As filed with the Securities and Exchange Commission on December 18, 1997
File No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
MEDICAL DYNAMICS, INC.
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(Exact name of Registrant as specified in charter)
Colorado 84-0631765
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.
Van A. Horsley, President
99 Inverness Drive East 99 Inverness Drive East
Englewood, Colorado 80112 Englewood, Colorado 80112
(303) 790-2990 (303) 790-2990
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(Address, including zip code (Name, address, including
and telephone number, including zip code and telephone
area code, of registrant's number, including area
principal executive offices) code, of agent for service)
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It is requested that copies of all correspondence be sent to:
Herrick K. Lidstone, Jr., Esq.
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place
Denver, Colorado 80202
Telephone Number (303) 571-1400
Facsimile Number (303) 595-3159
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: ____
<PAGE>
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of each Amount Maximum Maximum Amount of
class of to be to be offering aggregate registration
registered registered per unit offering price fee *
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<S> <C> <C> <C> <C>
Common Stock 318,840 $3.45* $1,100,000 $324
shares
Common Stock # $289,728 86
Common Stock 84,615 $3.375+ $285,576 84
shares ---------- ----
$1,675,304 $494
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</TABLE>
* The amount to be registered includes an indeterminate number of shares
issuable upon conversion of a $1,100,000 convertible debenture held by
the Selling Shareholder herein. The registration fee is based on the
maximum amount of debentures which may be converted pursuant to Rule
457(c)(2).
# This includes an indeterminate number of additional shares of common
stock which may be issuable to the holder as interest on the
convertible debenture, assuming the debenture is not converted until
its maturity. The registration fee is based on the maximum amount of
interest payable through maturity pursuant to Rule 457(c)(2).
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+ Registration fee is based on the maximum exercise price of the warrants
pursuant to Rules 457(a) and (g).
Pursuant to Rule 416 of the Securities Act of 1933, there are also being
registered hereunder such additional shares as may be issued to the selling
stockholders because of future dividends, stock distributions, stock splits or
similar capital adjustments.
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.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to Completion, Dated December 18, 1997
PROSPECTUS
MEDICAL DYNAMICS, INC.
Medical Dynamics, Inc. ("MEDY") is hereby registering for resale by The
Tail Wind Fund, Ltd. (the "Selling Shareholder"):
an unspecified number of shares of MEDY's Common Stock (the "Common
Stock") which are issuable to the Selling Shareholder as a result of
the conversion of a $1,100,000 convertible debenture (the "Debenture")
based on a conversion price equal to the lesser of $3.45 per share or
100% of the Market Price (as defined) on the business day immediately
preceding the conversion date (the "Conversion Shares");
an unspecified number of shares of the Common Stock which are issuable
to the Selling Shareholder as interest on the Debenture to be
calculated at Market Price (as defined) (the "Interest Shares"); and
up to 84,615 shares issuable to the Selling Shareholder on exercise of
a warrant ( the "Tail Wind Warrant") to purchase Common Stock at an
exercise price equal $3.375 per share the "Warrant Shares").
"Market Price" is defined to mean the average of the two lowest closing bid
prices of the Common Stock as reported by The Nasdaq Stock Market over the 60
trading day period immediately preceding the determination date.
The Conversion Shares, the Interest Shares, and the Warrant Shares (collectively
the "Shares") are being offered for the account of The Tail Wind Fund, Ltd., as
Selling Shareholder. The Selling Shareholder acquired the Shares in a private
placement conducted by MEDY. See "Selling Shareholders." Additional shares that
may become issuable as a result of the anti-dilution provisions of the Tail Wind
Warrants are offered hereby pursuant to Rule 416 under the Securities Act of
1933, as amended (the "Securities Act"). MEDY will not receive any of the
proceeds from the sale of the Conversion Shares, Interest Shares, or Warrant
Shares being offered hereby (the "Offering"), but will receive the exercise
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price payable upon the exercise of the Tail Wind Warrant. There can be no
assurance that all or any part of the Tail Wind Warrant will be exercised or
that it will be exercised for cash.
The Shares may be sold from time to time in transactions (which may include
block transactions) on the Nasdaq SmallCap Market at the market prices then
prevailing. Sales of the Shares may also be made through negotiated transactions
or otherwise. The Selling Shareholders and the brokers and dealers through which
the sales of the Shares may be made may be deemed to be "underwriters" within
the meaning set forth in the Securities Act, and their commissions and discounts
and other compensation may be regarded as underwriters' compensation. See "Plan
of Distribution."
MEDY will pay all of the expenses incident to the filing of this
Registration Statement, estimated to be $20,000. Such expenses include legal and
accounting fees in connection with the preparation of the Registration Statement
of which this Prospectus is a part, legal fees in connection with the
qualification of the sale of the Shares under the laws of certain states,
registration and filing fees, printing expenses, and other expenses. The Selling
Shareholder will pay all other expenses incident to the offering and sale of the
Shares to the public, including commissions and discounts of underwriters,
brokers, dealers or agents, if any.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND THEIR PURCHASE
SHOULD BE CONSIDERED ONLY BY PERSONS ABLE TO SUSTAIN A TOTAL LOSS OF THEIR
INVESTMENT (SEE "RISK FACTORS").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Common Stock is traded in the over-the-counter market and is quoted on
the Nasdaq SmallCap Market under the symbol "MEDY." On December 16, 1997, the
closing bid and asked prices of the Common Stock, as reported by Nasdaq, were
$2.81 and $3.00 per share, respectively.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE TO
ANY PERSON IN ANY STATE, TERRITORY, OR POSSESSION OF THE UNITED STATES IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED BY THE LAWS THEREOF, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
The date of this Prospectus is _____________, 1997
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AVAILABLE INFORMATION
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MEDY is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street N.W., Washington
D.C. 20549, and at the Regional Offices of the Commission: The World Trade
Center, Suite 1300, New York, NY 10048; 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can also be obtained from the
Public Reference Section of the Commission at its principal office at 450 Fifth
Street N.W., Washington, D.C. 20549. In addition, MEDY files its information
with the Commission electronically through EDGAR and the Commission maintains a
Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The Common Stock is traded on the Nasdaq SmallCap Market
under the symbol "MEDY," and copies of reports and other information are also
available for inspection at the Nasdaq Stock Market, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
MEDY has filed with the Commission a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act with respect to the
Shares offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information and exhibits
set forth in the Registration Statement, of which this Prospectus is a part.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission. Copies of the Registration Statement and its exhibits are on file at
the offices of the Commission and may be obtained, upon payment of the fee
prescribed by the Commission, or may be examined without charge at the public
reference facilities maintained by the Commission described above. For further
information, reference is made to the Registration Statement and its exhibits.
