As filed with the Securities and
Exchange Commission on August 24, 2000 Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
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.)
6416 VARIEL AVENUE, WOODLAND HILLS, CALIFORNIA 91367 (818) 932-2300
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
----------------------
STEPHEN F. ROSS
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
6416 VARIEL AVENUE
WOODLAND HILLS, CALIFORNIA 91367
(818) 932-2300
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
----------------------
Copies to:
LISA H. KLEIN, 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(1) Per Share(3) Offering Price(3) Registration Fee
-------------------------------- ---------------------- --------------------------- -------------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value per share 1,861,861(2) $0.71875 $1,338,212.59 $353.29(4)
and Common Stock, $.01 par
value per share, issuable
upon exercise of warrant
================================ ====================== =========================== ========================== ====================
<FN>
(1) In the event of a stock split, stock dividend, or similar transaction
involving the Registrant's Common Stock, in order to prevent dilution, the
number of shares of Common Stock registered shall automatically increase to
cover the additional shares in accordance with Rule 416 under the
Securities Act.
(2) Consists of 1,396,396 shares of Common Stock and up to 465,465 shares of
Common Stock issuable upon exchange of Warrants.
(3) 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 August
22, 2000.
(4) Paid on August 23, 2000 based on the registration of 1,861,861 shares of
Registrant's Common Stock.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT 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 AUGUST __, 2000
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. THE SELLING SECURITY HOLDERS MAY NOT SELL
THESE SECURITIES BEFORE 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.
PROSPECTUS
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
1,861,861 SHARES OF Common Stock
(par value $.01 per share)
The persons listed in this prospectus under the caption "Selling Security
Holders" may from time to time offer and sell up to 2,161,861 shares of our
Common Stock. The Selling Security Holders acquired 1,396,396 of these shares
pursuant to a Securities Purchase Agreement, and will acquire up to 765,465 of
these shares (the "Warrant Shares") upon the exercise of warrants. The Selling
Security Holders are offering any and all of the shares to be sold in this
offering.
The Common Stock is quoted on the Nasdaq SmallCap Market under the symbol
"DMDS" and is listed on the Boston Stock Exchange under the symbol "DMD." On
August 22, 2000 the high and low prices of the Common Stock as quoted on the
Nasdaq SmallCap Market were $.75 and $0.6875, respectively.
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 3.
---------------
The date of this prospectus is August __, 2000
<PAGE>
PROSPECTIVE PURCHASERS OF THESE SHARES SHOULD RELY ONLY ON INFORMATION
CONTAINED IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE INTO IT. NEITHER THE
COMPANY NOR THE SELLING SECURITY HOLDERS HAVE AUTHORIZED ANYONE TO PROVIDE
DIFFERENT INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THESE SHARES BY ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
ABOUT DENTAL/MEDICAL DIAGNOSTIC SYSTEMS..................................2
RISK FACTORS.............................................................3
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS..........................9
USE OF PROCEEDS.........................................................10
SELLING SECURITY HOLDERS................................................11
PLAN OF DISTRIBUTION....................................................13
WHERE YOU CAN FIND MORE INFORMATION.....................................14
LEGAL MATTERS...........................................................15
EXPERTS.................................................................15
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES......................................15
</TABLE>
Page 1
<PAGE>
ABOUT DENTAL/MEDICAL DIAGNOSTIC SYSTEMS
We design, develop, manufacture and sell high technology dental equipment and
related consumables. Our highest grossing product is the tooth curing and
whitening device known as the "ApolloTM." We also market and sell a line of
whitening products known as "Apollo Secret(R)" for use in conjunction with the
ApolloTM. Starting in September of 1999, we began marketing and selling the
MPDxTM digital x-ray system. In addition, we continue to manufacture and sell
intraoral camera systems, known as the "TeliCam II System," and "TeliCam Elite,"
and a multi-operatory intraoral camera system, known as the "InTELInet", for use
in connection with the TeliCam II System and TeliCam Elite.
From early 1996 to mid 1998, we were primarily involved in designing,
developing, manufacturing, and marketing intra-oral camera systems referred to
as the "TeliCam Systems". The first shipments to customers of the TeliCam System
commenced in early February 1996.
On October 2, 1997, we purchased the assets of S.E.D. ("S.E.D."), a company
organized under the laws of France. Among the acquired assets was a patent for
S.E.D.'s "Biotron" soft tissue surgical device. From this technology, we
developed the "ApolloTM" a unique, visible-light curing instrument which is
designed for two different applications: the hardening of tooth-colored dental
composite materials in three seconds or less and for single appointment,
in-office tooth whitening in less than forty minutes. This plasma-arc lamp uses
a high-frequency electrical field to generate plasma energy, which is ideal for
the fast-curing (hardening) of photosensitive composites. The ApolloTM also
produces light and heat which, when used in conjunction with the Apollo
Secret(R) whitening materials, activates the whitening chemicals in the Apollo
Secret(R). The result of this activation is dramatic whitening of stained teeth.
The rapid performance of the ApolloTM in both hardening composite materials and
whitening teeth enables an average dental practice to save about 5 to 8 hours
per month of a dentist's time.
On October 10, 1997, we entered into an agreement with Suni Imaging
Microsystems, Inc. ("Suni") to develop digital x-ray technology for
incorporation into a digital x-ray system for the dental market. We have
obtained exclusive rights to market products to the dental market incorporating
the digital x-ray technology developed by Suni. Suni will retain the rights to
the developed microchip technology underlying the x-ray system. 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 while
eliminating the need to use and dispose of chemicals required to develop
conventional x-ray film. The resulting MPDxTM digital x-ray system was
introduced in September 1999.
