stock in connection with a private placement in July 1998 for a consideration of
$750,000. The following table assumes that the Selling Securityholder will sell
all shares of Common Stock offered by this Prospectus; however, there can be no
assurance that the Selling Securityholder will sell any or all of the Common
Stock.
<TABLE>
<CAPTION>
Amount and Shares of Common
Nature of Beneficial Shares of Common Stock Owned After
Name Ownership Stock to Be Sold Offering
- --------------------------------------------- --------------------- -------------------- --------------------
<S> <C> <C> <C>
The Shaar Fund Ltd........................ 655,486(1) 655,486(1) 0
- --------------------------------------------
</TABLE>
(1) Represents 542,986 shares of Common Stock issuable upon
conversion of 750 shares of Series B Preferred Stock and
and 112,500 shares of Common Stock issuable upon exercise of
Warrants expiring August 1, 2001. Does not include shares of
Common Stock issued in payment of dividends on the Series B
Preferred Stock or as a result of certain changes in the
conversion rate thereon.
PLAN OF DISTRIBUTION
The Selling Securityholder may sell the shares of Common Stock offered
hereby from time to time directly to purchasers, or through broker-dealers who
may receive compensation in the form of commissions or discounts from the
Selling Securityholder or purchasers. Sales of shares of Common Stock may be
effected by broker-dealers in ordinary brokerage transactions or block
transactions on The Nasdaq SmallCap Market, through sales to one or more dealers
who may resell as principals, in privately negotiated transactions or otherwise,
at the market price prevailing at the time of sale, a price related to such
prevailing market price or at a negotiated price. Usual and customary or
specifically negotiated brokerage fees may be paid by the Selling Securityholder
in connection therewith. To the Company's knowledge, the Selling Securityholder
has not entered into any underwriting arrangements for the sale of the shares of
Common Stock offered hereby.
The Selling Securityholder may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profits realized by it may be deemed
to be underwriting commissions. Any broker-
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<PAGE>
dealers that participate in the distribution of the shares of Common Stock also
may be deemed to be "underwriters," as defined in the Securities Act, and any
commissions or discounts paid to them, or any profits realized by them upon the
resale of any securities purchased by them as principals, may be deemed to be
underwriting commissions or discounts under the Securities Act. The sale of the
shares of Common Stock by the Selling Securityholder is subject to the
prospectus delivery and other requirements of the Securities Act.
The shares of Common Stock offered hereby have been registered pursuant
to registration rights granted to the Selling Securityholder. The Company has
agreed to bear certain expenses in connection with the registration and sale of
the shares being offered by the Selling Securityholder. The Selling
Securityholder is responsible for the payment of brokerage commissions and
discounts incurred in connection with the sale of its shares of Common Stock.
The Company has agreed to indemnify the Selling Securityholder against certain
liabilities, including liabilities under the Securities Act.
Under the Exchange Act and the regulations thereunder, any person
engaged in a distribution of the shares of Common Stock offered hereby may not
simultaneously engage in market-making activities with respect to the Common
Stock during the applicable "cooling off" period prescribed by Rule 101 of
Regulation M prior to the commencement of such distribution. In addition, and
without limiting the foregoing, the Selling Securityholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Rule 102 of Regulation M, which
provisions may limit the timing of purchases and sales of Common Stock by the
Selling Securityholder.
To the extent required, the Company will file, during any period in
which offers or sales of shares of Common Stock are being made by or on behalf
of the Selling Securityholder, one or more amendments or supplements to this
Prospectus which describe any material information with respect to the plan of
distribution not previously disclosed herein, including the name or names of any
underwriters, broker-dealers or agents, if any, the purchase price paid by any
underwriter for shares of Common Stock purchased from a Selling Securityholder,
and any discounts, commissions or concessions allowed or reallowed or paid to
broker-dealers.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, $0.001 par value per share, 2,500 shares of Series A 8%
Cumulative Convertible Preferred Stock, $0.001 par value per share (the "Series
A Preferred Stock"), 1,000 shares of Series B 5% Convertible Preferred Stock
(the "Series B Preferred Stock") and 4,996,500 shares of "blank check" preferred
stock, $0.001 par value per share. As of June 30, 1998, 2,981,769 shares of
Common Stock and 2,072 shares of Series A Preferred Stock were issued and
outstanding. Subsequent to June 30, 1998, 750 shares of Series B Preferred Stock
were issued and sold to the Selling Securityholder and are outstanding as of the
date of this Prospectus.
