PROSPECTUS
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MEDICAL DYNAMICS, INC.
Up to 1,804,769 Shares of Common Stock
Offered for Resale by the Selling Shareholders
This Prospectus relates to up to 1,804,769 shares of common stock of
Medical Dynamics, Inc., a Colorado corporation (the "Company" or "MEDY") which
are being offered and sold by The Tail Wind Fund, Inc. ("Tail Wind") and by
Merchant Capital, Inc. ("MCI"), collectively referred to herein as the "Selling
Shareholders." The shares being offered by this Prospectus will be received by
the Selling Shareholders are defined in greater detail in the section below
entitled "Selling Shareholders," but which are summarized as follows:
up to 1,132,000 shares of MEDY's common stock (the "Common Stock") which
are issuable to Tail Wind as a result of the conversion of certain
debentures referred to as the "1998 Debentures" in the aggregate principal
amount of $1,500,000 based on a conversion price equal to the lesser of the
"Ceiling Price" or 85% of the Market Price (both as defined) on the
business day immediately preceding the conversion date (the "Conversion
Shares");
25,769 shares issued, and up to 410,000 shares of the Common Stock which
are issuable, to Tail Wind as interest on the 1998 Debentures to be
calculated at Market Price (as defined) (the "Interest Shares");
up to 150,000 shares issuable to Tail Wind on exercise of a warrant to
purchase Common Stock referred to as the "1998 Warrant" at an exercise
price equal to $2.58 per share (the "Warrant Shares");
up to 12,000 shares of Common Stock held by MCI; and
up to 75,000 shares of Common Stock issuable to MCI upon exercise of
options issued to MCI (the "MCI Options") at prices from $4.00 per share
(as to 25,000 shares), $4.50 per share (25,000 shares), and $5.00 per share
(25,000 shares).
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For the purposes of the 1998 Debentures held by Tail Wind, "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. As of March 18, 1999,
Market Price as defined in the 1998 Debentures would be $1.56 per share. For the
purposes of the 1998 Debentures, "Ceiling Price" is defined to mean 105% of the
average closing bid price of the Common Stock for the twenty trading days prior
to the effective date of this registration statement. The Ceiling Price is to be
adjusted on July 31, 2000, to 105% of the Market Price on that date if the
adjustment would result in a lower price. The number of shares available for
sale by Tail Wind has been estimated because the conversion of the convertible
securities will be based in part on the market price of the Common Stock on the
date of conversion.
One-third of the 1998 Debentures held by Tail Wind arecurrently
convertible, and the 1998 Warrants also held by Tail Wind are currently
exercisable, subject, however, to the "5% Limitation" and the "Future Priced
Securities" limitation which are explained in the section entitled "Selling
Shareholders," below. The remaining 1998 Debentures become convertible on June
1, 1998 (as to an additional one-third) and January 1, 2000 (as to all of the
1998 Debentures). The MCI Options held by MCI are also currently exercisable.
MEDY's common stock is traded in the over-the-counter market and is quoted
on the Nasdaq SmallCap Market under the symbol "MEDY." On March 18, 1999, Nasdaq
reported that the closing price of the Common Stock was $2.625 per share.
The Company will not receive any proceeds from the sale of the Shares by
either of the Selling Shareholders, but will receive the exercise prices payable
upon exercise of the 1998 Warrants or the MCI Options (if exercised for cash).
There can be no assurance that all or any part of the Warrants or the MCI
Options will be exercised or that they will be exercised for cash. All expenses
incurred in connection with this offering (not including, however, commissions
or discounts paid or allowed by the Selling Shareholders to underwriters,
dealers, brokers or agents) are being borne by the Company.
The Selling Shareholders have not advised the Company of any specific plans
for the distribution of the Shares, but it is anticipated that 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 also may be made through negotiated transactions or otherwise. The
Selling Shareholders and the brokers and dealers though which the sales of the
Shares may be made may be deemed to be "underwriters" within the meaning set
forth in the Securities Act of 1933, as amended, and their commissions and
discounts and other compensation may be regarded as underwriters' compensation.
See "Plan of Distribution" commencing at page 17, below.
Registration Statement - Medical Dynamics, Inc. Page 2
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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" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
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.
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 March 28, 1999
AVAILABLE INFORMATION
Medical Dynamics, Inc. (referred to in this Prospectus as either the
"Company" or "MEDY") is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "1934 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 of 1933 (the "1933 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
Registration Statement - Medical Dynamics, Inc. Page 3
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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.
The Company 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) The Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1998.
