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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 18, 2000
REGISTRATION NO. 333 - 92519
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
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 22-3198032
(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
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rights to purchase Common Stock 1,586,857 N/A N/A N/A
Common Stock, $.0019 par value
per share, underlying rights to purchase 1,586,857 $2.55 $4,046,485.35 $1,069(2)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
(2) A fee of $1,056 was previously paid. An additional $13 is being paid in
connection with the filing of this Amendment No. 1 to the Registration
Statement.
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 JANUARY 18, 2000
BIONX IMPLANTS, INC.
1,586,857 SHARES OF COMMON STOCK
$2.55 per share
Bionx Implants, Inc. is distributing subscription rights in this rights
offering to persons who owned shares of our common stock on January 10,
2000. During this rights offering, we may issue up to 1,586,857 shares of
common stock.
<TABLE>
<CAPTION>
Subscription Rights Price Proceeds to Bionx Implants, Inc.(1)
<S> <C> <C>
Per Share $2.55 $2.55
Total $4,046,485 $4,046,485
</TABLE>
(1) Before deducting expenses payable by us, estimated to be $100,000.
THE EXERCISE OF THE SUBSCRIPTION RIGHTS INVOLVES SUBSTANTIAL RISK. YOU SHOULD
REFER TO THE DISCUSSION OF MATERIAL RISK FACTORS, BEGINNING ON PAGE 8 OF THIS
PROSPECTUS.
You will receive 0.173 of a subscription right for each share of common
stock that you owned on January 10, 2000. 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 $2.55 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 February
18, 2000.
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.
Shares of our common stock are currently listed for quotation on the
Nasdaq National Market under the symbol "BINX". On January 14, 2000, the closing
price of a share of our common stock on Nasdaq was $2.875.
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 JANUARY 18, 2000.
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TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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<S> <C>
Summary
Questions and Answers About Bionx Implants, Inc. .................. 3
Questions and Answers About the Rights Offering ................... 3
A Warning About Forward-Looking Statements .............................. 7
Risk Factors ............................................................ 8
Risks Related to Our Business ..................................... 8
Risks Related to Our Common Stock ................................. 14
Risks Related to the Subscription Rights Offering ................. 16
Selected Financial Information .......................................... 18
Recent Developments ..................................................... 19
The Rights Offering ..................................................... 21
If You Have Questions ................................................... 28
Description of Our Common Stock ......................................... 28
Provisions of Our Articles of Incorporation and By-Laws
That May Have Anti-Takeover Effects ............................... 28
Use of Proceeds ......................................................... 29
Price Range of Common Stock ............................................. 29
Determination of Offering Price ......................................... 30
Plan of Distribution .................................................... 30
Counsel ................................................................. 30
Experts ................................................................. 30
If You Would Like More Information ...................................... 30
</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 craniofacial 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, 0.173 of a subscription right
for every share of common stock that you owned on January 10, 2000. 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 $2.55.
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 $2.55.
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 $2.55 per
share.
WHAT ARE THE LIMITATIONS ON THE OVER-SUBSCRIPTION PRIVILEGE?
We will only issue 1,586,857 shares of common stock in the rights
offering. The number of shares available for over-subscription privileges will
be 1,586,857 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 0.173 of a subscription right for each share of common
stock that you owned on January 10, 2000. 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 $2.55. 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 enclosed subscription certificate, you
may request to purchase as many additional shares as you wish for $2.55 per
share. We may honor all of the over-subscription requests, but if not, you may
not be able to
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purchase as many 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 $2.55 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
February 18, 2000. The address for the Subscription Agent is on page 26. 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 FEBRUARY 18, 2000, 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 $2.55 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 8.
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
February 18, 2000. 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 February 18, 2000, 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 1,586,857 shares which may be purchased upon
exercise of the rights offered by this prospectus, then we will receive proceeds
of $4,046,485, before deducting expenses payable by us, estimated to be
$100,000. Since four of our five 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 $4,046,485 from
the rights offering, before deducting expenses.
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 1,586,857 new
shares of common stock during the rights offering. In that case, we will have
approximately 10,759,442 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 filed a motion for
summary judgment on an issue of invalidity. In late December 1999, the court
denied that summary judgment motion. There is no assurance as to what the
disposition of the third party's other assertions will be.
