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.)
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 F. 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>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================
Proposed Maximum Proposed Maximum
Title Of Shares Amount To Be Aggregate Price Aggregate Amount Of
To Be Registered Registered Per Share(1) Offering Price(1) Registration Fee
- ---------------- ------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Common Stock 3,375,000(2) $1.5625 $5,273,438 $1,392
=============================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average high and low prices of
Registrant's Common Stock reported on the Nasdaq SmallCap Market on April 20,
2000.
(2) Consists of up to 2,700,000 shares of Common Stock issuable upon exchange of
Series B Exchangeable Preferred Stock and 675,000 shares of Common Stock
issuable upon exchange of Warrants.
</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 APRIL 25, 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 STOCKHOLDERS 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.
3,375,000 SHARES OF COMMON STOCK
The persons listed in this Prospectus under the caption "Selling Security
Holders" may from time to time offer and sell up to 3,375,000 shares of our
common stock. The selling security holder(s) will acquire up to 2,700,000 of
these shares upon the exchange of exchangeable preferred stock. The selling
security holder(s) will acquire 675,000 of these shares upon the exercise of
warrants.
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
April 20, 2000 the high and low prices of the Common Stock as quoted on the
Nasdaq SmallCap Market were $1.75 and $1.375, 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 5.
---------------
The date of this prospectus is April __, 2000
Page 2
<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 STOCKHOLDERS 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 OF CONTENTS
PAGE
ABOUT DENTAL/MEDICAL DIAGNOSTIC SYSTEMS......................................4
RISK FACTORS.................................................................5
LEGAL PROCEEDINGS ..........................................................15
USE OF PROCEEDS.............................................................16
SELLING SECURITY HOLDERS....................................................17
PLAN OF DISTRIBUTION........................................................19
WHERE YOU CAN FIND MORE INFORMATION.........................................21
LEGAL MATTERS...............................................................22
EXPERTS.....................................................................22
Page 3
<PAGE>
ABOUT DENTAL/MEDICAL DIAGNOSTIC SYSTEMS
Dental/Medical Diagnostic Systems, Inc. designs, develops, assembles and markets
high technology dental equipment and related consumables. Our best selling
product during 1999 was the tooth curing and whitening devise known as the
"Apollo 95E." We also market and sell a line of whitening gels known as "Apollo
Secret" for use with the Apollo 95E and a line of composite resin materials
known as "ASAP - Accelerated Solutions for Aesthetic Procedures," also for use
with the Apollo 95E. Due to less than expected sales, we discontinued the
composite product line in the first quarter of 2000. In addition, we 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.
TeliCam System II and Elite systems sales have recently been below levels of
prior comparable periods, a trend that we expect to continue. In September of
1999, we introduced a digital dental x-ray device known as "MPDx-MegaPixel
Diagnostic System or MPDx."
Apollo Secret power whitening offers the following benefits:
o the procedure causes less patient discomfort compared to competing
technologies;
o the procedure can be performed by a dental assistant or hygienist in
most states, generally in less than 40 minutes;
o the procedure may whiten the patient's teeth up to ten shades lighter;
and
o the procedure causes no surface damage to the tooth enamel or pulp.
We have the exclusive rights to market products to the dental market
incorporating certain digital x-ray technology developed by Suni Imaging
Microsystems, Inc. Suni keeps 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 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. The technology developed for us by Suni offers the following benefits:
o improved image quality;
o competitive pricing; and
o database storage and recall of images.
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 200 North Westlake Boulevard, Suite 202, Westlake Village, California 91362.
Our telephone number is (805) 381-2700.
Page 4
<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 Apollo 95E since
March 1998. Therefore, we have a limited relevant operating history upon which
to evaluate the likelihood of our success. 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 year ended December 31, 1997 we had a net loss of
$2,044,729, for the fiscal year ended December 31, 1998 we had a net loss of
$1,816,702, and for the fiscal year ended December 31, 1999 we had a net loss of
$6,727,638. At December 31, 1999, our accumulated deficit was $12,077,131. 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.
One of our primary products has 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 Apollo 95E have been our primary products since inception. 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 at or below
levels of prior comparable periods, a trend which we expect to continue.