The following are brief descriptions of the securities offered hereby
and other securities of the Company. The rights of the holders of shares of the
Company's capital stock are established by the Company's Certificate of
Incorporation, a Certificate of Designation authorizing the Series A Preferred
Stock, a Certificate of Designation authorizing the Series B Preferred Stock,
the Company's By-laws and Delaware law. The following statements do not purport
to be complete or give full effect to statutory or common law, and are subject
in all respects to the applicable provisions of the Certificate of
Incorporation, the Certificates of Designation, By-laws and state law.
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<PAGE>
Common Stock. Holders of the Common Stock are entitled to one vote per
share, and subject to the rights of holders of the Series A Preferred Stock, the
Series B Preferred Stock or any other series of preferred stock, to receive
dividends when, as and if declared by the Board of Directors and to share
ratably in the assets of the Company legally available for distribution to
holders of Common Stock in the event of the liquidation, dissolution or winding
up of the Company. Holders of the Common Stock do not have subscription,
redemption, conversion or preemptive rights.
Each share of Common Stock is entitled to one vote on any matter
submitted to the holders, including the election of directors. Holders of Common
Stock do not have cumulative voting rights; therefore, holders of a majority of
the outstanding shares of Common Stock entitled to vote for the election of
Directors may elect all of the Directors to be elected, if they so choose, and
in such event, the holders of the remaining shares will not be able to elect any
of the Company's Directors. Except as otherwise required by the Delaware General
Corporation Law (the "DGCL"), all stockholder action (other than the election of
Directors, who are elected by plurality vote), is subject to approval by a
majority of the shares of Common Stock present at a stockholders' meeting at
which a quorum (a majority of the issued and outstanding shares of Common Stock)
is present in person or by proxy, or by written consent pursuant to Delaware
law.
All shares of Common Stock outstanding are fully paid and
non-assessable, and the shares of Common Stock offered hereby, when issued upon
payment of the purchase price set forth on the cover page of the Prospectus,
will be fully paid and non-assessable.
The Board of Directors is authorized to issue additional shares of
Common Stock within the limits authorized by the Company's Certificate of
Incorporation without further stockholder action.
Preferred Stock. The Company is authorized to issue up to 5,000,000
shares of "blank check" preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without further stockholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights that could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. No shares of preferred stock are outstanding, other than
2,072 shares of Series A Preferred Stock and 750 shares of Series B Preferred
Stock.
Series A Preferred Stock. The Board of Directors has authorized the
issuance of up to 2,500 shares of Series A Preferred Stock, of which 2,072
shares are outstanding. The terms of the Series A Preferred Stock are as
follows:
Dividend Rights. Holders of Series A Preferred Stock are entitled to
receive, prior to the payment of cash dividends on the Common Stock, cumulative
dividends at the rate of $80 per share per annum, and no more, when, as and if
declared by the Company's Board of Directors, out of funds legally available
therefor. Dividends on the Series A Preferred Stock are payable, in the sole and
absolute discretion of the Board of Directors, in cash, additional shares of
Series A Preferred Stock (based upon the liquidation value thereof), or a
combination thereof. Dividends may not be paid or declared on, and no other
distributions may be made with respect to, and no expenditure shall be made for
the purchase, redemption or retirement of, any of the Company's capital stock
junior to or in parity with the Series A Preferred Stock, unless all cumulative
dividends payable on the Series A Preferred Stock for all prior annual dividend
periods have been paid. The Company has agreed that it will not declare or pay
any cash dividends on the Series A
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<PAGE>
Preferred Stock without the prior written consent of the underwriter for
Company's the initial public offering.
Redemption. The Series A Preferred Stock is not subject to redemption.
Liquidation Rights. Subject to the prior rights of the Company's
creditors and the holders of senior securities, the holders of the Series A
Preferred Stock are entitled to receive, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, $1,000 per share, plus
accrued and unpaid dividends. If, in any such case, the assets of the Company
are insufficient to make such payment in full, then the available assets will be
distributed among the holders of the Series A Preferred Stock and any other
series of preferred stock which is in parity with the Series A Preferred Stock,
ratably in proportion to the full amount to which each holder would be entitled.
Conversion Rights. Each share of Series A Preferred Stock is
convertible into 222.22 shares of Common Stock (the "conversion rate"), subject
to adjustment in certain events, at the option of the holder thereof commencing
April 24, 1999. The conversion rate is subject to adjustment in the event of a
stock split, stock dividend, recapitalization, merger, consolidation or certain
other events. The right of conversion with respect to the shares of the Series A
Preferred Stock called for redemption will terminate at the close of business on
the business day preceding the date fixed for redemption. Upon conversion, no
payment or allowance will be made in respect of any accrued but unpaid dividends
on the Series A Preferred Stock.
Voting Rights. Holders of Series A Preferred Stock have no voting
rights, except as may be required by law.
