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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-83469
PROSPECTUS
[LOGO]
OXBORO MEDICAL INTERNATIONAL, INC.
13828 LINCOLN STREET NE
HAM LAKE, MINNESOTA 55304
(612) 755-9516
RIGHTS OFFERING OF 890,824 SHARES OF COMMON STOCK
AND 445,412 WARRANTS
EACH RIGHT CONSISTING OF THE RIGHT TO PURCHASE TWO SHARES OF COMMON STOCK
AND ONE WARRANT TO PURCHASE ONE SHARE OF COMMON STOCK
------------------------
- Oxboro Medical International, Inc. is offering a right to purchase for
each outstanding share held by our shareholders of record at August 20,
1999. Each right permits the shareholder to purchase two shares of Oxboro
common stock and one warrant to purchase one additional share of common
stock for a total purchase price of $2.50. The term of the warrant is one
year and the exercise price of the warrant is $2.75.
- The price of the securities in this rights offering may not reflect the
market price of our shares after the rights offering.
- Shareholders who exercise all of their purchase rights may be entitled to
purchase additional shares of common stock and warrants to the extent
purchase rights are not exercised by other shareholders.
- Shareholders must exercise their purchase rights according to a rights
subscription certificate accompanied by payment. A shareholder's
investment decision is not revocable after payment is received by Norwest
Bank Minnesota, N.A., who is acting as our subscription agent for this
offering.
- Our board of directors has approved a 1-for-5 reverse stock split,
effective August 13, 1999, for shares outstanding on the same date. All
share amounts shown in this prospectus and the registration statement of
which it is a part reflect post-split share amounts.
- Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"OMED." For a brief period of time following our reverse stock split, our
shares were traded under the symbol "OMEDD." On August 31, 1999 the
closing bid price for our common stock was $3.25.
- Although there is no minimum purchase requirement in connection with this
rights offering, two of our directors have severally advised us that they
intend to exercise their rights in connection with this offering.
- The purchase rights will begin on the date of this prospectus and
terminate at 12:00 midnight, central time, on October 31, 1999. The
warrants expire one year from the date of issuance.
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THIS INVESTMENT IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
This prospectus is dated September 1, 1999
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PROSPECTUS
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
About this Prospectus...................................................................................... 2
Where You Can Find More Information........................................................................ 2
Summary.................................................................................................... 4
Risk Factors............................................................................................... 7
Business................................................................................................... 13
Use of Proceeds............................................................................................ 14
Determination of Offering Price............................................................................ 14
Dividend Policy............................................................................................ 14
Capitalization............................................................................................. 15
Dilution................................................................................................... 16
Material United States Federal Income Tax Considerations................................................... 17
Plan of Distribution....................................................................................... 18
Related Party Transactions................................................................................. 18
Subsequent Events.......................................................................................... 18
Legal Opinions............................................................................................. 19
Experts.................................................................................................... 19
Indemnification............................................................................................ 19
</TABLE>
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ABOUT THIS PROSPECTUS
The registration statement that contains this prospectus (including the
exhibits to the registration statement) contains additional information about
our company and the securities offered under this prospectus. That registration
statement can be read at the Securities and Exchange Commission web site or at
the SEC offices mentioned under the heading "Where You Can Find More
Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. You can also obtain copies of the documents
at prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference facilities.
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We "incorporate by reference" into this prospectus the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. Information that we file subsequently with
the SEC will automatically update this prospectus. We incorporate by reference
the documents listed below, and any filings we make with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 after the
initial filing of the registration statement that contains this prospectus and
before the time that we sell all the securities offered by this prospectus:
- Annual report on Form 10-KSB for the year ended September 30, 1998;
- Quarterly reports on Form 10-QSB for the quarters ended December 31, 1998,
March 31, 1999 and June 30, 1999;
- Definitive notice and proxy statement for our annual meeting of
shareholders held on March 4, 1999; and
- Current report on Form 8-K, filed on July 8, 1999 with respect to the sale
of Oxboro Outdoors, Inc.
You may request a copy of these filings at no cost, by writing to or
telephoning us at the following address.
Oxboro Medical International, Inc.
13828 Lincoln Street NE
Ham Lake, Minnesota 55304
(612) 755-9516
Attention: President
You should rely only on the information included or incorporated by
reference in this prospectus. We have not authorized anyone else to provide you
with different information. We are only offering these securities in states
where the offer is permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the dates on the front of the
document. Information on our Web site is not a part of this prospectus.
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SUMMARY
Information provided in this summary has been adjusted to reflect a 1-for-5
reverse stock split approved by our board of directors for shareholders of
record at August 13, 1999 and effective as of the same date. Because this is a
summary, it does not contain all of the information that may be important to
you. Please read the entire prospectus carefully before you decide to invest.
THE BUSINESS
Oxboro Medical International, Inc. develops, assembles, markets and sells
medical and surgical devices, including silicone loops, silicone and fabric
clamp covers, instrument guards, suture aid booties, identification sheet and
roll tape, and various holders and organizers for instruments used in the
operating room. We sell our products, both through our own direct sales force
and through independent distributors, primarily to hospitals, clinics and
extended care facilities and home healthcare agencies. Our products are
available throughout the United States and in selected international markets.
Until June 30, 1999, we also developed, assembled and sold products for the
fishing, hunting and related outdoor recreational market through our
wholly-owned subsidiary, Oxboro Outdoors, Inc. Oxboro Outdoors sold products
licensed by professional sports organizations and miscellaneous fishing and
hunting products such as tackle products, fishing tools and equipment and
related accessory products. After reviewing our current financial condition, our
board of directors determined this year that the operation of Oxboro Outdoors
was creating significant and unnecessary losses for our core business. On June
30, 1999, we sold all of the issued and outstanding shares of Oxboro Outdoors to
a group of unrelated private investors. The purchase price for the shares was
$650,000, including $385,000 in cash and $265,000, subject to adjustments, in
the form of a 90-day, 9% promissory note. The sale of Oxboro Outdoors will
permit us to once again focus our efforts on our core business of selling
medical and surgical devices.
Our executive offices are located at 13828 Lincoln Street NE, Ham Lake,
Minnesota 55304. Our telephone number is (612) 755-9516.