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> 12
- 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> 13
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> 14
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> 15
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> 16
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.
Prior to this rights offering, our management and directors as a group
beneficially owned 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> 17
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> 18
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 15% discount from the
market price of the common stock at the time the Board determined the
subscription price 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> 19
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)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
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) 1,1,253 991 (6,420)
Net income (loss) ........... (162) (1,478) (4,992) 2,1,261 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,
(In thousands)
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
CONSOLIDATED BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C>
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>
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(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> 20
- 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. In late December 1999, the court
denied that summary judgment motion. There is no assurance as to what the
disposition of the third party's other assertions will be.
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<PAGE> 21
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> 22
THE RIGHTS OFFERING
BEFORE EXERCISING OR SELLING ANY SUBSCRIPTION RIGHTS, YOU SHOULD READ CAREFULLY
THE INFORMATION SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 8.
THE SUBSCRIPTION RIGHTS
We are distributing non-transferable subscription rights to shareholders
who owned shares of our common stock on January 10, 2000, at no cost to the
shareholders. We will give you 0.173 of a subscription right for each share of
common stock that you owned on January 10, 2000. 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
$2.55. If you wish to exercise your subscription rights, you must do so before 5
P.M., Eastern Standard Time, on February 18, 2000. 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
$2.55, 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 February 18, 2000, 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 ensures that all of the shares
offered in this rights offering will be subscribed for.
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<PAGE> 23
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 February 18,
2000, 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 February 18, 2000, 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 $2.55 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 $2.55 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 stock will not decline during or after the
rights offering. We also cannot assure you that you will be able
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<PAGE> 24
to sell shares of common stock purchased during the rights offering at a price
equal to or greater than $2.55 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 February 18, 2000:
- A properly completed and duly executed subscription certificate;
- Any required signature guarantees; and
- Payment in full of $2.55 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:
Bank Name: FirsTrust Bank
Address: Philadelphia, PA
ABA#: 236073801
Account #: 135513117
Account Name: StockTrans as Agent for Bionx.
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 February 18, 2000, 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.
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<PAGE> 25
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
February 18, 2000, you may exercise your subscription rights if you satisfy the
following guaranteed delivery procedures:
(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 February 18,
2000;
(2) You send, and the Subscription Agent receives, on or prior to February
18, 2000, 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
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<PAGE> 26
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:
(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> 27
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 10,759,442 shares of common stock will be issued and
outstanding. This would represent a 14.7% 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 AGENT
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 $18,000. 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
FEBRUARY 18, 2000. 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> 28
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.
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<PAGE> 29
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:
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
o provide for a classified Board of Directors;
o require a supermajority vote to amend certain provisions of the articles
of incorporation or by-laws;
o describe specific procedures that must be followed in order for
shareholder proposals to be considered at shareholders' meetings;
o provide that shareholders may not act by consent instead of at a
meeting; and
o 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
o 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",
o 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
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<PAGE> 30
- 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.
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 $4,046,485.
Net of expected expenses incurred in this offering, we would, in that event,
receive proceeds of approximately $3,946,485.
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.
<TABLE>
<CAPTION>
HIGH LOW
YEAR ENDED DECEMBER 31, 1998:
<S> <C> <C>
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 ENDED DECEMBER 31, 1999:
First Quarter 9.50 5.25
Second Quarter 6.44 4.00
Third Quarter 5.88 3.50
Fourth Quarter 4.00 2.19
YEAR ENDING DECEMBER 31, 2000:
First Quarter (through January 14) 3.59 2.69
</TABLE>
As of January 10, 2000, there were 9,172,585 shares of Common Stock outstanding
owned by 57 holders of record and approximately 1,700 beneficial holders.
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<PAGE> 31
DETERMINATION OF OFFERING PRICE
Our Board of Directors decided to set a $2.55 per share subscription price
after considering a variety of factors described elsewhere in this prospectus.
The $2.55 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 $2.55 per share. We have neither sought, nor obtained, any valuation
opinion from outside financial advisors or investment bankers.
PLAN OF DISTRIBUTION
On or about January 24, 2000, we will distribute the subscription rights,
subscription certificates and copies of this prospectus to individuals who owned
shares of common stock on January 10, 2000. 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 26. If you have any
questions, you should contact our Vice President-Finance, Drew Karazin, at the
telephone number and address on page 28.
