<PAGE>
As filed with the Securities and Exchange Commission on November 20, 1998.
================================================================================
Registration No. 333-63563
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
----------
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------
BIO-VASCULAR, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1526554
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
-------------
2575 University Avenue
St. Paul, Minnesota 55114
(651) 603-3700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------
Connie L. Magnuson
Vice President - Finance and Chief Financial Officer
2575 University Avenue
St. Paul, Minnesota 55114
(651) 603-3700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
Michael J. Kolar, Esq.
Oppenheimer Wolff & Donnelly LLP
3400 Plaza VII, 45 South Seventh Street
Minneapolis, Minnesota 55402
(612) 607-7000
---------------
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
---------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------
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>
PROSPECTUS
585,872 Shares
BIO-VASCULAR, INC.
Common Stock
-----------------------
This Prospectus relates to 585,872 shares of Common Stock, par value $0.01
per share (the "Common Stock"), of Bio-Vascular, Inc. ("Bio-Vascular" or the
"Company"), that may be offered for sale for the account of certain shareholders
of the Company named under the heading "Selling Shareholders." The shares being
offered by the Selling Shareholders were issued in a private transaction in
connection with the Company's acquisition of all of the outstanding capital
stock of Jer-Neen Manufacturing Co., Inc., a Minnesota corporation, pursuant to
an Acquisition Agreement and Plan of Reorganization dated July 31, 1998 (the
"Acquisition Agreement").
The Selling Shareholders have advised the Company that sales of the shares
offered hereunder by them or by their respective pledgees, donees, transferees
or other successors in interest, may be made from time to time on the Nasdaq
National Market, in the over the counter market, in ordinary brokerage
transactions, in negotiated transactions, or otherwise, at market prices
prevailing at the time of the sale or at negotiated prices. See "Plan of
Distribution."
The Selling Shareholders and any broker-dealers or other persons acting on
their behalf in connection with the sale of Common Stock hereunder may be deemed
to be an "underwriter" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions received by the Selling
Shareholders and any profit realized by them on the resale of Common Stock as
principals may be deemed to be underwriting commissions under the Securities
Act. As of the date hereof, there are no special selling arrangements between
any broker-dealer or other person and any of the Selling Shareholders.
The Company will not receive any part of the proceeds of any sales of
shares pursuant to this Prospectus. Pursuant to the terms of the Acquisition
Agreement, the Company will pay all the expenses of registering the shares,
except for selling expenses incurred by the Selling Shareholders in connection
with this offering. Any fees and commissions payable to broker-dealers or other
persons will be borne by the Selling Shareholders. In addition, the Acquisition
Agreement provides for certain other usual and customary terms regarding
registration of shares, including indemnification by the Company of the Selling
Shareholders against certain liabilities arising under the Securities Act.
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "BVAS." On November 19, 1998, the last sale price of the Common Stock
on the Nasdaq National Market was $3.75 per share.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-----------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 20, 1998.
<PAGE>
TABLE OF CONTENTS
Page No.
--------
THE COMPANY ............................................................ 3
RISK FACTORS............................................................ 3
SELLING SHAREHOLDERS.................................................... 11
PLAN OF DISTRIBUTION.................................................... 12
VALIDITY OF COMMON STOCK................................................ 13
EXPERTS................................................................. 13
AVAILABLE INFORMATION................................................... 14
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... 14
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus in
connection with the offer described in this Prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or the Selling Shareholders. Neither the delivery of
this Prospectus nor any sale made under this Prospectus will under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state to any
person to whom it is unlawful to make such offer in such state.
2
<PAGE>
This Prospectus contains certain forward-looking statements. For this
purpose, any statements contained in this Prospectus or in documents
incorporated by reference into this Prospectus that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate" or "continue" or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of factors,
including those described under the caption "Risk Factors."
THE COMPANY
Bio-Vascular, Inc. ("Bio-Vascular" or the "Company") develops, manufactures
and markets branded proprietary and patented specialty medical products for use
in thoracic, cardiac, neuro, vascular and ophthalmic surgery. The Company's
branded products include the Tissue Guard(TM) product line, the Biograft(R)
peripheral vascular graft and surgical productivity tools used in cardiac and
vascular surgery. The Tissue Guard product line includes Peri-Strips(R),
Peri-Strips Dry(R), Dura-Guard(R), Vascu-Guard(R), Supple Peri-Guard(R),
Peri-Guard(R), Tissue-Guard and Supple Tissue-Guard(TM). Tissue Guard products
are made from bovine pericardium (the thin membrane surrounding the heart of
cattle) processed using proprietary tissue-fixation technology. The Tissue Guard
products, made in various configurations, are used in a wide variety of surgical
procedures and are designed to reinforce, reconstruct and repair tissue and
prevent leaks of air, blood and other body fluids.
The Company's wholly-owned subsidiary, Jer-Neen Manufacturing Co., Inc.