(2) The Company's Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1998.
(3) The Company's Current Report on Form 8-K reporting an event of March
18, 1999, describing amendments to the Company's agreements with The Tail Wind
Fund, Ltd. and financing accomplished with Resonance Limited.
(4) The Company's Current Report on Form 8-K reporting an event of March 4,
1999, describing amendments to the Company's agreements with The Tail Wind Fund,
Ltd.
(5) The Company's Current Report on Form 8-K reporting an event of October
9, 1998, describing a line of credit the Company obtained from Norwest Business
Credit, Inc.
(6) The Company's Current Report on Form 8-K, as amended, reporting an
event of October 23, 1997, describing the Company's acquisition of Computer Age
Dentist, Inc.
All 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 covered by this Prospectus shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
Registration Statement - Medical Dynamics, Inc. Page 4
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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, ext. 13.
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 Shareholder 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, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Certain statements contained in this
Prospectus and the documents incorporated herein using the terms "may," "expects
to," and other terms denoting future possibilities are 'forward-looking
statements.' Forward-looking statements include, but are not limited to, those
statements relating to development of new products, the projected financial
condition of MEDY, the ability to increase distribution of MEDY's products,
integration of new businesses MEDY has acquired during the 1998 fiscal year,
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. The accuracy of these statements cannot be guaranteed as they
are subject to a variety of risks which are beyond MEDY's ability to predict or
control and which may cause actual results to differ materially from the
projections or estimates contained herein or in the documents incorporated by
reference. 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, and under "Item 1 - Business" and "Item 6
Management's Discussion and Analysis" in MEDY's annual report on Form 10- KSB
for the fiscal year ended September 30, 1998, and in the subsequent filings
pursuant to the Securities Exchange Act of 1934.
Registration Statement - Medical Dynamics, Inc. Page 5
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PROSPECTUS SUMMARY
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 1981. In October 1997 MEDY acquired Computer Age Dentist,
Inc. (CADI), a California corporation based in Los Angeles, California. CADI
operates as a wholly-owned subsidiary of the Company which develops and sells
practice management software and related electronic services to the dental
profession. In February 1998, through CADI the Company acquired Information
Presentation Systems, Inc. of Marietta, Georgia, one of the nation's largest
suppliers of customized multimedia systems for use in a variety of dental
operatory environments. In April 1998, through CADI the Company acquired Command
Dental Systems of Farmington Hills, Michigan, which develops and markets
turn-key computer systems for the efficient management of dental practices.
The Company'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.
The Securities
Currently the only class of securities of MEDY for which there is a public
market is its Common Stock. As of December 31, 1998, as adjusted for the
issuance of interest shares to Tail Wind and the completion of equity financing
in March 1999, there were 10,851,270 shares of its Common Stock outstanding. See
"Description of Securities" commencing on page 19, of this Prospectus.
The Offering
The Selling Shareholders are offering up to 1,804,769 shares of Common
Stock (the "Shares"). Of these:
1,717,769 shares will be received by the Tail Wind upon conversion and
exercise of convertible securities described in "The 1998 Debentures and
Warrants" under the caption "Selling Shareholders" beginning on page 14 of
this Prospectus. The number of shares available for sale by the Tail Wind
has been estimated because the conversion of the convertible securities
will be based in part on the market price of the Common Stock on the date
of conversion.
Registration Statement - Medical Dynamics, Inc. Page 6
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12,000 shares are held by MCI, and an additional 75,000 shares are issuable
upon exercise of the MCI Options described under the caption "Selling
Shareholders" beginning on page 14 of this Prospectus.
The Selling Shareholder will receive all of the proceeds from the offer and sale
of the Shares. The Company will receive proceeds to the extent either of the
Selling Shareholders exercise the Warrants or the MCI Options for cash.
The Company will pay the costs related to the filing of the registration
statement in which this Prospectus is included. The Selling Shareholders will
pay their own expenses related to the offer and sale of the Shares, including
any underwriter discounts or commissions.
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. Losses from Operations. MEDY has a history of net operating losses,
which, when accumulated, total $20,792,400 through December 31, 1998. 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.
2. Working Capital Shortages and Dependence on Third Party Financing. As
discussed in MEDY's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1998, MEDY has regularly incurred working capital shortages and
has sought to alleviate these shortages through debt and equity financing
provided by third party and affiliated investors and, most recently, through a
working capital line of credit from an unaffiliated bank. There can be no
assurance that such sources of capital will continue to be available on terms
Registration Statement - Medical Dynamics, Inc. Page 7
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which are acceptable to MEDY. Eventually MEDY will be required to finance its
operations with its cash flow, and MEDY is attempting to increase its revenues
in an effort to do so. There can be no assurance, however, that the working
capital shortages which MEDY has incurred will not continue and may not
adversely affect MEDY's ability to raise additional debt or equity capital if
necessary.
