As filed with the Securities and Exchange Commission on December 2, 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)
----------------------
STEPHEN ROSS
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 STEUBER PASICH REDDICK & TOBEY, LLP
2029 CENTURY PARK EAST, 24TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 728-3000
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. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
====================================================================================================
<CAPTION>
Proposed Maximum Proposed Maximum
Title Of Shares Amount To Be Aggregate Price Aggregate Amount Of
To Be Registered Registered Per Unit(1) Offering Price Registration Fee
- ---------------- ------------ ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Common Stock 100,000 $6.60 $660,000 $195
====================================================================================================
</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 November 30,
1998.
<PAGE>
PROSPECTUS
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
100,000 SHARES OF COMMON STOCK
(par value $0.01 per share)
This is an offering of 100,000 shares (the "Shares") of common stock, par
value $.01 per share (the "Common Stock") of Dental/Medical Diagnostic Systems,
Inc. (the "Company" or "DMD"). The Selling Stockholder identified in this
prospectus is offering all of the shares to be sold in the offering. DMD will
not receive any of the proceeds from the offering. All costs, expenses and fees
in connection with the registration of the shares offered hereby will be borne
by the Selling Stockholder.
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."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTING IN THE SHARES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
---------------
The date of this Prospectus is December 2, 1998
Page 2
<PAGE>
TABLE OF CONTENTS
PAGE
WHERE YOU CAN FIND MORE INFORMATION.......................................... 4
SUMMARY...................................................................... 5
CAUTIONARY STATEMENTS AND RISK FACTORS....................................... 6
USE OF PROCEEDS............................................................. 16
SELLING STOCKHOLDER......................................................... 17
PLAN OF DISTRIBUTION........................................................ 18
LEGAL MATTERS............................................................... 19
EXPERTS......................................................................19
DIRECTORS' AND OFFICERS' LIABILITY...........................................19
-----------------------
DMD's principal executive offices are located at 200 North Westlake
Boulevard, Suite 202, Westlake Village, California 91362, (805) 381-2700.
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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. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available on the SEC's Website at
"http://www.sec.gov." You can also inspect such reports, proxy statements and
other information at the offices of the Nasdaq Stock Market.
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 to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
Commission will automatically update and supersede this information. We
incorporate by reference the following documents we filed with the commission
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"):
o Annual Report on Form 10-KSB for the year ended December 31, 1997.
o Quarterly Report on Form 10-QSB for the quarter ended March 31, 1998.
o Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998.
o Quarterly Report on Form 10-QSB for the quarter ended September 30, 1998.
o DMD's Proxy Statement on Form 14A filed on June 23, 1998.
o Description of our capital stock contained on page 45 of our amendment
No. 2 on Form SB-2 (File # 33-22507).
o All documents filed by us with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this prospectus and before the offering of the common stock
is terminated.
This prospectus is part of a registration statement we filed with the SEC.
You may request a copy of any of the above filings by writing to or calling:
Stephen Ross
Chief Financial Officer
Dental/Medical Diagnostic Systems, Inc.
200 North Westlake Boulevard, Suite 202
Westlake Village, California 91362
(805) 381-2700
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
Stockholder 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.
Page 4
<PAGE>
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 OUR STOCKHOLDERS ON MARCH 24, 1997 ("REVERSE STOCK SPLITS"). THIS
PROSPECTUS AND OTHER INFORMATION INCORPORATED HEREIN, CONTAIN 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."
SUMMARY
Dental Medical Diagnostic Systems, Inc. ("DMD") designs, develops, manufactures
and sells high technology dental equipment. Our primary product emphasis for
approximately the past two years has been on the manufacture and sale of an
intraoral camera system known as the "TeliCam II System," an updated version of
the intraoral camera system, the "TeliCam Elite," and a multi-operatory
intraoral camera system known as the InTELInet, for use in connection with the
TeliCam II System. However, in the last nine months our primary product emphasis
has begun to shift toward a teeth whitening and curing device known as the
Apollo 95E which we now market both domestically and internationally. We
received 510(k) notification required to commence marketing of the Apollo 95E in
the United States on August 20, 1998 and on August 24, 1998, we began shipping
Apollo 95E units into the United States and Canada.
