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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
MEDICAL DEVICE TECHNOLOGIES, INC.
(exact name of registrant specified in its charter)
Utah
-----------------------
(State or other jurisdiction of incorporation or organization)
58-1475517
---------------------
(IRS Employer Identification Number)
9171 Towne Centre Drive - Suite 355 - San Diego, California - 92122
(Address of principal executive offices)
1997 STOCK COMPENSATION PLAN
(Full title of the plan)
M. Lee Hulsebus, Chief Executive Officer
Medical Device Technologies, Inc.
9171 Towne Centre Drive - Suite 355 - San Diego, California 92122
(Name and address of agent for service)
(619) 455-7127
(Telephone number, including area code, of agent for service)
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- ------------------------ ------------------ --------------------------- ------------------------- ---------------------
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Aggregate Offering Price Registration Fee
Per Share
- ------------------------ ------------------ --------------------------- ------------------------- ---------------------
<S> <C> <C> <C> <C>
Common Stock 5,000,000 $0.125 $625,000 $189.39
- ------------------------ ------------------ --------------------------- ------------------------- ---------------------
</TABLE>
Notes:
1. If plan interests are being registered, include the following: In
addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to be
offered or sold pursuant to the employee benefit plan(s) and described herein.
2. Specific details relating to the fee calculation shall be furnished in
notes to the table, including references to provisions of Rule 457 relied upon,
if the basis of the calculation is not otherwise evident from the information
presented in the table.
<PAGE>
PART I. INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
This registration statement relates to two separate prospecti.
Items 1 and 2 hereof, and the documents incorporated herein by reference
pursuant to Part II, item 3 hereof, constitutes the first prospectus relating to
offers by the Company to its employees and consultants of 5,000,000 shares (the
"Shares") of common stock, par value $.15 per share (the "Common Stock"), to be
issued pursuant the Company's 1997 Stock Compensation Plan, as amended, (the
"Stock Plan"). The second prospectus relates to the re-offer or resale of any
Shares which are deemed to be "control securities" or "restricted securities"
under the Securities Act of 1933, as amended. The Company's principal offices
are located at 9171 Towne Centre Drive, Suite 355, San Diego, California 92122,
telephone 619/455-7127.
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PROSPECTUS
----------
Item 1. Plan Information
STOCK PLAN INFORMATION
The 1997 Stock Compensation Plan, as amended, was established by the
Company effective on January 10, 1997 to provide the Company flexibility and to
conserve the Company's cash resources in compensating certain of its technical,
administrative and professional employees and consultants. The issuance of
shares under the Stock Plan is restricted to persons and firms who are
closely-related to the Company and who provide services in connection with the
development, production of the Company's products or otherwise in connection
with its business. The Stock Plan authorizes the Company to issue up to
7,250,000 shares of the Company's Common Stock. Shares must be issued only for
bona fide services and may not be issued under the Stock Plan contingent on
services to be rendered in the future or for services in connection with the
offer and sale of securities in a capital-raising transaction. Shares are
awarded under the Stock Plan pursuant to individually negotiated compensation
contracts as determined and/or approved by the Stock Plan Committee (the
"Committee"). The Committee must be comprised of two or more of the Company's
Directors appointed thereto by the Company's Board of Directors. Committee
members need not be independent Directors. Messrs. M. Lee Hulsebus and Thomas E.
Glasgow presently serve on the Committee. Eligible participants include
directors, employees and non-employee consultants and advisors. The Company
intends to award up to 15,000 shares under the Stock Plan to each of its six
directors to compensate them for their service on the Company's Board of
Directors during 1997. Subject to the restriction that shares may not be awarded
under the Stock Plan to persons owning beneficially or of record ten percent
(10%) or more of the Company's then outstanding Common Stock or who would own
such amount of shares as a result of an award under the Stock Plan, there is no
limit as to the number of shares which may be awarded to a single participant.
The Company anticipates that a substantial portion of the shares to be issued
under the Stock Plan will be issued as compensation to technical consultants and
advisors to the Company who provide development and clinical services to the
Company in the development and testing of its various products. Shares may be
awarded under the Stock Plan until January 1999. The Company anticipates all
7,250,000 shares under the Stock Plan will be awarded during 1997 and 1998.
The Stock Plan does not require restrictions on the transferability of
shares issued thereunder. However, such shares may be restricted as a condition
to their issuance where the Board of Directors deems such restrictions
appropriate. The Stock Plan is not subject to the Employee Retirement Income
Securities Act of 1974 ("ERISA"). Shares awarded under the Stock Plan are
intended to be fully taxable to the recipient as earned income.
<PAGE>
Item 2. Registrant Information and Employee Plan Annual Information
The Registrant shall provide without charge, upon written or oral request,
the documents incorporated by reference in Item 3 of Part II of this
Registration Statement. Such documents are incorporated by reference in the
Section 10(a) prospectus. The Registrant shall also provide without charge, upon
written or oral request, all other documents required to be delivered to
employees pursuant to Rule 428(b). Any and all such requests shall be directed
to the Registrant at its office at 9171 Towne Centre Drive, Suite 355, San
Diego, California, 92122.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
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 the
Plan shall, under any circumstances, create any implication that there has been
no change in the affairs of the Company since the date hereof.
