SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 1
to
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
SURGICAL SAFETY PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
New York 65-1565144
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2018 Oak Terrace
Sarasota, Florida 34231
(941) 927-7874
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(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
Dr. G. Michael Swor, President and Chief Executive Officer
2018 Oak Terrace
Sarasota, Florida 34231
(941) 927-7874
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications to:
Mercedes Travis, Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, Florida 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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(a) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment, filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
Proposed Proposed
Maximum Maximum
Title of Shares Amount to be Aggregate Price Aggregate Amount of
to be Registered registered per Share Offering Price Registration Fee
(1) (2) (3)
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Common Stock, 20,038,097 $1.437 $28,794,745 $8,005
$.001 par value
</TABLE>
(1) Common Stock issuable upon conversion of the Issuer's notes held by Selling
Shareholders and upon exercise of Issuer's Warrants held by Selling
Shareholders.
(2) The number of shares initially to be registered for resale by the Selling
Shareholders is contained in a registration rights agreements covering the
notes issued and warrants granted to the Selling Shareholders.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c), based on the average of the bid and asked
price quoted on the OTC BB for the
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Company's Common Stock under the symbol "SURG" as of March 29, 2000, which
is within five (5) days prior to the date of filing of this 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 commission, acting pursuant to said section 8(a),
may determine.
The information in the preliminary prospectus in Part I hereof is not
complete and may be changed. The Selling Shareholders may not sell these
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This preliminary prospectus is not an offer to
sell these securities and is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
Subject to completion. Dated April 3, 2000.
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PART I
PROSPECTUS
20,038,097 Shares
SURGICAL SAFETY PRODUCTS, INC.
Common Stock
The 20,038,097 shares of Surgical Safety Products, Inc. ("Surgical" or
the "Company") Common Stock covered by this prospectus are all being offered for
the account of the Selling Shareholders listed on page 18. Surgical will not
receive any of the proceeds from any sales of these securities.
Each of the Selling Shareholders may offer and sell from time to time
shares of Surgical's Common Stock directly or through broker-dealers or
underwriters who may act solely as agents, or who may acquire shares as
principals. The price to the public and the net proceeds to the Selling
Shareholders from the sale of the shares will depend on the nature and timing of
the sales and therefore will not be known until the sales are actually made.
Surgical's Common Stock is quoted on the OTC BB under the symbol
"SURG". On March 29, 2000, the closing price for Surgical's Common Stock as
quoted on the OTC BB was $1.437 per share.
See "Risk Factors" on page 8 to read about factors you should consider
before buying shares of the Company's Common Stock.
The Company's principal executive offices are located at 2018 Oak
Terrace, Sarasota, Florida 34231, its telephone is (941) 927-7874 and its
facsimile number is (941) 925-0515.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is dated April 3, 2000.
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PROSPECTUS SUMMARY
This summary highlights information incorporated by reference or
contained elsewhere in this prospectus. It is not complete and may not contain
all of the information that you should consider before investing in our
securities. You should read the entire prospectus carefully, including the "Risk
Factors" section, and you must consult the more detailed financial statements,
and notes to the financial statements, incorporated by reference to this
prospectus.
This prospectus and the documents incorporated by reference contain
certain forward-looking statements. These statements can be identified by the
use of forward-looking terminology such as "may", "will", "could", "expect",
"anticipate", "estimate", "continue", "plan" or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other forward-looking information.
Examples of forward-looking statements can be found in the discussion set forth
under "Management Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999, incorporated in this prospectus by reference. Such statements
are based on current expectations that involve a number of uncertainties
including those set forth in the risk factors below. When considering
forward-looking statements, you should keep in mind that the risk factors noted
below and other factors noted throughout this prospectus or incorporated by
reference could cause our actual results to differ significantly from those
contained in any forward- looking statement.
The Company
Surgical Safety Products, Inc. (the "Company" or "Surgical") is
incorporated in the State of New York and qualified to do business as a foreign
corporation in the State of Florida. Surgical Safety Products, Inc. originally
was incorporated under the laws of the State of Florida on May 15, 1992. On
November 28, 1994 the Company merged into Sheffeld Acres Inc., a New York shell
corporation which had approximately 1,100 shareholders, but had never commenced
operations. Although Sheffeld Acres, Inc. was technically the surviving entity,
the Company changed its name after the merger to Surgical Safety Products, Inc.
Articles of Merger were filed with the State of Florida on October 12, 1994 and
a Certificate of Merger was filed with the State of New York on February 8,
1995. The Company filed to do business as a foreign corporation on April 11,
1995 in the State of Florida. The Company's Common Stock is quoted on the OTC
Bulletin Board under the symbol "SURG". The Company's executive offices are
presently located at 2018 Oak Terrace, Sarasota, Florida 34231, its telephone
number is (941) 927-7874 and its facsimile number is (941) 925-0515.
The Company was formed for the initial purpose of combating the
potential spread of blood borne pathogen infections, such as HIV and hepatitis.
The founding philosophy arose from a concern regarding the occupational risks of
healthcare workers in the operating room. Since inception, the Company has
broadened its mission to include the research, development and production of
innovative products and services which create and maintain a safe surgical
environment for medical and hospital staff, healthcare workers and patients, as
well as enhance the level of surgical care available to patients.
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The Company is engaged in product development, sales and services for
the medical industry. The Company is currently engaged in one line of business
which is divided into three (3) divisions each of which is involved with
specialty medical product research and development: (1) a division which
develops various medical-related services to be marketed to healthcare
facilities, including an entire family of computer software applications
designed to evaluate, track, organize and manage infection control data for
healthcare facilities and to provide multi-media information centers for a
facility's healthcare workers ("Data Systems Division"); (2) a division which
researches and develops medical products for sale in the marketplace ("Medical
Products Division"); and (3) a division which provides confidential consultation
services to third party developers of medical products, usually physicians and
healthcare technicians ("Medical Products Consultation Division"). The common
thread interwoven into each area requires medical research, education and a
commitment to safety issues. It is the Company's intention to gradually make the
transition from a research and development-oriented medical device company into
a multi-product device manufacturer and distributor.
The Company was formed in 1992, and until 1996, was primarily engaged
in women's healthcare, medical research and product development with a focus on
safety-related products geared to the reduction of occupational risks to
healthcare workers. To date, the Company has received four (4) patents on two
(2) products, is seeking patent protection on other products and is in the
process of developing or acquiring the rights to approximately nine (9)
additional medical products intended to be marketed to the healthcare community.
The concepts and designs of the additional medical products are at various
stages of development or negotiation. The Company has an exclusive five (5) year
manufacturing and supply agreement for a line of protective prescription
eyeglasses; however, it has decided to discontinue marketing efforts for this
line due to poor sales. The Company markets its product lines under the
trademark, Compliance Plus.
The Company's premiere product in the Compliance Plus line, marketed
under the trade name, SutureMate(R), is a disposable Food and Drug
Administration ("FDA") approved, multi- function, suturing safety device for
surgery. Three (3) of the patents apply to this product. The original instrument
and its developmental variations facilitate advanced surgical techniques, which
increase surgical efficiency and reduce the occupational risk of exposure to
blood borne pathogens such as HIV and hepatitis. The original product is
currently being re-released. The product has been re-engineered and updated
after feedback from over 4,000 surgeons and surgical technologists. New clinical
advantages and significantly lower manufacturing costs create potential for this
patented, disposable surgical assist device which was originally designed to
facilitate the preferred one-handed suturing technique.
The Company intends to market under the trade name, Prostasert(R), a
FDA listed product which was developed to improve the preparation of pregnant
patients for labor by providing a mechanism for applying and maintaining a
pharmaceutical gel to the cervix and vagina. One (1) of the patents applies to
this product.
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In addition, the Company intends to market an infection control
equipment kit for healthcare workers under the trademark, IcePak(TM).
The Company has two (2) additional products in the development stage:
Prepwiz(TM), which is a revolutionary surgical prep and drape system and
FingerSafe(TM), which is a multi-featured surgical thimble.