As a result of the decline in sales of the
TeliCam, our future depends on our ability
to develop and introduce new products.
As a result of the decline in the 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. 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.
Page 5
<PAGE>
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.
If we are unable to raise additional capital
to finance research and development of our
new products we may be forced to forego the
development of new products and limit current
operations.
We anticipate that we will need to raise additional capital during the next 12
months to satisfy our expected increased research and development requirements.
We are currently exploring alternatives to fulfill these requirements, but
cannot assure 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 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. We cannot guarantee that we will be able
to make the minimum periodic royalty payments, nor can we guarantee that we will
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 6
<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 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
prior to or 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.
Page 7
<PAGE>
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.
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 Apollo 95E. The Apollo 95E 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
Apollo 95E 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.
Page 8
<PAGE>
The Year 2000 issue could have an impact
on our information technology and
non-information technology systems as
well as those of our suppliers and/or
customers, any of which could negatively
affect sales of our products.
The Year 2000 readiness issue 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. The Year 2000 issue
has an impact on both information technology systems and non-information
technology systems, such as manufacturing systems and physical facilities
including, but not limited to, security systems and utilities. The failure to
correct a material Year 2000 problem could result in an interruption in, or a
failure of, certain normal business activities or operations. Such failure could
materially and adversely effect our results of operations, liquidity and
financial condition. Based on assessments conducted in the year ended December
31, 1999, we believe that our information technology and non-information
technology systems are Year 2000 compliant. Due to the general uncertainty
inherent in the Year 2000 problem, resulting primarily from the uncertainty of
the Year 2000 compliance of third party suppliers and customers, we are unable
to determine at this time whether the consequences of any Year 2000
non-compliance will have a material impact on our results of operations,
liquidity or financial condition.
To date, we have not experienced a material Year 2000 problem relating to our
information technology or non-information technology systems and have not been
informed of any Year 2000 problem relating to the information technology or non-
information technology systems of our vendors or customers that could have a
material adverse effect on our results of operations, liquidity or financial
condition. During the year ended December 31, 1999, we did not spend a material
amount to assess the Year 2000 compliance of our information technology and non-
information technology systems and that of our material vendors. We do not
intend to make further assessments of the Year 2000 problem and does not
anticipate incurring any additional expenses related to the Year 2000 problem.
Page 9
<PAGE>
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 Exchangeable 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 Exchangeable Preferred Stock. On and after
March 15, 2000, holders of Series A Exchangeable 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 Exchangeable 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.
Holders of Series B Exchangeable 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
Exchangeable Preferred Stock then being exchanged. As a result, the holders of
Series B Exchangeable 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.
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 April 20,
2000, the high and low prices of our Common Stock were $1.75 and $1.375,
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 Percentage of
2,000 shares of Series A 2,250 shares of Series B Outstanding Shares of
Average Trading Price Preferred Stock may Preferred Stock may Common Stock after
of Common Stock Exchange Exchange Exchange
- --------------------- ------------------------ ------------------------ ---------------------
<S> <C> <C> <C>
$ 2.75 727,273 818,182 23.8%
2.50 800,000 900,000 26.2%
2.25 888,889 1,000,000 29.1%
2.00 1,000,000 1,125,000 32.7%
1.75 1,142,857 1,285,714 37.4%
1.50 1,333,333 1,500,000 43.6%
1.25 1,600,000 1,800,000 52.3%
1.00 2,000,000 2,250,000 65.4%
</TABLE>
Page 10
<PAGE>
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. Because, in connection
with the sale of shares of Series B Preferred Stock, we issued warrants to
purchase up to 675,000 shares of common stock (10% of our then outstanding
common stock), if we do not receive stockholder approval of the Series B
transaction we will likely have to honor the exchange of a significant number of
shares of Series B Preferred Stock in cash. 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. If all Series A Preferred Stock were exchanged, we would have a cash
obligation of $2.5 million, plus all accrued but unpaid dividends (if any). 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. If all of the Series B
Preferred Stock were exchanged, we would have a cash obligation of $2.25
million. 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 11
<PAGE>
If the trading price of our common stock falls
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 April 20, 2000 was $1.75 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 falls 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 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.
