As filed with the Securities and Exchange Commission on July 30, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under The Securities Act of 1933
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SPECTRASCIENCE, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1448837
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
3650 Annapolis Lane, Suite 101
Minneapolis, Minnesota 55447-5434
(612) 509-9999
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Chester E. Sievert, Jr. Copy to: Kenneth L. Cutler, Esq.
Chairman, Chief Executive Officer Dorsey & Whitney LLP
and President 220 South Sixth Street
3650 Annapolis Lane, Suite 101 Minneapolis, Minnesota 55402-1498
Minneapolis, Minnesota 55447-5434 (612) 340-2600
(612) 509-9999
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Title of Each Class of Amount Maximum Offering Maximum Aggregate Amount of
Securities to be Registered to be Registered(1) Price per Share(2) Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $.25 par value 703,464 Shares $4.9375 $3,473,353.50 $966.00
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</TABLE>
(1) This amount represents shares to be offered by the selling shareholders
from time to time after the effective date of this Registration Statement
at prevailing market prices at time of sale.
(2) Estimated solely for the purpose of calculating the registration fee based
upon the average of the high and low sales prices for the Common Stock on
July 27, 1999 as reported on the Over-the-Counter Bulletin Board.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
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, DATED JULY 30, 1999
PROSPECTUS
SPECTRASCIENCE, INC.
3650 ANNAPOLIS LANE, SUITE 101
MINNEAPOLIS, MINNESOTA 55447-5434
703,464 SHARES
SPECTRASCIENCE, INC.
COMMON STOCK
Shares of common stock of SpectraSCIENCE, Inc. are being offered by
this Prospectus. The shares will be sold from time to time by the selling
shareholders named in this Prospectus. We will not receive any of the proceeds
from the sale of the shares.
Our common stock is traded on the Over-the-Counter Bulletin Board under
the symbol "SPSI." On July 27, 1999, the last sale price of our common stock as
reported on the Over-the-Counter Bulletin Board was $5.00 per share.
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INVESTMENT IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
SECTION TITLED "RISK FACTORS" BEGINNING ON PAGE 3 TO READ ABOUT CERTAIN FACTORS
YOU SHOULD CONSIDER BEFORE BUYING SHARES OF COMMON STOCK.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
THE DATE OF THIS PROSPECTUS IS _______________, 1999.
<PAGE>
ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission (the "SEC"). The Prospectus relates to
703,464 shares (the "Shares") of our common stock (the "Common Stock") which the
selling shareholders named in this Prospectus (the "Selling Shareholders") may
sell from time to time. We will not receive any of the proceeds from these
sales. We have agreed to pay the expenses incurred in registering the Shares,
including legal and accounting fees.
The Shares have not been registered under the securities laws of any
state or other jurisdiction as of the date of this Prospectus. Brokers or
dealers should confirm the existence of an exemption from registration or
effectuate such registration in connection with any offer and sale of the
Shares.
This Prospectus describes certain risk factors that you should consider
before purchasing the Shares. See "Risk Factors" beginning on page 3. You should
read this Prospectus together with the additional information described under
the heading "Where You Can Find More Information."
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TABLE OF CONTENTS
Page
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About This Prospectus................................. 2
Risk Factors.......................................... 3
Where You Can Find More Information................... 11
About SPECTRASCIENCE, Inc. ........................... 12
Selling Shareholders.................................. 14
Plan of Distribution.................................. 16
Legal Matters......................................... 17
Experts............................................... 17
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RISK FACTORS
AN INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, TOGETHER WITH THE OTHER
INFORMATION IN THIS PROSPECTUS, BEFORE BUYING ANY SHARES. YOU SHOULD ALSO BE
AWARE THAT CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT RELATED
TO HISTORICAL RESULTS ARE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS, SUCH AS STATEMENTS OF OUR STRATEGIES, PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS, INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS.
LIMITED OPERATING HISTORY; SIGNIFICANT AND CONTINUING LOSSES
We have generated minimal revenues to date, no revenues on the Optical
Biopsy(TM) System (the "OBS"), and have sustained significant operating losses
each year since our inception. To date, we have directed our efforts primarily
toward researching, developing, testing and obtaining regulatory clearances for
the OBS. Our net losses for the years ended December 31, 1997 and 1998 were
approximately $1.64 million and $2.41 million, respectively. We had an
accumulated deficit of approximately $46.5 million as of December 31, 1998. Of
this amount, approximately $11.9 million has been incurred since October 1992
when we began development of our current products and changed our name. Our
ability to achieve profitable operations will be largely dependent on obtaining
regulatory approval and reimbursement codes for, and successfully
commercializing, the OBS and other future products. We expect further operating
losses at least through the end of calendar year 2000 as we conduct
outcome-based clinical trials, expand research and development activities,
establish production level manufacturing capabilities and develop sales and
marketing activities. We can provide no assurance that we will be able to
successfully commercialize any of our potential products, achieve significant
revenues or achieve or sustain profitability.
UNCERTAINTY OF HEALTH CARE REIMBURSEMENT
We plan to market and sell the OBS and other products primarily through
hospitals and clinics. In the United States, the purchasers of medical devices
generally rely on Medicare, Medicaid, private health insurance plans, health
maintenance organizations ("HMOs") and other sources of third party
reimbursement for health care costs, to reimburse all or part of the cost of the
procedure in which the medical device is used. Sales of the OBS and other
proposed products will be substantially dependent on the availability of
adequate reimbursement from third-party payors for procedures carried out using
our products.
The OBS is not currently approved for reimbursement by third-party
payors, and there can be no assurance that the OBS will be approved for any
third party reimbursement, even if it proves to play a significant role in the
early detection and subsequent treatment of colorectal cancer. Third-party
payors are increasingly challenging the pricing of medical products and
procedures. Even if a procedure is eligible for reimbursement, the level of
reimbursement may not be adequate. Additionally, payors may deny reimbursement
if they determine that the device used in a treatment was unnecessary,
inappropriate, not cost-effective, experimental or used for a non-approved
indication. Any failure to obtain third-party reimbursement for diagnostic or
treatment procedures that use or rely on our products could have a material
adverse effect on our business, financial condition and results of operations.
We are unable to predict what additional legislation or regulation
relating to the health care industry or third-party coverage and reimbursement
may be enacted in the future, if any, or what effect it might have on us.