The Company's principal offices are located at 9171 Towne Centre Drive,
Suite 355, San Diego, California 92122, telephone 619/455-7127.
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.
The date of this Prospectus is December 5, 1997
<PAGE>
PROSPECTUS
----------
MEDICAL DEVICE TECHNOLOGIES, INC.
5,000,000 shares of Common Stock,
$.15 par value per share
This Prospectus relates to up to 5,000,000 shares of common stock, $.15 par
value (the "Common Stock"), of Medical Device Technologies, Inc., a Utah
corporation (the "Company"), to be issued to various individuals and affiliates
of the Company pursuant to the Company's 1997 Stock Compensation Plan, as
amended, which are deemed control securities and may be re-offered and resold
from time to time by such affiliates. All of the shares of Common Stock
registered hereunder, are sometimes hereinafter referred to as the "Securities."
The holders of the shares of Common Stock are sometimes hereinafter collectively
referred to as the "Selling Stockholders." All costs in connection with the
registration of the Securities are being borne by the Company. The Company will
not receive any of the proceeds from the sale of the Securities pursuant to this
Prospectus.
The Common Stock is quoted on the Nasdaq SmallCap Market under the symbol
"MEDD." The last reported closing bid and asked prices of the Common Stock on
Nasdaq on December 2, 1997 were $0.063 and $0.094 per share.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED ONLY
BY THOSE PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. THE COMPANY HAS
INCURRED SUBSTANTIAL OPERATING LOSSES. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION.
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 constitue an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any Sate in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS 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.
The Selling Stockholders directly or through agents, dealers or
underwriters to be designated from time to time may sell the Securities on terms
to be determined at the time of sale. To the extent required, the number of
Securities to be sold, the respective purchase price and public offering price,
the name of any agent, dealer or underwriter 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."
The Selling Stockholders and any agents, dealers or underwriters that
participate with the Selling Stockholders in the distribution of their shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), and any commissions received by them
and any profits on the resale of the Selling Stockholders' shares, may be deemed
to be underwriting commissions or discounts under the Securities Act. Under
applicable rules and regulations promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), any person engaged in a distribution
of securities may not simultaneously bid for or purchase securities of the same
class for a period of two (2) business days prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Stockholders will be subject to the applicable provisions of the Exchange Act
and the rules and regulations thereunder, including, without limitation, Rules
10b-2, 10b-5, 10b-6 and 10b-7, in connection with transactions in the Securities
during the effectiveness of the Registration Statement of which this Prospectus
forms a part. All of the foregoing may affect the marketability of the
Securities.
The date of this Prospectus is December 5, 1997.
ii
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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, N.W.,
Washington, DC 20549; Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, IL 60661 and 7 World Trade Center, New York, NY 10048. Copies
of such material can be obtained at prescribed rates from the public reference
section of the Commission at 450 Fifth Street, N.W., Washington, DC 20549. The
Commission maintains a web-site that contains reports, proxy and information
statements and other information regarding the Company that are on file with the
Commission. The address of the Commission's web-site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-8 (including all amendments thereto, the "Registration Statement"), with
respect to the Common Stock 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,
N.W., 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.
1
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents
heretofore filed with the Commission: the Annual Report of the Company on Form
10-KSB for the fiscal year ended December 31, 1996; the Definitive Proxy
Statement on Form 14-A dated April 8, 1997 with respect to the Company's 1997
Annual Stockholders Meeting held on May 23, 1997; the Quarterly Reports of the
Company on Form 10-QSB for the periods ended March 31, 1997, June 30, 1997 and
September 30, 1997 and the Company's Form 8-K dated June 23, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering hereby 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 herein by
reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated herein by reference)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
The Company will provide, without charge to each person to whom a
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into the information that is incorporated into the Prospectus. Such
written requests should be directed to the Secretary of the Company at 9171
Towne Centre Drive, Suite 355, San Diego, California 92122, telephone (619)
455-7127.
2
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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 is in the business of identifying, developing and bringing to
market medical devices and their related products which the Company believes are
innovative, represent improvements over existing products, or are responsive to
a presently unfulfilled need in the marketplace. Pursuant to this strategy, the
Company has identified and acquired three licenses to develop products, all of
which the Company believes have commercial viability. In addition, depending on
the specific device and other circumstances, such as the Company's then current
financial and operating situation, the Company pro-actively attempts, on a
limited basis from time to time, to identify and license additional patented
technologies in the medical device field. See "The Company" and "Risk Factors"
below.
The Company's principal offices are located at 9171 Towne Centre Drive,
Suite 355, San Diego, California 92122, telephone (619) 455-7127.
The Offering
- ------------
Up to 5,000,000 shares of Common Stock are being offered pursuant to this
Prospectus which may be offered from time to time by the Selling Stockholders
for their own account.
