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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1997
REGISTRATION NO. 333-02001
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
94-2579751
(I.R.S. Employer Identification Number)
9162 ETON AVENUE, CHATSWORTH, CALIFORNIA 91311
(818) 709-1244
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices
DR. FRED H. DEINDOERFER
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
9162 ETON AVENUE
CHATSWORTH, CALIFORNIA 91311
(818) 709-1244
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
It is requested that copies of communications be sent to:
DANIEL G. CHRISTOPHER, ESQ.
IRELL & MANELLA LLP
1800 AVENUE OF THE STARS, SUITE 900
LOS ANGELES, CALIFORNIA 90067
(310) 277-1010
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of the Registration Statement as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
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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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PROSPECTUS
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
COMMON STOCK
($.01 PAR VALUE)
466,311 SHARES
This Prospectus relates to 466,311 shares (the "Shares") of Common
Stock, par value $.01 per share (the "Common Stock"), of International Remote
Imaging Systems, Inc., a Delaware corporation (the "Company" or "IRIS"), which
may be offered from time to time by one or all of the selling stockholders
named herein (the "Selling Stockholders"). The Company will receive no part of
the proceeds of such sales; however, to the extent that Selling Stockholders
choose to exercise any options or warrants to purchase Shares, the Company will
receive proceeds equal to the exercise price of such options or warrants
multiplied by the number of shares purchased. The Company has agreed to pay
certain costs and expenses incurred in connection with the registration of the
Shares, except that the Selling Stockholders shall be responsible for all
selling commissions, transfer taxes and related charges in connection with the
offer and sale of such Shares. See "Plan of Distribution."
_____________________________________
The Securities offered hereby involve a high degree of risk.
See "Risk Factors" on page 3.
_____________________________________
The Selling Stockholders may sell all or a portion of the Shares from
time to time on the American Stock Exchange (the "AMEX") at prevailing prices
at the time of such sales on the relevant exchange, at prices related to such
prevailing prices or at negotiated prices. The Selling Stockholders may sell
all or a portion of the Shares in private transactions or in the
over-the-counter market at prices related to the prevailing prices of the
Shares on the AMEX at the time of the sale. The Selling Stockholders may
effect such transactions by selling to or through one or more broker-dealers,
and such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholders. The
Selling Stockholders and any broker-dealers that participate in the
distribution may under certain circumstances be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and any commissions received by such broker-dealers and any profits
realized on the resale of shares by them may be deemed to be underwriting
discounts and commissions under the Securities Act. To the extent required,
the specified shares to be sold, the public offering price, the names of any
such broker-dealers, and any applicable commission or discount with respect to
any particular offer will be set forth in a prospectus supplement. See "Plan
of Distribution."
The Common Stock is traded on the AMEX. On July 15, 1997, the closing
sale price of the Company's Common Stock on the AMEX was $4.125 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is July 15, 1997.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH SOLICITATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports and other information
filed by the Company with the Commission pursuant to the informational
requirements of the Exchange Act may 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 its Regional Office at 5757
Wilshire Boulevard, Suite 500, Los Angeles, California 90036. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Certain
reports, proxy statements, and other information filed by the Company may also
be obtained at the Commission's World Wide Web site, located at
http://www.sec.gov. The Company's Common Stock, par value $.01 per share, is
listed on the American Stock Exchange and reports, proxy statements and other
information regarding the Company can be inspected at the offices of such
exchange.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the Shares offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto, as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Shares, reference is hereby made to the Registration Statement,
including the exhibits filed or incorporated as a part thereof. Statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of the document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by reference to the copy of the applicable documents
filed with the Commission.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company under the
Exchange Act with the Commission are incorporated herein by reference: (1) the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996; (2) the description of the Company's Common Stock as set forth in the
registration statement filed by the Company on Form 8-A dated June 22, 1993;
and (3) the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the shares of Common Stock made hereby shall
be deemed to be incorporated in this Prospectus by reference and to be a part
hereof from the date of filing of such documents. Any statement incorporated
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that 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.
The Company will provide, without charge, to each person to whom a
copy of this Prospectus has been delivered, on the request of such person, a
copy of any and all of the information that has been or may be incorporated by
reference in this Prospectus, other than exhibits thereto. Written or oral
requests for such copies should be directed to International Remote Imaging
Systems, Inc., 9162 Eton Avenue, Chatsworth, California 91311, Attention:
Corporate Secretary. The telephone number is (818) 709-1244.