("Jer-Neen"), is a value-added manufacturer of precision, unbranded component
products such as micro coils, wire forms and spring components used in
implantable defibrillation, interventional medicine and other surgical
applications within the medical device industry. References to the Company
include Jer-Neen unless otherwise specified or unless the context otherwise
indicates.
The Company was incorporated in Minnesota in July 1985. The Company's
principal executive offices are located at 2575 University Avenue, St. Paul,
Minnesota 55114-1024 and its telephone number is (651) 603-3700.
RISK FACTORS
The following factors should be considered carefully in evaluating an
investment in Common Stock. Additionally, the following factors could cause the
Company's actual results to materially differ from those reflected in any
forward-looking statements of the Company.
Recent History of Losses
The Company has incurred net losses on continuing operations for the fiscal
year ended October 31, 1997 and each of the first three quarterly periods in
fiscal 1998. In January 1996, the Health Care Financing Administration (the
agency of the federal government that administers Medicare) made a national
policy decision to not reimburse lung volume reduction surgery ("LVRS"), which
had been a primary use of the Company's Peri-Strips tissue products until that
time. The Company's recent net losses on continuing operations are attributable
to the impact of that decision on the Company's revenues as well as the
Company's determination to focus resources on research and development. The
Company has increased revenues since the HCFA non-coverage decision through
growth of previously existing
3
<PAGE>
products, new product introductions, and the acquisition of the component
product business of Jer-Neen. The Company expects to continue to fund research
and development related primarily to new configurations and applications for its
tissue-based, branded products. While the Company has developed and obtained
regulatory approval for additional branded products since the HCFA non-coverage
decision, there can be no assurance that the Company will ultimately be able to
successfully commercialize these products. As the Company continues to invest in
research and development for branded products, the Company's ability to achieve
profitability in the future will depend, in part, upon its ability to obtain
regulatory approval for additional branded products and to successfully
manufacture and market such products, of which there can be no assurance.
Issues Related to the Acquisition of Jer-Neen
Following the recent acquisition of Jer-Neen, it is anticipated that the
separate businesses and operations of Bio-Vascular and Jer-Neen will be
continued largely intact, with each continuing to separately manufacture their
branded and component products, respectively, and serving their respective
customers and markets, with Jer-Neen operating as a wholly owned subsidiary of
Bio-Vascular. In making this acquisition, the Company did not contemplate
significant integration of the separate businesses, operations or systems, nor
the achievement of specific operating efficiencies or synergies as a result of
the combination of the two companies. The success of the combined organization
will be dependent upon the ability of each of these separate businesses to
accomplish their respective strategic growth and profitability objectives.
In connection with the acquisition of Jer-Neen, the Company recorded
intangibles, including goodwill, of approximately $6,200,000. These intangibles
will be amortized by the Company over lives of up to 15 years, and therefore the
related amortization will reduce the Company's pre-tax operating income.
Limitations on Third-Party Reimbursement
The Company's branded products are purchased primarily by hospitals and
other users, and its unbranded component products are sold directly to medical
device manufacturers who distribute finished medical products to hospitals and
other end-users. Hospitals and end-users of such products, in turn, bill various
third-party payers, including government health programs, private health
insurance plans, managed care organizations and other similar programs, for the
health care goods and services provided to their patients. Third-party payers
may deny reimbursement if they determine that a product used in a procedure was
not used in accordance with established third-party payer protocol regarding
treatment methods or was used for an unapproved indication.
Third-party payers are also increasingly challenging the prices charged for
medical products and services and, in some instances, have put pressure on
medical device suppliers to lower their prices. The Company is unable to predict
what changes will be made in the reimbursement methods used by third-party
payers. There can be no assurance that procedures in which the Company's
products are directly or indirectly used will continue to be considered
cost-effective by third-party payers, that reimbursement for such procedures
will be available or, if available will continue, or that third-party payers'
reimbursement levels will not adversely affect the Company's ability to sell its
products on a profitable basis. The cost of health care has risen significantly
over the past decade, and there have been and may continue to be proposals by
legislators, regulators and third-party payers to curb these costs. Failure by
hospitals and other users of the Company's products to obtain reimbursement from
third-party payers, changes in third-party payers' policies towards
reimbursement for procedures directly or indirectly using
4
<PAGE>
the Company's products or legislative action could have a material adverse
effect on the Company's business, financial condition and results of operations.
As discussed above, in January 1996 HCFA made a national policy decision
not to reimburse LVRS, which had been a primary use for the Company's
Peri-Strips product prior to the decision. The Company understands that many
private payers, insurance companies and managed care organizations are
continuing to reimburse LVRS based on their own evaluation of the procedure and
its outcomes. The Company estimates that 80% of its domestic revenues from the
sale of Peri-Strips result from the use of Peri-Strips in LVRS. It is unknown
whether these private payers will change their reimbursement practices in the
future. If these private payers change their reimbursement practices, it could
have a material, adverse impact on the Company's business, financial condition
and results of operations.