Reforms may include mandated basic health care benefits, controls on health care
spending through limitations on the growth of private health insurance premiums
and Medicare and Medicaid spending, greater reliance on prospective payment
systems, the creation of large insurance purchasing groups and fundamental
changes to the health care delivery system. We anticipate that Congress and
state legislatures will continue to review and assess alternative health care
delivery systems and payment mechanisms. Due to uncertainties regarding the
ultimate features of reform initiatives and their enactment and implementation,
we cannot predict which reform proposals, if any, will be adopted, when they may
be adopted or what impact they may have on us.
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NO ASSURANCE OF TIMELY GOVERNMENT REGULATORY APPROVAL
Medical product design, manufacture, labeling, distribution and
marketing is subject to extensive and rigorous government regulation in the
United States and internationally. The United States Food and Drug
Administration ("FDA") classifies medical devices into one of three classes,
Class I, Class II or Class III. The controls deemed necessary by the FDA to
ensure the safety and efficacy of the device determine how it is classified.
Class I devices are those devices for which the safety and efficacy can
reasonably be ensured through the use of general controls such as labeling,
adherence to the FDA's Quality System Regulations ("QSR") requirements and the
510(k) process of marketing pre-notification. Class II devices are those devices
for which the safety and efficacy can reasonably be ensured through
implementation of general and special controls, such as performance standards,
post-market surveillance, patient registries and FDA guidelines. Generally,
Class III devices are those that must receive Pre-Market Application ("PMA")
approval to ensure their safety and efficacy. These devices are generally
life-sustaining, life-supporting or implantable devices. They also include
devices that are not substantially equivalent to a legally marketed Class I or
Class II device or to a Class III device first marketed prior to May 28, 1976
for which a PMA has not yet been requested by the FDA. The OBS is a Class III
device that requires PMA approval prior to commercialization.
Securing FDA clearance requires the submission to the FDA of extensive
clinical data and supporting information. The process of obtaining FDA clearance
and other required regulatory approvals is lengthy, expensive, uncertain and
typically requires from 180 days to several years from the date of PMA filing
with the FDA, if pre-market approval is obtained at all. We can provide no
assurance that the FDA will approve our PMA application for the OBS, that the
FDA will not request additional data or otherwise require us to conduct further
clinical trials, which would cause us additional delay and expense.
Additionally, further clinical trials, if required by the FDA, may identify
significant technical or other obstacles to be overcome before necessary
regulatory approvals will be granted. Other risks attendant to the clinical
trials include the unpredictability of the time frame for completion due to
possible patient unavailability, potential changes in hospital procedures and
policies, and potential changes in the principal investigators leading such
clinical trials. Even if such obstacles are identified and overcome, regulatory
approval for, and resulting commercialization of, the OBS may be delayed. If the
FDA requires further clinical trials and the OBS does not prove to be safe and
effective, or if we cannot obtain regulatory approval or successfully
commercialize the OBS, our business, financial condition and results of
operations will be materially adversely affected.
To obtain FDA clearance to market our products, we will be required to
adhere to the FDA's QSR requirements. Other countries have similar quality
regulations, such as ISO 9001 standards in the European Union, which include
testing, control, and documentation requirements. Federal and state agencies in
the United States, and comparable agencies in other countries, conduct
inspections to monitor compliance with QSR or ISO 9001 standards and other
applicable regulatory requirements. If we fail to comply with these standards or
other regulatory requirements, we may be required to take corrective actions,
such as modifying our manufacturing policies and procedures. In addition, we may
be required to cease all or part of our operations for some period of time until
we can demonstrate that appropriate steps have been taken to comply with QSR or
ISO 9001 regulations. We can provide no assurance that we will not experience
difficulties as we develop our manufacturing capabilities or that future audits
by regulatory authorities will find us to be in compliance with QSR or ISO 9001
standards. Failure to develop our manufacturing capabilities in compliance with
QSR or ISO 9001 standards would prohibit us from manufacturing and distributing
our products, which could have a material adverse effect on our business,
financial condition and results of operations.
Sales of medical devices outside the United States are subject to
regulatory requirements that vary from country to country with respect to the
time typically required for approval and the degree of investigation. The
European Union adopted a Medical Device Directive, which was implemented in all
countries of the European Union in July 1998. Under this directive, we are
required to obtain ISO 9001 certification and/or undergo type testing on our
products in order to affix the CE mark to our products. The CE mark is an
international symbol of adherence to certain quality assurance standards and
compliance with applicable European medical device directives, and is required
in order to sell a product in member countries of the European Union. We have
registered with a notified body to begin the ISO 9001 certification process, and
also plan to obtain CE mark registration for our products. We can provide no
assurance that
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we will be able to obtain regulatory approvals in such countries on a timely
basis or at all, or that we will not incur significant costs in obtaining or
maintaining non-U.S. regulatory approvals. Delays in or failure to receive
required regulatory approvals, failure to comply with existing or future
regulatory requirements or the loss of previously obtained approvals would have
a material adverse effect on our business, financial condition and results of
operations.
Regulatory approvals, even if granted, may impose significant
limitations on the indicated uses for which the product may be marketed. In
addition, the FDA and certain foreign regulatory authorities may impose numerous
other requirements with which medical device manufacturers must comply. Product
approvals could be withdrawn for failure to comply with regulatory standards or
the occurrence of unforeseen problems following the initial marketing. Failure
to comply with applicable regulatory requirements, including the marketing of
products for unapproved uses, could result in actions such as fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, refusal by a government to grant pre-market approval
for devices, withdrawal of approvals and criminal prosecution. Any failure to
maintain regulatory approval for the OBS or any other products we may develop
would have a material adverse effect on our business, financial condition and
results of operations.
DEPENDENCE ON PRINCIPAL PRODUCT
We have not yet commercialized any of our products, and anticipate that
for the foreseeable future we will be solely dependent on the successful
development and commercialization of the OBS. The OBS will require additional
regulatory approvals before it can be marketed internationally. Although we
currently expect to receive PMA approval from the FDA in 1999 and expect to
begin commercializing the OBS shortly thereafter, there can be no assurance that
our development efforts will be successful or that the OBS will be proven to be
safe or effective, approved by regulatory authorities, eligible for
reimbursement codes, capable of being manufactured in commercial quantities at
acceptable costs or successfully marketed. In addition, there can be no
assurance that demand for the OBS will be sufficient to allow profitable
operations. Even though we are in the process of developing new products in
addition to the OBS, there can be no assurance that such development efforts
will be successful or that any resulting products will achieve market
commercialization. Failure to successfully commercialize the OBS would have a
material adverse effect on our business, financial condition and results of
operations.