RIGHTS OFFERING
We are offering to each of our shareholders of record at August 20, 1999 the
right to purchase, at a price of $2.50 per right, two shares of our common stock
and one warrant to purchase one additional share of common stock, at a warrant
exercise price of $2.75, for each share of common stock currently held by the
shareholder. The offering period began on the date of this prospectus and will
continue until 12:00 midnight, central time, on the termination date of October
31, 1999, unless extended by us. Shareholders exercising their rights in full
will also have an oversubscription privilege as described below.
SECURITIES OFFERED. We will distribute to our current shareholders rights
to purchase an aggregate 890,824 shares of common stock and 445,412 warrants on
the basis of one right to purchase two shares of common stock and one warrant
for each share of common stock held. Upon exercise of the warrants, if any, we
expect to issue approximately 445,412 additional shares of common stock to our
shareholders for a total of approximately 1,336,236 shares of common stock
issued as a result of this offering and an aggregate 1,781,648 shares of common
stock outstanding after this offering.
SHARES OF COMMON STOCK AUTHORIZED AND OUTSTANDING. We have 2,000,000 shares
of common stock authorized, $.01 par value, of which approximately 445,412
shares are issued and outstanding at the date of this offering. The number of
outstanding shares reflects a 1-for-5 reverse stock split that we effected on
August 13, 1999. We also have granted 9 options that entitle the holders to
purchase a total
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of 50,400 shares of common stock at prices ranging from $5.00 to $7.50 per
share. These options vest at varying rates and expire on various dates during
the period from May 2000 through June, 2005.
BASIC SUBSCRIPTION PRIVILEGE. Shareholders receiving purchase rights are
entitled to purchase two shares of our common stock and one warrant to purchase
one additional share of common stock for each right held at a total subscription
price of $2.50 per right. Each warrant entitles its holder to purchase one share
of common stock, at an exercise price of $2.75 per share, at any time prior to
one year from the date of issuance. The warrants are expected to expire on
either September 30, 2000 or October 31, 2000 depending upon the date of
issuance. Eligible shareholders may exercise their purchase rights in the
offering only by executing a rights subscription certificate.
OVERSUBSCRIPTION PRIVILEGE. Shareholders who exercise their entire purchase
rights will have the right to subscribe for additional shares of common stock
and warrants, if any, to the extent that other shareholders do not exercise
their rights in this offering. Shareholders who wish to subscribe for additional
shares must complete the appropriate "Oversubscription Privilege" provision of
the rights subscription certificate for this offering and may exercise their
oversubscription privilege for up to the total number of shares remaining
unissued, if any, in this offering. To the extent that the exercise of
oversubscription privileges exceeds the shares remaining unissued, we will fill
oversubscriptions on a pro rata basis according to the number of shares
purchased by subscribing shareholders pursuant to their basic subscription
privileges.
PURPOSE OF OFFERING; STANDBY SUBSCRIPTION GUARANTEES. One of the purposes
of this offering is to raise funds to increase our net tangible asset level to
the minimum $2,000,000 required for listing on the Nasdaq SmallCap Market. Our
Form 10-QSB for the quarter ended June 30, 1999 shows our current net tangible
assets at $1,627,963, or approximately $372,000 less than Nasdaq's SmallCap
minimum listing requirement. To ensure compliance with this requirement, two of
our directors, Gary W. Copperud and Kenneth W. Brimmer, have severally agreed to
exercise their purchase rights and subscribe for shares in this offering at the
subscription price, and to purchase additional shares remaining unissued, if
any, in an amount sufficient to provide the proceeds necessary to raise our net
tangible asset level to the required minimum. The guarantees of Messrs. Copperud
and Brimmer are applicable only to this offering.
USE OF PROCEEDS. We intend to use the proceeds of this offering, in order
of priority, for working capital, purchases of equipment, products or product
lines, possible acquisitions of companies selling products or product lines
similar to ours, research and development, repayment of debt and other general
corporate purposes.
RECORD DATE. Shareholders of record on August 20, 1999 are eligible to
receive purchase rights in this offering.
EXPIRATION DATE. Beginning on the date of this prospectus, shareholders may
exercise their initial rights to purchase shares in this offering for a period
of thirty days and then may exercise their oversubscription privilege during an
additional thirty-day period until 12:00 midnight, central time, on October 31,
1999, unless extended by our board of directors. After the expiration of this
rights offering, the rights will expire and have no value.
NASDAQ SYMBOL. Our stock is listed on the Nasdaq SmallCap Market under the
symbol "OMED." For a brief period of time following our reverse stock split, our
stock was listed under the symbol "OMEDD."
TRANSFERABILITY OF RIGHTS. The purchase rights are not transferable. The
warrants issued as part of this offering are transferable.
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SUBSCRIPTION AGENT. Norwest Bank Minnesota, N.A. is our transfer agent and
will act as our subscription agent for this offering.
PARTICIPATION OF ADDITIONAL SHAREHOLDERS IN THE OFFERING. In determining
the number of shareholders eligible to participate in this offering, we have
included those current and former employees who participated in our Employee
Stock Ownership Plan. The Oxboro board of directors has approved the
participation of these employees in the rights offering and, solely for purposes
of the rights offering, will consider them to be shareholders of record as of
the August 20, 1999 record date.
SHARES OUTSTANDING AFTER RIGHTS OFFERING. If all of the 890,824 shares of
our common stock and 445,412 warrants are purchased in this offering, we will
have 1,336,236 shares outstanding after the offering and 1,781,648 shares
outstanding upon full exercise of all of the warrants.
FEDERAL INCOME TAX CONSEQUENCES OF THE RIGHTS OFFERING. Holders of our
common stock will not recognize taxable income for federal income tax purposes
in connection with receipt of the rights in this offering. See "MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS."
RISK FACTORS. Please see "RISK FACTORS" for a discussion of certain risks
that you should consider when determining whether to invest in this offering.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information contained in this prospectus
before deciding to invest in shares of our common stock.
RISKS RELATED TO OUR BUSINESS
WE HAVE SUSTAINED LOSSES IN THE PAST DUE TO SUBSIDIARY OPERATIONS
We have incurred substantial losses in recent years that have depleted our
working capital and reduced our stockholders' equity. Our business incurred a
net loss of $1,209,281 for the nine months ended June 30, 1999 and $1,453,544
for the year ended September 30, 1998. These losses have resulted principally
from expenses incurred in the development of our subsidiary, Oxboro Outdoors,
and expenses due to payment of severance packages to our former officers in
connection with related proxy litigation. On June 30, 1999, we completed the
sale of Oxboro Outdoors. However, prior to the sale and as a result of losses in
Oxboro Outdoors, we incurred significant operating losses. Although we have
taken measures to increase our sales revenues and profit margins and expect to
show further improvement following the sale of Oxboro Outdoors, there can be no
assurance that our core business will operate profitably in the future.