Highly Competitive Industries and Risk of Technological Obsolescence
The Company faces intense competition. The medical products industry is
highly competitive and characterized by rapid innovation and technological
change. The Company expects technology to continue to develop rapidly, and the
Company's success will depend to a large extent on its ability to maintain a
competitive position with its technology. Additionally, the success of the
Company's component business will depend on the ability of its customers to
maintain a competitive position with their technology. There can be no assurance
that the Company will be able to compete effectively in the marketplace or that
products developed by its competitors or developed by competitors of its
component business customers will not render the Company's products obsolete or
non-competitive. Similarly, there can be no assurance that these competitors
will not succeed in developing or marketing products that are viewed by
physicians as providing superior clinical performance or are less expensive
relative to the products currently marketed or to be developed by the Company or
its component business customers.
Several established companies manufacture and sell products which compete
with all of the Company's products. Some of the companies with which the Company
competes have greater distribution capabilities, substantially greater capital
resources and larger marketing, research and development staffs and facilities
than the Company. In addition, many of the Company's competitors offer broader
product lines within the Company's specific product markets. Broad product lines
may give the Company's competitors the ability to negotiate exclusive, long-term
medical product or component supply contracts and the ability to offer
comprehensive pricing for their products, including those that compete with the
Company's products. Competitors who offer broad product lines may also have a
significant advantage in competing with the Company's branded products for sales
to group purchasing organizations and managed care organizations that
increasingly seek to reduce costs. There can be no assurance that the Company
will be able to compete effectively with such manufacturers.
Risks Associated with Intellectual Property
The Company protects its technology through trade secrets, proprietary
know-how and patents, both owned and licensed. The Company seeks to protect its
trade secrets and proprietary know-how through confidentiality agreements with
employees, consultants and other parties. Supple Peri-Guard, which is used in
the manufacture of the majority of the Company's Tissue-Guard products, is
protected exclusively by trade secrets (although Peri-Guard is protected by
patent). There can be no assurance that the Company's trade secrets or
confidentiality agreements will provide meaningful protection of the Company's
proprietary information or, in the event of a breach of any confidentiality
agreement, that the Company will have adequate remedies. Additionally, there can
be no assurance that any pending or
5
<PAGE>
future patent applications will result in issued patents, or that any current or
future patent, regardless of whether the Company is an owner or licensee of such
patent, will not be challenged, invalidated or circumvented or that the rights
granted thereunder or under its licensing agreements will provide a competitive
advantage to the Company. Furthermore, there can be no assurance that others
will not independently develop similar technologies or duplicate any technology
developed by the Company or that the Company's technology does not or will not
infringe patents or other rights owned by others.
The medical product industry is characterized by frequent and substantial
intellectual property litigation, and competitors may resort to intellectual
property litigation as a means of competition. Intellectual property litigation
is complex and expensive, and the outcome of such litigation is difficult to
predict. Any future litigation, regardless of the outcome, could result in
substantial expense to the Company and significant diversion of the efforts of
the Company's technical and management personnel. Litigation may also be
necessary to enforce patents issued to the Company and license agreements
entered into by the Company, to protect trade secrets or know-how owned by the
Company or to determine the enforcement, scope and validity of the proprietary
rights of others. An adverse determination in any such proceeding could subject
the Company to significant liabilities to third parties, or require the Company
to seek licenses from third parties or pay royalties that may be substantial.
Furthermore, there can be no assurance that necessary licenses would be
available to the Company on satisfactory terms, if at all. Accordingly, an
adverse determination in a judicial or administrative proceeding or failure to
obtain necessary licenses could prevent the Company from manufacturing or
selling certain of its products which, in turn, would have a material adverse
effect on the Company's business, financial condition and results of operations.
Risks Associated with Human Tissue Products
Both the United States and Europe have recently focused attention on the
safety of tissue banks, spurred by incidents of the transmission of human
disease during tissue transplantation. In the United States, regulations drafted
by the U.S. Food and Drug Administration ("FDA") have outlined requirements for
tissue banks. The regulations have specifically excluded from regulation medical
devices subject to FDA review, including preserved umbilical cord vein grafts
such as Biograft. As a result, the Company does not expect Biograft to be
subject to tissue bank regulations in the United States and the related
expensive donor screening and donor testing procedures. There can be no
assurance, however, that the FDA will not impose additional regulatory
requirements on Biograft at some later date or that Biograft would be able to
meet any such new requirements.
The long-term future regulatory environment for Biograft in Europe is
uncertain. The Medical Device Directive ("MDD") issued by the European Union
("EU") explicitly excludes medical devices from human tissue; however, there is
an effort developing to include such devices under a comprehensive regulatory
program. This effort is in the early stages; the Company understands that a
consensus on such a directive could take several years. In addition, if
extensive donor screening and donor testing requirements are imposed, such
requirements could make it uneconomical to sell Biograft in Europe even under a
regulatory program. Biograft accounted for 5% of the Company's net revenue for
the nine-month period ended July 31, 1998 and accounted for 8% of the Company's
net revenue for the year ended October 31, 1997.