The Company aggressively protects its intellectual properties through
patents, trademarks and copyrights, as well as by proprietary software designs
(flow charts, algorithms, reports and databases). In addition to the utility and
design patents already issued to the Company, the Company has a number of other
products in various stages of development which have patent potential.
In 1997, the Company focused on the creation and establishment of an
information system for multiple applications within healthcare. Formerly named
Surgical Safety Network, this information system is now marketed under the name
OASiS which is the acronym for Occupational Automated Services Information
System. In April 1998, the Company filed for two (2) patents on this system, one
related to this touch-access information system and the other related to a
technology transfer application. This touch access system has developed into a
platform for initially managing three areas of need: (1) exposure (to blood
borne pathogen) management; (2)healthcare training; and (3) healthcare risk
management.
In February 1998, the Company executed a letter of intent to joint
venture with U.S. Surgical Corporation ("U S Surgical"), a major manufacturer of
surgical products which distributes its products worldwide, for the marketing of
the OASiS system. The parties executed a final agreement dated October 28, 1998
(the "Short Term Agreement"). On October 1, 1998, Tyco Healthcare Group LP
("Tyco") consummated a merger with US Surgical. On July 30, 1999 Surgical
entered into a private partner network agreement with US Surgical. Under the
July agreement, Surgical is to supply up to four hundred (400) OASiS systems to
US Surgical under licenses calling for installation in nominated hospitals (the
"Long Term Agreement").
The Company's other products and concepts in development generally fall
into the categories of occupational safety, infection control, obstetrics and
gynecology, and new "minimally invasive" surgery devices and techniques. Most of
these development projects originated from within the Company, although several
are being co-developed with outside third party inventors who are mainly
physicians and medical technicians for whom the Company provides consulting
services in new product development.
The FDA lists Surgical as a medical device specifier. Under FDA
Registration No. 1056687, as a medical device specifier, Surgical is permitted
to control the specifications of its products. The Company spent its formative
years in research and development and in obtaining patent protection on its core
products and services. Tangential to its core competency, the Company had found
it necessary to diversify its offerings, but has, over the past fiscal year
focused a majority of its efforts towards the commercialization of its
touch-access information system, OASiS.
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Surgical is attempting to secure a research-backed, OSHA mandate status
for its OASiS information system which would make the availability of Compliance
Plus required in hospitals and other medical facilities. The Company's plan is
to accumulate enough research on product lines to demonstrate statistically
their significant safety advantages to support such products inclusion in OSHA
requirements for workplace safety compliance. There can be no assurance that
such statistics will demonstrate such facts, or even if demonstrated, that such
products will be included in OSHA requirements.
Fifteen (15) OASiS unit are now installed in seven (7). Lease payments
from OASiS currently are made directly to Surgical from the customer hospital
but may be made, in the future, through a third party leasing intermediary. In
the case of the third party intermediary, Surgical is paid a lump sum at the
front end of the lease and the hospital then makes its payments to the leasing
company. Selection of the leasing arrangements is made based upon Surgical's
current financial status and based upon the financial strength of the hospital
involved.
SutureMate(R) was originally sold in limited quantities and had limited
success due to the high manufacturers suggested retail price. New manufacturing
arrangements will allow sales in the $5 to $6 range, more in keeping with
disposable products. Due to limited sales, the Company is dropping the MediSpecs
Rx(TM) product line. Consulting fees are derived from the Medical Consultation
Division on an as needed basis.
The Company now is positioned to commercialize Compliance Plus product
lines and its proprietary OASiS system through its alliance with US Surgical and
their full size international sales force. The Company is preparing other
alliances with one or more established industry leaders in healthcare. The
Company believes that recurring multiple revenue streams and a "cookie cutter"
program and network will allow for potentially rapid growth in the number of
OASiS system installations. When the OASiS system reaches the appropriate size,
the Company may consider the spin-off of a separate subsidiary for managing this
Internet-based healthcare information network and subsequently an initial public
offering related to the spun off subsidiary. If the Company grows and attains
its projected earnings, it intends to apply for listing on the NASDAQ Quotation
System where it believes the market would apply an appropriate multiple to the
earnings per share. At such time, the Company may position itself as an
acquisition target for major medical or information system entities, although it
has no such plans at this time.
The Company has been seeking debt or equity financing in the amount of
between $2,000,000 and $5,000,000. In December 1999, the Company executed a Loan
Agreement with Thomson Kernaghan & Co., Ltd. ("TK"), as Agent and Lender,
whereby TK agreed to make loans to the Company of up to $5,000,000 in
installments during the period commencing with the date of the agreement and
ending on November 30, 2002 (the "TK Loan Commitment"). Under the terms of the
TK Loan Commitment, each installment is supported by a convertible note and
security agreement and the Agent and Lender are granted warrants to purchase
shares of the Company's Common Stock. Further, 2,700,000 shares are held by TK
in escrow for the potential conversion of the notes or exercise of the warrants.
Under the terms of the TK Loan Commitment, an initial loan of $650,000 was made
on December 30, 1999, the Lender was granted a warrant to purchase
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3,428,571 shares and the Agent was granted a warrant to purchase 1,142,857
shares. The Company granted TK registration rights and is obligated to file a
Form S-3 within sixty (60) days of the agreement covering initially 20,038,097
shares of its Common Stock. The issuance of the securities was made pursuant to
Regulation S of the Act. The Company thus far has borrowed $650,000 as the first
installment under which the note could be convertible into a maximum of
1,7333,333 shares of the Company's Common Stock at the lowest possible
conversion price and has issued warrants to purchase 3,428,571 and 1,142,857
shares of the Company's Common Stock. However due to the formula nature of the
conversion price, the Company is unable to project the exact number of
additional shares, if any, of its Common Stock which will be required to be
issued if all of the debt is converted or all of the warrants are exercised. As
of December 31, 1999, the Company had short term debt of $100,000 as a result of
draw downs under its revolving loan agreement with South Trust Bank and long
term debt of $650,000 as a result of the initial loan under the TK Loan
Commitment. The TK Loan Commitment, once interest payments begin to accrue, will
increase both the short or long term debt of the Company. The Company has
entered into consulting agreements with several other potential funding sources;
however, to date, has not concluded terms for any financing which it feels
appropriately meets the requirements of the Company under such agreements. With
the TK Loan Commitment and in the event additional debt is raised, it will incur
future interest expenses. The TK Loan Commitment, if fully converted and all
warrants are exercised, will dilute the interest of existing shareholders and in
the event additional equity is raised, management may be required to dilute the
interest of existing shareholders further or forgo a substantial interest in
revenues, if any. In the event that the Company is successful in securing
additional debt financing, the amount of such financing, depending upon its
terms, would increase either the short or long term debt of the Company or both.
The Company entered into an agreement with IBM Global Services
effective January 3, 2000 which includes an IBM Customer Agreement and a
Statement of Work (the "IBM Global Agreement"). Under the terms of the IBM
Global Agreement IBM will provide complete implementation and support service
solutions for 1,200 OASiS terminals in an estimated 400 end user locations
during the 12 month period commencing December 1, 1999. On February 3, 2000, IBM
Global Services and the Company finalized the Statement of Work. The services to
be provided under the agreement include project planning, site surveys, product
acquisition, network design, web-site hosting services, premises wiring, OASiS
TouchPort Implementation, help desk support and consulting services. The
estimated cost for performing the work is approximately $10 million. In
addition, IBM Global Services will bill the Company a monthly service charge for
pre and post installation support services, including 24-7 support, and for
labor, travel and out of pocket expenses. The Company will provide technical
resources and oversee the IBM Global's activities. The Company believes that
this agreement will expedite the deployment of its OASiS systems under the terms
of its Long Term Agreement with US Surgical.