MEDY furnishes Annual Reports to the holders of its securities which
contain financial information which have been examined and reported upon, with
an opinion expressed by, its independent certified public accountants.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
The following documents filed with the Commission are incorporated into
this Prospectus by reference:
(1) MEDY's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1997.
(2) MEDY's Current Report on Form 8-K, as amended, reporting an
event of October 23, 1997.
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(3) All other documents filed by MEDY pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act after the date hereof and
prior to the termination of the offering of the Shares.
Each of the foregoing documents shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
Any statement contained herein or in any documents incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that statements contained herein,
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without charge,
upon written or oral request, a copy of any and all of the documents
incorporated by reference herein (not including exhibits to those documents,
unless such exhibits are specifically incorporated by reference into the
information that the Prospectus incorporates). Requests for such documents
should be directed to Medical Dynamics, Inc., 99 Inverness Drive East,
Englewood, Colorado 80112, attn: Van A. Horsley, President; telephone (303)
790-2990.
No person has been authorized in connection with this offering to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by MEDY, the
Selling Shareholders or any other person. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to purchase, any securities other
than those to which it relates, nor does it constitute an offer to sell or a
solicitation of an offer to purchase by any person in any jurisdiction in which
it is unlawful for such person to make such an offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
CAUTIONARY STATEMENT
This prospectus, as well as information incorporated by reference herein,
contains forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include,
but are not limited to, those statements relating to development of new
products, the financial condition of MEDY, the ability to increase distribution
of MEDY's products, integration of a new business MEDY recently acquired,
approval of MEDY's products as and when required by the Food and Drug
Administration ("FDA") in the United States and similar regulatory bodies in
other countries, and other risks set forth hereinafter. These forward-looking
statements are subject to the business and economic risks faced by MEDY and
MEDY's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors as described above and
including those set forth under "Risk Factors" below, under "Item 1 - Business"
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and "Item 6 - Management's Discussion and Analysis" in the 1997 annual report on
Form 10-KSB, and in the other documents incorporated by reference herein.
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PROSPECTUS SUMMARY
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The following summary is qualified in its entirety by the information,
including the financial statements, referred to elsewhere in this Prospectus.
The Company
Medical Dynamics, Inc., a Colorado corporation incorporated in March 1971
("MEDY" or the "Company"), is engaged in the design, development, manufacture
and marketing of medical and dental video cameras and related disposable
products for a variety of professional specialties. MEDY's principal products
are small, color, medical and dental video camera systems for use in patient
diagnosis and various surgical procedures. MEDY has been manufacturing such
cameras since August of 1981. In October 1997 MEDY acquired 100% of the
outstanding capital stock of Computer Age Dentist, Inc. (CADI), a California
corporation based in Los Angeles, California. CADI is engaged in the development
and sale of Practice Management Software and related electronic services to the
dental profession. MEDY also has one inactive subsidiary, MedPacific
Corporation, a Washington state corporation. MEDY's principal executive offices
and manufacturing facilities are at 99 Inverness Drive East, Englewood,
Colorado, 80112. Its telephone number at that address is (303) 790-2990.
During the fiscal year ended September 30, 1997, MEDY was not involved in
any bankruptcy, receivership or similar proceeding nor did it engage in any
material reclassification, or consolidation. During that period, MEDY did not
dispose of any material amounts of its assets other than in the ordinary course
of its business.
During the 1995 fiscal year MEDY entered into a distribution agreement with
Micro- Medical Devices, Inc. (MMD), of Castle Rock, Colorado. MMD is a
corporation formed by and wholly-owned by MEDY's Chairman. MMD manufactures and
sells minimal quantities of various medical products to MEDY. See Item 12 of
MEDY's Form 10-KSB for the year ended September 30, 1997 - "Certain
Relationships and Related Transactions, Distribution Agreement."
As discussed in Note 2 to the financial statements, the Company has
suffered recurring losses and negative cash flows from operations. Subsequent to
fiscal year end, MEDY sold a convertible debenture in the amount $1,100,000 to
The Tail Wind Fund, Ltd., an unaffiliated entity, pursuant to an exemption from
registration under Regulation D. Despite the recurring operating losses,
management believes the Company has adequate capital resources to carry out
planned activities in fiscal 1998. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of MEDY's Form 10-KSB
for the year ended September 30, 1997.
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The Offering
The Securities ...................... an undetermined number of shares
issuable upon conversion of a
convertible debentures (the "Tail Wind
Debenture") issued to The Tail Wind
Fund, Ltd., on October 31, 1997, bearing
interest at 8% per annum, payable
semi-annually. The Tail Wind Debenture
is convertible into Common Stock at the
lesser of $3.45 per share or 100% of the
Market Price (as defined) on the
business day immediately preceding the
conversion date (the "Conversion
Shares").
........................ an undetermined number of shares of the
Common Stock which are issuable to the
Selling Shareholder as interest on the
Tail Wind Debenture to be calculated at
Market Price (as defined) (the "Interest
Shares"); and
........................ up to 84,615 shares issuable to the
Selling Shareholder on exercise of a
warrant (the "Tail Wind Warrant") to
purchase Common Stock at an exercise
price equal to $3.375 per share "Warrant
Shares").
(See "Description of Securities.")
Shares of Common Stock outstanding:
At December 8, 1997......... 9,255,736 shares (3)
After exercise of the
Options and conversion of
debenture(1)(2)(3)........ 9,780,351 shares
Estimated net proceeds
to MEDY (1)(2)(3)......... $285,576
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(1) Assumes the conversion of all of the Tail Wind Debenture at a
conversion price of $2.50 per share, and the issuance of no Interest
Shares. There can be no assurance that any of the Tail Wind Debentures
will be converted or that the price will not decrease below the
conversion price were the Tail Wind Debentures converted at this time.