3. Risk of Dilution from Conversion of Convertible Debentures. Assuming
full conversion of the 1998 Debentures as of the date hereof at the Market Price
set forth on the cover page of this prospectus, 1,132,000 shares of Common Stock
would be issued to the Selling Shareholder. Based on the current Market Price as
set forth on the cover page of this prospectus, 19,230 shares are issuable to
Tail Wind quarterly in payment of $30,000 interest that accrues on the entire
amount of the 1998 Debentures. Although this would result in a conversion of a
liability on MEDY's balance sheet to equity, this would result in dilution to
existing MEDY shareholders, many of whom may have purchased Common Stock in the
over-the-counter market at a higher price than the price at which Tail Wind
would convert its Debentures. MEDY has the right to pay interest on the 1998
Debentures in cash or shares of Common Stock at Market Price, in its discretion.
To date MEDY has paid interest in shares of its Common Stock and intends to
continue to do so in the future to conserve MEDY's working capital. It appears
to MEDY that Tail Wind has sold the shares underlying the 1997 Debentures and
the Interest Shares pursuant to the existing registration statement shortly
after converting the 1997 Debentures or receiving the Interest Shares.
It can be expected that the sales of the Common Stock by Tail Wind, and
perhaps even the possibility of these sales, have had and may continue to have
in the future a negative impact on the market for the Common Stock. In addition,
for so long as the 1998 Debentures remain outstanding, the conversion ratio
(which is based on the lowest prices over a sixty day period) may continue to
exert a downward pressure on the market price for the Common Stock.
4. Product Liability. MEDY could be subject to claims for personal injuries
resulting from the use of its products. Although MEDY carries product liability
insurance coverage in amounts it believes to be commercially reasonable within
its industry, there can be no assurance that the amount of coverage would be
sufficient to cover any proven claims. Claims proven and damages awarded in
excess of the coverage limits would have a material adverse effect on MEDY.
5. Acquisition of New Businesses. During the fiscal year ended September
30, 1998, MEDY acquired three new businesses, CADI, IPS, and CDS. While the
integration of these businesses into MEDY has been generally successful, MEDY is
seeking to resolve certain issues with respect to the CDS acquisition. Following
the completion of the CDS acquisition, certain of the principals appear to have
violated confidentiality and non-competition provisions, and certain former
employees of CDS who became employees of CADI were encouraged to violate their
employment obligations, and the operations of the CDS assets did not conform to
representations made to MEDY. MEDY is negotiating with the former CDS principals
to resolve the issues identified, but the resolution is not expected to have a
material adverse effect on MEDY as a whole.
6. Need for Additional Financing and Risk of Dilution. 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. Although management believes that the
Registration Statement - Medical Dynamics, Inc. Page 8
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capital available to MEDY is sufficient to fund its short-term operations, it is
unable to predict what additional expenses will be incurred beyond those
contemplated since research, development, and marketing programs frequently
involve unanticipated expenditures.
To the extent additional capital is needed, MEDY may seek financing through
additional offerings of equity or debt securities. Sales of additional equity
securities could dilute the ownership interest of existing shareholders,
including investors in this Offering. Sales of debt securities would necessarily
result in interest expense and would risk the loss of the Company's assets if
MEDY were to become unable to pay the interest. Offerings of debt securities
also could include conversion features requiring the issuance of additional debt
or equity securities which, ultimately, also could dilute the ownership of prior
shareholders, including purchasers of the shares being offered by the Selling
Shareholders in this Offering.
The purchase of securities by Resonance Limited as reported on MEDY's Form
8-K dated March 18, 1999 could result in the issuance of additional shares
should the market price for MEDY common stock decrease below Resonance's
purchase price ($1.5275 per share); the issuance of additional shares of
Resonance could result in dilution to MEDY's existing shareholders.
