As filed with the Securities and Exchange Commission on May 4, 1998
Registration No.
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3152648
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 NORTH WESTLAKE BOULEVARD, SUITE 202, WESTLAKE VILLAGE, CALIFORNIA 91362
(805) 381-2700
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
--------------
RONALD E. WITTMAN
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
200 NORTH WESTLAKE BOULEVARD, SUITE 202
WESTLAKE VILLAGE, CALIFORNIA 91362
(805) 381-2700
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
--------------
Copies to:
MURRAY MARKILES, ESQ.
TROOP MEISINGER STEUBER & PASICH, LLP
10940 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(310) 824-7000
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 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 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 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>
<C> <C> <C> <C> <C>
===========================================================================
Title Of Proposed Maximum Proposed Maximum
Shares To Amount To Be Aggregate Price Aggregate Amount of
Be Registered Registered Per Unit(1) Offering Price Fee
- ---------------------------------------------------------------------------
Common Stock 450,000 $6.73 $3,028,500 $894
===========================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average high and low prices of
Registrant's Common Stock reported on the Nasdaq SmallCap Market on April
28, 1998.
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.
<PAGE>
Subject to Completion, Dated May 4, 1998
PROSPECTUS
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
450,000 SHARES OF COMMON STOCK
(par value $0.01 per share)
--------------------
This Prospectus relates to the sale of an aggregate of 450,000
shares (the "Shares") of the common stock, par value $.01 per share (the
"Common Stock") of Dental/Medical Diagnostic Systems, Inc. (the "Company"
or "DMD") offered for the account of certain stockholders of the Company
(the "Selling Stockholders"). The 450,000 Shares being offered by the
Selling Stockholders are issuable by the Company to the Selling
Stockholders pursuant to the exercise of common stock purchase warrants
(the "Warrants") that were issued to the Selling Stockholders pursuant to
a Purchase Agreement, dated as of March 2, 1998, between the Company and
the Selling Stockholders in connection with the Company's private placement
of its 12% Senior Subordinated Notes due 1999. See "Selling Stockholders
and Plan of Distribution." The Selling Stockholders may from time to time
sell all or a portion of the Common Stock which may be offered by them
under this Prospectus in routine brokerage transactions in the NASDAQ
SmallCap market and/or the Boston Stock Exchange, at prices and terms
prevailing at the time of sale. The Selling Stockholders may also make
private sales directly or through brokers. The Selling Stockholders may
pay customary brokerage fees, commissions and expenses. The Company will
pay all other expenses of the offering. The Selling Stockholders and the
brokers executing selling orders on behalf of the Selling Stockholders may
be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), in which event commissions
received by such brokers may be deemed underwriting commissions under the
Securities Act.
The Company will not receive any proceeds from the sale of the
Common Stock offered by the Selling Stockholders hereby.
The Common Stock is quoted on the Nasdaq SmallCap Market ("Nasdaq
SmallCap Market") under the symbol "DMDS" and on the Boston Stock Exchange
under the symbol "DMD." On April 28, 1998, the high and low prices of the
Common Stock on the Nasdaq SmallCap Market was $6.82 and $6.63,
respectively, and the bid and the ask prices of the Common Stock on the
Boston Stock exchange was $5.88 and $6.88, respectively.
THESE SHARES OF COMMON STOCK HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 HEREOF FOR A DISCUSSION OF
CERTAIN INFORMATION THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SHARES.
--------------
The date of this Prospectus is May 4, 1998
Page 1
<PAGE>
No dealer, salesman or any other person has been authorized to give
any information or to make any representation not 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 or the
Managers. This Prospectus does not relate to any securities other than
those described herein or constitute an offer to sell, or the solicitation
of an offer to buy, securities in any jurisdiction where, or to any person
to whom, it is unlawful to make such an offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that the information herein is correct
as of any time subsequent to the date hereof or that there has been no
change in the affairs of the Company since such date.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus, which constitutes part of the
Registration Statement does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock
offered hereby, reference is hereby made to such Registration Statement,
and the exhibits and schedules thereto which may be obtained from the
Commission's principal office in Washington, D.C., upon payment of the fees
prescribed by the Commission. Statements contained in this Prospectus as
to the contents of any contract, agreement or other document are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, each such statement being
qualified in all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. These reports, proxy statements and other information
can be inspected and copied at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the following regional offices of the Commission: Offices located at 7
World Trade Center, Suite 1300, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the
material can be obtained at prescribed rates by writing to the Securities
and Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The Common Stock is traded on the
Nasdaq SmallCap Market and the Company's reports, proxy or information
statements, and other information filed with the Nasdaq SmallCap Market may
be inspected at the offices of Nasdaq at 1735 K Street, N.W., Washington,
D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are incorporated by reference into
this Prospectus:
(1) Registrant's Report on Form 10-KSB, as amended, for the twelve-month
period ended December 31, 1997;
(2) Page 45 from Registrant's Amendment No. 2 on Form SB-2, File No. 33-
22507, containing the discussion set forth under the caption "Description
of Securities."
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior
to the termination of the offering of the securities covered by this
Prospectus shall be deemed to be incorporated by reference herein and to be
part hereof from the date of filing of such documents. Any statement
contained herein or in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, upon the oral
or written 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 expressly incorporated by reference
into such documents). Written requests for such copies should be directed
to Ronald E. Wittman, Chief Financial Officer, Dental/Medical Diagnostic
Systems, Inc. 200 North Westlake Boulevard, Suite 202, Westlake Village,
California, 91362. Telephone inquiries may be directed to Dental/Medical
Diagnostic Systems, Inc., at (805) 381-2700.
Page 2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO,
AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN
THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS HAS BEEN ADJUSTED TO REFLECT A ONE-FOR-2.197317574 REVERSE STOCK
SPLIT OF THE COMMON STOCK EFFECTED ON JANUARY 13, 1997, AND A
ONE-FOR-1.333333333 REVERSE STOCK SPLIT APPROVED BY THE COMPANY'S
STOCKHOLDERS ON MARCH 24, 1997 ("REVERSE STOCK SPLITS"). THIS PROSPECTUS
AND OTHER INFORMATION INCORPORATED HEREIN, CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN
THE FORWARD-LOOKING STATEMENTS AS A RESULT OF, AMONG OTHER FACTORS, THE
FACTORS SET FORTH UNDER THE CAPTION "RISK FACTORS."