IF WE CANNOT MAINTAIN ADEQUATE OPERATING CAPITAL AND BANK FINANCING, OUR
BUSINESS WILL SUFFER
Our most recent bank examination indicates that we currently have the
minimum qualifying inventory and receivables, excluding the assets of Oxboro
Outdoors, to cover our existing loan balance. However, there can be no assurance
that we will have sufficient inventory and accounts receivable in the future to
pay our remaining loan balance. Failure to meet our loan obligations would have
a material adverse effect on our business. We recently negotiated an extension
of a credit line with our bank through March 31, 2000. The credit line consists
of $550,000 for general corporate purposes and $150,000 for equipment
acquisition. As of August 30, 1999, the outstanding balance on the line of
credit was $145,593. Additionally, we have a mortgage on our 30,000 square foot
building with an outstanding balance of $380,834. The mortgage has a balloon
payment due June 1, 2001. There can be no assurance that the line of credit will
be extended after expiration of the current term, nor can there be any assurance
that we will be able to refinance the building at the time the balloon payment
is due.
IF WE DO NOT REMAIN COMPETITIVE IN THE MARKETS WE SERVE, OUR BUSINESS WILL BE
ADVERSELY AFFECTED
There is growing pressure on healthcare providers in general, and the
surgical area in particular, to reduce costs. The trend is towards hospitals
purchasing through buying groups and other large distributors, which generally
occurs at lower prices than selling direct to the customer. This trend will make
it difficult to maintain and grow sales at our historic profit margins. If we
are not able to introduce new products into such an economic environment and
compete at lower prices than other larger distributors, our business will be
adversely affected.
WE ARE DEPENDENT ON OUR MANAGEMENT AND KEY PERSONNEL TO SUCCEED
Our principal executive officers and key personnel have extensive experience
in sales of medical products, which requires research and development efforts to
bring our products to market. Our success also depends on our development of a
marketing and sales program to implement and close the sales. Competition for
qualified sales and marketing personnel is intense. The loss of the services of
any of our executive officers or other key personnel, or our failure to attract
and retain other skilled and experienced personnel on acceptable terms, could
impede the achievement of our business objectives and have a material adverse
effect on our business.
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THE PRICING STRATEGIES OF OUR COMPETITORS AND OUR RESPONSE TO THOSE STRATEGIES
MAY RESULT IN A DECLINE IN OUR REVENUES
The medical products market is extremely competitive. We believe that the
principal competitive factors in our market are selection, price, customer
service, convenience, product quality, reliability and speed of order
fulfillment. We believe that among our direct competitors are firms with longer
operating histories, larger customer bases, greater financial and marketing
capability, and greater resources and experience than we have. We compete with
companies including Scanlon Instruments, Key Surgical and Healthmark. In
addition, our competitors are often able to offer lower prices than we can and
thus can limit our penetration and market share. These factors may have an
adverse impact upon our business.
IF WE DO NOT PREVAIL IN A LICENSE DISPUTE WITH A FORMER OFFICER, OUR REVENUES
AND PROFITS COULD DECLINE
Larry A. Rasmusson, our former Chief Executive Officer and a former director
of Oxboro, has notified us that he believes we are currently in default on
exclusive license agreements that we executed with him relating to some of our
medical products, including bulldogs, fabric ties, Radiopaque fabric clamp
covers, bulk and fabric tape, loops, surgical booties, various types of
instrument and specialty guards, a tape stripper, patient hangars and patient
care holders. As a result, Mr. Rasmusson has taken the position that the rights
to these medical products have reverted back to him. We believe we are not in
default and, moreover, that the agreements may be legally invalid. If necessary
and appropriate, we will seek to terminate such agreements and take whatever
other actions may be appropriate, including commencing litigation, to terminate
the agreements or have them declared invalid or both. If, however, the royalty
agreements are found valid, and any resulting litigation is determined adversely
to us, we may lose the right to manufacture and distribute products related to
the royalty agreements. This would have a substantial negative impact on our
revenues and profits until we were able to acquire or develop alternate
products.
THE SUCCESS OF COMPETITIVE PRODUCTS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS
The medical products industry is intensely competitive and hospitals have a
wide variety of product choices and technologies from which to choose. The
success of any competing alternative product to those provided by Oxboro could
have a material adverse effect on our business, financial condition and results
of operations. We believe that our competitors include companies that have
substantially greater financial capabilities for product development and
marketing than we do and can therefore market their products or procedures to
hospitals and the medical community in a more effective manner. In addition,
companies having proprietary rights to the products we sell could choose to
market their products directly to our customers and competitors selling the same
or similar products may duplicate our marketing methods and reduce our ability
to effectively sell our product lines. In either event, our business would be
materially adversely affected by these actions.
IF WE FAIL TO ACQUIRE PRODUCTS OR DEVELOP NEW PRODUCTS, OUR BUSINESS WILL BE
ADVERSELY AFFECTED
Part of the proceeds of this offering will be used to acquire product lines
and develop new products. Although we have no present plans to include new
product lines, it is likely that the focus of new product development will
center on the surgical products market. There can be no assurance that we will
be able to acquire or successfully develop new products. Failure to do so would
have a materially adverse effect on our business.
FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS MAY NEGATIVELY AFFECT OUR STOCK
PRICE
We may experience variability in our net sales and operating profit on a
quarterly basis as a result of many factors, including, among other things, the
buying habits of our customers, size and timing of
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orders by certain customers, shifts in demand for types of products,
technological changes and industry announcements of new products. If revenues do
not meet expectations in any given quarter, operating results may be materially
adversely affected.
THE FAILURE OF KEY SUPPLIERS AND OUR REPORTING SYSTEM TO BE YEAR 2000 COMPLIANT
COULD NEGATIVELY AFFECT OUR BUSINESS
We may realize exposure and risk if the systems on which we are dependent to
conduct our operations are not Year 2000 compliant. Our potential areas of
exposure include products purchased from third parties, computers, software,
telephone systems and other equipment used internally. If our present efforts to
address Year 2000 compliance issues are not successful, or if distributors,
suppliers and other third parties with whom we conduct business, which includes
approximately 3,800 hospitals, do not successfully address these issues, we
could be unable to receive, process, or ship orders to customers on a timely
basis, which would materially adversely affect our business.