We began marketing the Apollo 95E, a curing and whitening device, in
international markets in the first quarter of 1998 and in U.S. and Canadian
markets in the third quarter of 1998. We believe that the Apollo 95E produces
faster results than products currently available in the marketplace. 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 TeliCam II and Elite Systems display close-up color video images of dental
patients' teeth and gums. These TeliCam images help dentists show their patients
the dental health and hygiene problems the patient has and, as a result of such
display, promote patient acceptance of treatment plans. The TeliCam II System
gives dentists the ability to capture and display multiple video images without
an expensive device such as a video cassette recorder or color printer. Thus, we
are able to provide a low-cost alternative to the more expensive traditional
intraoral dental camera systems. We have been shipping the Telecam Systems to
the marketplace since February 1996, but now believe that the market for
intraoral cameras such as the TeliCam II and Elite System is a market which has
declined. TeliCam System II and Elite Systems sales have recently been below
levels of prior comparable periods, a trend which we expect to continue.
We also began marketing the chemical composite (Apollo Cure) and whitening
materials (Apollo Secret) to be used in connection with the Apollo 95E in
November 1998. We are currently in the process of having the products
manufactured for initial shipment to dentists. We have the exclusive worldwide
distribution rights for Apollo Secret whitening agents and composite curing
materials, and plan to begin shipping to dentists in December 1998. The formula
of the Apollo Secret Power Whitening offers the following benefits:
o a reduction of patient discomfort;
o the procedure can be performed by a dental assistant or hygienist
(generally in less than 40 minutes);
o the ability to whiten the patient's teeth up to ten shades lighter; and
o no surface damage to the teeth, enamel or pulp.
Apollo Secret is the subject of a pending patent application by its developer.
No assurance can be given that the tooth whitening formula will be successfully
introduced or that we will be able to commercially exploit it.
We have the exclusive rights to market products to the dental market
incorporating certain digital x-ray technology being developed by Suni Imaging
Microsystems, Inc. ("Suni"). Suni will keep the rights to developed microchip
technology underlying the x-ray system it develops for us. Digital x-ray
systems, including competitive systems currently on the market, reduce
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<PAGE>
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
us by Suni, would provide the following benefits:
o an improved image quality digital x-ray system;
o a price expected to be lower than competitive systems; and
o database storage and recall of images for comparison purposes similar to
competitive systems.
We do not guarentee that digital x-ray technology will be successfully developed
by Suni, or if the technology is developed, that we will be able to commercially
exploit it. Additionally, we believe that any products Suni or we may develop
incorporating the digital x-ray technology will require FDA notification prior
to marketing, and as a consequence, the timing of the domestic introduction of
such a product is uncertain. We plan to launch this product internationally
commencing in April of 1999 but do not guarantee that we will achieve this
schedule. If our digital x-ray technology is successfully developed, marketing
of this technology domestically will begin if, and when, FDA approval pursuant
to a 510(k) filing is granted. We cannot assure you that approval pursuant to a
510(k) filing will be received. See "Cautionary Statements and Risk Factors --
Substantial Dependence on Third Parties -- SUPPLIERS."
In November 1996, we introduced our InTELInet Video Monitoring System
("InTELInet") which generally includes two TeliCam systems, a printer, a
videocassette monitor, cabling and installation. InTELInet creates a
video-electronic information link between the different examination rooms (which
are referred to as "operatories" by us and our customers) of the dental office.
InTELInet is different from most other intra-office networking systems known to
us in that it enables use of two or more intraoral cameras at the same time,
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.
We are only marketing the InTELInet in the United States.
DMD was organized in New York in 1981 under the name Edudata Corporation and
reincorporated in Delaware in 1983. DMD was initially organized to provide
education in the use of personal computers, to market software programs
developed by others, and to provide a broad range of advisory services to
businesses in conjunction with both computer and non-computer related management
issues. From 1988 to early 1996, DMD's operations were limited to exploring
opportunities to acquire or to become an operating business.