7. Limitations on Ability to Obtain Additional Financing. The agreement
between MEDY and Tail Wind contains limitations on MEDY's ability to raise
additional capital by issuing convertible debt or equity securities at prices
which fluctuate or pursuant to a registration statement for selling security
holders other than the Selling Shareholder. Although these restrictions prohibit
the Company from raising working capital or other equity investment in a
transaction similar to the transactions with the Selling Shareholder until at
least August 1999, the Company believes that it will be able to work within
these restrictions to the extent it needs additional capital. As announced in a
Form 8-K reporting an event of October 9, 1998, the Company has entered into a
line of credit with an unaffiliated bank which does not conflict with the
capital raising limitations contained in the agreement with Tail Wind.
8. Technological Change and Risk of Technological Obsolescence. The medical
products segment and the dental products segment, the Company's two principal
lines of business, are subject to rapid and significant technological change.
Accordingly, MEDY's viability will be dependent on its ability to introduce
competitive products to the marketplace in a timely manner and enhance and
improve such products to its customers' satisfaction. There can be no assurance
that MEDY will be able to keep pace with technological developments or that its
products will not become obsolete.
9. Competition -- MEDY and CADI. 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.
In addition, there are a large number of competitors in the dental practice
management area. Most of these competitors are smaller businesses. CADI's
software is Y2K compliant, unlike the software offered by some of CADI's
competitors. There can be no assurance, however, that competitors may not reduce
Registration Statement - Medical Dynamics, Inc. Page 9
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CADI's market share by offering their proprietary version of dental practice
management software. CADI plans to compete with these other businesses by
continuing to upgrade its software and by continuing to package the dental
practice software it with a complete office system of hardware and software and
diagnostic equipment.
10. 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 and in the best interests of MEDY.
Although MEDY uses its best efforts to minimize conflicts of interest, the
existence of such conflicts may impact MEDY in its business activities.
11. 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 stepson. CADI's operations are significantly dependent on the continued
availability of the services of Daniel L. Richmond and Chae U. Kim. The loss of
the services of any of these persons would have a material adverse effect on the
Company. In the event of such a loss, MEDY can give no assurance that it could
replace any person without incurring substantial additional expense. MEDY does
not have employment contracts with either Mr. Horsley or Dr. Adair. Both Messrs.
Richmond and Kim are subject to five year employment agreements which expire in
October 2002.
12. Government Regulation. Because certain of the products that MEDY
manufactures are used in surgery and other medical applications, the products
are subject to regulations of and close scrutiny by agencies of the federal
government, including the FDA. Although MEDY believes that its facilities are in
compliance with all applicable regulations, 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 which would have a material adverse effect on MEDY.
Although MEDY has had difficulty in certain instances in the past in obtaining
FDA approval on new products, MEDY's current business in not materially
dependent on this issue and, therefore, this is not deemed to be a significant
risk.
13. 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 unauthorized 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. The unauthorized use of MEDY's trade secrets and
the infringement of its patents could have a material adverse effect on MEDY and
its ability to compete.
Registration Statement - Medical Dynamics, Inc. Page 10
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14. Significant Investment in Intangible Assets. As a result of the
acquisitions of CADI, IPS and CDS, MEDY has a significant investment in
intangible assets, amounting to approximately $5,945,100 at December 31, 1998
(64% of MEDY's total assets). The expenses associated with the annual
amortization of the intangible assets will make it more difficult for MEDY to
realize net income. Because intangible assets are incapable of precise
valuation, it may be necessary for MEDY to reduce the balance sheet valuation of
these assets at some later point, although MEDY has no intention or basis to do
so at the present time.
15. Limited Public Market; Price Volatility; and No Assurance of Liquidity.
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
purchase prices paid in this Offering, 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.
16. Dependence on Principal Customers. In the past, MEDY has been dependent
on a limited number of principal customers. During the 1997 fiscal year, MEDY's
principal customer which accounted for 61% of MEDY's revenues was Information
Presentation Systems, Inc., of Marietta, Georgia. IPS purchased certain of
MEDY's camera products and packaged the products with other hardware and
software, including CADI's software, for resale. As described elsewhere in this
Prospectus, MEDY, though CADI, acquired IPS in February 1998. (See MEDY's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1998, "Item 1 -
Business" and Item 6 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" therein) which report is incorporated by
reference). As a result of the IPS acquisition during the 1998 fiscal year, the
Company did not have any single customer accounting for more than 10% of its
sales during the 1998 fiscal year, although it is possible that there may be
significant customers in future fiscal years.
17. No Dividends Paid or Contemplated. No dividends have been paid by MEDY
in the past and dividends are not contemplated in the foreseeable future.
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. The Company's lending arrangements with Norwest Business Credit,
Inc., significantly restrict the Company's ability to pay dividends.