We are currently installing a new financial computer system that is Year
2000 compliant and expect the system to be operational prior to December 31,
1999. We anticipate that we will complete all of our reprogramming efforts by
September 30, 1999, allowing adequate time for testing of the new reporting
system. There can be no assurance, however, that the systems of other companies,
on which our systems rely, will also be converted in a timely manner. Moreover,
we cannot be certain that any such failure to convert by another company would
not have a material adverse effect on our business, financial conditions or
results of operations.
We are not expecting to have a material accounts receivable exposure or
significant amount of revenues with any one customer after December 31, 1999.
Therefore, we are not pursuing verification of customer Year 2000 compliance at
this time. Any failure to pay in a timely manner, or place orders for our
products, by a significant number of individual customers or by a customer with
a material accounts receivable balance, due to Year 2000 compliance issues would
have material adverse effects on our business, financial condition or results of
operations.
At this time, we do not believe it is necessary to develop a contingency
plan for the possibility that assessments and potential corrections will not be
completed in a timely manner. However, we will continue to assess the need for a
contingency plan, particularly as it relates to the capabilities of our
customers.
WE DEPEND UPON THIRD PARTY SUPPLIERS
We currently purchase our component materials from several sources.
Alternative suppliers for these materials exist should the current suppliers
discontinue production or distribution. However, we would need to investigate
the materials obtained from any new suppliers for quality and performance.
Additionally, limited notice of the need to switch suppliers for any reason
could affect on our ability to fulfill customer orders, which would have a
material adverse effect on our profitability. We have not experienced any
difficulty with suppliers to date. However, there can be no assurance that
delays in the distribution or sale of our products will not occur in the future.
IF A PRODUCT WE SELL INJURES A USER, WE COULD BE SUBJECT TO A PRODUCT LIABILITY
EXPOSURE
We sell medical products which may involve product liability risk. We carry
general casualty insurance, including coverage for product liability claims up
to $1 million per incident and $2 million aggregate per year. We also carry
liability umbrella coverage of $3 million. However, there can be no assurance
that this coverage will be adequate for any claims that may be raised. We are
not aware of any pending product liability claims against us. However, a
successful product liability suit could materially adversely affect our business
operations.
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RISKS RELATED TO THIS OFFERING
THE PRICE OF THIS OFFERING HAS NOT BEEN DETERMINED BY AN INVESTMENT BANK AND MAY
NOT REFLECT THE MARKET PRICE OF OUR COMMON STOCK
We have not employed an investment bank or other similar party in connection
with this offering. The purchase price determined for this offering is based
upon management's review of our current financial condition and prospects. There
can be no assurance that the purchase price in this offering will adequately
reflect the current market price of the shares of our common stock on completion
of this offering.
AFTER THIS OFFERING, SOME OF OUR DIRECTORS WILL HAVE THE ABILITY TO INFLUENCE
CORPORATE ACTIONS
Prior to this offering, three of our shareholders owned greater than 10%
each of the outstanding shares of our common stock and may continue to hold
these percentages if they elect to exercise their full purchase rights under
this offering. In addition, Kenneth W. Brimmer, one of our current directors,
holds greater than 5% of the outstanding shares of our common stock and Gary E.
Copperud, another director, controls greater than 10% of the outstanding shares
through a privately owned company. Each of these shareholders and directors has
the ability to influence our management and affairs. In connection with this
offering, Directors Brimmer and Copperud, have individually agreed to exercise
their respective purchase rights and also to exercise their respective stock
options in order to purchase a number of shares to generate sufficient proceeds
for us to meet the net capital requirement for our continued listing on the
Nasdaq SmallCap Market. Messrs. Brimmer and Copperud are also entitled and may
elect to purchase additional shares and warrants in this offering pursuant to
the oversubscription privilege and, as a result, may increase their respective
percentages of share ownership. As a result, each of the shareholders and named
directors, by virtue of their share ownership, will have the ability to
influence our management and affairs. In connection with state governmental
approvals necessary to proceed with this offering, the California Department of
Corporations required that our board of directors recommend to our shareholders
the approval of two amendments to our articles of incorporation. The amendments
will reduce the number of affirmative votes required on matters to be voted upon
by shareholders, relating to the number of directors and removal of directors,
and in some cases will eliminate voting restrictions on shareholders who hold
more than 10% of our shares. Our board will comply with the Department of
Corporation's requirement. If approved by our shareholders, these amendments may
have the effect of increasing the ability of shareholders who hold more than 10%
of our shares to influence on our management and affairs.
IF WE ARE UNABLE TO CONTINUE OUR NASDAQ LISTING, OUR STOCK PRICE AND OUR
BUSINESS COULD SUFFER
We are currently listed on the Nasdaq SmallCap Market System. Our net
tangible assets were $1,627,963 as of June 30, 1999, or approximately $372,000
below the minimum capital requirements for continued listing on the Nasdaq
SmallCap Market. We received a notice, dated May 21, 1999, from the Nasdaq Stock
Market, Inc. notifying us of this deficiency and requiring us to develop and
execute a plan, satisfactory to Nasdaq, that would within approximately 60 days
bring our net tangible assets up to the required $2,000,000 minimum. We provided
Nasdaq with a compliance plan including, among other things, the sale of Oxboro
Outdoors, the execution of this rights offering and the commitment of two of our
directors to purchase a sufficient number of shares in this offering to provide
proceeds to enable us to meet the minimum capital requirement. Following the
sale of Oxboro Outdoors on June 30, 1999, we filed a Current Report on Form 8-K
indicating that, as of March 31, 1999, our net tangible assets on a pro forma
basis were $1,653,108, or approximately $347,000 below the $2,000,000 minimum
capital requirement for continued listing on the Nasdaq SmallCap Market. Nasdaq
subsequently extended our deadline for compliance to September 30, 1999, subject
to our demonstrating at that date that we are in compliance with all other
applicable SmallCap listing
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requirements. If we are unable to execute our compliance plan, including this
offering, in order to meet the minimum capital requirement, our stock will be
delisted by Nasdaq. Although our stock may then be eligible to trade on the OTC
Bulletin Board, the delisting would have a materially adverse effect on the
price and liquidity of our common stock. In addition to this offering, on August
13, 1999 we effected a 1-for-5 reverse stock split that caused the number of our
outstanding shares of common stock to temporarily fall below the Nasdaq SmallCap
minimum listing requirement. We intend to correct this deficiency through sales
of shares in this rights offering. However, there can be no assurance that we
will be able to sell a sufficient number of shares of common stock to restore
the total number of outstanding shares to the required minimum or that we will
be able to consistently maintain compliance with all of the other applicable
Nasdaq SmallCap listing requirements. Failure to do so will cause our shares to
be delisted from Nasdaq.