Bovine Spongiform Encephalopathy ("BSE") has been endemic in cattle in the
United Kingdom and has received much publicity in Europe regarding beef for
dietary consumption. Under the direction of the U.S. Department of Agriculture
("USDA"), the U.S. government has had an active program of surveillance and
import controls since the late 1980's, designed to prevent the introduction of
BSE into
6
<PAGE>
U.S. cattle. To date all evidence indicates that U.S. cattle are free of BSE.
The Company obtains all of its raw pericardium for its Tissue-Guard products
from USDA-inspected slaughterhouses. The Company cannot predict whether or not a
case of BSE may someday be reported in the United States. If a case of BSE were
reported in U.S. cattle, it could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
notified body under the MDD, the British Standards Institute, and French
authorities have specifically reviewed Tissue-Guard sourcing and manufacturing
processes and have then certified the Company's bovine pericardium products.
Although the Company does not anticipate that countries will prohibit the sale
of Tissue-Guard products as a result of concerns related to BSE, such
prohibition by certain countries could have a material adverse effect on the
Company's business, financial condition and results of operation.
Governmental Regulation
The Company's products, development activities and manufacturing processes
related to branded products, as well as the products, development activities and
manufacturing processes related to products produced by its component business
customers are subject to extensive and rigorous regulation by the FDA and by
comparable agencies in foreign countries. In the United States, the FDA
regulates the introduction, manufacturing, labeling and recordkeeping procedures
for medical devices including the Company's branded products and medical devices
incorporating the Company's component products. The process of obtaining
marketing clearance from the FDA for new products and new applications for
existing products can be time-consuming and expensive, and there is no assurance
that such clearances will be granted or that FDA review will not involve delays
that would adversely affect the Company's ability to commercialize additional
products or additional applications for existing products. In addition, certain
of the Company's branded products and devices incorporating component products
that are in the research and development stage may be subject to a lengthy and
expensive pre-market approval ("PMA") process with the FDA. Even if regulatory
approvals to market a product are obtained from the FDA, these approvals may
entail limitations on the indicated uses of the product. Product approvals by
the FDA can also be withdrawn due to failure to comply with regulatory standards
or the occurrence of unforeseen problems following initial approval. The FDA
could also limit or prevent the manufacture or distribution of the Company's
branded products or medical devices incorporating the Company's component
products, and has the power to require the recall of such products, if
indicated. If enacted, proposed regulations currently under consideration by the
FDA could also adversely impact the use and marketing of certain of the
Company's branded products. FDA regulations depend heavily on administrative
interpretation, and there can be no assurance that future interpretations made
by the FDA or other regulatory bodies, with possible retroactive effect, will
not adversely affect the Company.
The FDA, various state agencies and foreign regulatory agencies inspect the
Company and its manufacturing facilities for branded products from time to time
to determine whether the Company is in compliance with various regulations
relating to manufacturing practices, validation, testing, quality control and
product labeling. A determination that the Company is in violation of such
regulations could lead to imposition of civil penalties, including fines,
product recalls or product seizures and, in extreme cases, criminal sanctions,
depending on the nature of the violation.
International regulatory bodies have established varying regulations
governing product standards, packaging requirements, labeling requirements,
import restrictions, tariff regulations, duties and tax requirements. In Japan,
a potentially significant market for the Company's branded products, clinical
trials of certain of the Company's branded products are required before such
products can be cleared for sale in the Japanese market. The Company relies on
independent distributors to comply with such foreign regulatory requirements. As
a result, communication between foreign regulatory agencies
7
<PAGE>
and the Company is indirect as it occurs through the foreign distributor. The
inability or failure of independent distributors to comply with the varying
regulations or the imposition of new regulations could restrict such
distributors' ability to sell the Company's branded products internationally and
thereby adversely affect the Company's business, financial condition and results
of operations.
The registration scheme in the EU for the Company's branded products
requires that the Company's quality system conform with the ISO 9001
international quality standard and that its branded products conform with
"essential requirements" set forth by the MDD. Compliance with these
requirements will allow the Company to issue a "Declaration of Conformity" and
apply the CE mark to branded products, allowing free sale in the EU. While the
Company has obtained the "CE" mark for all of its current branded products
(except for Biograft, which is exempt), there can be no assurance that the
Company will be able to maintain compliance with the regulations to retain the
CE mark. In addition, there can be no assurance that the Company will be
successful in obtaining the CE mark for new product introductions. Devices
incorporating the Company's component products are also subject to these
requirements, and there can be no assurance that the Company's component
business customers will be successful in obtaining or maintaining compliance
with the EU regulatory scheme for their current or future products.