18. Year 2000 Compliance. Although there can be no assurance, MEDY does not
anticipate that it will suffer any adverse impact as a result of Year 2000 (Y2K)
computer software issues either as a result of third party non-compliance or as
Registration Statement - Medical Dynamics, Inc. Page 11
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a result of internal matters. None of the information technology or other
software and hardware systems utilized by MEDY and its subsidiaries incorporates
technology that is incapable of recognizing dates beyond December 31, 1999.
CADI, through its internal staff, has developed its dental practice management
software for the Windows platform and, consequently, such software recognizes
dates beyond December 31, 1999. While CADI is still supporting some software
which is DOS-based or otherwise may not be Y2K compliant, the customers using
this software have been advised of their need to upgrade their office software
in anticipation of Y2K. Even if MEDY or CADI were to provide the necessary
software upgrade to these customers at no cost (which CADI does not have an
obligation to do), the total loss to MEDY would be less than $60,000 in revenues
and is not considered to be material. Because CADI's dental practice management
software is Y2K compliant, CADI and MEDY believe that this offers them a
marketing opportunity in that some of their competitors' software currently
being utilized by dental offices is not Y2K compliant and will need to be
replaced by those offices before December 31, 1999. There can be no assurance,
however, that these offices will all purchase dental practice management systems
from CADI.
In making the foregoing determination, MEDY and CADI have assessed embedded
systems contained in their office buildings, equipment, and other
infrastructures. As a result, MEDY and CADI have not established a contingency
plan to come into effect in the event of a Y2K catastrophe, and management does
not believe that such a plan is necessary. Of course, MEDY and CADI are both
dependent on facilities outside of their control, such as electrical power
supplies, banking facilities, transportation facilities (such as airlines), and
communications facilities. While MEDY and CADI believe, based on public reports
and some notifications they have received, that these outside facilities are or
will be Y2K compliant, neither MEDY nor CADI has any other basis for determining
their compliance. The operations of MEDY and CADI would be significantly and
adversely affected if any of these outside facilities are adversely affected by
the millenium change or by other issues related to Y2K.
USE OF PROCEEDS
The Selling Shareholder will receive all proceeds from the sale of the
Shares offered and sold under this Prospectus.
If, and to the extent, the 1998 Warrants or the MCI Options are exercised
for cash, the Company will receive proceeds equal to the aggregate exercise
price of the Warrants and Options, approximately $387,000 if all of the 1998
Warrants and $637,500 if all of the MCI Options are exercised for cash. The 1998
Warrants (but not the MCI Options) allow the holder to effect a "cashless"
exercise of the Warrants. The Warrants and MCI Options are described under the
captions "The 1998 Debentures and Warrants" and "The MCI Options" in this
Prospectus under "Selling Shareholders." Any proceeds the Company receives from
the exercise of the Warrants and MCI Options will be used for working capital.
There can be no assurance that any Warrants or MCI Options will ever be
exercised.
Registration Statement - Medical Dynamics, Inc. Page 12
<PAGE>
THE COMPANY
Medical Dynamics, Inc., a Colorado corporation incorporated in March 1971
(referred to herein as "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.
In February 1998 CADI acquired by merger Information Presentation Systems,
Inc. of Marietta, Georgia ("IPS"), a supplier of customized multimedia systems
for use in a variety of dental operatory environments.
In April 1998, CADI acquired by merger Command Dental Systems of Farmington
Hills, Michigan ("Command"), which develops and markets turn-key computer
systems for the efficient management of dental practices.
In reviewing MEDY's financial statements which are incorporated herein by
reference, it should be noted that a substantial portion of the Company's
revenues for fiscal 1998 derives from the businesses acquired by MEDY during
fiscal 1998 and not from MEDY's historical businesses of medical and dental
camera manufacturing. For example, MEDY's revenues during fiscal year 1998
(ending September 30, 1998) totaled approximately $7,847,000; of that amount,
approximately $7,575,000 was attributable to the acquisitions of CADI, IPS and
Command.
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.
SELLING SHAREHOLDERS
The Selling Shareholders under this prospectus are the Tail Wind Fund, Ltd.
("Tail Wind") and Merchant Capital, Inc. ("MCI"). Neither Tail Wind nor MCI is
an affiliate of MEDY; nor has either Selling Shareholder or any affiliate of
either Selling Shareholder had any position, office or other material
relationship with MEDY within more than the past three years, except as
disclosed below. Tail Wind's business address is Windermere House, P.O. Box
SS-5539, Nassau, Bahamas. The business address of MCI is 5300 West Sahara, Suite
101, Las Vegas, Nevada 89102.