MEDY will receive no proceeds from the conversion of the Tail Wind
Debenture, if such conversion occurs.
(2) Assumes the exercise of all of the Tail Wind Warrant at a price of
$3.375 per share. There can be no assurance that any of the Tail Wind
Warrant will be exercised or that the price will not decrease below the
exercise price were the options exercised at this time.
(3) Before deduction of the expenses of this offering, which are estimated
at approximately $20,000.
Securities Being Offered
The Selling Shareholder is offering to the public the Conversion Shares,
the Interest Shares, and the Warrant Shares as defined above. MEDY will receive
proceeds from the exercise of the Tail Wind Warrant (if exercised), but will
receive no proceeds from the sale of the Shares being offered hereby.
Risk Factors
This offering involves substantial risks, and prospective investors should
understand that they may lose all or part of their investment. Specific risk
factors include, but are not limited to, lack of sustained profitability,
product liability, substantial industry competition, reliance on significant
customers, dependence on management, governmental regulation by the Food and
Drug Administration, and the recent acquisition of a new business and the risks
of integrating it into MEDY. (See "Risk Factors.")
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RISK FACTORS
------------
The securities offered hereby are speculative and involve a high degree of
risk, including, but not limited to, the risk factors described below. Each
prospective investor should carefully consider the following risk factors
inherent in and affecting the business of MEDY and this offering before making
an investment decision.
1. Lack of Profitability. MEDY has a history of net operating losses, that
when accumulated total, $17,271,500 through September 30, 1997. This has
resulted in working capital shortages from time to time. MEDY can give no
assurance that it will be able to operate profitably in the future. The
likelihood of the success of MEDY must be considered in light of the problems,
expenses, difficulties, complications and delays frequently encountered in
connection with the regulatory environments in which MEDY operates, the problems
related to research and development of new products subject to Food and Drug
Administration ("FDA") and other government approvals and regulations, and
substantial competition from other companies as to those products. (See the
Financial Statements and related notes included in MEDY's Annual Report on Form
10-KSB for the fiscal year ended September 30, 1997, which report is
incorporated herein by this reference.)
2. Product Liability. MEDY could be subjected to claims for personal
injuries resulting from the use of its products. In the event any claims for
substantial amounts were successful, they could substantially affect MEDY's
viability. Although MEDY does have product liability insurance, there can be no
assurance that the amount of coverage would be sufficient to cover any potential
claims. In the event coverage proves insufficient, MEDY's viability would be
materially adversely affected. (See "Item 1 - Business" in MEDY's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 1997, which report is
incorporated herein by this reference.)
3. No Dividends Paid or Contemplated. No dividends have been paid by MEDY
in the past and dividends are not contemplated in the foreseeable future.
Dividends will be dependent upon earnings of MEDY, financial needs, and other
similar unpredictable factors and will be declared solely at the discretion of
the Board of Directors. Investors who anticipate the need of either immediate or
future income by way of dividends from their investment should refrain from the
purchase of shares offered hereby.
4. Acquisition of New Business. As described elsewhere herein, MEDY
recently acquired 100% ownership of Computer Age Dentist, Inc., a California
corporation ("CADI"). MEDY has never previously been engaged in CADI's business,
and must integrate CADI's accounting, financial management, personnel, and
business functions into its own. There can be no assurance that MEDY will be
able to do so successfully, or that it will be able to do so at a reasonable
cost. (See "Recent Events" herein and "Item 1 - Business" in MEDY's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1997, which report
is incorporated herein by this reference.)
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5. Need for Additional Financing. Although management believes that the
capital available to MEDY is sufficient to fund its short-term operations, MEDY
will eventually have to finance its operations out of earnings. The Company has
not generated earnings in the past several years and there can be no assurance
that MEDY will be able to do so in the future. It is impossible to predict what
additional expenses will be incurred beyond those contemplated since research,
development, and marketing programs frequently involve unanticipated
expenditures. In such event, MEDY would seek financing through (1) sale of
additional equity securities, which would dilute the ownership interest of prior
shareholders, including investors in this Offering or (2) debt financing, which
would result in interest expense and risks of loss of assets of MEDY in the
event of default.
Some of MEDY's products are manufactured and sold under a license agreement
with the Chairman of MEDY's Board of Directors. Through September 30, 1996, this
license agreement provided for minimum annual royalties of $120,000. The license
agreement continues to require the payment of actual royalties based on the sale
of licensed products. (See "Item 1 - Business" and "Item 13 - Certain
Relationships and Related Transactions" in MEDY's Annual Report on Form 10-KSB
for the fiscal year ended September 30, 1997, which report is incorporated
herein by reference.)
6. Technological Change and Risk of Technological Obsolescence. The
medical and dental camera industry (MEDY's principal line of business) and the
office management industry (CADI's principal line of business) are both subject
to rapid and significant technological change. There can be no assurance that
MEDY's competitors will not succeed in developing technologies and products
relating to these industries prior to MEDY or that they will not develop
technologies, software, and products that are better than any which have been or
are being developed by MEDY. In addition, the medical products market is
characterized by changing technology and developing industry standards sometimes
resulting in product obsolescence or short product life cycles. Accordingly, the
ability of MEDY to compete will be dependent on its introducing products to the
marketplace in a timely manner and enhancing and improving such products. There
can be no assurance that MEDY will be able to keep pace with technological
developments or that its products will not become obsolete. (See "Item 1
Business" in MEDY's annual report on Form 10-KSB for the fiscal year ended
September 30, 1997, which report is incorporated herein by reference.)
7. Competition. MEDY's operations and product lines are subject to a high
level of competition from foreign, as well as domestic, manufacturers of color
medical and dental video cameras and other medical devices which are currently
manufactured and sold by MEDY, or which MEDY may develop in the future. Some
competitors are affiliated with large companies with substantial economic and
personnel resources which greatly exceed those of MEDY. There can be no
assurance that MEDY will be able to compete successfully with other companies to
achieve sustained profitable operations. (See "Item 1 - Business" in MEDY's
Annual Report on Form 10-KSB for the fiscal year ended September 30, 1997, which
report is incorporated herein by reference.)