CAUTIONARY STATEMENTS AND 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, appear below. In
addition to other information contained in this document, readers should
carefully consider the following cautionary statements and risks factors:
LIMITED OPERATING We have only operated our present business
HISTORY; HISTORY OF which designs and markets our TeliCam
LOSSES AND Systems and Apollo 95E since October 1995.
ACCUMULATED DEFICIT For the period from our inception (October
23, 1995) to March 2, 1996, we incurred a
net loss of $1,625,213, and for the ten-
month period ended December 31, 1996, DMD
had net income of $137,151. For the twelve
months ended December 31, 1997 we had a
net loss after an extraordinary item of
$2,044,729, and for the nine months ended
September 30, 1998 we had a net loss of
$2,897,915. At September 30, 1998, our
accumulated deficit was $6,430,706.
Our ability to obtain and sustain
profitability will depend, in part, upon
the successful marketing of our existing
products and the successful and timely
introduction of new products. We do not
guarantee that we will be able to generate
and sustain net sales or profitability in
the future.
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<PAGE>
DEPENDENCE UPON TWO The TeliCam Systems, together with relat-
PRODUCTS ed products such as the InTELInet system,
and the Apollo 95E have been our primary
products and during the last nine months
have made up a substantial portion of our
revenue. We believe that the market for
intraoral cameras, such as the TeliCam
systems, is a market that has declined.
TeliCam Systems sales have recently been
below levels of prior comparable periods,
a trend which we expect to continue. For
example, TeliCam Systems sales for the
nine-month period ended September 30, 1998
were $4,125,000 as compared to $11,500,000
for TeliCam Systems sales for the
nine-month period ended September 30,
1997. If we are unable to successfully
develop and introduce new products and
product lines, or continue the sales
growth of our Apollo 95E, it is likely
that our business would be substantially
and adversely impacted.
IMPORTANCE OF NEW Our future depends upon our ability
PRODUCT DEVELOPMENT to develop and successfully introduce new
TO GROWTH products, particularly obtaining 510(k)
notification for a line of tooth whitening
chemicals and composites, and the digital
x-ray technology under development by
Suni. Development of new product lines is
risk intensive and often requires:
o long-term forecasting of market trends;
o the development and implementation of
new designs;
o compliance with extensive governmental
regulatory requirements; and
o a substantial capital commitment.
Also, the medical and dental device
industry is characterized by rapid
technological change. As technological
changes occur in the marketplace, we may
have to modify our products in order to
become or remain competitive or ensure our
products do not become obsolete. If we
fail to anticipate or respond in a
cost-effective and timely manner to
government requirements, market trends or
customer requirements, or if there are any
significant delays in product development
or introduction, this could have a
material adverse effect on our business.
NEED FOR ADDITIONAL We anticipate that we will need additional
FINANCING capital during the calendar year 1999 to
satisfy our expected increased working
capital and research and development
requirements for our planned new products
and to repay $4,770,000 of principal and
interest on promissory notes coming due on
March 31, 1999. We are currently exploring
alternatives to fulfill these
requirements, but cannot assure you that
additional financing will be available
when needed or that, if available, it will
be on terms favorable to us or our
stockholders. If needed funds are not
available, we may be required to limit our
operations, which could have a material
adverse effect on our business, operating
results and financial condition. If
additional funds are raised through the
sale of DMD stock, additional dilution to
stockholders may occur. In addition, if
the funds needed to repay the Notes are
not available, the Notes may be converted
to shares of Common Stock and additional
dilution to stockholders may occur.
Page7
<PAGE>
EXPANSION THROUGH We intend to expand our product lines
UNDETERMINED ACQUISITIONS and domestic and international markets,
in part, through possible acquisitions.
Our ability to expand successfully through
acquisitions will depend upon the
following:
o the availability of suitable acquisition
candidates at prices we find acceptable.
o our ability to compete for acquisition
opportunities with companies which have
significantly greater financial and
management resources.
o our ability to complete such transac-
tions.
o the availability of financing on terms
we find acceptable.
We do not guarantee that we will be
successful in completing acquisitions.