Registration Statement - Medical Dynamics, Inc. Page 13
<PAGE>
The Shares being offered hereby by Tail Wind are issuable upon the
conversion of the outstanding 1998 Debentures (of which $1,500,000 in face
amount are outstanding), the payment of interest related thereto and upon
the exercise of the 1998 Warrants. There are no shares underlying the 1997
Debentures remaining to be issued or sold; and
The Shares being offered hereby by MCI were issued to MCI for four months
services pursuant to a Financial Public Relations/Consulting Agreement
(12,000 shares), and are issuable upon exercise of options issued to MCI
pursuant to that agreement (75,000 shares underlying the MCI Options).
Neither Tail Wind nor MCI owns, directly or indirectly, any other shares of
Common Stock. Assuming that Tail Wind and MCI sell all Shares offered hereby
(although there is no requirement that either do so), they will beneficially own
no shares of Common Stock at the conclusion of the Offering.
Tail Wind
General. The exact number of shares to be offered and sold by Tail Wind is
not known at the date of this Prospectus because Tail Wind will acquire the
shares upon conversion of convertible securities at varying prices, most of
which will be converted based on the market price of the Common Stock on the
date of conversion. Were the 1998 Debentures held through their term and then
converted in full at the Market Price set forth on the cover page of this
Prospectus and the 1998 Warrants exercised in full, the following number of
shares of Common Stock would be issued:
1998 Debentures 1,132,000 shares
Interest Shares 435,769 shares (including 25,769 shares issued prior to the
date hereof)
1998 Warrants 150,000 shares of Common Stock, exercisable through July 31,
2003 at a price of $2.58 per share
Tail Wind has agreed by contract that it will at no time own more than 4.99% of
the Common Stock. This contractual limitation prohibits Tail Wind from
converting the 1998 Debentures or exercising the 1998 Warrants to the extent
that conversion or exercise would result in Tail Wind owning more than 4.99% of
the issued and outstanding shares of Common Stock. This limitation is referred
to in this Prospectus as the "5% Limitation." As a result of the 5% Limitation
Registration Statement - Medical Dynamics, Inc. Page 14
<PAGE>
and pursuant to SEC Rule 13d- 4, Tail Wind disclaims beneficial ownership of all
shares to the extent such ownership would result in it exceeding the 5%
Limitation. Since the 5% Limitation is the result of a contractual agreement
between MEDY and Tail Wind, the parties could, by agreement, waive the
restriction.
MEDY and Tail Wind have agreed that, notwithstanding any decrease in Market
Price, Tail Wind may not convert 1998 Debentures which would result in the
issuance of more than 1,880,000 shares (including shares issued as interest on
the 1998 Debentures, or issued or issuable upon exercise of the 1998 Warrants).
If Tail Wind is precluded from converting any 1998 Debentures because of this
provision, Tail Wind may demand, upon six months' notice, that the Company
redeem the remaining 1998 Debentures for 115% of the remaining principal amount.
This is referred to herein as the "Future Priced Securities" limitation. If MEDY
is required to redeem any portion of the 1998 Debentures as a result of the
Future Priced Securities limitation, MEDY will have six months notification to
obtain the financing to do so. In such an event, MEDY will have to seek debt or
equity financing (unless it has sufficient funds from other sources, such as
revenues from operations, available). Although MEDY believes it can do so based
on its past experiences, there can be no assurance that MEDY will be able to
obtain financing necessary to redeem the 1998 Debentures if required.
If all the Shares being offered by Tail Wind are sold, Tail Wind will own
no shares of the Company's common stock following the completion of the
Offering.
The 1998 Debentures and Warrants. On July 31, 1998, in a private placement
offering under Regulation D, the Selling Shareholder purchased debentures in an
aggregate principal amount of $1,100,000 and, in November 1998, purchased an
additional $400,000 principal amount (the "1998 Debentures"). The 1998
Debentures bear interest at 8% per annum, with interest payable semi-annually on
January 5 and July 5 of each year, commencing January 5, 1999. Principal and
accrued but unpaid interest is due in full on July 31, 2003. Events of default
under the 1998 Debentures which could result 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/or (iii) events of bankruptcy and similar events.