LIMITED MANUFACTURING EXPERIENCE FOR OUR PRODUCTS; UNCERTAINTY OF MARKET
ACCEPTANCE
There have been no sales of the OBS to date, and we anticipate that
revenues from sales of our products will not be significant for at least another
year. In order to be financially successful, we must manufacture our products in
accordance with regulatory requirements and in commercial quantities. We must do
this while maintaining appropriate quality levels and acceptable costs. We have
no experience manufacturing our products in the volumes that will be necessary
for us to achieve significant commercial sales, and there can be no assurance
that reliable, high-volume manufacturing capacity can be established or
maintained at commercially reasonable costs. If we receive FDA or foreign
approval for the OBS or any other products, we will need to expend capital
resources and develop the necessary expertise to establish production level
manufacturing capabilities. We may encounter many of the following difficulties
in attempting to scale up production of new products:
* obtaining satisfactory production yields;
* maintaining quality control;
* minimizing component supply shortages;
* hiring qualified personnel;
* complying with applicable regulations; and
* obtaining regulatory approval for new manufacturing processes
We believe that our current facility will be adequate to support our
commercial assembly and manufacturing activities in the near term but that
additional space may be required within the next one or two years in order to
commercialize the OBS.
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Even if we are able to manufacture the OBS in commercial quantities,
there can be no assurance that the OBS or our other products will be acceptable
to the market. There are many reasons that promising potential products are not
successfully commercialized. Newly developed products may not receive regulatory
approval or may not be successfully introduced and marketed at prices that would
permit profitable operations. Failure of any of our products to achieve market
acceptance could have a material adverse effect on our business, financial
condition and results of operations.
LACK OF SALES AND MARKETING EXPERIENCE; RELIANCE ON DISTRIBUTORS AND CORPORATE
PARTNERS
We intend to market and sell some of our products directly, while
relying on the sales and marketing expertise of corporate partners for other
products. Presently, we have limited marketing and sales capabilities, but we
intend to establish an in-house sales, marketing and business development group.
This group will assist in commercializing our products worldwide and provide
clinical education to physicians, nurses and laboratory technicians. However,
because we have limited experience in direct marketing of our products, we can
provide no assurance that such direct marketing will be successful.
Since we have limited marketing and sales capabilities, our future
success may depend, in part, on our ability to enter into and successfully
develop strategic partnerships and relationships to market and distribute our
products. We intend to sell our products in the United States and outside the
United States through strategic partners and international distributors, and are
currently seeking to enter into relationships with viable strategic partners and
international distributors. Although we have participated in preliminary
discussions with certain potential strategic partners and international
distributors, we have not yet entered into any definitive agreements with such
potential strategic partners and distributors. The prospects for relationships
with strategic partners and distributors will depend on the other parties'
interests in the specific products involved and their willingness and ability to
perform in the role we contemplate. We may have limited or no control over the
resources that any particular strategic partner or distributor devotes to its
relationship with us. In addition, there can be no assurance that we will be
successful in locating qualified parties with which to enter into strategic
partner or distributor relationships or that any such relationships can be
maintained or will ultimately prove beneficial to us. If we are not able to
develop these types of relationships, or if these relationships do not prove
successful, our business, financial condition and results of operations could be
materially adversely affected.
UNCERTAIN ABILITY TO MANAGE GROWTH
We will be required to expand our operations in the areas of research
and development, manufacturing, quality assurance and sales and marketing, in
order to accomplish the following objectives:
* conduct outcome-based clinical studies on the OBS;
* obtain third-party reimbursement for the OBS;
* manufacture the OBS in commercial quantities;
* market the OBS to HMOs and other customers; and
* develop future products
We expect to finance the expansion of operations and any necessary
improvements of our information systems through a combination of sales of the
OBS and equity contributions by potential distributors and corporate partners.
Our successful transition to a larger-scale commercial enterprise will depend on
several factors, such as our ability to obtain additional regulatory approvals,
increase our commercial manufacturing, sales and marketing capabilities, and
establish relationships with distributors in the United States and
internationally. Our inability to establish such capabilities and relationships
would have a material adverse effect on our business, financial condition and
results of operations.
As we expand our operations, there will be new and increased
responsibilities for management personnel. To accommodate growth and compete
effectively, we will be required to improve or implement new information
systems,
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procedures and controls. We will also need to expand, train, motivate and manage
our work force. We can provide no assurance that our personnel, systems,
procedures and controls will be adequate to support our future operations. In
addition, we can provide no assurance that our capabilities, procedures or
controls will be designed, implemented or improved in a timely and
cost-effective manner. Any failure to implement new or improved operational,
financial and management systems or expand, train, motivate or manage employees
as required by any future growth would have a material adverse effect on our
business, financial condition and results of operations.
NEED FOR ADDITIONAL CAPITAL; UNCERTAINTY OF ADDITIONAL FINANCING
The development of future products will require us to commit
substantial funds to conduct research and development, establish commercial
scale manufacturing capabilities, and develop sales and marketing capabilities
to market the products. Our future capital requirements will depend on, but not
be limited to, the following factors:
* the progress and timing of our research and development;
* the scope, design and results of our clinical trials;
* the time and expense required to obtain regulatory approvals;
* the rate of technological advances;
* the determination of the commercial potential of our products
(which may be dependent upon receiving reimbursement codes);
* the status of competitive products; and
* our ability to establish manufacturing capacity
We anticipate that our current funds will be adequate to satisfy
capital requirements at least through fiscal year 1999 but that we will need to
raise substantial additional funds to commercialize the OBS and develop future
products. These funds may be raised through additional public or private
offerings, strategic partnerships or other means. We can provide no assurance
that additional financing will be available, or that it will be available on
terms favorable to us or our shareholders. If we are not able to obtain
additional financing when needed, we may have to significantly curtail our
operations or obtain financing through strategic partners on terms that might
require us to relinquish significant rights to our technology or potential
markets.