THE COMPANY
Dental/Medical Diagnostic Systems, Inc. ("DMD" or the "Company")
designs, develops, manufactures and sells high technology dental equipment.
Currently, the Company's primary existing product emphasis is on the
manufacture and sale, of an intraoral camera system, known as the "TeliCam
II System," a multi-operatory intraoral camera system, known as the
InTELInet, for use in connection with the TeliCam II System, and a tooth
whitening and curing device known as the Apollo 95E, which the Company
markets internationally, except in Canada. The Company is currently developing
with others the Apollo 9500, a tooth whitening and curing device for the
United States and Canadian markets, and a digital x-ray system. The Company
is also developing an updated version of its intraoral camera system, the
"TeliCam Elite" and plans to introduce the updated camera in the second quarter
of fiscal year 1998.
The TeliCam II System displays close-up color video images of dental
patients' teeth and gums. These TeliCam images assist dentists in
displaying dental health and hygiene problems to patients and, as a result
of such display, promote patient acceptance of treatment plans. The TeliCam
II System offers dentists the ability to capture and display multiple video
images without an expensive external capture device such as a video
cassette recorder or color printer, thereby providing a low-cost
alternative to the more expensive traditional intraoral dental camera
systems. The Company commenced shipments of a predecessor of the TeliCam II
System known as the "TeliCam I System" to customers in February 1996, and
shipped TeliCam II Systems commencing in the second quarter of 1997.
Through December 31, 1997, the Company had sold 4,511 TeliCam I and TeliCam
II Systems to dentists throughout the United States, as well as to several
dental schools, and 2,406 TeliCam I and II Systems internationally. The
Company believes that the market for intraoral cameras such as the TeliCam
II system is a market which has matured. TeliCam System II sales have
recently been below levels of prior comparable periods, a trend which the
Company expects to continue.
The Company recently introduced a curing and whitening device, the
Apollo 95E, to markets outside of the US and Canada. The Apollo 95E was
developed by S.E.D. Gerant ("S.E.D."), a developer and manufacturer of
medical and dental devices organized under the laws of France which was
acquired by the Company in 1997. The Company believes that the Apollo 95E
produces faster results than products currently available in that market
place. This product is designed to cure composite material in three
seconds or less, and to produce teeth whitening in a dental operatory in
less than one hour. The Company will also market the chemical composite
and whitening materials to be used with both these products. See
"Cautionary Statements and Risk Factors -- Substantial Dependence on Third
Parties -- SUPPLIERS."
Under an exclusive distribution agreement with Ion Laser Technology,
Inc. ("ILT"), the Company has obtained the right to distribute a composite
curing and whitening system currently under development by ILT to the dental
market in the US and Canada. As of April 30, 1998, no devices had yet been
shipped by ILT which met the Company's specifications. Based upon recent
events and communications with ILT, the Company does not believe that an
acceptable device will be developed and delivered to the Company in
accordance with the requirements of the Company's agreement with ILT; in
which case the Company intends to introduce the Apollo 95E into the United
States and Canada. Shipment of the 95E into the US requires regulatory
approval from the Food and Drug Administration and, while no assurance of
receipt of the required approvals can be given, the Company expects that a
period of three to six months will be required to obtain necessary approvals.
See "Cautionary Statements and Risk Factors -- Substantial Dependence on
Third Parties -- SUPPLIERS."
Page 3
<PAGE>
The Company has entered into an agreement with Suni Imaging
Microsystems, Inc. ("Suni") to develop digital x-ray technology for
incorporation into systems for the dental market. The Company has obtained
exclusive rights to market products to the dental market incorporating
certain digital x-ray technology developed by Suni. Suni will retain the
rights to developed microchip technology underlying the x-ray system it
develops for the Company. Digital x-ray systems, including those currently
on the market, reduce radiation exposure compared to conventional x-ray
systems and allow dentists to view x-ray images in real-time without the
time-consuming process of film development and eliminate the need to use
and dispose of chemicals required to develop conventional x-ray film. This
technology, if successfully developed for the Company by Suni, would
provide an improved image quality digital x-ray system at a price point
expected to be lower than competitive systems. Digital x-ray systems,
including those currently on the market, reduce radiation exposure compared
to conventional x-ray systems and allow dentists to view x-ray images in
real-time without the time-consuming process of film development and
eliminate the need to use and dispose of chemicals required to develop
conventional x-ray film. This technology also is designed to allow
database storage and recall of images for comparison purposes. The
development of the technology will be done by Suni and funded by the
Company. No assurance can be given that digital x-ray technology will be
successfully developed, or if the technology is developed, that the Company
will be able to commercially exploit it. Additionally, the Company believes
that any products it may develop incorporating the digital x-ray technology
will require FDA approval prior to marketing, and as a consequence, the timing
of the domestic introduction of such product is uncertain. The Company will
determine whether or not to proceed with the marketing of such product based
upon the results of the development. See "Cautionary Statements and Risk
Factors -- Substantial Dependence on Third Parties -- SUPPLIERS."
In November 1996, the Company introduced its InTELInet Video
Monitoring System ("InTELInet") which generally includes two TeliCam
systems, a printer, a video-cassette monitor, cabling and installation.
InTELInet creates a video-electronic information link between the different
operatories of the dental office. InTELInet is different from most other
intra-office networking systems known to the Company in that it enables
simultaneous use of two or more intraoral cameras, which allows dentists
and their staffs to conduct more than one patient examination at a time
using two or more intraoral cameras simultaneously. InTELInet is thus
designed to be a cost-effective solution to the problems generally
associated with standard networking of various intraoral cameras in
multiple operatories within a single dental practice. The Company
emphasizes the savings to dental practices and the ease of use of the
InTELInet in its marketing campaigns. The InTELInet is being marketed by
the Company only in the US due to the general absence of multiple operatory
practices outside of the United States. The InTELInet facilitates simple
network expansion and is only compatible with intraoral dental cameras
marketed by the Company. While there can be no assurance that digital x-ray
technology will be developed, the Company has designed the InTELInet system
to be compatible with the digital x-ray technology the Company is currently
developing with Suni Imaging Microsystems, Inc. From the time of its first
introduction in late November 1996, through December 31, 1997, 385
InTELInet multiple operatory networking systems have been sold by the
Company.