Plan of Distribution
- --------------------
The Selling Stockholders, 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 SmallCap Market. See "Plan of Distribution."
3
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RISK FACTORS
Investment in the Company's securities involves a high degree of risk.
Investors should carefully consider the following factors, among others,
relating to the Company.
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 Fluid Alarm System
(the "FAS"), in 1996, although to date, the Company has only realized
approximately $83,000 in sales, and no profits, with respect to the FAS 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, 1996, partially as a
result of its unsuccessful oil and gas activities, the Company had an
accumulated deficit of approximately $17,300,000. 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 the Fluid Alarm System, the Company
needs to conduct additional development activities with respect to its other
products, which include clinical testing and establishing manufacturing with
respect to the Cell Recovery System and substantial research and development,
clinical testing and obtaining regulatory clearance with respect to the
Intracranial Pressure Monitoring System. Although the Company received FDA
marketing clearance of the Company's second device, the CRS, in March 1996, the
Company intends to complete certain clinical trials for a follow-up submission
to the FDA to establish that the device is comparable to results achieved from
biopsy, the most costly and invasive biopsy procedure in the detection of
certain urological diseases, such as bladder cancer. There can be no assurance
that the Company will receive 510(k) clearance, which is for products that are
similar to products that have already received FDA clearance (a "510(k)"), from
the FDA for such additional claims or that the FDA will not require the Company
to submit a pre-market approval application (a "PMA") for such claims which
would substantially delay marketing clearance. There can also be no assurance
that the Company will be successful in establishing manufacturing of the
system's instrumentation and disposables. The Company's third device, the ICP,
is still undergoing development.
4
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The Company intends to complete clinical testing and to establish volume
manufacturing with respect to the CRS. The costs of conducting these testing and
clearance procedures, together with projected general and administrative
expenses and projected marketing costs related to the FAS and launch of 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 FAS and to 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 commercialized. Further, the Company's
independent certified public accountants' report on the Company's financial
statements for the year ended December 31, 1996 includes an explanatory
paragraph that the Company's recurring losses from operations 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.
Need for Additional Capital; Possible Issuance of Securities and Corresponding
Possible Future, Substantial Dilution
The Company's cash requirements continue to be significant. In order for
the Company to satisfy its capital needs for the next 12 months, the Company
needs to increase sales of the FAS (which the Company does not presently believe
will be sufficient for the Company to maintain its current level of operations,
including its current product development and research and development plan) and
raise additional capital. The Company has limited commitments with respect to
additional private convertible notes; there can be no assurance that additional
capital can be obtained on terms acceptable to the Company, or at all. Failure
by the Company to realize significant sales and achieve profitability from the
FAS or CRS or obtain additional capital, would have a material adverse effect on
the Company and would cause the Company to substantially curtail product
development
5
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and planned market introduction of its devices due to lack of funds.
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
securities, which dilution could be substantial.
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, 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, 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 development stage 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. Although the Company has commenced the marketing
of one of its products, the FAS, it is not currently possible to predict the
demand and market acceptance for the FAS 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 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 current manufacturing capabilities and will continue to
be forced to rely on third parties to manufacture its products. The Company must
be able to effect the manufacture of the devices that it will seek to
commercialize, in sufficient quantities 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 Current Good Manufacturing Practices ("CGMP")
regulations.
6
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There can be no assurance that third party manufacturers acceptable to the
Company 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.
The Company currently has a limited sales and marketing staff and does not
presently intend to establish its own extended sales force. The Company is
presently seeking to engage independent regional distributors of medical devices
to effect the sale of its FAS device. At a future date the Company may also form
a marketing alliance with a strategic corporate partner with respect to the FAS
device, although there can be no assurance that it will be able to do so.
Similarly, the Company presently intends to engage independent distributors of
medical devices or form marketing alliances with strategic corporate partners to
effect sales of its other two medical devices. 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 the Company will be able to rely on unaffiliated third parties to
successfully effect sales of its products or 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 FAS Device
Although the Company commenced the marketing of the FAS device in 1996, to
date the Company has only realized approximately $83,000 in sales and achieved
limited profitability with respect to the FAS device. The Company currently
believes that before the FAS will experience any significant sales, the Company
will have to convince the medical community of the potential 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
FAS 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 "fluid-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 fluid-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 parties. There can be no
7
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assurance that the Company will be able to convince the medical community the
need for a device like the FAS and consequently, there can be no assurance that
a market will develop for the FAS device. The failure of the Company to
establish a market for the FAS device and effect significant sales of the FAS
device would have a material adverse effect on the Company. Further, in the
event that the Company does not effect sufficient sales of the FAS device, which
the Company does not presently believe that it will be able to obtain, the
Company will be required to raise additional capital.