Exposure to Product Liability Claims; Risk of Product Recall
The medical product industry historically has been litigious, and the
manufacture and sale of the Company's products inherently entails a risk of
product liability claims. In particular, the Company's principal branded and a
significant portion of its component products are designed to be permanently
placed in the human body, and production or other errors could result in an
unsafe product and injury to the patient. The Company maintains product
liability insurance coverage on a claims-made basis with an annual aggregate
limit of $7 million, subject to an annual aggregate self insured retention of
$250,000. Although the Company believes these amounts to be adequate based upon
the nature and risks of its business in general and its actual experience to
date, there can be no assurance that one or more liability claims will not
exceed the coverage limits of such policies or that such insurance will continue
to be available on commercially reasonable terms, if at all. Furthermore, the
Company does not expect to be able to obtain insurance covering its costs and
losses as the result of any recall of its products due to alleged defects,
whether such a recall is instituted by the Company or required by a regulatory
agency. A product liability claim, recall or other claim with respect to
uninsured liabilities or in excess of insured liabilities could have a material
adverse effect on the business, financial condition and results of operations of
the Company.
Dependence on Domestic and International Distributors and Sales Representatives
Sales to both domestic and international distributors and sales
representatives constitute a significant portion of the Company's current
business related to its branded products. For the nine-month period ended July
31, 1998 as well as the year ended October 31, 1997, three domestic distributors
accounted for an aggregate of 44% of gross revenue, with each of such
distributors accounting for in excess of 10% of the Company's gross revenue for
those periods. The Company also relies on sales representative organizations for
certain of its domestic branded product business and relies on a number of
distributors for all of its international branded product business. There can be
no assurance that the Company will be able to maintain its relationships with
any of its distributors or sales representatives, or, in the event of
termination of any of such relationships, that a new replacement distributor or
sales representative will be found. The loss of a significant distributor or a
significant number of other distributors or sales representatives could
materially adversely affect the Company's
8
<PAGE>
business, financial condition and results of operations if another suitable
sales organization could not be found on a timely basis to serve the relevant
geographic market.
Year 2000 Compliance
The Company and third parties with which the Company does business are
significantly dependent upon information systems and other systems which may be
susceptible to the so-called Year 2000 problem. The Company has initiated a
comprehensive internal Year 2000 identification and remediation efforts,
although there can be no assurance that the Company will be able to fully
identify and address all of its internal Year 2000 issues as a result of these
efforts. As a part of its Year 2000 initiatives the Company intends to request
information from its business partners as to their Year 2000 compliance in order
to assess and mitigate the Company's risks. There can be no assurance, however,
that Year 2000 issues encountered by such parties will not have a material,
adverse effect on the Company's business, financial condition and results of
operations.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries of the European
Union are scheduled to establish fixed conversion rates between their existing
sovereign currencies and the euro, and to adopt the euro as their common legal
currency on that date. The Company currently denominates all of its foreign
transactions in U.S. dollars, and therefore is not presently faced with the task
of converting its information systems and practices to accommodate euro
conversion. Euro conversion is, however, expected to generally increase
cross-border price transparency among the participating countries and result in
a more competitive European market. The Company is uncertain as to the effect,
if any, that euro conversion will have on its ability to sell its products in
the European market. Euro conversion could potentially impact pricing strategies
and demand for the Company's products in the European market, lead to increased
competition within the European market for the specific types of products
manufactured and sold by the Company, or impact the Company's international
distributor relationships. The Company could also potentially be required to
denominate future transactions in the euro and incur currency risk and
conversion start-up costs as a result. There can be no assurance that euro
conversion will not have a material, adverse effect on the Company's business,
financial condition and results of operation.
Dependence on Significant Customer
Sales to one customer of the Company's component business accounted for
approximately 40% of the business unit's revenues for the nine-month period
ended July 31, 1998. There can be no assurance that the Company will be able to
maintain its relationship with this significant customer, or in the event of
termination of the relationship, that the Company will be able to replace
production levels with new or existing customers. The loss of the significant
customer could materially adversely affect the Company's business, financial
condition and results of operations.
Possible Volatility of Share Price
Market prices for securities of medical technology companies are highly
volatile. The trading price of the Company's Common Stock could be subject to
significant fluctuations in response to quarterly variations in operating
results, announcements of technological innovations by the Company, its
competitors or competitors of its component business customers, governmental
regulation and other events or factors, including the various risk factors
discussed above. In addition, market prices of
9
<PAGE>
medical technology companies have from time to time experienced extreme price
and volume fluctuations, which may be unrelated to the operating performance of
the particular company. These broad market fluctuations may materially adversely
affect the market price of the Company's Common Stock.
Absence of Dividends
The Company has not paid any cash dividends since its inception and does
not anticipate paying cash dividends in the foreseeable future.
Anti-Takeover Considerations
The Company's Board of Directors has the authority, without any action on
the part of the Company's shareholders, to fix the rights and preferences of
shares of the Company's Serial Preferred Stock to be issued from time to time.
In addition, as a Minnesota corporation, the Company is subject to certain
anti-takeover provisions of the Minnesota Business Corporation Act (the "MBCA").
The Board's authority regarding the Serial Preferred Stock and the anti-takeover
provisions of the MBCA could have the effect of delaying, deferring or
preventing a change in control of the Company, may discourage bids for the
Company's Common Stock at a premium over then-prevailing market prices and may
adversely affect the market price, voting rights and other rights of
shareholders.
