<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1997
REGISTRATION NO. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
Delaware 94-2579751
(State of Incorporation) (I.R.S. Employer Identification Number)
9162 ETON AVENUE
CHATSWORTH, CALIFORNIA 91311
(818) 709-1244
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DR. FRED H. DEINDOERFER
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
9162 ETON AVENUE
CHATSWORTH, CALIFORNIA 91311
(818) 709-1244
(Agent for service)
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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
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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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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C>
Proposed Maximum Proposed Maximum
Title of Shares to be Registered Amount to be Aggregate Offering Aggregate Offering Amount of
Registered Price Per Share (1) Price (1) Registration Fee
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Common Stock ($.01 par value) 1,180,000 $3.50 $4,130,000 $1,252
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</TABLE>
(1) Estimated solely for purpose of determining the registration fee
pursuant to Rule 457(c) on the basis of the average of the high and low
prices per share of the Common Stock reported on the American Stock
Exchange on May 12, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED MAY 15, 1997
PROSPECTUS
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
COMMON STOCK
($.01 PAR VALUE)
1,180,000 SHARES
This Prospectus relates to 1,180,000 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 the selling stockholder named herein (the
"Selling Stockholder"). The Company will receive no part of the proceeds of such
sales; however, to the extent that the Selling Stockholder chooses to exercise
warrants to purchase Shares, the Company will receive proceeds equal to the
exercise price of such 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 Stockholder 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 Stockholder 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 Stockholder 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 Stockholder 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 Stockholder. The Selling Stockholder 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 May ___, 1997 the closing
sales price of the Company's Common Stock on the AMEX was $_____ 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 May __, 1997.
<PAGE> 3
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 STOCKHOLDER 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 Amendment No. 1 to Form 8-A dated
June 16, 1992; 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: Martin S. McDermut.
The telephone number is (818) 709-1244.
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<PAGE> 4
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 $7.4 million for the fiscal year
ended December 31, 1996. 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
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secure adequate supplies of discontinued components on satisfactory terms could
have a material adverse effect on the Company.
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
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distinctive benefits. However, often there is resistance to products which
require significant capital expenditures or which eliminate jobs through
automation.
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
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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 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
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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 is not currently hedging the
risks associated with fluctuations in exchange rates and therefore 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 the Selling
Stockholder chooses to exercise certain warrants to purchase shares of Common
Stock, the Company will receive proceeds equal to the exercise price of the
warrants multiplied by the number of shares purchased.(1)
SELLING STOCKHOLDER
The Company sold 3,000 shares of Convertible Preferred Stock
("Preferred Stock") to the Selling Stockholder and issued warrants to purchase
84,720 shares of Common Stock to the Selling Stockholder in connection therewith
("Warrants") in December 1996. The Shares consist of (i) up to 1,115,730 shares
of Common Stock issuable upon conversion of shares of the Preferred Stock and
(ii) 84,270 shares of Common Stock issuable upon exercise of the Warrants.
Each share of Preferred Stock is convertible into a number of shares of
Common Stock equal to (i) the liquidation value of a share of Preferred Stock
($1,000) divided by (ii) a variable conversion price (the "Conversion Price").
The Conversion Price is equal to the lower of (i) 85% of the average closing bid
price of the Common Stock for the five consecutive trading days immediately
preceding the conversion date (but in no event less than $1.50) or (ii) $3.56.
Based on the Conversion Price on May 6, 1997, each share of Preferred Stock is
convertible into approximately 322 shares of Common Stock, and the Company would
issue approximately 966,962 shares of Common Stock if the Selling Stockholder
elected to convert all the outstanding shares of Preferred Stock.
The following table sets forth the number of Shares beneficially owned
by the Selling Stockholder as of May 6, 1997 and included herein.
<TABLE>
<CAPTION>
Beneficially Owned
Shares as a Percent
Beneficially Owned of Outstanding
Name of Selling Stockholder Number of Shares Common Stock(2)
- --------------------------- ---------------- -------------
<S> <C> <C>
Thermo Amex Convertible
Growth Fund I, L.P. 1,051,232 14.9%
</TABLE>
Because the Selling Stockholder may offer all or some of the Shares
which they own pursuant to the offering contemplated by this Prospectus, and
because the Company is not aware of any 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 Stockholder
after completion of this offering. The Shares offered by this Prospectus may be
offered from time to time by the Selling Stockholder.
- --------
(1) The Company issued the Selling Stockholder warrants to purchase from
the Company an aggregate of 84,270 shares of Common Stock for $3.56 per share,
or an aggregate exercise price of approximately $300,000. See "--Selling
Stockholder."