Series B Preferred Stock. The Board of Directors has authorized the
issuance of up to 1,000 shares of Series B Preferred Stock, of which 750 shares
are outstanding. The terms of the Series B Preferred Stock are as follows:
Dividend Rights. Holders of Series B Preferred Stock are entitled to
receive, prior to the payment of cash dividends on the Common Stock or the
Series A Preferred Stock, cumulative dividends at the rate of $50 per share per
annum, and no more, when, as and if declared by the Company's Board of
Directors, out of funds legally available therefor. Dividends on the Series B
Preferred Stock are payable, in the sole and absolute discretion of the Board of
Directors, in cash, or shares of Common Stock (based upon the value thereof).
Dividends may not be paid or declared on, and no other distributions may be made
with respect to, and no expenditure shall be made for the purchase, redemption
or retirement of, any of the Company's capital stock junior to or in parity with
the Series B Preferred Stock, unless all cumulative dividends payable on the
Series B Preferred Stock for all prior annual dividend periods have been paid.
Redemption. With respect to such shares as to which the holder thereof
has not theretofore furnished an effective conversion notice and only if the
current market price of the Common Stock is not greater than one hundred thirty
percent (130%) of the closing bid price of the Common Stock on July 27, 1998,
the Company may in whole or in part from time to time redeem in cash Series B
Preferred Stock at one hundred thirty-five percent (135%) of the stated value
thereof plus all accrued and unpaid dividends thereon to the date of redemption.
Liquidation Rights. Subject to the prior rights of the Company's
creditors and the holders of senior securities, the holders of the Series B
Preferred Stock are entitled to receive, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, $1,000 per share, plus
accrued and unpaid dividends. If, in any such case, the assets of the Company
are insufficient to make such payment in
16
<PAGE>
full, then the available assets will be distributed among the holders of the
Series B Preferred Stock and any other series of preferred stock which is in
parity with the Series B Preferred Stock, ratably in proportion to the full
amount to which each holder would be entitled.
Conversion Rights. Each share of Series B Preferred Stock is
convertible into the number of shares of Common Stock having the value of
$1,000, on the basis of the lower of (i) $1.925 per share and (ii) a price equal
to 80 to 85% of a price related to the market price for the Common Stock at the
time of conversion, as provided in and subject to the terms and conditions of
the Certificate of Designation defining the Series B Preferred Stock (the
"conversion rate"), at the option of the holder thereof. In addition, if the
Common Stock is delisted from NASDAQ for any reason, then any remaining
unconverted Series B Preferred Stock may be converted at a price per share equal
to 75% of a price related to the market price. The conversion rate is also
subject to adjustment in the event of a stock split, stock dividend,
recapitalization, merger, consolidation or certain other events. The right of
conversion with respect to the shares of the Series B Preferred Stock called for
redemption will terminate at the close of business on the business day preceding
the date fixed for redemption. Upon conversion, no payment or allowance will be
made in respect of any accrued but unpaid dividends on the Series B Preferred
Stock.
Voting Rights. Holders of Series B Preferred Stock have no voting
rights, except as may be required by law.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York,
10158-0125.
EXPERTS
The consolidated balance sheet as of December 31, 1997, and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1997, incorporated by
reference in this Prospectus, have been incorporated herein in reliance on the
report, which includes an explanatory paragraph regarding the Company's ability
to continue as a going concern, of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
17
<PAGE>
================================================================================
No dealer, salesman or any other person is authorized to give any information or
to make any representations other than those contained in this Prospectus in
connection with any offer to sell or sale of the securities to which this
Prospectus relates and, if given or made, such information or representations
must not be relied upon as having been authorized. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, imply
that there has been no change in the facts herein set forth since the date
hereof. This Prospectus does not constitute an offer to sell or to a
solicitation of any offer to buy from any person in any state in which any such
offer or solicitation would be unlawful.
----------------------
TABLE OF CONTENTS
Page
----
Available Information........................................................2
The Company..................................................................3
Risk Factors.................................................................4
Use of Proceeds.............................................................13
Selling Securityholder......................................................13
Plan of Distribution........................................................13
Description of Securities...................................................14
Legal Matters...............................................................17
Experts ...................................................................17
----------------------
Until January 5, 1999 (25 days after the date of this Prospectus),
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a Prospectus. This is
in addition to the obligation of dealers to deliver a Prospectus when acting as
Underwriters and with respect to their unsold allotments or subscriptions.
================================================================================
<PAGE>
================================================================================
1,050,000 SHARES OF
COMMON STOCK
UNIVEC, INC.
----------------------
Prospectus
----------------------
December 11, 1998
================================================================================