The Company's principal executive offices are located at 200 North
Westlake Boulevard, Suite 202, Westlake Village, California 91362, and its
telephone number is (805) 381-2700.
Page 4
<PAGE>
RISK FACTORS
Several of the matters discussed in this document contain forward
looking statements that involve risks and uncertainties. Factors associated
with the forward looking statements which could cause actual results to
differ materially from those projected or forecast in the statements that
appear below. In addition to other information contained in this document,
readers should carefully consider the following cautionary statements and
risks factors:
LIMITED OPERATING HISTORY; HISTORY OF LOSSES AND ACCUMULATED DEFICIT. While
the Company has been in existence since 1981, its operations between 1988
and its acquisition of DMD and BDI in March 1996, were limited to the
exploration of acquisition opportunities. Dental/Medical Diagnostic
Systems, the division of the Company which designs and markets the
Company's TeliCam II System, and BDI, a subsidiary of the Company, have
only been in operation since October 1995. For the period from inception
(October 23, 1995) to March 2, 1996, the Company incurred a net loss of
$1,625,213, and for the ten-month period ended December 31, 1996, the Company
had net income of $137,151. For the twelve months ended December 31, 1997 the
Company had a net loss after extraordinary item of $2,044,729. At December 31,
1997, the Company's accumulated deficit was $3,532,791. The ability of the
Company to obtain and sustain profitability will depend, in part, upon the
successful marketing of existing products and the successful and timely
introduction of new products. There can be no assurance that the Company
will be able to generate and sustain net sales or profitability in the future.
DEPENDENCE UPON A SINGLE PRODUCT. The TeliCam II System, has been the
Company's primary product and, together with related products such as the
InTELInet system, accounted for a substantial portion of the Company's
revenue. See "-- Importance of New Product Development to Growth." The
Company believes that the market for intraoral cameras such as the TeliCam
II system is a market which has matured. TeliCam System II sales have
recently been below levels of prior comparable periods, a trend which the
Company expects to continue. If the Company is unable to succesfully
develop and introduce additional products and product lines, it is
likely that the Company's business operations would be substantially
and adversely impacted.
IMPORTANCE OF NEW PRODUCT DEVELOPMENT TO GROWTH. The Company's ability
to develop and successfully introduce new products, particularly, a tooth
whitening and curing device suitable for the United States market such as
either the Apollo 9500 under development by ILT or the Company's Apollo 95E,
and the digital x-ray technology under development for the Company by Suni,
will be a significant factor in the Company's ability to grow and remain
competitive. See "Cautionary Statements and Risk Factors -- Substantial
Dependence on Third Parties -- SUPPLIERS." The Company presently does not
believe that ILT will be able to perform its obligations and deliver to the
Company a marketable product in accordance with the delivery schedule
established by ILT's agreement with the Company. New product development
often requires long-term forecasting of market trends, the development and
implementation of new designs, compliance with extensive governmental
regulatory requirements and a substantial capital commitment. The medical and
dental device industry is characterized by rapid technological change. As
technological changes occur in the marketplace, the Company may have to
modify its products in order to keep pace with these changes and
developments. The introduction of products embodying new technologies, or the
emergence of new industry standards, may render existing products, or
products under development, obsolete or unmarketable. Any failure by the
Company to anticipate or respond in a cost-effective and timely manner to
government requirements, market trends or customer requirements, or any
significant delays in product development or introduction, could have a
material adverse effect on the Company's business, operating results and
financial condition.
NEED FOR ADDITIONAL FINANCING. Based on its current operating plan,
the Company anticipates that in addition to the remaining proceeds of the
Offering, together with the credit facility and proceeds of the Debt
Placement, further capital will be required during the next twelve months
to satisfy the Company's expected increased working capital and research
and development requirements for its planned new products. The Company is
currently exploring alternatives to fulfill these requirements. No
assurance can be given that additional financing will be available when
needed or that, if available, it will be on terms favorable to the Company
or its stockholders. If needed funds are not available, the Company may be
required to curtail its operations, which could have a material adverse
effect on the Company's business, operating results and financial
condition. The Company will need to raise additional funds through bank
borrowings, public or private financings, or otherwise. If additional funds
are raised through the issuance of equity securities, additional dilution
to stockholders may occur. In addition, if sufficient funds to repay the
Notes are not available, the Notes may be converted to shares of Common
Stock and additional dilution to stockholders may occur. No assurance can
be given that additional financing will be available when needed or that,
if available, it will be on terms favorable to the Company or its
stockholders. If needed funds are not available, the Company may be
required to curtail its operations, which could have a material adverse
effect on the Company's business, operating results and financial
condition.
EXPANSION THROUGH UNDETERMINED ACQUISITIONS AND JOINT VENTURES. The
Company intends to expand its product lines and domestic and international
markets, in part, through acquisitions. The Company's ability to expand
successfully through acquisitions will depend upon the availability of
suitable acquisition candidates at prices acceptable to the Company, the
Company's ability to consummate such transactions and the availability of
financing on terms acceptable to the Company. There can be no assurance
that the Company will be successful in completing acquisitions. Such
transactions involve numerous risks, including possible adverse short-term
effects on the Company's operating results or the market price of the
Common Stock. These acquisitions and joint ventures may not be subject to
approval or review by the Company's stockholders. The Company does not
expect that it will obtain an
Page 5
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appraisal by any independent appraisers with respect to any such acquisition.
Certain of the Company's future acquisitions may also give rise to an
obligation by the Company to make contingent payments or to satisfy certain
repurchase obligations, which payments could have an adverse financial effect
on the Company. In addition, integrating acquired businesses may result in a
loss of customers or product lines of the acquired businesses and also
requires significant management attention and may place significant demands
on the Company's operations, information systems and financial resources. The
failure effectively to integrate acquired businesses with the Company's
operations could adversely affect the Company. In addition, the Company
competes for acquisition opportunities with companies which have
significantly greater financial and management resources than those of the
Company. There can be no assurance that suitable acquisition opportunities
will be identified, that any such transactions can be consummated, or that,
if acquired, such new businesses can be integrated successfully and
profitably into the Company's operations. Moreover, there can be no assurance
that the Company's historic rate of growth will continue, that the Company
will continue to successfully expand, or that growth or expansion will result
in profitability.