10
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth certain information, as of
August 21, 1998, and as adjusted to reflect the sale of the shares offered
hereby, with respect to the beneficial ownership of Common Stock by the Selling
Shareholders and any position, office or material relationship which the Selling
Shareholder has had within the past three years with the Company or any of its
predecessors or affiliates. Except as set forth in the footnotes below, the
Selling Shareholders possess sole voting and investment power with respect to
the shares shown.
<TABLE>
<CAPTION>
Shares Beneficially
Shares of Owned After
Common Stock Number of Completion of
Beneficially Shares the Offering (2)
Owned Prior to Being -----------------------
Selling Shareholders the Offering (1) Offered Number % of Class(3)
- -------------------- --------------- ------- ------ -------------
<S> <C> <C> <C> <C>
James F. Pfau 86,358(4) 86,358 - *
Data Sales Co., Inc. 203,447(5) 203,447 - *
George Nelson 31,957 31,957 - *
Ronald C. Breckner 433,109(6) 229,662 - *
Catherine A. Sykes 34,448(7) 17,224 - *
Willard D. Sykes 34,448(8) 17,224 - *
-------
585,872
=======
</TABLE>
- ----------
* Less than one percent (1%)
(1) Based upon questionnaires received from each Selling Shareholder or a
representative of the Selling Shareholder in connection with the
preparation of a Registration Statement on Form S-3, of which this
Prospectus forms a part.
(2) This assumes all shares being offered and registered hereunder are sold,
although the Selling Shareholders are not obligated to sell any shares.
(3) Based upon 9,628,986 shares of Common Stock outstanding as of September 29,
1998.
(4) Mr. Pfau was formerly a director and managing director of Jer-Neen and
continues to serve as the President of Jer-Neen pursuant to a three-year
Employment Agreement dated July 31, 1998. Under the Employment Agreement
Mr. Pfau was granted options to purchase 19,335 shares of Common Stock and
9,668 shares of restricted Common Stock, in each case vesting over a
four-year period. The number of shares shown above does not include these
options or restricted shares as no options were exercisable and no shares
were vested on (or would become exercisable or vest within 60 days of)
August 21, 1998.
11
<PAGE>
(5) Jer-Neen and Data Sales Co., Inc. are parties to a General Equipment Lease,
dated December 18, 1995. The lease agreement is structured as a master
lease under which four Equipment Schedules have been entered into by the
parties. These Equipment Schedules expire at various times between December
1999 and May 2001 and provide for aggregate future lease payments of
$269,855 as of September 30, 1998.
(6) Includes 203,447 shares held by Data Sales Co., Inc. Mr. Breckner is the
controlling shareholder, President and Chief Executive Officer of Data
Sales Co., Inc.
(7) Includes 17,224 shares held by Mrs. Sykes' husband, Willard Sykes. Mrs.
Sykes disclaims beneficial ownership of the shares held by Mr. Sykes.
(8) Includes 17,224 shares held by Mr. Sykes' wife, Catherine Sykes. Mr. Sykes
disclaims beneficial ownership of the shares held by Mrs. Sykes.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock on behalf of the
Selling Shareholders. As used in this section, "Selling Shareholders" includes
donees and pledgees selling shares received from a named Selling Shareholder
after the date of this Prospectus. All costs, expenses and fees in connection
with the registration of the shares offered hereby will be borne by the Company.
Brokerage commissions and similar selling expenses, if any, attributable to the
sale of shares will be borne by the Selling Shareholders. Sales of shares may be
effected by Selling Shareholders from time to time in one or more types of
transactions (which may include block transactions) on the Nasdaq National
Market, in the over-the-counter market, in negotiated transactions, through put
or call options transactions relating to the shares, through short sales of
shares, or a combination of such methods of sale, at market prices prevailing at
the time of sale, or at negotiated prices. Such transactions may or may not
involve brokers or dealers. The Selling Shareholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their securities,
nor is there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the Selling Shareholders.
The Selling Shareholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Shareholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Shareholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The Company has agreed to indemnify each Selling
Shareholder against certain liabilities, including liabilities arising under the
Securities Act. The Selling Shareholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares against certain liabilities, including liabilities arising under the
Securities Act.
12
<PAGE>
Because Selling Shareholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Shareholders will be
subject to the prospectus delivery requirements of the Securities Act pursuant
to Rule 153 under the Securities Act. The Company has informed the Selling
Shareholders that the anti-manipulative provisions of Regulation M promulgated
under the Securities Exchange Act of 1934, as amended, may apply to their sales
in the market.
Selling Shareholders also may resell all or a portion of the Shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of such Rule.