Registration Statement - Medical Dynamics, Inc. Page 15
<PAGE>
The Company may, at its option, pay accrued interest on the 1998 Debentures
with shares of its Common Stock valued at Market Price. Based on the Market
Price set forth on the cover page of this Prospectus, assuming all accrued
interest on the 1998 Debentures is paid in shares of Common Stock and that the
1998 Debentures are held to maturity, the Company will pay Tail Wind
approximately 410,000 shares of Common Stock (the "1998 Interest Shares") in
addition to the 25,769 interest shares paid to Tail Wind in March 1999.
Tail Wind is entitled to convert the 1998 Debentures, in whole or in part,
into shares of Common Stock at the lesser of 85% of Market Price or the "Ceiling
Price". As of March 18, 1999, 1998 Debentures totaling $500,000 are convertible
or will be convertible within sixty days; an additional $500,000 will be
convertible after June 1, 1999, and all of the 1998 Debentures will be
convertible after January 1, 2000. For purposes of the 1998 Debentures, "Ceiling
Price" means 105% of the average closing bid price of the Common Stock for the
20 trading days immediately preceding the effective date of this registration
statement. If conversion has not occurred by July 31, 2000, the Ceiling Price
thereafter will mean 105% of the Market Price on July 31, 2000 if the adjustment
would result in a lower price. Assuming that Tail Wind can and elects to convert
the full amount of the 1998 Debentures into shares of Common Stock, based on the
Market Price set forth on the cover page of this Prospectus, Tail Wind would
receive 1,128,000 shares of Common Stock (the "1998 Conversion Shares").
In connection with Tail Wind's purchase of the 1998 Debentures in July and
November 1998, the Company issued to Tail Wind warrants to purchase up to a
total of 150,000 shares of Common Stock, exercisable through July 31, 2003 at a
price of $2.58 per share (the "1998 Warrants"). The 1998 Warrants contains
anti-dilution provisions should MEDY issue stock dividends or conduct a stock
split or reorganization, or upon occurrence of certain other events. The
Warrants will be subject to adjustment as a result of the completion of MEDY's
recent equity financing. Subject to the 5% Limitation and the Future Priced
Securities limitation, the 1998 Warrants are currently exercisable.
If MEDY is unable to meet the effectiveness requirement for the shares
underlying the 1998 Debentures and Warrants, maintain effectiveness of this
registration statement, or maintain the listing of the Common Stock on the
Nasdaq SmallCap or the NMS Market (or senior stock exchange), MEDY will be
required to pay liquidated damages to the Selling Shareholders in an amount
equal to 2% of the aggregate principal amount of the 1998 Debentures 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 Tail Wind 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). Tail Wind waived the liquidated damages
penalty through March 18, 1999. Thereafter the penalty will accrue at the rate
of $30,000 per month.
Registration Statement - Medical Dynamics, Inc. Page 16
<PAGE>
The registration rights agreement contains standard cross-indemnification
provisions and requirements for contribution should the indemnification
provisions be found to be unavailable.
The 1997 Debentures and Warrants. On October 31, 1997, in a private
placement offering under Regulation D, Tail Wind purchased debentures in an
aggregate principal amount of $1,100,000. Tail Wind converted these debentures
into 520,349 shares of MEDY Common Stock, and the underlying shares have been
sold. MEDY had also granted Tail Wind warrants to acquire 84,615 shares of
Common Stock in connection with the October 31, 1997 debenture purchase. Tail
Wind surrendered these warrants in connection with certain amendments to the
1998 Debentures and Warrants, which amendments were negotiated in March 1999.
Merchant Capital
On September 1, 1998, MEDY entered into a "financial public
relations/consulting agreement" with Merchant Capital, Inc. ("MCI"). MCI
warranted to MEDY that it is "experienced in the field of financial public
relationships and in complying with the requirements of federal and applicable
state securities laws with respect to [its] activities in the financial public
relations field." MEDY appointed MCI as a non-exclusive financial public
relations counsel to assist MEDY in dealing with the investment banking and
broker-dealer communities, and in organizing, writing, and distributing public
relations communications. The Agreement with MCI contained standard
indemnification provisions.
The Agreement with MCI does not require that MEDY pay any cash compensation
to MCI; the Agreement required that MEDY pay MCI shares of Common Stock and MCI
Options. MEDY terminated the Agreement with MCI on December 28, 1998. MCI earned
and has been paid 12,000 shares of MEDY's restricted Common Stock and MCI
Options to acquire 75,000 shares of Common Stock as follows:
25,000 exercisable at $4.00 per share;
25,000 exercisable at $4.50 per share; and
25,000 exercisable at $5.00 per share.
In all cases, the MCI Options are exercisable for cash, and expire (unless
previously exercised) at the close of business on August 31, 2000.
