<PAGE>
THIS PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3 IS BEING FILED ON PAPER
----------------------------------------------------------------------
PURSUANT TO SECTION 202(d) OF REGULATION S-T
--------------------------------------------
As filed with the Securities and Exchange Commission on April ___, 1996
Registration No. 333-1150
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1
____________________________
MEDICAL DEVICE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Utah 58-1475517
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
9191 Towne Centre Drive, Suite 430
San Diego, California 92122
619/455-7127
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
____________________________
M. LEE HULSEBUS With copy to:
Chief Executive Officer BRUCE J. RUSHALL, ESQ.
9191 Towne Centre Drive, Suite 430 RUSHALL & McGEEVER
San Diego, California 92122 2111 Palomar Airport Road, Suite 200
619/455-7127 Carlsbad, California 92009
(Name, address, including zip code, 619/438-6855
and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
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]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed
Price Per Share Maximum
Amount Proposed Aggregate Amount of
Title of Each Class of being Maximum Offering Registration
Securities to be Registered Registered Offering Price Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.15 per value.. 3,182,175 $0.60 $1,909,305 /(1)/ $658 /(2)/
====================================================================================================================================
</TABLE>
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 the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
/(1)/ Estimated solely for the purposes of calculating the registration fee
based on 3,182,175 shares of the Selling Shareholders at $0.60 per share
(the average of the high and low sales price of common stock of the
Company on the NASDAQ Small Cap market on February 2, 1996).
/(2)/ 1/29 of 1% of the proposed Maximum Offering Price.
================================================================================
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b)
<TABLE>
<CAPTION>
Item Number and Caption Location or Heading
in Form S-3 in Prospectus
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<S> <C>
1. Forepart of Registration Facing Page of Registration
Statement and Outside Front Cover Statement; Cover Page of Prospectus.
Page of Prospectus.
2. Inside Front and Outside Back Inside Front and Outside Back Cover
Cover Pages of Prospectus. Pages of Prospectus.
3. Summary Information, Risk Factors Prospectus Summary; The Company; Risk
and Ratio of Earnings to Fixed Factors.
Charges.
4. Use of Proceeds. Prospectus Summary.
5. Determination of Offering Price. *
6. Dilution. *
7. Selling Security Holders. Cover Page; Selling Shareholders.
8. Plan of Distribution. Cover Page; Plan of Distribution.
9. Description of Securities to be Incorporation of Certain Documents by
Registered. Reference; Description of Capital
Stock.
10. Interests of Named Experts and *
Counsel.
11. Material Changes. The Company; Risk Factors;
Description of Capital Stock.
12. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference. Reference.
13. Disclosure of Commission *
Position on Indemnification for
Securities Act Liabilities.
</TABLE>
______________________________
* Omitted as not applicable.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL ___, 1996
PROSPECTUS
MEDICAL DEVICE TECHNOLOGIES, INC.
3,182,175 Shares of Common Stock, $0.15 Par Value Per Share
This Prospectus relates to the offering of 3,182,175 shares of Common
Stock, par value $0.15 per share (the "Common Stock"), of Medical Device
Technologies, Inc., a Utah corporation (the "Company"), by certain selling
shareholders of the Company ("Selling Shareholders"). See "SELLING
SHAREHOLDERS". The shares of Common Stock registered hereunder are hereinafter
referred to as the "Shares." The Selling Shareholders acquired their Shares
from the Company as follows:
1. 1,482,175 Shares and warrants to purchase 518,750 Shares on or before
August 31, 1997 at a price of $1.00 per Share, were issued to Selling
Shareholders in a private placement offering completed in 1995. These
securities were issued in units at a price of $50,000 per unit, each of
which was comprised of 71,430 Shares and 25,000 warrants.
2. 687,500 Shares and warrants for the purchase of 137,500 Shares on or before
the tenth day following the date of this Prospectus at a price of $0.60 per
Share were issued to Selling Shareholders in a private placement offering
of convertible notes and warrants completed in 1995. These securities were
issued in units at a price of $50,000 per unit, each of which was comprised
of a $50,000 principal amount note, convertible in to 12,500 Shares, and
25,000 Warrants. The convertible notes were converted into 687,500 Shares
by the Selling Shareholders in December, 1995.
3. A Warrant to purchase 300,000 Shares on or before June 21, 1996 was issued
to First Equity Group, Inc., on June 21, 1995 as partial compensation for
public relations consultation services. This Warrant is exercisable as
follows: 50,000 Shares at $1.00 per Share; 50,000 Shares at $1.25 per
Share; 100,000 Shares at $1.50 per Share; and 100,000 Shares at $2.00 per
Share.
4. A Warrant to purchase 56,250 Shares on or before August 31, 1997 at a price
of $1.00 per Share was issued to Rater of North America, Inc. on April 30,
1995, as partial compensation for investment banking services.
All of the Shares offered hereby may be offered from time to time by the
Selling Shareholders. The Selling Shareholders, directly or through agents,
dealers or underwriters, may offer and sell from time to time all or any part of
the Securities held by each of them in amounts and on terms to be determined or
at quoted prices then prevailing on the NASDAQ Small Cap market. To the extent
required, the amounts of the Securities to be sold, purchase prices, public
offering prices, names of any agents, dealers or underwriters, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in and accompanied by a Prospectus Supplement. See "PLAN OF
DISTRIBUTION." Persons who may be deemed to be "affiliates" of the Company
within the meaning of Rule 144 promulgated under the Securities Act of 1933, as
amended, (the "Act") may not publicly offer or sell their Securities except
pursuant to an effective registration statement under the Act or pursuant to
Rule 144 under such Act (without regard to the applicable holding period
provided thereunder). The Company will not receive any of the proceeds from the
sale of the Securities by the Selling Shareholders. The Company will pay all
costs of the registration of the Securities. Such costs, fees and disbursements
are estimated to be approximately $17,000.
PURCHASERS OF THE SECURITIES SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH
UNDER "RISK FACTORS" (PAGES 5-15).
The Common Stock to be registered hereunder is listed for trading on the
NASDAQ Small Cap/SM/ market under the symbol "MEDD."
________________
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.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
________________
This date of this Prospectus is April ___, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company in accordance with the
Exchange Act can be inspected and copies made at the public reference facilities
maintained by the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street NW,
Washington, DC 20549, Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
public reference section of the Commission at 450 Fifth Street NW, Washington,
DC 20549.
The Company has filed with the Commission a Registration Statement on Form
S-3 (including all amendments thereto, the "Registration Statement"), with
respect to the Securities offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information about the Company and the Securities
offered hereby, reference is made to the Registration Statement and the exhibits
thereto, which may be examined without charge at the public reference facilities
maintained by the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street NW,
Washington, DC 20549, and copies of which may be obtained from the Commission
upon payment of the prescribed fees.
No person has been authorized by the Company to give any information or to
make any representation other than as contained in this Prospectus and, if given
or made, such information or representation must not be relied upon as having
been authorized by the Company. Neither the delivery of this Prospectus nor any
distribution of the shares of the common stock issuable under the terms of this
Prospectus, under any circumstances, create any implication that there has been
no change in the affairs of the Company since the date hereof.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference and shall be deemed to be a part hereof:
1. The Company's current Report on Form 8-K dated January 15, 1996.
2. The Company's current Report on Form 8-K dated January 31, 1996.
3. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995.