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THE COMPANY
The Company designs, develops, manufactures and markets in vitro
diagnostic ("IVD") imaging systems based on patented and proprietary automated
intelligent microscopy ("AIM") technology for automating microscopic procedures
performed in clinical laboratories. AIM combines the Company's capabilities in
automated specimen presentation, including its patented slideless microscope,
and proprietary high-speed digital processing hardware and software to classify
and present images of microscopic particles in easy-to-view displays. The
Company's IVD imaging systems are designed to provide customers with better and
more rapid results and labor cost-savings over manual methods of performing
microscopy. IRIS markets its products primarily to hospital and clinical
reference laboratories.
The Company pioneered its first IVD imaging system application in 1983
with its introduction of The Yellow IRIS family of workstations for urinalysis.
The Company believes that it is still the only supplier of laboratory systems
which fully automate a complete urinalysis, and it recently introduced its
fourth generation models which incorporate significant advancements in speed,
utility and ease of use. In 1996, the Company received Food and Drug
Administration ("FDA") clearance and began to market the Model 900UDx urine
pathology system designed especially for the high-volume testing requirements
of larger laboratories. The Company also provides ongoing sales of supplies
and service necessary for operation of The Yellow IRIS workstations. Most
supplies are purchased under standing orders and, following the initial
one-year warranty period, the majority of customers purchase annual service
contracts.
In addition to urinalysis, the Company has also added new applications
for its IVD imaging systems. It recently completed development of The White
IRIS leukocyte differential analyzer for the field of hematology. The FDA
cleared The White IRIS for marketing in May 1996, and the Company expects to
start sales of this system in 1997. The Company also plans to sell supplies
and service for The White IRIS comparable to those sold for The Yellow IRIS.
In July 1996, the Company entered the field of genetics with the
acquisition (the "PSI Acquisition") of the digital imaging business of
Perceptive Scientific Instruments, Inc. ("PSI"). PSI's principal product is
the PowerGene genetic analyzer -- an IVD imaging system for karyotyping, DNA
probe analysis and comparative genomic hybridization. The Company also
acquired international operations from PSI.
IRIS was incorporated in 1979 under the laws of California and in 1987
reincorporated under the laws of Delaware. IRIS executive offices are located
at 9162 Eton Avenue, Chatsworth, California 91311 and the telephone number is
(818) 709-1244.
RISK FACTORS
Prospective investors should carefully consider the specific factors
set forth below, as well as all of the other information contained in this
Registration Statement on Form S-3, before deciding to invest in the
Securities. This Registration Statement on Form S-3 contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties which could cause the Company's actual results to differ
materially from such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below as well as those discussed elsewhere in this Registration Statement on
Form S-3 and in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it will continue to have sufficient
liquidity and capital resources to conduct its business until the maturity of
its bank loans in April 1998. Based upon its forecasted cash flow, the Company
presently estimates that it will require approximately $6.0 million of
additional outside financing to repay the remaining principal balance of its
bank loans and continue its long-term business strategy. While the Company is
presently pursuing the required financing, there can be no assurance that the
Company can secure adequate financing on favorable terms, if at all. The
failure to secure adequate financing would have a material adverse effect on
the Company's financial position and its long-term business strategy.
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Equity financing could result in dilution to holders of Common Stock,
and debt financing could result in the imposition of significant financial and
operational restrictions on the Company. In addition, the seller of PSI has
requested that the Company reduce the exercise price of the five-year warrant
to purchase 875,000 shares of Common Stock issued as part of the purchase price
for the PSI Acquisition, which could result in additional dilution to holders
of Common Stock. The Company has declined to consider the seller's request
until the Company has evaluated its claims against the seller. See
"Litigation" in the Company's 1996 Annual Report on Form 10-K.
RECENT LOSSES
The Company incurred net losses of approximately $7.4 million for
the fiscal year ended December 31, 1996 and approximately $200,000 for the
fiscal quarter ended March 31, 1997. While the majority of the losses are
attributable to write-offs, acquisition expenses and restructuring charges,
the Company attributes a significant portion of the losses to substantial
increases during 1996 in expenditures for research and development, sales and
marketing and general administration. In response, the Company implemented a
restructuring during the fourth quarter of 1996 and expects to reduce annual
operating expenses by more than $1.9 million as compared to operating expenses
immediately prior to the restructuring. However, there can be no assurance of
the degree to which the Company's efforts will succeed, if at all, and the
failure to significantly reduce operating expenses would have a material
adverse effect on the Company's business, financial condition and results of
operations.