Also, such transactions involve numerous
risks, including:
o possible adverse short-term effects on
our operating results or on the market
price of our Common Stock.
o an obligation on our part to make con-
tingent payments or to satisfy certain
repurchase obligations.
o the failure to effectively integrate an
acquired business with our business which
could have an adverse effect on the DMD.
We do not guarantee that we will be able
to (i) find suitable acquisition
opportunities, (ii) complete such
transactions, or (iii) that, if acquired,
integrate successfully and profitably such
new businesses with our operations.
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<PAGE>
EXPANSION THROUGH We also may attempt to expand our product
UNDETERMINED JOINT VENTURES lines and domestic and international mark-
ets through joint ventures. Our ability
to expand successfully through joint
ventures will depend upon the following:
o availability of suitable joint
venture candidates whose terms we
find acceptable.
o our ability to compete for
expansion opportunities with companies
that have significantly greater financial
and management resources.
o our ability to complete such
transactions.
o the availability of financing on
terms we find acceptable.
We do not guarantee that we will attempt
or be successful in completing joint
ventures. Such transactions involve
numerous risks, including:
o possible adverse short-term effects
on our operating results or the
market price of our Common Stock.
o failure to effectively
integrate joint ventures with our
operations could have an adverse effect on
our business.
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<PAGE>
SUBSTANTIAL DEPENDENCE We substantially depend upon third parties
UPON THIRD PARTIES for several critical elements of our
business including the development and
licensing for distribution of our
products.
o Suppliers. We depend on
products supplied by other companies. We
cannot be sure that these companies will
continue to sell or provide us with the
products we need to continue the shipment
to the marketplace of our products. If,
for any reason, any of these suppliers
cease to do business with us or if the
products become unavailable to us in the
future, we may need to find other
suppliers or change our products. We may
experience production delays associated
with either developing or obtaining
alternative sources of supply which could
have a significant adverse effect on our
operating results and financial condition.
o Developers. We are dependent
upon third party developers and suppliers
for the development and manufacture of
tooth whitening chemicals and composites,
such as Apollo Secret and Apollo Cure, for
sale with the Apollo 95E. Although tooth
whitening chemicals and composites usable
with the Apollo 95E are commercially
available, if we fail to develop and
successfully market our own line of tooth
whitening and composite chemicals that
failure could have an adverse effect on
our earnings and revenues because of
higher cost and lesser functionality of
commercially available products.
o Suni. Under licensing and
development arrangements we have obtained
exclusive marketing rights to products
incorporating certain digital x-ray
technology developed by Suni. We have paid
significant advances to, and are dependent
upon Suni to successfully develop the
digital x-ray technology and to
commercialize the digital x-ray
technology. We do not guarantee that Suni
will be successful in this endeavor. If
Suni should not develop a digital x-ray
product we believe to be acceptable or
successful in the marketplace, this would
have a material adverse effect on our
operating results and financial condition.
Also, the agreement with Suni provides
that we are obligated to make minimum
royalty payments if products incorporating
the developed technology are introduced to
the market in order to maintain our rights
to be the exclusive distributor of the
digital x-ray technology. We cannot
guarantee that we will be able to meet the
royalty payments required to maintain our
rights to be the exclusive distributor.
Suni would then be able to license the
developed technology to our competitors,
or grant an exclusive license to a
competitor, which could have a material
adverse effect on our operating results
and financial condition.
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EXTENSIVE GOVERNMENT
REGULATION Our products and our manufacturing
practices are regulated by the United
States Food and Drug Administration
("FDA") under 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 which
we are currently developing must receive
FDA clearance or notification before
they may be sold, or be exempted from the
need to obtain such clearance or
notification. FDA regulations also require
us to adhere to certain "Good
Manufacturing Practices" regulations,
which include validation testing, quality
control and documentation procedures. Our
compliance with applicable regulatory
requirements is subject to periodic
inspections by the FDA.
