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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1999
REGISTRATION NO. 333 -
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BIONX IMPLANTS,INC.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 22-3458598
(State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification No.)
1777 SENTRY PARKWAY WEST
GWYNEDD HALL, SUITE 400
BLUE BELL, PENNSYLVANIA 19422
215-643-5000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Gerard S. Carlozzi, President
Bionx Implants, Inc.
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, Pennsylvania 19422
(215) 643-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH A COPY TO:
Peter H. Ehrenberg, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
(973) 597-2500
Approximate date of proposed sale to the public: As soon as practicable after
the registration statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Rights to purchase Common Stock........ N/A N/A N/A
Common Stock, $.0019 par value
per share, underlying rights to purchase $ $4,000,000 $1,056
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(1) Maximum number of shares of common stock of Bionx Implants, Inc. to be sold
to current holders of its common stock in this rights offering.
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(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(g) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL, AND IT IS NOT SOLICITING AN OFFER TO BUY, THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 10, 1999
BIONX IMPLANTS, INC.
________ SHARES OF COMMON STOCK
$___ per share
Bionx Implants, Inc. is distributing subscription rights in this rights
offering to persons who owned shares of our common stock on
_______________. During this rights offering, we may issue up to
____________ shares of common stock.
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Subscription Rights Price Proceeds to Bionx Implants, Inc.(1)
<S> <C> <C>
Per Share $ $
Total $ $4,000,000
</TABLE>
(1) Before deducting expenses payable by us, estimated to be $______.
THE EXERCISE OF THE SUBSCRIPTION RIGHTS INVOLVES SUBSTANTIAL RISK. YOU SHOULD
REFER TO THE DISCUSSION OF MATERIAL RISK FACTORS, BEGINNING ON PAGE _ OF THIS
PROSPECTUS.
You will receive 0. of a subscription right for each share of common
stock that you owned on ________. Your subscription rights will be aggregated
for all of the shares that you owned on that date and then rounded down to the
nearest whole number, so that you will not receive any fractional rights. Each
subscription right entitles you to purchase one share of common stock at the
purchase price of $___ per share. If you exercise all of your subscription
rights, you may also have the opportunity to purchase additional shares at the
same purchase price.
The subscription rights are exercisable beginning on the date of this
prospectus and continuing until 5:00 p.m., Eastern Standard Time, on
__________________, ____.
The subscription rights may not be sold or transferred. The
subscription rights will not be listed for trading on any stock exchange.
Four of our five directors, who own our common stock through various
family partnerships and other entities, have advised us that they intend to
exercise their basic subscription privileges in full. Three of those four
directors have further advised us that they intend to exercise their respective
over-subscription privileges in an amount equal to the total number of shares
offered in this right offering minus the shares purchased by them through their
basic subscription privileges. This commitment, which ensures that all of the
shares offered in this rights offering will be subscribed for, is based on the
assumption that the subscription price will reflect a 15% discount from the
current market price at the time the rights offering begins.
Shares of our common stock are currently listed for quotation on the
Nasdaq National Market under the symbol "BINX".
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THE DATE OF THIS PROSPECTUS IS __________, ____.
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TABLE OF CONTENTS
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PAGE NO.
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Summary
Questions and Answers About Bionx Implants, Inc..................
Questions and Answers About the Rights Offering..................
A Warning About Forward-Looking Statements................................
Risk Factors..............................................................
Risks Related to Our Business....................................
Risks Related to Our Common Stock................................
Risks Related to the Subscription Rights Offering................
Selected Financial Information............................................
Recent Developments.......................................................
The Rights Offering.......................................................
If You Have Any Questions.................................................
Description of Our Common Stock...........................................
Provisions of Our Articles of Incorporation and By-Laws
that May Have Anti-Takeover Effects.................................
Use of Proceeds...........................................................
Price Range of Common Stock...............................................
Determination of Offering Price...........................................
Plan of Distribution......................................................
Counsel...................................................................
Experts...................................................................
If You Would Like More Information........................................
</TABLE>
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SUMMARY
This section answers in summary form some questions you may have about
Bionx Implants, Inc. and this rights offering. The information in this section
is not complete and does not contain all of the information that you should
consider before exercising your subscription rights. You should read the entire
prospectus carefully, including the "Risk Factors" section and the documents
listed under "If You Would Like More Information."
QUESTIONS AND ANSWERS ABOUT BIONX IMPLANTS, INC.
WHAT IS BIONX IMPLANTS, INC.?
We are a leading developer, manufacturer and marketer of
self-reinforced, resorbable polymer implants, including screws, pins, arrows and
stents, for use in orthopedic surgery, urology and cranio-facial surgery. We use
several proprietary manufacturing and processing techniques to create
self-reinforced, resorbable implants. Our technologies modify a resorbable
polymer's properties from a brittle structure into a physiologically strong
polymer implant with controlled variable strength retention ranging from three
weeks to twelve months. We currently market 10 product lines representing
approximately 150 distinct products.
WHERE ARE WE LOCATED?
Our principal executive offices are located at:
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, Pennsylvania 19422
We also maintain manufacturing facilities in Tampere, Finland. Our US telephone
number is (215) 643-5000.
WHEN WERE WE FORMED?
Through predecessor companies, we have been engaged in the development
of resorbable polymer products since 1984. Bionx Implants was incorporated in
Delaware in October 1995. On August 27, 1999, we changed our state of
incorporation from Delaware to Pennsylvania. There was no change in our name,
business, management, benefit plans, location, assets, liabilities or net worth
as a result of this reincorporation.
QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING
WHAT IS A SUBSCRIPTION RIGHT?
We are distributing to you, at no charge, 0.__ of a subscription right
for every share of common stock that you owned on _________. We will not
distribute any fractional subscription rights, but will round the number of
subscription rights you receive down to the nearest whole number. Each
subscription right entitles you to purchase one share of common stock for
$_____. When you "exercise" a subscription right, that means that you choose to
purchase the common stock that the subscription right entitles you to purchase.
You may exercise any number of your subscription rights, or you may choose not
to exercise any subscription rights. You cannot give or sell your subscription
rights to anybody else; only you can exercise them.
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WHAT IS A RIGHTS OFFERING?
A rights offering is an opportunity for you to purchase additional
shares of common stock at a fixed price to be determined before the rights
offering begins and in an amount proportional to your existing interest, which
enables you to maintain your current percentage ownership in Bionx Implants.
WHAT IS THE BASIC SUBSCRIPTION PRIVILEGE?
The basic subscription privilege of each subscription right entitles
you to purchase one share of our common stock at a subscription price of $___.
WHAT IS THE OVER-SUBSCRIPTION PRIVILEGE?
We do not expect that all of our shareholders will exercise all of
their basic subscription rights. By extending over-subscription privileges to
our shareholders, we are providing for the purchase of those shares which are
not purchased through exercise of basic subscription privileges. The
over-subscription privilege entitles you, if you fully exercise your basic
subscription privilege, to subscribe for additional shares of common stock not
acquired by other holders of rights at the same subscription price of $__ per
share.
WHAT ARE THE LIMITATIONS ON THE OVER-SUBSCRIPTION PRIVILEGE?
We will only issue ______ shares of common stock in the rights
offering. The number of shares available for over-subscription privileges will
be ______ minus the number of shares purchased upon exercise of all basic
subscription privileges. If sufficient shares are available, we will seek to
honor the over- subscription requests in full. If over-subscription requests
exceed the number of shares available, we will allocate the available shares
among shareholders who over-subscribed in proportion to the number of shares
purchased by those over-subscribing shareholders through the basic subscription
privilege. However, if your pro rata allocation exceeds the number of shares you
requested, you will receive only the number of shares that you requested, and
the remaining shares from your pro rata allocation will be divided among other
shareholders exercising their over-subscription privileges who have subscribed
for additional shares in proportion to the number of shares purchased by that
group of over-subscribing shareholders through the basic subscription privilege.
In certain circumstances, however, in order to comply with applicable state
securities laws, we may not be able to honor all over-subscription privileges
even if we have shares available.
WHY ARE WE ENGAGING IN A RIGHTS OFFERING?
We are offering the subscription rights to our current shareholders in
order to raise approximately $4.0 million in additional capital. Our cash and
cash equivalents have decreased from $14.2 million at December 31, 1998 to $2.9
at September 30,1999. We need additional funds for working capital purposes and
to improve our liquidity. Instead of selling additional shares of common stock
to outside parties, our Board of Directors has chosen to give you the
opportunity to buy more shares and provide us with additional capital. Of
course, we cannot assure you that we will not need to seek additional financing
in the future.
HOW MANY SHARES MAY I PURCHASE?
You will receive 0.__ of a subscription right for each share of common
stock that you owned on ________. We will not distribute fractional subscription
rights, but will round the number of subscription rights you receive down to the
nearest whole number. Each subscription right entitles you to purchase one share
of common stock for $___. If you exercise all of the subscription rights that
you receive, you may have the opportunity to purchase additional shares of
common stock. On the attached subscription certificate, you may request to
purchase as many additional shares as you wish for $___ per share. We may honor
all of the over-subscription requests, but if not, you may not be able to
purchase as many
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shares as you requested on your subscription certificate. Subject to state
securities laws and regulations, we have the discretion to issue less than the
total number of shares that may be available for over-subscription requests in
order to comply with state securities laws.
HOW DID WE ARRIVE AT THE $___ PER SHARE PRICE?
In determining the price at which a share of common stock may be
purchased in this rights offering, our Board of Directors considered several
factors including the historic and current market price of the common stock, our
business prospects, our recent history of losses, general conditions in the
securities market, our need for capital, alternatives available to us for
raising capital, the amount of proceeds desired, the pricing of similar
transactions, the liquidity of our common stock, the level of risk to our
investors, and the need to offer shares at a price that would be attractive to
our investors relative to the current trading price of our common stock. We did
not seek or obtain any opinion of financial advisors or investment bankers in
establishing the subscription price.
HOW DO I EXERCISE MY SUBSCRIPTION RIGHTS?
You must properly complete the attached subscription certificate and
deliver it to the Subscription Agent before 5 p.m., Eastern standard Time, on
_______________. The address for the Subscription Agent is on page __. Your
subscription certificate must be accompanied by proper payment for each share
that you wish to purchase.
HOW LONG WILL THE RIGHTS OFFERING LAST?
You will be able to exercise your subscription rights only during a limited
period. IF YOU DO NOT EXERCISE YOUR SUBSCRIPTION RIGHTS BEFORE 5 P.M., EASTERN
STANDARD TIME, ON ______________________, YOUR SUBSCRIPTION RIGHTS WILL EXPIRE.
We may, in our discretion, decide to extend the rights offering. In addition, if
the commencement of the rights offering is delayed, the expiration date will
similarly be extended.
AFTER I EXERCISE MY SUBSCRIPTION RIGHTS, CAN I CHANGE MY MIND?
No. Once you send in your subscription certificate and payment, you
cannot revoke the exercise of your subscription rights, even if you later learn
information about us that you consider to be unfavorable. You should not
exercise your subscription rights unless you are certain that you wish to
purchase additional shares of common stock at a price of $____ per share.
IS EXERCISING MY SUBSCRIPTION RIGHTS RISKY?
The exercise of your subscription rights involves certain risks.
Exercising your subscription rights means buying additional shares of our common
stock, and should be carefully considered as you would view other equity
investments. Among other things, you should carefully consider the risks
described under the heading "Risk Factors," beginning on page __.
WHAT HAPPENS IF I CHOOSE NOT TO EXERCISE MY SUBSCRIPTION RIGHTS?
You will retain your current number of shares of common stock in Bionx
Implants even if you do not exercise your subscription rights. However, if other
shareholders exercise their subscription rights and you do not, the percentage
of Bionx Implants that you own will diminish, and your relative voting rights
and economic interests will be diluted.
CAN I SELL OR GIVE AWAY MY SUBSCRIPTION RIGHTS?
No.
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MUST I EXERCISE ANY SUBSCRIPTION RIGHTS?
No.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF EXERCISING MY SUBSCRIPTION
RIGHTS?
The receipt and exercise of your subscription rights are intended to be
nontaxable. You should seek specific tax advice from your personal tax advisor.
WHEN WILL I RECEIVE MY NEW SHARES?
If you purchase shares of common stock through the rights offering, you
will receive certificates representing those shares as soon as practicable after
______________. Subject to state securities laws and regulations, we have the
discretion to delay allocation and distribution of any shares you may elect to
purchase by exercise of your basic or over-subscription privilege in order to
comply with state securities laws.
CAN WE CANCEL THE RIGHTS OFFERING?
Yes. Our Board of Directors may cancel the rights offering at any time
on or before ___________, for any reason. If we cancel the rights offering, any
money received from shareholders will be refunded promptly, without interest.
HOW MUCH MONEY WILL BIONX IMPLANTS RECEIVE FROM THE RIGHTS OFFERING?
Our gross proceeds from the rights offering depend on the number of
shares that are purchased. If we sell all _______ shares which may be purchased
upon exercise of the rights offered by this prospectus, then we will receive
proceeds of $4,000,000, before deducting expenses payable by us, estimated to be
$________. Since four of our directors have advised us that they intend to
exercise their basic subscription privileges in full and three of those four
directors have further advised us that they intend to exercise their respective
over-subscription privileges in an amount equal to the total number of shares
offered in this right offering minus the shares purchased by them through their
basic subscription privileges, we expect to receive proceeds of $4,000,000 from
the rights offering, before deducting expenses. This commitment from our
directors is based on the assumption that the subscription price will reflect a
15% discount from the current market price at the time the rights offering
begins.
HOW WILL WE USE THE PROCEEDS FROM THE RIGHTS OFFERING?