In April 2000, we established Forever White, Inc. as a wholly-owned subsidiary
to market our home tooth whitening system, Forever WhiteTM. The product will be
marketed through informercials in a national advertising campaign on both
national cable and select regional network television stations. Test marketing
of the product began June 9, 2000 in select areas with national coverage
beginning in August of 2000.
We are in the process of introducing a new product known as "Apollo E" (patent
applied for), a wireless, fast curing device that cures (hardens) dental filings
without heat, and will be phasing out our current model, the Apollo 95E, which
originally sold for $4,500. The Apollo E will be priced at $2,495, will be fully
portable and will be programmable by bar code or by the Internet for any
particular composite material. We expect to launch the Apollo E during the third
quarter of fiscal year 2000, and have scheduled our launch of another new
product, the wireless "Apollo Cam" handheld intraoral camera, for the fourth
quarter of fiscal year 2000.
We were organized in New York in 1981 under the name Edudata Corporation and
reincorporated in Delaware in 1983. Our principal executive offices are located
at 6416 Variel Avenue, Woodland Hills, California 91367. Our telephone number is
(818) 932-2300.
Page 2
<PAGE>
RISK FACTORS
Investment in the shares covered by this prospectus involves a significant
degree of risk. You should carefully consider all of the information in this
prospectus, and, in particular, should evaluate the following risks related to
an investment in the shares.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH TO EVALUATE OUR LIKELIHOOD OF
SUCCESS.
We have only manufactured and distributed our digital x-ray systems since
September 1999, our TeliCam systems since October 1995 and our ApolloTM since
March 1998. Therefore, we have a limited relevant operating history upon which
to evaluate the likelihood of our success. In addition, we anticipate additional
revenues from our two new products, Apollo E and Forever WhiteTM. We expect
Apollo E will be available for shipment during September 2000, and our national
advertising campaign for Forever WhiteTM began in August 2000. However, we have
not yet commenced significant sales of Apollo E and Forever WhiteTM, and we can
give no assurances as to the likelihood of success of these products. Factors
such as the risks, expenses and difficulties frequently encountered in the
operation and expansion of a new business and the development and marketing of
new products must be considered in evaluating the likelihood of our success.
WE HAVE A HISTORY OF LOSSES AND ACCUMULATED DEFICIT AND THIS TREND OF LOSSES MAY
CONTINUE IN THE FUTURE.
For the period from October 23, 1995 to March 2, 1996, we incurred a net loss of
$1,625,213. For the fiscal years ended December 31, 1997, 1998, and 1999 we had
net losses of $2,044,729, $1,816,702, and $6,727,638, respectively, and for the
six months ended June 30, 2000, we had a net loss of $6,145,734. At June 30,
2000, our accumulated deficit was $18,222,865. 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
can give no assurances that we will achieve profitability or, if achieved, that
we will sustain profitability.
FLUCTUATION IN QUARTERLY RESULTS MAY RESULT IN DECLINES IN OUR STOCK PRICE.
Certain quarterly influences may affect our business. Historically, sales have
been generally higher in the fourth quarter due to the purchasing patterns of
dentists in the United States and have been generally lower in the first quarter
due primarily to the effect upon demand of increased purchases in the prior
quarter. Historically we have experienced lower sales in the summer months as a
result of holiday vacations and fewer trade shows. These fluctuations in
quarterly operating results could result in increased volatility, including
significant declines, of the trading price of our common stock.
TWO OF OUR PRIMARY PRODUCTS HAD A SIGNIFICANT DECLINE IN SALES AND IF THIS
DECLINE CONTINUES WE MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN PROFITABILITY.
The TeliCam systems, together with related products such as the InTELInet
system, and the ApolloTM have been our primary products since inception. We
believe that our market for the Telicam intraoral cameras, is a market that has
declined. TeliCam systems sales have recently been at or below levels of prior
comparable periods, a trend which we expect to continue. In addition there has
been a decrease in ApolloTM sales as competitor's lamps curing times become
closer to that of the ApolloTM, a trend which we also expect to continue.
AS A RESULT OF THE DECLINE IN SALES OF THE TELICAM SYSTEMS AND APOLLOTM
PRODUCTS, OUR FUTURE DEPENDS ON OUR ABILITY TO DEVELOP AND INTRODUCE NEW
PRODUCTS.
As a result of the decline in our Telicam intraoral camera market, our future
depends upon our ability to develop and successfully introduce new products to
make up for the diminished sales of the Telicam systems and ApolloTM products.
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;
Page 3
<PAGE>
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 to
ensure that 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 demands, or if there are any significant delays in product
development or introduction, our revenues and profit margins may decline which
could adversely affect our cash flows, liquidity and operating results.
WE MAY HAVE A NEED FOR ADDITIONAL CAPITAL.