We will need to file for 510(k)
notification for any new products that are
developed in the future using digital
x-ray technology, as well as certain other
products. The process of obtaining
required regulatory clearances or
notifications can be time-consuming and
expensive, and compliance with the FDA's
Good Manufacturing Practices regulations
and other regulatory requirements can be
burdensome. Moreover, we do not guarantee
that the required regulatory notifications
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 us more
difficult in the future. The failure to
obtain the required regulatory clearances
or to comply with applicable regulations
could result in any of the following:
o fines;
o delays or suspensions of
clearances;
o seizures or recalls of products;
o operating restrictions; and
o criminal prosecution. (any of which
would have a material adverse effect on
us)
COMPETITION The manufacture and distribution of medi-
cal and dental devices are intensely
competitive. We compete with numerous
other companies, including several major
manufacturers and distributors. With
respect to the intraoral camera market, we
have at least twelve major competitors.
The Apollo 95E presently has two major
competitors. Some of our competitors have
greater financial and other resources
than we do. Consequently, these competing
companies may begin to develop,
manufacture, market and distribute systems
which are substantially similar or
superior to our products, which could
adversely affect our operating results and
financial condition.
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RELIANCE ON At September 30, 1998, our international
INTERNATIONAL SALES receivables accounted for 83% of DMD's
AND DISTRIBUTORS AND accounts receivable, and international
GENERAL RISKS OF sales were approximately 34% of our total
INTERNATIONAL OPERATIONS sales for the nine-month period ended
September 30, 1998. We expect that
international sales may increase as a
percentage of sales in the future.
Consequently, we face certain risks of
conducting business internationally,
including:
o unexpected changes in, or imposi-
tions of, legislative or regulatory
requirements.
o fluctuations in the value of
the US dollar which could materially
adversely affect US dollar revenues.
o tariffs and other barriers and
restrictions.
o potentially adverse taxes.
o the burdens of complying with
international laws and communications
standards.
o potentially longer payment cycles.
o greater difficulty collecting
accounts receivable.
o political and economic instability.
o changes in diplomatic and trade
relationships.
We do not guarantee that these risks of
conducting business internationally will
not have a material adverse effect on our
business. Further, any failure to predict
or plan for changes in the international
arena could have a material adverse effect
on our financial success.
DEPENDENCE ON KEY Our success is highly dependent upon our
PERSONNEL Chairman of the Board and Chief Executive
Officer, Robert H. Gurevitch, and upon
certain other key employees. The loss of
service of one or more of these persons
could have a material adverse effect on
our business. We have entered into
Employment Agreements with Robert H.
Gurevitch and Dewey Perrigo, our Vice
President of Sales, pursuant to which they
each have agreed to render services to us
until October 1, 1999. We have obtained
"key person" life insurance on Mr.
Gurevitch in the amount of $2,000,000, of
which we are the sole beneficiary, but
there can be no assurance that the
proceeds of such insurance will be
sufficient to offset the loss to us in the
event of his death. We do not maintain any
insurance on the lives of its other senior
management. In addition, our success will
be dependent upon our ability to recruit
and retain qualified personnel. Any
failure to retain and attract key
personnel could have a material adverse
effect on our business.
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LIMITED PROPRIETARY Our future success and ability to compete
PROTECTION is dependent in part upon our proprietary
technology. Our proprietary technology is
not protected by any patents. The Apollo
95E has a patent pending but it is not
certain to be issued. Consequently, we
rely primarily on trademark, trade secret
and copyright laws to protect our
technology. Also, we have 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. For example, third parties
may try to copy or reverse-engineer our
products. Similarly, our customers may
take inadequate precautions to protect our
proprietary information. In addition, many
foreign countries' laws may not protect us
from improper use of our proprietary
technology overseas. We may not have
adequate remedies if our proprietary
rights are breached or our trade secrets
are disclosed.
CONFLICTS OF INTERESTS Robert Gurevitch, our Chairman, has lent
money to DMD and has guaranteed the
performance by DMD under its leases for
our Irvine, California and Westlake,
California premises. We believe that all
of these transactions were on terms no
less favorable than were available from
unaffiliated third parties. We intend to
attempt to relieve Mr. Gurevitch from his
obligations under his guarantees and it is
possible that, in order to achieve his
release from these guarantees, we will be
required to post collateral or provide
other concessions to the recipients of the
guarantees. We have, in the past, entered
into transactions with affiliates and may
enter into transactions with affiliated
parties in the future.