No Assurance of Market for CRS Device
The Company received marketing clearance for the CRS device with respect to
urological procedures in March 1996. Nevertheless, the Company will not commence
marketing the CRS until 1998, so that the Company can complete certain clinical
trials for a follow-up 510(k) submission to the FDA to establish that the device
assists with the detection of certain urological diseases, such as bladder
cancer. There can be no assurance that the Company will receive 510(k) clearance
from the FDA for such additional claims or that the FDA will not require the
Company to submit a PMA application for such claims that would substantially
delay marketing clearance. The Company also intends to commence, prior to a
scheduled marketing launch of the CRS, manufacturing of the system's
instrumentation and disposables, although there can be no assurance that the
Company will be able to do so. The Company currently believes that before the
CRS will experience any significant sales that the device's capabilities in
assisting with the detection of certain diseases, such as with respect to
assisting the detection of bladder cancer, particularly in comparison to current
cell sampling methods, will have to be established. There can be no assurance
that the Company will be able to establish to the medical community that the CRS
device is as effective as biopsy in assisting the detection of 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. Further, since the
Company has not yet commenced adaptation of the CRS device for any other
procedures, there can be no assurance that there will be a market for any other
procedures 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 urological or any other field could
have a material adverse effect on the Company.
8
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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 Company's Fluid Alarm System and the Cell Recovery System, no assurance
can be given that clearances will be granted for any expanded claims for the CRS
or for the sale of the ICP or any other future products, if any, 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, including clinical studies, establishing
the safety and efficacy of new medical devices. The principal methods by which
FDA clearance is obtained are pre-market approval (a "PMA"), 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 Federal Food, Drug and
Cosmetic 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). The review period for a 510(k)
application is approximately one hundred fifty (150) days from the date of
filing the application, although there can be no assurance that the review
period will not extend beyond such a period.
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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 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 the Intracranial
Pressure Monitoring System or for expanded claims for the CRS in order to be
granted 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 of the Intracranial Pressure
Monitoring System or expanded claims for the CRS device.
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 materially 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.
10
<PAGE>
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 exclusive license agreements with respect to
each of the patents underlying the Company's first three products: the Fluid
Alarm System; the Cell Recovery System; and the Intracranial Pressure Monitoring
System. 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. 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 licenses 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 FAS, 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.
11
<PAGE>
Even though the 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 Scientific 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 with the same technological
advantages as those the Company presently intends to sell, the Company is
12
<PAGE>
presently aware of one technology similar to the FAS that is being developed and
tested, and one that is already in the marketplace, although there can be no
assurance that other similar or competitive technologies are not being
developed. Due to the Company's relative lack of experience, financial,
marketing and other resources 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.
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 is 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 products 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.
Whether a medical procedure is subject to reimbursement from third party
payors impacts upon the likelihood that a medical product associated with such a
procedure will be purchased. Third party payors are increasingly challenging the
prices charged for medical products. Two of the Company's three products, the
CRS and the ICP also involve a medical procedure. 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 extent any or all of the Company's medical
products, and any accompanying medical procedures, are not reimbursable 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.
13
<PAGE>
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 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 clearances for expanded
diagnostic claims with respect to the Cell Recovery System or Intracranial
Pressure Monitoring System, or there is significant commercial demand for the
Fluid Alarm System or Cell Recovery System as currently cleared by the FDA, the
Company will need to hire additional administrative and sales and marketing
personnel. These demands are 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 Company has recently
been notified by Nasdaq that it is not in compliance with one of the alternative
maintenance standards, although the Company's Common Stock will not be excluded
from listing on the Nasdaq SmallCap Market until such failure to comply is
finally resolved in the Nasdaq hearing process. As a result, there can be no
assurance that the Company will be able to satisfy the standards required for
the continued Nasdaq SmallCap Market listing of its Common Stock, and as a
consequence, its securities may be delisted from the Nasdaq SmallCap Market. In
the event that 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.
14
<PAGE>
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.
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. 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. The Company has
product liability insurance which it believes is adequate, however, there can be
no assurance that such insurance will provide sufficient coverage against
potential liabilities or that it will be able to maintain or, if need be,
increase such coverage.
Anti-Takeover Provisions; Poison Pill Issuance of Other Preferred Stock; Utah
Anti-Takeover Provisions
The Company's Articles 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 has a staggered Board of Directors, which is a
further impediment to a change in control.
15
<PAGE>
The Company has adopted a so-called "poison pill." Specifically, the poison
pill significantly increases 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.
In addition, 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. In addition, 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 and the Preferred 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.
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. Sections
61-6-3 through 61-6-12 effectively provide that in the event a person acquires
ownership or the power to effect, directly or indirectly, the exercise of 20% or
more of the voting power of a Utah corporation in connection with the election
of directors, then such person shall only be entitled to vote to the extent
expressly agreed to 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.
Shares Eligible for Future Sale
There are presently 602,688 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, all of which are currently eligible for resale in
compliance with Rule 144 of the Securities Act. Of these shares, 66,965 are
owned by current officers and directors of the Company.