RELIANCE ON UNIQUE PRODUCTS
The Company has derived, and expects to continue to derive, a
substantial portion of its revenues from sales of The Yellow IRIS family of
urinalysis workstations and related supplies and service. The Company believes
that it is the only supplier of laboratory systems which fully automate a
complete urinalysis, and that this has enabled it to achieve a certain level of
gross margins on sales of The Yellow IRIS family. Relatively modest declines
in sales or gross margins for these workstations could have a material adverse
effect on the Company's revenues and profits.
COMPETITION
There are numerous companies engaged in active research and
development programs within and outside of the clinical laboratory imaging
systems field that have considerable experience in areas of interest to the
Company. The Company cannot determine if other firms are currently engaged in
potentially competitive research. However, any one or more of these firms
could develop and introduce products comparable or superior to The Yellow IRIS,
The White IRIS, the PowerGene or any other product ultimately developed or
acquired by the Company.
Boehringer Mannheim GmbH ("BMG") recently introduced an automated,
slide-based microscopic urine analyzer in Europe and Asia, the Seditron, to
perform the microscopic portion of a complete urinalysis. The Company believes
that the Seditron is more appropriate for laboratories smaller than those
presently targeted by the Company and is therefore not believed to be directly
competitive with the Company's products. Moreover, the Company plans to
exercise an exclusive option granted to it by BMG to distribute the Seditron in
the United States. Nonetheless, there can be no assurance that the Seditron
will not have a material adverse effect upon future sales of The Yellow IRIS.
RELIANCE ON SINGLE SOURCE SUPPLIERS
Certain key components of the Company's instruments are manufactured
according to the Company's specifications or are available only from single
suppliers. Various models of The Yellow IRIS, for example, require front end
sample handling systems, CHEMSTRIP/IRIStrip test strips and microscopes
supplied by BMG, Boehringer Mannheim Corporation and Nikon, respectively. Some
of these suppliers have notified the Company that they have discontinued, or
will soon discontinue, production of key components. Although, in the past,
the Company has successfully transitioned to new components to replace
discontinued components, there can be no assurance that the Company can
successfully transition to satisfactory replacement components or that the
Company will have access to adequate supplies of discontinued components on
satisfactory terms during the transition period. The Company's inability to
transition successfully to replacement components or to secure adequate
supplies of discontinued components on satisfactory terms could have a material
adverse effect on the Company.
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OPTION TO ACQUIRE POLY U/A SYSTEMS, INC.
In September 1995, the Company entered into a research and development
contract with Poly U/A Systems, Inc. ("Poly"), a Company-sponsored research
and development entity, for development of several new products to enhance
automated urinalysis (the "Poly Products"). The Company has an option to
acquire all of the common stock of Poly for an aggregate price increasing on
August 1, 1997 from $4.4 million to $5.1 million payable in cash or shares of
Common Stock at the Company's discretion.
If the Company elects to exercise its option, the portion of the net
cost of the acquisition allocated to completed products would be capitalized
and its subsequent amortization would impact future earnings. For the portion
of the net cost of the acquisition allocated to in-process research and
development, the Company would record a nonrecurring, noncash (if purchased
with Common Stock) charge against then current earnings. In June 1995, the
Company exercised a similar option to acquire LDA Systems, Inc. ("LDA") another
Company-sponsored research and development entity, in exchange for Common Stock
and incurred a non-cash charge of $2.9 million against earnings in 1995 for the
acquisition of in-process research and development related to The White IRIS
leukocyte differential analyzer.
The Company has not reached a decision to exercise its option to
acquire Poly and is under no obligation to do so. However, the Company will
periodically review the merits of acquiring Poly and may elect to exercise the
option in the future based on factors which are subject to change, including
(i) the progress of research and development of the Poly Products, (ii) the
Company's assessment of the commercial feasibility of the Poly Products, (iii)
the cost to acquire Poly and (iv) the market price of the Common Stock at the
time the Company considers exercising the option.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends in significant part upon the continued
service of certain key personnel, and its continuing ability to attract,
assimilate and retain such personnel. Competition for such personnel is
intense and there can be no assurance that the Company can retain its key
personnel or that it can attract, assimilate or retain other highly qualified
personnel in the future. While the Company generally enters into agreements
with its employees regarding patents, confidentiality and related matters, the
Company does not have employment agreements with most of its key employees.
The Company does not maintain life insurance polices on such employees. The
loss of key personnel, especially without advance notice, or the inability to
hire or retain qualified personnel could have a material adverse effect on the
Company.