A SIGNIFICANT NUMBER OF OUR SHARES ARE ELIGIBLE FOR SALE AND THEIR SALE COULD
DEPRESS THE MARKET PRICE OF OUR STOCK AND REDUCE OUR LIQUIDITY
As of August 13, 1999, there were 445,412 (2,187,155 pre-split) shares of
our common stock issued and outstanding and 50,400 shares reserved for issuance
upon exercise of outstanding options. Assuming all rights in this offering are
exercised and all of the underlying shares are purchased and that all of the
warrants purchased are fully exercised, we expect to issue 1,336,236 shares of
common stock as a result of this offering and will have a total of 1,781,648
shares outstanding after the offering. However, there can be no assurance that
all of the rights in this offering will be exercised and all of the shares
issued. The overall reduction in our issued and outstanding shares from
2,187,155 shares to 445,412 shares as a result of the 1-for-5 reverse stock
split, effected on August 13, 1999, even assuming all shares are sold in the
offering, could depress the market price of our common stock and otherwise
reduce our liquidity.
SHAREHOLDERS WHO HOLD LESS THAN 100 SHARES MAY PAY DISPROPORTIONATE COMMISSIONS
ON SALE OF THEIR SHARES
Partially as a result of our 1-for-5 reverse stock split, we have a number
of shareholders who hold fewer than 100 shares. It is our understanding that the
minimum unit for our common stock traded by broker-dealers in the Nasdaq
SmallCap market is a round lot of 100 shares. Because of this, and the fact that
a number of brokerage firms have minimum commission amounts, shareholders
holding fewer than 100 shares of our common stock might pay a disproportionately
high level of commissions upon sale of their shares.
THERE IS NO ASSURANCE THAT FUTURE CAPITAL WILL BE AVAILABLE TO US, AND
ADDITIONAL CAPITAL WILL DILUTE THE HOLDINGS OF OUR STOCKHOLDERS
Our shareholders have no preemptive rights. If we:
1. commence a subsequent public or private offering of common stock,
convertible debt, or preferred stock; or
2. issue preferred stock or shares of common stock upon exercise of
warrants to consultants or other parties providing goods or services to us
in lieu of or in addition to cash consideration,
our shareholders, who may not participate in any future stock issuance, will
experience dilution of their equity investment. At this time, we cannot
determine the potential dilution to our shareholders.
We cannot assure that additional financing will be available, or if
available, that it will be available on terms favorable to our shareholders. If
funds are not available to satisfy our short-term and long-term operating
requirements, we may limit or suspend our operations in the entirety or, under
certain circumstances, seek protection from creditors. We believe that future
financing undertaken may
11
<PAGE>
contain terms that could result more substantial dilution than we now have,
which would adversely affect our business.
OUR STOCK PRICE MAY BE MATERIALLY AFFECTED BY MARKET VOLATILITY
The stock market has, from time to time, experienced significant price and
volume fluctuations that have affected the market prices of companies similar to
ours and these fluctuations often have been unrelated to the operating
performance of such companies. Factors not directly related to our performance,
such as negative industry reports or disappointing earnings announcements by
publicly traded competitors, may have an adverse impact on the market price of
our common stock. In the past, following periods of volatility in the market
price of a company's securities, securities class action claims have often been
brought against that company. This litigation could result in substantial costs
and a diversion of management's attention and resources.
WE MAY BE ADVERSELY AFFECTED BY STATUTORY ANTI-TAKEOVER PROVISIONS
As a Minnesota corporation, we are subject to certain anti-takeover
provisions of the Minnesota Business Corporation Act. The authority of the Board
with regard to the anti-takeover provisions of the Act could have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids for our common stock at a premium over the then prevailing
market price, and may adversely affect the market price of, and the voting and
other rights of the holders of our common stock. If we issue additional shares,
whether for purposes of raising additional capital or otherwise, it could have
the effect of making a takeover more difficult.
RISKS RELATED TO GOVERNMENT REGULATION AND LEGAL UNCERTAINTY
CHANGES IN GOVERNMENT REGULATION OF THE PRODUCTS WE SELL MAY NEGATIVELY AFFECT
OUR BUSINESS
Our products are regulated by government agencies in the United States and
foreign countries. In the United States, our products are regulated by the Food
and Drug Administration. The FDA regulates, among other things, (1) the content
of our products, (2) the product labels, (3) the claims in our product
literature and advertising, and (4) the manufacture of the products. The FDA and
other government agencies may in the future issue new regulations, or issue new
interpretations of existing regulations, which affect the manufacture, marketing
and sale of our products. Our operations may also be affected if Congress passes
new legislation or if courts issue new rulings with respect to existing
legislation. We can offer no assurance that we will not be adversely affected by
new, or newly interpreted, regulatory requirements.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. When used in this prospectus, the words or phrases "believes,"
"anticipates," "expects," "intends," "estimates" or similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying such statements. These forward-looking statements involve risks
and uncertainties that may cause our actual results to differ materially from
those expressed or implied by the forward-looking statements. Important factors
that could cause our actual results to differ materially from projections
include, but are not limited to, those discussed in "Risk Factors," and
"Business," as well as those discussed elsewhere in this prospectus. Given these
uncertainties, you should not place undue reliance on the forward-looking
statements. We do not intend to update any forward-looking statements.
12
<PAGE>
BUSINESS
GENERAL
Oxboro Medical International, Inc. develops, assembles, and markets medical
and surgical devices. Until June 30, 1999, Oxboro also developed, assembled and
marketed products for the fishing, hunting, and related outdoor recreational
markets through a wholly-owned subsidiary, Oxboro Outdoors, Inc. Effective June
30, 1999, we sold all of the outstanding shares of Oxboro Outdoors to a group of
private investors. See "RELATED PARTY TRANSACTIONS."
PRODUCTS. Principal medical products produced and sold by Oxboro include
silicone loops, silicone and fabric clamp covers, instrument guards, suture aid
booties, identification sheet and roll tape, and various holders and organizers
for instruments used in the operating room.