Page 12
<PAGE>
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 Teli Units are key components of our intraoral
digital cameras. The BMC Distribution Agreement has a five-year initial term.
The BMC Distribution Agreement is 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.
We are investigating the claims made by Boston Marketing in their complaint.
During the fiscal year ended December 31, 1999, we purchased fewer than 2,500
units under the BMC Distribution Agreement. Boston Marketing has refused to
accept a subsequently placed order. We intend to defend this matter vigorously
and believe we have meritorious defenses to this suit. However, if the BMC
Distribution Agreement is canceled because of failure to meet minimum purchase
requirements, we would need to obtain an alternative source of supply.
Management believes that, if necessary, other CCD chips, CCU processors and
frame grabbers could be obtained from third-party suppliers on comparable terms,
although a disruption in supplies of components could extend for several months,
which could materially adversely affect our operating results. In addition, if
we were forced to seek supplies of CCD chips, CCU processors and frame grabbers
not manufactured by Teli, 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.
Page 13
<PAGE>
LEGAL PROCEEDINGS
During the fiscal year ended December 31, 1999, we purchased fewer than 2,500
units under the Boston Marketing Distribution Agreement. Boston Marketing has
refused to accept a subsequently placed order. On April 7, 2000 Boston Marketing
filed suit in Los Angeles Superior Court alleging breach of contract and seeking
unspecified damages. We are investigating the allegations and have not yet
responded to the suit. We intend to defend the action vigorously and believe
that we have meritorious defenses to the suit. However, because the discovery
process has not yet commenced, we are not able to estimate the extent of
liability, if any, that we face as a result of this suit. Management believes
that, if necessary, other CCD chips, CCU processors and frame grabbers could be
obtained from third-party suppliers on comparable terms, although a disruption
in supplies of components could extend for several months, which could
materially adversely affect our operating results. In addition, if we were
forced to seek supplies of CCD chips, CCU processors and frame grabbers not
manufactured by Teli, 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.
Page 14
<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 15
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth the names of the Selling Security Holders and the
maximum amount of Common Stock which may be offered for the accounts of the
Selling Security Holders under this prospectus.
<TABLE>
<CAPTION>
Number of
Shares of
Common
Stock
Underlying
Series B
Exchangeable Number of Number of Common Percentage of
Preferred B-1 Warrant B-2 Warrant Stock Outstanding
Name of Selling Security Stock Shares Shares Offered Common
Holders Owned(1) Owned (2) Owned (3) Hereby(4) Stock (5)
- ------------------------------ -------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
AMRO International, S.A. 1,200,000 100,000 200,000 1,500,000 18.76%
c/o Ultra Finanz AG
Grossmuensterplatz 6
Zurich, CH-8022 Switzerland
Esquire Trade & Finance Inc. 420,000 35,000 70,000 525,000 7.48%
P.O. Box 2154
Baar, CH-6342 Switzerland
Austinvest Anstalt Balzers 420,000 35,000 70,000 525,000 7.48%
Landstrasse 938
9494 Balzers
Furstentum, Liechtenstein
Leval Trading 360,000 30,000 60,000 450,000 6.48%
c/o Thierry Vegmann
14 Rue du Conseil General
1205 Geneva Switzerland
The Keshet Fund, L.P. 180,000 15,000 30,000 225,000 3.35%
Talbiya B. Investments 120,000 10,000 20,000 150,000 2.26%
<FN>
(1) In March 2000, AMRO International, S.A., Esquire Trade & Finance Inc.,
Austinvest Anstalt Balzers, Leval Trading, The Keshet Fund, L.P. and
Talbiya B. Investments (collectively, the "Investors") acquired an
aggregate of 2,250 shares of Series B Exchangeable Preferred Stock. The
Series B Exchangeable Preferred Stock has an aggregate stated value of
$2.25 million and is exchangeable into Common Stock at a rate per share
equal to the lesser of (a) $2.85 or (b) one hundred percent (100%) of the
Market Price on the date of the exchange. The Market Price is the average
of the closing bid prices of any three (3) of the prior thirty (30)
consecutive trading days selected by the holder of the Series B
Exchangeable Preferred Stock then being exchanged. By agreement with the
Investors, we have agreed to register for resale 175% of the shares of
Common Stock issuable upon exchange of the Series B Exchangeable Preferred
Stock, assuming an exchange in full on the trading day prior to our filing
the registration statement of which this prospectus is a part. Because the
number of shares of Common Stock issuable upon exchange of Series B
Exchangeable Preferred Stock is not determinable until the date of the
exchange, each number in this column represents 175% of the shares of
Common Stock issuable upon exchange of Series B Exchangeable Preferred
Stock, assuming exchange in full by each Selling Security Holder on
April 20, 2000.