We will use the proceeds from the rights offering for additional
working capital to fund operations, for continuing research and development and
for surgeon education.
HOW MANY SHARES WILL BE OUTSTANDING AFTER THE RIGHTS OFFERING?
The number of shares of common stock that will be outstanding after the
rights offering depends on the number of shares that are purchased. If we sell
all of the shares offered by this prospectus, then we will issue ____________
new shares of common stock during the rights offering. In that case, we will
have approximately ____________ shares of common stock outstanding after the
rights offering.
WHAT IF I HAVE MORE QUESTIONS?
If you have more questions about the rights offering, please contact
Drew Karazin, Vice President- Finance of Bionx Implants, at (215) 643-5000.
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains and may incorporate by reference
"forward-looking" statements, including statements regarding our expectations,
beliefs, intentions or strategies regarding the future. Such statements can be
identified by the use of forward-looking terminology such as "may," "will,"
"believe," "intend," "expect," "anticipate," "estimate," "continue," or other
similar words. Variations on those or similar words, or the negatives of such
words, also may indicate forward-looking statements. Although we believe that
the expectations reflected in this prospectus are reasonable, we cannot assure
you that our expectations will be correct. We have included a discussion
entitled "Risk Factors" in this prospectus, highlighting important factors that
could cause our actual results to differ materially from our expectations. If in
the future you hear or read any forward-looking statements concerning us, you
should refer back to the discussion of Risk Factors. The forward-looking
statements in this prospectus are accurate only as of its date. If our
expectations change, or if new events, conditions or circumstances arise, we are
not required to, and may not, update or revise any forward-looking statement in
this prospectus.
These forward-looking statements include, but are not limited to, a
description of the steps management has taken to improve operating results and
reduce the amount of cash used by operations. Forward- looking statements are
inherently uncertain. Our actual performance and results of operations may
differ materially from those projected or suggested in the forward-looking
statements due to certain risks and uncertainties, including, but not limited
to, the following:
- our history of losses and accumulated deficit, inconsistent
revenues and the uncertainty of future profitability;
- the uncertainty of market acceptance of our existing products
or of any products that we may introduce in the future;
- uncertainty as to whether we will be successful in
commercializing products in development;
- uncertainty as to whether we will be successful in developing
new products;
- uncertainty as to the success, timing and costs related to our
preclinical studies, clinical trials and product clearances by
the U.S. Food and Drug Administration and other regulatory
agencies;
- uncertainty as to the performance of our direct sales persons,
independent sales agents, distributions and dealers;
- uncertainty as to the impact of unanticipated changes in U.S.
and foreign regulations applicable to our business;
- the intensity of competition in our industry;
- the rapid progress of technology in the medical field;
- uncertainty as to the outcome of pending litigation that we
initiated to protect our patent position;
- our dependence on the development of strategic alliances with
others in areas outside of craniofacial devices and
orthopedics; and
- the level of protection over our licenses, trade secrets,
patents and proprietary rights.
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In addition to the risks and uncertainties discussed below under
"Risk Factors", you can find additional information concerning risks and
uncertainties that would cause actual results to differ materially from those
projected or suggested in the forward-looking statements in our filings with the
Securities and Exchange Commission and in our Annual Report on Form 10-K for the
year ended December 31, 1998. The forward- looking statements contained in this
prospectus represent our judgment as of the date of this prospectus, and you
should not unduly rely on such statements.
RISK FACTORS
An investment in our securities involves a high degree of risk. You
should carefully consider the risks and uncertainties described below and the
other information in this prospectus before deciding whether to invest in shares
of our common stock. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, financial condition
and operating results could be materially adversely affected. In such case, the
trading price of our common stock could decline and you may lose part or all of
your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE SUSTAINED OPERATING LOSSES IN THE PAST, WE HAVE AN ACCUMULATED DEFICIT
AND WE MAY NOT REGAIN PROFITABILITY.
We incurred substantial operating losses from our inception through
December 31, 1996, with an accumulated deficit of $7.7 million as of December
31, 1996. Such losses resulted principally from:
- expenses associated with the development, patenting and
clinical testing of our self- reinforcing technologies and
resorbable implant designs;
- preparation of submissions to the FDA and foreign regulatory
agencies;
- the development of sales, marketing and distribution channels;
- the write-off of acquired in-process research and development;
and
- the development of our manufacturing capabilities.
After recording profitable results for a number of quarters, we have again
recorded losses in recent periods. We attribute our more recent losses primarily
to:
- steps taken in 1998 to build inventory levels and personnel in
anticipation of continued growth in our core business and the
introduction of new products in the Craniofacial surgical
market;
- our inability to increase revenues at the rate that we had
planned; and
- legal costs incurred to protect our intellectual property.
As of September 30, 1999, our accumulated deficit was $10.0 million. We may
incur significant operating losses in the future as we continue our product
development efforts, expand our marketing, sales and distribution activities,
develop strategies for competing with other manufacturers, and scale up our
manufacturing capabilities. There can be no assurance that we will be able to
successfully commercialize our products or that profitability will again be
achieved.
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IF WE CANNOT MAINTAIN ADEQUATE OPERATING CAPITAL, OUR BUSINESS WILL SUFFER.
We have substantially less liquidity today than we had on December 31,
1998. At November 30, 1999, our cash and cash equivalents have decreased to $3.3
million. A continuation of operating losses may eliminate our remaining cash
balances at or before the end of the first quarter of 2000, absent cash from
this offering. On a going forward basis, operations may not provide sufficient
internally generated cash flows to meet our projected requirements. Our ability
to continue to finance our operations will depend on our ability to achieve
profitability by improving sales and margins, our ability to reduce cash
outflows and, if necessary, our ability to obtain other sources of funding
sufficient to support our operations. We can't assure you that such funding will
be available on satisfactory terms or at all.
OTHER SOURCES FOR THE NEEDED CAPITAL HAVE NOT YET BEEN IDENTIFIED, AND MAY NOT
BE AVAILABLE.
The subscription rights we are offering may not be fully exercised and
we may not be able to raise the maximum amount of capital we hope to raise by
this rights offering. Even if we sell all of the shares that we are offering,
the net proceeds from this rights offering, combined with internally generated
cash, may not be sufficient to enable us to develop and market our products, in
which event we will have to seek additional capital from other sources. We have
not as yet explored whether any additional sources for capital will be
available, To the extent, if any, that we are able to obtain equity capital from
other sources, the issuance of more shares of stock may dilute the economic
interest and will dilute the voting interests of current shareholders. To the
extent, if any, that we are able to obtain debt financing, the terms of such
financing may be expensive and may subject us to covenants that materially
restrict us.
IF OUR PRODUCTS ARE NOT ACCEPTED BY PHYSICIANS, OUR BUSINESS WILL BE MATERIALLY
ADVERSELY AFFECTED.
Our success will depend in part upon the acceptance of our
self-reinforced, resorbable implants by the medical community, including health
care providers, such as hospitals and physicians, and third-party payors. This
acceptance may depend upon the extent to which the medical community perceives
our products as a safe, reliable and cost-effective alternative to
non-resorbable products which are widely accepted, have a long history of use
and are generally sold at prices lower than the prices of our products.
Ultimately, for our products to gain wide market acceptance, it will also be
necessary for us to convince surgeons that the benefits associated with our
products justify the modification of standard surgical techniques in order to
use our implants safely and effectively. For members of the medical community
who have accepted the use of resorbable implants, we also must convince the
market that our products are superior to our competitors' products. We can't
assure you that our products will achieve significant market acceptance on a
timely basis, or at all. Failure of some or all of our products to achieve
significant market acceptance could have a material adverse effect on our
business, financial condition and results of operations. A reduction in the
number of our products that physicians use in particular surgical procedures
could also have a material adverse effect on our business, financial condition
and results of operations.
IF WE DO NOT REMAIN COMPETITIVE IN THE MARKETS WE SERVE, OUR BUSINESS WILL BE
ADVERSELY AFFECTED.
There is growing pressure on healthcare providers in general, and the
surgical area in particular, to reduce costs. The trend is towards hospitals
purchasing through buying groups and other large distributors, which generally
occurs at lower prices than selling direct to the customer. This trend will make
it difficult to maintain and grow sales and improve profit margins. If we are
not able to introduce new products into such an economic environment and compete
at lower prices than other larger distributors, our business will be adversely
affected.
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THE SUCCESS OF COMPETITIVE PRODUCTS COULD HAVE AN ADVERSE EFFECT ON OUR
BUSINESS.
The medical products industry is intensely competitive and hospitals
have a wide variety of product choices and technologies from which to choose.
The success of any competing alternative products to those we provide could have
a material adverse effect on our business, financial condition and results of
operations. We believe that our competitors include companies that have
substantially greater financial capabilities for product development and
marketing than we do and can therefore market their products or procedures to
hospitals and the medical community in a more effective manner. There is also a
risk that our competitors may succeed in developing safer or more effective
products that could render our products obsolete or noncompetitive.
OUR PATENTS MAY NOT PROTECT OUR PRODUCTS FROM COMPETITION.
We have patents in the United States and certain foreign countries, and
have filed patent applications in the United States and other foreign countries,
for certain products. Although several patents have been issued to us, there can
be no assurance that any additional patents will be issued to us, or that any
patents that are issued to us will provide us with meaningful patent protection,
or that others will not successfully challenge the validity or enforceability of
any patent issued to us. The costs required to uphold the validity and prevent
infringement of any patent issued to us could be substantial, and we might not
have the resources available to defend our patent rights.
WE ARE PRESENTLY ENGAGED IN PATENT LITIGATION THAT IS EXPENSIVE TO PURSUE AND
MAY NOT JUSTIFY THE INVESTMENTS OF TIME AND MONEY THAT WE HAVE MADE AND ARE
MAKING.
We previously initiated a patent infringement lawsuit asserting that a
third party who is selling self-reinforced devices is infringing one of the
principal patents assigned to Bionx Implants. We are seeking both monetary and
injunctive relief from the third party. The third party has asserted that this
patent is invalid, unenforceable and not infringed and has filed a motion for
summary judgment on an issue of invalidity with the court which, if granted,
would result in the dismissal of the case. The motion has not yet been argued in
court, and we plan to vigorously oppose the motion.
In another case, which is still pending, we sued a third party and
asserted that the party was infringing one of the principal patents licensed to
us. We are seeking both monetary and injunctive relief. The third party filed
summary judgment motions asserting that the patent was invalid and unenforceable
and that they did not infringe. In November 1999, we were orally informed by the
judge's law clerk that the third party's motions with respect to invalidity and
unenforceability will be denied but that the third party will prevail in the
non-infringement motion. We have not received the judge's final judgment in
writing. If the third party does in fact prevail on the issue of
non-infringement, we intend to appeal. This litigation has been expensive, and
there can be no assurance of the outcome.
ALTHOUGH WE WILL SPEND A PORTION OF THE NET PROCEEDS FROM THIS OFFERING
ON RESEARCH AND DEVELOPMENT, WE MIGHT NOT SUCCEED IN DEVELOPING NEW PRODUCTS AND
TECHNOLOGIES THAT ARE USEFUL IN MEDICINE.
In considering our plans to use a portion of the net proceeds for
research and development purposes, you should consider the following:
- We are attempting to develop new medical products and
technologies.
- Many of our experimental products and technologies have not
been applied in human medicine and have only been used in
laboratory studies on animals, and there can be no assurance
that those products will prove to be useful in human medicine.
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<PAGE> 14
- The experimentation we are doing is costly, time consuming and
uncertain as to its results.
- If we are successful in developing a new technology or
product, refinement of the new technology or product and
definition of the practical applications and limitations of
the technology or product may take years and require the
expenditure of large sums of money.
IF A PRODUCT WE SELL INJURES A USER, WE COULD BE SUBJECT TO PRODUCT LIABILITY
EXPOSURE.
We sell medical products which may involve product liability risk.
While we carry product liability insurance, there can be no assurance that our
coverage will be adequate to protect us against future liability claims. In
addition, product liability insurance is expensive and there can be no assurance
that this insurance will be available to us in the future on terms satisfactory
to us, if at all. A successful product liability claim or series of claims
brought against us in excess of our insurance coverage could have a material
adverse effect on our business, financial condition and results of operations.
IF WE DO NOT RECEIVE FDA AND OTHER REGULATORY APPROVALS, WE WILL NOT BE
PERMITTED TO SELL OUR PRODUCTS.
The products that we develop cannot be sold until the FDA and
corresponding foreign regulatory authorities approve the products for medical
use. This means that:
- We will have to conduct expensive and time consuming clinical
trials of new products;
- We will incur the expense and delay inherent in seeking FDA
approval of new products;
- A product that is approved may be subject to restrictions on
use;
- The FDA can recall or withdraw approval of a product if
problems arise; and
- We will face similar regulatory issues in foreign countries.
THE PRICE AND SALES OF OUR PRODUCTS MAY BE LIMITED BY HEALTH INSURANCE COVERAGE
AND GOVERNMENT REGULATION.
Our success in selling our products may depend in part on the extent to
which health insurance companies, health maintenance organizations and
government health administration authorities, such as Medicare and Medicaid,
will pay for the cost of the products and related treatment. There can be no
assurance that adequate health insurance, health maintenance organization and
government coverage will be available to permit our products to be sold at
prices high enough for us to generate a profit. In some foreign countries,
pricing or profitability of health care products is subject to government
control. In the United States, there have been a number of federal and state
proposals to implement similar government controls, and new proposals are likely
to be made in the future.
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<PAGE> 15
WE DO NOT HAVE MANUFACTURING FACILITIES IN THE UNITED STATES AND THUS MUST
FOREGO ECONOMIES THAT MIGHT BE ACHIEVABLE IF WE HAD A MANUFACTURING PRESENCE IN
THE UNITED STATES.