All documents filed by the Company pursuant to Section 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 Securities shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or
-2-
<PAGE>
deemed to be incorporated by reference 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 subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
A copy of any or all of the documents incorporated herein by reference
(other than exhibits unless such exhibits are specifically incorporated by
reference in any such document) will be provided without charge to any person,
including a beneficial owner, to whom a copy of this Prospectus is delivered,
upon written or oral request. Requests for such copies should be addressed to
the Secretary of the Company at 9191 Towne Centre Drive, Suite 430, San Diego,
California 92122, telephone number 619/455-7127.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
descriptions and financial information and statements appearing elsewhere in
this Prospectus and the documents incorporated herein by reference.
THE COMPANY
- -----------
The Company, Medical Technologies, Inc., is in the business of the
development and marketing of certain medical devices and related products. It
is in the development stage and has patent or license rights to three (3)
medical devices and their related products. See "THE COMPANY" and "RISK
FACTORS" below.
The Company's principal offices are located at 9191 Towne Centre Drive,
Suite 430, San Diego, California 92122, telephone 619/455-7127.
THE OFFERING
- ------------
Up to 3,182,175 shares are being offered pursuant to this Prospectus may be
offered from time to time by the Selling Shareholders for their own account.
PLAN OF DISTRIBUTION
- --------------------
The Selling Shareholders, directly or through agents or underwriters, may
offer and sell from time to time all or any part of the Securities held by them
in amounts and on terms to be determined or at quoted prices then prevailing on
the NASDAQ Small Cap market. See "PLAN OF DISTRIBUTION" below.
RISK FACTORS
- ------------
The Company has to date brought only one of its products (the PAS device)
to market. However, the Company has only recently introduced its PAS device to
market and the Company has yet to receive material revenues from the sale of any
of its products, has not to date demonstrated
-3-
<PAGE>
the commercial practicality of any of its products, and has not established a
market share for its products. Moreover, the Company has limited capital and
liquidity and will require additional funds to complete the development and
marketing of its CRS and ICP devices. Accordingly, an investment in the Company
involves the following substantial risks:
. The Company does not have funds to maintain its current levels of
expenditures for operating and development activities.
. The Company has an accumulated deficit and anticipated continuing
losses for an indefinite period.
. The Company has substantial debt, the payment of $1,650,000 of which
is secured by liens on all of the Company's assets.
. The Company has not demonstrated commercial feasibility of its
products.
. The Company has not achieved commercial sales or distribution of any
of its products.
. The Company has limited financial capability and will require
substantial additional funds to complete the development and market
introduction of its products.
. Risks and uncertainties as to the development of the Company's
products and their acceptance by their market.
. The Company's business is subject to substantial government
regulation.
THE COMPANY
The Company's business is the development and marketing of medical devices
and related products. The Company currently has licensed the patent rights to
three medical devices, the Personal Alarm System (the "PAS"), the Cell Retrieval
System device (the "CRS"), and the Intracranial Pressure Instrument (the "ICP").
Please refer to the Company's 10-KSB Report for the year ended December 31, 1995
and the Company's Reports on Form 8-K dated January 15, 1996 and January 31,
1996 for additional information regarding the Company's business activities and
products. The PAS device is currently being produced and marketed and the CRS
and ICP devices are under development. The Company was incorporated on February
6, 1980. On April 18, 1995, the Company changed its name to "Medical Device
Technologies, Inc." from "Cytoprobe Corporation."
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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
NW, Washington, DC 20549.
-4-
<PAGE>
The Company's Common Stock is traded in the National Association of Securities
Dealers Automated Quotation ("NASDAQ") under the symbol "MEDD."
The Company's principal offices are located at 9191 Towne Centre Drive,
Suite 430, San Diego, California 92122, telephone 619/455-7127.
RISK FACTORS
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS.
DEVELOPMENT STAGE COMPANY; HISTORY OF OPERATING LOSSES; ACCUMULATED
-------------------------------------------------------------------
DEFICIT; UNCERTAINTY OF FUTURE PROFITABILITY; AUDITORS' GOING CONCERN. The
- ---------------------------------------------------------------------
Company was exclusively engaged in oil and gas activities until June 1992, when
it entered into its first license agreement and commenced its current operations
in the medical device business. The Company subsequently entered into two
additional licenses for medical devices and in April of 1994 discontinued
entirely its oil and gas operations. The Company commenced the limited
manufacture and marketing of its first medical device, the Personal Alarm System
(the "PAS"), in January of 1996, although to date, the Company has not yet
realized any significant sales of the PAS device. The Company is currently
developing its other two medical devices, the Cell Recovery System (the "CRS")
and the Intracranial Pressure Monitoring System (the "ICP"). Consequently, the
Company is still a development stage company with respect to the medical device
business. At December 31, 1995, partially as a result of its unsuccessful oil
and gas activities, the Company had an accumulated deficit of approximately
$11,727,000. The Company expects losses to continue until such time, if ever,
as the Company's medical devices can successfully be brought to market and
generate sufficient operating revenues. Although the Company has commenced
marketing its first product, the PAS, it still needs to conduct substantial
development activities, which include pre-marketing clinical testing of the CRS
and substantial clinical testing and regulatory clearance with respect to the
ICP. Although the Company received pre-market clearance from The Food and Drug
Administration (the "FDA") for the CRS on March 28, 1996, the Company will not
commence marketing the CRS until the fourth quarter of 1996, after it completes
pre-marketing clinical trials for this device. The ICP is still undergoing
clinical trials solely with respect to the first generation ICP device that the
Company intends to develop. It is currently anticipated that clinical trials
for the second generation ICP will not begin until the end of 1996. The ongoing
pre-market clinical testing for the CRS and the extensive clinical testing and
regulatory clearance required for the ICP together with projected general and
administrative expenses and projected marketing costs related to the PAS and the
CRS, are expected to result in continuing losses until such time as the Company
achieves significant sales from one or more of its products.
The Company's ability to achieve profitability depends upon its ability to
successfully market the PAS and develop and successfully market the CRS and ICP,
of which there can be no assurance. In addition, the Company will continue to
seek to license additional medical products for development and
commercialization, although there can be no assurances that the Company will be
able to identify any additional products that it deems suitable for development
and commercialization, or that if it does identify such products that any of
them will be successfully developed and
-5-
<PAGE>
commercialized. Further, the Company's independent auditor's report on the
Company's financial statements for the year ended December 31, 1995 includes an
explanatory paragraph that the Company's recurring losses from operations,
negative working capital, and limited capital resources raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. See the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995 (the "1995 10-KSB").