DEPENDENCE ON CONSULTANTS AND CONTRACT MANUFACTURERS
We are a party to key consulting arrangements with a number of
individuals and business organizations. These arrangements provide us with
services in the area of regulatory compliance and submissions, management, and
software development. Risks attendant to the use of consultants include our
ability to hire competent consultants and the availability of such consultants
on short notice. We also rely on contract manufacturers, and any contract
manufacturers that we use will be subject to audit by the FDA. There can be no
assurance that these contract manufacturers will be in, or remain in, compliance
with applicable FDA regulations. Additional risks associated with the use of
contract manufacturers include:
* potential difficulties in maintaining proprietary information;
* potential inability to obtain products on a timely basis; and
* lack of control over costs, inventory and the manufacturing
process
All of these consequences could have a material adverse effect on our business,
financial condition and results of operations.
DEPENDENCE ON SOLE OR LIMITED SOURCES OF SUPPLY
We purchase raw materials and certain key components of our products,
including the OBS Forceps and certain components of the OBS Console, from sole,
single or limited sources of supply. For certain of these components, there are
relatively few alternative sources of supply. We currently have an agreement
with one of the leading manufacturers
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of medical forceps in the United States. Under this agreement, the contract
manufacturer has agreed to supply us with the quantity of OBS Forceps that we
require. This agreement expires in June 2000 but may be renewed by the contract
manufacturer for an additional two years upon six months' notice. We cannot
assure you that this agreement will be renewed.
Establishing alternate sources of supply for key components that we
currently purchase from sole, single or limited sources of supply could be time
consuming and costly. The inability of any of our suppliers to provide an
adequate supply of components in a timely manner, or our inability to locate
qualified alternative suppliers for materials and components at a reasonable
cost, could adversely affect our business. Any delays or shortages, particularly
as we scale up our manufacturing activities in support of sales, could have a
material adverse effect on our business, financial condition and results of
operations.
HIGHLY COMPETITIVE INDUSTRY
The medical device industry is highly competitive. We are not aware of
any direct competitors using an endoscopic optical biopsy system like the OBS to
detect and differentiate between healthy and cancerous tissues in the
gastrointestinal tract. However, there can be no assurance that we will be the
first to market such a system or to market such a system effectively. Many of
our competitors and potential competitors have substantially greater capital
resources and also have greater resources and expertise in the areas of research
and development, obtaining regulatory approvals, and manufacturing and marketing
products. We can provide no assurance that our competitors and potential
competitors will not succeed in developing, marketing and distributing
technologies and products that are more effective than those developed and
marketed by us or that would render our technology and products obsolete or
non-competitive. In addition, we can provide no assurance that we will be able
to compete effectively against such competitors and potential competitors in
terms of manufacturing, marketing and sales.
NEED FOR CONTINUOUS PRODUCT DEVELOPMENT; RISK OF RAPID TECHNOLOGICAL CHANGE
The medical device industry is characterized by rapid innovation and
technological change. Any product we develop that gains regulatory clearance or
approval will have to compete for market acceptance and market share. Since the
medical device industry is subject to rapid technological innovation, the life
cycle of any particular product is short. The timing of market introduction of
competitive products is therefore an important factor in gaining market
acceptance and market share. Our ability to introduce competitive products in a
timely manner will be dependent on several factors, including our ability to
accomplish the following:
* develop new, competitive products;
* gain regulatory approval for our products;
* gain third-party reimbursement for our products; and
* supply commercial quantities of our products to the market
There can be no assurance that alternative diagnostic systems or other
discoveries and developments with respect to diagnosis and treatment of cancer
and other human diseases will not render our products obsolete.
DEPENDENCE ON KEY PERSONNEL
Our success is highly dependent on our ability to retain principal
members of our management and scientific staff, including Chester E. Sievert,
Jr., our Chairman, President and Chief Executive Officer. Our success is also
dependent on our ability to recruit additional qualified personnel. There is
intense competition for qualified personnel from other companies, organizations,
and research and academic institutions. There can be no assurance that we will
be successful in hiring or retaining qualified personnel. The loss of key
personnel or the inability to hire or retain qualified personnel could have an
adverse effect on our business, financial condition and results of operations.
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DEPENDENCE ON PATENTS, PROPRIETARY RIGHTS AND LICENSES
Our success depends and will continue to depend in part on our ability
to maintain patent protection for our products and processes, to preserve our
trade secrets and to operate without infringing upon the proprietary rights of
third parties. Although we have filed or been awarded a number of patents that
we hope to exploit commercially, we can provide no assurance that the patents
will afford protection against competitors with similar technology. The validity
and breadth of claims covered in medical technology patents involve complex
legal and factual questions and, therefore, may be highly uncertain. We also
rely upon proprietary technology that is not patented. We can provide no
assurance that we will be able to protect our rights to such unpatented
proprietary technology or that others will not duplicate or independently
develop substantially equivalent technology.
We may be required to obtain licenses to patents or other proprietary
rights of third parties in order to manufacture and market certain products. We
can provide no assurance that we will be able to license relevant technology at
a reasonable cost, if at all. If we do not obtain the necessary licenses, we
could face delays in introducing certain products while we attempt to design
around the patents for which we do not have licenses. We can provide no
assurance that we would be able to design around these patents. Even if we are
successful in our redesign efforts, we could find that the development,
manufacture or sale of such products could be adversely affected.
In addition, we could incur substantial costs in defending suits
brought against us on such patents or in suits in which we may assert our patent
rights against another party. There has been substantial litigation regarding
patent and other intellectual property rights in the medical device industry.
Litigation, which could result in substantial cost to us and diversion of our
effort, may be necessary to enforce patents issued to us, to protect trade
secrets or know-how that we own, to defend ourselves against claimed
infringement of the rights of others or to determine the ownership, scope or
validity of our proprietary rights and those of others. Any adverse
determination related to our proprietary rights could subject us to significant
liabilities to third parties, could require us to seek licenses from third
parties and could prevent us from manufacturing, selling or using our products.
Any of these events could have a material adverse effect on our business,
financial condition and results of operations.
We are party to certain license agreements that grant significant
proprietary rights and which can be terminated by the licensor in the event of
certain material breaches on our part. If in the future, any of these agreements
were terminated we could lose the right to continue to develop and market one or
more products. We can provide no assurance that defaults will not occur in the
future.
VOLATILITY OF STOCK PRICE; ADVERSE EFFECT OF SALES ON MARKET PRICE AND DILUTION
Historically, the market price for securities of companies with high
technology medical products has been highly volatile. From time to time the
securities of some companies experience significant price and volume
fluctuations that are unrelated to the operating performance of the company.