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8. Potential Conflicts of Interest. There have been significant conflicts
of interest in the operation and management of MEDY, including the purchase by
MEDY of certain equipment and patents from its directors and executive officers,
granting of royalties, loans made available to MEDY through its Chairman, and
the employment by MEDY of sons of two of MEDY's directors. These transactions
were not negotiated at arms' length, although the Board of Directors believes
that all of these transactions were fair to MEDY. (See "Item 1 - Business" and
"Item 13 - Certain Relationships and Related Transactions" in MEDY's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1997, which report
is incorporated herein by reference.)
9. Dependence on Principal Customers. MEDY is largely dependent on a
limited number of principal customers, one of which contributed 10% or more of
the gross revenues of MEDY for fiscal year 1997. (See MEDY's Annual Report on
Form 10-KSB for the fiscal year ended September 30, 1997, "Item 1 - Business"
and Item 6 "Management's Discussion and Analysis of Financial Condition and
Results of Operations" therein, which report is incorporated herein by
reference.)
10. Dependence on Management. At present, the success of MEDY is dependent
upon the active participation of its management, MEDY's Chairman and principal
shareholder, Dr. Adair, and its Chief Executive Officer, Van Horsley, Dr.
Adair's step-son. In the event the services of either person are lost for any
reason, MEDY's business operations would be severely disrupted. In the event of
such a loss, MEDY can give no assurance that it could replace either person
without incurring substantial additional expense. MEDY does not have employment
contracts with either of these persons, although it does carry key man life
insurance coverage of $100,000 on Dr. Adair.
11. Government Regulation. Because the products that MEDY manufactures are
used in surgery and other medical applications, the products are subject to
close scrutiny from agencies of the federal government, including the FDA. MEDY
can give no assurance that it will be able to comply fully with all of the
government regulations to which it is subject. Failure to comply strictly with
all FDA requirements (not all of which are written) may result in sanctions as
severe as the cessation of MEDY's manufacturing business. (See "Item 1 Business"
in MEDY's Annual Report on Form 10-KSB for the fiscal year ended September 30,
1997, which report is incorporated herein by reference.)
12. Protection of Technology. Although MEDY obtains secrecy agreements from
its employees and others having access to its trade secrets and holds patents on
certain of its technology, such agreements and patents do not afford complete
protection against the use of such information by others. Furthermore, the costs
of prosecuting persons who may accidentally or intentionally infringe on MEDY's
patents or divulge its trade secrets can be expensive and time consuming. (See
"Item 1 - Business" in MEDY's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1997, which report is incorporated herein by reference.)
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13. Limited Public Market. There currently is a limited public market for
MEDY's Common Stock. No assurance can be given that a market for the Common
Stock will continue subsequent to this offering or that purchasers will be able
to resell their securities at the respective exercise prices, or liquidate their
investment without considerable delay, if at all. If a market does continue, the
price may be highly volatile. Factors such as those discussed in this "Risk
Factors" section may have a significant impact on the market price of the
securities offered. Also, some brokerage firms may not effect transactions in
securities that trade below a stipulated price. Further, most lending
institutions will not permit the use of low-priced or thinly traded securities
as collateral for loans. (See "Item 10 - Executive Compensation" and "Item 11 -
Security Ownership of Certain Beneficial Owners and Management" of MEDY's Form
10-KSB.)
14. Effect of Outstanding Options, Warrants, and Convertible Debentures. As
of December 8, 1997, MEDY had outstanding options and warrants to purchase
2,927,652 shares of Common Stock with an average exercise price of $2.98 per
share and convertible debentures to acquire approximately 440,000 shares (based
on an assumed conversion price of $2.50). Of the total number of shares of
Common Stock underlying the outstanding options and warrants, 1,593,837 shares
have been registered for sale in connection with the Company's employee benefit
plans. The Company has also registered an indeterminate number of Conversion
Shares and Interest Shares. Approximately 67% of the outstanding options are
owned by executive officers and directors of MEDY. To the extent that the
outstanding options, warrants, and debentures are exercised or converted, as the
case may be, the holders thereof are given an opportunity to profit from a rise
in the market price of the Common Stock with a resulting dilution in the
interest of the other stockholders. Further, the terms on which MEDY may obtain
additional financing during that period may be adversely affected since the
holders of such options, warrants, and debentures may exercise or convert them
at a time when MEDY would likely be able to obtain additional capital through a
new offering of securities on terms more favorable than those provided thereby.
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RECENT EVENTS
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Acquisition of CADI
- -------------------
On October 23, 1997, effective as of October 1, 1997, MEDY acquired all of
the outstanding capital stock of Computer Age Dentist, Inc. ("CADI"), a
California corporation, which is based in Los Angeles, California and is engaged
in the business of development and sales of dental practice management software
and related electronic services.
The acquisition was accomplished pursuant to a reverse triangular merger by
which MEDY paid to the two former shareholders of CADI: 1,295,520 shares of its
restricted common stock, promissory notes aggregating $300,000, and $254,697 in
cash. In addition, MEDY assumed certain existing obligations of CADI to a former
shareholder and satisfied such obligations by paying the former shareholder
304,480 shares of restricted MEDY common stock, $45,303 in cash, and a $100,000
promissory note. The promissory notes are due, in full, no later than October
23, 1998. MEDY used its working capital to pay the cash portion of the
acquisition price. There was no prior relationship between MEDY and either CADI
or its shareholders. As a result of the acquisition, the two former CADI
shareholders, Daniel L. Richmond and Chae U. Kim, were named to the MEDY Board
of Directors. MEDY's president and Chief Executive Officer, Van Horsley, became
a director and Vice President of CADI. MEDY agreed to use its best efforts to
register for resale 240,000 shares of the stock issued in the transaction at
some time during the first year following the completion of the transaction.
MEDY has not yet commenced this registration.
In acquiring CADI, MEDY also acquired cash, trade receivables, inventories,
and personal property and equipment owned by CADI. CADI employs approximately 40
people, including its two principals, Daniel L. Richmond and Chae U. Kim. In the
opinion of MEDY's management, the fundamental source of value obtained was
CADI's software technology which includes source code, development costs, and
the potential for future sales of the dental practice management software, as
well as CADI's current technical support contracts with its customers. CADI has
a base of more than 2,200 customer installations throughout the United States,
serving in excess of 3,500 dental professionals.