At June 30, 2000, we had cash and cash equivalents of $1,252,955. After taking
into account our cash and cash equivalents, projected revenues and receipt of
funds from other sources, we may need to raise additional funding through debt
or equity financing during the next twelve months to satisfy our requirements
for research and product development, marketing, and general and administrative
expenses. Our cash requirements, however, may vary materially from those now
planned because of changes in our operations or market conditions. In addition,
at June 30, 2000, we were not in compliance with financial covenants of our
Imperial Bank credit agreement. As of August 21, 2000, we obtained a forbearance
agreement stating that so long as we remain current in our payments of principal
and interest, and so long as we reduce our overdraft balance to zero by August
29, 2000, Imperial Bank will not exercise any remedies it may have resulting
from such lack of compliance until September 21, 2000. If we are not able to
meet all of the conditions by such dates, Imperial Bank can declare the loans in
default and require us to pay the balance of the loan, which is currently
approximately $6.2 million. In such event, we would seek to obtain alternative
financing. There can be no assurance that alternative financing, whether from
equity or debt financing agreements, will be available, if at all, on favorable
terms to us or our stockholders. If we need capital and cannot raise additional
funds, we may be required to limit or forego the development of new products or
limit the scope of our current operations, which could have a material adverse
effect on our business, operating results and financial condition. If we raise
needed funds through the sale of additional shares of our common stock or
securities convertible into shares of our common stock it may result in dilution
to current stockholders.
WE SUBSTANTIALLY DEPEND UPON UNAFFILIATED THIRD PARTIES FOR SEVERAL CRITICAL
ELEMENTS OF OUR BUSINESS, INCLUDING THE DEVELOPMENT AND LICENSING FOR
DISTRIBUTION OF OUR PRODUCTS.
We are dependent upon unaffiliated third party developers and suppliers for the
development and manufacture of all of the components used in our dental
equipment and for the development and manufacture of our consumable products.
Outside of updating our current products, we do not develop any of our
technology. Instead of developing technology, we continually seek out third
parties that own new and innovative technology that they may be willing to
license to us or develop into new dental products under a development agreement.
We have had problems in the past obtaining a marketable product from companies
with whom we had entered into a licensing arrangement. We entered into a
licensing agreement with Ion Laser Technology under which ILT was unable to
develop a product in accordance with the delivery schedule established by our
agreement that met our specifications; as a result, we were forced to find an
alternative product to that which we had contracted with ILT.
IF WE DO NOT MAKE CERTAIN REQUIRED MINIMUM ROYALTY PAYMENTS TO SUNI, AND IF WE
DO NOT PURCHASE REQUIRED AMOUNTS OF CERTAIN PRODUCTS MANUFACTURED BY SUNI, WE
WILL LOSE OUR EXCLUSIVE RIGHTS TO THE DIGITAL X-RAY TECHNOLOGY DEVELOPED FOR US
BY SUNI.
In order to maintain our right to be the exclusive dental licensee of the
digital x-ray technology developed by Suni, we must make significant minimum
periodic royalty payments to Suni, and we must purchase a significant amount of
certain products manufactured by Suni. To date, we have made the required
periodic minimum royalty payments to Suni and have purchased the required
amounts of certain products manufactured by Suni. We cannot guarantee that we
will continue to be able to make the minimum periodic royalty payments, nor can
we guarantee that we will continue to be able to purchase the amount of products
that are required to maintain our right to be the exclusive distributor. If we
do not make the required periodic royalty payments and purchase the required
products, Suni will 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.
Page 4
<PAGE>
THE GOVERNMENT EXTENSIVELY REGULATES OUR PRODUCTS AND FAILURE TO COMPLY WITH
APPLICABLE REGULATIONS COULD RESULT IN FINES, SUSPENSIONS, SEIZURE ACTIONS,
PRODUCT RECALLS, INJUNCTIONS AND CRIMINAL PROSECUTIONS.
The United States Food and Drug Administration, as well as state and foreign
agencies, regulate almost all aspects of our medical devices including:
o entry into the marketplace;
o design;
o testing;
o manufacturing procedures;
o reporting of complaints;
o labeling; and
o promotional activities.
Under the Federal Food, Drug, and Cosmetic Act, FDA has the authority to control
the introduction of new products into the marketplace. Unless specifically
exempted by the agency, medical devices enter the marketplace through either FDA
clearance of a premarket approval application or FDA approval of an application
for 510k clearance. FDA conducts periodic inspections to assure compliance with
it's regulations. The Company has applications pending for a hand held cordless
curing lamp and a cordless, remote controlled, high resolution, intraoral
camera. The Company expects to receive FDA 510k notification for these products
during the third quarter of 2000. Any delay in receipt of FDA 510k notification
for these products will delay our ability to market and sell these products and
could allow our competitors to develop and introduce competing products.
Unless specifically exempted by FDA's regulations, we will need to file a 510k
submission or PMA application for any new products developed in the future
including any using digital x-ray technology. The process of obtaining a
clearance or approval can be time-consuming and expensive. Compliance with FDA's
regulatory requirements can be expensive and time consuming. We do not guarantee
that the required regulatory approvals or clearances will be obtained. Any
approval or clearance obtained from FDA may include significant limitations on
the use of the medical device which is the subject of the approval or clearance.
We cannot market a medical device if needed FDA approval or clearance is not
granted. Inability to obtain such approval or clearance could result in a delay
or suspension of the manufacture and sale of affected medical devices. Any such
delay or suspension would have a material adverse effect on our business. 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 one or more of the following:
o fines;
o delays or suspensions of device clearances;
o seizure actions;
o mandatory recalls;
o injunction action; and
o criminal prosecution.