We presently do not have adequate facilities or resources to
manufacture our products in the United States. All of our products are
manufactured in Finland. While we had initially planned to construct or acquire
our own manufacturing facilities in the United States, we no longer believe that
such plans are feasible. Accordingly, we will continue to supply our United
States customers with products manufactured in Finland. This places us at a
disadvantage in the United States marketplace when we compete against companies
that manufacture their products in the United States.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE LOSE THE SERVICES OF THE KEY
PERSONNEL UPON WHOM WE DEPEND.
Our product development efforts are dependent upon Pertti Tormala,
Ph.D, and the Technical University in Tampere, Finland. Dr. Tormala, a founder,
director and executive officer of Bionx Implants, is currently an Academy
Professor at the Technical University and has been permitted by the University
to devote his efforts to developing new products for us. We cannot assure you
that the University will allow Dr. Tormala to continue to devote his efforts and
University resources to our product development efforts. If we are unable to
obtain the continued services of Dr. Tormala, or if we are required to fund
research at the Technical University at a substantially increased level, our
business, financial condition and results of operations could be materially
adversely affected.
The loss of other key personnel and the inability to successfully
recruit and retain additional highly skilled and experienced management and
technical personnel could also have a material adverse effect on our business,
financial condition and results of operations.
WE OVERBUILT OUR INVENTORY POSITION.
During 1998 we overbuilt our inventory position in anticipation of
substantially greater sales growth than we have experienced to date. This has
placed a serious drain our cash resources. Some of this inventory has a limited
shelf-life and will be come outdated if we are unable to sell this inventory
more rapidly than we have been able to sell our inventory during 1999. To the
extent that our inventory becomes unusable or unsalable, it will be necessary
for us to charge the asset value of such inventory against our earnings.
WE ARE DEPENDENT UPON INDEPENDENT SALES AGENTS, DISTRIBUTORS AND DEALERS.
We market and sell our products in part through managed networks of
independent sales agents in the United States and independent distributors and
dealers in foreign countries. As a result, a substantial portion of our revenues
are dependent upon the sales efforts of these sales agents, distributors and
dealers. We also rely on our distributors to assist us in obtaining
reimbursement and regulatory approvals in certain international markets. We
cannot assure you that our sales agents, distributors and dealers, some of which
operate relatively small businesses, have the financial stability to assure
their continuing presence in their markets. The inability of a sales agent,
distributor or dealer to perform its obligations, or the cessation of business
by a sales agent, distributor or dealer, could materially and adversely affect
our business, financial condition and results of operations. There can be no
assurance that we will be able to engage or retain qualified sales agents,
distributors or dealers in each territory that we target. The failure to engage
these sales agent, distributors or dealers in these territories would have a
material adverse effect on our business, financial condition and results of
operations.
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<PAGE> 16
A SIGNIFICANT PERCENTAGE OF OUR PRODUCT SALES ARE GENERATED IN INTERNATIONAL
MARKETS, WHICH RESULTS IN INCREASED RISKS TO OUR BUSINESS.
Approximately 20% of our sales during 1998 and approximately 16% of our
sales during the first nine months of 1999 were generated in international
markets. We anticipate that during the next few years, the relative percentage
of our international product sales to total products sales will increase.
International sales and operations may be limited or disrupted by:
- government controls
- export license requirements
- political instability
- trade restrictions
- changes in tariffs
- difficulties in managing international operations
- import restrictions and
- fluctuations in foreign currency exchange rates.
WE MAY NEED STRATEGIC PARTNERS TO BE SUCCESSFUL.
We anticipate that it may be necessary to enter into arrangements with
corporate partners, licensees or others, in order to efficiently market, sell
and distribute our products in areas outside of craniofacial devices and
orthopedics. These strategic partners may also be called upon to assist in the
support of our products, including support of certain product development
functions. As a result, our success may be dependent in part upon the efforts of
these third parties. While we have negotiated one such arrangement, there can be
no assurance that we will be able to negotiate additional acceptable
arrangements with strategic partners or that we will realize any meaningful
revenues pursuant to these arrangements.
WE MAY BE EXPOSED TO YEAR 2000 RISKS.
Computer systems and software products used by many companies may need
to be upgraded to comply with the problems associated with the Year 2000. Many
currently-installed computer systems and software products are designed to
accept only two digit entries in the date code field. Beginning in the Year
2000, these fields will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. Otherwise, these systems and software
could miscalculate dates or fail completely. This could result in the disruption
of business operations controlled by them.
We have assessed and upgraded all systems that we believe could be
affected by the Year 2000 problem. We believe that our production software,
information technology systems, hardware and telecommunications systems are Year
2000 compliant. However, we cannot assure you that we will not experience
unanticipated negative consequences, including material costs caused by
undetected errors or defects in the technology used in our internal systems.
Also, our systems interact electronically and operationally with
software, hardware and equipment outside of our control. The failure of our key
business partners, vendors, suppliers and service providers to be Year 2000
compliant could have a material adverse effect on our business, financial
condition and results of operations.
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<PAGE> 17
Since we believe that our production software, information technology
systems, hardware and telecommunications systems are Year 2000 compliant, we
have not developed and do not plan to develop a contingency plan for
noncompliant software, information technology systems, hardware and
telecommunications systems.
RISKS RELATED TO OUR COMMON STOCK
OUR COMMON STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE, WHICH COULD
RESULT IN SUBSTANTIAL LOSSES FOR INDIVIDUAL SHAREHOLDERS WHO EXERCISE THEIR
SUBSCRIPTION RIGHTS.
The market price of our common stock ranged between a high sales price
of $9.50 and a low sales price of $2.50 during 1999 and may continue to be
highly volatile and subject to wide fluctuations in response to factors
including the following, some of which are beyond our control:
- actual or anticipated variations in our quarterly operating
results;
- announcements of technological innovations or new products or
services or new pricing practices by us or our competitors;
- changes in financial estimates by security analysts;
- underperformance against analysts' estimates;
- changing United States and foreign government regulations
relating to approval of our products;
- results of regulatory inspections;
- the status of patents and proprietary rights related to our
products that are developed by us or our competitors;
- increased market share penetration by our competitors;
- announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or
capital commitments;
- additions or departures of key personnel;
- sales of additional shares of common stock; and
- existing and potential litigation.
In addition, the stock market in general, and stocks of medical technology
companies in particular, have from time to time experienced extreme price and
volume fluctuations. This volatility is often unrelated or disproportionate to
the operating performance of these companies. These broad market fluctuations
may adversely affect the market price of our common stock, regardless of our
actual operating performance.
WE DO NOT EXPECT TO PAY COMMON STOCK DIVIDENDS.
We have not paid cash dividends in the past and do not intend to pay
cash dividends on our common stock for the foreseeable future. In determining
whether to pay dividends, our Board of Directors will consider many factors,
including our earnings, capital requirements and financial condition.
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<PAGE> 18
SOME ANTI-TAKEOVER PROVISIONS OF OUR CHARTER DOCUMENTS MAY DELAY OR PREVENT A
TAKEOVER OF OUR COMPANY.
Certain provisions of our charter documents may make it more difficult
for a third party to acquire control of us without Board approval, even on terms
that a shareholder might consider favorable. Our articles of incorporation
authorize the Board of Directors to issue preferred stock without shareholder
approval. The issuance of preferred stock could make it more difficult for a
third party to acquire our company because the preferred stock could have
dividend, redemption, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of holders of our common
stock. Our Board of Directors does not currently have any intent to issue shares
of preferred stock.
Our articles of incorporation also provide that our Board of Directors
is divided into three classes, and the directors in each class serve staggered
three year terms. Further, our articles of incorporation require, in most
instances, that parties seeking to gain control of Bionx Implants gain Board
approval for business combinations. These provisions may make it more difficult
for shareholders to replace current members of our Board and may make the
acquisition of our company by a third party more difficult.
CONTROLLING SHAREHOLDERS CAN LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF
MATTERS REQUIRING SHAREHOLDER APPROVAL AND COULD DISCOURAGE POTENTIAL
ACQUISITIONS OF OUR BUSINESS BY THIRD PARTIES.
Our management and directors as a group beneficially own approximately
4.4 million shares or 48.5% of our voting securities. This percentage may
increase as a result of the rights offering if such persons purchase shares as a
result of their over-subscription privileges. These shareholders, acting
together, could exert significant or controlling influence over all matters
requiring approval by shareholders, including the election or removal of
directors and the approval of mergers or other business combination
transactions. This concentration of ownership could have the effect of delaying
or preventing a change in control or otherwise discouraging a potential acquirer
from attempting to obtain control of Bionx Implants. This in turn could harm the
market price of our common stock or prevent our shareholders from realizing a
premium over the market price for their shares of common stock.
THE SALE OF RESTRICTED SHARES COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO DROP SIGNIFICANTLY.
Most of the shares of common stock beneficially owned by our management
and directors are restricted securities under federal law. They may be sold but
are subject to certain volume and other restrictions. We cannot estimate the
number of these shares that may be sold in the future or the effect that their
sale may have on the market price of the common stock. However, it could drop
significantly if the holders of these restricted shares sell them or are
perceived by the market as intending to sell them, even if our business is doing
well.
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<PAGE> 19
THE MARKET PRICE OF OUR COMMON SHARES COULD DECLINE IF WE DO NOT MEET THE
REQUIREMENTS FOR CONTINUED LISTING ON NASDAQ.
Our shares of common stock are traded on the Nasdaq National Market,
which has adopted rules that establish criteria for initial and continued
listing of securities. To comply with the continued listing criteria of the
Nasdaq National Market, a company must comply with at least one of two sets of
rules. Under one set of rules, a company must maintain at least $4,000,000 of
net tangible assets, have at least 750,000 publicly held shares with a market
value of over $5,000,000 and have a minimum bid price of $1.00 per share. Under
another set of rules, a company must maintain a market capitalization of at
least $50,000,000, or total assets and total revenue of at least $50,000,000
each for the most recently completed fiscal year or two of the three most
recently completed fiscal years. Although we currently meet the first set of
rules for continued listing, a continuing decline in the market price of our
common stock or future losses from operations could cause us to fail to meet the
Nasdaq listing criteria in the future. If our common stock is delisted from the
Nasdaq National Market, trading in our common stock could be conducted on the
Nasdaq SmallCap Market or on an electronic bulletin board established for
securities that do not meet the Nasdaq listing requirements. If our common stock
were delisted from the Nasdaq National Market and were not listed on the Nasdaq
SmallCap Market, it would be subject to the so-called penny stock rules that
impose restrictive sales practice requirements on broker-dealers who sell those
securities. Consequently, delisting, if it occurred, could affect the ability of
shareholders to sell their common stock in the secondary market. The
restrictions applicable to shares that are de-listed, as well as the lack of
liquidity for shares that are traded on an electronic bulletin board, may
adversely affect the market price of such shares.
RISKS RELATED TO THE SUBSCRIPTION RIGHTS OFFERING
IF YOU DO NOT EXERCISE ALL OF YOUR SUBSCRIPTION RIGHTS, YOU MAY SUFFER
SIGNIFICANT DILUTION OF YOUR PERCENTAGE OWNERSHIP OF OUR COMMON STOCK.
This rights offering is designed to allow all current shareholders to
purchase additional shares of common stock at a discount from the market price
of the stock on the date the rights are offered. The purpose of this structure
is to enable Bionx Implants to raise capital while allowing current shareholders
to maintain their relative proportionate voting and economic interest. Four of
our directors, who own their common stock through family partnerships and other
entities, have advised us that they intend to exercise their basic subscription
privileges in full and may exercise their respective over-subscription
privileges. To the extent that current shareholders do not exercise their
subscription rights and shares are purchased by other shareholders in the rights
offering, the proportionate voting interest of the non-exercising shareholders
will be reduced, and the percentage that their original shares represent of our
expanded equity after exercise of the subscription rights will be
disproportionately diluted.
THE PRICE OF OUR COMMON STOCK MAY DECLINE BEFORE OR AFTER THE SUBSCRIPTION
RIGHTS EXPIRE.
We cannot assure you that the public trading market price of our common
stock will not decline after you exercise your subscription rights. If that
occurs, you will have committed to buy shares of common stock at a price above
the prevailing market price and you will have an immediate unrealized loss.
Moreover, we cannot assure you that following the exercise of subscription
rights you will be able to sell your shares of common stock at a price equal to
or greater than the subscription price. Until certificates are delivered upon
expiration of the rights offering, you may not be able to sell the shares of our
common stock that you purchase in the rights offering. Certificates representing
shares of our common stock purchased will be delivered as soon as practicable
after expiration of the rights offering. We will not pay you interest on funds
delivered to the Subscription Agent pursuant to the exercise of rights.
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<PAGE> 20
ONCE YOU EXERCISE YOUR SUBSCRIPTION RIGHTS, YOU MAY NOT REVOKE THE EXERCISE.
Once you exercise your subscription rights, you may not revoke the
exercise, even if less than all of the shares that we are offering are actually
purchased. If we elect to withdraw or terminate the rights offering, neither we
nor the Subscription Agent will have any obligation with respect to the
subscription rights except to return, without interest, any subscription
payments.
THE SUBSCRIPTION PRICE IS NOT AN INDICATION OF THE VALUE OF OUR COMPANY.