The Company also intends to expand its product lines and domestic and
international markets through joint ventures. The Company's ability to
expand successfully through joint ventures will depend upon the
availability of suitable joint venture candidates whose terms are
acceptable to the Company, the Company's ability to consummate such
transactions and the availability of financing on terms acceptable to the
Company. There can be no assurance that the Company will be successful in
completing joint ventures. Such transactions involve numerous risks,
including possible adverse short-term effects on the Company's operating
results or the market price of the Common Stock. The failure effectively to
integrate joint ventures with the Company's operations could adversely
affect the Company. In addition, the Company competes for expansion
opportunities with companies which have significantly greater financial and
management resources than those of the Company. There can be no assurance
that suitable investment opportunities will be identified, that any such
transactions can be consummated, or that such new businesses can be
integrated successfully and profitably into the Company's operations.
Moreover, there can be no assurance that the Company's historic rate of
growth will continue, that the Company will continue to successfully
expand, or that growth or expansion will result in profitability.
SUBSTANTIAL DEPENDENCE ON THIRD PARTIES
The Company substantially depends upon third parties for several
critical elements of its business including the development and licensing
for distribution of its products.
SUPPLIERS. With the exception of the TeliCam System's CCD processor
unit, the Company believes that there are multiple sources from which it
may purchase the components of the TeliCam System. The Company anticipates
that it will obtain certain of the components of the TeliCam System from a
single source or a limited number of sources of supply. Although the
Company believes it will be able to negotiate satisfactory supply
arrangements and relationships, the failure to do so may have a material
adverse effect on the Company. Furthermore, there can be no assurance that
suppliers will dedicate sufficient production capacity to satisfy the
Company's requirements within scheduled delivery times or at all. Failure
or delay by the Company's suppliers in fulfilling its anticipated needs may
adversely affect the Company's ability to market the TeliCam System.
Pursuant to the Boston Marketing Distribution Agreement, the Company has
the exclusive right to market Teli Units to the dental market. Boston
Marketing is a licensed distributor of the Teli Units under a separate
agreement with their manufacturer. The agreement between Boston Marketing
and the Teli Units manufacturer obligates Boston Marketing to meet minimum
purchase obligations. If Boston Marketing fails to meet these obligations,
Boston Marketing will be terminated as a licensed distributor. In the event
of such termination, the Company, as a sublicensee subdistributor of Boston
Marketing, may lose its right to purchase the Teli Units. Moreover, in the
event the Company is unable to meet its minimum annual purchase obligations
under the Boston Marketing Distribution Agreement, and, as a consequence,
such agreement terminates, the Company may be required to find an
alternative source for the primary component of its TeliCam System. The
Company believes that, in the event the Company loses its right to sell the
Teli Units, replacement components could be developed by and obtained from
third parties, but that this may take more than six months. The potential
delay associated with locating an alternative source of supply would have a
significant adverse effect on the Company's operating results and financial
condition. In addition, there is no guarantee that an intraoral dental
camera system utilizing the replacement components will be accepted by the
dental marketplace. The Company has an oral agreement with S.E.D. to
manufacture its Apollo 95E product for sale internationally. Dr. Duret,
president of S.E.D. will oversee manufacturing of the Apollo 95E for the
Company, and will render consulting services for the Company. If S.E.D. is
unable to meet the Company's requirements, the Company would have to obtain
an alternative manufacturing arrangement. The Company believes that such
manufacturing capability could be developed by the Company or obtained from
third parties, but that developing or obtaining alternative capacities may
take up to four months. The potential delay associated with either
developing or locating an alternative source of supply could have a
significant adverse effect on the Company's operating results and financial
condition.
DISTRIBUTION AND LICENSING RELATIONSHIPS. The Company has entered into
licensing and/or distribution relationships with ILT and SUNI.
Page 6
<PAGE>
As of April 30, 1998, no devices had yet been shipped by ILT which met the
Company's specifications. The Company presently does not believe that ILT
will be able to perform its obligations and deliver to the Company a
marketable product in accordance with the delivery schedule established by
ILT's agreement with the Company; in which case, the Company intends to
introduce its Apollo 95E product for sale in the US and Canada. The Company
believes that it would need to delay product shipments of the 95E into the US
for four to six months while it obtains FDA regulatory approval. If
the regulatory approval of the 95E product cannot be obtained, the Company
believes an alternative source of supply for curing and whitening devices
could be developed by the Company, or be obtained from third parties.
Developing or locating such an alternative source could result in substantial
delays. Regulatory approval for any such alternative product may need to be
obtained prior to any sale in the US and Canada. If ILT is able to meet its
obligations, under the terms of the Company's agreement with ILT, the Company
will be required to meet substantial minimum purchase and sales goals during
each year of the five-year initial term of its license with ILT in order to
retain exclusive rights to sell ILT's tooth curing and whitening devices in
the US and Canada. If the Company is unable to meet its minimum purchase and
sales requirements, ILT may terminate the agreement and license its devices
for sale by the Company's competitors, or may grant exclusive rights to such
a competitor. There can be no assurance that the Company will achieve
sufficient sales to be able to maintain its right to sell ILT products. If
ILT licenses the technology to a competitor, this could have a material
adverse effect on the Company's operating results and financial condition.
The initial five year term of the agreement may be renewed at the option of
the Company for ten successive one year terms, provided that the Company has
met its annual purchase and sales requirements. If the contract with ILT
expires, or is terminated except by reason of ILT's non-performance, the
Company has agreed not to sell any product competitive with the Apollo 9500
into the US or Canadian markets for a period of one year following
termination or expiration of the contract. In the event of such termination
or expiration, the Company would not be able to introduce a competitive
device, including the 95E, into the US or Canadian markets for at least a
year, even if prior regulatory approval of such product is obtained. Delays
associated with regulatory approval, product development, locating an
alternative source of supply, and the Company's inability to sell alternative
devices in the US and Canada for one year following expiration or termination
of the contract, would have a significant adverse effect on the Company's
operating results and financial condition. In addition, there is no guarantee
that any device manufactured by ILT, the Apollo 95E, or a product developed
and manufactured by an alternative supplier, once introduced, will be
accepted by the dental marketplace.