Registration Statement - Medical Dynamics, Inc. Page 17
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholders have advised MEDY that they 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 Shareholders 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 Shareholders may be deemed to be an underwriter of the Shares offered
hereby within the meaning of the Securities Act of 1933, as amended.
In effecting sales, brokers or dealers engaged by the Selling Shareholders
(or either of them) may arrange for other brokers or dealers to participate.
Such broker or dealers may receive commissions or discounts from the Selling
Shareholders in amounts to be negotiated by the Selling Shareholders. The
Selling Shareholders may enter into hedging transactions with broker-dealers and
the broker-dealers may engage in short sales of the Common Stock in the course
of hedging the positions they assume with the Selling Shareholders (including,
without limitation, in connection with the distribution of the Common Stock by
such broker-dealers). The Selling Shareholder may also engage in short sales of
the Common Stock and may enter into option or other transactions with
broker-dealers that involve the delivery of the Common Stock to the
broker-dealers, who may then resell or otherwise transfer such Common Stock.
Such broker-dealers and any other participating broker-dealers may, in
connection with such sales, be deemed to be underwriters within the meaning of
the Securities Act of 1933, as amended. Any discounts or commissions received by
any such broker-dealers may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933, as amended.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed broke-dealers.
MEDY will pay all of the expenses incident to the filing of this
Registration Statement, estimated to be $45,000. These expenses include legal
and accounting fees in connection with the preparation of the Registration
Statement of which this Prospectus is a part, legal and other fees in connection
with the qualification of the sale of the Shares under the laws of certain
states (if any), 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. MEDY has agreed
to use its best efforts to keep the registration of the Shares offered hereby
effective until the date upon which all of the Shares offered by the Selling
Shareholders have been sold.
Registration Statement - Medical Dynamics, Inc. Page 18
<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
Authorized. MEDY is authorized to issue 30,000,000 shares of $.01 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 and 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 31, 1998, MEDY had issued and
outstanding 10,301,667 shares of Common Stock. In February 1999 MEDY issued
25,769 interest shares to Tail Wind. On March 18, 1999, MEDY issued 523,834
additional shares in connection with further financing activities; this latter
transaction may result in the issuance of additional shares and a common stock
purchase warrant, but the number of such additional shares and warrants will not
be determined until after a registration statement relating to those shares is
declared effective. This number does not include any of the estimated 1,779,000
shares issuable upon exercise of the 1998 Debentures, the unissued 1998 Interest
Shares, the 1998 Warrant Shares, or the shares underlying the MCI Options which,
if and when issued, will be offered for sale pursuant to this Prospectus by the
Selling Shareholders. For information about these shares, see the description
contained under the caption "Selling Shareholders" above.
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.
MEDY's agreement with Norwest Business Credit, Inc. (entered into in
October 1998 for a $1,000,000 line of credit described in more detail in the
Company's Current Report on Form 8-K reporting an event of October 9, 1998 and
its Form 10-KSB for the year ended September 30, 1998, which report is
incorporated by reference herein.
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.
Registration Statement - Medical Dynamics, Inc. Page 19
<PAGE>
No Preemptive Rights. Holders of Common Stock are not entitled to
preemptive rights to purchase additional shares of Common Stock when offered for
sale by the Company.
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.
1998 Debentures and Warrants
For a description of these securities, see"1998 Debentures and Warrants"
under the caption "Selling Shareholders" in this Prospectus.
Stock Options
Exclusive of the 1998 Warrants and the MCI Options, on December 31, 1998,
MEDY had outstanding stock options to purchase 3,801,237 shares of Common Stock
exercisable at exercise prices ranging between $1.00 and $4.50 per share.
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.
LEGAL MATTERS
The firm of Norton * Lidstone, LLC, 5445 DTC Parkway, Suite 850, Englewood,
CO 80111, has acted as counsel for MEDY in connection with this offering and has
passed upon the validity of the securities offered hereby.
Registration Statement - Medical Dynamics, Inc. Page 20
<PAGE>
EXPERTS
The financial statements of Medical Dynamics, Inc. for the years ended
September 30, 1998 and 1997 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.
Registration Statement - Medical Dynamics, Inc. Page 21
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANYINFORMATION 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
USE OF PROCEEDS
THE COMPANY
SELLING SHAREHOLDERS
PLAN OF DISTRIBUTION
DESCRIPTION OF SECURITIES
LEGAL MATTERS
EXPERTS
Registration Statement - Medical Dynamics, Inc. Page 22