DEPENDENCE ON OFFERING PROCEEDS; NEED FOR ADDITIONAL FINANCING; POSSIBLE
------------------------------------------------------------------------
ISSUANCE OF SECURITIES; FUTURE DILUTION. The Company's cash requirements will
- ---------------------------------------
be significant. The Company will depend on the proceeds from a proposed public
offering of its equity securities to repay the $1,650,000 of principal
indebtedness, plus interest, incurred by the Company in connection with a
private placement that the Company completed in January 1996, and to implement
its current business over the plan the first twelve (12) months after the
completion of that proposed offering. There can be no assurances, however, that
the Company will successfully complete the proposed offering or that, even if it
is successfully completed, either prior to the expiration of such 12 month
period or thereafter, the Company will not encounter unexpected costs and/or the
Company will fail to generate sufficient revenues from sales such that the
Company will be required to seek additional financing. The Company may also,
however, encounter unexpected costs in connection with the implementation of its
business plan and as a consequence, require additional financing to continue to
effect its business plan. The Company has no current arrangements with respect
to such additional financing and there can be no assurance that any such
additional financing can be obtained on terms acceptable to the Company, or at
all. Failure by the Company to obtain additional financing either from the
proposed Offering or from another public or private offering of its securities,
a strategic joint venture or partnership, or otherwise, would have a material
adverse effect on the Company. Further, in the event that the Company obtains
any additional financing, such financings will most likely have a dilutive
effect on the holders of the Company's securities.
UNCERTAINTY OF PRODUCT DEVELOPMENT; CORPORATE INEXPERIENCE. Development of
----------------------------------------------------------
the Company's medical devices will be subject to all of the risks associated
with new product development generally, including unanticipated delays,
expenses, technical problems, or other difficulties that could result in
abandonment or substantial change in the proposed commercialization of the
Company's medical devices. Given the uncertainties inherent in new product
development generally, and the Company's inexperience in the business of
commercializing medical devices, there can be no assurances that the Company
will be successful in developing its products. Investors should be aware of the
potential problems, delays and difficulties often encountered by any
inexperienced company. As a consequence, problems may arise that may be beyond
the experience or control of management and accordingly, the Company's prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by development stage companies in the establishment of a new
business in a highly competitive and highly regulated industry. To date, the
Company only recently commenced the marketing of one of its products, the PAS,
and it is not currently possible to predict the demand and market acceptance for
the PAS or any of the Company's other products. Accordingly, there can be no
assurance that the Company's development and commercialization activities will
be successful, that the Company will receive FDA clearance for any of its other
products, or that any of the Company's devices will be commercially viable and
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<PAGE>
successfully marketed, or that the Company will ever achieve significant levels
of revenue or profits, if any.
DEPENDENCE ON THIRD PARTY MANUFACTURING; LIMITED MARKETING CAPABILITIES.
-----------------------------------------------------------------------
The Company has no manufacturing capabilities and, as a result, will rely in the
foreseeable future on third parties to manufacture its products. The Company
must be able to effect the manufacture of the PAS, and any other devices that it
will seek to commercialize, in sufficient quantities, in compliance with
regulatory requirements and at acceptable costs. Further, the Company and
third-party manufacturers will need to comply with FDA and other regulatory
requirements in connection with its manufacturing activities and facilities,
including FDA Good Manufacturing Practice ("GMP") regulations. The Company
entered into an agreement with a third-party manufacturer in January of 1996,
effective as of December 15, 1995, for the manufacture of the PAS. Although
this manufacturer satisfies the FDA's GMP regulations, in the event that the
Company experiences substantial sales of its PAS device, of which there can be
no assurance, the Company may have to identify other third party manufacturers
in connection with additional manufacturing of the PAS as well as the
anticipated manufacturing of the CRS and ICP devices. There can be no assurance
that such other manufacturers can be identified on commercially acceptable
terms, or at all, or that such other manufacturers, if identified, will be
adequate for the Company's long-term needs, or that they can meet all relevant
regulatory requirements. Moreover, there can be no assurance that the Company's
manufacture of products on a limited scale basis means that the Company can
effect the successful transition to commercial, large-scale production.
Finally, changes in methods of manufacture, including commercial scale-up, can,
among other things, require the performance of new clinical studies under
certain circumstances.
The Company currently has a limited sales and marketing staff and does not
presently intend to establish its own sales force. Thus, expenditures,
management resources and time will be required to market any of the Company's
products which may be approved for commercialization. The Company presently
intends to form marketing alliances with independent distributors or corporate
partners, as well as effect direct sales through regional managers. As a
consequence, the Company's current marketing and sales strategy will
substantially rely on unaffiliated third parties to effect the sales of its
products. There can be no assurance that such a strategy will be successful and
that the Company will not have to incur significant additional expenditures,
which may include the employment of sales personnel, in order to successfully
effect the sales of its products.
NO ASSURANCE OF MARKET FOR PAS DEVICE; NEED FOR CERTAIN MINIMUM PAS SALES.
-------------------------------------------------------------------------
Although the Company commenced the marketing of the PAS device in January 1996,
to date the Company has not effected any significant sales of the PAS device.
The Company currently believes that before the PAS will experience any
significant sales that the Company will have to convince the medical community
of the unreliability of infection control barriers such as latex surgical
gloves, particularly in the absence of obvious breaches, punctures or tears of
the gloves. In order for the PAS to be successful, the Company must demonstrate
that fluid contact between health care professionals and patients occurs as a
routine matter as a result of the saturation of latex surgical gloves even when
such gloves have not been punctured or torn. The Company also needs to
establish that when fluid contact does occur between health care professionals
and patients as a result of saturated but otherwise non-damaged latex gloves,
that pathogens (which are disease producing organisms) are transmitted between
the health care professional and the patient, thus resulting in a health risk to
both
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<PAGE>
parties. There can be no assurance that the Company will be able to establish
to the medical community the need for a device like the PAS and consequently,
there can be no assurance that a market will develop for the PAS device. The
failure of the Company to establish a market for the PAS device and effect
significant sales of the PAS device would have a material adverse effect on the
Company. Further, in the event that the Company does not effect certain minimum
sales of the PAS device in 1996, the Company will require additional capital in
order to sustain itself even if its proposed Offering is successfully completed.
NO ASSURANCE OF MARKET FOR CRS DEVICE. The Company received pre-market
-------------------------------------
clearance for the CRS device with respect to urological procedures on March 28,
1996. Nevertheless, the Company will not commence marketing the CRS until the
fourth quarter of 1996 so that the Company can complete pre-marketing clinical
trials. The Company currently believes that before the CRS will experience any
significant sales that the Company will have to establish to the medical
community the device's efficacy to accurately detect bladder cancer,
particularly as compared to current methods. As a consequence, the Company has
commissioned four leading urologists and one pathologist to conduct pre-
marketing clinical trials to establish the efficacy of the CRS device in
detecting bladder cancer. There can be no assurance that the Company will be
able to establish to the medical community that the CRS device is effective in
detecting bladder cancer and consequently there can be no assurance that a
market will develop for the CRS device relative to the detection of bladder
cancer, which is the Company's initial application of the CRS device. Further,
since the Company has not yet commenced adaptation of the CRS device for other
procedures, there can be no assurance at this time that there will be a market
for any other procedures, if any, for which the Company is successful in
adapting the CRS device. The failure of the Company to establish a market for
the CRS device and effect significant sales of the CRS device in the urology or
any other field could have a material adverse effect on the Company.