OXBORO'S STRATEGY. Following the sale of Oxboro Outdoors, our general
strategy is to focus on our sale of medical products. Oxboro's strength is its
base of approximately 3,000 customers who purchase our surgical devices and
instrument reprocessing accessories. We will attempt to capitalize on this base
through efforts to increase the breadth of our currently very limited product
line, through acquisitions, license agreements, distribution agreements and
through the development of new products.
MARKETING, SALES AND DISTRIBUTION. Approximately 75% of our sales of
medical products are direct to over 3,000 medical centers throughout the United
States. We accomplish direct sales through an in-house telemarketing sales
force. In recent years, an increasing proportion of our sales have been effected
through foreign distributors and distributors and kit packers in the United
States. We expect this trend to continue.
RESEARCH AND DEVELOPMENT. Historically, we have not spent a substantial
amount on research or development of new products. As a result of recent changes
in management, however, we now have a new focus on medical products sales with a
goal of expanding our product lines. We anticipate that research and development
expenditures will grow rapidly in the future, should attractive opportunities
arise.
COMPETITION. We operate in a highly competitive industry in which there are
many established companies, including Scanlon Instruments, Key Surgical and
Healthmark, among others. Companies with stronger financial resources may be
able to develop and market similar or competing products and reduce or negate
any competitive advantage that we may have due to the proprietary nature of
their products or their ability to more successfully market those products.
GOVERNMENT REGULATION. Because we manufacture and sell medical products,
both the products and the manufacturing procedures are subject to regulation in
the United States by the Food and Drug Administration and in the European
Community by the Medical Device Directives. As a result, we are subject to
extensive rules and regulations, compliance with which may require expenditure
of material amounts. In addition, should Oxboro fail to comply with these
regulations, we would be subject to administrative and criminal actions, which
could have a material adverse effect on our business. Oxboro is also subject to
CE Mark Certification, which we must adhere to in order to continue to sell our
products in certain international markets. Our continued compliance with all
regulatory requirements may require significant expenditures.
PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS. Many of the products we
currently market are not unique. Accordingly, we believe that the effect of
patents on other than a few select products would be negligible. If we
substantially develop and test any new unique products, patent protection could
be important. However, it may not be available. Also, we may incur substantial
costs in attempting to secure patent protection for any new products. Prior to
its recent sale, Oxboro Outdoors had applied for and received trademark
registrations for licensed products it marketed and sold. Oxboro Outdoors
13
<PAGE>
also manufactured and marketed several products pursuant to license agreements
with professional sports organizations. These trademark registrations and
license agreements were transferred upon sale of the subsidiary. See "RELATED
PARTY TRANSACTIONS."
EMPLOYEES. We currently have 47 full-time employees, including 1 in
management, 7 in sales, 33 in production and shipping, and 6 in general
administration. We also employ approximately 2 or 3 persons part-time. Eight
persons were also employed with Oxboro Outdoors until its sale effective June
30, 1999.
USE OF PROCEEDS
The net proceeds that we will receive from this rights offering depend upon
the number of rights exercised. The net proceeds from the sale of an aggregate
890,824 shares of our common stock and 445,412 warrants underlying this rights
offering, assuming a purchase price of $2.50 per right, are estimated to be
approximately $1,007,155 if all of the rights being offered are exercised. There
can be no assurance, however, that any of the rights will be exercised. Although
there is no minimum purchase requirement in connection with this rights
offering, two of our directors, Kenneth W. Brimmer and Gary W. Copperud, have
severally provided us with verbal standby subscription guarantees and have
advised us that they intend to exercise their rights in connection with this
offering. There can be no assurance that all of the rights offered will be
exercised and that all of the shares, including shares underlying the warrants,
will be issued in this offering.
We intend to use the proceeds from this rights offering, in order of
priority, for working capital, purchases of equipment and products or product
lines, possible acquisitions of companies selling products or product lines
similar to ours, research and development, repayment of debt and other general
corporate purposes. If substantially less than the maximum proceeds are obtained
in this offering, we will apply those proceeds to working capital. Pending the
uses specified above, we will invest any balance of the proceeds in short-term,
high quality interest bearing investments.
DETERMINATION OF OFFERING PRICE
In determining the offering price of the rights and warrants and the
exercise price of the warrants, we considered various factors, including a
review of our current and historical financial position and our short and
long-term business plans. We also analyzed the benefits to our continued listing
on the Nasdaq SmallCap Market and concluded that a rights offering to all
shareholders would be the most equitable method to raise capital in order to
maintain our listing. We believe that the recapitalization effected by our
1-for-5 reverse stock split and repricing is necessary to ensure a successful
offering.
DIVIDEND POLICY
We have not declared or paid a cash dividend on our common stock. We
currently intend to retain any earnings for use in the operation and expansion
of our business and, therefore, do not anticipate paying any cash dividends in
the foreseeable future.
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<PAGE>
CAPITALIZATION
We are offering purchase rights to our shareholders without reliance upon an
independent investment banker. Effective August 13, 1999, our board of directors
approved a 1-for-5 reverse stock split of the outstanding shares of our common
stock to shareholders of record on the same date. The information and share
amounts in this prospectus and the registration statement of which it is a part
reflect the 1-for-5 reverse stock split as well as our estimate of the value of
our common stock on a post-split basis, based upon current market conditions.
As reported in our Form 10-QSB for the quarter ended June 30, 1999, we had a
net tangible book value of $1,627,963, or $3.72 per share of common stock
outstanding. The following table sets forth capitalization as of June 30, 1999,
as adjusted to reflect the 1-for-5 reverse stock split, as adjusted to reflect
the sale by Oxboro of the required number of rights to achieve capitalization of
$2 million, and as adjusted to reflect the sale by Oxboro of the maximum 890,824
shares of its common stock pursuant to this rights offering at a subscription
price of $2.50 per purchase right exercised, excluding the exercise of the
warrants. There is no minimum purchase requirement in this offering. See "Use of
Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1999
---------------------------------
<S> <C> <C> <C>
AS ADJUSTED AS ADJUSTED
ACTUAL (MINIMUM)(1)(2) (MAXIMUM)(1)(3)
------------ --------------- ----------------
Shareholders' Equity:
Common stock, $0.01 par value; 2,000,000 shares authorized;
437,431 shares issued and outstanding; 796,160 shares and
1,336,255 shares as adjusted................................ $ 4,374 $ 7,962 $ 13,363
Additional paid-in capital...................................... 1,513,429 1,881,878 2,551,596
Retained earnings............................................... 329,466 329,466 329,466
Stock Subscription Agreements................................... (219,306) (219,306) (219,306)
------------ --------------- ----------------
Total shareholders' equity.................................... 1,627,963 2,000,000 2,675,119
------------ --------------- ----------------
Total capitalization.......................................... $ 1,627,963 $ 2,000,000 $ 2,675,119
------------ --------------- ----------------
------------ --------------- ----------------
</TABLE>
- ------------------------
(1) Includes the investment of an aggregate $40,000 by Messrs. Copperud and
Brimmer on exercise of their respective options to purchase an aggregate
8,000 shares, at a purchase price of $5.00 per share, which will occur prior
to the distribution record date, as defined herein.