The subscription price was set by our Board of Directors after
considering a variety of factors, including the desire to encourage full
shareholder participation in this rights offering by setting an exercise price
below the current market price of the common stock. The subscription price does
not necessarily bear any relationship to the book value of our assets, past
operations, cash flows, losses, financial condition or any other established
criteria for value. You should not consider the subscription price as an
indication of the present or future value of Bionx Implants. Our Board of
Directors has established the subscription price at a __% discount from the
market price of the common stock on the date of the offering of the subscription
rights to encourage all shareholders to exercise their subscription rights and
thereby raise capital without diluting the interests of current shareholders. We
have neither sought nor obtained a valuation opinion from an outside financial
consultant or investment banker.
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<PAGE> 21
SELECTED FINANCIAL INFORMATION
Our consolidated selected financial information is derived from our
Annual Report on Form 10-K for the year ended December 31, 1998 and our
Quarterly Report on Form 10-Q for the period ended September 30, 1999. You
should read the following financial information in conjunction with those
reports. See "If You Would Like More Information."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues ................................. $1,280 $ 1,622 $ 5,379 $16,014 $21,100 $15,071 $15,173
Gross profit ............................. 804 1,084 3,165 12,336 16,573 11,871 10,410
Operating expenses ....................... 883 2,439 7,819 10,579 15,320 10,880 16,830
Operating income (loss) .................. (79) (1,355) (4,654) 1,757 1,253 991 (6,420)
Net income (loss) ........................ (162) (1,478) (4,992) 2,158 1,261 1,191 (5,761)
Earnings (loss) per share(1):
Basic .................................. (0.89) 0.28 0.14 0.13 (0.65)
Diluted ................................ (0.89) 0.25 0.14 0.13 (0.65)
Shares used in computing earnings (loss)
per share(1):
Basic .................................. 5,621 7,787 8,918 8,921 8,895
Diluted ................................ 5,621 8,526 9,243 9,261 8,895
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------ September 30,
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit) .......... $ (164) $ (576) $ 2,046 $ 24,549 $ 23,984 $ 17,360
Total assets ....................... 2,029 1,794 9,370 33,541 36,949 29,397
Long-term debt less current portion 301 896 590 115 75 60
Mandatorily redeemable convertible
preferred stock ................. -- -- 5,000 -- -- --
Accumulated deficit ................ (1,215) (2,693) (7,686) (5,527) (4,266) (10,027)
Total stockholders' equity (deficit) (280) (1,036) 1,023 29,081 30,241 24,446
</TABLE>
- --------------
(1) In 1996, prior to our initial public offering, Bionx Implants was
reorganized. Accordingly, earnings (loss) per share is not presented for 1994
and 1995.
We have analyzed our three most recently completed fiscal years in
the last Annual Report on Form 10-K that we filed and our current fiscal year
in the last Quarterly Report on Form 10-Q that we filed.. See "If You Would Like
More Information."
We have derived our product revenues from three product categories:
sports medicine, orthopedic trauma and craniofacial devices. Our sports medicine
revenues have been our strongest category since 1996, when we commenced selling
our Meniscus Arrow product. However, in recent periods, our Meniscus Arrow
revenues have been adversely impacted by competitive products and possibly by
lower unit usage in particular procedures.
In late 1998, we built inventory levels and personnel in
anticipation of continued growth in our core business and the introduction of
new products in the craniofacial surgical market. Our actual sales results were
less than planned; thus these increased expenditures, together with legal costs
incurred to protect our intellectual property, resulted in substantial operating
losses during 1999.
During the second and third quarters of 1999, we have implemented
initiatives to refocus our business and reallocate critical resources with a
goal to achieve sales growth, profit improvement and a positive cash flow
position. These initiatives included:
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<PAGE> 22
- the development of a management-restructuring plan to add
critical resources in areas expected to have the greatest
impact on sales growth and profit improvement;
- the consolidation of sales efforts for craniofacial and
orthopedic products, designed to improve sales efficiencies,
increase market coverage and reduce our cost of sales;
- a reduction in sales administration, in order to reduce our
overall cost of sales;
- a refocus of research and development efforts on new products
that will complement orthopedic and craniofacial products that
we plan to introduce by December 31, 2000;
- a consolidation of our inventories worldwide in order to
reduce our overall investment in inventories and improve
customer service levels;
- a reduction in our inventory levels in order to improve
inventory turn rates, thereby reducing the cash that we need
to support our inventory;
- an increase in sales and marketing efforts designed to expand
sales from markets outside of the United States; and
- the implementation of surgeon educational programs designed to
increase surgeon awareness and use of the Company's products.
In addition to these initiatives, during the second quarter of
1999, four new patents were issued for the application of the
Company's technology for orthopedic indications.
We cannot assure you that our initiatives will be successful or that our
initiatives will result in profitable operations.
RECENT DEVELOPMENTS
We have continued to incur operating losses in the fourth quarter of
1999, and expect to report a net loss for the quarter.
Four of our employees located in Finland have recently left the
company, and we are concerned that they intend to compete with Bionx Implants.
These individuals have previously signed agreements with us, in which they have
agreed to keep confidential any information concerning our business that they
obtained during their employment and to refrain from using such information for
their own benefit or the benefit of a third party after their employment
terminated. However, they have declined to assure us that they do not intend to
compete with us. If these former employees establish a competitor, we intend to
vigorously pursue all remedies available to us.
In September, 1999, each of our four outside directors was granted a
stock option to purchase 40,000 shares of our common stock at an exercise price
of $4.125 per share, the fair market value on the date of grant. On the same
date, the following executive officers received stock options to purchase shares
of our common stock at the same exercise price: Gerard Carlozzi - 100,000
shares; Pertii Viitanen - 40,000 shares; and Pertti Tormala - 40,000 shares.
We previously initiated a patent infringement lawsuit asserting that a
third party who is selling self-reinforced devices is infringing one of the
principal patents assigned to Bionx Implants. We are seeking both monetary and
injunctive relief from the third party. The third party has asserted that this
patent is invalid, unenforceable and not infringed and has filed a motion for
summary judgment on an issue of invalidity with the court which, if granted,
would result in the dismissal of the case. The motion has not yet been argued in
court, and we plan to vigorously oppose the motion.
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<PAGE> 23
In another case, which is still pending, we sued a third party and
asserted that the party was infringing one of the principal patents licensed to
us. We are seeking both monetary and injunctive relief. The third party filed
summary judgment motions asserting that the patent was invalid and unenforceable
and that they did not infringe. In November 1999, we were orally informed by the
judge's law clerk that the third party's motions with respect to invalidity and
unenforceability will be denied but that the third party will prevail in the
non-infringement motion. We have not received the judge's final judgment in
writing. If the third party does in fact prevail, we intend to appeal. This
litigation has been expensive, and there can be no assurance of the outcome.
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<PAGE> 24
THE RIGHTS OFFERING
BEFORE EXERCISING OR SELLING ANY SUBSCRIPTION RIGHTS, YOU SHOULD READ CAREFULLY
THE INFORMATION SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE ___.
THE SUBSCRIPTION RIGHTS
We are distributing non-transferable subscription rights to
shareholders who owned shares of our common stock on __________, at no cost to
the shareholders. We will give you 0.__ of a subscription right for each share
of common stock that you owned on _________. You will not receive fractional
subscription rights during the rights offering, but instead we will round your
number of subscription rights down to the nearest whole number. Each
subscription right will entitle you to purchase one share of common stock for
$__. If you wish to exercise your subscription rights, you must do so before 5
P.M., Eastern Standard Time, on _______, ____ After that date, the subscription
rights will expire and will no longer be exercisable.
BASIC SUBSCRIPTION PRIVILEGE
Each subscription right will entitle you to receive, upon payment of
$___, one share of common stock. You will receive certificates representing the
shares that you purchase pursuant to your basic subscription privilege as soon
as practicable after _______, ___, whether you exercise your subscription rights
immediately prior to that date or earlier.
OVER-SUBSCRIPTION PRIVILEGE
Subject to the allocation described below, each subscription right also
grants you an over-subscription privilege to purchase additional shares of
common stock that are not purchased by other shareholders. You are entitled to
exercise your over-subscription privilege only if you exercise your basic
subscription privilege in full. If you wish to exercise your over-subscription
privilege, you should indicate the number of additional shares that you would
like to purchase in the space provided on your subscription certificate. When
you send in your subscription certificate, you must also send the full purchase
price for the number of additional shares that you have requested to purchase
(in addition to the payment due for shares purchased through your basic
subscription privilege). If the number of shares remaining after the exercise of
all basic subscription privileges is not sufficient to satisfy all over-
subscription privileges, we will allocate the available shares among
shareholders who over-subscribed in proportion to the number of shares purchased
by those over-subscribing shareholders through the basic subscription privilege.
However, if your pro rata allocation exceeds the number of shares you requested,
you will receive only the number of shares that you requested, and the remaining
shares from your pro rata allocation will be divided among other shareholders
exercising their over-subscription privileges who have subscribed for additional
shares in proportion to the number of shares purchased by that group of over-
subscribing shareholders through the basic subscription privilege. In certain
circumstances, however, in order to comply with applicable state securities
laws, we may not be able to honor all over-subscription privileges even if we
have shares available.
INTENDED PURCHASES
Four of our five directors, David J. Bershad, Anthony J. Dimun, David
H. MacCallum and Terry D. Wall, who own our common stock through various family
partnerships and other entities, have advised us that they intend to exercise
their basic subscription privileges in full. Messrs. Bershad, Dimun and Wall
have further advised us that they intend to exercise their respective
over-subscription privileges in an amount equal to the total number of shares
offered in this right offering minus the shares purchased by them through their
basic subscription privileges. This commitment, which ensures that all of the
shares offered in this rights offering will be subscribed for, is based on the
assumption that the
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<PAGE> 25
subscription price will reflect a 15% discount from the current market price at
the time the rights offering begins.
NO RECOMMENDATION
We are not making any recommendations as to whether or not you should
exercise your subscription rights. You should make your decision based on your
own assessment of your best interests.
EXPIRATION DATE
The rights will expire at 5 p.m., Eastern standard Time, on ______,
____,unless we decide to extend the rights offering. If you do not exercise your
subscription rights prior to that time, your subscription rights will be null
and void. We will not be required to issue shares of common stock to you if the
Subscription Agent receives your subscription certificate or your payment after
that time, regardless of when you sent the subscription certificate and payment,
unless you send the documents in compliance with the guaranteed delivery
procedures described below.
WITHDRAWAL RIGHT
Our Board of Directors may withdraw the rights offering in its sole
discretion at any time prior to or on _____, ____, for any reason (including,
without limitation, a change in the market price of the common stock). If we
withdraw the rights offering, any funds you paid will be promptly refunded,
without interest or penalty.
DETERMINATION OF SUBSCRIPTION PRICE
Our Board of Directors chose the $___ per share subscription price
after considering a variety of factors, including the following:
- the historic and current market price of the common stock;
- our business prospects;
- our history of losses;
- general conditions in the securities market;
- our need for capital;
- alternatives available to us for raising capital;
- the amount of proceeds desired;
- pricing of similar transactions;
- the liquidity of our common stock;
- the level of risk to our investors; and
- the need to offer shares at a price that would be attractive
to our investors relative to the current trading price of our
common stock.
The $____ per share subscription price should not be considered an indication of
the actual value of Bionx Implants or of our common stock. We cannot assure you
that the market price of the common
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<PAGE> 26
stock will not decline during or after the rights offering. We also cannot
assure you that you will be able to sell shares of common stock purchased during
the rights offering at a price equal to or greater than $____ per share.
TRANSFERABILITY OF SUBSCRIPTION RIGHTS
Both the basic subscription rights and over-subscription rights are
non-transferable and non- assignable. Only you may exercise these rights.
EXERCISE OF SUBSCRIPTION RIGHTS
You may exercise your subscription rights by delivering to the
Subscription Agent on or prior to ________, ____:
- A properly completed and duly executed subscription
certificate;
- Any required signature guarantees; and
- Payment in full of $ ____ per share for the shares of common
stock subscribed for by exercising your basic subscription
rights and, if desired, your over-subscription rights.
You should deliver your subscription certificate and payment to the
Subscription Agent at the address shown under the heading "Subscription Agent."
We will not pay you interest on funds delivered to the Subscription Agent
pursuant to the exercise of rights.
METHOD OF PAYMENT
Payment for the shares must be made by check or bank draft (cashier's
check) drawn upon a United States bank or a postal, telegraphic or express money
order payable to the order of StockTrans, Inc., as Subscription Agent. Payment
for basic subscription rights and over-subscription rights may also be effected
through wire transfer as follows: _________________________. Payment will be
deemed to have been received by the Subscription Agent only upon:
(A) clearance of any uncertified check;
(B) receipt by the Subscription Agent of any certified check or
bank draft drawn upon a U.S. bank or of any postal,
telegraphic or express money order;
(C) receipt by the Subscription Agent of any funds transferred by
wire transfer; or
(D) receipt of funds by the Subscription Agent through an
alternative payment method approved by Bionx Implants.
Please note that funds paid by uncertified personal check may take at
least five business days to clear. Accordingly, if you wish to pay by means of
an uncertified personal check, we urge you to make payment sufficiently in
advance of _________________, to ensure that the payment is received and clears
before that date. We also urge you to consider payment by means of a certified
or cashier's check or money order.