Under the Company's licensing and development arrangements with Suni
for the development of digital x-ray technology for the dental market, the
Company has obtained exclusive marketing rights to products incorporating
certain digital x-ray technology developed by Suni. The Company has paid
significant advances to, and is dependent upon Suni to successfully develop
the digital x-ray technology and to commercialize the digital x-ray
technology. There can be no assurance that Suni will be successful in this
endeavor. If Suni should not develop a digital x-ray product acceptable to
the Company or the marketplace, this would have a material adverse effect
on the Company's operating results and financial condition. The agreement
with Suni provides that the Company is obligated to make minimum royalty
payments if products incorporating the developed technology are introduced
to the market in order to maintain exclusivity. There can be no assurance
that the Company will be able to meet the royalty payments required to
maintain exclusivity. Suni would then be able to license the developed
technology to the Company's competitors, or grant an exclusive license to a
competitor, which could have a material adverse effect on the Company's
operating results and financial condition.
FLUCTUATIONS IN QUARTERLY RESULTS. The Company's business is subject
to certain quarterly influences. Management's prior experience in the
industry would indicate that net sales and operating profits are generally
higher in the fourth quarter due to the purchasing patterns of dentists and
are generally lower in the first quarter due primarily to increased
purchases in the prior quarter and during the summer months due to a
reduced volume of trade shows and increased unavailability of dentists due
to summer vacations. The Company plans to increase expenses to fund greater
levels of research and development and to fund investments in joint
ventures and acquisitions. To the extent that such expenses precede or are
not subsequently followed by increased revenues, the Company's business,
quarterly operating results and financial condition will be adversely
affected. Quarterly results may also be adversely affected by a variety of
other factors, including the timing of acquisitions and their related
costs, as well as the release of new products and promotions taking place
within the quarter. Other factors that may influence the Company's
quarterly operating results include the timing of introduction or
enhancement of products by the Company or its competitors, market
acceptance of the TeliCam II, the InTELInet System and other new products,
development and promotional expenses relating to the introduction of new
products or enhancements of existing products, reviews in the industry
press concerning the products of the Company or its competitors, changes or
anticipated changes in pricing by the Company or its competitors, mix of
distribution channels through which products are sold, mix of products
sold, product returns, the timing of orders from major distributors, order
cancellations, delays in shipment and general economic conditions. Due to
all of the foregoing factors, it is also likely that in some future periods
the Company's operating results may be below the expectations of analysts
and investors. In such event, the price of the Company's Common Stock would
likely be materially adversely affected.
EXTENSIVE GOVERNMENT REGULATION. The Company's products and its
manufacturing practices are subject to regulation by the United States Food
and Drug Administration ("FDA") pursuant to the Federal Food, Drug and
Cosmetic Act ("FDC Act"), and by other state and foreign regulatory
agencies. Under the FDC Act, medical and dental devices, including those
under development by the Company must receive FDA clearance or approval
before they may be sold, or be exempted from the need to obtain such
clearance or approval. FDA regulations also require the Company to adhere
to certain "Good Manufacturing Practices" ("GMP") regulations,
Page 7
<PAGE>
which include validation testing, quality control and documentation
procedures. The Company's compliance with applicable regulatory requirements
is subject to periodic inspections by the FDA.
The Company will need 510(k) approval for any new products which are
developed in the future using digital x-ray technology. The process of
obtaining required regulatory clearances or approvals can be time-consuming
and expensive, and compliance with the FDA's GMP regulations and other
regulatory requirements can be burdensome. Moreover, there can be no
assurance that the required regulatory clearances will be obtained, and
those obtained may include significant limitations on the uses of the
product in question. In addition, changes in existing regulations or the
adoption of new regulations could make regulatory compliance by the Company
more difficult in the future. If ILT is unable to perform its obligations,
the Company believes it would have to seek regulatory approval of its
Apollo 95E, or any alternative curing and whitening device, prior to sale
in the US. Although the Company believes that its products and procedures
are currently in material compliance with all relevant FDA requirements,
the failure to obtain the required regulatory clearances or to comply with
applicable regulations could result in fines, delays or suspensions of
clearances, seizures or recalls of products, operating restrictions and
criminal prosecutions, and would have a material adverse effect on the
Company.
COMPETITION. The manufacture and distribution of medical and dental
devices is intensely competitive. The Company competes with numerous other
companies, including several major manufacturers and distributors. With
respect to the intraoral camera market, the Company has at least five major
competitors. Most of the Company's competitors have greater financial and
other resources than the Company. Consequently, such entities may begin to
develop, manufacture, market and distribute systems which are substantially
similar or superior to the Company's products.
RAPID EXPANSION OF THE COMPANY'S BUSINESS. From inception (October 23,
1995) through December 31, 1997, the Company has experienced rapid and
substantial growth in revenues and geographic scope of operations. Any
future growth may place a significant strain on management and on the
Company's financial resources and information processing systems. The
failure to recruit additional staff and key personnel, to have sufficient
financial resources, to maintain or upgrade these financial reporting
systems, or to respond effectively to difficulties encountered during
expansion could have a material adverse effect on the Company's business,
operating results and financial condition.
RELIANCE ON INTERNATIONAL SALES AND DISTRIBUTORS AND GENERAL RISKS OF
INTERNATIONAL OPERATIONS. For the twelve-month period ended December 31,
1997, international sales have accounted for approximately 24% of the
Company's net sales, and the Company expects that international sales may
increase as a percentage of sales in the future. Consequently, the Company
is subject to the risks of conducting business internationally, including
unexpected changes in, or impositions of, legislative or regulatory
requirements; fluctuations in the US dollar which could materially
adversely affect US dollar revenues; tariffs and other barriers and
restrictions; potentially adverse taxes; and the burdens of complying with
a variety of international laws and communications standards. The Company's
international sales involve potentially longer payment cycles and the
Company may experience greater difficulty collecting accounts receivable.