The TK Loan Commitment will be used by the Company to fund a portion of
the commitment under the IBM Global Agreement, the balance of which will be
funded from increased revenues as installations are completed and from the sale
of some of those leases to third party leasing companies. The Company's ability
to rapidly deploy its OASiS units through the IBM Global Agreement will cover
its obligations under the Long Term Agreement with US Surgical and
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for general operating expenses. With the additional installments under the TK
Loan Commitment, or subject to the availability of additional financing, of
which there can be no assurance, with such additional financing, the Company
plans (1) to facilitate implementation of its sales strategies, (2) to apply
additional funding to existing new technology; and (3) to apply additional
funding to complimentary products and services through corporate acquisition and
exclusive licensing.
The Company currently employs, under the agreement with Staff and on a
full-time basis, seven (7) people, including its President and Vice President.
Total employee salaries for the year ending December 31, 1999 were $363,418 of
which $216,221 was paid as Executive Compensation, including salaries and the
value of Common Stock and Options issued and granted to such executives. The
Company's executive officers and directors devote such time and effort as are
necessary to participate in the day-to-day management of the Company. During the
fourth quarter of 1999, the Company did not employed any additional staff.
Subject to the availability of additional funding, of which there can be no
assurance, the Company plans to add personnel as needed to implement the Long
Term Agreement with US Surgical and other growth plans.
The Company is dependent upon the services of two of its officers and
directors. Dr. G. Michael Swor, the founder and Chairman of the Board and Chief
Executive Officer, is responsible for inventing all four (4) of the patents,
which patents were assigned to the Company in exchange for stock. Dr. Swor is
responsible for the overall corporate policy and the financing activities of the
Company. The Company is the beneficiary of a "key-man" insurance policy
currently owned by Dr. Swor. In addition to his duties with the Company, Dr.
Swor is a board certified, practicing physician with a specialty in Obstetrics
and Gynecology. Donald K. Lawrence, a Director, President and Chief Operating
Officer, is responsible for operations, sales management, market planning and
advertising for the Company. Mr. Lawrence in addition to nearly ten (10) years
in medical device sales, has extensive experience in computer graphics,
multi-media and computer equipment leasing programs. The Company plans to
continue to use to its advantage the reputations and skills of these two
officers in the medical industry. Nevertheless, while these officers have been
successful in the past, there can be no assurance that they will be successful
in the continued development of the Company which is needed for a successful
operation of the Company. The Company has employment agreements with each of
these individuals.
RISK FACTORS
Before you decide to invest, you should consider carefully the risks
described below, together with the information provided in other parts of this
prospectus. Any and all of these factors or others not mentioned below could
affect our prospects as a whole.
Our Company Has a History of Losses
Although Surgical has been in business since May 15, 1992 it was in the
development stage until July 7, 1993 when it began commercial shipments of its
first product. As of December 31,
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1997, the Company had total assets of $445,235, a net loss of $148,422 on
revenues of $255,386 and stockholders deficit of $59,043. As of December 31,
1998, the Company had total assets of $373,514, a net loss of $847,662 on
revenues of $42,393 and stockholders equity of $268,183. As of December 31,
1999, the Company had total assets of $1,276,106, a net loss of $1,039,441 on
revenues of $174,983 and stockholders equity of $35,549. Due to the Company's
operating history and limited resources, among other factors, there can be no
assurance that profitability or significant revenue will occur in the future.
Moreover, the Company expects to continue to incur operating losses through at
least the first half of 2000, and there can be no assurance that losses will not
continue thereafter. The ability of the Company to establish itself as a going
concern is dependent upon the receipt of additional funds from operations or
other sources to continue those activities. The Company is subject to all of the
risks inherent in the operation of a development stage business and there can be
no assurance that the Company will be able to successfully address these risks.
Our Company Has Minimal Assets, Working Capital and Net Worth
As of December 31, 1999, the Company's total assets in the amount of
$1,276,106, consisted , principally, of the sum of $516,799 in cash, $103,556 in
deposits, $203,533 in property and equipment and $420,119 in other assets. As a
result of its minimal assets and a net loss from operations, in the amount
of1,039,441, as of December 31, 1999, the Company had a net worth of $35,549.
Further, there can be no assurance that the Company's financial condition will
improve. Even though management believes, without assurance, that it will obtain
sufficient capital with which to implement its expansion plan, the Company is
not expected to proceed with its expansion without an infusion of capital. Under
the TK Loan Commitment, the Company is required to issue shares on conversion of
the note or exercise of the warrants which will dilute the interest of existing
shareholders. In the event the Company obtains additional debt or equity
financing, management may be required to dilute the interest of existing
shareholders or forego a substantial interest of its revenues, if any.
Our Company Needs Additional Capital
Without an infusion of capital or profits from operations, the Company
is not expected to proceed with its expansion as planned. Under the TK Loan
Commitment, the Company has the ability to secure a total of $5 million in
financing, subject to certain terms and conditions. The Company is not expected
to overcome its history of losses unless this line can be drawn upon as and when
needed or the Company secures additional equity and/or debt financing. The
Company does not anticipate the receipt of increased operating revenues until
management successfully implements its expansion plan, which is not assured.
Further, Surgical may incur significant unanticipated expenditures which deplete
its capital at a more rapid rate because of among other things, the stage of its
business, its limited personnel and other resources and its lack of a widespread
client base and market recognition. Because of these and other factors,
management is presently unable to predict what additional costs might be
incurred by the Company beyond those currently contemplated to achieve market
penetration on a commercial scale in its expanded line of business, i.e. medical
device supplier and risk exposure systems developer. Other than TK, Surgical has
no identified alternative sources of funds, and there can be no assurance that
resources will be available to the Company when needed.
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Our Company Is Dependent On Its Current Management
The possible success of the Company is expected to be largely dependent
on the continued services of its Founder, Chairman and Chief Executive Office,
Dr. G. Michael Swor, and its President and Chief Operating Officer, Donald K.
Lawrence. Virtually all decisions concerning the marketing, distribution and
sales of the Company's products and services will be made or significantly
influenced by the Company's officers. These officers are expected to devote only
such time and effort to the business and affairs of the Company as may be
necessary to perform their responsibilities as executive officers and directors
of Surgical. The loss of the services of any of these officers, but particularly
Dr. Swor, would adversely affect the conduct of the Company's business and its
prospects for the future. The Company presently has employment agreements with
Dr. Swor and Mr. Lawrence and holds no key-man life insurance on the lives of,
and has no other agreement with any of these officers, except that the Company
is the named beneficiary of a key- man life insurance policy currently owned by
Dr. Swor.
Our Company Has Limited Distribution Capability
The Company's success depends in large part upon its ability to
distribute its products and services. As compared to Surgical, which lacks the
financial, personnel and other resources required to compete with its larger,
better-financed competitors, virtually all of the Company's competitors have
much larger budgets for securing customers. Although the Company has entered
into several distribution agreements for its medical products, none are
producing significant revenues at this time. Further, the OASiS system currently
is in a few locations. Depending upon the level of funding which the Company can
draw down under the TK Loan Commitment, management believes, without assurance,
that it will be possible for Surgical to attract additional customers for its
products and services. However, in the event that the Company is limited in the
amount it can take down under the commitment, the Company anticipates that its
limited finances and other resources may be a determinative factor in the
decision to go forward with planned expansion. Until such time, as the Company
draws down sufficient advances under the commitment, it intends to continue
marketing its products through its current distribution arrangements. However,
the fact that these arrangement have not thus far produced significant revenue
may adversely impact the Company's chances for success.
There Are Risks and Possible Unforseen Costs Which May Be Associated with
our Entry into the Medical Device and Exposure Reporting Information Industries
There can be no assurance that the costs for the establishment of a
client base for its products and services will not be significantly greater than
those estimated by Company management. Therefore, the Company may expend
significant unanticipated funds or significant funds may be expended by Surgical
without development of a commercially viable medical device or exposure
reporting information business. There can be no assurance that cost overruns
will not occur or that such cost overruns will not adversely affect the Company.
Further, unfavorable general economic conditions and/or a downturn in customer
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confidence could have an adverse effect on the Company's business. Additionally,
competitive pressures and changes in customer mix, among other things, which
management expects the Company to experience in the uncertain event that it
achieves commercial viability, could reduce the Company's gross profit margin
from time to time. Accordingly, there can be no assurance that Surgical will be
capable of establishing itself in a commercially viable position in local,
state, nationwide and international medical device and exposure reporting
information markets.