(2) In March 2000, the Investors received Warrants to purchase up to an
aggregate 225,000 shares of Common Stock at a purchase price of $2.51 per
share (the "B-1 Warrants").
(3) In March 2000, the Investors received Warrants to purchase up to an
aggregate 450,000 shares of Common Stock at a purchase price of $3.50 per
share (the "B-2 Warrants").
(4) Because the number of shares of Common Stock issuable upon exchange of
Series B Exchangeable Preferred Stock is not determinable until the date of
the exchange, each number in this column includes 175% of the shares of
Common Stock issuable upon exchange of Series B Exchangeable Preferred
Stock, assuming exchange in full by each Selling Security Holder on the
original issuance date. The Series B Exchangeable Preferred Stock is not
exchangeable by any holder to the extent that following such exchange, such
holder would be the beneficial owner of more than 9.9% of our Common Stock.
Accordingly, the percentages shown under the column heading "Percentage of
Outstanding Common Stock" are for illustrative purposes only.
Page 16
<PAGE>
(5) Based on 6,497,564 shares outstanding as of March 24, 2000.
</FN>
</TABLE>
The Selling Security Holders may offer all or some portion of the Common
Stock that they have the right to acquire upon exchange of the Series B
Exchangeable Preferred Stock. Accordingly, no estimate can be given as to the
amount of the Common Stock that will be held by the Selling Security Holders
upon termination of any such sales. In addition, the Selling Security Holders
may have sold, transferred or otherwise disposed of all or a portion of their
Series B Exchangeable Preferred Stock since the date on which they provided the
information regarding the Series B Exchangeable Preferred Stock in transactions
exempt from the registration requirements of the Securities Act. See "Plan of
Distribution."
The Selling Security Holders may from time to time offer and sell any or
all of the Common Stock issuable upon exchange of the Series B Exchangeable
Preferred Stock. The term Selling Security Holders includes the holders listed
in any Supplement to this Prospectus and the beneficial owners of the Series B
Exchangeable Preferred Stock and their transferees, pledges, donees or other
successors. Any supplement will contain certain information with respect to the
Selling Security Holders and the respective number of shares of Common Stock
beneficially owned by the Selling Security Holders that may be offered pursuant
to this Prospectus. Such information will be obtained from the Selling Security
Holders.
Under the Securities Exchange Act of 1934 and the regulations promulgated
thereunder, any person engaged in a distribution of the shares of the Common
Stock offered by this Prospectus may not simultaneously engage in market making
activities with respect to our shares of Common Stock during the applicable
"cooling off" periods prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Security Holders will
need to comply with applicable provisions of the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of shares of Common Stock by the Selling Security Holders. Regulation M
contains certain limitations and prohibitions intended to prevent issuers and
selling security holders and other participants in a distribution of securities
from conditioning the market through manipulative or deceptive devices to
facilitate the distribution.
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 17
<PAGE>
PLAN OF DISTRIBUTION
On March 3, 2000, we sold, pursuant to an Exchangeable Preferred Stock and
Warrant Purchase Agreement (the "Purchase Agreement") dated as of February 24,
2000 with the Selling Security Holders, an aggregate of 2,250 shares of Series B
Exchangeable Preferred Stock and Warrants to purchase up to 675,000 shares of
Common Stock. We received gross proceeds from this transaction of $2,250,000.