THE LOSS OF OUR CHIEF EXECUTIVE OFFICER COULD RESULT IN THE LOSS OF A
SIGNIFICANT PORTION OF OUR BUSINESS BECAUSE OF HIS PERSONAL RELATIONSHIPS IN THE
INDUSTRY.
Our success is highly dependent upon our Chairman of the Board and Chief
Executive Officer, Robert H. Gurevitch. Unlike larger companies, we rely heavily
on a small number of officers to conduct a large portion of our business. The
loss of service of Robert H. Gurevitch along with the loss of his numerous
contacts and relationships in the industry would have a material adverse effect
on our business. We have entered into an Employment Agreement with Robert H.
Gurevitch under which he has agreed to render services to us until September 30,
2002. 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.
Page 5
<PAGE>
NONE OF OUR PRODUCTS ARE PROTECTED BY PATENTS, AND THEREFORE, THEY MAY NOT BE
ADEQUATELY PROTECTED FROM COPYING BY COMPETITORS.
Our future success and ability to compete is dependent in part upon our
proprietary technology used in the ApolloTM. The ApolloTM is currently only
protected by a patent in France. We are currently seeking patent protection in
all of the countries of the world in which this technology can be marketed.
There can be no assurance that patents outside of France will be granted for the
ApolloTM system, and, if granted, the patents will provide adequate protection
for the Company's technologies. Consequently, we rely primarily on trademark,
trade secret and copyright laws to protect our technology. However, there can be
no assurance that third parties will not try to copy our products. 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 and therefore a breach of our proprietary rights
could have a material adverse effect on our financial condition.
WE ARE SUSCEPTIBLE TO PRODUCT LIABILITY SUITS AND IF A LAWSUIT IS BROUGHT
AGAINST US IT COULD RESULT IN US HAVING TO PAY LARGE LEGAL EXPENSES AND/OR
JUDGMENTS.
Although we have not yet had any product liability claims, because of the nature
of the medical/dental device industry, there can be no assurance that we will
not be subject to such claims in the future. Our products come into contact with
vulnerable areas of the human body, such as the mouth, tongue, teeth and gums,
and, therefore, the sale and support of dental products makes us susceptible to
the risk of such claims. A successful product liability claim or claim arising
as a result of use of our products brought against us, 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 insurance 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.
ISSUANCE OF PREFERRED STOCK MAY HAVE THE EFFECT OF PREVENTING A CHANGE OF
CONTROL.
We have authorized 1,000,000 shares of preferred stock, which may be issued by
the Board of Directors with certain rights not granted to the holders of common
stock. Issuance of such preferred stock, depending upon the terms and rights
thereof, may have the effect of delaying, deterring or preventing a change of
control.
OUR RECENT SALES OF SERIES A AND B EXCHANGEABLE PREFERRED STOCK, COMMON STOCK
AND WARRANTS TO PURCHASE COMMON STOCK MAY RESULT IN SUBSTANTIAL DILUTION TO OUR
COMMON SHAREHOLDERS.
On November 23, 1999 we sold an aggregate of 2,000 shares of Series A
Exchangeable Preferred Stock ($2 million face value), 2,500 shares of Common
Stock and Warrants to purchase up to 40,000 shares of Common Stock. On March 3,
2000 we sold an aggregate of 2,250 shares of Series B Exchangeable Preferred
Stock ($2.25 million face value) and Warrants to purchase up to 675,000 shares
of Common Stock.
Prior to March 15, 2000, holders of Series A Preferred Stock could exchange
their shares into common stock at $4.00 per share based upon a stated value of
$1,000 per share of Series A Preferred Stock. On and after March 15, 2000,
holders of Series A Preferred Stock may exchange their shares for shares of
common stock at the lesser of $4.00 per share or the average of the closing bid
prices of the common stock during any three (3) of the prior thirty (30)
consecutive trading days selected by the holder of the Series A Preferred Stock
then being exchanged. As a result, the holders will likely be in a position to
exchange their shares for shares of common stock at a discount to the then
current trading price of our common stock. To date, 928 shares of Series A
Preferred Stock have been converted into 821,142 shares of common stock. 1,072
shares of Series A Preferred Stock remain outstanding.
Holders of Series B Preferred Stock may exchange their shares into common stock
at a price per share equal to the lesser of $2.85 or one hundred percent (100%)
of the Market Price on the date of exchange. The Market Price is the average of
the closing bid prices of any three (3) of the prior thirty (30) days
consecutive trading days selected by the holder of the Series B Preferred Stock
then being exchanged. As a result, the holders of Series B Preferred Stock may
be in a position to exchange their shares of common stock at a discount to the
then current trading price of our common stock. 67 shares of Series B Preferred
Stock have been converted into 65,986 shares of common stock. 2,183 shares of
Series B Preferred Stock remain outstanding.