Our Company Is Dependent On Securing a Suitable Strategic Partner
The Company's ability to establish a sufficient customer base at a
level sufficient to meet the larger competition depends in part upon the ability
of the Company to capitalize on its joint venture with US Surgical with regard
to OASiS and to finalize a joint venture agreement with a suitable partner for
its disposable medical devices. The Company has no tentative agreements with any
strategic partner for expansion of its medical device business. There can be no
assurance that a qualified strategic arrangement will be found at the levels
which management believes are possible. Further, even if the Company receives
sufficient proceeds from the TK Loan Commitment, thus enabling it to go forward
with its planned expansion of its business, it will nevertheless be dependent
upon the availability of a qualified strategic partner to progress at the levels
which the Company believes are necessary. OASiS has only been in the marketplace
for the past year and appears to be meeting expectations; however, its market
acceptance has not yet been determined. SutureMate(R) had limited acceptance as
originally marketed, which limited acceptance the Company believes was due to
the manufacturers suggested retail price. SutureMate(R) has been redesigned and
will be re- released at a price more in keeping with disposal devices. MediSpecs
RX(TM) has had limited acceptance to date and due to poor sales, will be dropped
by the Company. Initially, the proceeds of the TK Loan Commitment are
anticipated to be sufficient to meet the needs to expand OASiS and the Company
has elected to concentrate on development of markets for OASiS rather than
focusing on the expansion of the markets for its two other products and will
rely on its existing markets for these products. Although management believes
that the acceptance of its products and services will continue to find the
market acceptance which has occurred in the past, there can be no assurance that
this will be so.
Our Company Currently Has Significant Customer and Product Concentration
To date, a limited number of customers and distributors have accounted
for substantially all of the Company's revenues with respect to product sales.
The Company anticipates that the main focus of its selling efforts will be to
continue to sell its products to a relatively small group of medical products
distributors with the objective of having its products distributed on a large
national and international scale. Although the company entered into agreements
with US Surgical, had an exclusive distributorship agreement with Hospital News
and believes it can reactivate its distributorship agreements with Johnson &
Johnson Medical Pty Ltd. to sell its SutureMate(R) product (in the territories
of Australia, New Zealand, Papua, New Guinea and Fiji), with the two other
distributors to sell such product in Saudi Arabia and the Netherlands and that
Noesis will generate
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sales, there is no assurance that the Company will be able to obtain adequate
distribution of its products to the intended end user. Most medical product
distributors carry an extensive line of products (some of which they manufacture
themselves) which they make available to end users (hospitals, surgeons,
healthcare workers) and various of these products may compete with each other as
to function, price or other factors. In addition, numerous medical product
distributors are not themselves well capitalized and their financial condition
may impact their ability to properly distribute the Company's products. The
Company's ability to achieve revenues in the future will depend in significant
part upon its ability to obtain orders from, maintain relationships with and
provide support to, existing and new distributors, as well as the condition of
its distributors. As a result, any cancellation, reduction or delay in orders by
or shipments to any customer or the inability of any customer to finance its
purchases of the Company's products may materially adversely affect the
Company's business, financial condition and results of operations. There can be
no assurance that the Company's revenues will increase in the future or that the
Company will be able to support or attract customers.
Our Company Has Experienced Fluctuations in Results of Operations
The Company has experienced and may in the future experience
significant fluctuations in revenues, gross margins and operating results. On
the medical products development side of its business, the introduction of new
products and the manufacture and marketing of most of the Company's products is
a lengthy (ranging from a minimum of six weeks to an estimated maximum of
eighteen (18) months from order to delivery) process and the timing and amount
of product sales is difficult to predict reliably. In addition, a single
customer's order scheduled for shipment in a fiscal quarter can represent a
significant portion of the Company's potential sales for such quarter. As with
many developing businesses, the Company expects to fail to receive expected
orders, and delivery schedules may have to be deferred as a result of changes in
customer requirements, among other factors. As a result, the Company's operating
results for a particular period have, to date, been and may in the future be
materially adversely affected by a delay, rescheduling or cancellation of even
one purchase order. Moreover, purchase orders are often received and accepted
substantially in advance of shipment, and the failure to reduce actual costs to
the extent anticipated or an increase in anticipated costs before shipment could
materially, adversely affect the gross margins for such order, and as a result,
the Company's results of operations. Moreover, a majority of the Company's
anticipated orders could be canceled since orders are expected to be made
substantially in advance of shipment, and even though the Company's contracts do
not typically provide that orders may be canceled, if an important distributor
wishes to cancel an order, the Company may be compelled, due to competitive
conditions, to accede to such request. As a result, backlog, if any, will not
necessarily be indicative of future sales for any particular period.
Furthermore, a substantial portion of net sales may be realized near the end of
each quarter. A delay in a shipment near the end of a particular quarter, due,
for example, to an unanticipated shipment rescheduling, to cancellations or
deferrals by customers or to unexpected manufacturing difficulties experienced
by the Company, may cause net revenues in a particular quarter to fall
significantly below the company's expectations and may materially adversely
affect the Company's operating results for such quarter.
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A large portion of the Company's expenses are fixed and difficult to
reduce should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new products and technologies could cause
customers to defer purchases of the Company's products or a reevaluation of
products under development, which would materially adversely affect the
Company's business, financial condition and results of operations. Additional
factors that may cause the Company's revenues, gross margins and results of
operations to vary significantly from period to period include: product
development, patent processing, FDA processing, clinical trials, mix of products
sold; manufacturing efficiencies, costs and capacity; price discounts; market
acceptance and the timing of availability of new products by the Company or its
customers, usage of different distribution and sales channels; warranty and
customer support expenses; customization of systems; and general economic and
political conditions. In addition, the Company's results of operations are
influenced by competitive factors, including the pricing and availability of and
demand for, competitive products. All of the above factors are difficult for the
Company to forecast, and these or other factors could materially adversely
affect the Company's business, financial condition and results of operations. As
a result, the Company believes that period-to-period comparisons are not
necessarily meaningful and should not be relied upon as indications of future
performance.
Our Company Can Be Affected By Unfavorable Interpretation of Government
Regulation
As a medical device specifier, the Company is subject to all federal,
state and local statutes and regulations governing its products, to the extent
applicable. The Company will not be subject to additional regulation unless it
elects to produce products which require it to conduct extensive clinical trials
for FDA clearance which are not required for the Company's products at this
time. In such event the Company shall have all of the uncertainties such
clinical trials present including the risk of loss of substantial capital in the
event a product never receives the required approvals.
Medical products are subject to extensive regulation by the United
States (U.S. Food and Drug Administration ("FDA") and U.S. Patent Office),
state, local and foreign laws and international treaties. The Company's products
must conform to a variety of domestic and international requirements. In order
for the Company to sell its products in a foreign jurisdiction, it must obtain
regulatory approval and comply with different regulations in each jurisdiction.
The delays inherent in this governmental approval process may cause the
cancellation, postponement or rescheduling of the purchase by the Company's
customers, which in turn may have a material adverse effect on the sale of such
products by the Company to such foreign customers. The failure to comply with
current or future domestic and foreign regulations or changes in the
interpretation of existing regulations could result in the suspension or
cessation of product sales. Such regulations or such changes in interpretation
could require the Company to modify its products and incur substantial costs to
comply with such time-consuming regulations and changes.
The regulatory environment in which the Company operates is subject to
change. Regulatory changes, which are affected by political, economic and
technical factors, could significantly impact the Company's operations by
restricting development efforts by the Company and its customers, making current
products obsolete or increasing the opportunity for additional competition. Any
such
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regulatory changes could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company might deem
it necessary or advisable to alter or modify its products to operate in
compliance with such regulations. Such modifications could be extremely
expensive and, especially if subject to regulatory review and approval,
time-consuming.