POTENTIAL FOR INCREASED ROYALTIES WITH RESPECT TO THE ICP DEVICE. In
----------------------------------------------------------------
addition to the license agreements that the Company has entered into with
respect to the ICP, the Company also entered into an agreement with respect to
the ICP device on November 23, 1992 with Hampton Morgan Holdings, S.A., a
Panamanian company ("Hampton Morgan"), which was controlled by a then
substantial shareholder of the Company (the "Hampton Morgan agreement"). The
Company had previously retained the consulting services of Hampton Morgan in
June of 1992 in connection with the CRS device. The Hampton Morgan Agreement
provided, among other things, for (i) a payment of 166,667 shares of Common
Stock to Hampton Morgan as a finder of the ICP device, (ii) royalties to Hampton
Morgan equal to 8% of gross sales of the ICP, and (iii) the issuance of
2,000,000 shares of Common stock to Hampton Morgan upon the Company achieving
gross sales of $10,000,000 with respect to the ICP. The Company issued the
166,667 shares to Hampton Morgan as a finder in 1992, but the Company, on the
advice of counsel, believes that the balance of the Hampton Morgan Agreement is
not enforceable because Hampton Morgan has failed to make certain required
payments to the Company under the Hampton Morgan Agreement. Consequently, the
Company does not intend to pay the 8% royalty or 2,000,000 shares of Common
Stock to Hampton Morgan. In the event that the Company is incorrect and has to
pay some or all of the royalty payments and/or shares of Common Stock to Hampton
Morgan under the Hampton Morgan Agreement, it would have a material adverse
effect on the potential profitability of the ICP and could have a material
effect on the Company as a whole.
-8-
<PAGE>
NO ASSURANCE OF IDENTIFICATION; ACQUISITION OR COMMERCIALIZATION OF
-------------------------------------------------------------------
ADDITIONAL TECHNOLOGIES. From time to time, if the Company's resources allow,
- -----------------------
the Company intends to explore the acquisition and subsequent development and
commercialization of additional patented technologies in the medical device
field. There can be no assurance, however, that the Company will be able to
identify any additional technologies and, even if suitable technologies are
identified, there can be no assurance that the Company will have sufficient
funds to commercialize any such technologies or that any such technologies will
ultimately be viable.
GOVERNMENT REGULATIONS. The Company's medical device products are subject
----------------------
to extensive government regulations in the United States and in other countries.
In order to clinically test, produce, and market its devices, the Company must
satisfy numerous mandatory procedures, regulations, and safety standards
established by the FDA, and comparable state and foreign regulatory agencies.
Typically, such standards require that the products be cleared by the government
agency as safe and effective for their intended use prior to being marketed for
human applications. The clearance process is expensive and time consuming.
Other than with respect to the PAS, no assurance can be given that clearances
will be granted for the sale of the Company's products or that the length of
time for clearance will not be extensive, or that the cost of attempting to
obtain any such clearances will not be prohibitive.
The FDA employs a rigorous system of regulations and requirements governing
the clearance processes for medical devices, requiring, among other things, the
presentation of substantial evidence, in certain cases, based upon clinical
studies, establishing the safety and efficacy of new medical devices. The
principal methods by which FDA clearance is obtained are pre-market approval,
which is for products that are not comparable to any other product in the
market, or filing a pre-market notification under Section 510(k) of the Food,
Drug and Cosmetics Act (a "510(k)") which is for products that are similar to
products that have already received FDA clearance. Although both methods may
require clinical testing of the products in question under an approved protocol,
because PMA clearance relates to more unique products, the PMA procedure is more
complex and time consuming. Applicants under the 510(k) procedure must prove
that the products for which clearance is sought are substantially equivalent to
products on the market prior to the Medical Device Amendments of 1976, or
products approved thereafter pursuant to the 510(k) or PMA procedure. The
review period for a 510(k) application is typically ninety (90) days from the
date of filing the application, although there can be no assurance that the
review period will not extend beyond such ninety (90) day period.
Under the PMA procedure, the applicant is required to conduct substantial
clinical testing to determine the safety, efficacy and potential hazards of the
product. The review period under a PMA application is one hundred eighty (180)
days from the date of filing, and the application is not automatically deemed
cleared if not rejected during that period. The preparation of a PMA
application is significantly more complex, expensive and time consuming than the
510(k) procedure. Further, the FDA can request additional information, which
can prolong the clearance process.
In order to conduct human clinical studies for any medical procedure
proposed for the Company's products, the Company could also be required to
obtain an Investigational Device Exemption ("IDE") from the FDA, which would
further increase the time before potential FDA clearance. In order to obtain an
IDE, the Company would be required to submit an application to
-9-
<PAGE>
the FDA, including a complete description of the product, and detailed medical
protocols that would be used to evaluate the product. In the event an
application were found to be in order, an IDE would ordinarily be granted
promptly thereafter.
The Company may be required to use the PMA process for either or both of
the CRS or ICP devices, in order to be granted final FDA clearance. The
clearance process can take from a minimum of six (6) months to several or more
years, and there can be no assurance that FDA clearance will be granted for the
commercial sale or for routine clinical use of either the CRS or the ICP.
The FDA also imposes various requirements on manufacturers and sellers of
medical devices under its jurisdiction, such as labeling, manufacturing
practices, record keeping and reporting requirements. The FDA may also require
post-market testing and surveillance programs to monitor a product's effect.
There can be no assurance that the appropriate clearance from the FDA will be
obtained, that the process to obtain such clearance will not be excessively
expensive or lengthy, or that the Company will have sufficient funds to pursue
such clearances. Moreover, failure to receive requisite clearance for the
Company's products or processes would prevent the Company from commercializing
its products as intended, and would have a menially adverse effect on the
business of the Company.
Even after regulatory clearance is obtained, any such clearance may include
significant limitations on indicated uses. Further, regulatory clearances are
subject to continued review, and later discovery of previously unknown problems
may result in restrictions with respect to a particular product or manufacturer,
including withdrawal of the product from the market, or sanctions or fines being
imposed on the Company.
Distribution of the Company's products in countries other than the United
States may be subject to regulation in those countries. There can be no
assurance that the Company will be able to obtain the approvals necessary to
market its medical devices outside of the United States.
PATENTS AND INTELLECTUAL PROPERTY RIGHTS. The Company has entered into an
----------------------------------------
exclusive license agreement with respect to each of the patents underlying the
Company's first three products, the PAS, CRS and ICP devices. There can be no
assurance, however, that such patents will provide the Company with significant
protection from competitors. Patent protection relative to medical devices is
generally uncertain, and involves complex legal and factual questions. To date,
there has emerged no consistent policy regarding the breadth of claims allowed
in connection with the patent protection of medical devices. Accordingly, there
can be no assurance that any patents licensed by the Company will afford
protection against competitors with similar technologies. Finally, there can be
no assurance that the Company will have the financial resources necessary to
enforce its patent rights.
Even though the Company has licensed patents, under the terms of the
Company's license agreements, the Company is responsible for protecting such
patents. Challenges may be instituted by third parties as to the validity,
enforceability and infringement of the patents. Further, the cost of the
litigation to defend any challenge to the Company's licensed patents or to
uphold the validity and enforceability and prevent infringement of the Company's
licensed patents can be substantial.