The Company currently depends on third party distributors for substantially
all of its international sales. At December 31, 1997, nine of the Company's
international distributors accounted for 60% of the Company's accounts
receivable, and nine of these distributors accounted for approximately
$3,877,000 or 24%, of the Company's total sales for the twelve-month period
ended December 31, 1997. Certain of the Company's third party distributors
may also act as resellers for competitors of the Company and could devote
greater effort and resources to marketing competitive products. The loss
of, or other significant reduction in sales to, certain of these third
party distributors could have a material adverse effect on the Company's
business and results of operations. The Company is also subject to general
geopolitical risks, such as political and economic instability and changes
in diplomatic and trade relationships, in connection with its international
operations. There can be no assurance that these risks of conducting
business internationally will not have a material adverse effect on the
Company's business. Further, any failure by the Company to predict or plan
for changes in the international arena could have a material adverse effect
on the Company's business, operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL. The Company's future performance will
depend significantly upon its Chairman of the Board and Chief Executive
Officer, Robert H. Gurevitch, and upon certain other key employees of the
Company. The loss of service of one or more of these persons could have a
material adverse effect on the Company's business and operations. The
Company has entered into Employment Agreements with Robert H. Gurevitch and
Dewey Perrigo, the Company's Vice President of Sales, pursuant to which
they each have agreed to render services to the Company until October 1,
1999. The Company has obtained "key person" life insurance on Mr. Gurevitch
in the amount of $2,000,000, of which the Company is the sole beneficiary,
but there can be no assurance that the proceeds of such insurance will be
sufficient to offset the loss to the Company in the event of his death. The
Company does not maintain any insurance on the lives of its other senior
management. In addition, the Company's success will be dependent upon its
ability to recruit and retain qualified personnel. Any failure by the
Company to retain and attract key personnel could have a material adverse
effect on the Company's business, operating results, and financial
condition.
Page 8
<PAGE>
LIMITED PROPRIETARY PROTECTION. The Company's success and ability to
compete is dependent in part upon its proprietary technology. The Company's
proprietary technology is not protected by any patents. Consequently, the
Company relies primarily on trademark, trade secret and copyright laws to
protect its technology. Also, the Company has implemented a policy that
most senior and technical employees and third-party developers sign
nondisclosure agreements. However, there can be no assurance that such
precautions will provide meaningful protection from competition or that
competitors will not be able to develop similar or superior technology
independently. Also, the Company has no license agreements with the end
users of its products, so it may be possible for unauthorized third parties
to copy the Company's products or to reverse engineer or otherwise obtain
and use information that the Company regards as proprietary. If litigation
is necessary in the future, to enforce the Company's intellectual property
rights, to protect the Company's trade secrets or to determine the validity
and scope of the proprietary rights of others, such litigation could result
in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, operating results and financial
condition. Ultimately, the Company may be unable, for financial or other
reasons, to enforce its rights under intellectual property laws. In
addition, the laws of certain countries in which the Company's products are
or may be distributed may not protect the Company's products and
intellectual property rights to the same extent as the laws of the United
States.
The Company believes that its products do not infringe upon any valid
existing proprietary rights of third parties. Although the Company has
received no communication from third parties alleging the infringement of
proprietary rights of such parties, there can be no assurance that third
parties will not assert infringement claims in the future. Any such third
party claims, whether or not meritorious, could result in costly litigation
or require the Company to enter into royalty or licensing agreements. There
can be no assurance that the Company would prevail in any such litigation
or that any such licenses would be available on acceptable terms, if at
all. If the Company were found to have infringed upon the proprietary
rights of third parties, it could be required to pay damages, cease sales
of the infringing products and redesign or discontinue such products, any
of which alternatives, individually or collectively could have a material
adverse effect on the Company's business, operating results and financial
condition.
CONFLICT OF INTERESTS. Robert Gurevitch, Chairman of the Company, has
loaned money to the Company ("Loan Obligations") and has guaranteed the
performance by the Company under its leases for its Irvine (Technology
Drive) and Westlake, California premises. The Company believes that all of
these transactions were on terms no less favorable than were available from
unaffiliated third parties. The Company intends to attempt to relieve Mr.
Gurevitch from his obligations under each of these guarantees and it is
possible that, in order to achieve the release of Mr. Gurevitch from these
guarantees, the Company will be required to post collateral or provide
other concessions to the recipients of the guarantees. The Company has, in
the past, entered into transactions with affiliates and there can be no
assurance that the Company will not enter into transactions with affiliated
parties in the future.
LIMITATION OF LIABILITY AND INDEMNIFICATION. The Company's Amended and
Restated Certificate of Incorporation limits, to the maximum extent
permitted by the Delaware General Corporation Law ("Delaware Law"), the
personal liability of directors for monetary damages for breach of their
fiduciary duties as a director, and provides that the Company shall
indemnify its officers and directors and may indemnify its employees and
other agents to the fullest extent permitted by law. The Company has
entered into indemnification agreements with its directors and executive
officers which may require the Company, among other things, to indemnify
such directors against liabilities that arise by reason of their status or
service as directors or officers (other than liabilities arising from
willful misconduct of a culpable nature), to advance their expenses
incurred as a result of any proceeding against them as to which they could
be indemnified, has obtained director's and officer's insurance. The
Company has purchased director's and officer's liability insurance in the
amount of $3.0 million. Section 145 of the Delaware Law provides that a
corporation may indemnify a director, officer, employee or agent made, or
threatened to be, a party to an action by reason of the fact that he was a
director, officer, employee or agent of the corporation or was serving at
the request of the corporation against expenses actually and reasonably
incurred in connection with such action if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
if he had no reasonable cause to believe his conduct was unlawful. Delaware
Law does not permit a corporation to eliminate a director's duty of care,
and the provisions of the Company's Amended and Restated Certificate of
Incorporation have no effect on the availability of equitable remedies,
such as injunction or rescission, for a director's breach of the duty of
care.
ANTI-TAKEOVER PROVISIONS. The Company has an authorized class of
1,000,000 shares of preferred stock which may be issued by the Board of
Directors on such terms and with such rights, preferences and designations
as the Board of Directors may determine. Issuance of such preferred stock,
depending upon the rights, preferences and designations thereof, may have
the effect of delaying, deterring or preventing a change in control of the
Company. In addition, certain "anti-takeover" provisions of the Delaware
Law, among other things, restrict the ability of stockholders to effect a
merger or business combination or obtain control of the Company, and may be
considered disadvantageous by a stockholder.