GUARANTEED DELIVERY PROCEDURES
If you want to exercise your subscription rights, but time will not
permit your subscription certificate to reach the Subscription Agent on or prior
to ____________, ____, you may exercise your subscription rights if you satisfy
the following guaranteed delivery procedures:
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<PAGE> 27
(1) You send, and the Subscription Agent receives, payment in full for each
share of common stock being subscribed for through the basic subscription
privilege and the over-subscription privilege, on or prior to _______,
_____;
(2) You send, and the Subscription Agent receives, on or prior to ______,
____, a notice of guaranteed delivery, substantially in the form provided
with the attached instructions, from a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States. The notice of guaranteed delivery must
state your name, the number of subscription rights that you hold, the
number of shares of common stock that you wish to purchase pursuant to the
basic subscription privilege and the number of shares, if any, you wish to
purchase pursuant to the over-subscription privilege. The notice of
guaranteed delivery must guarantee the delivery of your subscription
certificate to the Subscription Agent within three over-the-counter trading
days following the date of the notice of guaranteed delivery; and
(3) You send, and the Subscription Agent receives, your properly completed
and duly executed subscription certificate, including any required
signature guarantees, within three over-the-counter trading days following
the date of your notice of guaranteed delivery. The notice of guaranteed
delivery may be delivered to the Subscription Agent in the same manner as
your subscription certificate at the addresses set forth under the heading
"Subscription Agent," or may be transmitted to the Subscription Agent by
facsimile transmission, to facsimile number 610-649-7302. You can obtain
additional copies of the form of notice of guaranteed delivery by
requesting them from the Subscription Agent at the address set forth under
the heading "Subscription Agent."
SIGNATURE GUARANTEE
Signatures on the subscription certificate do not need to be guaranteed
if either the subscription certificate provides that the shares of common stock
to be purchased are to be delivered directly to the record owner of such
subscription rights, or the subscription certificate is submitted for the
account of a member firm of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States. If
a signature guarantee is required, signatures on the subscription certificate
must be guaranteed by an Eligible Guarantor Institution, as defined in Rule
17Ad-15 of the Securities Exchange Act of 1934, as amended, subject to the
standards and procedures adopted by the Subscription Agent. Eligible Guarantor
Institutions include banks, brokers, dealers, credit unions, national securities
exchanges and savings associations.
SHARES HELD FOR OTHERS
If you are a broker, a trustee or a depository for securities, or you
otherwise hold shares of common stock for the account of a beneficial owner of
common stock, you should notify the beneficial owner of such shares as soon as
possible to obtain instructions with respect to their subscription rights. If
you are a beneficial owner of common stock held by a holder of record, such as a
broker, trustee or a depository for securities, you should contact the holder
and ask him or her to effect transactions in accordance with your instructions.
AMBIGUITIES IN EXERCISE OF SUBSCRIPTION RIGHTS
If you do not specify the number of subscription rights being exercised
on your subscription certificate, or if your payment is not sufficient to pay
the total purchase price for all of the shares that you indicated you wished to
purchase, you will be deemed to have exercised the maximum number of
subscription rights that could be exercised for the amount of the payment that
the Subscription Agent receives from you. If your payment exceeds the total
purchase price for all of the subscription rights shown on your subscription
certificate, your payment will be applied, until depleted, to subscribe for
shares of common stock in the following order:
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<PAGE> 28
(1) to subscribe for the number of shares, if any, that you indicated
on the subscription certificate that you wished to purchase through your basic
subscription privilege;
(2) to subscribe for shares of common stock until your basic
subscription privilege has been fully exercised;
(3) to subscribe for additional shares of common stock pursuant to the
over-subscription privilege (subject to any applicable proration).
Any excess payment remaining after the foregoing allocation will be returned to
you as soon as practicable by mail, without interest or deduction.
REGULATORY LIMITATION
We will not be required to issue you shares of common stock pursuant to
the rights offering if, in our opinion, you would be required to obtain prior
clearance or approval from any state or federal regulatory authorities to own or
control such shares if, at the time the subscription rights expire, you have not
obtained such clearance or approval.
STATE AND FOREIGN SECURITIES LAWS
The rights offering is not being made in any state or other
jurisdiction in which it is unlawful to do so, nor are we selling or accepting
any offers to purchase any shares of common stock to you if you are a resident
of any such state or other jurisdiction. We may delay the commencement of the
rights offering in certain states or other jurisdictions in order to comply with
the securities law requirements of such states or other jurisdictions. It is not
anticipated that there will be any changes in the terms of the rights offering.
In our sole discretion, we may decline to make modifications to the terms of the
rights offering requested by certain states or other jurisdictions, in which
case stockholders who live in those states or jurisdictions will not be eligible
to participate in the rights offering.
OUR DECISION BINDING ON YOU
All questions concerning the timeliness, validity, form and eligibility
of any exercise of subscription rights will be determined by us, and our
determinations will be final and binding. In our sole discretion, we may waive
any defect or irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported exercise of any
subscription right by reason of any defect or irregularity in such exercise.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as we determine in our
sole discretion. Neither Bionx Implants nor the Subscription Agent will be under
any duty to notify you of any defect or irregularity in connection with the
submission of a subscription certificate or incur any liability for failure to
give such notification.
NO REVOCATION
After you have exercised your basic subscription privilege or
over-subscription privilege, YOU MAY NOT REVOKE THAT EXERCISE. You should not
exercise your subscription rights unless you are certain that you wish to
purchase additional shares of common stock.
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<PAGE> 29
SHARES OF COMMON STOCK OUTSTANDING AFTER THE RIGHTS OFFERING
Assuming we issue all of the shares of common stock offered in the
rights offering, approximately _____ shares of common stock will be issued and
outstanding. This would represent a ____% increase in the number of outstanding
shares of common stock. IF YOU DO NOT EXERCISE YOUR BASIC SUBSCRIPTION RIGHTS,
THE PERCENTAGE OF COMMON STOCK THAT YOU HOLD WILL DECREASE IF SHARES ARE
PURCHASED IN THE RIGHTS OFFERING.
FEES AND EXPENSES
We will pay all fees charged by the Subscription Agent. You are
responsible for paying any other commissions, fees, taxes or other expenses
incurred in connection with the exercise of the subscription rights. Neither
Bionx Implants nor the Subscription Agent will pay such expenses.
SUBSCRIPTION
We have appointed our transfer agent, StockTrans, Inc., as Subscription
Agent for the rights offering. The Subscription Agent's address for packages
sent by mail or overnight delivery is:
StockTrans, Inc.
Seven East Lancaster Avenue
Ardmore, Pennsylvania 19003-2318.
The Subscription Agent's telephone number is 610-649-7300 and its
facsimile number is 610-649-7302. You should deliver your subscription
certificate, payment of the subscription price and notice of guaranteed delivery
(if any) to the Subscription Agent. We will pay the fees and certain expenses of
the Subscription Agent, which we estimate will total $_____. We have also agreed
to indemnify the Subscription Agent from any liability which it may incur in
connection with the rights offering.
IMPORTANT
PLEASE CAREFULLY READ THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION CERTIFICATE
AND FOLLOW THOSE INSTRUCTIONS IN DETAIL. DO NOT SEND SUBSCRIPTION CERTIFICATES
DIRECTLY TO US. YOU ARE RESPONSIBLE FOR CHOOSING THE PAYMENT AND DELIVERY METHOD
FOR YOUR SUBSCRIPTION CERTIFICATE, AND YOU BEAR THE RISKS ASSOCIATED WITH SUCH
DELIVERY. IF YOU CHOOSE TO DELIVER YOUR SUBSCRIPTION CERTIFICATE AND PAYMENT BY
MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED. WE ALSO RECOMMEND THAT YOU ALLOW A SUFFICIENT NUMBER OF DAYS
TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO
_________, ____. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR, WE STRONGLY URGE YOU TO PAY, OR ARRANGE FOR PAYMENT, BY
MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the material federal income tax considerations
of the rights offering to you and Bionx Implants. This summary is based on
current law, which is subject to change at any time, possibly with retroactive
effect. This summary is not a complete discussion of all federal income tax
consequences of the rights offering, and, in particular, may not address federal
income tax consequences applicable to stockholders subject to special treatment
under federal income tax law. In addition, this summary does not address the tax
consequences of the rights offering under applicable state, local or foreign tax
laws. This discussion assumes that your shares of common stock and the
subscription rights and shares issued to you during the rights offering
constitute capital assets.
Receipt and exercise of the subscription rights distributed pursuant to
the rights offering is intended to be nontaxable to stockholders, and the
following summary assumes you will qualify for such nontaxable treatment. If,
however, the rights offering does not qualify as nontaxable, you would be
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<PAGE> 30
treated as receiving a taxable distribution equal to the fair market value of
the subscription rights on their distribution date. The distribution would be
taxed as a dividend to the extent made out of Bionx Implants' current or
accumulated earnings and profits; any excess would be treated first as a return
of your basis (investment) in your Bionx Implants stock and then as a capital
gain. Expiration of the subscription rights would result in a capital loss.
THIS DISCUSSION IS INCLUDED FOR YOUR GENERAL INFORMATION ONLY. YOU SHOULD
CONSULT YOUR TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES TO YOU OF THE RIGHTS
OFFERING IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES, INCLUDING ANY STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES.
TAXATION OF STOCKHOLDERS
Receipt of a Subscription Right. You will not recognize any gain or
other income upon receipt of a subscription right.
Tax Basis and Holding Period of Subscription Rights. Your tax basis in
each subscription right will effectively depend on whether you exercise the
subscription right or allow the subscription right to expire.
If you exercise a subscription right, your tax basis in the
subscription right will be determined by allocating the tax basis of your common
stock on which the subscription right is distributed between the common stock
and the subscription right, in proportion to their relative fair market values
on the date of distribution of the subscription right. However, if the fair
market value of your subscription rights is less than 15 percent of the fair
market value of your existing shares of common stock, then the tax basis of each
subscription right will be deemed to be zero, unless you elect, by attaching an
election statement to your federal income tax return for the taxable year in
which you receive the subscription rights, to allocate tax basis to your
subscription rights.
If you allow a subscription right to expire, it will be treated as
having no tax basis.
Your holding period for a subscription right will include your holding
period for the shares of common stock upon which the subscription right is
issued.
Expiration of Subscription Rights. You will not recognize any loss upon
the expiration of a subscription right.
Exercise of Subscription Rights. You generally will not recognize a
gain or loss on the exercise of a subscription right. The tax basis of any share
of common stock that you purchase through the rights offering will be equal to
the sum of your tax basis (if any) in the subscription right exercised and the
price paid for the share. The holding period of the shares of common stock
purchased through the rights offering will begin on the date that you exercise
your subscription rights.
TAXATION OF BIONX IMPLANTS
We will not recognize any gain, other income or loss upon the issuance
of the subscription rights, the lapse of the subscription rights, or the receipt
of payment for shares of common stock upon exercise of the subscription rights.
IF YOU HAVE QUESTIONS
If you have questions or need assistance concerning the procedure for
exercising subscription rights or if you would like additional copies of this
prospectus, the instructions, or the Notice of Guaranteed Delivery, you should
contact Drew Karazin, Vice President-Finance of Bionx Implants, at:
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<PAGE> 31
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, Pennsylvania 19422
Telephone (215) 643-5000
DESCRIPTION OF OUR COMMON STOCK
As a holder of common stock, you are entitled to one vote for each
share held of record on all matters submitted to a vote of our stockholders. You
are entitled to receive dividends, if any, declared by our Board of Directors.
If we liquidate Bionx Implants, you will be entitled to share ratably with the
other stockholders in the distribution of all assets that we have left after we
pay all of our liabilities. You have no preemptive rights to subscribe for
additional shares of common stock and no right to convert your common stock into
any other securities. In addition, you do not have the benefit of a sinking fund
for your shares of common stock. Your common stock is not redeemable by Bionx
Implants.
PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BY-LAWS
THAT MAY HAVE ANTI-TAKEOVER EFFECTS
Our articles of incorporation and by-laws
- provide for a classified Board of Directors;
- require a supermajority vote to amend certain provisions of
the articles of incorporation or by-laws;
- describe specific procedures that must be followed in order
for shareholder proposals to be considered at shareholders'
meetings;
- provide that shareholders may not act by consent instead of at
a meeting; and
- authorize the Board of Directors to issue shares of preferred
stock without further stockholder approval and to set the
rights, privileges and preferences of those shares.
In addition, to the full extent possible, Bionx Implants has opted out
of the specific anti-takeover provisions included in the Pennsylvania Business
Corporation Law (the "BCL"). Instead, our articles of incorporation contain
provisions which generally prevent the corporation from engaging in a "business
combination", which includes a merger or sale of more than 10% of our assets,
with any "interested stockholder" (generally defined as a stockholder who,
together with its affiliates and associates, owns 15% or more of our outstanding
voting shares) for three years following the date that such stockholder became
an "interested stockholder" unless
- prior to such date, our Board of Directors approved either the
business combination or the transaction which resulted in the
stockholder becoming an "interested stockholder",
- upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the
interested stockholder owned at least 85% of our voting stock
outstanding at the time the transaction commenced (excluding
certain shares), or
- on or after that date, the business combination is approved by
our Board of Directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least
66 2/3% of the voting stock which is not owned by the
"interested stockholder".
Additionally, by reason of their approximately 48.5% aggregate interest
in our outstanding common stock, the directors and executive officers of Bionx
Implants, should they decide to act in concert, can prevent the approval of any
transaction, even if it might be beneficial to other shareholders.
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<PAGE> 32
These provisions are designed to encourage any person who desires to
take control of and/or acquire Bionx Implants to enter into negotiations with
our Board of Directors, thereby making more difficult the acquisition of Bionx
Implants by means of a tender offer, a proxy contest or other non-negotiated
means, even if it would be in your best interest. In addition to encouraging any
person intending to attempt a takeover of Bionx Implants to negotiate with our
Board of Directors, these provisions also curtail a person's use of a dominant
equity interest to control any negotiations with our Board. Under these
circumstances, our Board of Directors may be better able to make and implement
reasoned business decisions and protect the interests of all of our
stockholders. Any one of, or a combination of, these anti-takeover provisions
could discourage a third party from attempting to acquire control of Bionx
Implants.