Page 6
<PAGE>
The conversion price of our Series A Preferred Stock and Series B Preferred
Stock is variable and may dilute the price of our common stock. On August 22,
2000, the high and low prices of our common stock were $0.75 and $0.6875,
respectively. If the trading price of our common stock declines, the number of
shares of common stock into which the Series A Preferred Stock and Series B
Preferred Stock may exchange will increase. The following table illustrates this
effect:
<TABLE>
<CAPTION>
--------------- ------------------------ ----------------------- -------------------
Number Of Shares Of Number Of Shares Of
Common Stock Into Which Common Stock Into Which
All Outstanding Shares All Outstanding Shares Percentage Of
Average Trading Of Series A Of Series B Outstanding Shares
Price Of Preferred Stock Preferred Stock Of Common Stock
Common Stock May Be Exchanged May Be Exchanged After Exchange
--------------- ------------------------ ----------------------- -------------------
<S> <C> <C> <C>
1.75 612,571 1,247,428 17.5%
--------------- ------------------------ ----------------------- -------------------
1.50 714,666 1,455,333 19.8%
--------------- ------------------------ ----------------------- -------------------
1.25 857,600 1,746,400 22.9%
--------------- ------------------------ ----------------------- -------------------
1.00 1,072,000 2,183,000 27.1%
--------------- ------------------------ ----------------------- -------------------
.75 1,429,333 2,910,666 33.1%
--------------- ------------------------ ----------------------- -------------------
</TABLE>
WE REQUIRE STOCKHOLDER APPROVAL OR AN ADDITIONAL CASH PAYMENT FOR WHICH WE MAY
NOT HAVE SUFFICIENT FUNDS AND MAY HAVE TO SEEK ADDITIONAL FINANCING.
Under the rules and regulations of the Nasdaq Stock Market, we require
stockholder approval to issue 20% or more of our outstanding common stock in a
single transaction. Because the rate at which the Series A Preferred Stock and
Series B Preferred Stock exchange into common stock fluctuates, it is possible
that the number of shares of common stock into which the Series A Preferred
Stock or Series B Preferred Stock may exchange could exceed 20%. We have agreed
with the purchasers of the Series A Preferred Stock and the Series B Preferred
Stock that we will seek stockholder approval of these issuances at the 2000
Annual Meeting of Stockholders. Prior to receiving stockholder approval, or if
stockholder approval is not obtained, any attempted exchange of shares of Series
A Preferred Stock or Series B Preferred Stock in excess of 19.9% of the
outstanding common stock of the Company must be paid in cash to the holder of
the Series A Preferred Stock or Series B Preferred Stock. If we do not receive
stockholder approval of the Series A transaction and if all Series A Preferred
Stock were exchanged, we would have to redeem the shares of Series A Preferred
Stock at a price equal to 125% of the Stated Value, which is $1,000 per Share,
and would also have to pay all accrued but unpaid dividends. As of August 23,
2000, this redemption would result in a cash obligation of $1,390,940, including
all accrued but unpaid dividends. If we do not receive stockholder approval of
the Series B transaction and if all of the Series B Preferred Stock were
exchanged, we would have to redeem the shares of Series B Preferred Stock at a
price equal to 100% of the Stated Value, which is $1,000 per Share and would
also have to pay all accrued but unpaid dividends (if any). As of August 23,
2000, this redemption would result in a cash obligation of $2,210,999, including
all accrued but unpaid dividends. At the time of exchange, we may not have
sufficient funds to honor the exchange of a significant number of shares of
Series A Preferred Stock or Series B Preferred Stock in cash, and any efforts by
the holders of Series A Preferred Stock or Series B Preferred Stock to receive
cash in exchange for shares of Series A Preferred Stock or Series B Preferred
Stock could have a material adverse effect on our liquidity and financial
condition. If we are obligated to honor the exchange of shares of Series A
Preferred Stock or Series B Preferred Stock in cash, we would likely have to
obtain considerable financing to fulfill the obligation. We cannot guarantee
that such financing will be available or, if available, that it can be obtained
on terms satisfactory to us or on terms favorable to the holders of our common
stock.
A DECREASE IN THE PRICE OF OUR COMMON STOCK COULD INCREASE SHORT SALES OF OUR
COMMON STOCK BY THIRD PARTIES WHICH COULD RESULT IN FURTHER REDUCTIONS IN THE
PRICE OF OUR COMMON STOCK.
Exchange of shares of our Series A Preferred Stock or Series B Preferred Stock
into common stock at a discount to the market price of our common stock could
result in reductions in the market price of our common stock. Downward pressure
on the price of our common stock could encourage short sales of our common stock
by third parties. Material amounts of short selling could place further downward
pressure on the market price for our common stock. A short sale is a sale of
stock that is not owned by the seller. The seller borrows the stock for delivery
at the time of the short sale, and buys back the stock when it is necessary to
return the borrowed shares. If the price of the stock declines between the time
the seller sells short the stock and the time the seller subsequently
repurchases the stock, the seller will realize a profit.
Page 7
<PAGE>
IF THE TRADING PRICE OF OUR COMMON STOCK REMAINS BELOW $1.00, WE MAY BE DELISTED
FROM THE NASDAQ STOCK MARKET AND THE BOSTON STOCK EXCHANGE.
The closing sale price of our Common Stock on August 22, 2000 was $0.6875 per
share. Under the rules and regulations of the Nasdaq Stock Market and the Boston
Stock Exchange, to maintain listing on the Nasdaq Small Cap Market and the
Boston Stock Exchange we must maintain a trading price per share of more than
$1.00. If the trading price per share of our common stock remains below $1.00,
we may be delisted from the Nasdaq Small Cap Market and the Boston Stock
Exchange. If we were delisted from the Nasdaq Small Cap Market and the Boston
Stock Exchange, trading in our common stock, if any, would have to be conducted
in the over-the-counter market in so-called "pink sheets" or, if then available,
the OTC Bulletin Board. As a result, the holders of our common stock would find
it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, our common stock.