(2) Based upon 5,991,388 shares of Common Stock outstanding as of May 6,
1997.
-8-
<PAGE> 10
PLAN OF DISTRIBUTION
The sale of all or a portion of the Shares offered hereby by the
Selling Stockholder 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 Stockholder 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 Stockholder 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 Stockholder. 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 Stockholder may
arrange for other brokers or dealers to participate in the resales.
The Selling Stockholder 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.
The Company and the Selling Stockholder 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
Stockholder 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
Stockholder 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 the Selling Stockholder 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 Stockholder of the Shares
continuously effective until the later of (1) in the case of any Shares,
December 31, 1999 and (2) in the case of Shares issued or issuable upon exercise
of the Warrants, the later of (i) the date which is three years after the date
the Registration Statement is first ordered effective by the Commission in the
event that the Warrants have been exercised in full on a net exercise basis and
(ii) the date which is three years after the latest exercise of the Warrants for
cash; provided, however, the Company shall not keep the Registration Statement
effective later than the date on which all Shares have been sold by the Selling
Stockholder (or any transferees and assignees who agree to be bound by the terms
of the registration rights agreement entered into by and between the Company and
the Selling Stockholder) under circumstances in which the buyers may resell the
Shares without registration under the Securities Act.
LEGAL MATTERS
The validity of the securities offered hereby will be 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
-9-
<PAGE> 11
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.
-10-
<PAGE> 12
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....................... $ 3,000
Legal Fees and Expenses............................ 10,000
Miscellaneous Expenses............................. 1,000
---------
Total..................................... $14,000
=======
</TABLE>
The Selling Stockholder 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
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
4.1 Specimen of Common Stock Certificate (1)
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
</TABLE>
- ----------------------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-3, as filed with the Securities and Exchange Commission on March
27, 1996 (File No. 333-002001).
II-1
<PAGE> 13
ITEM 17. UNDERTAKINGS
(a) 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;
(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 Exchange
Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) 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 Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(c) 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> 14
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 on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California, on the ______
day of May 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 report 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, May 12, 1997
- --------------------------- President, and Chief Executive Officer
Fred H. Deindoerfer
/s/ Martin S. McDermut Vice President, Finance and May 12, 1997
- --------------------------- Administration, Chief Financial
Martin S. McDermut Officer and Principal Accounting Officer
/s/ John A. O'Malley Director May 12, 1997
- ---------------------------
John A. O'Malley
/s/ Steven M. Besbeck Director May 12, 1997
- ---------------------------
Steven M. Besbeck
/s/ Thomas F. Kelley Director, Vice President and General
- --------------------------- Manager, StatSpin Division May 12, 1997
Thomas F. Kelley
</TABLE>
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.1 Specimen of Common Stock Certificate (1)
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
</TABLE>
- ---------------------------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-3, as filed with the Securities and Exchange Commission on March
27, 1996 (File No. 333-002001).
<PAGE> 1
Exhibit 5.1
May 12, 1997
Board of Directors
International Remote Imaging Systems, Inc.
9162 Eton Avenue
Chatsworth, California 91311
Gentlemen:
We have acted as counsel in connection with the preparation and filing
of that certain Registration Statement on Form S-3 (the "Registration
Statement") to be filed by you with the Securities and Exchange Commission in
connection with the registration of 1,180,000 shares (the "Shares") of the
common stock, par value $.01 per share (the "Common Stock"), of International
Remote Imaging Systems, Inc., a Delaware corporation. The Shares consist of (i)
up to 1,115,730 shares of Common Stock issuable upon the conversion of 3,000
shares of Series A Convertible Preferred Stock (the "Preferred Stock") and (ii)
84,270 shares of Common Stock issuable upon exercise of certain warrants issued
in connection with the issuance of the Preferred Stock (the "Warrants"). As such
counsel, we have examined the Preferred Stock and the Warrants and such other
matters and documents as we have deemed necessary or relevant as a basis for
this opinion.
Based on these examinations, it is our opinion that the Common Stock,
when issued and paid for in the manner referred to in the Registration
Statement, will be legally issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters."
Very truly yours,
/s/ IRELL & MANELLA LLP
<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 balance sheets of IRIS as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows 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
May 12, 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 balance sheets of StatSpin,
Inc. as of March 31, 1995 and 1994, and the related statements of income and
accumulated deficit and cash flows for the years then ended, 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
May 12, 1997