There are many factors that may have a material adverse effect on the market
price of our Common Stock, including the following:
* quarterly fluctuations in our operating results;
* the liquidity of the market for our stock;
* announcements of technological innovations;
* development of new diagnostic or therapeutic products;
* changes in government regulations;
* developments or disputes concerning patents or other
proprietary rights; and
* general market conditions
In addition, future sales of common stock by existing shareholders and
holders of options and warrants could adversely affect the prevailing market
price of our Common Stock.
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LIQUIDITY OF OUR COMMON STOCK; TRADING ON THE OVER-THE-COUNTER BULLETIN BOARD
Shares of our Common Stock are currently trading on the
Over-the-Counter ("OTC") Bulletin Board under the symbol SPSI. The OTC Bulletin
Board is a less orderly market than the Nasdaq SmallCap Market on which our
Common Stock formerly traded. After obtaining FDA clearance for, and beginning
commercialization of, the OBS, we anticipate re-listing the Company's Common
Stock on Nasdaq. However, there can be no assurance that we will be able to
achieve re-listing on Nasdaq. As a result, an investor may find it more
difficult to dispose of or to obtain accurate quotations as to the market value
of our Common Stock. In addition, we are subject to criteria set forth in a rule
promulgated by the Securities and Exchange Commission that, if we fail to meet,
affects broker-dealers involved with our securities. This rule imposes various
sales practice requirements on those broker-dealers who sell securities governed
by the rule to persons other than established customers and accredited
investors. For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and must have received the
purchaser's written consent to the transactions prior to sale. Consequently, the
rule may have an adverse effect on the ability of broker-dealers to sell our
securities, which may affect the ability of purchasers of our Common Stock to
sell the Common Stock in the secondary market.
PRODUCT LIABILITY RISK; LIMITED INSURANCE COVERAGE
We face the inherent business risk of exposure to product liability
claims. Clinical trials or marketing of any of our products may expose us to
liability claims resulting from the use of our products from consumers, health
care providers or by others selling the products. We currently maintain $2
million of product liability insurance coverage. There can be no assurance that
we will be able to maintain such insurance at a reasonable cost, or at all. If
we are not able to maintain insurance at acceptable costs or at all, it could
adversely affect the clinical testing or commercialization of our products. We
will also be likely to require additional product liability insurance as we
begin to commercialize our products. In addition, there can be no assurance,
regardless of the availability of product liability insurance, that we will be
adequately protected from claims that may be brought against us. A product
liability claim or recall could have a material adverse effect on our business,
financial condition and results of operations.
YEAR 2000 MATTERS
Many currently installed computer systems and software accept only two
digit entries in the date code fields. These date code fields will need to
accept four-digit entries to distinguish 21st century dates from 20th century
dates. The inability to correctly distinguish dates could result in system
failures or miscalculations, which could cause disruptions to business
operations, including a temporary inability to process transactions, send
invoices or engage in other business activities. As a result, many companies
need to upgrade or replace their computer systems and software in order to
comply with Year 2000 requirements. The potential global impact of the Year 2000
problem is not known, and, if not corrected in a timely manner, could affect us
and the U.S. and world economy generally.
We are currently taking steps to ensure Year 2000 compliance for our
products and systems as well as those of important customers and suppliers. We
cannot assure you that Year 2000 compliance will be achieved by customers,
suppliers and other third parties. We are communicating with these parties to
determine how they are addressing the Year 2000 issue and to evaluate any likely
impact on us. This process will continue throughout fiscal 1999. The efforts of
third parties are not within our control, however, and their failure to remedy
Year 2000 issues successfully could result in business disruption and increased
operating costs. At the present time, it is not possible to determine whether
any such events are likely to occur, or to quantify any potential negative
impact they may have on our future results of operations and financial
condition.
We believe that most of our products and systems are currently Year
2000 ready. Although we can provide no assurance, we believe that all of our
products and systems that are not Year 2000 compliant will be compliant prior to
January 1, 2000.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires us to file information with the SEC
concerning our business and operations. We file annual, quarterly and special
reports, proxy statements and other information with the SEC. You can read and
copy these documents at the public reference facility maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, DC 20549. You can
also copy and inspect such reports, proxy statements and other information at
the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public on the
SEC's web site at http://www.sec.gov. You can also inspect our reports, proxy
statements and other information at the offices of the National Association of
Securities Dealers, Inc.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this Prospectus, and later information
that we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
* Annual report on Form 10-K for the fiscal year ended December 31,
1998;
* Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
and
* The description of our Common Stock contained in the Registration
Statement on Form 8-A, dated January 3, 1985, as amended.
This Prospectus is part of a registration statement we filed with the
SEC (Registration No. 333-______). You may request a free copy of any of the
above filings by writing or calling:
Chester E. Sievert, Jr.
Chairman, President, Chief Executive Officer and Corporate Secretary
3650 Annapolis Lane, Suite 101
Minneapolis, MN 55447-5434
(612) 509-9999
You should rely only on the information incorporated by reference or
provided in this Prospectus or any supplement to this Prospectus. We have not
authorized anyone else to provide you with different information. The Selling
Shareholders should not make an offer of these Shares in any state where the
offer is not permitted. You should not assume that the information in this
Prospectus or any supplement to this Prospectus is accurate as of any date other
than the date on the cover page of this Prospectus or any supplement.
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<PAGE>
ABOUT SPECTRASCIENCE, INC.
We design, develop, manufacture and intend to market innovative
spectrophotometry systems capable of determining whether tissue is normal,
potentially cancerous or cancerous without physically removing the tissue from
the body. We began our operations in May 1983 as GV Medical, Inc. In 1992, we
initiated our current business focus on diagnostic and therapeutic products
utilizing spectroscopic techniques and changed our name to SPECTRASCIENCE, Inc.
Our principal product, the OBS, operates by using light to optically
examine tissue, and our products provide the physician with an instant spectral
analysis of whether the tissue is healthy, pre-cancerous or cancerous. The OBS
is composed of three components:
* a biopsy forceps that incorporates an optical fiber to deliver and
collect light, and may be used to remove cancerous tissue if
necessary;
* a spectrophotometric console that produces the light, analyzes the
returned light and displays the results; and
* proprietary software that analyzes the recorded data
The OBS optical fiber and biopsy forceps are used through the endoscope to make
contact with a polyp, optically examine tissue and give an instant analysis. The
OBS is intended to be used by physicians to assist them when they make
diagnostic decisions as to whether small polyps should be biopsied, removed or
left for further surveillance.