DEPENDENCE ON COMPUTER PLATFORM
PSI currently uses the Macintosh computer, manufactured by Apple
Computer, as the platform for its PowerGene product line. Apple Computer
recently announced its intention to switch the Macintosh to a new operating
system in 1998. While PSI is committed to using the Macintosh computing
platform, PSI is keeping all options open in the long term by evaluating
whether to continue with the sole use of the Macintosh platform, switch to a
Macintosh-compatible platform, or pursue the use of a different platform, such
as Windows NT, for the PowerGene product line. In the event that PSI decides
to use a Macintosh or a Macintosh-compatible platform, there can be no
assurance of Apple Computer's successful and timely transition to a new
Macintosh operating system or of PSI's ability to secure adequate supplies and
service from Apple Computer or a Macintosh-compatible manufacturer. Any delay
or disruption in platform supply or service could adversely affect future sales
of the PowerGene product line. Furthermore, if PSI decides to pursue a
different platform for its products, there can be no assurance of PSI's
successful and timely transition to a new platform, and any delay or disruption
in supply or service of the new platforms could also adversely affect future
sales of the PowerGene product line.
DIFFICULTIES ASSOCIATED WITH INTRODUCTION OF FUTURE PRODUCTS
The commercial success of the Company's future products and systems
depends upon their acceptance by the medical community. Capital-intensive
laboratory instruments such as The White IRIS and the Company's other future
products can significantly reduce labor costs, improve precision and offer
other distinctive benefits. However, often there is resistance to products
which require significant capital expenditures or which eliminate jobs through
automation.
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There can be no assurance that the Company's new products and systems
will achieve significant market acceptance in the future or that sales of such
future products and systems will grow at the rates expected by management.
Furthermore, new product introductions or product enhancements by the Company's
competitors or the use of other technologies could cause a decline in sales or
gross margins on sales or loss of market acceptance of the Company's systems.
INTELLECTUAL PROPERTY RIGHTS
The Company's commercial success depends in part on its ability to
protect and maintain its proprietary technology. The Company has received
patents with respect to certain of its technologies. Receipt of such patents
may not insulate the Company from damaging competition. The validity and
breadth of claims in clinical laboratory instrumentation patents involve
complex legal and factual questions and, therefore, are highly uncertain.
There can be no assurance that the claims allowed under patents held by the
Company or under patents based on pending or future patent applications by the
Company will be sufficiently broad to protect what the Company believes to be
its proprietary rights, that issued patents will not be circumvented by
competitors, or that the rights granted under such patents will provide
competitive advantages to the Company. There also can be no assurance that
other parties will not take, or threaten to take, legal action against the
Company, alleging infringement of such parties' patents by current and proposed
products of the Company or that any of the Company's patents, or patents in
which it has licensed rights, will be held valid and enforceable if
subsequently challenged.
The Company also has trade secrets and unpatented technology and
proprietary knowledge related to the sale, promotion, operation, development
and manufacturing of its products. While the Company generally enters into
confidentiality agreements with its employees and consultants, there can be no
assurance that the Company's trade secrets or proprietary technology will not
become known or be independently developed by competitors in such a manner that
the Company has no practical recourse. Nor can there be any assurance that
others will not develop or acquire equivalent expertise or develop products
which render the Company's current or future products noncompetitive or
obsolete.
The Company also claims copyrights in its software and the ways in
which it assembles and displays images and certain trademark rights in the
United States and other foreign countries. There can be no assurance that
copyright and trademark protection can be obtained, or if obtained, can or will
be enforced or will provide significant commercial advantage to the Company.
Litigation regarding patent and other intellectual property rights,
whether with or without merit, could be time-consuming and expensive and could
divert the Company's technical and management personnel. There can be no
assurance that the Company's litigation expenses will not increase in the
future. Any change in the Company's ability to protect and maintain its
proprietary rights could have a material adverse effect on the Company.
TECHNOLOGICAL CHANGE
The market for the Company's systems is characterized by rapid
technological advances, changes in customer requirements and frequent new
product introductions and enhancements. The Company's future success depends
upon its ability to enhance its current product lines, to introduce new
products that keep pace with technological developments and to respond to
evolving customer requirements. Any failure by the Company to anticipate or
respond adequately to technological developments by its competitors or to
changes in customer requirements, or significant delays in product
introduction, could result in a loss of competitiveness and revenues. There
can be no assurance that the Company will be successful in developing and
marketing new products or product enhancements on a timely or cost-effective
basis, and such failure could have a material adverse effect on the Company.