-10-
<PAGE>
In the event that others are able to design around the Company's licensed
patents, the Company's business could be materially and adversely affected.
The Company may be required to obtain additional licenses from others to
continue to refine, develop, manufacture, and market new products. There can be
no assurance that the Company will be able to obtain any such license on
commercially reasonable terms, or at all, or that the rights granted pursuant to
any licenses will be valid and enforceable.
Notwithstanding the Company's exclusive license with respect to the patents
underlying the PAS, CRS and ICP, there can be no assurance that others will not
independently develop similar technologies, or design around the patents. If
others are able to design around the patents, the Company's business will be
materially adversely affected. Further, the Company will have very limited, if
any, protection of its proprietary rights in those jurisdictions where it has
not effected any patent filings or where it fails to obtain patent protection
despite filing therefor.
Even though the two patents underlying the Company's three medical devices
have been issued by the United States Patent and Trademark Office, challenges
may be instituted by third parties as to the validity and enforceability of the
patents. The Company is not presently aware of any challenges to the patents.
Similarly, the Company may also have to institute legal actions in order to
protect infringement of the patents by third parties. The Company is not
presently aware of any such infringements. The costs of litigation or
settlement in connection with the defense of any third party challenges relative
to the validity and enforceability of its patents and/or to prevent any
infringement of the patents by third parties, which pursuant to the license
agreements with respect to the patents are the Company's responsibility, could
be substantial. Moreover, in the event that the Company was unsuccessful in any
such litigation, the Company could be materially adversely affected.
In addition to relying on patent protection for its products, of which
there is no assurance, the Company will also attempt to protect its products,
processes and proprietary rights by relying on trade secret laws and non-
disclosure and confidentiality agreements, as well as exclusive licensing
arrangements with persons who have access to its proprietary materials or
processes, or who have licensing or research arrangements exclusive to the
Company. Despite these protections, no assurance can be given that others will
not independently develop or obtain access to such materials or processes, or
that the Company's competitive position will not be adversely affected thereby.
To the extent members of the Company's Scientific Advisory Board have consulting
arrangements with, or are employed by, a competitor of the Company, such members
might encounter certain conflicts of interest, and the Company could be
materially adversely affected by the disclosure of the Company's confidential
information by such advisors.
COMPETITION; PRODUCT OBSOLESCENCE. The medical device industry is
---------------------------------
intensely competitive, particularly in terms of price, quality and marketing.
Most of the Company's competitors are better established and have substantially
greater financial, marketing and other resources than the Company. Further,
most of the Company's competitors have been in existence for a substantially
longer period of time and may be better established in those markets where the
Company intends to sell its devices. Although the Company is not presently
aware of any competitor that commercially manufactures and sells any medical
devices similar to those the Company presently intends to sell, the Company is
-11-
<PAGE>
aware that several technologies similar to the PAS are being developed and
tested. Due to the Company's relative lack of experience, financial, marketing
and other resources, even though it has received FDA clearance for the PAS,
there can be no assurance that the Company will be able to market this device
successfully, develop and market any of its other medical devices, or compete in
the medical device industry in general.
Moreover, competitors may develop and successfully commercialize medical
devices that directly or indirectly accomplish what the Company's medical
devices are designed to accomplish in a superior and/or less expensive manner.
As a consequence, such competing medical devices may render the Company's
medical devices obsolete. There can be no assurance that, either prior to or
after the Company has developed, commercialized and marketed any of its medical
devices that such devices will not be rendered obsolete by competing medical
devices.
HEALTH CARE REFORM AND RELATED MEASURES; UNCERTAINTY OF PRODUCT PRICING AND
---------------------------------------------------------------------------
REIMBURSEMENT. The levels of revenues and profitability of sales of medical
- --------------
devices may be affected by the continuing efforts of governmental and third
party payors to contain or reduce the costs of health care through various means
and the initiatives of third party payors with respect to the availability of
reimbursement. For example, in certain foreign markets, pricing or
profitability of medical devices could be subject to government control. In the
United States there have been, and the Company expects that there will continue
to be, a number of federal and state proposals to implement similar governmental
control. Although the Company cannot predict what legislative reforms may be
proposed or adopted or what actions federal, state or private payors for health
care goods may take in response to any health care reform proposals or
legislation, the existence and pendency of such proposals could have a material
adverse effect on the Company in general.
In both the United States and elsewhere, sales of medical products are
dependent, in part, on the availability of reimbursement to the consumer from
third party payors, such as governmental and private insurance plans. In
addition, two of the Company's three products, the CRS and the ICP, also involve
a medical procedure. As is the case with medical products, medical procedures
are also dependent in part on the availability of reimbursement from third-party
payors. There can be no assurance that any of the Company's products, or the
procedures that accompany the CRS and ICP, will be reimbursable to the consumer
in whole or in part. To the extent any or all of the Company's medical devices,
and any accompanying medical procedures, are not reimbursable to the consumers
by third-party payors, the Company's ability to sell its products on a
competitive basis will be adversely affected, which could have a material
adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL. The Company's success will depend to a large
---------------------------
extent upon its ability to retain Mr. M. Lee Hulsebus, its Chief Executive
Officer and Chairman of the Board. The Company intends to obtain a term "key
man life insurance policy" in the amount of $1,000,000 with respect to Mr.
Hulsebus of which the Company will be the sole beneficiary in the event of his
death. The loss or unavailability of the services of Mr. Hulsebus would have a
material adverse effect on the business and operations of the Company.
NEED FOR ADDITIONAL PERSONNEL. In the event that the Company receives FDA
-----------------------------
clearance for the CRS or ICP devices, or there is significant commercial demand
for the PAS, the Company will need to hire additional administrative and sales
and marketing personnel. These demands are
-12-
<PAGE>
expected to require the addition of new management personnel and the development
of additional expertise by existing management personnel. There can be no
assurance that the Company will be able to hire and retain the additional
personnel that it will require. Failure to do so could have a material adverse
effect on the Company.
CONTINUED NASDAQ SMALLCAP LISTING. The Company's Common Stock is presently
---------------------------------
listed on the Nasdaq SmallCap Market. The National Association of Securities
Dealers Automated Quotation System has established certain standards for the
initial listing and continued listing of a security on the Nasdaq SmallCap
Market. The maintenance standards require, among other things, that an issuer
have total assets of at least $2,000,000, capital and surplus of at least
$1,000,000, a minimum bid price for the listed securities of $1.00 per share,
and that the minimum market value of the "public float" be at least $1,000,000.
The Company intends to continue to list its Common Stock on the Nasdaq SmallCap
Market. However, there can be no assurance that the Company will continue to
satisfy the minimum price per share or other standards required for the
continued Nasdaq SmallCap Market listing of its Common Stock. If the Company's
Common Stock were excluded from the Nasdaq SmallCap Market it would materially
adversely affect the price and liquidity of the Common Stock and the Preferred
Stock. In the event that the Company is unable to satisfy Nasdaq SmallCap
Market's maintenance requirements, trading would be conducted in the "pink
sheets" or the OTC's Electronic Bulletin Board. As a consequence, trading with
respect to the Company's Common Stock would be subject to the so-called "penny
stock" rules. Unless an exception is available, the penny stock rules require,
among other things, the delivery to a prospective purchaser, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock rules and the risks associated therewith. If the Company's Common
Stock was subject to the regulations on penny stocks, the market liquidity for
the Common Stock would be severely affected by limiting the ability of
broker/dealers to sell the Common Stock in the public market. There is no
assurance that trading in the Company's securities will not be subject to these
or other regulations that would materially adversely affect the market for such
securities.