LIMITATION OF LIABILITY DMD's Amended and Restated Certificate of
AND INDEMNIFICATION Incorporation limits, to the maximum
extent permitted by law, the personal lia-
bility of directors for monetary damages
for breach of their fiduciary duties as a
director, and provides that we must
indemnify our officers and directors and
may indemnify our employees and other
agents to the fullest extent permitted by
law. We have entered into indemnification
agreements with our directors and
executive officers which may require us,
among other things, to indemnify them
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) and to advance their expenses
incurred as a result of any proceeding
against them as to which they could be
indemnified. We have purchased directors'
and officer's liability insurance in the
amount of $5,000,000. The limitation of
liability of our directors and their
indemnity may lead them to be less
cautious in their actions than would be
the case if their liability for monetary
damages were not eliminated and if
indemnification were not provided.
ANTI-TAKEOVER We have authorized 1,000,000 shares of
PROVISIONS preferred stock, which may be issued by
the Board of Directors on such terms, and
with such rights, preferences and designa-
tions as the Board of Directors may deter-
mine. 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. In addition, certain
"anti-takeover" provisions of Delaware
law, among other things, restrict the
ability of stockholders to affect a merger
or business combination or obtain control
of the company, and some stockholders
might consider this to be disadvantageous.
Page 13
<PAGE>
PRODUCT LIABILITY Although we have not yet had any product
liability claims, the sale and support of
products by DMD may open DMD to the risk
of such claims, and there can be no
assurance that DMD will not be subject to
such claims in the future. A successful
product liability claim or claim arising
as a result of use of our products brought
against DMD, or the negative publicity
brought up by such claim, could have a
material adverse effect upon our business.
We maintain product liability insurance
with coverage limits of $10,000,000 per
occurrence and $11,000,000 per year. While
we believe that we maintain adequate in-
surance coverage, we do not guarantee that
the amount of insurance will be adequate
to satisfy claims made against us in the
future, or that we will be able to obtain
insurance in the future at satisfactory
rates or in adequate amounts.
FLUCTUATION IN Our business is subject to certain quar-
QUARTERLY RESULTS terly influences. Sales are generally
higher in the fourth quarter due to the
purchasing patterns of dentists in the
United States and are generally lower in
the first quarter due primarily to the
effect upon demand of increased purchases
in the prior quarter. It is also expected
that our business will experience lower
sales in the summer months as a
consequence of holiday vacations and a
lesser number of trade shows. These
fluctuations could result in significant
fluctuations, including significant
declines in our stock price.
Quarterly results may be adversely
affected in the future by a variety of
other factors, including the possible
costs of obtaining capital, as well as the
release of new products and promotions
taking place within the quarter. We plan
to continue to fund research and
development and to increase working
capital requirements for the new products.
To the extent that such expenses precede
or are not subsequently followed by
increased revenues, our business will be
adversely affected.
Page 14
<PAGE>
YEAR 2000 ISSUE The Year 2000 readiness issue, which is
common to most businesses, arises from the
inability of information systems, and
other time and date sensitive products and
systems, to properly recognize and process
date-sensitive information or system
failures. Estimates of the potential cost
and effects of Year 2000 issues vary
significantly among businesses, and it is
extremely difficult to predict the actual
impact. Recognizing this uncertainty,
management is continuing to actively
analyze, assess and plan for various Year
2000 issues across its businesses.
The Year 2000 issue has an impact on both
information technology ("IT") systems and
non-IT systems, such as its manufacturing
systems and physical facilities including,
but not limited to, security systems and
utilities. Although our management
believes that a majority of our IT systems
are Year 2000 ready, such systems still
have to be tested for Year 2000 readiness.
We are replacing or upgrading those
systems that are identified as non-Year
2000 compliant. Certain IT systems
previously identified as non-Year 2000
compliant are being upgraded or replaced
which should be complete by June 30, 1999.
Non-IT system issues are more difficult to
identify and resolve. We are actively
identifying non-IT Year 2000 issues
concerning our products and services, as
well as our physical facility locations.