Daniel L. Richmond, one of the two principals of CADI and Chief Executive
Officer of CADI since its inception in June 1987, holds a Bachelor of Science
degree in mathematics and computer science from the University of California at
Los Angeles. Chae U. Kim, the other principal of CADI, has been president of
CADI since its inception in June 1987 and holds a Bachelor of Science degree in
biology from the University of California at Los Angeles. Messrs. Richmond and
Kim also continued as employees of CADI under five year employment contracts. As
partial consideration for their continuing employment, they each accepted
options to acquire a total of 600,000 shares of MEDY common stock. These options
vest on the occurrence of certain revenue and profit goals. If not vested
earlier, the options will all vest on March 31, 2004, and they expire unless
exercised by September 30, 2004.
13
<PAGE>
Private Placement Financing
- ---------------------------
On October 31, 1997, MEDY sold the Tail Wind Debenture in the amount of
$1,100,000 to Tail Wind Fund, Ltd. pursuant to Regulation D, as described below
in "Description of Securities" Rochon Capital Ltd., San Rafael, California,
acted as placement agent for the transaction. A commission of 8.75% was paid to
the placement agent, and legal fees and expenses of $17,500 were reimbursed to
the placement agent and the purchaser. The transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended,
and Rule 506 thereunder.
Renegotiation of License Agreement
- ----------------------------------
MEDY entered into an exclusive revocable license agreement with Dr. Edwin
Adair effective June 3, 1987, as amended, relating to use of certain technology
invented and developed by Dr. Adair relating to certain malleable endoscopes,
flexible optical catheters, the Adair/Veress(TM) needle and complementary
viewing systems for use in connection with detection, diagnosis and treatment of
disease or injury in humans and animals. Before an amendment negotiated in
September 1997, MEDY was obligated to pay Dr. Adair a minimum annual royalty of
$120,000. Additionally, Dr. Adair was obligated to give MEDY a right of first
refusal for his inventions. Actual royalties never exceeded the minimum annual
royalty. As a result of negotiations between the disinterested directors and Dr.
Adair, the parties agreed to amend the license agreement to waive the minimum
annual royalty due September 30, 1997 for the year then ended, and any future
minimum annual royalty, and to waive Dr. Adair's obligation to provide MEDY with
a right of first refusal on future technology.
USE OF PROCEEDS
---------------
All proceeds from the sale of the Shares will be for the benefit of the
Selling Shareholders; only proceeds from the exercise of the Tail Wind Warrant
(if exercised, of which there can be no assurance) will accrue to MEDY. To the
extent that MEDY does receive any proceeds from the exercise of the Tail Wind
Warrant, MEDY will add the proceeds to its working capital.
SELLING SHAREHOLDERS
--------------------
The Selling Shareholder is not an affiliate of MEDY, nor has the Selling
Shareholder or any affiliate of the Selling Shareholder had any position, office
or other material relationship with MEDY within the past three years. The
following table sets forth information with respect to the Selling Shareholder,
based upon information provided to MEDY by the Selling Shareholder:
14
<TABLE>
<CAPTION>
<PAGE>
Shares Shares Shares After %Age After
NAME Owned Offered Offering Offering(1)
- ---- ----- ------- -------- -----------
<S> <C> <C> <C> <C>
The Tail Wind Fund, Ltd. -0- (2) -0- 0%
c/o Mees Pierson Fund Services
Fourth Floor Russell House
Dublin 2 1M14LE
Republic of Ireland
</TABLE>
- ------------
(1) Assumes that all shares offered hereby are sold by persons who are not
affiliates of the Selling Shareholder. The Selling Shareholder may, but is
not required to, sell all shares offered hereby.
(2) At the present time, the Selling Shareholder owns no Shares, but has the
right to acquire the Conversion Shares (in an indeterminate amount) and the
84,615 Warrant Shares at prices to be established in accordance with the
terms of the Tail Wind Debenture and the Tail Wind Warrant. The conversion
price of the Tail Wind Debenture and the exercise price of the Tail Wind
Warrant are dependent on the Market Price of the Common Stock at the time
of exercise or conversion. Interest Shares are issuable in the discretion
of MEDY, and if issued would be valued at Market Price for the purposes of
issuance. See "Description of Securities."
Based on the current Market Price, the Tail Wind Debenture would be
converted at, a $2.50 conversion price. The Tail Wind Warrant will be
exercised, if at all, at $3.375 exercise price.
The Tail Wind Debenture and the Tail Wind Warrant were issued to the
Selling Shareholder in a private placement transaction pursuant to Regulation D
in October 1997 as described above in "Recent Events."
In recognition of the fact that the Selling Shareholders may wish to be
legally permitted to sell their Shares when they deem appropriate, MEDY entered
into agreements with the Selling Shareholder to file with the Securities and
Exchange Commission, under the 1933 Act, a registration statement on Form S-3 of
which this prospectus forms a part, with respect to the resale of the Shares.
MEDY agreed to prepare and file such amendments and supplements to the
registration statement from time-to-time as may be necessary to keep the
registration statement effective until the Shares are no longer required to be
registered for the sale thereof by the Selling Shareholders, to the extent MEDY
can do so legally or practically.
The Selling Shareholders have advised MEDY that they do not necessarily
plan to sell or transfer any of its shares, including those shares offered
hereby, but that they reserve the ability to do so upon such terms and
conditions (including price) as they may deem advisable. (See "Plan of
Distribution.")
15
<PAGE>
PLAN OF DISTRIBUTION
--------------------
Sale of Shares by Selling Shareholders
The Selling Shareholder has advised MEDY that it may sell the Shares in one
or more transactions (which may involve one or more block transactions) on the
over-the-counter markets on Nasdaq and upon terms then prevailing or at prices
related to the then current market price, or in separately negotiated
transactions or in a combination of such transactions. The Shares offered hereby
may be sold by one or more of the following methods, without limitation: (a) a
block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; (d) privately negotiated transactions; and (e) face-to-face
transactions between sellers and purchasers without a broker-dealer. The Selling
Shareholder may also sell Shares in accordance with Rule 144 under the
Securities Act of 1933, as amended, if Rule 144 is then available. The Selling
Shareholder may be deemed to be underwriters of the shares offered hereby within
the meaning of the Securities Act.