VOLATILITY OF THE COMPANY'S COMMON STOCK PRICES. The market price of the
-----------------------------------------------
Company's Common Stock has experienced significant volatility. Various factors
and events, including announcements by the Company or its competitors concerning
patents, proprietary rights, technological innovations or new commercial
products, as well as public concern about the safety of medical devices in
general, may have a significant impact on the Company's business and the price
of the Company's Common Stock.
NO DIVIDENDS WITH RESPECT TO COMMON STOCK. The Company has not paid any
-----------------------------------------
cash dividends with respect to its Common Stock, and it is unlikely that the
Company will pay any dividends on its Common Stock in the foreseeable future.
The Company is not required to pay current dividends with respect to its
currently outstanding Preferred Stock buy may be required to do so in the
future. Earnings, if any, that the Company may realize will be retained in the
business for further development and expansion.
PRODUCT LIABILITY AND INSURANCE. The Company's business could, in the
-------------------------------
future, expose it to product liability claims for personal injury or death.
Such risks are inherent in the testing, manufacturing and marketing of its
products and services. Although the Company recently obtained product liability
insurance, there can be no assurance that such insurance will provide adequate
-13-
<PAGE>
coverage against potential liabilities or that it will be able to maintain or,
if need be, increase such coverage.
BROAD MANAGEMENT DISCRETION IN APPLICATION OF PROCEEDS. A substantial
------------------------------------------------------
portion of the proceeds of this offering will be applied to working capital of
the Company. The Company's management will therefore have broad discretion with
respect to the application of the proceeds of this offering in order to
accommodate changing circumstances.
ANTI-TAKEOVER PROVISIONS; POISON PILL ISSUANCE OF OTHER PREFERRED STOCK;
------------------------------------------------------------------------
UTAH ANTI-TAKEOVER PROVISIONS. The Company's Certificate of Incorporation and
- -----------------------------
By-Laws contain provisions that may make the acquisition of control of the
Company by means of tender offer, over-the-counter market purchases, a proxy
fight or otherwise, more difficult. This could prevent securityholders from
realizing a premium on their securities of the Company. The Company also
adopted a staggered Board of Directors at its most recent annual meeting of
shareholders, which is a further impediment to a change in control.
The Company has adopted a so-called "poison pill." Specifically, the
Company's Articles of Incorporation contains provisions significantly increasing
the cost to an unwanted party to acquire control of the company upon the
acquisition by such unwanted suitor of 15% of the outstanding voting power of
the Company.
Also, the Board of Directors may issue one or more series of preferred
stock without any action on the part of the shareholders of the Company, the
existence and/or terms of which may adversely affect the rights of holders of
the Common Stock. The issuance of any such additional preferred stock may be
used as an "anti-takeover" device without further action on the part of the
shareholders. Issuance of additional preferred stock, which may be accomplished
through a public offering or a private placement to parties favorable to current
management, may dilute the voting power of holders of Common Stock (such as by
issuing preferred stock with super voting rights) and may render more difficult
the removal of current management, even if such removal may be in the
shareholders' best interests. See "Description of Capital Stock".
The Company is subject to the provisions of Sections 61-6-3 through 61-6-12
of the Utah Control Shares Acquisition Act, an anti-takeover statute. These
provisions effectively provide that in the event a person acquires ownership or
the power to effect, directly or indirectly, the exercise of the voting power of
securities of a Utah corporation which, when added to all other securities of
such Utah corporation owned by such person or in respect to which such person
may exercise or direct the exercise of voting power, entitles such person to
exercise or direct the exercise of the voting power of 1/5 or more of all voting
power in the election of such Utah corporation's directors, then such person
shall only be entitled to vote to the extent expressly agreed to by a resolution
approved by the majority of the other shareholders of the corporation.
Accordingly, potential acquirors of the Company may be discouraged from
attempting to effect acquisitions of the Company's voting securities, thereby
possibly depriving holders of the Company's securities of certain opportunities
to sell or otherwise dispose of such securities at above-market prices.
LITIGATION. The Company is currently involved in a lawsuit that could have
----------
a material adverse effect on the Company. Please see the Company's 1995 10-KSB.
-14-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE. There are presently 3,746,856 shares of
-------------------------------
Common Stock that were issued and outstanding that are "restricted securities"
as that term is defined by Rule 144 of the Securities Act. Of such shares,
3,182,175 shares of which are covered by this Prospectus and additional 212,966
of which are currently eligible for resale in compliance with Rule 144 of the
Securities Act, of which 5,336 shares are owned by current officers and
directors of the Company. Following the date of this Prospectus, 176,766 shares
owned by current officers and directors of the Company will be eligible for
resale.
SELLING SHAREHOLDERS
All of the Securities offered hereby will be sold for the account of the
Selling Shareholders. Information regarding the Selling Shareholders is set
forth in the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES OR SHARES SHARES OWNED
REGISTERED OWNER WARRANTS OWNED OFFERED HEREBY AFTER OFFERING
---------------- -------------- -------------- --------------
<S> <C> <C> <C>
Don Arnwine 43,750 Shares 37,500 12,500
6,250 Warrants
John E. Brennan 71,430 Shares 96,430 0
25,000 Warrants
Marguerite C. Calvert 62,500 Shares 75,000 0
12,500 Warrants
William Chang 31,250 Shares 37,500 0
6,250 Warrants
David Cooper 35,715 Shares 48,215 0
12,500 Warrants
James Cullen 31,250 Shares 37,500 0
6,250 Warrants
Randall E. Fischer 35,715 Shares 48,215 0
12,500 Warrants
Fundamental Growth Partners, 71,430 Shares 96,430 0
Ltd. 25,000 Warrants
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OR SHARES SHARES OWNED
REGISTERED OWNER WARRANTS OWNED OFFERED HEREBY AFTER OFFERING
---------------- -------------- -------------- --------------
<S> <C> <C> <C>
(Cont'd.)
Robert R. Gerhart, Jr. 142,860 Shares 192,860 0
50,000 Warrants
Gary and Kaythi Gieseke 17,858 Shares 24,180 0
6,250 Warrants
Thomas E. Glasgow 135,555 Shares 133,930 32,875
31,250 Warrants
Edward C. Gomez 71,430 Shares 96,430 0
25,000 Warrants
Harold L. Housh 31,250 Shares 37,500 0
6,250 Warrants
Al Hulsebus 62,500 Shares 75,000 0
12,500 Warrants
Larry Hulsebus 62,500 Shares 75,000 0
12,500 Warrants
Andrew C. Katcher 71,430 Shares 96,430 0
25,000 Warrants
John W. Keck 31,250 Shares 37,500 0
6,250 Warrants
J. Harris Levy 17,858 Shares 24,180 0
6,250 Warrants
Virgil W. McDonald 571,440 Shares 771,440 0
200,000 Warrants
Gerald E. and Janice K. Meltzer 35,715 Shares 48,215 0
12,500 Warrants
Robert E. Meshel 77,930 Shares 96,430 6,500
25,000 Warrants
Esther Purjes 125,000 Shares 150,000 0
25,000 Warrants
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OR SHARES SHARES OWNED
REGISTERED OWNER WARRANTS OWNED OFFERED HEREBY AFTER OFFERING
---------------- -------------- -------------- --------------
<S> <C> <C> <C>
(Cont'd.)