As non-IT areas are identified, our
management formulates the necessary
actions to ensure minimal disruption to
our business processes. Although our
management believes that its efforts will
be successful and the costs will be
immaterial (i.e., less than $25,000) to
our consolidated financial position and
results of operations, it also recognizes
that any failure or delay could cause a
potential impact.
We have initiated efforts to ensure Year
2000 readiness of our products and
services. We have moved to a Year 2000
compliant Network Operating System, and
our key financial, manufacturing and other
in-house systems are already materially
compliant.
The Year 2000 readiness of our customers
varies. We are not investigating whether
or not our customers are evaluating and/or
preparing their own systems. These efforts
by customers to address Year 2000 issues
may affect the demand for certain products
and services; however, the impact on our
revenue is highly uncertain.
We have also begun efforts to assess the
Year 2000 readiness of our key suppliers
and business partners. Our direction of
this effort is to ensure the adequacy of
resources and supplies to minimize any
potential business interruptions. Our
Management plans to complete this part of
its Year 2000 readiness plan in the early
part of calendar 1999.
The Year 2000 issue presents a number of
other risks and uncertainties that could
impact us, such as public utilities
failures, potential claims against us for
damages arising from products and services
that are not Year 2000 compliant, and the
response ability of certain government
commissions of the various geographic
areas where DMD conducts business. While
we continue to believe the Year 2000
issues described above will not materially
affect our financial position, it remains
uncertain as to what extent, if any, we
may be impacted.
Page 15
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Shares offered by the
Selling Stockholder under this prospectus. All costs, expenses and fees in
connection with the registration of the Shares offered hereby will be borne by
the Selling Stockholder.
Page 16
<PAGE>
SELLING STOCKHOLDER
We are registering 100,000 shares of common stock on behalf of
Chrysalis Dental, Inc. (the "Selling Stockholder"). We issued the 100,000 shares
of Common Stock to the Selling Stockholder as the purchase price for our
acquisition of a worldwide license to technology owned by the Selling
Stockholder in October of 1998. We agreed to register the Common Stock on a Form
S-3 Registration Statement.
We do not know if, when, or in what amounts the Selling Stockholder
will sell shares of the Common Stock. Thus, we cannot estimate how many shares
the Selling Stockholder will hold after completion of the offering.
Common Stock Owned Prior to the Offering
----------------------------------------
Number of Number of
Shares of Percent of Shares to be
Common Stock Class Sold
--------------- ------------ --------------
Chrysalis Dental, Inc. 100,000 1.9% 100,000
Page 17
<PAGE>
PLAN OF DISTRIBUTION
We are registering the Shares on behalf of the Selling
Stockholder. As used in this prospectus, the term "Selling Stockholder" includes
donees and pledgees selling Shares received from the Selling Stockholder after
the date of this Prospectus. All costs, expenses and fees in connection with the
registration of the Shares offered hereby will be borne by the Selling
Stockholder. Brokerage commissions and similar selling expenses, if any,
attributable to the sale of the Shares will also be borne by the Selling
Stockholder. Sales of Shares may be effected by the Selling Stockholder from
time to time in one or more types of transactions (which may include block
transactions) on the Nasdaq SmallCap Market or the Boston Stock Exchange, in
negotiated transactions, through put or call options relating to the Shares,
through short sales of Shares, or a combination of such methods of sale, at
market prices prevailing at the time of sale, or at negotiated prices. Such
transactions may or may not involve brokers or dealers. The Selling Stockholder
has advised us that it has not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
securities, nor is there an underwriter or coordinating broker acting in
connection with the proposed sale of Shares by the Selling Stockholder.
The Selling Stockholder may effect such transactions by
selling Shares directly to purchasers or to or through broker-dealers, which may
act as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholder or
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Stockholder and any broker-dealers that act in
connection with the sale of Shares might be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any commissions received
by such broker-dealers and any profit on the resale of the Shares sold by them
while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act.
Because the Selling Stockholder may be deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act, the
Selling Stockholder will be subject to the prospectus delivery requirements of
the Securities Act. We have informed the Selling Stockholder that the
anti-manipulative provisions of Regulation M promulgated under the Securities
Exchange Act may apply to their sales in the market.
The Selling Stockholder also may resell all or a portion of
the Shares in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of Rule 144.