MEDY has agreed to keep effective the registration of the Shares offered
hereby until the date upon which all of the Shares offered hereby have been sold
or until the date on which the Shares may be sold without registration,
whichever is shorter.
In effecting sales, brokers or dealers engaged by the Selling Shareholder
may arrange for other brokers or dealers to participate. Such broker or dealers
may receive commissions or discounts from the Selling Shareholder in amounts to
be negotiated by the Selling Shareholder. Such brokers and dealers and any other
participating brokers or dealers may, in connection with such sales, be deemed
to be underwriters within the meaning of the Securities Act. Any discounts or
commissions received by any such brokers or dealers may be deemed to be
underwriting discounts and commissions under the Securities Act.
MEDY is bearing all of the costs relating to registration of the Shares,
except commissions, discounts or other fees payable to a broker, dealer,
underwriter, agent or market maker in connection with the sale of any of the
Shares.
MEDY is unable to predict the effect which sales of the Shares by the
Selling Shareholders might have upon the market price of MEDY's Common Stock or
MEDY's ability to raise further capital.
In connection with this offering MEDY and the Selling Shareholder have
agreed to indemnify each other against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended.
16
<PAGE>
DESCRIPTION OF SECURITIES
-------------------------
Common Stock
Authorized. MEDY is authorized to issue 15,000,000 shares of $.001 par
value common stock (the "Common Stock"). No holder of any shares of Common Stock
has any preemptive right to subscribe to any of MEDY's securities. Upon
dissolution, liquidation or winding up of MEDY, the assets will be divided pro
rata on a share-for-share basis among holders of the shares of Common Stock or
Preferred Stock if any shares are outstanding. All shares of Common Stock
outstanding are fully paid and nonassessable and, when issued, the shares
offered hereby will be fully paid and nonassessable.
Issued and Outstanding. On December 8, 1997, MEDY had issued and
outstanding 9,255,736 shares of Common Stock. This does not include the
Conversion Shares or the Warrant Shares which have not been issued, or any
Interest Shares which have not yet been issued. See "Recent Events."
Dividends. Holders of Common Stock are entitled to dividends when, as and
if declared by the Board of Directors out of funds legally available therefor,
subject to the rights, if any, of holders of any outstanding shares of Preferred
Stock. MEDY has not declared or paid any dividends on its Common Stock and does
not anticipate the declaration or payment of dividends in the foreseeable
future.
No Cumulative Voting. Each holder of Common Stock is entitled to one vote
per share with respect to all matters that are required by law to be submitted
to stockholders. The stockholders are not entitled to cumulative voting in the
election of directors. Accordingly, the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors if they
choose to do so; and, in such event, the holders of the remaining less than 50%
of the shares voting for the election of the directors will be unable to elect
any person or persons to the Board of Directors.
Preferred Stock
MEDY is authorized to issue up to 5,000,000 shares of $.001 par value
Preferred Stock, in series to be designated by the Board of Directors (the
"Preferred Stock"). No shares of Preferred Stock have been issued and it is not
contemplated that any shares of Preferred Stock will be issued by MEDY in the
immediate future; however, the Board may use its ability to issue Preferred
Stock to effect the business purposes of MEDY.
Material provisions concerning the terms of any series of Preferred Stock
such as dividend rate, conversion features and voting rights, will be determined
by the Board of Directors of MEDY at the time of such issuance. The ability of
the Board to issue Preferred Stock also could be used by MEDY as a means of
resisting a change of control of MEDY and therefore could be considered an
"anti-takeover" device.
17
<PAGE>
Stock Options
On December 8, 1997 MEDY had outstanding stock options to purchase
2,843,037 shares of Common Stock exercisable at exercise prices ranging between
$1.00 and $4.50 per share in addition to the Tail Wind Warrants included herein.
Certain of these options are only exercisable upon the Company achieving certain
performance goals.
Transfer and Warrant Agent
The transfer agent for MEDY's Common Stock and Warrant Agent for MEDY's
Common Stock is Continental Stock Transfer & Trust Co., 72 Reade Street, New
York, New York 10007.
The Tail Wind Debenture and the Tail Wind Warrants
MEDY issued the Tail Wind Debenture and the Tail Wind Warrants to the
Selling Shareholder in a private placement pursuant to Regulation D on October
31, 1997. The Selling Shareholder is not offering interests in the Tail Wind
Debenture or the Tail Wind Warrants pursuant to this Prospectus; only the
underlying shares (the Conversion Shares, the Interest Shares, and the Warrant
Shares, or, collectively, the "Shares") are being offered hereby.
The Tail Wind Debenture was issued in a total amount of $1,100,000. It
bears interest at 8% per annum, with interest payable semi-annually on April 5
and October 5 of each year, commencing April 5, 1998. Principal and accrued but
unpaid interest is due in full on October 31, 2000. MEDY is entitled, at its
option, to pay accrued interest with shares of its Common Stock valued at
"Market Price" (as defined below). The holder is entitled to convert the Tail
Wind Debenture, in whole or in part, into shares of Common Stock at the lesser
of $3.45 per share or Market Price (as defined below). The Tail Wind Debenture
may be converted at any time from and after January 29, 1998 (as to one-third of
the Tail Wind Debenture), on and after February 28, 1998 (as to two-thirds of
the Tail Wind Debenture), and on and after March 30, 1998 (as to the entire Tail
Wind Debenture). Market Price is defined to be the average of the two lowest
closing bid prices of the Common Stock as reported by the Nasdaq Stock Market
over the sixty trading day period ending on the date in question. Events of
default under the Tail Wind Debenture (resulting in acceleration of amounts due,
among other things), include: (i) failure to pay any amounts of principal or
interest when due; (ii) failure of the Common Stock to be listed on the Nasdaq
SmallCap Market, the Nasdaq National Market, the New York Stock Exchange, or the
American Stock Exchange; and (iii) events of bankruptcy and similar events.