(2) Assumes the exercise of purchase rights by directors Gary W. Copperud and
Kenneth W. Brimmer, severally, at a price of $2.50 per purchase right
exercised, in accordance with their respective subscription guarantees and
assumes that the number of shares purchased will be determined by the
difference between the Nasdaq $2,000,000 minimum net tangible asset
requirement for listing of SmallCap companies and the net tangible assets as
reported by us on our most current report filings with the Securities and
Exchange Commission filed prior to the effective date of this offering. See
"DILUTION."
(3) Assumes the issuance of the maximum of 890,824 shares of common stock
pursuant to this rights offering at a price of $2.50 per purchase right
exercised, excluding exercise of the warrants.
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<PAGE>
DILUTION
As of June 30, 1999, the pro forma net tangible book value of Oxboro, which
is made up of total assets, excluding intangible assets, less total liabilities,
was $1,627,963, or $3.38 per share of common stock outstanding, without giving
effect to the sale of shares of common stock offered in this rights offering.
Assuming the sale of the maximum 890,824 shares of common stock in the
rights offering, excluding the exercise of warrants, the pro forma net tangible
book value of Oxboro common stock purchased as a result of this rights offering
would be increased by $.78 per share without any additional investment
(excluding the exercise of rights) and all existing shareholders would
experience an immediate dilution of $1.72 per share for those shares previously
held. Assuming the sale of 350,729 shares of common stock in the rights offering
to achieve capitalization of $2 million, the pro forma net tangible book value
of our common stock purchased in this rights offering would be increased by
$1.29 per share without any additional investment (excluding the exercise of
rights) and all existing shareholders would experience an immediate dilution of
$1.21 per share for those shares previously held. There is no minimum purchase
requirement in this offering.
The following table illustrates the changes in pro forma net tangible book
value of Oxboro common stock outstanding immediately following the distribution
and the anti-dilution that would be experienced by persons exercising the
rights, without giving effect to the results of operations after June 30, 1999:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
----------- -----------
<S> <C> <C> <C> <C>
Price paid per share in the rights offering........................................ $ 1.225 $ 1.225
Net tangible book value per share before offering.................................. 3.72 3.72
Decrease in net tangible book value per share resulting from offering.............. 1.21 1.72
--------- ---------
Pro forma net tangible book value per share after offering......................... 2.51 2.00
----------- -----------
Anti-dilution per share to investors in this offering.............................. $ 1.29 $ .78
----------- -----------
----------- -----------
</TABLE>
COMMITMENT OF EXISTING DIRECTORS
Two of our directors, Gary W. Copperud and Kenneth W. Brimmer, have
independently advised us that they each intend to exercise their purchase rights
in connection with this offering, and purchase additional rights if necessary
and to the extent available, to ensure that we have sufficient proceeds from
this offering to raise our net tangible assets to the minimum level required for
listing on the Nasdaq SmallCap Market.
COMMITMENT TO PURCHASE BY EXISTING DIRECTORS
Set forth below are the number of shares beneficially owned as of the record
date by Messrs. Copperud and Brimmer, the maximum number of shares each would be
entitled to purchase on exercise of their rights in this offering and the
aggregate consideration payable for those shares. However, the deficiency in
Oxboro's minimum capitalization, as reflected in its June 30, 1999 financial
statements, cannot be satisfied solely by Messrs. Copperud and Brimmer
exercising all of their purchase rights in the initial round of this offering.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK
PURCHASABLE PURSUANT
CURRENT SHARES TO EXERCISE OF AGGREGATE
NAME OWNED RIGHTS(1) CONSIDERATION(1)
- -------------------------------------------------------- --------------- --------------------- ---------------
<S> <C> <C> <C>
Gary W. Copperud, as President
of CMM Properties, LLC................................ 60,709 121,418 $ 151,773
Kenneth W. Brimmer(2)................................... 34,000 68,000 $ 85,000
</TABLE>
- ------------------------
(1) Assumes a purchase price for each right exercised of $2.50.
(2) Includes 20,000 shares as to which Mr. Brimmer has shared voting and
dispositive power and 2,000 shares beneficially owned by his wife.
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<PAGE>
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes some of the material U.S.
Federal Income Tax consequences to shareholders relating to this rights
offering. This discussion is a summary for general information purposes only,
and is based upon the Internal Revenue Code of 1986, as amended, applicable
Treasury Regulations, and judicial and administrative interpretations of the
Code and Regulations, all as in effect on the date of this prospectus. Each
shareholder should be aware that the Code, the Regulations and any
interpretation thereof are subject to change and that any change could be
applied retroactively. This summary does not discuss all aspects of federal
income taxation that may be relevant to particular shareholders in light of
their personal investment circumstances or to certain types of shareholders
subject to special treatment under the federal income tax laws (for example,
banks, insurance companies, tax-exempt entities and foreign taxpayers). This
discussion is limited to those Oxboro shareholders who have held their Oxboro
common stock as a capital asset within the meaning of the Code.
This summary also does not discuss any aspects of state, local or foreign
tax laws. Shareholders are urged to consult their own tax advisors to determine
the tax consequences that may be relevant to each of them in connection with the
distribution of the rights and the acquisition of shares in this offering.
RECEIPT OF THE RIGHTS. No gain or loss will be recognized by the Oxboro
shareholders upon receipt of the rights or the related oversubscription
privilege.