The initial application for the OBS is for the detection of colorectal
cancer. With an estimated 56,500 deaths in 1998, colorectal cancer is second
only to lung cancer as the leading cause of cancer death. Five-year survival
rates using current techniques to detect and treat colorectal cancer indicate
that 92% survive if the cancer is detected and treated at an early stage,
whereas the survival rates drops to 64% if the cancer spreads outside the colon
to the lymph nodes and to 7% if the cancer spreads further to the liver or other
organs. As a result, early detection of colorectal cancer is critical to
long-term survival.
In 1998, we conducted multi-center clinical trials using the OBS for
detection of colorectal cancer at the Mayo Clinic, Massachusetts General
Hospital, Hennepin County Medical Center, and Minnesota Gastroenterology P.A.
Results of our clinical studies indicated that the use of the OBS significantly
increases the physician's diagnostic accuracy in correctly identifying normal,
cancerous or pre-cancerous polyps. Based on our clinical study results, we
believe that the OBS offers the following advantages:
* significantly improves the diagnostic accuracy of the physician in
determining whether tissue is normal, cancerous or pre-cancerous;
* provides an instant diagnostic analysis that may eliminate patient
waiting time for receiving pathology results, or rescheduling an
additional procedure after pathology results are known;
* provides a cost-effective alternative because it allows the
physician to combine a diagnostic and therapeutic procedure in the
same visit and with the same instrument; and
* improves patient survival rates by providing enhanced diagnostic
accuracy
Based on the results of our clinical studies to date on the OBS, we
anticipate receiving FDA approval to market the OBS during 1999. Once we receive
FDA approval to market the OBS, we plan to focus our initial marketing efforts
on the following areas:
* establishing a limited in-house sales and marketing group to market
initially to HMOs;
* launching the OBS initially in the United States to HMOs by
performing clinical outcome-based studies to demonstrate efficacy
and cost-effectiveness;
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<PAGE>
* using the results of the HMO clinical outcome-based studies to
obtain reimbursement codes which are necessary for third-party
reimbursement;
* identifying major cancer and endoscopy centers in the United States
and leading endoscopists and other physicians at those institutions
to leverage their reputation in the medical community to generate
demand for the OBS; and
* conducting physician-training seminars and attending major medical
meetings to educate physicians about the OBS
In addition to the colorectal cancer clinical trials, we have also
commenced a feasibility clinical trial for the detection of esophageal cancer at
the Mayo Clinic and the University of California at San Francisco. These
clinical trials are designed to determine the viability of spectroscopic
techniques to detect esophageal cancer and to develop and demonstrate the
feasibility of using the OBS on such patients.
Our principal executive offices are located at 3650 Annapolis Lane,
Suite 101, Minneapolis, Minnesota 55447- 5434. Our telephone number is (612)
509-9999, and our fax number is (612) 509-9805. For further information
concerning SPECTRASCIENCE, see the section titled "Where You Can Find More
Information."
RECENT DEVELOPMENTS
FINANCING
In January 1999, we received net proceeds of $485,407 from the exercise
of warrants to purchase 87,668 shares of Common Stock at $6.00 per share. The
warrants, which were originally scheduled to expire in December 1998, were held
by shareholders who invested in our Series B Convertible Preferred Stock in
December 1995. In December 1998, we extended the expiration date of these
warrants until January 26, 1999, and reduced the exercise price from $9.00 per
share to $6.00 per share. To induce warrant holders to exercise their amended
warrants, we also granted a conditional warrant to these warrant holders which
entitled all warrant holders who exercised their amended warrants prior to their
expiration on January 26, 1999 to receive an equivalent number of new warrants.
The exercise price of these conditional warrants is $6.00 per share, and they
expire on December 28, 1999. Of the amended warrants, a total of 87,668 were
exercised and the rest expired unexercised. If all of the 87,668 contingent
warrants that were issued are exercised on or prior to December 28, 1999, we
would receive additional net proceeds of $526,008.
In February 1999, an option holder exercised an option to purchase
2,500 shares of our Common Stock. Based on the option exercise price of $4.7625
per share, we received net proceeds of $11,906. These shares are not being
offered pursuant to this Prospectus.
In March 1999, various warrant holders exercised their warrants to
purchase 174,998 shares of our Common Stock at $3.00 per share. As a result of
these warrant exercises, we received net proceeds of $525,000. These 174,998
shares have been previously registered. In addition, these warrant holders were
granted 87,503 additional warrants which are being registered under this
Prospectus.
In March 1999, we received net proceeds of $1,157,500 from a private
placement to accredited investors of our Common Stock at $4.00 per share.
Investors purchased a total of 293,750 shares in this private placement, 258,750
shares of which were sold on March 12, 1999, and 35,000 shares of which were
sold on March 31, 1999. These private placement investors also received a
warrant to purchase one-half share of Common Stock at $5.00 per share, for each
share purchased in the private placement. The warrants will expire in March
2000, and, if exercised, would raise an additional $734,375 for the Company.
We granted registration rights to the Selling Shareholders covering
the resale of Common Stock issuable upon the exercise of the conditional
warrants described above, the resale of Common Stock issuable upon the exercise
of the warrants issued to investors in the March 1999 private placement of
Common Stock, and the resale of Common Stock issued to investors in the March
1999 private placement of Common Stock. We are registering the Shares on a Form
-13-
<PAGE>
S-3 Registration Statement, of which this Prospectus forms a part, pursuant to
which all of the Shares may be offered from time to time by the Selling
Shareholders.
STOCK LISTING
Our Common Stock traded on the Nasdaq SmallCap Market from May 15, 1996
until March 17, 1999. The process that led to delisting of the Company's Common
Stock from the Nasdaq SmallCap Market is described below.