Stuart Ross 62,500 Shares 75,000 0
12,500 Warrants
David M. Schneider 35,715 Shares 48,215 0
12,500 Warrants
Noriyuki K. Shimoda 31,250 Shares 37,500 0
6,250 Warrants
Isaac and Rebeca Sklar 17,858 Shares 24,108 0
6,250 Warrants
Ruben Sklar 17,858 Shares 24,108 0
6,250 Warrants
Jon Solow 17,858 Shares 24,108 0
6,250 Warrants
Joseph P. Swick 102,680 Shares 133,930 0
31,250 Warrants
Donald D. Walker 35,715 Shares 48,215 0
12,250 Warrants
David Weiner 62,500 Shares 75,000 0
12,250 Warrants
First Equity Group, Inc. -0- Shares 300,000 0
300,000 Warrants
Rator of North America -0- Shares 56,250 0
56,250 Warrants
------------------ -------------- -----------
Total: 3,234,050 3,182,175 51,875
</TABLE>
All Securities covered by this Prospectus are sold by the Selling
Shareholder, no Selling Shareholder would own one percent or more of the
Company's outstanding Common Stock.
Except as set forth below, none of the Selling Shareholders has any
position, office or other material relationship with the Company (or had any
such position, office or material relationship
-17-
<PAGE>
within the past three years), or will own greater than one percent of the Common
Stock of the Company after this Offering. Mr. Thomas Glasgow and Mr. Don
Arnwine, each of whom is a director of the Company, respectively, own 133,930
and 37,500 of the Selling Shareholders' Shares covered by this Prospectus.
Neither Mr. Glasgow nor Mr. Arnwine have any present intention to sell or
otherwise dispose of any of their Common Stock covered by this Prospectus. Mr.
Robert E. Meshel, whose law firm, The Law Offices of Robert E. Meshel, serves as
general counsel to the Company, owns 96,430 shares of the Selling Shareholders'
shares covered by this Prospectus.
The Selling Shareholders purchased or will have purchased their Shares as
follows: (i) 1,482,175 Shares directly and another 518,750 Shares upon the
exercise of warrants issued in a private placement offering of units of Common
Stock and warrants completed in 1995; (ii) 687,500 shares upon the conversion
of convertible notes in December, 1995 and 137,500 shares upon the exercise of
warrants issued with such convertible notes in a private placement offering
completed in 1995; and (iii) in the case of First Equity Group, Inc., and Rator
of North America, a total of 356,250 Shares pursuant to the exercise of warrants
issued to them in 1995.
DESCRIPTION OF CAPITAL STOCK
The summary of the terms of the capital stock of the Company set forth
below does not purport to be complete and is subject to and qualified in its
entirety by reference to the Company's Articles of Incorporation, as amended,
(the "Charter") and its bylaws, copies of which are exhibits to the Registration
Statement of which this Prospectus is a part. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
GENERAL
The Company is authorized to issue 100,000,000 shares of Common Stock, par
value $0.15 per share, of which 8,645,099 shares were issued and outstanding as
of January 29, 1996. The Company is also authorized to issue up to 10,000,000
shares of Preferred Stock, 247,500 of which are outstanding.
The Transfer Agent of the Company's Common Stock is Atlas Stock Transfer
Corporation, 5899 South State Street, Salt Lake City, Utah 84107.
COMMON STOCK
All shares of the Common Stock sold pursuant to this Prospectus are duly
authorized, fully paid and nonassessable. Subject to the preferential rights of
any series of Preferred Stock, holders of the Common Stock are entitled to
receive distributions on such shares if, as and when authorized and declared by
the Board of Directors of the Company out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its stockholders in the event of its liquidation, dissolution or
winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company. Holders of the Common Stock have no conversion,
sinking fund, redemption rights or preemptive rights to subscribe for any
securities of the Company. All shares of Common Stock have equal dividend,
distribution, liquidation and other rights, and will
-18-
<PAGE>
have no preference, appraisal or exchange rights. The Company does not
currently pay and does not intend to pay any distributions or dividends on the
Common Stock.
Each outstanding share of Common stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any other class or series of stock, the holders of such shares will
possess the exclusive voting power. There is no cumulative voting in the
election of directors, which means that the holders of a majority of the
outstanding shares can elect all of the directors then standing for election and
the holders of the remaining shares will not be able to elect any directors.
PREFERRED STOCK
As of the date of this Prospectus, the Company had outstanding 247,500
shares of Series I Preferred Stock. The Series I Preferred Stock has a
liquidation preference over the Company's Common Stock and any classes of junior
preferred stock of $5.00 per share. The Series I Preferred Stock will be
converted into Common Stock and/or other equity securities of the Company under
specified conditions.
PLAN OF DISTRIBUTION
The plan of distribution of the Selling Shareholders and of the Company is
set forth on the cover page of this Prospectus. The Selling Shareholders
reserve the sole right to accept and, together with any agent of the Selling
Shareholders, to reject in whole or in part any proposed purchase of the
Securities. The Selling Shareholders will pay any sales commissions or other
seller's compensation applicable to such transactions. The Selling Shareholders
and agents who execute orders on their behalf may be deemed to be underwriters
as that term is defined in Section 2(11) of the Securities Act of 1933, as
amended (the "Securities Act"), and a portion of any proceeds of sales and
discounts, commissions or other seller's compensation may be deemed to be
underwriting compensation for purposes of the Securities Act. Certain of the
Selling Shareholders may pledge or otherwise encumber shares covered by this
Prospectus pursuant to agreements with lenders, and to the extent such shares
subsequently become the property of such lenders pursuant to such agreements,
such shares may be offered and sold from time to time by such lenders in the
manner set forth above. The Company has agreed to indemnify certain of the
Selling Shareholders and any underwriter (as defined in the Securities Act) for
such Selling Shareholders against certain liabilities, including liabilities
under the Securities Act.
All of the securities to be issued upon the exercise of the Warrants are to
be offered initially for the account of the Company. The Company will not pay
any sales commissions or other seller's compensation in connection with the
exercise of the Warrants. Securities issued upon the exercise of the Warrants
will be freely transferrable by the holders thereof (subject to certain
limitation upon ownership set forth in the Articles of Incorporation of the
Company, as described herein), except for such Securities received by persons
who may be deemed to be "affiliates" of the Company (within the meaning of Rule
144 promulgated under the Securities Act of 1933, as amended (the "Act")).
Persons who are deemed to be affiliates of the Company within the meaning of
Rule 144 may not publicly offer or sell such Securities received upon exercise
of the Warrants except pursuant to an
-19-
<PAGE>
effective registration statement under the Act or pursuant to Rule 144 under
such Act (without regard to the applicable holding period provided thereunder).