18
<PAGE>
The Tail Wind Warrant permits the holder to purchase up to 84,615 shares of
Common Stock through October 31, 2000 at a price of $3.375. The Tail Wind
Warrant contains standard anti-dilution provisions should MEDY issue stock
dividends or conduct a stock split or reorganization, and certain other events.
In connection with the issuance of the Tail Wind Debenture and the Tail
Wind Warrant, MEDY entered into a registration rights agreement with The Tail
Wind Fund, Ltd. which provides that MEDY file a registration statement relating
to the Conversion Shares, the Interest Shares, and the Warrant Shares not later
than 30 days after October 31, 1997 and obtain effectiveness of such
registration statement within 90 days (110 days if the registration statement is
subject to review by the Commission). MEDY agreed to pay all expenses associated
with the registration, excluding discounts, commissions, fees of underwriters,
selling brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Shares, and reasonable fees and expenses of
counsel to the Selling Shareholder.
If MEDY is unable to meet the effectiveness requirement, MEDY will be
required to pay liquidated damages to the Selling Shareholder in an amount equal
to 2% of the aggregate principal amount of the Tail Wind Debenture for each
month or portion thereof following the required effectiveness date during which
the registration statement is not effective. In such event, MEDY shall bear all
reasonable fees or costs incurred by the Investor for legal counsel as a result
of the filing of any post-effective amendments to the Registration Statement.
The amounts payable as liquidated damages pursuant to this paragraph shall be
payable in cash (not Common Stock). The registration rights agreement contains
standard cross-indemnification provisions and requirements for contribution
should the indemnification provisions be found to be unavailable.
INFORMATION WITH RESPECT TO MEDY
--------------------------------
This Prospectus is accompanied by MEDY's Annual Report on Form 10-KSB for
the fiscal year ended September 30, 1997.
LEGAL MATTERS
-------------
The firm of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC 1400
Glenarm Place, Denver, Colorado 80202, has acted as counsel for MEDY in
connection with this offering and has passed upon the validity of the securities
offered hereby.
EXPERTS
-------
The financial statements of Medical Dynamics, Inc. for the years ended
September 30, 1997 and 1996 incorporated into the Registration Statement by
reference have been audited by Hein + Associates LLP, independent certified
public accountants, upon the authority of that firm as experts in accounting and
auditing.
19
<PAGE>
======================================== =====================================
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY MEDY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
MEDICAL DYNAMICS, INC.
TABLE OF CONTENTS
AVAILABLE INFORMATION................
DOCUMENTS INCORPORATED BY
REFERENCE..........................
PROSPECTUS SUMMARY...................
RISK FACTORS.........................
RECENT EVENTS........................ Shares of Common Stock
USE OF PROCEEDS......................
SELLING SHAREHOLDERS.................
PLAN OF DISTRIBUTION.................
DESCRIPTION OF SECURITIES............ PROSPECTUS
INFORMATION WITH RESPECT
MEDY............................... , 1997
LEGAL MATTERS........................
EXPERTS..............................
===================================== ========================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
--------------------------------------------
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Registrant in connection with
the issuance and distribution of the securities being offered. All expenses are
estimated except the registration fee and NASD filing fee.
Registration and filing fee $ 494
NASD filing fee -0-
Printing 1,000
Accounting fees and expenses 4,000
Legal fees and expenses 10,000
Blue sky filing fees and expenses 2,000
Transfer and Warrant Agent fees 500
Miscellaneous 2,006
-------
Total $ 20,000
=========
Item 15. Indemnification of Directors and Officers.
------------------------------------------
Section 7-109-102 of the Colorado Revised Statutes and the Registrant's
Articles of Incorporation, under certain circumstances provide for the
indemnification of the Registrant's officers, directors and controlling persons
against liabilities which they may incur in such capacities. A summarization of
the circumstances in which such indemnification is provided for is contained
herein, but that description is qualified in its entirety by reference to the
Registrant's Articles of Incorporation and the relevant Section of the Colorado
Revised Statutes.
In general, the statute provides that any director may be indemnified
against liabilities (including the obligation to pay a judgment, settlement,
penalty, fine or expense), incurred in a proceeding (including any civil,
criminal or investigative proceeding) to which the director was a party by
reason of such status. Such indemnity may be provided if the director's actions
resulting in the liabilities: (i) were taken in good faith; (ii) were reasonably
believed to have been in the Registrant's best interest with respect to actions
taken in the director's official capacity; (iii) were reasonably believed not to
be opposed to the Registrant's best interest with respect to other actions; and
(iv) with respect to any criminal action, the director had no reasonable grounds
to believe the actions were unlawful. Unless the director is successful upon the
merits in such an action, indemnification may generally be awarded only after a
determination of independent members of the Board of Directors or a committee
thereof, by independent legal counsel or by vote of the shareholders that the
applicable standard of conduct was met by the director to be indemnified.
II-1
<PAGE>
The statutory provisions further provide that unless limited by a
corporation's articles of incorporation, a director or officer who is wholly
successful, on the merits or otherwise, in defense of any proceeding to which he
was a party, is entitled to receive indemnification against reasonable expenses,
including attorneys' fees, incurred in connection with the proceeding. In
addition, a corporation may indemnify or advance expenses to an officer,
employee or agent who is not a director to a greater extent than permitted for
indemnification of directors, if consistent with law and if provided for by its
articles of incorporation, bylaws, resolution of its shareholders or directors
or in a contract. The provision of indemnification to persons other than
directors is subject to such limitations as may be imposed on general public
policy grounds.
In addition to the foregoing, unless hereafter limited by the Registrant's
articles of incorporation, a court, upon petition by an officer or director, may
order the Registrant to indemnify such officer or director against liabilities
arising in connection with any proceeding. A court may order the Registrant to
provide such indemnification, whether or not the applicable standard of conduct
described above was met by the officer or director. To order such
indemnification the court must determine that the petitioner is fairly and
reasonably entitled to such indemnification in light of the circumstances. With
respect to liabilities arising as a result of proceedings on behalf of the
Registrant, a court may only require that a petitioner be indemnified as to the
reasonable expenses incurred.