GOVERNMENT REGULATION
Most of the Company's products are subject to stringent government
regulation in the United States and other countries. The regulatory process
can be lengthy, expensive and uncertain, and securing clearances or approvals
may require the submission of extensive official data and other supporting
information. Failure to comply with applicable requirements can result in
fines, recall or seizure of products, total or partial suspension of
production, withdrawal of existing product approvals or clearances, refusal to
approve or clear
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new applications or notices and criminal prosecution, any of which could have a
material adverse effect on the Company. Furthermore, changes in existing
federal, state or foreign laws or regulations, or in the interpretation or
enforcement thereof, or the discussion or promulgation of any additional laws
or regulations could have a material adverse effect on the Company.
ACQUISITIONS AND EXPANSION
As part of the Company's strategy to enhance and maintain its
competitive position, the Company may from time to time consider potential
acquisitions of complementary products, technologies and other businesses. The
Company has completed a number of acquisitions in the past two years. The
evaluation, negotiation and integration of acquisitions may consume significant
time and resources of the Company. There can be no assurance that acquisitions
will not have a material adverse effect upon the Company due to, among other
things, operational disruptions, integration issues, unexpected expenses and
accounting charges associated with such acquisitions.
HEALTHCARE REFORM POLICIES
In recent years, an increasing number of legislative proposals have
been introduced or proposed in Congress and in some state legislatures that
would effect major changes in the healthcare system, nationally, at the state
level or both. Future legislation, regulation or payment policies of Medicare,
Medicaid, private health insurance plans, health maintenance organizations and
other third-party payors could adversely affect the demand for the Company's
current or future products and its ability to sell its products on a profitable
basis. Moreover, healthcare legislation is an area of extensive and dynamic
change, and the Company cannot predict future legislative changes in the
healthcare field or their impact on its business.
CERTAIN ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of the Certificate of Incorporation and Bylaws of
the Company and the Delaware General Corporation Law (the "DGCL") could,
together or separately, discourage potential acquisition proposals, delay or
prevent a change in control of the Company and limit the price that certain
investors might be willing to pay in the future for shares of Common Stock.
These provisions provide, among other things, for a classified Board of
Directors, for the issuance, without further stockholder approval, of preferred
stock with rights and privileges which could be senior to the Common Stock, and
for limitations on the right of stockholders to call a special meeting of
stockholders and to take action without a meeting. The Company also is subject
to Section 203 of the DGCL which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any of a broad range of business
combinations with any "interested stockholder" for a period of three years
following the date that such stockholder became an interested stockholder.
PRODUCT LIABILITY
The Company's products are used to gather information for medical
decisions and diagnosis. Accordingly, the manufacture and sale of the
Company's products entails an inherent risk of product liability arising from
an inaccurate, or allegedly inaccurate, test result. The Company has product
liability insurance coverage of $1.0 million per incident and $2.0 million in
the aggregate per year, and an umbrella policy of $5.0 million. There can be
no assurance that the Company's product liability insurance will be sufficient
to protect the Company in the event of a product liability claim. There has
not been any indication that the Company's insurance carrier will not renew the
Company's product liability insurance at or near current premiums; however,
there can be no assurance that the Company will be able to renew product
liability insurance in the future at acceptable premiums. In addition, any
failure to comply with the FDA's Good Manufacturing Practices regulations could
have a material adverse effect on the ability of the Company to defend against
product liability lawsuits.
CURRENCY FLUCTUATIONS
The Company acquired a foreign subsidiary in the PSI Acquisition which
conducts business in various foreign currencies. Consequently, fluctuations in
exchange rates will affect the Company's future consolidated operating results
and such fluctuations could have an adverse effect on the Company. The impact
of future fluctuations in exchange rates cannot be predicted with any measure
of accuracy and will depend on the percentage of sales generated
internationally. The Company currently does not hedge the risks
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associated with fluctuations in exchange rates, and continues to be subject to
such risks. In the future, the Company may undertake such transactions. If
any hedging techniques are implemented by the Company, there can be no
assurance that such techniques can be successful in eliminating or reducing the
effects of currency fluctuations.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock offered hereby; however, to the extent that Selling
Stockholders choose to exercise any options or warrants to purchase Shares, the
Company will receive proceeds equal to the exercise price of such options or
warrants multiplied by the number of shares purchased.(1)
SELLING STOCKHOLDERS(2)
The Company acquired StatSpin Technologies in February 1996 (the
"Acquisition"). The Selling Stockholders are former securityholders of
StatSpin Technologies. The Shares consist of (i) 340,260 shares of Common
Stock issued in exchange for shares of common stock of StatSpin Technologies
and stock appreciation rights issued by StatSpin Technologies and (ii) 126,051
shares of Common Stock issuable upon the exercise of options and warrants
issued by StatSpin Technologies and assumed by the Company in connection with
the acquisition.