Upon notification to us by the Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of the Selling Stockholder and of the
participating broker-dealers, (ii) the number of Shares involved, (iii) the
price at which such Shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, (v) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus and (vi) other facts
material to the transaction. In addition, upon notification to us by the Selling
Stockholder that a donee or pledgee intends to sell more than 500 Shares, a
supplement to this Prospectus will be filed.
Page 18
<PAGE>
LEGAL MATTERS
Troop Steuber Pasich Reddick & Tobey, LLP, Los Angeles, California, has rendered
to DMD a legal opinion as to the validity of the Common Stock covered by this
Prospectus.
EXPERTS
Our consolidated balance sheets 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
audited by PricewaterhouseCoopers LLP, independent accountants, as indicated in
their reports with respect thereto, and are incorporated herein in reliance upon
the authority of that firm as experts in accounting and auditing.
DIRECTORS' AND OFFICERS' LIABILITY
Our Certificate of Incorporation includes provisions to (i) eliminate
the personal liability of our directors for monetary damages resulting from
breaches of their fiduciary duty to the fullest extent permitted by the Delaware
General Corporation Law and (ii) indemnify our directors and officers to the
fullest extent permitted by Section 145 of the Delaware General Corporation Law.
We believe that these provisions are necessary to attract and retain qualified
persons as directors and officers.
Page 19
<PAGE>
Part II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses, to be borne by the Selling Stockholder, in connection
with the offering are as follows:
Amount
----------------
Registration Fee Under Securities Act of 1933...................$ 172.00
NASD Filing Fee.................................................$ *
Blue Sky Fees and Expenses......................................$ *
Printing and Engraving Certificates.............................$ *
Legal Fees and Expenses.........................................$7,500.00
Accounting Fees and Expenses....................................$5,000.00
Registrar and Transfer Agent Fees...............................$ *
Miscellaneous Expenses..........................................$ *
----------------
TOTAL..................................................$ 12,672
================
- -----------------
* Not applicable or none.
ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law ("DGCL"), DMD's
Amended and Restated Certificate of Incorporation limits the personal liability
of directors to DMD 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 DMD 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.
DMD 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
Page 20
<PAGE>
derivative action, on account of their services as a director or officer of DMD
or of any subsidiary of DMD or of any other company or enterprise in which they
are serving at the request of DMD. 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.
DMD has purchased a directors and officers liability insurance policy
in the amount of $5,000,000.
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.
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 21
<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 November 30, 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 Stephen Ross 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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert H. Gurevitch Chairman of the Board and
- ------------------------- Chief Executive Officer November 30, 1998
Robert H. Gurevitch
/s/ Stephen Ross Chief Financial Officer and
- ------------------------- Chief Accounting Officer November 30, 1998
Stephen Ross
/s/ Marvin H. Kleinberg
- ------------------------- Director November 30, 1998
Marvin H. Kleinberg
/s/ Jack D. Preston
- ------------------------- Director November 30, 1998
Jack D. Preston
Page 22
<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 Steuber Pasich Reddick & Tobey, LLP.
23.1 Consent of PricewaterhouseCoopers, LLP.
23.2 Consent of Troop Steuber Pasich Reddick & Tobey, LLP (included as part
of Exhibit 5.1).
24.1 Power of Attorney (included in signature page).
Page 23
[LETTERHEAD OF TROOP STEUBER PASICH REDDICK & TOBEY, LLP]
December 1, 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 attrached as Exhibit 5.1
filed by Dental/Medical Diagnostic Sytems, Inc., a Delaware corporation (the
"Company"), in order to register under the Securities Act of 1933, as amended
(the "Act"), 100,000 shares of Common Stock (the "Shares") of the Company issued
pursuant a certain Stock Purchase Agreement, dated October 2, 1998.
We are of the opinion that the Shares have been duly authorized and upon
issuance and sale, 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 STEUBER PASICH REDDICK & TOBEY, LLP
TROOP STEUBER PASICH REDDICK & TOBEY, LLP
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 period 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. We also consent to the reference to
our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP.
Los Angeles, California
December 1, 1998