USE OF PROCEEDS
We will apply the net proceeds from the rights offering for additional
working capital to fund operations, for continuing research and development and
for surgeon education.
Assuming that stockholders exercise all of the subscription rights
offered, we will receive gross proceeds from the rights offering of $4,000,000.
Net of expected expenses incurred in this offering, we would, in that event,
receive proceeds of approximately $______.
PRICE RANGE OF COMMON STOCK
Our common stock is listed for quotation on the Nasdaq National Market
under the symbol "BINX." The following table sets forth, for the periods
indicated, the intra-day high and low sales prices per share of our common stock
on the Nasdaq National Market.
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<PAGE> 33
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
First Quarter ........................... $31.88 $17.88
Second Quarter .......................... 24.94 15.00
Third Quarter ........................... 16.63 5.50
Fourth Quarter .......................... 10.88 4.88
YEAR ENDING DECEMBER 31, 1999:
First Quarter ........................... 9.50 5.25
Second Quarter .......................... 6.44 4.00
Third Quarter ........................... 5.88 3.50
Fourth Quarter (through __________, 1999)
</TABLE>
As of ________, 1999, there were ________ shares of Common Stock outstanding
owned by __ holders of record and approximately ___ beneficial holders.
DETERMINATION OF OFFERING PRICE
Our Board of Directors decided to set a $___ per share subscription
price after considering a variety of factors described elsewhere in this
prospectus. The $___ per share price should not be considered an indication of
the actual value of Bionx Implants or of our common stock. We cannot assure you
that the market price of the common stock will not decline during or after the
rights offering. We also cannot assure you that you will be able to sell shares
of common stock purchased during the rights offering at a price equal to or
greater than $___ per share. We have neither sought, nor obtained, any valuation
opinion from outside financial advisors or investment bankers.
PLAN OF DISTRIBUTION
On or about ______________, ____, we will distribute the subscription
rights, subscription certificates and copies of this prospectus to individuals
who owned shares of common stock on _____. If you wish to exercise your
subscription rights and purchase shares of common stock, you should complete the
subscription certificate and return it with payment for the shares, to the
Subscription Agent, StockTrans, Inc., at the address on page __. If you have any
questions, you should contact our Vice President-Finance, Drew Karazin, at the
telephone number and address on page __.
We have agreed to pay the Subscription Agent a fee of $______ plus
certain expenses. We estimate that our total expenses in connection with the
rights offering will be $_________.
COUNSEL
The validity of the shares of common stock offered by this prospectus
will be passed upon for us by Lowenstein Sandler PC, Roseland, New Jersey.
EXPERTS
The consolidated financial statements of Bionx Implants, Inc. as of
December 31, 1998 and 1997, and for the years in the three-year period ended
December 31, 1998, included in Bionx Implants' 1998 Annual Report on Form 10-K
have been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
also incorporated by reference herein and upon the authority of said firm as
experts in accounting and auditing.
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<PAGE> 34
IF YOU WOULD LIKE MORE INFORMATION
Bionx Implants files annual, quarterly and special reports, proxy
statement and other information with the SEC. You may read and copy this
information at the SEC's public reference rooms, which are located at:
450 Fifth Street, N.W.
Washington, D.C. 20549
7 World Trade Center, Suite 1300
New York, NY 10048
500 West Madison Street, Suite 1400
Chicago, IL 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. This information is also available online through the
SEC's Electronic Data Gathering, Analysis, and Retrieval System (EDGAR), located
on the SEC's web site (http://www.sec.gov).
Also, we will provide you (free of charge) with any of our documents
filed with the SEC. To get your free copies, please call or write to Bionx
Implants at:
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, Pennsylvania 19422
Attention: Chief Financial Officer
Telephone: (215) 643-5000
We have filed a registration statement with the SEC on Form S-3 with
respect to the rights offering. This prospectus is a part of the registration
statement, but the prospectus does not repeat important information that you can
find in the registration statement, reports and other documents that we have
filed with the SEC. The SEC allows us to "incorporate by reference" those
documents, which means that we can disclose important information to you by
referring you to other documents. The documents that are incorporated by
reference are legally considered to be a part of this prospectus. The documents
incorporated by reference are:
(1) our Annual Report on Form 10-K, as amended, for the year ended
December 31, 1998;
(2) our Quarterly Reports on Form 10-Q, as amended, for the periods
ended March 31, 1999, June 30, 1999 and September 30, 1999;
(3) the description of our common stock contained in our definitive
proxy materials for our 1999 annual meeting of shareholders; and
(4) any filings we make with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 between the date of this
prospectus and the expiration of the rights offering.
As you read the above documents, you may find some inconsistencies in
information from one document to another. If you find inconsistencies between
the documents, or between a document and this prospectus, you should rely on the
statements made in the most recent document.
You should rely only on the information in this prospectus or
incorporated by reference. We have not authorized anyone to provide you with any
different information.
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<PAGE> 35
This prospectus is not an offer to sell nor is it seeking an offer to
buy these securities in any state where the offer or sale is not permitted. This
prospectus is not an offer to sell nor is it seeking an offer to buy securities
other than the shares of common stock to be issued pursuant to the rights
offering. The information contained in this prospectus is correct only as of the
date of this prospectus, regardless of the time of the delivery of this
prospectus or any sale of these securities.
No action is being taken in any jurisdiction outside the United States
to permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable in the jurisdiction.
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<PAGE> 36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses incurred by Bionx Implants,
Inc. in connection with the issuance and distribution of the securities being
registered:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee ................................. $1,056
NASDAQ Listing Fee ...................................
Blue Sky Fees and Expenses* ..........................
Printing and Engraving Expenses* .....................
Legal Fees and Expenses* .............................
Accounting Fees and Expenses* ........................
Subscription Agent Fees and Expenses* ................
Miscellaneous* .......................................
Total Expenses .......................................
</TABLE>
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1741 of the Pennsylvania Business Corporation Law (the "BCL")
permits a corporation to indemnify its directors and officers against expenses,
judgments, fines and amounts paid in settlement reasonably incurred by them in
connection with any pending, threatened or completed action or proceeding to
which they were or are parties or were threatened to be made parties by reason
of the fact that they are or were directors or officers of the corporation.
The BCL also permits indemnification against expenses reasonably
incurred in connection with any pending, threatened or completed derivative
action, if the director or officers has acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. Under the BCL, court approval
is required with respect to any payment made with respect to a derivative
action. Furthermore, the BCL provides that expenses incurred in defending any
action or proceeding may be paid by the corporation in advance of the final
disposition upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined that the director or
officer is not entitled to be indemnified by the corporation.
The Registrant's Articles of Incorporation contain the following
provisions concerning indemnification:
"ARTICLE 10:
Section 1. Every person who is or was a director of officer of
the Company shall be indemnified by the Company to the fullest extent allowed by
the BCL against all liabilities and expenses imposed upon or incurred by that
person in connection with any proceeding in which that person may be made, or
threatened to be made, a party, or in which that person may become involved by
reason of that person being or having been a director or officer or of serving
or having served in any capacity with any other enterprise at the request of the
Company, whether or not that person is a director or officer or continues to
serve the other enterprise at the time the liabilities or expenses are imposed
or incurred.
Section 2. To the fullest extent permitted by applicable law,
the Company is authorized to provide indemnification of (and advancement of
expenses to) agents of the Company (and any other persons to which Pennsylvania
law permits the Company to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, votes of shareholders or
disinterested
II-1
<PAGE> 37
directors or otherwise, in excess of the indemnification and advancement
otherwise permitted by the BCL subject only to limited created by applicable
Pennsylvania law (statutory or non-statutory), with respect to actions for
breach of duty to the Company, its shareholders and others."
The Registrant's Articles of Incorporation also contain the
following provision concerning the personal liability of directors:
"ARTICLE 9:
Section 1. To the fullest extent permitted by the BCL
as the same exists or as may hereafter be amended, a director of the Company
shall not be personally liable to the Company or its shareholders for monetary
damages for breach of fiduciary duty as a director."
ITEM 16. INDEX TO EXHIBITS
The following exhibits are filed as part of this registration
statement.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
5.1* Opinion of Lowenstein Sandler PC
23.1 Consent of KPMG LLP.
23.2 Consent of Lowenstein Sandler PC (contained in its
opinion filed as Exhibit 5.1).
24.1 Power of Attorney.
99.1 Form of Subscription Certificate.
99.2 Instructions on Use of Bionx Implants, Inc.
Subscription Certificates.
99.3 Notice of Guaranteed Delivery.
99.4 Form of Letter to Shareholders.
99.5 Form of Letter to Brokers.
</TABLE>
- -------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with
II-2
<PAGE> 38
the Commission pursuant to rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendments is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining liability under the
Securities Act, the registrant will treat each post-effective
amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.
(3) That, the registrant will file a post-effective amendment to
remove from registration any of the securities that remain unsold
at the end of the offering.
(4) That, for determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant under
Rule 424(b)(1), or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time
the Commission declared it effective.
(5) That, for determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement for the securities
offered in the registration statement, and the offering of the
securities at that time shall be deemed to be the initial bona
fide offering of those securities.
The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Blue Bell, in the Commonwealth of Pennsylvania,
on December 10, 1999.
BIONX IMPLANTS, INC.
By: /S/ Gerard S. Carlozzi
-------------------------------------
Gerard S.Carlozzi, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> /s/ Gerard S. Carlozzi <C> <C>
- -----------------------------------------
Gerard S.Carlozzi President, Chief Executive December 10, 1999
Officer and Director
*/s/ David J. Bershad
- -----------------------------------------
David J. Bershad Director December 10, 1999
*/s/ Anthony J. Dimun
- -----------------------------------------
Anthony J. Dimun Director December 10, 1999
- -----------------------------------------
David H. MacCallum Director
*/s/Pertti Tormala
- -----------------------------------------
Pertti Tormala Director December 10, 1999
*/s/ Terry D. Wall
- -----------------------------------------
Terry D. Wall Director December 10, 1999
*/s/ Drew Karazin
- -----------------------------------------
Drew Karazin Vice President-Finance and December 10, 1999
Chief Financial Officer
* By: /s/ Gerard S. Carlozzi
------------------------------------
Gerard S. Carlozzi,
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
5.1* Opinion of Lowenstein Sandler PC
23.1 Consent of KPMG LLP.
23.2 Consent of Lowenstein Sandler PC (contained in its
opinion filed as Exhibit 5.1).
24.1 Power of Attorney.
99.1 Form of Subscription Certificate.
99.2 Instructions on Use of Bionx Implants, Inc.
Subscription Certificates.
99.3 Notice of Guaranteed Delivery.
99.4 Form of Letter to Shareholders.
99.5 Form of Letter to Brokers.
- ------------------
* To be filed by amendment.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Bionx Implants, Inc.
We consent to the use of our report dated February 3, 1999,
incorporated herein by reference, and to the reference to our firm under the
heading "Experts" in the registration statement and related prospectus.
/s/KPMG LLP
Philadelphia, Pennsylvania
December 10, 1999
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
WHEREAS, the undersigned officers and directors of Bionx Implants, Inc.
desire to authorize Gerard Carlozzi and Drew Karazin to act as their
attorneys-in-fact and agents, for the purpose of executing and filing a
registration statement on Form S-3, including all amendments thereto,
NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gerard Carlozzi and Drew Karazin, and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign a Registration Statement on Form S-3
registering Rights to purchase common stock and shares of common stock of Bionx
Implants, Inc. issuable in connection with a $4,000,000 rights offering by Bionx
Implants, Inc., including any and all amendments and supplements thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this power of
attorney in the following capacities on this 8th day of December, 1999.
SIGNATURES TITLE
/s/ Gerard Carlozzi President, Chief Executive Officer and
- -------------------------- Director
Gerard Carlozzi
/s/ David J. Bershad Director
- --------------------------
David J. Bershad
/s/ Anthony J. Dimun Director
- --------------------------
Anthony J. Dimun
Director
- --------------------------
David H. MacCallum
/s/ Pertti Tormala Director
- --------------------------
Pertti Tormala
/s/ Terry D. Wall Director
- --------------------------
Terry D. Wall
/s/ Drew Karazin Vice President-Finance and Chief
- -------------------------- Financial Officer
Drew Karazin
<PAGE> 1
EXHIBIT 99.1: FORM OF SUBSCRIPTION CERTIFICATE
<TABLE>
<S> <C> <C>
Certificate No.: THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN Certificate for
THE COMPANY'S PROSPECTUS DATED, ___________ __, 1999 (THE
____________ "PROSPECTUS") AND ARE INCORPORATED HEREIN BY REFERENCE. _____________
COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM Rights
STOCKTRANS, INC. AS THE SUBSCRIPTION AGENT.
</TABLE>
BIONX IMPLANTS, INC.
Incorporated under the laws of the Commonwealth of Pennsylvania
SUBSCRIPTION CERTIFICATE
Evidencing _________ Non-Transferable Subscription Rights to Purchase
a Comparable Number of Shares of the Common Stock of Bionx Implants, Inc.
Subscription Price: $___ per share
VOID IF NOT EXERCISED BEFORE THE EXPIRATION DATE
(AS DEFINED IN THE PROSPECTUS)
REGISTERED OWNER:
THIS CERTIFIES THAT the registered owner whose name is inscribed herein is the
owner of the number of Subscription Rights set forth above, each of which
entitles the owner to subscribe for and purchase one share of the Common Stock,
par value $.0019 per share (the "Common Stock"), of Bionx Implants, Inc., a
Pennsylvania corporation (the "Company"), on the terms and subject to the
conditions set forth in the Company's Prospectus and instructions relating
thereto on the reverse side hereof. The non-transferable Subscription Rights
represented by this Subscription Certificate may be exercised by duly completing
Section 1 on the reverse side hereof. Special delivery restrictions may be
specified by completing Section 2 on the reverse side hereof.