PRODUCT LIABILITY. Although the Company has not experienced any
product liability claims to date, the sale and support of products by the
Company may entail the risk of such claims, and there can be no assurance
that the Company will not be subject to such claims in the future. A
successful product liability claim or claim arising as a result of use of
the Company's products brought against the Company, or negative publicity
attendant to any such claim, could have a material adverse effect upon the
Company's business,
Page 9
<PAGE>
operating results and financial condition. The Company maintains product
liability insurance with coverage limits of $1,000,000 per occurrence and
$1,000,000 per year. While the Company believes that it maintains adequate
insurance coverage, there can be no assurance that the amount of insurance
will be adequate to satisfy claims made against the Company in the future,
or that the Company will be able to obtain insurance in the future at
satisfactory rates or in adequate amounts.
Page 10
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Securities offered by the Selling Stockholders hereunder.
Page 11
<PAGE>
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The Shares to be sold by the Selling Stockholders consist of 450,000
issuable by the Company to the Selling Stockholders pursuant to the
exercise of common stock purchase warrants (the "Warrants") that were
issued to the Selling Stockholders pursuant to a Purchase Agreement, dated
as of March 2, 1998, between the Company and the Selling Stockholders in
connection with the Company's private placement of its 12% Senior
Subordinated Notes due 1999. The following table sets forth certain
information regarding the beneficial ownership of the Common Stock by the
Selling Stockholders as of March 3, 1998 and as adjusted to reflect the
sale of the Shares by the Selling Stockholders. The Selling Stockholders
respectively have the sole voting and investment power with respect to the
Shares owned, subject to applicable community property laws. As of March
24, 1998, the Company had outstanding 5,115,777 shares of Common Stock, par
value $.01 per share, the only outstanding voting security of the Company.
<TABLE>
<CAPTION>
Common Stock Owned Prior to the
Common Stock Owned
Offering(1)
After the Offering(1)
-------------------------------
- ----------------------
Number of Number Percent
Shares of Percent of Shares to Number of
Common Stock of Class(2) be Sold of Shares Class
------------ ---------- ------------ --------- ------
<S> <C> <C> <C> <C> <C>
JMG Capital Partners, L.P. 125,001 2.4 50,000 75,001 1.5
Triton Capital Investments, Ltd. 50,000 1 50,000 0 *
JMG Capital Management, Inc. 2,500 * 2,500 0 *
Dorchester Partners, L.P. 222,651 4.3 100,000 122,651 2.4
J. Steven Emerson IRA R/O I(3) 355,134 6.7 100,000 255,134 4.9
G. Tyler Runnels(4) 254,951 4.9 25,000 229,951 4.4
John B. Davies 10,000 * 10,000 0 *
The Muhl Family Trust 8,751 * 5,000 3,751 *
Dated 10/11/95
Tallac Corporation 176,600 3.4 100,000 76,600 1.5
c/o Investment Manager
Alavarado Partners
Bruce A. Brown, as his sole and 2,500 * 2,500 0 *
separate property
Page 12
<PAGE>
Bruce A Brown and Judith A Brown 5,000 * 5,000 0 *
as Joint Tenants with Right of
Survivorship
</TABLE>
- -----------------------
* Less than one percent.
(1) Includes any shares of Common Stock which underlie outstanding
warrants or options to purchase the Company's Common Stock that
are currently exercisable or will become exercisable within the
next 60 days, including the 450,000 shares covered by this
registration statement.
(2) The number of outstanding Shares takes into account and assumes
the exercise of any warrants or options owned by the particular
shareholder that are currently exercisable or will become
exercisable within 60 days.
(3) Includes 48,000 shares underlying common stock purchase warrants
that are in addition to the 100,000 shares underlying common
stock purchase warrants that are being hereby registered.
(4) Includes 28,500 shares underlying redeemable common stock
purchase warrants, exercisable May 9, 1998, that are in addition
to the 25,000 shares underlying common stock purchase warrants
that are being hereby registered. Also includes 40,959 shares
underlying options granted to Mr. Runnels.
The Selling Stockholders may sell all or a portion of the Shares
offered hereby from time to time in brokerage transactions in the NASDAQ
SmallCap Market and/or the Boston Stock Exchange at prices and terms
prevailing at the times of such sales. The Selling Stockholders may also
make private sales directly or through brokers. The Selling Stockholders
may individually pay customary brokerage commissions and expenses. In
connection with any sales, the Selling Stockholders and any brokers
participating in such sales may be deemed to be underwriters within the
meaning of the Securities Act, in which event commissions received by such
brokers may be deemed underwriting commissions under such Act.
Under the Exchange Act and the regulations thereunder, any person
engaged in a distribution of the shares of Common Stock of the Company
offered by this Prospectus may not simultaneously engage in market making
activities with respect to the shares of Common Stock of the Company during
the applicable "cooling off" periods prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Stockholders will need to comply with applicable provisions of the Exchange
Act and the rules and regulations thereunder including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales
of shares of Common Stock by the Selling Stockholders. Regulation M
contains certain limitations and prohibitions and is intended to prevent
issuers and selling security holders and other participants in a
distribution of securities from conditioning the market through
manipulative or deceptive devices to facilitate the distribution.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Troop Meisinger Steuber & Pasich, LLP, Los Angeles, California.
Page 13
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EXPERTS
The consolidated balance sheets of Dental/Medical Diagnostic Systems,
Inc. as of December 31, 1996 and December 31, 1997 and the consolidated
statements of income, retained earnings and cash flows for the period from
inception to March 2, 1996, the ten months ended December 31, 1996 and for
the twelve-month period ended December 31, 1997, incorporated by reference in
this registration statement on Form S-3, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
Future audited financial statements of the Company and the reports
thereon of the Company's independent public accountants will also be
incorporated by reference in this prospectus in reliance upon the authority
of those accountants as experts in giving those reports to the extent said
firm has audited those financial statements and consented to the use of
their reports thereon.
INDEMNIFICATION
As permitted by the Delaware General Corporation Law ("DGCL"), the
Company's Amended and Restated Certificate of Incorporation limits the
personal liability of directors to the Company for monetary damages for
certain breaches of fiduciary duty. Liability is not eliminated for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful
payment of dividends or stock purchases or redemptions pursuant to
Section 174 of the DGCL, or (iv) any transaction from which the director
derived an improper personal benefit.