Our Company's Proprietary Rights Are Important To Its Continued Growth
The Company attempts to protect its intellectual property rights
through patents, trademarks, secrecy agreements, trade secrets and a variety of
other measures. However, there can be no assurance that such measures will
provide adequate protection for the Company's trade secrets or other proprietary
information, that disputes with respect to the ownership of its intellectual
property rights will not arise, that the Company's trade secrets or proprietary
technology will not otherwise become known or be independently developed by
competitors or that the Company can otherwise meaningfully protect its
intellectual property rights. There can be no assurance that any patent owned by
the Company will not be invalidated, circumvented or challenged, that the rights
granted thereunder will provide competitive advantages to the Company or that
any of the Company's pending or future patent applications will be issued with
the scope of the claims sought by the Company, if at all. Furthermore, there can
be no assurance that others will not develop similar products, duplicate the
Company's products or design around the patents owned by the Company or that
third parties will not assert intellectual property infringement claims against
the Company. In addition, there can be no assurance that foreign intellectual
property laws will adequately protect the Company's intellectual property rights
abroad. The failure of the Company to protect its proprietary rights could have
a material adverse effect on its business, financial condition and results of
operations.
Litigation may be necessary to protect the Company's intellectual
property rights and trade secrets, to determine the validity of and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
infringement, invalidity, right to use or ownership claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted in the future. If any claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party's
intellectual property rights. There can be no assurance, however, that a license
will be available under reasonable terms or at all. In addition, should the
Company decide to litigate such claims, such litigation could be extremely
expensive and time consuming and could materially adversely affect the Company's
business, financial condition and results of operations, regardless of the
outcome of the litigation.
Our Company May Not Be Able To Manage Growth
The Company expects to grow through its alliance with US Surgical, one
or more strategic alliances, acquisitions, internal growth and by granting
licenses for products which are not within the focuses defined by management.
There can be no assurance that the Company will be able to create a greater
market presence, or if such market is created, to expand its market presence or
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successfully enter other markets. The ability of the Company to grow will depend
on a number of factors, including the availability of working capital to support
such growth, existing and emerging competition, one or more additional qualified
strategic alliances and the Company's ability to maintain sufficient profit
margins in the face of pricing pressures. The Company also must manage costs in
a changing regulatory environment, adapt its infrastructure and systems to
accommodate growth within the niche market which it has created.
The Company also plans to expand its business, in part, through
acquisitions. Although the Company will continuously review potential
acquisition candidates, it has not entered into any agreement, understanding or
commitment with respect to any additional acquisitions at this time. There can
be no assurance that the Company will be able to successfully identify suitable
acquisition candidates, complete acquisitions on favorable terms, or at all, or
integrate acquired businesses into its operations. Moreover, there can be no
assurance that acquisitions will not have a material adverse effect on the
Company's operating results, particularly in the fiscal quarters immediately
following the consummation of such transactions, while the operations of the
acquired business are being integrated into the Company's operations. Once
integrated, acquisitions may not achieve comparable levels of revenues,
profitability or productivity as at then existing Company-owned locations or
otherwise perform as expected. The Company is unable to predict whether or when
any prospective acquisition candidate will become available or the likelihood
that any acquisitions will be completed. The Company will be competing for
acquisition and expansion opportunities with entities that have substantially
greater resources than the Company. In addition, acquisitions involve a number
of special risks, such as diversion of management's attention, difficulties in
the integration of acquired operations and retention of personnel, unanticipated
problems or legal liabilities, and tax and accounting issues, some of all of
which could have a material adverse effect on the Company's results of
operations and financial condition.
As a Device Specifier, Our Company May Be Subject To Potential Legal Liability
Providers of medical devices may be subject to claims relating to their
product. In addition, under the terms of an agreement with Sarasota Medical
Hospital ("SMH"), the Company is required to indemnify and hold harmless SMH and
the Lessee against any and all claims regarding the use of the OASiS system.
Management has adopted and implemented policies and guidelines to reduce its
exposure to these risks; principally in the area of its initial product research
and development. However, the failure of any product to meet such policies and
guidelines may result in governmental intervention, negative publicity,
injunctive relief and the payment by the Company of money damages or fines.
There can be no assurance that the Company will not experience such problems.
At such time as the Company enters into licensing agreements for
certain products which it feels are not a proper mix but deserve exploitation,
the Company may be subject to claims asserting that it is vicariously liable for
the damages allegedly caused by the products produced by the licensees.
Generally, liability for the acts or inactions of its licensees are based on
agency and products liability concepts. The Company intends for its license
agreements to state that the parties are not agents, that the licensees control
the manufacturer and production of the product, and that any modifications are
the sole responsibility of the licensee. Despite these efforts to minimize the
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risk of liability, there can be no assurance that a claim will not be made
against the Company.
Our Company Operated In a Highly Competitive Market
The medical products and devices industry is highly competitive, with
several major companies involved. The exposure reporting information industry
has only one (1) known competitor at this time. The Company will be competing
with larger competitors in international, national, regional and local markets.
In addition, the Company may encounter substantial competition from new market
entrants. Many of the Company's competitors have significantly greater name
recognition and have greater marketing, financial and other resources than the
Company. There can be no assurance that the Company will be able to compete
effectively against such competitors in the future.
Our Company Operates In an Area of Rapid Technological Change
The market for surgical safety products and services is subject to
rapid technological change, frequent new product introductions and enhancements,
product obsolescence and changes in end- user requirements. The Company's
ability to be competitive in this market will depend in significant part upon
its ability to successfully develop, introduce and sell new innovative
proprietary products, services and enhancements thereof on a timely and
cost-effective basis that respond to changing customer requirements. Any success
of the Company in developing new and enhanced products and services will depend
upon a variety of factors, including new product selection, timely and efficient
compliance with and completion of the regulatory process (FDA and the U.S.
Patent and Trademark Office), timely and efficient completion of design, timely
and efficient implementation of manufacturing and assembly process, its cost
reduction program and the development, completion, performance, quality and
reliability and development of competitive products and services by competitors.
The Company may experience delays from time to time in completing development
and introduction of new products and services. Moreover, there can be no
assurance that the Company will be successful in selecting, developing,
manufacturing and marketing new products and services. There can be no assurance
that defects will not be found in the Company's products and services after
commencement of commercial shipments, which could result in the loss of or delay
in market acceptance. The inability of the Company to introduce in a timely
manner new products and services that contribute to revenues could have a
material adverse effect on the Company's business, financial condition and
results of operations.
There Is an Uncertainty As To The Market Acceptance of Our Products
The future operating results of the Company depend to a significant
extent upon the continued development of products and services deemed necessary,
useful, convenient, affordable and competitive by medical professionals and
their patients. There can be no assurance that the Company has the ability to
continuously introduce propriety products and services into the marketplace
which will achieve the market penetration and acceptance necessary for the
Company to grow and become profitable on a sustained basis, especially given the
fierce competition that exists from companies more established and well financed
than the Company.
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To date, substantially all of the Company's product sales have been to
customers within the United States with a small portion of such sales generated
internationally. The Company's future results of operations will be dependent in
significant part on its ability to penetrate markets in the United States and
foreign countries in which the Company has not yet established a meaningful
presence. There can be no assurance that the Company will be successful in
penetrating these additional markets.
Our Company Has Never Declared a Dividend
While payments of dividends on the Common Stock rests with the
discretion of the Board of Directors, there can be no assurance that dividends
can or will ever be paid. Payment of dividends is contingent upon, among other
things, future earnings, if any, and the financial condition of the Company,
capital requirements, general business conditions and other factors which cannot
now be predicted. It is highly unlikely that cash dividends on the Common Stock
will be paid by the Company in the foreseeable future.
Our Charter Does Not Permit Cumulative Voting
The election of directors and other questions will be decided by a
majority vote. Since cumulative voting is not permitted and one-third of the
Company's outstanding Common Stock constitute a quorum, investors who purchase
shares of the Company's Common Stock may not have the power to elect even a
single director and, as a practical matter, the current management will continue
to effectively control the Company.