THE SUBSCRIPTION RIGHTS EVIDENCED BY THIS SUBSCRIPTION CERTIFICATE ARE NOT
TRANSFERABLE. SUCH SUBSCRIPTION RIGHTS MAY NOT BE EXERCISED UNLESS THE REVERSE
SIDE HEREOF IS COMPLETED AND SIGNED.
Dated:
- ------------------------------------- ------------------------------------
Gerard S. Carlozzi Drew Karazin
President and Chief Executive Officer Secretary
<PAGE> 2
SECTION 1 - EXERCISE AND SUBSCRIPTION
The undersigned irrevocably exercises Subscription Rights to subscribe for
shares of the Company's Common Stock, as indicated below, on the terms and
subject to the conditions specified in the Company's Prospectus relating to the
offering of such Subscription Rights, receipt of which is hereby acknowledged.
(a) Number of shares of the Company's Common Stock subscribed for pursuant
to the Basic Subscription Privilege: _______
(b) Number of shares of the Company's Common Stock subscribed for pursuant
to the Over-Subscription Privilege: ______
YOU MAY NOT EXERCISE THE OVER-SUBSCRIPTION PRIVILEGE UNLESS YOUR BASIC
SUBSCRIPTION PRIVILEGE HAS BEEN EXERCISED IN FULL.
(c) Total Subscription Price (total number of shares subscribed for
pursuant to both the Basic Subscription Privilege and the
Over-Subscription Privilege multiplied by the Subscription Price of
$____ per share: ___________________.
METHOD OF PAYMENT (CHECK ONE)
|_| Uncertified personal check, [payable to Bionx Implants, Inc.] PLEASE
NOTE THAT FUNDS PAID BY UNCERTIFIED PERSONAL CHECK MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR. ACCORDINGLY, SUBSCRIPTION RIGHTS HOLDERS WHO WISH TO PAY
THE PURCHASE PRICE BY MEANS OF AN UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE
PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE THAT SUCH
PAYMENT IS RECEIVED AND CLEARS BY THE EXPIRATION DATE, AND ARE URGED TO CONSIDER
PAYMENT BY MEANS OF A CERTIFIED OR BANK CHECK, MONEY ORDER OR WIRE TRANSFER OF
IMMEDIATELY AVAILABLE FUNDS.
|_| Certified check or bank check drawn on a U.S. bank or money order,
payable to StockTrans, Inc., as Subscription Agent.
|_| Wire transfer directed to the account maintained by StockTrans, Inc. at
_______________, Account No. ________________.
If the amount enclosed or transmitted is not sufficient to pay the purchase
price for all share(s) of Common Stock that are stated to be subscribed for, or
if the number of share(s) of Common Stock being subscribed for is not specified,
the number of share(s) of Common Stock subscribed for will be assumed to be the
maximum number that could be subscribed for upon payment of such amount. If the
amount enclosed or transmitted exceeds the purchase price for all share(s) of
Common Stock that the undersigned has the right to subscribe for (such excess
amount, the "Subscription Excess"), the Subscription Agent shall return the
Subscription Excess to the subscriber without interest or deduction.
SECTION 2 -- SPECIAL ISSUANCE OR DELIVERY INSTRUCTIONS FOR SUBSCRIPTION RIGHTS
HOLDERS:
(a) To be completed ONLY if the certificate representing the Common Stock
is to be issued in a name other than that of the registered holder. See the
Instructions. DO NOT FORGET TO COMPLETE THE GUARANTEE OF SIGNATURE(S) SECTION
BELOW.
Name:______________________________ Soc. Sec. #/Tax ID #: ____________________
<PAGE> 3
Address: _______________________________________________________________________
(b) To be completed ONLY if the certificate representing the Common Stock
is to be sent to an address other than that show above. (See the Instructions.)
DO NOT FORGET TO COMPLETE THE GUARANTEE OF SIGNATURE(S) SECTION BELOW.
Name: _____________________________ Soc. Sec. #/Tax ID #: ____________________
Address: _______________________________________________________________________
ACKNOWLEDGMENT -- THE SUBSCRIPTION ORDER FORM IS NOT VALID UNLESS YOU SIGN
BELOW
I/We acknowledge receipt of the Prospectus and understand that after delivery of
this Subscription Certificate to the Company's Subscription Agent, I/we may not
modify or revoke this Subscription Certificate. Under penalties of perjury, I/we
certify that the information contained herein, including the social security
number or taxpayer identification number given above, is correct. If the Special
Issuance or Delivery Instructions for Subscription Rights Holders are completed,
I/we certify that although the certificate representing the Common Stock is to
be issued in a name other than the registered holder, beneficial ownership of
the Common Stock will not change.
The signature below must correspond with the name of the registered holder
exactly as it appears on the books of the Company's transfer agent without any
alteration or change whatsoever.
Signature(s) of Registered Holder: ___________________ Date: ____________
If signature is by trustee(s), executor(s), administrator(s), guardian(s),
attorney(s)-in-fact, agent(s), officer(s) of a corporation or another acting in
a fiduciary or representative capacity, please provide the following information
(please print).
See the Instructions.
Name: _________________ Capacity: _____________ Soc. Sec. #/Tax ID #:___________
Address: ______________________________________ Phone: _______________________
<PAGE> 4
GUARANTEE OF SIGNATURE(S)
All Subscription Rights Holders who specify special issuance or delivery
instructions must have their signatures guaranteed by an Eligible Institution,
as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.
See the Instructions.
Authorized Signature: Name of Firm:
Name: ___________________ Title: ______________ Soc. Sec. #/Tax ID #: __________
Address: _________________________________________ Phone: ______________________
YOU MUST HAVE YOUR SIGNATURE GUARANTEED IF YOU WISH TO HAVE YOUR SHARES
DELIVERED TO AN ADDRESS OTHER THAN YOUR OWN OR TO A STOCKHOLDER OTHER THAN THE
REGISTERED HOLDER.
Signature Guaranteed: By: _________________________________
Name of Bank or Firm:
<PAGE> 1
EXHIBIT 99.2
INSTRUCTIONS FOR USE OF BIONX IMPLANTS, INC.
SUBSCRIPTION CERTIFICATES
The following instructions relate to a rights offering (the "Rights Offering")
by Bionx Implants, Inc., a Pennsylvania corporation ("Bionx Implants"), to the
holders of its common stock, par value $.0019 per share ("Common Stock"), as
described in Bionx Implants' prospectus dated _______ __, 1999 (the
"Prospectus"). Holders of record of Common Stock at the close of business on
___________ __, 1999 (the "Record Date") will receive 0.__ of a non-transferable
subscription right (the "Subscription Rights") for each share of Common Stock
held by them as of the close of business on the Record Date, rounded down to the
nearest whole number. An aggregate of approximately __________ Subscription
Rights exercisable to purchase an aggregate of __________ shares of the Common
Stock of Bionx Implants are being distributed in connection with the Rights
Offering. Each Subscription Right is exercisable, upon payment of $_____ in cash
(the "Subscription Price"), to purchase one share of Common Stock (the "Basic
Subscription Privilege"). In addition, subject to the allocation described
below, each Subscription Right also carries the right to subscribe at the
Subscription Price for additional shares of Common Stock (the "Over-Subscription
Privilege") (to the extent available, and subject to proration). See "The Rights
Offering" in the Prospectus.
No fractional Subscription Rights or cash in lieu thereof will be issued or
paid. The number of Subscription Rights issued to each stockholder will be
rounded down to the nearest full Subscription Right.
The Subscription Rights will expire at 5:00 p.m., Eastern Standard Time, on
__________ __, 1999 (as it may be extended, the "Expiration Date").
The number of Subscription Rights to which you are entitled is printed on the
face of your Subscription Certificate. You should indicate your wishes with
regard to the exercise of your Subscription Rights by completing the appropriate
section on the back of your Subscription Certificate and returning the
Subscription Certificate to the Subscription Agent in the envelope provided.
YOUR SUBSCRIPTION CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION AGENT, OR
GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR SUBSCRIPTION CERTIFICATES
MUST BE COMPLIED WITH, ON OR BEFORE THE EXPIRATION DATE. PAYMENT OF THE
SUBSCRIPTION PRICE OF ALL SUBSCRIPTION RIGHTS EXERCISED, INCLUDING
OVER-SUBSCRIPTION SHARES, INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE
RECEIVED BY THE SUBSCRIPTION AGENT ON OR BEFORE THE EXPIRATION DATE. ONCE A
HOLDER OF SUBSCRIPTION RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE
AND/OR THE OVER-SUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED.
1. SUBSCRIPTION PRIVILEGES. To exercise Subscription Rights, complete your
Subscription Certificate and send your properly completed and executed
Subscription Certificate, together with payment in full of the Subscription
Price for each share of Common Stock subscribed for pursuant to the Basic
Subscription Privilege and the Over-Subscription Privilege, to the Subscription
Agent. Delivery of the Subscription Certificate must be made by mail or by
overnight delivery. FACSIMILE DELIVERY OF THE SUBSCRIPTION CERTIFICATE WILL NOT
CONSTITUTE VALID DELIVERY. All payments must be made in United States dollars by
(i) check or bank draft drawn upon a United States bank or postal, telegraphic
or express money order payable to StockTrans, Inc., as Subscription Agent; or
(ii) wire transfer of immediately available funds to StockTrans, Inc., as
Subscription Agent.
ACCEPTANCE OF PAYMENTS. Payments will be deemed to have been received by the
Subscription Agent only upon the (a) clearance of any uncertified check, or (b)
receipt by the Subscription Agent of any certified check or bank draft drawn
upon a United States bank or postal, telegraphic or express money order or funds
transferred through a wire transfer. IF PAYING BY UNCERTIFIED PERSONAL
<PAGE> 2
CHECK, PLEASE NOTE THAT THE FUNDS PAID THEREBY MAY TAKE AT LEAST FIVE BUSINESS
DAYS TO CLEAR. ACCORDINGLY, HOLDERS OF SUBSCRIPTION RIGHTS WHO WISH TO PAY THE
SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE
PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE THAT SUCH
PAYMENT IS RECEIVED AND CLEARS BY SUCH DATE. YOU ARE URGED TO CONSIDER PAYMENT
BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
PROCEDURES FOR GUARANTEED DELIVERY. You may cause a written guarantee
substantially in the form available from the Subscription Agent (the "Notice of
Guaranteed Delivery") from a member firm of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office or correspondent in the
United States, to be received by the Subscription Agent on or prior to the
Expiration Date guaranteeing delivery of your properly completed and executed
Subscription Certificate within three over-the-counter ("OTC") trading days
following the date of the Notice of Guaranteed Delivery. If this procedure is
followed, your Subscription Certificates must be received by the Subscription
Agent within three OTC trading days of the Notice of Guaranteed Delivery.
Additional copies of the Notice of Guaranteed Delivery may be obtained upon
request from the Subscription Agent at the address, or by calling the telephone
number, indicated below. Banks, brokers and other nominee holders of
Subscription Rights who exercise the Basic Subscription Privilege and the
Over-Subscription Privilege on behalf of beneficial owners of Subscription
Rights will be required to certify to the Subscription Agent and Bionx Implants
as to the aggregate number of Subscription Rights that have been exercised, and
the number of shares of Common Stock that are being subscribed for pursuant to
the Over-Subscription Privilege, by each beneficial owner of Subscription Rights
(including such nominee itself) on whose behalf such nominee holder is acting.
In the event such certification is not delivered in respect of a Subscription
Certificate, the Subscription Agent shall for all purposes (including for
purposes of any allocation in connection with the Over-Subscription Privilege)
be entitled to assume that such certificate is exercised on behalf of a single
beneficial owner. If the number of shares remaining after the exercise of all
basic subscription privileges is not sufficient to satisfy all over-subscription
privileges, holders will be allocated shares pro rata (subject to elimination of
fractional shares), in proportion to the number of shares purchased by those
over-subscribing shareholders through the basic subscription privilege.
CONTACTING THE SUBSCRIPTION AGENT. The address and facsimile numbers of the
Subscription Agent are as follows:
If by First Class Mail, Registered Mail or Overnight Delivery:
StockTrans, Inc.
Attention: Rights Agent
Seven East Lancaster Avenue
Ardmore, Pennsylvania 19003-2318
Telephone: 610-649-7300
Facsimile: 610-649-7302
PARTIAL EXERCISES; EFFECT OF OVER- AND UNDERPAYMENTS. If you exercise less than
all of the Subscription Rights evidenced by your Subscription Certificate, the
Subscription Agent will, upon your request, issue to you a new Subscription
Certificate evidencing the unexercised Subscription Rights. However, if you
choose to have a new Subscription Certificate sent to you, you may not receive
any such new Subscription Certificate in sufficient time to permit exercise of
the Subscription Rights evidenced thereby. If you have not indicated the number
of Subscription Rights being exercised, or if the dollar amount you have
forwarded is not sufficient to purchase (or exceeds the amount necessary to
purchase) the number of shares subscribed for, you will be deemed to have
exercised the Basic Subscription Privilege with respect to the maximum number of
whole Subscription Rights which may be exercised for the Subscription Price
payment delivered by you. To the extent that the Subscription Price payment
delivered by you exceeds the product of the Subscription Price multiplied by the
number of Subscription Rights evidenced by the Subscription Certificates
delivered by you (such excess being the "Subscription Excess"), you will be
deemed to have exercised your Over-Subscription Privilege to purchase, to the
<PAGE> 3
extent available, that number of whole shares of Common Stock equal to the
quotient obtained by dividing the Subscription Excess by the Subscription Price.