Indemnification in connection with a proceeding by or in the right of the
Registrant in which the director is successful is permitted only with respect to
reasonable expenses incurred in connection with the defense. In such actions,
the person to be indemnified must have acted in good faith, in a manner believed
to have been in the Registrant's best interest and must not have been adjudged
liable for negligence or misconduct. Indemnification is otherwise prohibited in
connection with a proceeding brought on behalf of the Registrant in which a
director is adjudged liable to the Registrant, or in connection with any
proceeding charging improper personal benefit to the director in which the
director is adjudged liable for receipt of an improper personal benefit.
Colorado law authorizes the Registrant to reimburse or pay reasonable
expenses incurred by a director, officer, employee or agent in connection with a
proceeding, in advance of a final disposition of the matter. Such advances of
expenses are permitted if the person furnishes to the Registrant a written
statement of his belief that he met the applicable standard of conduct required
to permit such indemnification. The person seeking such expense advances must
also provide the Registrant with a written agreement to repay such advances if
it is determined the applicable standard of conduct was not met. A determination
must also be made that the facts known to the Registrant would not preclude
indemnification.
The statutory section cited above further specifies that any provisions for
indemnification of or advances for expenses to directors which may be contained
in the Registrant's Articles of Incorporation, Bylaws, resolutions of its
shareholders or directors, or in a contract (except for insurance policies)
shall be valid only to the extent such provisions are consistent with the
Colorado statutes and any limitations upon indemnification set forth in the
Articles of Incorporation.
II-2
<PAGE>
The statutory provision cited above also grants the power to the Registrant
to purchase and maintain insurance policies which protect any director, officer,
employee, fiduciary or agent against any liability asserted against or incurred
by them in such capacity arising out of his status as such. Such policies may
provide for indemnification whether or not the corporation would otherwise have
the power to provide for it. No such policies providing protection against
liabilities imposed under the securities laws have been obtained by the
Registrant. The registration rights agreement dated October 31, 1997, between
the Registrant and The Tail Wind Fund, Inc., provides for cross indemnification
by the Registrant and The Tail Wind Fund, Ltd., in certain circumstances,
including for certain securities laws violations.
Item 16. Exhibits and Financial Statement Schedules.
-------------------------------------------
(a) Exhibits. The following is a complete list of exhibits filed as a part
of this Registration Statement, which Exhibits are incorporated herein.
Number Description
- ------ -----------
4.1 Form of Convertible Debenture, incorporated by reference to the
Registrant's Current Report on Form 8-K reporting an event of
October 23, 1997 (Commission file no. 0-8632)*
4.2 Common Stock Purchase Warrant issued to The Tail Wind Fund, Ltd.,
incorporated by reference to the Registrant's Current Report on
Form 8-K reporting an event of October 23, 1997 (Commission file
no. 0-8632)*
5.1 Opinion and Consent of Friedlob Sanderson Raskin Paulson &
Tourtillott, LLC.**
10.1 Agreement and Plan of Merger by and between Medical Dynamics,
Inc., CADI Acquisition Corp., and Computer Age Dentist, Inc.,
dated as of October 1, 1997, incorporated by reference to the
Registrant's Current Report on Form 8-K reporting an event of
October 23, 1997 (Commission file no. 0-8632)*
10.2 Form of Registration Rights Agreement between Medical Dynamics,
Inc., Daniel L. Richmond, Chae U. Kim and James DeVico, Jr.,
incorporated by reference to the Registrant's Current Report on
Form 8-K reporting an event of October 23, 1997 (Commission file
no. 0-8632)*
II-3
<PAGE>
10.3 Purchase Agreement between Medical Dynamics, Inc. and The Tail
Wind Fund, Ltd., incorporated by reference to the Registrant's
Current Report on Form 8-K reporting an event of October 23, 1997
(Commission file no. 0-8632)*
10.4 Registration Rights Agreement between Medical Dynamics, Inc. and
The Tail Wind Fund, Ltd., incorporated by reference to the
Registrant's Current Report on Form 8-K reporting an event of
October 23, 1997 (Commission file no. 0-8632)*
13.1 Registrant's Annual Report on Form 10-KSB for the Fiscal Year
Ended September 30, 1997, including exhibits thereto.*
23.1 Consent of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC.
(See Exhibit 5.1)**
23.2 Consent of Hein + Associates LLP.
- ----------
* Previously filed.
** To be filed by amendment.
Item 17. Undertakings.
-------------
The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
the Registration Statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement, including (but not limited to) any addition or deletion of a managing
underwriter; (2) that for the purpose of determining any liability under the
Securities Act of 1933, 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; and (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.
The undersigned Registrant hereby undertakes that, for purposed of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
II-4
<PAGE>
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered, to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Registrant's Articles of Incorporation, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
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 and County of Denver, State of Colorado, on December 17,
1997.
MEDICAL DYNAMICS, INC.
By /s/ Van A. Horsley
--------------------------
Van A. Horsley, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Edwin L. Adair Director December 17, 1997
- -------------------------
Edwin L. Adair, M.D.
/s/ Pat Horsley Adair Director December 17, 1997
- -------------------------
Pat Horsley Adair
/s/ I. Dean Bayne Director December 17, 1997
I. Dean Bayne, M.D.
/s/ Van A. Horsley Director, December 17, 1997
- -------------------------
Van A. Horsley Principal Financial
Officer, Principal Accounting
Officer and Chief Executive
Officer
/s/ Leroy Bilanich Director December 17, 1997
- -------------------------
Leroy Bilanich
/s/ Daniel L. Richmond Director December 17, 1997
- -------------------------
Daniel L. Richmond
/s/ Chae U. Kim Director December 17, 1997
- -------------------------
Chae U. Kim
II-6
</TABLE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the registration statement on
Form S-3 of Medical Dynamics, Inc. of our report dated November 20, 1997, on our
audits of the consolidated financial statements of Medical Dynamics, Inc. as of
September 30, 1997, and for each of the two years in the period ended September
30, 1997, which report is included in the Company's Annual Report on Form
10-KSB.
/s/ Hein + Associates LLP
- -----------------------------
Hein + Associates LLP
Denver, Colorado
December 11, 1997