We have agreed to pay the Subscription Agent a fee of $18,000 plus certain
expenses. We estimate that our total expenses in connection with the rights
offering will be $100,000.
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.
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
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<PAGE> 32
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.
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> 33
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.......................... $ 1,069
NASDAQ Listing Fee............................ 17,500
Blue Sky Fees and Expenses*................... 1,085
Printing and Engraving Expenses*.............. 3,500
Legal Fees and Expenses*...................... 35,000
Accounting Fees and Expenses*................. 11,500
Subscription Agent Fees and Expenses*......... 18,000
Miscellaneous*................................ 12,346
------
Total Expenses................................ $100,000
=======
</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> 34
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.
EXHIBIT NO. DESCRIPTION
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.
- -------------------
* Filed with Amendment No. 1.
** Previously filed.
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
II-2
<PAGE> 35
estimated maximum offering range may be reflected in the form of
prospectus filed with 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> 36
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
Amendment No. 1 to its 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 January 14, 2000.
BIONX IMPLANTS, INC.
By:/s/ Gerard S. Carlozzi
--------------------------
Gerard S.Carlozzi, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registrant's registration statement has been signed by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gerard S. Carlozzi
- ----------------------------
Gerard S. Carlozzi President, Chief Executive January 14,2000
Officer and Director
*/s/ David J. Bershad
- ----------------------------
David J. Bershad Director January 14, 2000
*/s/ Anthony J. Dimun
- ----------------------------
Anthony J. Dimun Director January 14, 2000
*/s/ David H. MacCallum
- ----------------------------
David H. MacCallum Director
*/s/ Pertti Tormala
- ----------------------------
Pertti Tormala Director January 14, 2000
*/s/ Terry D. Wall
- ----------------------------
Terry D. Wall Director January 14, 2000
*/s/ Drew Karazin
- ----------------------------
Drew Karazin Vice President-Finance and January 14, 2000
Chief Financial Officer
*By: /s/ Gerard S. Carlozzi
----------------------
Gerard S. Carlozzi,
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 37
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.
</TABLE>
- ------------------
* Filed with Amendment No. 1
** Previously filed
<PAGE> 1
EXHIBIT 5.1
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
January 14, 2000
Bionx Implants, Inc.
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, PA 19422
Re: Registration Statement on Form S-3 under the Securities Act of 1933, as
amended
Ladies and Gentlemen:
We have acted as counsel to Bionx Implants, Inc., a Pennsylvania corporation
(the "Company"), in connection with the registration under the Securities Act of
1933, as amended (the "Act"), of its common stock subscription rights (the
"Rights") and shares (the "Shares") of the Company's common stock, par value
$0.0019 per share (the "Common Stock"), to be offered (the "Rights Offering") by
the Company pursuant to a Registration Statement on Form S-3 (the "Registration
Statement").
As such counsel, we have reviewed the corporate proceedings taken by the Company
with respect to the authorization of the issuance of the Rights and the Shares.
We have also examined and relied upon originals or copies of such corporate
records, documents, agreements or other instruments of the Company as we have
deemed necessary to review. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have entirely relied upon certificates of officers of
the Company, and have assumed, without independent inquiry, the accuracy of
those certificates.
We have assumed the genuineness of all signatures, the conformity to the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing a document. We have also
assumed that the registration requirements of the Act and all applicable
requirements of state laws regulating the sale of securities will have been duly
satisfied.
We further assume that (a) all Rights will be granted in accordance with the
terms of the Rights Offering as described in the Registration Statement, (b) all
Shares issued upon exercise of the Rights will be issued in accordance with the
terms of the Rights Offering as described in the Registration Statement, and (c)
the purchase price of all Shares will be greater than or equal to the par value
per share of the Shares.
<PAGE> 2
This opinion is limited solely to the Pennsylvania Business Corporation Law as
applied by courts located in the Commonwealth of Pennsylvania.
Subject to the foregoing, it is our opinion that the Shares, when issued and
delivered upon the exercise of the Rights in accordance with the terms of the
Rights Offering as described in the Registration Statement, will be duly
authorized, validly issued and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Counsel" in the Prospectus included in the Registration Statement. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Lowenstein Sandler PC
--------------------------
LOWENSTEIN SANDLER PC
<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
January 14, 2000