2. DELIVERY OF STOCK CERTIFICATES, ETC. The following deliveries and payments to
you will be made to the address shown on the face of your Subscription
Certificate unless you provide instructions to the contrary on the back of your
Subscription Certificate.
(a) BASIC SUBSCRIPTION PRIVILEGE. As soon as practicable after the
valid exercise of Subscription Rights and the Expiration Date, the
Subscription Agent will mail to each exercising Subscription Rights
holder certificates representing shares of Common Stock purchased
pursuant to the Basic Subscription Privilege.
(b) OVER-SUBSCRIPTION PRIVILEGE. As soon as practicable after the
Expiration Date and after all prorations and adjustments
contemplated by the terms of the Rights Offering have been effected
and taking into account any delays or extensions in closing the
over-subscription purchases, the Subscription Agent will mail to
each Subscription Rights holder who validly exercises the
Over-Subscription Privilege the number of shares allocated to such
Subscription Rights holder pursuant to the Over-Subscription
Privilege. See "The Rights Offering" in the Prospectus.
(c) EXCESS PAYMENTS. As soon as practicable after the Expiration
Date and after all prorations and adjustments contemplated by the
terms of the Rights Offering have been effected, the Subscription
Agent will mail to each Subscription Rights holder who exercises
the Over-Subscription Privilege any excess funds received (without
interest or deduction) in payment of the Subscription Price for
shares that are subscribed for but not allocated to such
Subscription Rights holder pursuant to the Over-Subscription
Privilege.
3. TO HAVE A SUBSCRIPTION CERTIFICATE DIVIDED INTO SMALLER DENOMINATIONS. To
have a Subscription Certificate divided into smaller denominations, send your
Subscription Certificate, together with complete separate instructions
(including specification of the denominations into which you wish your
Subscription Rights to be divided) signed by you, to the Subscription Agent,
allowing a sufficient amount of time for the Subscription Certificates to be
issued and returned so that they can be used prior to the Expiration Date.
Alternatively, you may ask a bank or broker to effect such actions on your
behalf. Your signature must be guaranteed by an Eligible Guarantor Institution,
as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended,
if any of the new Subscription Certificates are to be issued in a name other
than that in which the old Subscription Certificate was issued. Subscription
Certificates may not be divided into fractional Subscription Rights, and any
instruction to do so will be rejected. As a result of delays in the mail, the
time of the transmittal, the necessary processing time and other factors, you
may not receive such new Subscription Certificates in time to enable you to
complete an exercise by the Expiration Date. Neither Bionx Implants nor the
Subscription Agent will be liable to you for any such delays.
4. EXECUTION.
(a) EXECUTION BY REGISTERED HOLDER. The signature on the
Subscription Certificate must correspond with the name of the
registered holder exactly as it appears on the face of the
Subscription Certificate without any alteration or change
whatsoever. Persons who sign the Subscription Certificate in a
representative or other fiduciary capacity must indicate their
capacity when signing and, unless waived by the Subscription Agent
in its sole and absolute discretion, must present to the
Subscription Agent satisfactory evidence of their authority so to
act.
(b) EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If the
Subscription Certificate is executed by a person other than the
holder named on the face of the Subscription Certificate, proper
evidence of authority of the person executing the Subscription
<PAGE> 4
Certificate must accompany the same unless the Subscription Agent,
in its discretion, dispenses with proof of authority.
(c) SIGNATURE GUARANTEES. Your signature must be guaranteed by an
Eligible Guarantor Institution if you wish a new Subscription
Certificate or Certificates to be issued in a name other than that
in which the old Subscription Certificate was issued, or if you
specify special payment or delivery instructions.
5. METHOD OF DELIVERY. The method of delivery of Subscription Certificates and
payment of the Subscription Price to the Subscription Agent will be at the
election and risk of the Subscription Rights holder. If sent by mail, it is
recommended that they be sent by registered mail, properly insured, with return
receipt requested, and that a sufficient number of days be allowed to ensure
delivery to the Subscription Agent prior to the Expiration Date.
6. SPECIAL PROVISIONS RELATING TO THE DELIVERY OF SUBSCRIPTION RIGHTS THROUGH
DEPOSITORY FACILITY PARTICIPANTS. In the case of holders of Subscription Rights
that are held of record through The Depository Trust Company ("DTC"), exercises
of the Basic Subscription Privilege and the Over-Subscription Privilege may be
effected by instructing DTC to transfer Subscription Rights (such Subscription
Rights, "Depository Rights") from the DTC account of such holder to the DTC
account of the Subscription Agent, together with payment of the Subscription
Price for each share of Common Stock subscribed for pursuant to the Basic
Subscription Privilege and the Over-Subscription Privilege.
<PAGE> 1
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
This form, or one substantially equivalent to this form, must be used
to exercise Subscription Rights pursuant to the Rights Offering described in the
prospectus, dated _______ __, 1999 (the "Prospectus"), of Bionx Implants, Inc.,
a Pennsylvania corporation ("Bionx"), if a holder of Subscription Rights cannot
deliver the Subscription Certificate(s) evidencing the Subscription Rights (the
"Subscription Certificate(s)"), to the Subscription Agent listed below (the
"Subscription Agent") at or prior to 5:00 p.m., Eastern Standard Time, on
___________ __, 1999 (as it may be extended, the "Expiration Date"). The Notice
of Guaranteed Delivery must be sent by facsimile transmission or mail to the
Subscription Agent, and must be received by the Subscription Agent on or prior
to the Expiration Date. See "The Rights Offering - Guaranteed Delivery
Procedures" in the Prospectus. Payment of the Subscription Price of $______ per
share for each share of Common Stock subscribed for upon exercise of such
Subscription Rights must be received by the Subscription Agent in the manner
specified in the Prospectus at or prior to 5:00 p.m., Eastern Standard Time, on
the Expiration Date, even if the Subscription Certificate evidencing such
Subscription Rights is being delivered pursuant to the procedure for guaranteed
delivery thereof. The Subscription Certificate evidencing such Subscription
Rights must be received by the Subscription Agent within three (3)
over-the-counter ("OTC") trading days after the Expiration Date.
The address and facsimile numbers of the Subscription Agent are as follows:
If by First Class Mail, Registered Mail or Overnight Delivery:
StockTrans, Inc.
Attention: Rights Agent
Seven East Lancaster Avenue
Ardmore, Pennsylvania 19003-2318
Telephone: 610-649-7300
Facsimile: 610-649-7302
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby represents that he or she is the holder of Subscription
Certificate(s) representing Subscription Rights issued by Bionx Implants, Inc.
and that such Subscription Certificate(s) cannot be delivered to the
Subscription Agent at or before 5:00 p.m., Eastern Standard Time, on the
Expiration Date. Upon the terms and subject to the conditions set forth in the
Prospectus, receipt of which is hereby acknowledged, the undersigned hereby
elects to exercise the Subscription Privilege to subscribe for one share of
Common Stock per Subscription Right with respect to each of the number of
Subscription Rights represented by such Subscription Certificate and shares set
forth below pursuant to the Over-Subscription Privilege described in the
Prospectus:
No. of Subscription Rights exercised pursuant to
Basic Subscription Privilege (shares subscribed for): ________________
plus
No. of Shares subscribed for pursuant to
Over-Subscription Privilege: ________________
<PAGE> 2
TOTAL: ________________
x $______
TOTAL PAYMENT DUE: $_______________
The undersigned understands that payment of the Subscription Price of $____ per
share for each share of Common Stock subscribed pursuant to the Basic
Subscription Privilege and the Over-Subscription Privilege must be received by
the Subscription Agent at or before 5:00 p.m., Eastern Standard Time, on the
Expiration Date and represents that such payment, in the aggregate amount set
forth above, either (check appropriate box):
|_| is being delivered to the Subscription Agent herewith; or
|_| has been delivered separately to the Subscription Agent; and is or
was delivered in the manner set forth below (check appropriate box and
complete information relating thereto):
|_| uncertified check (NOTE: Payment by uncertified check will not be
deemed to have been received by the Subscription Agent until such check
has cleared. Holders paying by such means are urged to make payment
sufficiently in advance of the Expiration Date to ensure that such
payment clears by such date).
|_| certified check
|_| bank draft (cashier's check)
|_| postal, telegraphic or express money order
|_| wire transfer of immediately available funds
If by certified check, bank draft or express money order, please provide the
following information:
name of maker: __________________________________________________________
date of check, draft or money order: ____________________________________
bank on which check is drawn or issuer of money order: __________________
Signature(s): Address:
(please type or print)
Name(s): Telephone:
Telephone:
(please type or print) (please type or print)
Subscription
Certificate No.(s):
<PAGE> 1
EXHIBIT 99.4: FORM OF LETTER TO STOCKHOLDERS.
BIONX IMPLANTS, INC.
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, Pennsylvania 19422
__________ __, 1999
Dear Stockholder:
Enclosed are the prospectus and other materials relating to the Rights Offering
by Bionx Implants, Inc. Please carefully review the prospectus, which describes
how you can participate in the Rights Offering. You will be able to exercise
your Subscription Rights to purchase additional shares of Bionx Implants Common
Stock only during a limited period. You will find answers to some frequently
asked questions about the Rights Offering beginning on page __ of the
prospectus. You should also refer to the detailed Instructions for Use of Bionx
Implants, Inc. Subscription Certificates, which is included with this letter.
The exercise of Subscription Rights will be irrevocable.
SUMMARY OF THE TERMS OF THE OFFERING
- - You will receive 0.__ of a non-transferable Subscription Right for each
share of Bionx Common Stock you owned on ___________ __, 1999. You will
not receive fractional Subscription Rights, but Bionx will round your
number of Subscription Rights down to the nearest whole number. For
example, if you own 100 shares of Common Stock, you will receive ___
Subscription Rights. If you own ___ shares of Common Stock, you will
receive ___ Subscription Rights.
- - You may purchase one share of Common Stock for each Subscription Right
you receive at the Subscription Price of $_____ per share. This right is
referred to as the Basic Subscription Privilege.
- - If you fully exercise the Basic Subscription Privilege issued to you, you
may subscribe for additional shares through the Over-Subscription
Privilege. If Subscription Rights holders subscribe to purchase more than
a total of __________ shares, shares purchased through the
Over-Subscription Privilege will be allocated among shareholders who
over-subscribe in proportion to the number of shares purchased by those
over-subscribing shareholders through the basic subscription privilege,
as more fully described in the prospectus.
- - The Rights Offering expires at 5:00 p.m., Eastern Standard Time, on
__________ ___, 1999. If you do not exercise your Subscription Rights
before that time, they will expire and will have no monetary value.
If your shares are held in your name, a Subscription Certificate is enclosed. If
your shares are held in the name of your bank or broker, you must contact your
bank or broker if you wish to participate in this offering.
If you do not exercise your Subscription Rights, your ownership in Bionx may be
diluted. Please see page __ of the prospectus for a discussion of dilution and
other risk factors.
If you have any questions concerning the Rights Offering, please feel free to
contact Drew Karazin, Vice President-Finance, at 215-643-5000.
Sincerely,
----------------------------------
Gerard Carlozzi, President and CEO
<PAGE> 1
EXHIBIT 99.5: FORM OF LETTER TO BROKERS.
BIONX IMPLANTS, INC.
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, Pennsylvania 19422
_____________ ___, 1999
To: Securities Dealers, Commercial Banks, Trust Companies, and Other Nominees
This letter is being distributed to securities dealers, commercial banks, trust
companies and other nominees in connection with the offering by Bionx Implants,
Inc. ("Bionx") of an aggregate of _________ shares of Common Stock, par value
$.0019 per share ("Common Stock"), of Bionx, at a subscription price of $___ per
share of Common Stock (the "Subscription Price"), pursuant to the exercise of
non-transferable subscription rights initially distributed on _______ __, 1999
("Subscription Rights"), to all holders of record of shares of Bionx's Common
Stock as of the close of business on ___________ __, 1999 (the "Record Date").
Each Subscription Right also carries the right to oversubscribe at the
Subscription Price for an unlimited number of additional shares of Common Stock
(subject to proration if necessary). The Subscription Rights are described in
the enclosed prospectus and evidenced by a Subscription Certificate registered
in your name or in the name of your nominee.
Each beneficial owner of shares of Common Stock registered in your name or the
name of your nominee is entitled to 0._____ of a Subscription Right for each
share of Common Stock owned by such beneficial owner on the record date.
Stockholders will not receive fractional Subscription Rights, but instead
Subscription Rights will be rounded down to the nearest full Subscription Right.
We are asking you to contact your clients for whom you hold shares of Common
Stock registered in your name or in the name of your nominee to obtain
instructions with respect to the Subscription Rights.
Enclosed are copies of the following documents:
1. Prospectus;
2. Form of Letter from Bionx to its Stockholders;
3. Instructions for Use of Bionx Implants, Inc. Subscription
Certificates;
4. Form of Notice of Guaranteed Delivery; and
5. Return envelope addressed to StockTrans, Inc., as Subscription
Agent.
Your prompt action is requested. The Subscription Rights will expire at
5:00 P.M., Eastern Standard Time, on ________ __, 1999 (as it may be
extended, the "Expiration Date").
To exercise Subscription Rights, properly completed and executed Subscription
Certificates and payment in full for all Subscription Rights exercised must be
delivered to the Subscription Agent as indicated in the prospectus prior to the
Expiration Date, unless the guaranteed delivery procedures described in the
prospectus are followed.
Additional copies of the enclosed materials may be obtained by contacting Drew
Karazin, Vice President-Finance, at 215-643-5000.
Sincerely,
---------------------------------------
Gerard Carlozzi, President and CEO