SHAREHOLDER BASIS AND HOLDING PERIOD OF THE RIGHTS. Except as provided in
the following sentence, the basis of the rights received by an Oxboro
shareholder as a distribution with respect to the shareholder's common stock
will be zero. If, however, either (i) the fair market value of the rights on the
date that the rights are distributed is 15% or more of the fair market value of
the shares of Oxboro common stock with respect to which they are received or
(ii) the shareholder properly elects, as part of the shareholder's Federal
Income Tax return for the taxable year in which the rights are received, to
allocate basis, then part of the shareholder's basis in shares of Oxboro common
stock will be allocated between the Oxboro common stock and the rights in
proportion to the fair market value of each on the date of this rights offering.
The holding period of an Oxboro shareholder with respect to the rights
received as a distribution on the shareholder's Oxboro common stock will include
the shareholder's holding period for the Oxboro common stock with respect to
which the rights were issued.
LAPSE OF THE RIGHTS. Oxboro shareholders who allow the rights received by
them to lapse will not recognize any gain or loss, and no adjustment will be
made to the basis of Oxboro common stock, if any, owned by those shareholders.
EXERCISE OF THE RIGHTS; BASIS AND HOLDING PERIOD OF SHARES. Oxboro
shareholders will not recognize any gain or loss upon the exercise of the
rights. The basis of the Oxboro common stock acquired through exercise of the
rights will be equal to the sum of the price paid therefor and the shareholder's
basis in such rights, if any. A shareholder's holding period for the Oxboro
common stock acquired through exercise of the rights will begin on the date the
rights are exercised.
SALE OF SHARES. A sale of the shares of Oxboro common stock acquired through
the exercise of the rights will result in the recognition of capital gain or
loss in an amount equal to the difference between the amount realized on the
sale and the shareholder's adjusted basis in the Oxboro common stock. The gain
or loss will be classified as long-term capital gain or loss if the shareholder
held the shares for more than twelve months. If the shares were held for less
than twelve months, the gain or loss will be a short-term gain or loss.
17
<PAGE>
PLAN OF DISTRIBUTION
We have not engaged an underwriter in connection with this offering. We
intend to distribute the purchase rights in this offering and copies of this
prospectus to our shareholders of record on a date promptly following the
effective date of the registration statement of which this prospectus forms a
part. Holders of rights who desire to subscribe for the purchase of our common
stock and warrants in this offering are urged to complete, date and sign the
attached subscription agreement and return it to the subscription agent on or
before the expiration date, together with payment in full of $2.50 for each
right exercised.
Our employees, officers or directors may solicit responses from shareholders
receiving rights to purchase, but these persons will not receive any commissions
or compensation for their services other than their normal employment
compensation.
RELATED PARTY TRANSACTIONS
OPTION EXERCISES; SUBSCRIPTION GUARANTEES. In connection with this
offering, two of our directors, Kenneth W. Brimmer and Gary W. Copperud, have
individually and severally agreed to exercise their respective options to
purchase an aggregate 8,000 shares of our common stock, at an exercise price of
$5.00 per share, for an aggregate purchase price of $40,000. Messrs. Brimmer and
Copperud have also independently agreed to exercise their rights to purchase
shares and have agreed to purchase additional shares, if necessary, sufficient
to enable us to restore our net tangible assets to at least the minimum required
for continued listing on the Nasdaq SmallCap Market System.
SUBSEQUENT EVENTS
SALE OF OXBORO OUTDOORS, INC. On June 30, 1999 we sold all of the
outstanding shares of our wholly-owned subsidiary, Oxboro Outdoors, Inc., to a
group of private investors. The transaction was effected pursuant to the terms
of a stock purchase agreement at a purchase price of $650,000. The purchase
price was paid $385,000 in cash and $265,000, subject to adjustments, in the
form of a 90-day, 9% promissory note. The purchase price is subject to offsets
in the event current licenses with Oxboro Outdoors are discontinued by the
licensor within 90 days of execution of the promissory note. The stock purchase
agreement also provides, among other things, that we will enter into a lease
agreement with the purchasers for lease of space we currently use.
Oxboro Outdoors develops, assembles and markets products for the fishing,
hunting and related outdoors recreational markets. Its sales include specific
products licensed by professional sports organizations, such as fishing lures
earrings and key chains, as well as miscellaneous fishing and hunting related
products.
AMENDMENTS TO ARTICLES OF INCORPORATION. On July 28, 1999, we filed an
application with the California Department of Corporations for permission to
distribute rights to purchase in this offering to our shareholders who are
California residents. The Department of Corporations required us to recommend to
our shareholders that they adopt two amendments to our Articles of
Incorporation: first, amend Article IX to reduce the voting requirement from 75%
to 66 2/3% for approval of changes in the number of directors, removal of
directors, and amendments to Article IX, and second, delete Article XII, which
was adopted to make Oxboro subject to the Minnesota Business Combination
Statute. The effect of these amendments will be to lower the voting requirement
for changes in the number and removal of directors and to permit shareholders
owning 10% or more of our outstanding shares, who are currently prevented from
voting on certain matters, to vote on all matters that require a shareholder
vote. Our board of directors has approved these amendments and will recommend
them for adoption by the shareholders at our annual meeting to be held in 2000.
There can be no assurance that the shareholders will approve these amendments.
However, if we do not recommend approval of the amendments, we will not be
permitted to offer rights to purchase to our shareholders in California.
18
<PAGE>
LEGAL OPINIONS
Lindquist & Vennum P.L.L.P. will issue an opinion about the legality of the
securities offered by this prospectus.
EXPERTS
Grant Thornton LLP, independent certified public accountants, has audited
our consolidated financial statements included in our Annual Report on Form
10-KSB for the year ended September 30, 1998, as set forth in their report,
which is incorporated by reference in this prospectus and elsewhere in the
registration statement in reliance upon their authority as experts in accounting
and auditing.
INDEMNIFICATION
The Oxboro Articles of Incorporation eliminate or limit certain liabilities
of its directors and the Oxboro bylaws provide for indemnification of directors,
officers and employees of Oxboro in certain instances. Insofar as exculpation
of, or indemnification for, liabilities arising under the Securities Act of 1933
may be permitted to directors, officers or persons controlling Oxboro pursuant
to the foregoing provisions, Oxboro has been informed that in the opinion of the
Securities and Exchange Commission such exculpation or indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
19
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING MADE
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
RIGHTS TO PURCHASE
UP TO 890,824 SHARES
OF COMMON STOCK
AND
445,412 WARRANTS
TO PURCHASE COMMON STOCK
OXBORO MEDICAL
INTERNATIONAL, INC.
PROSPECTUS
SEPTEMBER 1, 1999
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