16
<PAGE>
In addition to 1,972,500 issued and outstanding redeemable Warrants which
expire on June 23, 1999, each of which Warrant entitles its holder to purchase
two (2) shares of Common Stock for an exercise price of $3.75 per Warrant (or
$1.875 per share), the Company has also issued an aggregate of 794,680 private
warrants which shall vest and become exercisable from time to time. Of the
latter warrants, 511,801 are owned by officers and directors of the Company.
Rule 144 provides that, in general, a person holding restricted securities for a
minimum period of one (1) year may, every three (3) months thereafter, sell in
brokerage transactions an amount of shares which does not exceed the greater of
one percent (1%) of the Company's then outstanding Common Stock or the average
weekly trading volume of the Common Stock during the four (4) calendar weeks
immediately prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitations by a person
who is not an affiliate of the Company and was not an affiliate at any time
during the ninety (90) day period immediately prior to such sale, and who has
satisfied a two (2) year holding period. Sales of the Company's Common Stock by
shareholders under Rule 144 may have a depressive effect on the market price of
the Company's Common Stock.
Forward-Looking Statements and Associated Risk.
This Prospectus contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933, as amended, and section 21E of the
Securities Exchange Act of 1934, as amended, including statements regarding,
among other items (i) the Company's growth strategies, (ii) the Company's
products, (iii) the need for additional financing in order to effect the
acquisition of a particular medical device, and in general, (iv) the need for
and uncertainty with respect to necessary regulatory clearances, (v) commercial
acceptance of certain of the Company's medical devices, and (vi) the Company's
ability to successfully commercialize its medical devices and to achieve
profitability in general. These forward-looking statements are based largely on
the Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a result of the
factors described in "Risk Factors," including, among others, regulatory,
financial, market or general economic influences. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this Prospectus will in fact transpire or prove to be accurate.
17
<PAGE>
THE COMPANY
Effective as of January 1, 1994, the Company has been engaged full time in
identifying, developing and bringing to market medical devices which the Company
believes are innovative, represent improvements over existing products, or are
responsive to a presently unfulfilled need in the marketplace. The Company's
strategy consists of: (i) identifying patented technologies in the medical
device field that it believes have potential commercial viability but still
require refinement and regulatory clearance, (ii) providing the necessary funds
to develop and obtain the requisite regulatory clearance of such products in
exchange for the acquisition, license for some other right to commercialize such
technologies, and (iii) attempt to commercialize or sublicense such technologies
by entering into agreements with one or more entities for clinical development,
manufacturing and marketing of such products. Through this strategy, the Company
believes that it can play a role in bridging the gap between viable patented
technologies and their commercialization. Pursuant to this strategy, the Company
has identified and acquired three licenses to develop products, the Fluid Alarm
System (FAS), formerly the Personal Alarm System (PAS), the Cell Recovery System
(CRS) and the Intracranial Pressure Monitoring System (ICP), all of which the
Company believes have potential commercial viability.
18
<PAGE>
The primary focus of the Company's activities for the foreseeable future
will be: the continued marketing of the FAS, which commenced in 1996 and with
respect to which the Company, to date, has experienced minimal sales; and
completing the regulatory and development process relative to the CRS and ICP so
that the Company can also bring these products to market. In addition, the
Company also receives opportunities from time to time to license or acquire
other patented technologies in the medical device field. Depending on the
specific device and other circumstances, such as the Company's then current
financial and operating situation, the Company pro-actively attempts, on a
limited basis, to identify and license or acquire additional patented
technologies in the medical device field.
On June 19, 1997 the Company's shareholders approved the reincorporation of
the Company in Delaware in a statutory merger and in connection therewith
approved a reduction in the Company's authorized capital and approved a stock
option plan. As of this filing the filing necessary to reincorporate in Delaware
has not been completed.
19
<PAGE>
CERTAIN SELLING STOCKHOLDERS
The following table sets forth, as of the date hereof, the aggregate number
of the Company's shares of Common Stock to be offered by certain Selling
Stockholders who are to be issued shares of Common Stock pursuant to the Plan
which will be "control securities" (as such term is defined in the Act) assuming
all shares being offered pursuant to this Prospectus are sold.
<TABLE>
<CAPTION>
Number of
Shares to
Name and Address be Offered
- ---------------- ----------
<S> <C>
Edward C. Hall 125,000
P.O. Box 1518
Rancho Santa Fe, CA 92067
Richard E. Sloan 400,000
33905 Handrich Court
San Diego, CA 92131
- ------------------
TOTAL
</TABLE>
20
<PAGE>
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the shares of
Common Stock by the Selling Stockholders pursuant to this Prospectus. The
securities offered by this Prospectus may be sold from time to time by all of
the Selling Stockholders. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Stockholders.
The Selling Stockholder through whom such securities are sold may be deemed
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered, and any profits
realized or commissions received may be deemed underwriting compensation. The
Company has agreed to indemnify the certain of the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act.
At the time a particular offer of the shares is made by or on the behalf of
a Selling Stockholder, to the extent required, a Prospectus Supplement will be
distributed which will set forth the number of shares being offered and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, the purchase price paid by any underwriter for shares purchased from
the Selling Stockholders, any discounts, commissions and other items
constituting compensation from the selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers, and the
proposed selling price to the public.