There Could Be Potential Anti-Takeover and Other Effects of Issuance of
Preferred Stock Which May Be Detrimental to Common Shareholders
Potential anti-takeover and other effects of issuance the of preferred
stock may be detrimental to Common Shareholders. The Company is authorized to
issue shares of preferred stock. ("Preferred Stock"); none of which has been
issued to date. The issuance of Preferred Stock does not require approval by the
shareholders of the Company's Common Stock. The Board of Directors, in its sole
discretion, has the power to issue shares of Preferred Stock in one or more
series and to establish the dividend rates and preferences, liquidation
preferences, voting rights, redemption and conversion terms and conditions and
any other relative rights and preferences with respect to any series of
Preferred Stock. Holders of Preferred Stock may have the right to receive
dividends, certain preferences in liquidation and conversion and other rights;
any of which rights and preferences may operate to the detriment of the
shareholders of the Company's Common Stock. Further, the issuance of any shares
of Preferred Stock having rights superior to those of the Company's Common Stock
may result in a decrease in the value of market price of the Common Stock
provided a market exists, and additionally, could be used by the Board of
Directors as an anti-takeover measure or device to prevent a change in control
of the Company.
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Secondary Trading of Our Shares May Not Be Possible in Some States
Secondary trading in the Common Stock will not be possible in each
state until the shares of Common Stock are qualified for sale under the
applicable securities laws of the state or the Company verifies that an
exemption, such as listing in certain recognized securities manuals, is
available for secondary trading in the state. There can be no assurance that the
Company will be successful in registering or qualifying the Common Stock for
secondary trading, or availing itself of an exemption for secondary trading in
the Common Stock, in any state. If the Company fails to register or qualify, or
obtain or verify an exemption for the secondary trading of, the Common Stock in
any particular state, the shares of Common Stock could not be offered or sold
to, or purchased by, a resident of that state. In the event that a significant
number of states refuse to permit secondary trading in the Company's Common
Stock, a public market for the Common Stock will fail to develop and the shares
could be deprived of any value. The Company was listed in Moody's OTC Industrial
on April 28, 1998 and has been published in Standard & Poor's Daily News since
January 27, 2000. The Company will be published in the Standard & Poor's Manual
sometime in March, 2000. This listing should qualify the Company in those states
that recognize such listing as an exemption.
Penny Stock Regulations Could Adversely Effect Trading of Our Common Stock in
the Secondary Market
Although trading volume indicates that a secondary trading market has
developed to a certain extent for the shares of Common Stock of the Company, the
Common Stock is expected to come within the meaning of the term "penny stock"
under 17 CAR 240.3a51-1 because such shares are issued by a small company; are
low-priced (under five dollars); and are not traded on NASDAQ or on a national
stock exchange. The SEC has established risk disclosure requirements for broker-
dealers participating in penny stock transactions as part of a system of
disclosure and regulatory oversight for the operation of the penny stock market.
Rule 15g-9 under the Securities Exchange Act of 1934, as amended, obligates a
broker-dealer to satisfy special sales practice requirements, including a
requirement that it make an individualized written suitability determination of
the purchaser and receive the purchaser's written consent prior to the
transaction. Further, the Securities Enforcement Remedies and Penny Stock Reform
Act of 1990 require a broker-dealer, prior to a transaction in a penny stock, to
deliver a standardized risk disclosure instrument that provides information
about penny stocks and the risks in the penny stock market. Additionally, the
customer must be provided by the broker-dealer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and the
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. For so long as the
Company's Common Stock is considered penny stock, the penny stock regulations
can be expected to have an adverse effect on the liquidity of the Common Stock
in the secondary market, if any, which develops.
USE OF PROCEEDS
All of the shares of Surgical's Common Stock covered by this prospectus
are being offered for the account of the Selling Shareholders listed herein. We
will not receive any proceeds from this offering.
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SELLING SHAREHOLDERS
All of the 20,038,097 shares of Surgical's Common Stock covered by this
prospectus are being offered for the account of Thomas Kernaghan & Co., Ltd.
("TK") as Agent and Lender (the "Selling Shareholders") under a Loan Agreement
dated December 20, 1999 and the related Registration Rights Agreement dated
December 30, 1999, as amended.
Under the terms of the Registration Rights Agreement, we have agree,
among other things, to file a registration statement of which this prospectus is
a part with the Securities and Exchange Commission to register all of the shares
which potentially could be issued if TK makes a loan in the total aggregate
amount of $5 million, sufficient to cover the conversion of all of the notes
issued under such loan and the exercise of all of the warrants granted under
such loan. Further, under such agreement, we are to pay all of the registration
expenses incurred in connection with this registration and the reasonable fees
and expenses of one (1) counsel for the Selling Shareholders, except that TK is
to pay all selling commissions, underwriting discounts and disbursements,
transfer taxes and fees and expenses of separate counsel applicable to their
sale of Surgical's Common Stock to be issued pursuant to the agreements
underlying the TK Loan Commitment. The agreements provides that we must keep
current and effective the registration statement covering these shares for the
greater of (i) a period of at least three (3) years from the closing date and
(ii) a period of at least ninety (90) days after all of the notes have been
converted or paid and all the warrants have been exercised or have expired.
Prior to the TK Loan Commitment, neither TK nor any of its officers,
directors or principal shareholders have held any position or office nor have
any of them had a material relationship with Surgical or any of its affiliates
within the past three (3) years.
As of December 31, 1999, the Company had 14,515,373 shares outstanding,
of which 2,700,000 relate to the escrow required under the TK Loan Commitment
and are covered by this prospectus.
Assuming that all the other shares registered hereby are issued, the
total outstanding, with no other shares issued, would be 31,853,470. In such
event, TK's ownership of 20,038,097 shares would represent 62.91% of the total
voting shares of the Company and a controlling interest in it.
PLAN OF DISTRIBUTION
The Selling Shareholders may effect the distribution of the shares in
one or more transactions that may take place through block trades or ordinary
broker's transactions, or through privately negotiated transactions, an
underwritten offering, or a combination of any such methods of sale. Sales of
shares will be made at market prices prevailing at the time of sale or at
negotiated prices. Selling Shareholders may pay usual and customary or
specifically negotiated brokerage fees or commissions in connection such sales.
We have agreed to pay registration expenses incurred in connection with this
registration of approximately $36,055.
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The aggregate proceeds to the Selling Shareholders from the sale of the
shares will be the purchase price of the Surgical Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any. The Selling
Shareholders and any dealers or agents that participate in the distribution of
the shares may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Act"), and any profit from the sale of shares by
them and any commissions received by any such dealers or agents might be deemed
to be underwriting discounts and commissions under the Act..
In order to comply with the securities laws of certain states, if
applicable, the securities may be sold only through registered or licenses
brokers or dealers. In addition, in certain states, the securities may not be
sold unless they have been registered or qualified for sale in such state or any
exemption from such registration or qualification requirement is available and
the sale is made in compliance with the requirements.
We have agreed to indemnify the Selling Shareholders in certain
circumstances, against certain liabilities arising under the Act. The Selling
Shareholders have agreed to indemnify us and our directors and officers who sign
the registration statement against certain liabilities, including liabilities
arising under the Act.
DESCRIPTION OF SECURITIES
The securities offered by this prospectus are shares of our Common
Stock which are registered pursuant to Section 12 of the Securities and Exchange
Act of 1934 (the "Exchange Act").
At the annual shareholder meeting held on February 29, 2000, by a
majority vote, the Company was authorized it file a Certificate of Amendment to
its Certificate of Incorporation, increasing the number of authorized shares of
Common Stock from 20,000,000 to 100,000,000. The Certificate of Amendment was
sent to the New York Department of State for filing.
The transaction under which these shares are to be issued arose in
December 1999, when the Company executed the TK Loan Commitment with TK, as
Agent and Lender, whereby TK agreed to make loans to the Company of up to
$5,000,000 in installments during the period commencing with the date of the
agreement and ending on November 30, 2002. The TK Loan Commitment permits
instalments aggregating $500,000 in any 90-day period. The proceeds of the loan
are to pay agent fees and for working capital purposes. The TK Loan Commitment
provides that the offering has been conducted under Regulation S of the Act.