The following table sets forth the number of Shares beneficially owned
by each of the Selling Stockholders immediately after the Acquisition and
included herein. Because the Selling Stockholders may offer all or some of the
Shares which they own pursuant to the offering contemplated by this Prospectus,
and because there are currently no agreements, arrangements or understandings
with respect to the sale of any of the Shares, no estimate can be given as to
the amount of Shares that will be held by the Selling Stockholders after
completion of this offering. The Shares offered by this Prospectus may be
offered from time to time by the Selling Stockholders named below.
_________________________
1 Immediately after the Acquisition, the Selling Stockholders held
options and warrants to purchase from the Company an aggregate of 126,051
shares of Common Stock for an aggregate exercise price of approximately
$534,000.
2 The Company has not undertaken, and by filing this Amendment No. 2 to
Form S-3 does not undertake, to amend or update any information in the table
under the caption "Selling Stockholders." Furthermore, the Selling
Stockholders identified in the table may have sold, transferred or otherwise
disposed of all or a portion of their shares of Common Stock since the date on
which they provided the Company with information regarding their shares, and
the Company has not made any independent inquiries as to the foregoing.
-8-
<PAGE> 10
<TABLE>
<CAPTION>
Names of Selling Stockholders Beneficially Owned
----------------------------- Shares as
a Percent of
Beneficially Owned Outstanding
Number of Shares Common Stock(1)
---------------- ------------
<S> <C> <C>
Thomas Kelley(2) 101,556(3) 1.7%
Robert L. Scott 49,140 *
Allen & Co., Inc. 73,062(4) 1.2%
Corning Incorporated(5) 22,113 *
William R. Newhouse 25,277(6) *
Reuben Wisotzky 23,704(7) *
James & Mary McKenney 24,049(8) *
Michael Epstein 32,001(9) *
Bionostics, Inc. 4,095 *
Arnold M. Zais 4,095 *
Michael Cronin 10,682(10) *
Thalia V. Crooks 6,542(11) *
Gustav H. Dreier 13,738 *
Alan W. Eilertson 2,047 *
Donald H. Eilertson 2,047 *
Donald & Anna R. Husmann 7,709(12) *
Rosemary Kelley 1,638 *
Sid Shuman, Jr. 1,638 *
</TABLE>
____________________________
* Less than one percent.
1 Based upon 6,306,661 shares of IRIS Common Stock outstanding on April
24, 1996.
2 Dr. Kelley is a Director and a Vice President of IRIS and General
Manager of its StatSpin subsidiary.
3 Excludes 1,638 shares held by Rosemary Kelley, as to which Thomas
Kelley disclaims beneficial ownership.
4 Includes 47,776 shares issuable upon exercise of stock warrants which
expire November 14, 2000.
5 Including its donees.
6 Includes 1,093 shares issuable upon exercise of stock options which
expire March 31, 1998. Excludes 9,553 shares issuable upon exercise of stock
warrants held by Beverly Newhouse, which expire March 13, 1998, as to which
William Newhouse disclaims beneficial ownership.
7 Includes 2,182 shares issuable upon exercise of stock options which
expire March 13, 1998; and 4,778 shares issuable upon exercise of stock
warrants which expire March 13, 1998.
8 Includes 9,553 shares issuable upon exercise of stock warrants which
expire March 13, 1998.
9 Includes 8,190 shares issuable upon exercise of stock options which
expire November 14, 2000; and 9,553 shares issuable upon exercise of stock
warrants which expire March 13, 1998.
10 Includes 6,367 shares issuable upon exercise of stock warrants which
expire March 13, 1998.
11 Includes 3,181 shares issuable upon exercise of stock warrants which
expire March 13, 1998.
12 Includes 4,778 shares issuable upon exercise of stock warrants which
expire March 13, 1998.
-9-
<PAGE> 11
<TABLE>
<CAPTION>
Names of Selling Stockholders
----------------------------- Beneficially Owned
Shares as
a Percent of
Beneficially Owned Outstanding
Number of Shares Common Stock
---------------- ------------
<S> <C> <C>
Arnold Cattani 1,670(13) *
S. Cattani 819 *
K. Cattani 409 *
L. Cattani 409 *
M. Cattani 409 *
Beverly Newhouse 9,553(14) *
Joseph Whittier 779 *
Francis Lau 10,132 *
Julio Rotondi 422 *
Kathleen Gaumond 4,676 *
Steven Bois 3,897 *
Gail Magrath 3,507 *
Judith Gallego 779 *
Larry Shephard 422 *
James Laugharn 4,221 *
Victor Jones 14,029 *
</TABLE>
PLAN OF DISTRIBUTION
The sale of all or a portion of the Shares offered hereby by the
Selling Stockholders may be effected from time to time on the AMEX at prevailing
prices at the time of such sales, at prices related to such prevailing prices or
at negotiated prices. The Selling Stockholders may sell all or a portion of the
Shares in private transactions or in the over-the-counter market at prices
related to the prevailing prices of the Shares on the AMEX at the time of the
sale. The Selling Stockholders may effect such transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Stockholders. For example, the Shares may be sold by one or
more of the following without limitation: (a) a block trade in which the 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; and (d)
face to face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate in the
resales.