We were notified on February 9, 1999, by The Nasdaq Stock Market that
we must demonstrate a minimum of $4,000,000 in net tangible assets by March 12,
1999 in order for our Common Stock to remain listed on The Nasdaq SmallCap
Market. We were to file a pro forma balance sheet, as of January 31, 1999,
reflecting that we were in compliance with their requirement. On March 12, 1999,
we notified The Nasdaq Stock Market that we had not met the minimum $4,000,000
net tangible asset threshold but that our net tangible assets were in excess of
$2,000,000. In addition, we requested an extension of time to demonstrate our
ability to comply with the $4,000,000 net tangible asset threshold. On March 17,
1999, The Nasdaq Stock Market rejected our request for an extension and notified
us that our securities would be delisted effective with the close of business on
March 17, 1999. Since March 18, 1999, the Company's Common Stock has been
trading on the OTC Bulletin Board under the symbol "SPSI."
SELLING SHAREHOLDERS
The Selling Shareholders acquired the Shares in connection with the
private placement of our Common Stock or through the exercise of options and
warrants to acquire our Common Stock. The 703,464 Shares that may be sold by the
Selling Shareholders pursuant to this Prospectus were acquired in the following
transactions:
* 87,668 Shares were acquired upon exercise of amended warrants in
January 1999,
* 87,668 Shares represent conditional warrants granted to warrant
holders who exercised their amended warrants in January 1999,
* 87,503 Shares represent additional warrants that were issued to
warrant holders in March 1999,
* 293,750 Shares were acquired in our March 1999 private placement,
and
* 146,875 Shares represent shares of Common Stock that may be issued
upon exercise of warrants that were issued to investors in our March
1999 private placement.
For further information about these offerings, see "About
SPECTRASCIENCE--Financing" above.
The Shares are being registered to permit public secondary trading of
Shares, and the Selling Shareholders may offer the Shares for resale from time
to time. See "Plan of Distribution." The following table lists the Selling
Shareholders and sets forth certain information regarding the beneficial
ownership of Common Stock of each Selling Shareholder as well as the number of
Shares each Selling Shareholder may sell pursuant to this Prospectus.
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<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Shares Maximum Number of Shares
Beneficially Shares to be Sold Beneficially
Owned Prior to Pursuant to this Owned After
Name this Offering Prospectus(1) this Offering
- --------------------------------------------------- -------------- ----------------- -------------
<S> <C> <C> <C>
Edward Adamek, Jr. & Eleanore Adamek Trust * 3,334(2) *
Avery Family Limited Partnership * 22,500(4) *
William H. Baxter * 7,500(4) *
Herbert J. Bernick * 3,334(2) *
Craig C. Avery Company Profit Sharing Trust * 22,500(4) *
Eugene College 59,467 6,666(2) 66,133
Richard L. Danielson * 3,334(2) *
James P. Deanovic 112,591 8,000(2) 120,591
Ellis Limited Partnership * 6,666(2) *
Stephen J. Esser & Clara Linda Esser, Joint Tenants * 3,334(2) *
Laura S. Estebo * 4,500(4) *
Janet E. Frank * 4,000(2) *
Sandra J. Hale * 2,666(2) *
William F. Hoefer & Julia A. Hoefer, Joint Tenants * 3,334(2) *
Industricorp & Co. FBO T C Carpenters 77,777 16,667(3) 94,444
Neal T. Jansen * 6,666(2) *
Mark D. Johnson * 3,334(2) *
Robert A. Johnson * 6,666(2) *
Marla C. Kennedy * 3,334(2) *
William R. Kennedy * 4,167(3) *
Larry Kraning * 8,625(4) *
Anita H. Kunin * 3,334(2) *
James F. Lyons * 5,501(2)(3) *
Michael R. Marston * 3,334(2) *
Metropolitan Endodontics Pension * 3,332(2) *
John G. Ordway III * 3,334(2) *
Kenneth R. Parker * 13,334(2) *
Penn Dental Center * 6,666(2) *
Daniel S. and Patrice M. Perkins * 4,167(3) *
Perkins and Partners, Inc. Profit Sharing Plan and
Trust * 8,334(3) *
Pyramid Partners L.P.(5) 75,000 41,667(3) 116,667
Quest Venture Partners * 10,000(2) *
Reggeborgh Beheer BV(6) 184,000 375,000(4) 559,000
Harold Roitenberg IRA * 6,666(2) *
Steve Romanek * 6,666(2) *
John F. Rooney * 4,167(3) *
Edward E. Strickland * 4,167(3) *
Strickland Family Ltd. Partnership * 3,334(2) *
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Shares Maximum Number of Shares
Beneficially Shares to be Sold Beneficially
Owned Prior to Pursuant to this Owned After
Name this Offering Prospectus(1) this Offering
- --------------------------------------------------- -------------- ----------------- -------------
<S> <C> <C> <C>
William P. Treacy * 26,666(2) *
S.L. Wallack Revocable Trust * 2,666(2) *
Thomas A. Volpe & Linda C. Volpe Joint Tenants * 6,666(2) *
Thomas B. Wartman * 3,334(2) *
Kimberly K. Washburn * 3,334(2) *
Wallace S. Wells 108,502 6,668(2) 115,170
Total 703,464
</TABLE>
- -----------------------
* Represents less than 1% of our outstanding Common Stock.
(1) Assumes the sale of the Shares offered by this Prospectus.
(2) Represents Shares that were acquired upon exercise of 87,668 amended
warrants and issuance of 87,668 additional conditional warrants in January
1999.
(3) Represents Shares to be issued upon exercise of 87,503 additional warrants
that were issued to warrant holders in March 1999.
(4) Represents Shares that were acquired in the private placement of 293,750
shares of our Common Stock in March 1999 and Shares to be issued upon
exercise of an additional 146,875 warrants issued in connection with our
March 1999 private placement.
(5) The Shares owned by Pyramid Partners L.P. are deemed to be beneficially
owned by Perkins Capital Management, Inc., which collectively owns
approximately 11.2% of our Common Stock.
(6) Henry M. Holterman, a director of SPECTRASCIENCE since 1992, has been the
Managing Director of Reggeborgh Beheer BV since 1991.
PLAN OF DISTRIBUTION
We are registering the Shares on behalf of the Selling Shareholders. As
used in this Prospectus, the term "Selling Shareholders" includes donees and
pledgees selling Shares received from a named Selling Shareholder after the date
of this Prospectus. The Selling Shareholders will offer and sell the Shares to
which this Prospectus relates for their own accounts. We will not receive any
proceeds from the sale of the Shares but would receive gross proceeds of
$2,135,373 if all of the warrants registered under this Prospectus were
exercised. We will bear all expenses and fees of registration of the Shares.