If our common stock is delisted from trading on Nasdaq and the Boston Stock
Exchange and the trading price is less than $5.00 per share, trading in our
common stock would also be subject to the requirements of Rule 15g-9 promulgated
under the Securities Exchange Act of 1934. Under such rule, broker/dealers who
recommend these low-priced securities to persons other than established
customers and accredited investors must satisfy special sales practice
requirements, including a requirement that they make an individualized written
suitability determination for the purchaser and receive the purchaser's written
consent prior to the transaction. The Securities Enforcement Remedies and Penny
Stock Reform Act of 1990 also requires additional disclosure in connection with
any trades involving a stock defined as a penny stock (generally any equity
security not traded on an exchange or quoted on Nasdaq that has a market price
of less than $5.00 per share, subject to certain exceptions), including the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated with the penny stock
market. These requirements would likely severely limit the market liquidity of
our common stock and the ability of our shareholders to dispose of their shares,
particularly in a declining market.
A LARGE VOLUME OF SALES OF OUR COMMON STOCK RESULTING FROM THE EXCHANGE OF
SHARES OF SERIES A AND B EXCHANGEABLE PREFERRED STOCK AND/OR THE EXERCISE OF
WARRANTS MAY RESULT IN DOWNWARD PRESSURE OR INCREASED VOLATILITY IN THE TRADING
PRICE OF OUR COMMON STOCK.
Because we have agreed to register for resale the 2,500 shares of common stock
and the shares of common stock issuable upon exchange or exercise of the Series
A and B Exchangeable Preferred Stock and the Warrants, the holders thereof may
sell without regard to any volume restrictions, including the volume
restrictions set forth in Rule 144 promulgated under the Securities Act of 1933.
As a result, sales by the holders of Series A and B Exchangeable Preferred Stock
and the Warrants could lead to an excess supply of shares of our Common Stock
being sold which could, in turn, result in downward pressure or increased
volatility in the trading price of our Common Stock.
IF WE FAIL TO TIMELY AFFECT AN EXCHANGE OF SERIES A AND B EXCHANGEABLE PREFERRED
STOCK FOR SHARES OF COMMON STOCK, WE MAY BE LIABLE FOR SIGNIFICANT LIQUIDATED
DAMAGES.
We have agreed to effect an exchange of Series A and B Exchangeable Preferred
Stock into Common Stock within four (4) trading days of receipt of a notice from
a holder of Series A or B Exchangeable Preferred Stock requesting an exchange.
If we fail to effect an exchange of Series A and B Exchangeable Preferred Stock
into Common Stock within four (4) trading days of receipt of a valid notice, we
have agreed to pay to the holder of Series A and B Exchangeable Preferred Stock
requesting the exchange liquidated damages in an amount equal to $100 per day
for the first ten (10) days and $200 per day thereafter for each $5,000 in
liquidation preference amount then being exchanged. An obligation to pay these
liquidated damages could have a material adverse effect on our liquidity and
cash flows.
WE FACE THE POTENTIAL LOSS OF OUR TELICAM COMPONENT SUPPLY, AND OTHER CLAIMS OF
BOSTON MARKETING, WHICH COULD RESULT IN SIGNIFICANT LIABILITY, DISRUPT OUR
OPERATIONS AND ADVERSELY AFFECT OUR OPERATING RESULTS.
Effective October 1, 1996, we amended our distribution agreement ("BMC
Distribution Agreement") with Boston Marketing, a licensed distributor of the
Teli manufactured CCD chip which includes the Teli CCU processor. Pursuant to
the BMC Distribution Agreement, we have the exclusive right (i) to market
certain Teli manufactured CCD chip assemblies with CCU processors (each a "Teli
unit," and collectively the "Teli Units") to the dental market, and (ii) to use
the "TeliCam" trademark. The Units are key components of our intraoral digital
cameras. The initial term of the BMC Distribution
Page 8
<PAGE>
Agreement, as amended, was due to expire December 31, 2000, and was terminable
by Boston Marketing if we fail to meet our annual minimum purchase obligation.
In April 2000, we were served with a lawsuit that makes numerous claims
including the allegation that we failed to make the minimum purchases for
calendar year 1999 and 2000, and that the BMC Distribution Agreement has been
terminated as a result. Boston Marketing has refused to accept subsequently
placed orders. The lawsuit also claims that we failed to pay certain commissions
to Boston Marketing. We are investigating the claims made by Boston Marketing in
their complaint. We intend to defend this matter vigorously and believe we have
meritorious defenses to this suit. However, if the BMC Distribution Agreement is
cancelled because of failure to meet minimum purchase requirements, we would
need to obtain an alternative source of supply. We have now obtained other CCD
chips, CCU processors and frame grabbers from third-party suppliers. Management
believes that no disruption in the supply of these products occurred. However,
we may not be able to market the units incorporating those CCD chips, CCU
processors and frame grabbers under the "TeliCam" trademark which could
materially adversely affect our operating results.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains statements that constitute forward-looking statements
within the meaning of Section 21E of the Exchange Act of 1934 and Section 27A
of the Securities Act of 1933. The words "expect," "estimate," "anticipate,"
"predict," "believe" and similar expressions and variations thereof are
intended to identify forward-looking statements. Such statements appear in a
number of places in this prospectus and include statements regarding our
intent, belief or current expectations regarding our strategies, plans and
objectives, our product release schedules, our ability to design, develop,
manufacture and market products, our intentions with respect to strategic
acquisitions, and the ability of our products to achieve or maintain commercial
acceptance. Any forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those projected in this prospectus, for the reasons, among
others, described in the Risk Factors section beginning on page 3. You should
read the Risk Factors section carefully, and should not place undue reliance
on any forward-looking statements, which speak only as of the date of this
prospectus. We undertake no obligation to release publicly any updated
information about forward-looking statements to reflect events or circumstances
occurring after the date of this prospectus or to reflect the occurrence of
unanticipated events.