The shares of Common Stock may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, at varying prices
determined at the time of sale, or at negotiated prices. Such prices will be
determined by the Selling Stockholders or by agreement between the Selling
Stockholders and any underwriters.
In order to comply with the applicable securities laws of certain states,
if any, the shares of Common Stock will be offered or sold through registered or
licensed brokers or dealers in those states. In addition, in certain states the
shares of Common Stock may not be offered or sold unless they have been
registered or qualified for sale in such states or an exemption from such
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations promulgated under the Exchange Act,
any person engaged in a distribution of securities may not simultaneously bid
for or purchase securities of the same class for a period of two business days
prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Stockholders will be subject to applicable
21
<PAGE>
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Rules 10b-2, 10b-5, 10b- 6 and 10b-7, in connection
with transactions in the shares during the effectiveness of the Registration
Statement of which this Prospectus is a part. All of the foregoing may affect
the marketability of the shares of Common Stock.
The Company will pay all of the expenses incident to the registration of
the shares of Common Stock other than any fees or expenses of any counsel
retained by the Selling Stockholders and any out of pocket expenses incurred by
the Selling Stockholders or any person retained by the Selling Stockholders in
connection with the registration of the shares, fees and expenses of compliance
with state securities or blue sky laws and commissions and discounts of
underwriters, dealers or agents, if any.
22
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized stock of the Company consists of 100,000,000 authorized
shares of Common Stock, par value $.15 per share, 14,939,185 shares of which
were outstanding as of November 26, 1997; and 10,000,000 authorized shares of
Preferred Stock par value .01 per share, of which no shares of Preferred Stock
were outstanding.
Common Stock
- ------------
Each share of Common Stock is entitled to one vote, either in person or by
proxy, on all matters that may be voted upon by the owners thereof at a meeting
of the shareholders, including the election of directors. The holders of Common
Stock (i) have equal, ratable rights to dividends from funds legally available
therefor, when, as and if declared by the Board of Directors of the Company;
(ii) are entitled to share ratably in all of the assets of the Company available
for distribution to holders of Common Stock upon liquidation, dissolution or
winding up of the affairs of the Company; (iii) do not have preemptive or
redemption provisions applicable thereto; and (iv) are entitled to one
noncumulative vote per share on all matters on which shareholders may vote at
all meetings of shareholders.
All shares of Common Stock issued and outstanding are, and those offered
hereby, when issued, will be fully paid and nonassessable, with no personal
liability attaching to the ownership thereof.
Preferred Stock
- ---------------
6% Cumulative Convertible Series A Preferred Stock
--------------------------------------------------
The Company originally issued 1,847,500 shares of 6% Cumulative Convertible
Series A Preferred Stock, par value $.01 per share (the "Preferred Stock")
pursuant to an underwritten public offering ("Offering") on June 24, 1996. Each
share of Preferred Stock was convertible into four (4) shares of Commn Stock at
a price of $1.25 per share of Common Stock. In accordance with ther terms and
conditions of the Preferred Stock on July 24, 1997, any and all shares of
Preferred Stock were automatically converted into shares of Common Stock.
Accordingly, there are currently no shares of Preferred Stock issued and
outstanding, and all of the originally issued 1,847,500 shares of Preferred
Stock have been retired and have become authorized but unissued shares of
Preferred Stock.
23
<PAGE>
Other Preferred Stock
- ---------------------
As of the date hereof, there are no shares of preferred stock issued and
outstanding. The Company's Articles of Incorporation authorizes the issuance of
"blank check" preferred stock in one or more classes or series with such
designations, rights, preferences and restrictions as may be determined from
time to time by the Board of Directors. Accordingly, the Board of Directors may,
without prior shareholder approval, issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
relative voting power or other rights of the holders of the Preferred Stock or
the Common Stock. Preferred stock could be used, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control of the
Company. Although the Company has no present intention of issuing any shares of
preferred stock, there can be no assurance that it will not do so in the future.
If the Company issues preferred stock, such issuance may have a dilutive effect
upon the common shareholders, and the purchasers of the securities offered
hereby.
Warrants
- --------
The Warrants were issued in registered form pursuant to an agreement, dated
the date of the June 24, 1996 Prospectus (the "Warrant Agreement"), between the
Company and Continental Stock Transfer & Trust Company (the "Warrant Agent").