Upon the Company being notified by a Selling Shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of Shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(b) under the Act,
disclosing, to the extent applicable, (i) the name of each such selling
shareholder and of the participating broker-dealer(s), (ii) the number of shares
involved, (iii) the price at which such shares were sold, (iv) the commissions
paid or discounts or concessions allowed to such broker-dealer(s), where
applicable, (v) that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this prospectus
and (vi) other facts material to the transaction. In addition, upon the Company
being notified by a Selling Shareholder that a donee or pledgee intends to sell
more than 500 shares, a supplement to this Prospectus will be filed, if
necessary.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Oppenheimer Wolff & Donnelly LLP, Minneapolis,
Minnesota.
EXPERTS
The financial statements and related financial statement schedule of the
Company, which are included in the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1997, and incorporated by reference in this
Prospectus, have been audited by PricewaterhouseCoopers LLP, independent
accountants, for the periods indicated in such firm's reports thereon. The
financial statements and related financial statement schedule audited by
PricewaterhouseCoopers LLP (on July 1, 1998, Coopers & Lybrand L.L.P. merged
with Price Waterhouse LLP to form PricewaterhouseCoopers LLP) have been
incorporated herein by reference in reliance on such firm's reports given upon
their authority as experts in accounting and auditing.
To the extent PricewaterhouseCoopers LLP examines and reports on the
financial statements and financial statement schedules of the Company issued at
future dates, and consents to the use of their reports thereon, such financial
statements and financial statement schedules also will be incorporated by
reference in this Prospectus in reliance upon such firm's reports and said
authority.
13
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company pursuant to the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Room of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. In addition, the Commission maintains
a Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act. This Prospectus does not contain all of the
information, exhibits and undertakings set forth in the Registration Statement,
certain portions of which are omitted as permitted by the Rules and Regulations
of the Commission. Copies of the Registration Statement and the exhibits are on
file with the Commission and may be obtained, upon payment of the fee prescribed
by the Commission, or may be examined, without charge, at the offices of the
Commission set forth above. For further information, reference is made to the
Registration Statement and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
0-13907) are incorporated by reference in this Prospectus: (1) the Company's
Annual Report on Form 10-K for the year ended October 31, 1997; (2) the
Company's quarterly reports on Form 10-Q for the quarters ended January 31,
April 30 and July 31, 1998; (3) the Company's Current Report on Form 8-K dated
July 31, 1998, as amended; (4) all other reports filed by the Company pursuant
to Sections 13(a) or 15(d) of the Exchange Act since October 31, 1997; (5) the
description of the Company's Common Stock contained in its Registration
Statement on Form 8-A and any amendments or reports filed for the purpose of
updating such description; and (5) the description of the Company's Common Stock
Purchase Rights contained in its Registration Statement on Form 8-A and any
amendments or reports filed for the purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering hereunder will be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained herein or in a document all or any
portion of which is incorporated or deemed to be incorporated by reference
herein will be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
14
<PAGE>
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents referred to above which are incorporated by
reference in this Prospectus (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Requests should be directed to the attention of
Connie L. Magnuson, the Company's Chief Financial Officer, at the address and
phone number listed above under "The Company."
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. Exhibits
2.1 Acquisition Agreement and Plan of Reorganization by and among Bio-Vascular,
Inc., Jer-Neen Acquisition, Inc., Jer-Neen Manufacturing Co., Inc., George
Nelson, Jr., Ronald Breckner, James Pfau, Willard Sykes and Catherine
Sykes, dated July 31, 1998 (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K, dated July 31, 1998, as amended (File
No. 0-13907)).
4.1 Restated Articles of Incorporation of the Company, as amended,
(incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended April 30, 1997 (File No. 0-13907)).
4.2 Amended and Restated Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-4 (File No.
33-74750)).
4.3 Form of Common Stock Certificate of the Company (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form 10 (File
0-13907)).
4.4 Rights Agreement, dated as of June 12, 1996, between Bio-Vascular, Inc. and
American Stock Transfer & Trust Company, which includes as Exhibit A the
form of Rights Certificate (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated June 12, 1996 (File No.
0-13907)).
5.1 Opinion and Consent of Oppenheimer Wolff & Donnelly LLP (filed herewith
electronically).
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith electronically).
23.2 Consent of Oppenheimer Wolff & Donnelly LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-4 of this Registration Statement).*
- ----------
*Indicates item previously filed
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Paul and State of Minnesota, on November 19,
1998.
By: /s/ Connie L. Magnuson
--------------------------------
Connie L. Magnuson
Vice President - Finance and Chief Financial
Officer (Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on November 19,
1998 in the capacities indicated.
Signature Title
--------- -----
* President, Chief Executive Officer and
- ---------------------------- Director (Principal Executive Officer)
M. Karen Gilles
* Chairman of the Board and Director
- ----------------------------
Timothy M. Scanlan
* Director
- ----------------------------
William G. Kobi
* Director
- ----------------------------
Richard W. Perkins
* Director
- ----------------------------
Anton R. Potami
* Director
- ----------------------------
Timothy M. Scanlan
* Director
- ----------------------------
Edward E. Strickland
- ----------
* By: /s/ Connie L. Magnuson
---------------------------
Connie L. Magnuson
Attorney-in-fact
II-2
<PAGE>
BIO-VASCULAR, INC.