The Selling Stockholders and any broker-dealers that participate in the
distribution may under certain circumstances be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by such
broker-dealers and any profits realized on the resale of shares by them may be
deemed to be underwriting discounts and commissions under the Securities Act. To
the extent required under the Securities Act, a supplemental prospectus will be
filed disclosing (a) the name of any such broker-dealers, (b) the number of
Shares involved, (c) the price at which such Shares are to be sold, (d) the
commissions paid or discounts or concessions allowed to such broker-dealers,
where applicable, (e) that such broker-dealers did not conduct any investigation
to verify the information set out or incorporated by reference in this
prospectus, as supplemented, and (f) other facts material to the transaction.
___________________
13 Excludes the following shares as to which Arnold Cattani disclaims
beneficial ownership: 819 shares held by S. Cattani; 409 shares held by K.
Cattani; 409 shares held by L. Cattani; and 409 shares held by M. Cattani.
14 Includes 9,553 shares issuable upon exercise of stock warrants which
expire March 13, 1998.
-10-
<PAGE> 12
The Company and the Selling Stockholders may agree to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, the Company has agreed to indemnify the Selling
Stockholders and any underwriter with respect to the Shares against certain
liabilities, including, without limitation, certain liabilities under the
Securities Act, or, if such indemnity is unavailable, to contribute toward
amounts required to be paid in respect of such liabilities.
The Company has agreed to pay certain costs and expenses incurred in
connection with the registration of the Shares, except that the Selling
Stockholders shall be responsible for all selling commissions, transfer taxes
and related charges in connection with the offer and sale of such Shares.
There is no assurance that any of the Selling Stockholders will sell
any or all of the Shares. The Company has agreed to keep the registration
statement relating to the offering and sale by the Selling Stockholders of the
Shares effective for a period of two (2) years from the date the registration
statement became effective, increased by the length of time that the
effectiveness of the registration statement is suspended by the Company. The
Company is under no obligation to keep the registration statement relating to
the offering and sale by the Selling Stockholders effective with respect to any
Shares which may be resold to the public without registration pursuant to Rule
144 or another comparable rule under the Securities Act.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for
the Company by the law firm of Irell & Manella LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements of the Company, included in the
Annual Report on Form 10-K of the Company for the fiscal year ended December 31,
1996 referred to above in "Documents Incorporated by Reference," have been
audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in
their report dated March 21, 1997 (except for Note 8 and Note 14, for which the
dates are April 10, 1997 and April 6, 1997, respectively) accompanying such
financial statements, and are incorporated by reference in reliance upon the
report of such firm, which report is given upon their authority as experts in
accounting and auditing.
The financial statements of StatSpin, Inc., a wholly-owned subsidiary
of the Company, for the fiscal year ended March 31, 1995, insofar as they relate
to the amounts included for StatSpin, Inc. in the consolidated financial
statements of the Company for the fiscal year ended December 31, 1994 included
in the Annual Report on Form 10-K of the Company for the fiscal year ended
December 31, 1996 referred to above in "Documents Incorporated by Reference,"
have been audited by KPMG Peat Marwick LLP, independent accountants, as set
forth in their report dated May 26, 1995 accompanying such financial statements
and are incorporated by reference in reliance upon the report of such firm,
which report is given upon their authority as experts in accounting and
auditing.
Any financial statements herein incorporated by reference in the
Registration Statement of which this Prospectus is a part that have been audited
and are the subject of a report by independent accountants will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firms as experts in accounting and auditing to the extent covered by
consents filed with the Commission.