The Selling Shareholders may offer and sell the Shares from time to
time in the over-the-counter market in regular brokerage transactions, in
transactions directly with market makers or in privately negotiated
transactions, through put or call options transactions, through short sales or a
combination of such methods of sales at prices relating to prevailing market
prices or at negotiated prices. Sales may be made to or through brokers or
dealers who may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders or the purchasers of the Shares. As of
the date of this Prospectus, we are not aware of any agreement, arrangement or
understanding between any broker or dealer and the Selling Shareholders. There
is no assurance that the Selling Shareholders will sell any or all of the Shares
that they offer.
The Selling Shareholders and any brokers or dealers who participate in
the sale of the 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 realized by them on the resale of
Shares may be deemed to be underwriting discounts or commissions under the
Securities Act. Because the Selling Shareholders may be deemed to
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<PAGE>
be "underwriters" within the meaning of the Securities Act, the Selling
Shareholders will be subject to the prospectus delivery requirements of the
Securities Act.
The Selling Shareholders may also resell all or a portion of the Shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided it meets the criteria and conforms to the requirements of Rule 144.
LEGAL MATTERS
The validity of the Shares offered by this Prospectus has been passed
upon for us by Dorsey & Whitney LLP, Minneapolis, Minnesota.
EXPERTS
The financial statements incorporated by reference in our Annual Report
on Form 10-K for the year ended December 31, 1998 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee............................ $ 966
Accounting Fees and Expenses.................... 1,000
Legal Fees and Expenses......................... 15,000
Miscellaneous .................................. 534
------
Total.................................. $ 17,500
======
All fees and expenses other than the SEC registration fee are
estimated. The expenses listed above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The following description of indemnification allowed under Minnesota
statutory law is a summary rather than a complete description. Reference is made
to Section 302A.521 of the Minnesota Statutes, which is incorporated herein by
reference. The following summary is qualified in its entirety by that reference.
Minnesota Statutes Section 302A.521 provides that a corporation shall
indemnify any person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan; (2) acted in good faith; (3) received no
improper personal benefit and Section 302A.255 (with respect to director
conflicts of interest), if applicable, has been satisfied; (4) in the case of a
criminal proceeding, had no reasonable cause to believe the conduct was
unlawful; and (5) reasonably believed that the conduct was in the best interests
of the corporation in the case of acts or omissions in such person's official
capacity for the corporation or reasonably believed that the conduct was not
opposed to the best interests of the corporation in the case of acts or
omissions in such person's official capacity for other affiliated organizations.
The Company's Articles of Incorporation and Bylaws provide that the
Company shall indemnify officers and directors under such circumstances and to
the extent permitted by Section 302A.521 as now enacted or hereafter amended.
ITEM 16. LIST OF EXHIBITS
5.1 Opinion of Dorsey & Whitney LLP regarding legality.
23.1 Consent of Independent Auditors.
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5 to this
Registration Statement).
24.1 Power of Attorney.
ITEM 17. 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:
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(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 to such information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
under the Securities Act if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change in the
information set forth in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
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 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.
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 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 Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 the City of Minneapolis, State of Minnesota, on July 30, 1999.
SPECTRASCIENCE, INC.
By /s/ Chester E. Sievert, Jr.
--------------------------------------
Chester E. Sievert, Jr.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Name Title Date
---- ----- ----
/s/ Chester E. Sievert, Jr. Chairman of the Board, Chief July 30, 1999
- ----------------------------- Executive Officer and President
Chester E. Sievert, Jr. (Principal Executive Officer
and Principal Financial and
Accounting Officer)
* Director July 30 1999
- -----------------------------
Henry M. Holterman
* Director July 30, 1999
- -----------------------------
Nathaniel S. Thayer
* Director July 30, 1999
- -----------------------------
Johan A.P.M. de Hond
*By: /s/ Chester E. Sievert, Jr. July 30, 1999
---------------------------
Chester E. Sievert, Jr.
Attorney-in-fact
II-3
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
5.1 Opinion of Dorsey & Whitney LLP regarding legality
23.1 Consent of Independent Auditors
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5 to this
Registration Statement)
24.1 Power of Attorney
EXHIBIT 5.1
[Dorsey & Whitney LLP Letterhead]
SpectraSCIENCE, Inc.
3650 Annapolis Lane, Suite 101
Minneapolis, Minnesota 55447-5434
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to SpectraSCIENCE, Inc., a Minnesota
corporation (the "Company"), in connection with a Registration Statement on Form
S-3 (the "Registration Statement") to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to the sale
from time to time of up to 703,464 shares of common stock of the Company, par
value $.25 per share ("Common Stock"), by the Selling Shareholders named in the
Registration Statement.
We have examined such documents and have reviewed such questions of law
as we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Company, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Company and of public officials.
Based on the foregoing, we are of the opinion that the shares of Common
Stock to be sold by the Selling Shareholders pursuant to the Registration
Statement have been duly authorized by all requisite corporate action and are
validly issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the heading
"Legal Matters" in the Prospectus constituting part of the Registration
Statement.
Dated: July 30, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
KLC
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of SpectraSCIENCE,
Inc. for the registration of 703,464 shares of its Common Stock and to the
incorporation by reference therein of our report dated February 5, 1999, with
respect to the financial statements of SpectraScience, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
July 22, 1999
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each of Chester E. Sievert, Jr.
and Ruth M. Bryan, his or her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities to sign a Registration
Statement on Form S-3 of SpectraSCIENCE, Inc. (the "Company") and any and all
amendments thereto, including post-effective amendments, for the sale of shares
of the Company by certain selling shareholders, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and with such state securities commissions
and other agencies as necessary; granting unto said attorney-in-fact and agent,
full power and authority to do and perform to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or the substitutes for such attorney-in-fact and
agent, may lawfully do or cause to be done by virtue hereof.
Name Title Date
---- ----- ----
/s/ Chester E. Sievert, Jr. Chairman, President and July 30, 1999
- ------------------------------ Chief Executive Officer
Chester E. Sievert, Jr.
/s/ Henry M. Holterman Director July 30, 1999
- ------------------------------
Henry M. Holterman
/s/ Nathaniel S. Thayer Director July 30, 1999
- ------------------------------
Nathaniel S. Thayer
/s/ Johan A.P.M. de Hond Director July 30, 1999
- ------------------------------
Johan A.P.M. de Hond