Our Series B Exchangeable Preferred Stock has an aggregate stated value of
$2,250,000 and is exchangeable into Common Stock at a rate per share equal to
the lesser of (a) $2.85 or (b) one hundred percent (100%) of the Market Price on
the date of exchange. The table below sets forth the number of shares of our
Common Stock that the Selling Security Holders would acquire if they elected to
convert the entire $2,250,000 aggregate stated amount of Series B Exchangeable
Preferred Stock. The share amounts assume exchange prices of $2.75, $2.50,
$2.25, $2.00, $1.75 and $1.50. There were 6,497,564 shares of our Common Stock
outstanding on March 24, 2000 and the closing price of our Common Stock on
April 20, 2000 was $1.75.
<TABLE>
<CAPTION>
Shares of Common Stock Percentage of Outstanding
Assumed Exchange Price Issued Upon Exchange Common Stock after Exchange
- ---------------------- ---------------------- ---------------------------
<S> <C> <C>
$2.75 818,182 11.18%
$2.50 900,000 12.17%
$2.25 1,000,000 13.34%
$2.00 1,125,000 14.76%
$1.75 1,285,714 16.52%
$1.50 1,500,000 18.76%
$1.25 1,800,000 21.69%
$1.00 2,250,000 25.72%
</TABLE>
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.
Page 18
<PAGE>
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 19
<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.
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.
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 Investors 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 20
<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.
Page 21
<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....... $ 1,392
NASD Filing Fee..................................... $ *
Blue Sky Fees and Expenses.......................... $ *
Printing and Engraving Certificates................. $ *
Legal Fees and Expenses............................. $ 10,000
Accounting Fees and Expenses........................ $ 10,000
Registrar and Transfer Agent Fees................... $ *
Miscellaneous Expenses.............................. $ *
------------
TOTAL.................................. $ 21,392
============
- -----------------
* Not applicable or none.
ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law ("DGCL"), the Company's
Amended and Restated Certificate of Incorporation limits the personal liability
of directors to 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.
Page 22
<PAGE>
ITEM 16 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index of this Registration Statement.
ITEM 17 UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(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 23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Westlake Village, State of California, on April 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 April 24, 2000
Robert H. Gurevitch
/S/ STEPHEN F. ROSS Chief Financial Officer and
- ------------------------ Chief Accounting Officer April 24, 2000
Stephen F. Ross
/S/ JACK D. PRESTON
- ------------------------ Executive Vice President and April 24, 2000
Jack D. Preston Director
/S/ MARVIN H. KLEINBERG
- ------------------------ Director April 24, 2000
Marvin H. Kleinberg
/S/ JOHN KHADEMI
- ------------------------ Director April 24, 2000
John Khademi
</TABLE>
Page 24
<PAGE>
EXHIBIT INDEX
NO. ITEM
- --- ----
4.1 Certificate of Designations, Preferences and Rights of Series B
Exchangeable Preferred Stock of the Registrant. [Incorporated by
reference to the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1999.]
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 25
Exhibit 5.1
OPINION OF TROOP STEUBER PASICH REDDICK & TOBEY, LLP
April 24, 2000
Dental/Medical Diagnostic Systems, Inc.
200 N. Westlake Blvd.
Westlake Village, CA 91362
Ladies/Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") to which this letter is attached as Exhibit 5.1
filed by Dental/Medical Diagnostic Systems, Inc., a Delaware corporation (the
"Company"), in order to register under the Securities Act of 1933, as amended
(the "Act"), 3,375,000 shares of Common Stock (the "Shares") of the Company
issued March 3, 2000 or to be issued upon exchange of outstanding shares of
Series B Exchangeable Preferred Stock (the "Series B Preferred Stock") and upon
exercise of outstanding Warrants (the "Warrants").
We are of the opinion that the Shares have been duly authorized and upon
issuance pursuant to the terms of the Series B Preferred Stock or the Warrants,
as the case may be, 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
Page 26
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 17, 2000, except for the
subsequent events described in Note 10 and Note 21, as to which the dates are
March 23, 2000 and April 7, 2000, respectively, which appears in
Dental/Medical Diagnostic Systems, Inc.'s Annual Report on Form 10-KSB/A for the
year ended December 31, 1999. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/S/ PRICEWATERHOUSECOOPERS LLP
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Woodland Hills, California
April 24, 2000