The holders of the Warrants are entitled to exercise the Warrants from time
to time until their respective expiration dates for an aggregate of up to
1,012,500 shares of the Securities, representing approximately ten and eight-
tenths percent (10.5%) of the outstanding Common Stock of the Company on a fully
diluted basis at January 31, 1995. The Company has not been advised when or
whether the holders of the Warrants intend to exercise their Warrants, or if
they do so, whether they intend to sell their securities received as a result of
such exercise.
EXPERTS
The financial statements of the Company included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994, as amended, and
incorporated by reference in this Prospectus have been incorporated by reference
in reliance upon the report of Robert Early & Company, P.C., independent
accountants, given on the authority of that firm as experts in accounting and
auditing. The financial statements of the Company included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995, as
incorporated by reference in this Prospectus have been incorporated by reference
in reliance upon the report of BDO Seidman, LLP, independent accountants, given
on the authority of that firm as experts in accounting and auditing. BDO
Seidman, LLP's report includes an explanatory paragraph that the Company's
recurring losses from operations, negative working capital and limited capital
resources raise substantial doubt about the Company's ability to continue as a
going concern.
LEGAL MATTERS
Certain legal matters regarding the Shares will be passed upon for the
Company by Rushall & McGeever, Carlsbad, California.
-20-
<PAGE>
================================================================================
No dealer, salesperson or other individual has been authorized to give any
information or make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer by the Company to sell, or a solicitation of an offer to
buy, the securities offered hereby in any jurisdiction where, or to any person
whom, it is unlawful to make an offer or solicitation. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has been any change in the affairs of the
Company since the date hereof or that the information contained herein is
correct or complete as of any time subsequent to the date hereof.
_____________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION ......................................... -2-
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ............... -2-
PROSPECTUS SUMMARY ............................................ -3-
THE COMPANY ................................................... -4-
RISK FACTORS .................................................. -5-
SELLING SHAREHOLDERS .......................................... -15-
DESCRIPTION OF CAPITAL STOCK .................................. -18-
PLAN OF DISTRIBUTION .......................................... -19-
EXPERTS ....................................................... -20-
LEGAL MATTERS ................................................. -20-
</TABLE>
================================================================================
MEDICAL DEVICE
TECHNOLOGIES, INC.
3,182,175 SHARES
COMMON STOCK
________
PROSPECTUS
________
APRIL ___, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 1. Other Expenses of Issuance and Distribution.
-------------------------------------------
The following is an itemized statement of expenses incurred in connection
with this Registration Statement. All such expenses will be paid by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 835.00
Accounting and Legal Fees and Expenses 10,000.00
Printing 5,000.00
Miscellaneous Expenses 2,000.00
----------
TOTAL $17,835.00
</TABLE>
All of the above items except the registration fee are estimates.
Item 2. Indemnification of Directors and Officers.
-----------------------------------------
Registrant's Articles of Incorporation and Bylaws and the Utah General
Corporation Law provide for indemnification of directors and officers against
certain liabilities. In general, officers and directors of Registrant are
indemnified against expenses actually and reasonably incurred in connection with
proceedings, whether civil or criminal, provided that it is determined that they
acted in good faith, and are not deemed to be liable to Registrant for
negligence or misconduct in the performance of their duties.
Item 3. Exhibits.
--------
3.1 Articles of Incorporation of Gold Probe, Inc., a Utah corporation,
filed February 6, 1980./(1)/
3.2 Certificate of Amendment to the Articles of Incorporation of Gold
Probe, Inc. filed January 27, 1982./(1)/
3.3 Certificate of Amendment to the Articles of Incorporation of Hailey
Energy Corporation dated October 26, 1986./(1)/
3.4 Certificate of Amendment to the Articles of Incorporation of Hailey
Energy Corporation filed November 2, 1990./(1)/
3.5 Certificate of Amendment to the Articles of Incorporation of Hailey
Energy Corporation filed November 17, 1992./(1)/
3.6 Certificate of Amendment to the Articles of Incorporation of
Cytoprobe Corporation filed May 18, 1995./(2)/
3.7 Certificate of Amendment to the Articles of Incorporation of Medical
Device Technologies, Inc. filed December 14, 1995./(2)/
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<PAGE>
3.8 Certificate of Amendment to Articles of Incorporation of Medical
Device Technologies, Inc. filed January 17, 1996./(3)/
3.9 Certificate of Amendment to Articles of Incorporation of Medical
Device Technologies, Inc. filed January 19, 1996./(3)/
3.10 Bylaws of the Company./(1)/
4.1 Form of Warrant Agreement dated October 31, 1994 by and between the
Company and the holders of the 1994 Unit Warrants for the purchase
of 518,750 shares./(1)/
4.2 Form of Warrant Agreement dated July 5, 1994 by and between the
Company and the holders of the Convertible Note Warrants for the
purchase of 137,500 shares./(1)/
4.3 Form of Warrant Agreement with First Equity Group, Inc./(1)/
4.4 Form of Warrant Agreement with Rator of North America./(1)/
5.1 Opinion of Rushall & McGeever./(4)/
24.1 Consent of Rushall & McGeever (included in Exhibit 5.1 hereto).
24.2 Consent of Robert Early & Company./(4)/
24.3 Consent of BDO Seidman, LLP./(4)/
25.1 Powers of Attorney (included on page II-4 hereof).
__________________________________
/(1)/ Previously filed with this Registration Statement
/(2)/ Incorporated by reference from Form 8-K Report dated January 15, 1996
(File No. 0-12365).
/(3)/ Incorporated by reference from Form 8-K Report dated January 31, 1996
(File No. 0-12365).
/(4)/ To be filed by future Pre-effective Amendment.
Item 1. Undertakings.
------------
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the Securities registered hereby, a post-effective
amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
II-2
<PAGE>
fundamental change in the information set forth in this
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
Provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this Registration
Statement.
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the Securities being registered which remain
unsold at the termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15 (d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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 Securities and Exchange
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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in San Diego, California, on the 8th day of April 1996.
MEDICAL DEVICE TECHNOLOGIES, INC.
By: /s/ M. Lee Hulsebus
-------------------
M. Lee Hulsebus,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints M. Lee Hulsebus his attorney-in-fact and
agent, with full power of substitution and resubstitution for him in any and all
capacities, to sign any or all amendments or post-effective amendments to this
Registration Statement, and to file the same, with exhibits thereto and other
documents in connection therewith or in connection with the registration of the
Common Stock under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, granting unto such attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary in connection with such matters and hereby ratifying and confirming
all that such attorney-in-fact and agent or his substitute or substitutes may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ M. Lee Hulsebus Chairman of the Board, April 8, 1996
- -------------------
M. Lee Hulsebus Chief Executive Officer,
and President
/s/ Don Arnwine Director April 8, 1996
- ---------------
Don Arnwine
/s/ Arthur Bradley Director April 8, 1996
- ------------------
Dr. Arthur Bradley
/s/ Thomas Glasgow Director April 8, 1996
- ------------------
Thomas Glasgow
/s/ Edward C. Hall Chief Financial Officer April 8, 1996
- ------------------
Edward C. Hall
</TABLE>
II-4