Page 9
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered by the
Selling Security Holders, under this prospectus. We will pay all costs, expenses
and fees in connection with the registration of the shares offered under this
prospectus.
Page 10
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth the names of the Selling Security Holders,
the number of shares of Common Stock and the number of Warrant Shares owned by
the Selling Security Holders as of August 1, 2000, and the maximum amount
of Common Stock which may be offered for the accounts of the Selling Security
Holders under this prospectus.
We do not know if, or when, or in what amounts the Selling Security Holders will
sell shares of the Common Stock. Thus, we cannot estimate how may shares each of
the Selling Security Holders will hold after completion of the offering.
<TABLE>
<CAPTION>
Name of Selling Security Holders Number of Shares of Number of Warrant Common
Common Stock Owned Shares Owned Stock Offered
Prior to the Hereby
Offering
<S> <C> <C> <C>
Dolphin Offshore Partners 540,541 180,180(1) 720,721
129 East 17th Street, 2nd Floor
New York, NY 10003
A.N. Solomons 225,225 75,075(1) 300,300
10 Constable Close
London, NW11 6T4, UK
Winterthur Life RE A.N. Solomons 11,149 3,716(1) 14,865
10 Constable Close
London, NW11 6T4, UK
Hillard Investments Ltd. 33,896 11,299(1) 45,195
10 Constable Close
London, NW11 6T4, UK
Hillard Investments Pension Scheme 45,045 15,015(1) 60,060
10 Constable Close
London, NW11 6T4, UK
Singer & Friedlander Limited 135,135 45,045(1) 180,180
21 New Street
Bishopsgate
London EC2M 4HR, UK
Den-Mat Corporation 135,135 45,045(1) 180,180
2727 Skyway Drive
Santa Maria, CA 93456
Crilly Court Trust 90,090 30,030(1) 120,120
c/o Lakewest, Inc.
833 North Orleans St, Suite 400
Chicago, IL 60610
Jonathan Vannini 90,090 30,030(1) 120,120
828 Irwin Drive
Hillsborough, CA 94010
The Weinress Group 90,090 30,030(1) 120,120
3533 Knob Hill Drive
Sherman Oaks, CA 91423
<FN>
----------------------------------------------------------------------------------------------------------
(1) On July 21, 2000, the Selling Security Holders received Warrants to
purchase up to an aggregate 465,465 shares of Common Stock at a purchase
price of $2.22 per share.
</FN>
</TABLE>
Page 11
<PAGE>
We will bear all costs, expenses and fees in connection with the
registration of the Selling Security Holders' shares. All brokerage commissions,
if any, attributable to the sale of the Selling Security Holders' shares will be
borne by them.
Page 12
<PAGE>
PLAN OF DISTRIBUTION
On July 21, 2000, we sold, pursuant to a Securities Purchase Agreement
dated as of July 21, 2000 with the Selling Security Holders, an aggregate of
1,396,396 shares of Common Stock and Warrants to purchase up to 465,465 shares
of Common Stock. We received gross proceeds from this transaction of $1,550,000.
We agreed to register the resale of the Common Stock and the Common Stock
underlying the Warrants on a Form S-3 Registration Statement.
The Selling Security Holders have advised us that the sale or distribution
of the Common Stock may be effected directly to purchasers by the Selling
Security Holders as principals or through one or more underwriters, brokers,
dealers or agents from time to time in one or more transactions (which may
involve crosses or block transactions) (i) on the Boston Stock Exchange, on the
Nasdaq SmallCap market, or in the over-the-counter market, (ii) in transactions
otherwise than on any stock exchange or in the over-the-counter market, or (iii)
through the writing of options (whether such options are listed on an options
exchange or otherwise) on the Common Stock. Any of such transactions may be
effected at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, at varying prices determined at the time of sale
or at negotiated or fixed prices, in each case as determined by the Selling
Security Holders or by agreements between the Selling Security Holders and
underwriters, brokers, dealers or agents or purchasers. If the Selling Security
Holders effect such transactions by selling Common Stock to or through
underwriters, brokers, dealers or agents, such underwriters, brokers, dealers or
agents may receive compensation in the form of discounts, concessions or
commissions from the Selling Security Holders or commissions from purchasers of
Common Stock for whom they may act as agent (which discounts, concessions or
commissions as to particular underwriters, brokers, dealers or agents may be in
excess of those customary in the types of transactions involved). The Selling
Security Holders and any brokers, dealers or agents that participate in the
distribution of the Common Stock may be deemed to be underwriters, and any
profit on the sale of Common Stock by them and any discounts, concessions or
commissions received by any such underwriters, brokers, dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act.
Because the Selling Security Holders may each be deemed to be an
"underwriter" within the meaning of Section 2(11) of the Securities Act, the
Selling Security Holders will be subject to prospectus delivery requirements
under the Securities Act. Furthermore, in the event of a "distribution" of its
shares, the Selling Security Holders, any selling broker or dealer and any
"affiliated purchasers" may be subject to Regulation M under the Securities
Exchange Act of 1934 until its participation in the distribution is completed.