Upon completion of the June 24, 1996 Offering including overallotments purchased
by the underwriter of the offering (the "Representative"), the Company had an
aggregate of 1,972,500 Warrants outstanding, including the 247,500 Warrants
issued to the Selling Securityholders including exercise of the Representative's
Over-Allotment Option purchase of an additional 100,000 Warrants. The Warrants
are no longer publicly traded. The following discussion of certain terms and
provisions of the Warrants is qualified in its entirety by reference to the
detailed provisions of the Warrant Agreement, the form of which has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
Each Warrant entitles the holder to purchase two (2) shares of Common Stock
at an exercise price of $3.75 per Warrant ($1.875 per share of Common Stock (the
"Exercise Price") commencing July 24, 1997 and ending June 23, 1999 (the
"Expiration Date"), and is redeemable by the Company at a redemption price of
$.05 at any time after October 23, 1997 on not less than 30 days' prior written
notice, provided that the closing sales price of the Common stock on the
principal exchange on which the Common Stock is traded (if then listed on a
national securities exchange) or the average closing bid quotation for such
shares in the over-the-counter market (if then traded in the over-the counter
market), for a period of 20 consecutive trading days ending within 10 days prior
to the date of the notice of redemption delivered by the Company, has been at
least $2.50. The Redeemable Warrants will be entitled to the benefit of
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<PAGE>
adjustments in the Exercise Price and in the number of shares of Common Stock
and/or other securities deliverable upon exercise thereof in the event of a
stock dividends, stock split, reclassifications, reorganizations, consolidations
or merger and upon certain issuances of shares of Common Stock, or securities
convertible into or exercisable for shares of Common Stock, at a price per share
below the exercise price of the Common Stock. The Company may at any time
decrease the exercise price or change certain of the redemption terms of the
Redeemable Warrants for a period of not less than 30 days on not less than 30
days written notice to the holders of the Redeemable Warrants and the
Representative.
After the Expiration Date, the Warrants will become wholly void and of no
value. The Company may at any time extend the Expiration Date of all outstanding
Redeemable Warrants for such increased period of time as it may determine. The
Warrants may be exercised at the office of the Warrant Agent. If any Warrants
are called for redemption, such Warrants must be exercise prior to the close of
business on the last day before the date of such redemption or the right to
purchase the applicable shares of Common Stock is forfeited.
No holder, as such, of Warrants shall be entitled to vote or receive
dividends or be deemed the holder of shares of Common Stock for any purpose
whatsoever until such Warrants have been duly exercised and the Purchase Price
has been paid in full.
The Warrants provide that the Company shall not be obligated to issue
shares of Common Stock upon exercise of the Warrants unless there is a current
prospectus relating to the Common Stock issuable upon the exercise of the
Warrants under an effective registration statement filed with the Commission,
and unless such Common Stock is qualified for sale or exempt from qualification
under applicable state securities laws of the jurisdictions in which the various
holders of the Warrants reside. In accordance with the Securities Act, a
prospectus ceases to be current nine months after the date of such prospectus if
the information therein (including financial statements) is more than 16 months
old or if there have been other fundamental changes in the matters discussed in
the prospectus. Although the Company has agreed to use its best efforts to meet
such regulatory requirements in the jurisdictions in which the Securities are
sold in this Offering, there can be no assurance that the Company can continue
to meet these requirements. The Securities are not expected to be qualified for
sale or exempt under the securities laws of all states. Although the Securities
are not expected to be qualified for sale or exempt under the securities laws of
all states. Although the Warrants will not be knowingly be sold to purchasers in
jurisdictions in which the Warrants are not registered or otherwise qualified
for sale, purchasers may buy Warrants in the secondary market or may move to
25
<PAGE>
jurisdictions in which the shares of Common Stock issuable upon exercise of the
Warrants are not so registered or qualified. In this event, the Company would be
unable legally to issue the shares of common stock to those persons desiring to
exercise the Warrants unless and until the shares of Common Stock could be
qualified for sale in jurisdictions in which such pruchasers reside, or an
exemption from such qualification exists in such jurisdiction. No assurances can
be given that the Company will be able to effect any required registration or
qualification. The value of the Warrants could be adversely affected if a then
current prospectus covering the Common Stock issuable upon the exercise of the
Warrants is not available pursuant to an effective registration statement or if
such Common Stock is not qualified or exempt from qualification in the
jurisdictions in which the holders of the Warrants reside. Under the terms of
the agreement under which the Warrants will be issued, the Company is not
permitted to redeem such warrants unless a current prospectus is available at
the time of notice of redemption and at all times to and including the date of
redemption.
As a result of the Warrants and the Representative's Warrants being
outstanding, the Company may be deprived of favorable opportunities to obtain
additional equity capital, if it should then be needed, for its business.
Transfer Agent, Registrar and Warrant Agent
- -------------------------------------------
The Company has appointed Continental Stock Transfer & Trust Company, 2
Broadway, New York, NY 10004 as transfer agent and registrar for the Common
Stock, 6% Cumulative Convertible Series A Preferred Stock and the Warrants and
as Warrant Agent under the Warrant Agreement.
26
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person or to make such offer or solicitation in such
jurisdiction.
MEDICAL DEVICE TECHNOLOGIES, INC.