The Company has also entered into indemnification agreements with each
of its directors and executive officers. The indemnification agreements
provide that the directors and executive officers will be indemnified to
the fullest extent permitted by applicable law against all expenses
(including attorneys' fees), judgments, fines and amounts reasonably paid
or incurred by them for settlement in any threatened, pending or completed
action, suit or proceeding, including any derivative action, on account of
their services as a director or officer of the Company or of any subsidiary
of the Company or of any other company or enterprise in which they are
serving at the request of the Company. No indemnification will be provided
under the indemnification agreements, however, to any director or executive
officer in certain limited circumstances, including on account of knowingly
fraudulent, deliberately dishonest or willful misconduct. To the extent
the provisions of the indemnification agreements exceed the indemnification
permitted by applicable law, such provisions may be unenforceable or may be
limited to the extent they are found by a court of competent jurisdiction
to be contrary to public policy.
The Company has purchased a directors and officers liability insurance
policy in the amount of $3,000,000.
Page 14
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the offering are as follows:
<TABLE>
<CAPTION>
<C> <C>
Amount
------
Registration Fee Under Securities Act of 1933 . . . . . . $894.00
NASD Filing Fees. . . . . . . . . . . . . . . . . . . . . $ *
Blue Sky Fees and Expenses. . . . . . . . . . . . . . . . $ *
Printing and Engraving Certificate . . . . . . . . . . . $ *
Legal Fees and Expenses . . . . . . . . . . . . . . . . . $7,500.00
Accounting Fees and Expenses. . . . . . . . . . . . . . . $4,000.00
Registrar and Transfer Agent Fees . . . . . . . . . . . . $ *
Miscellaneous Expenses. . . . . . . . . . . . . . . . . . $ *
----------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . $12,394.00
===========
</TABLE>
- ----------------
* Not applicable or none.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law ("DGCL"), the
Company's Amended and Restated Certificate of Incorporation limits the
personal liability of directors to the Company for monetary damages for
certain breaches of fiduciary duty. Liability is not eliminated for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful
payment of dividends or stock purchases or redemptions pursuant to
Section 174 of the DGCL, or (iv) any transaction from which the director
derived an improper personal benefit.
The Company has also entered into indemnification agreements with each
of its directors and executive officers. The indemnification agreements
provide that the directors and executive officers will be indemnified to
the fullest extent permitted by applicable law against all expenses
(including attorneys' fees), judgments, fines and amounts reasonably paid
or incurred by them for settlement in any threatened, pending or completed
action, suit or proceeding, including any derivative action, on account of
their services as a director or officer of the Company or of any subsidiary
of the Company or of any other company or enterprise in which they are
serving at the request of the Company. No indemnification will be provided
under the indemnification agreements, however, to any director or executive
officer in certain limited circumstances, including on account of knowingly
fraudulent, deliberately dishonest or willful misconduct. To the extent
the provisions of the indemnification agreements exceed the indemnification
permitted by applicable law, such provisions may be unenforceable or may be
limited to the extent they are found by a court of competent jurisdiction
to be contrary to public policy.
The Company has purchased a directors and officers liability insurance
policy in the amount of $3,000,000.
Page 15
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index of this Registration Statement.
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 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;
(2) That, for the purpose of determining liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(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, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of the
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
Page 16
<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 Westlake Village, State of California, on
April _, 1998.
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
(Registrant)
By: /S/ ROBERT H. GUREVITCH
--------------------------------
Robert H. Gurevitch
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert H. Gurevitch and Ronald E.
Wittman or any one of them, his attorney-in-fact and agent, with full power
of substitution, for him in any and all capacities, to sign any amendments
to this Registration Statement on Form S-3, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact, or their substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<C> <C> <C>
SIGNATURE TITLE DATE
/s/ ROBERT H. GUREVITCH Chairman of the Board
- ----------------------- and Chief Executive Officer April 30, 1998
Robert H. Gurevitch
/S/ RONALD E. WITTMAN Chief Financial Officer and
- ----------------------- Chief Accounting Officer April 30, 1998
Ronald E. Wittman
/S/ MARVIN H. KLEINBERG
- ----------------------- Director April 29, 1998
Marvin H. Kleinberg
/S/ JACK D. PRESTON
- ----------------------- Director April 29, 1998
Jack D. Preston
</TABLE>
Page 17
<PAGE>
EXHIBIT INDEX
NO. ITEM
- --- -----
4.1 Specimen Stock Certificate of the Registrant
[Incorporated by reference to Amendment No. 1 of
Form SB-2 filed on April 7, 1997].
5.1 Opinion of Troop Meisinger Steuber & Pasich, LLP.
23.1 Consent of Coopers & Lybrand, LLP.
23.2 Consent of Troop Meisinger Steuber & Pasich, LLP
(included as part of Exhibit 5.1).
24.1 Power of Attorney (included in signature page).
Page 18
<PAGE>
TROOP MEISINGER STEUBER & PASICH, LLP
LAWYERS
May 4, 1998
Dental/Medical Diagnostic Systems, Inc.
200 N. Westlake Blvd.
Westlake Village, CA 91362
Ladies/Gentlemen:
At your request, we have examined the Registration Statement on
Form S-3 (the "Registration Statement") to which this letter is attached as
Exhibit 5.1 filed by Dental/Medical Diagnostic Systems, Inc., a California
corporation (the "Company"), in order to register under the Securities Act
of 1933, as amended (the "Act"), 450,000 shares of Common Stock (the
"Shares") of the Company issuable pursuant to the exercise of the warrants
obtained in connection with the certain Purchase Agreements, dated March 2,
1998.
We are of the opinion that the Shares have been duly authorized
and upon issuance and sale in conformity with and pursuant to the Plan, the
Shares will be validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an Exhibit to the
Registration Statement and to the use of our name in the Prospectus
constituting a part thereof.
Respectfully submitted,
/S/ TROOP MEISINGER STEUBER & PASICH
TROOP MEISINGER STEUBER & PASICH, LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of Dental/Medical Diagnostic Systems, Inc. on Form S-3 of our
report dated February 16, 1998 on our audits of the consolidated financial
statements of Dental/Medical Diagnostic Systems, Inc. As of December 31,
1997 and 1996 and for the twelve month period ended December 31, 1997, the
ten month priod ended December 31, 1996, and for the period from inception
(October 23, 1995) to March 2, 1996, which report is included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1997.
/s/ Coopers & Lybrand L.L.P.
Los Angeles, California
May 1, 1998