To comply with the securities laws of certain jurisdictions, if applicable,
the shares of Common Stock will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the shares of Common Stock may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or an exemption
from registration or qualification is available and is complied with.
The Selling Security Holders will be subject to applicable provisions of
the Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder, which provisions may limit the timing of purchases and sales of any
of the shares of Common Stock by the Selling Security Holders. The foregoing may
affect the marketability of the shares of Common Stock.
We have agreed to pay all expenses of the registration of the shares,
including, without limitation, Securities and Exchange Commission filing fees
and expenses of compliance with state securities or "blue sky" laws; provided,
however, that the Selling Security Holders will pay all underwriting discounts
and selling commissions, if any. The Selling Security Holders will be
indemnified by us against certain civil liabilities, including certain
liabilities under the Securities Act of 1933, or will be entitled to
contribution from us in connection therewith.
Page 13
<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:
o Annual Report on Form 10-KSB/A for the year ended December 31, 1999.
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 under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and before the offering of the Common Stock is terminated.
o Quarterly Report on Form 10-QSB for the period ended June 30, 2000.
o Quarterly Report on Form 10-QSB for the period ended March 31, 2000.
You may request a copy of the information incorporated by reference, at no cost,
by contacting us at the following address or telephone number:
Bette Smith
Dental/Medical Diagnostic Systems, Inc.
6416 Variel Avenue
Woodland Hills, California 91367
(818) 932-2300
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 Security
Holders 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 14
<PAGE>
LEGAL MATTERS
Troop Steuber Pasich Reddick & Tobey, LLP, Los Angeles, California, has rendered
an opinion as to the validity of the Common Stock covered by this prospectus.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
Annual Report on Form 10-KSB/A for the year ended December 31, 1999, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws provide that we will indemnify our directors and executive officers
and any of our other officers, employees and agents to the fullest extent
permitted by Delaware law. Our Bylaws also empower us to enter into
indemnification agreements with any such persons and to purchase insurance on
behalf of any person whom we are required or permitted to indemnify.
Our Amended and Restated Certificate of Incorporation provides that, pursuant to
Delaware law, our directors shall not be liable for monetary damages for breach
of the director's fiduciary duty of care to us and to our stockholders. Such
provision does not eliminate the duty of care and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. Each director continues to be subject to
liability for breach of the director's duty of loyalty, for acts or omissions
not in good faith or involving intentional misconduct, for knowing violations of
law, for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
--------------------------------------------------------------------------------
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 Security
Holders 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.
--------------------------------------------------------------------------------
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
PROSPECTUS
____ __, 2000
Page 15
<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 Security Holders, in
connection with the offering are as follows:
<TABLE>
<CAPTION>
Amount
-------------
<S> <C>
Registration Fee Under Securities Act of 1933........ $ 353.29
NASD Filing Fee...................................... $ *
Blue Sky Fees and Expenses........................... $ *
Printing and Engraving Certificates.................. $ *
Legal Fees and Expenses.............................. $ 10,000
Accounting Fees and Expenses......................... $ 5,000
Registrar and Transfer Agent Fees.................... $ *
Miscellaneous Expenses............................... $ *
-------------
TOTAL........................................... $ 15,353.29
============
<FN>
* Not applicable or none.
</FN>
</TABLE>
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 Dental/Medical Diagnostic Systems, Inc. or monetary damages for
certain breaches of fiduciary duty. Liability is not eliminated for (i) any
breach of the director's duty of loyalty to Dental/Medical Diagnostic Systems,
Inc. 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.
Dental/Medical Diagnostic Systems, Inc. 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 Dental/Medical Diagnostic
Systems, Inc. or of any subsidiary of Dental/Medical Diagnostic Systems, Inc. or
of any other company or enterprise in which they are serving at the request of
Dental/Medical Diagnostic Systems, Inc. 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.
Dental/Medical Diagnostic Systems, Inc. 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.
Page 16
<PAGE>
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;
(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; and
(4) 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 17
<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 Woodland Hills, State of California, on August 24, 2000.
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 PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert H. Gurevitch and Stephen F. Ross and each
of them, his attorneys-in-fact, each with the power of substitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully 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>
SIGNATURE TITLE DATE
--------- ----- -----
<S> <C> <C>
/S/ ROBERT H. GUREVITCH Chairman of the Board and Chief
----------------------------------- Executive Officer August 24, 2000
Robert H. Gurevitch
/S/ STEPHEN F. ROSS Chief Financial Officer and Chief
----------------------------------- Accounting Officer August 24, 2000
Stephen F. Ross
/S/ JACK D. PRESTON Executive Vice President and Director August 24, 2000
----------------------------------
Jack D. Preston
/S/ MARVIN H. KLEINBERG Director August 24, 2000
-----------------------------------
Marvin H. Kleinberg
/S/ JOHN KHADEMI Director August 24, 2000
-----------------------------------
John Khademi
</TABLE>
Page 18
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
NO. ITEM
<S> <C>
4.1 Securities Purchase Agreement.
4.2 Registration Rights Agreement.
4.3 Form of Stock Purchase Warrant issued to Selling Security Holders.
5.1 Opinion of Troop Steuber Pasich Reddick & Tobey, LLP.
23.1 Consent of Independent Accountants.
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).
</TABLE>
Page 19