Under the terms of the TK Loan Commitment, each installment is supported by a
convertible note and security agreement and the Agent and Lender are granted
warrants to purchase shares of the Company's Common Stock. Prior to each
instalment, the Company is obligated to escrow shares under the terms of an
escrow agreement. The convertible note bears interest at 8% per annum and may be
prepaid at any time. The note issued for the first installment is convertible at
any time at the option of TK at the higher of (i) $.375 or (ii) the lower of
$.8203 or 75% of the closing bid price of the Company's Common Stock on the
conversion date. The security agreement grants TK a security interest in all of
the Company's equipment, inventory, accounts, contract rights, chattel paper and
instruments, and the proceeds of any of the collateral.
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Both the Lender's and the Agent's warrants granted with the first installment
are exercisable at $1.09375 per share, subject to defined adjustments. The
warrants are exercisable 20% immediately and at the rate of an additional 1% for
each $25,000 of principal borrowed. The Company was obligated to issue 2,700,000
shares of its Common Stock to be held in escrow for the potential conversion of
the notes or exercise of the warrants. TK acts as escrow agent for the shares
and is authorized to release such shares upon receipt of a notice of note
conversion or warrant exercise. The Company granted TK registration rights and
is obligated to file a Form S-3 within sixty (60) days of the agreement. This
prospectus is part of the registration statement required and under the terms of
the agreement covers initially 20,038,097 shares. In the event the Company's
registration statement is not declared effective within one hundred twenty (120)
days of a specified deadline, the Company is required to pay a penalty equal to
$13,000 per month, to be adjusted pro rata for less periods. Under the terms of
the TK Loan Commitment, an initial loan of $650,000 was made on December 30,
1999, the Lender was granted a warrant to purchase 3,428,571 shares and the
Agent was granted a warrant to purchase 1,142,857 shares. The issuance of the
securities was made pursuant to Regulation S of the Act.
LEGAL OPINIONS
Mintmire & Associates will provide Surgical with an opinion that the
shares being offered in this prospectus are legally and validly issued. Donald
F. Mintmire, the principal of the firm, owned as of March 29, 2000 less than
60,000 shares of Surgical's Common Stock.
EXPERTS
The financial statements of Surgical as of December 31, 1999 included
and incorporated by reference in this prospectus and elsewhere in this
registration statement, have been audited by Kerkering, Barbario &Co., P.A.,
independent public accounts, as indicated in their report with respect thereto
and are included and incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information
with the Securities and Exchange Commission (the "SEC"). You may read and copy
any documents we file with the SEC at their public reference facilities in Room
1024 at 450 Fifth Street N.W., Washington, DC 20549 or at regional offices
located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and
7 World Trade Center, 13th Floor, New York, New York 10048. Please call the SEC
at 1-800- SEC-0330 for further information on the public reference rooms. Our
SEC filings also are available to the public on the SEC Internet site at
http://www.sec.gov.
We filed with the SEC a registration statement on Form S-3 under the
Act which registered the shares covered by this prospectus for resale by the
Selling Shareholders. This prospectus is only part of the registration
statement. It does not contain all of the information shown in the registration
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statement because the SEC rules and regulations allow us to include certain
information in the filing, but permit us to omit certain information from the
prospectus. Statements contained in this prospectus as to any contract or other
documents' contents are not necessarily complete. In each instance, if the
contract or document is filed as an exhibit to the registration statement, the
affected statement is qualified, in all aspects by reference to the applicable
exhibit to the registration statement. For further information about us and our
shares, we refer you to the registration statement and the exhibits that you may
obtain from the SEC at its principal office after you pay the SEC prescribed
fee, or you can obtain it through the Internet site listed above.
The SEC allows us to "incorporate by reference" the information we file
with them. This means that we can disclose important information to you by
referring you to these documents. The information we incorporate by reference is
an important part of this prospectus, and information that we file later with
the SEC will update or supercede automatically this information. We incorporate
by reference the following documents, which we have filed already with the SEC,
and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act until the termination of the offering under this
prospectus.
(1) Our Annual Report on Form 10KSB for the year ended December 31, 1999.
(2) The Company has not filed any current reports on Form 8K.
(3) The description of the Company's Common Stock, par value $.001 per
share is contained in its Registration Statement filed under the
Exchange Act on Form 10SB (File No. 0-24921), as amended on October
15, 1999.
You should rely only on the information we include or incorporate by
reference in this prospectus and any applicable prospectus supplement. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The information contained in this prospectus or
the applicable prospectus supplement is accurate only as of the date on the
front of those documents, regardless of the time of delivery of this prospectus
or the applicable prospectus supplement or of any sale of our securities.
Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference in this prospectus is
deemed to be modified or superseded for purposes of this prospectus to the
extent that any of the following modifies or superseded a statement in this
prospectus or incorporated by reference in this prospectus:
o in the case of a statement in a previously filed document incorporated
by reference or deemed to be incorporated by reference in this
prospectus, a statement contained in this prospectus;
o a statement contained in any accompanying prospectus supplement
relating to a specific offering of shares; or
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<PAGE>
o a statement contained in any other subsequently filed document that
modifies or supersedes a statement in this prospectus.
Any modified or superseded statement will not be deemed to constitute a
part of this prospectus or any accompanying prospectus supplement, except as
modified or superseded. Except as provided by the above mentioned exceptions,
all information appearing in this prospectus and each accompanying prospectus
supplement is qualified in its entirety by the information appearing in the
documents incorporated by reference.
We will provide, without charge to each person to whom a copy of this
prospectus is delivered, after their written or oral request, a copy of any or
all of the documents incorporated by reference into this prospectus, other than
exhibits to the documents, unless the exhibits are incorporated specifically by
reference in the documents. Requests may be made by writing or telephoning the
following person:
Stacy Quaid
Investor Relations
2018 Oak Terrace
Sarasota, Florida 34231
(941) 927-7874
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<PAGE>
No person is authorized in connection with any offering of the shares
to give any information or to give any representation not contained in this
prospectus, and you should not rely on any such information or representation as
having been authorized by Surgical or any Selling Shareholder. Neither the
delivery of this prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained in this
prospectus is correct as of any time subsequent to the date of this prospectus.
Until the later of December 31, 2002 or ninety (90) days after all
notes have been converted or paid and all warrants have been exercised or
expired, all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealer's obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
TABLE OF CONTENTS
Page No.
Prospectus Summary 1
Risk Factors 8
Use of Proceeds 18
Selling Shareholders 18
Plan of Distribution 19
Description of Securities 20
Legal Opinions 21
Experts 21
Where You Can Find More Information 21
PROSPECTUS
20,038,097 Shares
SURGICAL SAFETY PRODUCTS, INC.
Common Stock
This Prospectus is dated April 3, 2000.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be paid solely
by Surgical in connection with the distribution of the securities being
registered:
Securities and Exchange Registration Fee $ 8,005
Blue Sky Fees and Expenses $ 0
Printing Expenses $ 1,000
Accounting Fees and Expenses $ 800
Legal Fees and Expenses $ 25,000
Miscellaneous Expenses $ 1,250
TOTAL $ 36,055
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Surgical is organized under the laws of the State of New York. Section
722 of the Business Corporation Law permits a New York corporation to indemnify
any person is made, or threatened to be made, a party to an action or proceeding
( other than one by or in the right of the corporation to procure a judgment in
its favor), whether civil or criminal, including an action by or in the right of
any other corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
which any director or officer of the corporation served in any capacity at the
request of the corporation, by reason of the fact that he, his testator or
intestate, was a director or officer of the corporation, or served such other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against judgments, fines, and amounts paid in
settlement, and reasonable expenses, including attorneys` fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that his conduct was unlawful.