5,000,000 Shares of Common Stock
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION............................................1
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE............................................2
PROSPECTUS SUMMARY...............................................3
RISK FACTORS.....................................................4
THE COMPANY.....................................................18
SELLING STOCKHOLDERS............................................20
PLAN OF DISTRIBUTION............................................21
DESCRIPTION OF CAPITAL STOCK....................................23
---------------------------
PROSPECTUS
---------------------------
December 5, 1997
</TABLE>
<PAGE>
PART II
INFORMATION REQUIRED IN THE
REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Registrant incorporates the following documents by reference in this
Registration Statement:
(a) Registrant's Annual Report on Form 10-KSB filed for the year ended
December 31, 1996,
(b) the Definitive Proxy Statement on Form 14A dated April 8, 1997 with
respect to the Company's 1997 Annual Stockholders' Meeting on May 23, 1997.
(c) Registrant's Quarterly Report on Form 10-QSB for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997,
(d) The Company's current Report on Form 8-K dated June 23, 1997,
(e) All other documents filed by Registrant after the date of this
Registration Statement under Section 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a post-effective
amendment to this Registration Statement which deregisters the securities
covered hereunder which remain unsold.
Item 4. Description of Securities
Not applicable
PART II, Page 1
<PAGE>
Item 5. Interest of Named Experts and Counsel
None
Item 6. Indemnification of Officers and Directors
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 7. Exemption from Registration Claimed
None.
Item 8. Exhibits
5. Opinion of Zukerman Gore & Brandeis, LLP
24. Consent of Zukerman Gore & Brandeis, LLP. See Exhibit 5
24. Consent of BDO Seidman, LLP
Item 9. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including
(but not limited to) any addition or election of a managing underwriter.
Provided however, that paragraphs (i) and (ii) above shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by Registration pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
Part II - Page 2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement to the securities offered therein, and the offering of
such securities offered 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
Registrant's annual report pursuant to Section 13(a) or 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 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by 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 that matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the questions whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Part II - Page 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on this 2nd day of
December, 1997.
MEDICAL DEVICE TECHNOLOGIES, INC.
By: /s/ M. Lee Hulsebus
-----------------------
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933 as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/M. Lee Hulsebus Chief Executive Officer, December 2, 1997
President and Chairman
/s/Edward C. Hall Chief Financial December 2, 1997
Officer/Secretary
/s/Don L. Arnwine Director December 2, 1997
/s/Arthur E. Bradley Director December 2, 1997
/s/William A. Clarke Director December 2, 1997
/s/Thomas E. Glasgow Director December 2, 1997
<PAGE>
<PAGE>
OPINION AND CONSENT OF LEGAL COUNSEL
EXHIBIT 5
ZUKERMAN GORE & BRANDEIS, LLP
Attorneys at Law
900 Third Avenue
New York, NY 10022
December 5, 1997
Board of Directors
MEDICAL DEVICE TECHNOLOGIES, INC.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122
Re: Medical Device Technologies, Inc.
Registration Statement on Form S-8
Gentlemen:
We have acted as counsel for Medical Device Technologies, Inc., a Utah
corporation (the "Company") in connection with the preparation and filing by the
Company of a registration statement on Form S-8, and the two prospecti that form
a part thereof (the "Registration Statement" and "Prospecti", respectively)
under the Securities Act of 1933, as amended, relating to the registration by
the Company of an aggregate of 5,000,000 shares of the Company's common stock,
par value $.15 per share (the "Common Stock"), pursuant to the Company's 1997
Stock Compensation Plan, as amended, (the "Plan"), to be issued to employees and
consultants of the Company.
We have examined the Certificate of Incorporation and the By-Laws of the
Company, the minutes of the various meetings and consents of the Board of
Directors of the Company, originals or copies of such records of the Company and
where applicable, agreements, certificates of public officials, certificates of
officers and representatives of the Company, and others, and such other
documents, including the Plan, certificates, records, authorizations,
proceedings, statutes and judicial decisions as we have deemed necessary to form
the basis of the opinion expressed below. In such examination, we have assumed
the genuiness of all signatures, the authenticity of all documents submitted to
us as originals and the conformity to originals of all documents submitted to us
as copies thereof. As to various questions of fact material to such opinion, we
have relied upon statements and certificates of officers and representatives of
the Company and its predecessor-in-interest and others.
Based on the foregoing, we are of the opinion that:
All shares of Common Stock have been duly authorized and, when issued and
sold in accordance with each of the Prospecti, will be validly issued, fully
paid and nonassessable.
We hereby consent to the inclusion of this opinion as an exhibit in the
Registration Statement as attorneys who have passed upon the validity of the
shares of Common Stock.
We further consent to your filing a copy of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
/S/ZUKERMAN GORE & BRANDEIS, LLP
<PAGE>
<PAGE>
Consent of Independent Certified Public Accountants
---------------------------------------------------
Medical Device Technologies, Inc.
San Diego, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated January
31, 1997, relating to the consolidated financial statements of Medical Device
Technologies, Inc. appearing in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996. Our report contains an explanatory paragraph
regarding the Company's ability to continue as a going concern.
/S/BDO SEIDMAN, LLP
Los Angeles, California
December 5, 1997