-11-
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Company in connection with the
distribution of securities being registered, are estimated as follows:
<TABLE>
<S> <C>
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . $ 9,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . $ 25,000
Miscellaneous Expenses . . . . . . . . . . . . . . . . . . . . . . $ 2,000
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,000
========
</TABLE>
The Selling Stockholders will be responsible for all selling
commissions, transfer taxes and related charges in connection with the offer and
sale of the Shares.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article SEVENTH of the Company's Certificate of Incorporation contains
certain provisions permitted under the DGCL relating to the liability of
directors. The provisions eliminate a director's liability for monetary damages
for a breach of fiduciary duty, except in certain circumstances involving
wrongful acts, such as the breach of a director's duty of loyalty or acts or
omissions that involve intentional misconduct or knowing violation of law. The
Company's Certificate of Incorporation also contains provisions requiring the
Company to indemnify its directors and officers to the fullest extent permitted
by the DGCL.
Section 145 of the DGCL provides, in part, that a corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any suit or proceedings because such person is or was a
director, officer, employee or agent of the corporation or was serving at the
request of the corporation, as a director, officer, employee or agent of another
corporation, against all costs actually and reasonably incurred by him in
connection with such suit or proceedings if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation. Similar indemnity is permitted to be provided to such persons
in connection with an action or suit by or in the right of the corporation,
provided such person acted in good faith and in a manner he believed to be in or
not opposed to the best interests of the corporation, and provided further
(unless a court of competent jurisdiction otherwise determines) that such person
shall not have been adjudged liable to the corporation.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
4.1 Specimen of Common Stock Certificate*
5.1 Legal Opinion of Irell & Manella LLP*
23.1 Consent of Irell & Manella LLP (included in legal opinion
filed as Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP
* Previously filed.
II-1
<PAGE> 14
ITEM 17. UNDERTAKINGS
(a) Rule 415 Offering. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
provided, however, that paragraphs 1(i) and 1(ii) do not apply
if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(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.
(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.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities 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.
(c) Request For Acceleration of Effective Date. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-2
<PAGE> 15
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
4.1 Specimen of Common Stock Certificate*
5.1 Legal Opinion of Irell & Manella LLP*
23.1 Consent of Irell & Manella LLP (included in legal opinion filed as
Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP
__________________
* Previously filed.
II-3
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
hereby certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing this Amendment No. 2 to Form S-3 and has duly
caused this Post Effective Amendment to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on the 15th day of July 1997.
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
By: /s/ Fred H. Deindoerfer
------------------------------------
Fred H. Deindoerfer
Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Fred H. Deindoerfer and Martin S.
McDermut, jointly and severally, as his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments and post-effective amendments to the Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, thereby ratifying and confirming all that said attorneys-in-fact and
agents or either of them or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this registration statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Fred H. Deindoerfer Chairman of the Board of Directors, July 15, 1997
- ----------------------------- President, and Chief Executive Officer
Fred H. Deindoerfer
/s/ Martin S. McDermut Vice President, Finance and July 15, 1997
- ----------------------------- Administration, Chief Financial Officer
Martin S. McDermut
/s/ Donald E. Horacek Controller and Chief Accounting Officer July 15, 1997
- -----------------------------
Donald E. Horacek
* Director July 15, 1997
- -----------------------------
John A. O'Malley
</TABLE>
<PAGE> 17
<TABLE>
<S> <C>
* Director July 15, 1997
- -----------------------------
Steven M. Besbeck
* Director, Vice President and General July 15, 1997
- ----------------------------- Manager, StatSpin Division
Thomas F. Kelley
/s/ Fred H. Deindoerfer
- -----------------------------
* By Fred H. Deindoerfer,
as attorney-in-fact
</TABLE>
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of International Remote Imaging Systems, Inc. ("IRIS") on Form S-3 of
our report dated March 21, 1997 (except for Note 8 and Note 14, for which the
dates are April 10, 1997 and April 6, 1997, respectively) on our audits of the
consolidated financial statements and financial statement schedule of IRIS as of
December 31, 1996 and 1995, and for the years ended December 31, 1996, 1995 and
1994, which report appears in the Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
We further consent to the reference to our firm under "Experts" in this
registration statement on Form S-3 of IRIS.
Coopers & Lybrand L.L.P.
/s/ Coopers & Lybrand L.L.P.
Los Angeles, California
July 10, 1997
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this registration
statement on Form S-3 of International Remote Imaging Systems, Inc. ("IRIS") of
our report dated May 26, 1995, with respect to the statements of income and
accumulated deficit and cash flow of StatSpin, Inc. for the year ended March 31,
1995, which report appears in the Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
We further consent to the reference to our firm under the heading
"Experts" in this registration statement on Form S-3 of IRIS.
KPMG Peat Marwick LLP
/s/ KPMG PEAT MARWICK LLP
__________________________
Boston, Massachusetts
July 15, 1997