However, under certain circumstances a director remains liable for his
actions. Section 719 excludes any limitation of liability of directors in the
following cases:
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<PAGE>
(a) Directors of a corporation who vote for or concur in any of the
following corporate actions shall be jointly and severally liable to the
corporation for the benefit of its creditors or shareholders, to the extent of
any injury suffered by such persons, respectively, as a result of such action:
(1) The declaration of any dividend or other distribution to
the extent that it is contrary to the provisions of paragraphs (a) and (b) of
section 510 (Dividends or other distributions in cash or property).
(2) The purchase of the shares of the corporation to the
extent that it is contrary to the provisions of section 513 (Purchase or
redemption by a corporation of its own shares).
(3) The distribution of assets to shareholders after
dissolution of the corporation without paying or adequately providing for all
known liabilities of the corporation, excluding any claims not filed by
creditors within the time limit set in a notice given to creditors under
articles 10 (Non-judicial dissolution) or 11 (Judicial dissolution).
(4) The making of any loan contrary to section 714 (Loans
to directors).
(b) A director who is present at a meeting of the board, or any
committee thereof, when action specified in paragraph (a) is taken shall be
presumed to have concurred in the action unless his dissent thereto shall be
entered in the minutes of the meeting, or unless he shall submit his written
dissent to the person acting as the secretary of the meeting before the
adjournment thereof, or shall deliver or send by registered mail such dissent to
the secretary of the corporation promptly after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action. A director who is absent from a meeting of the board, or any committee
thereof, when such action is taken shall be presumed to have concurred in the
action unless he shall deliver or send by registered mail his dissent thereto to
the secretary of the corporation or shall cause such dissent to be filed with
the minutes of the proceedings of the board or committee within a reasonable
time after learning of such action.
(c) Any director against whom a claim is successfully asserted under
this section shall be entitled to contribution from the other directors who
voted for or concurred in the action upon which the claim is asserted.
(d) Directors against whom a claim is successfully asserted under this
section shall be entitled, to the extent of the amounts paid by them to the
corporation as a result of such claims:
(1) Upon payment to the corporation of any amount of an
improper dividend or distribution, to be subrogated to the rights of the
corporation against shareholders who received such dividend or distribution with
knowledge of facts indicating that it was not authorized by section 510, in
proportion to the amounts received by them respectively.
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<PAGE>
(2) Upon payment to the corporation of any amount of the
purchase price of an improper purchase of shares, to have the corporation
rescind such purchase of shares and recover for their benefit, but at their
expense, the amount of such purchase price from any seller who sold such shares
with knowledge of facts indicating that such purchase of shares by the
corporation was not authorized by section 513.
(3) Upon payment to the corporation of the claim of any
creditor by reason of a violation of subparagraph (a) (3), to be subrogated to
the rights of the corporation against shareholders who received an improper
distribution of assets.
(4) Upon payment to the corporation of the amount of any loan
made contrary to section 714, to be subrogated to the rights of the corporation
against a director who received the improper loan.
(e) A director shall not be liable under this section if, in the
circumstances, he performed his duty to the corporation under paragraph (a) of
section 717.
(f) This section shall not affect any liability otherwise imposed by
law upon any director.
Article VI of the Company's Articles of Incorporation contains
provisions providing for the indemnification of directors of the Company as
follows:
"The personal liability of directors to the corporation or its
shareholders for damages for any breach of duty in such capacity is
hereby eliminated except that such personal liability shall not be
eliminated if a judgment or other final adjudication adverse to such
director establishes that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that
he personally gained in fact a financial profit or other advantage to
which he was not legally entitled or that his acts violated Section 719
of the Business Corporation Law."
Article VI of the Company's By-Laws contains provisions providing for
the indemnification of directors and officers of the Company as follows:
"Each director and officer of this corporation shall be indemnified by
the corporation against all costs and expenses actually and necessarily
incurred by him or her in connection with the defense of any action,
suit or proceeding in which he or she may be involved or to which he or
she may be made a party by reason of his or her being or having been
such director or officer, except in relation to matters as to which he
or she shall be finally adjudged in such action, suit or proceeding to
be liable for negligence or misconduct in the performance of duty."
The Company has no other agreements with any of its directors or
executive offices providing for indemnification of any such persons with respect
to liability arising out of their capacity or status as officers and directors.
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<PAGE>
At present, there is no pending litigation or proceeding involving a
director or officer of the Company as to which indemnification is being sought.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
<TABLE>
<S> <C>
ITEM 16. EXHIBITS
Exhibit No. Description of Exhibit
3.(I).10 Certificate of Amendment filed February 29, 2000
5.1 Opinion of Mintmire & Associates as to the legality of the Securities to be issued.
10.38 Effective December 30, 1999, Loan Agreement, Note, Security Agreement, Lender's
Warrant, Agent's Warrant, Registration Rights Agreement and Escrow Agreement
relative to the December 1999 transaction with Thomson Kernaghan & Co., Inc.
under which the securities offered herein arise and Amendment thereto.
10.39 Effective January 3, 2000 IBM Customer Agreement and Statement of Work.
23.1 * Consent of Kerkering, Barbario & Co., P.A., Independent Public Accounts.
23.2 Consent of Mintmire & Associates is contained in the Opinion as to legality of
Securities filed as Exhibit 5
27.1 * Financial Data Schedule
</TABLE>
- -------------
* Filed Herewith, all other exhibits filed with the Company's Form S-3.
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) of the Act;
(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
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<PAGE>
change in the information set forth 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 and high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
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 in such information in the
registration statement.
Provided, however, that paragraph (1)(i) and (1) (ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3 and the information
required [or] to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to section 13
or section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for purposes of determining any liability under the Act, each
such post- effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d)
of the Exchange Act) 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.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sarasota, State of Florida, on April 3, 2000.
SURGICAL SAFETY PRODUCTS INC.
By:/s/ G. Michael Swor
--------------------
Dr. G. Michael Swor, Chairman of
the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons, who represent a
majority of the Board of Directors, in the capacities and on the dated indicated
<TABLE>
<S> <C> <C>
Signature Capacity Date
- - --------- ----- ----
/s/ G. Michael Swor Chairman of the Board April 3, 2000
- - --------------------------- and Chief Executive
G. Michael Swor Officer
/s/ David Collins Acting Chief Financial Officer, April 3, 2000
- - --------------------------- Secretary, Treasurer and
David Collins Director (principal financial
or accounting officer)
/s/ Donald K. Lawrence President, Chief Operating April 3, 2000
- - --------------------------- Officer and Director
Donald K. Lawrence
/s/ Frank Clark Director April 3, 2000
- -----------------------------
Frank Clark
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
/s/ James D. Stuart Director April 3, 2000
- - ---------------------------
James D. Stuart
/s/ Sam Norton Director April 3, 2000
- ------------------------------
Sam Norton
/s/ David Swor Director April 3, 2000
- ------------------------------
David Swor
/s/ William B. Saye Director April 3, 2000
- ------------------------------
William B. Saye
</TABLE>
[SIGNATURE PAGE SSP S-3/A-1 TK]
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<PAGE>
SURGICAL SAFETY PRODUCTS INC.
INDEX TO EXHIBITS FILE WITH
AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
23.1 * Consent of Kerkering, Barbario & Co., P.A.,
Independent Public Accounts. 32
27.1 * Financial Data Schedule
-31-
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Form S-3 (Registration Number 333-31472) and
related Prospectus of Surgical Safety Products Inc. for the registration of
initially 20,038,097 shares of its common stock and to the incorporation by
reference therein of our report dated March 12, 1999 relating to the financial
statements which appear in the Annual Report on Form 10K for the year ended
December 31, 1999.
/s/ Kerkering, Barbario & Co., P.A.
----------------------------------
Kerkering, Barbario & Co., P.A.,
Independent Public Accountants.
Sarasota, Florida
April 3, 2000
-32-
<TABLE> <S> <C>
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<CIK> 0001063530
<NAME> Surgical Safety Products, Inc.
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<CURRENCY> U.S. Currency
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1999
<PERIOD-END> Dec-31-1999
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0
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