EXHIBIT INDEX TO REGISTRATION STATEMENT ON FORM S-3
<TABLE>
<CAPTION>
Item No. Description Method of Filing
- -------- ----------- ----------------
<S> <C> <C>
2.1 Acquisition Agreement and Plan of
Reorganization by and among
Bio-Vascular, Inc., Jer-Neen
Acquisition, Inc., Jer-Neen
Manufacturing Co., Inc., George Nelson, Jr.,
Ronald Breckner, James Pfau, Willard
Sykes and Catherine Sykes, dated
July 31, 1998.................................Incorporated by
reference to Exhibit
2.1 to the Company's
Current Report on Form
8-K, dated July 31,
1998, as amended (File
No. 0-13907).
4.1 Restated Articles of Incorporation of the
Company, as amended...........................Incorporated by
reference to Exhibit
3.1 to the Company's
Quarterly Report on
Form 10-Q for the
quarter ended April
30, 1997 (File No.
0-13907).
4.2 Amended and Restated Bylaws of the
Company.......................................Incorporated by
reference to Exhibit
3.2 to the Company's
Registration Statement
on Form S-4 (File
No. 33-74750).
4.3 Form of Common Stock Certificate of the
Company.......................................Incorporated by
reference to
Exhibit 4.1 to the
Company's Registration
Statement on Form 10
(File 0-13907).
4.4 Rights Agreement, dated as of June 12, 1996,
between Bio-Vascular, Inc. and American
Stock Transfer & Trust Company, which
includes as Exhibit A the form of Rights
Certificate...................................Incorporated by
reference to Exhibit
4.1 to the Company's
Current Report on Form
8-K dated June 12,
1996 (File No.
0-13907)).
5.1 Opinion and Consent of Oppenheimer Wolff &
Donnelly LLP..................................Filed herewith
electronically.
23.1 Consent of PricewaterhouseCoopers LLP.........Filed herewith
electronically.
23.2 Consent of Oppenheimer Wolff & Donnelly LLP...Included in
Exhibit 5.1.
24.1 Power of Attorney.............................Included on page II-4
of this Registration
Statement.*
</TABLE>
- ----------
*Indicates item previously filed
<PAGE>
EXHIBIT 5.1
November 19, 1998
Bio-Vascular, Inc.
2575 University Avenue
St. Paul, MN 55114
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for Bio-Vascular Inc., a Minnesota corporation (the
"Company"), in connection with the registration by the Company of the offer and
sale of 585,872 shares of the Company's Common Stock, $.01 par value (including
the associated Common Stock Purchase Rights) (the "Shares"), pursuant to the
Company's Registration Statement on Form S-3 (the "Registration Statement").
The Registration Statement has been filed with the Securities and Exchange
Commission on behalf of those certain selling shareholders named therein (the
"Selling Shareholders"). The Shares have been issued under the terms of an
Acquisition Agreement and Plan of Reorganization, dated as of July 31, 1998, by
and among the Company, Jer-Neen Manufacturing Co., Inc. and the Selling
Shareholders (the "Acquisition Agreement").
In rendering this opinion, we have examined and relied upon originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements and other instruments, certificates of officers,
certificates of public officials and other documents as we have deemed necessary
or appropriate as a basis for the opinions expressed herein.
In connection with our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents tendered to us as originals, the
legal capacity of all natural persons and the conformity to original documents
of all documents submitted to us as certified or photostatic copies.
Based on the foregoing, it is our opinion that:
(1) The Company had the corporate authority to issue the Shares in the
manner and under the terms of the Acquisition Agreement.
(2) The Shares being registered for resale by the Selling Shareholders
under the Registration Statement have been duly authorized and are
validly issued, fully paid and nonassessable.
<PAGE>
We express no opinion with respect to laws other than those of the State of
Minnesota and the federal laws of the United States of America, and we assume no
responsibility as to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, to its use as part of the Registration Statement, and to
the use of our name under the caption "Validity of Common Stock" in the
Prospectus constituting a part of the Registration Statement.
We are furnishing this opinion to the Company for its benefit in connection with
the Registration Statement as described above. This opinion is not to be used,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
/s/ OPPENHEIMER WOLFF & DONNELLY LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF PRICEWATERHOUSECOOPERS LLP
We consent to the incorporation by reference in this Registration Statement of
Bio-Vascular, Inc. on Amendment No. 1 to Form S-3 of our reports dated December
9, 1997, on our audits of the financial statements and financial statement
schedule of Bio-Vascular, Inc., as of October 31, 1997 and 1996, and for the
fiscal years ended October 31, 1997, 1996 and 1995, which reports are included
in the Annual Report on Form 10-K of Bio-Vascular, Inc. for the fiscal year
ended October 31, 1997. We also consent to the references to our Firm under the
caption "Experts" in this Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
November 20, 1998
