As filed with the Securities and Exchange Commission on April 20, 1998.
Registration Statement No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3 REGISTRATION STATEMENT
Under the Securities Act of 1933
---------------
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 93-0945003
(State or other jurisdiction (I.R.S. Employer's
of incorporation or organization) Identification Number)
---------------
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
655 East Medical Drive
Bountiful, UT 84010 (801) 298-3360
(Address, including zip code and telephone number,
including area code, of Registrant's principal executive office)
-----------------
Eric L. Robinson
BLACKBURN & STOLL, LC
77 West Second South, Suite 400
Salt Lake City, UT 84101 (801) 521-7900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
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, check the following box. |X|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Each Class of Amount Maximum Maximum Amount of
Securities to be to be Offering Price Aggregate Registration
Registered Registered Per Share(1) Offering Price(1) Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock(2) 2,991,598 $1.59(3) $4,767,859 $1,406.52
Common Stock(4) 4,439,787 $1.59(3) $7,155,598 $2,110.90
Total $3,517.42
- ------------------------------------------------------------------------------------------------------------------------
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.
=======================================================================================================================
</TABLE>
<PAGE>
(footnotes continued from previous page)
(1) Estimated solely for the purpose of determining the registration fee.
(2) Outstanding shares of Common Stock offered for sale from time to time by
Selling Security holders.
(3) Represents the average of the bid and asked prices of the Common Stock on
the NASDAQ Small Cap Market on April 14, 1998. Fees were calculated under
Rule 457(c) under the Securities Act of 1933.
(4) Issuable by the Registrant from time to time upon the exercise of
outstanding warrants and stock options.
<PAGE>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
Item Number of Caption Location or Heading in Prospectus
1. Forepart of Registration Statement and Outside Front Page of
Outside Front Cover of Prospectus..... Registration Statement and
Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus................... Cover Page of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary and Risk
Ratio of Earnings to Fixed Charges.... Factors
4. Use of Proceeds....................... Use of Proceeds
5. Determination of Offering Price....... Not Applicable
6. Dilution.............................. Not Applicable
7. Selling Security Holders.............. Principal and Selling
Securityholders
8. Plan of Distribution.................. Plan of Distribution
9. Description of Securities to be
Registered............................ Not Applicable
10. Interest of Named Experts and Counsel. Not Applicable
11. Material Changes...................... Not Applicable
12. Incorporation of Certain Information Incorporation of Certain
by Reference.......................... Documents by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................... Not Applicable
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 20, 1998.
PRELIMINARY PROSPECTUS
7,431,385 Shares of Common Stock
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
This prospectus relates to (1) the offer and sale from time to time of
up to 2,991,598 shares of common stock, $.02 par value ("Common Stock"), of
Specialized Health Products International, Inc. (the "Company") by certain
stockholders of the Company named herein (the "Selling Stockholders"); (2) the
offer and sale from time to time by the warrantholders named herein (the
"Selling Warrantholders") of up to 4,379,787 shares of Common Stock (the
"Warrant Stock") issuable to such warrantholders upon exercise of the Series D
Warrants and certain other outstanding warrants of the Company (collectively,
the "Warrants") during the term of the Warrants; and (3) the offer and sale from
time to time by the stock option holders named herein (the "Selling Option
Holders") of up to 60,000 shares of Common Stock (the "Option Stock") issuable
to such stock option holders upon exercise of the stock options (collectively,
the "Stock Options") during the term of the Stock Options. The Common Stock,
Warrant Stock and Option Stock are referred to collectively as the "Securities."
The Selling Stockholders, selling Warrantholders and selling Stock Options
Holders named herein are referred to collectively as the "Selling
Securityholders." See "Principal and Selling Securityholders."
The Common Stock is quoted on the NASD Automated Quotation ("Nasdaq")
Small-Cap Market under the trading symbol "SHPI." On April 13, 1998, the closing
price of the Common Stock, as reported by Nasdaq was $1.75 per share.
The Securities offered hereby involve a high degree of risk. See "Risk
Factors" on page 5 of the Prospectus.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The Common Stock offered hereby may be sold from time to time on Nasdaq
through brokers, dealers, underwriters or agents, and also in
privately-negotiated sales by the Selling Securityholders named herein, on terms
to be determined at the times of such sales. See "Principal and Selling
Securityholders." The Company is registering the Common Stock pursuant to the
Company's obligations under certain registration rights agreements, but the
registration of the Securities does not necessarily mean that any of the
Securities will be offered or sold by the Selling Securityholders hereunder. To
the extent required, the specific Securities to be sold, the names of the
Selling Securityholders, the respective purchase prices and public offering
prices, the names of any broker, dealer, underwriter or agent, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying Prospectus Supplement or, if appropriate, a
post-effective amendment to the Registration Statement to which this Prospectus
is a part. See "Plan of Distribution."
The Selling Securityholders and any dealers or agents that participate
in the distribution of the Securities offered hereby may be deemed to be
"underwriters" as defined in the Securities Act of 1933, as amended (the
"Securities Act") and any profit on the sale of the Securities offered hereby by
them and any discounts, commissions or concessions received by any such dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act.
The Company will receive no proceeds from the sale of the Securities by
the Selling Securityholders hereunder, but the Company has agreed to bear
certain expenses of registration of such Securities under federal and state
securities laws. The Company will receive up to $8,888,874 in proceeds when and
if the Warrants and Stock Options are exercised.
---------------
The date of this Prospectus is April 20, 1998
<PAGE>
AVAILABLE INFORMATION
The Company, with principal executive offices at 655 East Medical
Drive, Bountiful, Utah 84010, telephone number (801) 298-3360, 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"). Reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission in Washington, D.C., and at the following regional
offices of the Commission: Seven World Trade Center, 13th Floor, New York, New
York, 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates and the Commission's web site located at
http://www.sec.gov.
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the Securities offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement,
certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement, including the schedules and exhibits filed as a part
thereof, which may be obtained from the Commission upon payment of the fees
prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
31, 1997, which has been filed by the Company with the Commission, is
incorporated herein by reference.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Common Stock
shall 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 incorporated or deemed to be incorporated by reference
in this Prospectus shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any document incorporated by reference in this Prospectus, other than exhibits
to any such documents not specifically described above. Requests for such
documents should be directed to Specialized Health Products International, Inc.,
655 East Medical Drive, Bountiful, Utah 84010, Attention: Investor Relations
(Telephone Number (801) 298-3360).
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus. Unless the context otherwise
requires, all references in this Prospectus to the "Company" shall mean
Specialized Health Products International, Inc. and its subsidiaries on a
consolidated basis and, where the context so requires, shall include its
predecessors.
THE COMPANY
The Company is engaged principally in the development of
cost-effective, disposable, proprietary health care products designed to reduce
the incidence of accidental injury in the health care industry, and thus reduce
the spread of disease. The Company has created a portfolio of proprietary health
care products that are in various stages of production, pre-production,
development and research. At present, the Company is focusing its resources and
activities principally on marketing products currently available for sale,
preparing products nearing completion for manufacturing and marketing,
developing new products designed to reduce the risk of acquiring HIV/AIDS,
hepatitis B and other blood-borne diseases through accidental needlesticks and
the development of other medical products.
The Company is a Delaware corporation with its principal executive
offices at 655 East Medical Drive, Bountiful, UT 84010. Its telephone number is
(801) 298-3360.
THE OFFERING
The principal terms of the Securities offered hereunder are summarized
below. The Selling Securityholders will receive all the proceeds from the sale
of the Common Stock.
Common Stock:
Securities Offered ..............................7,431,385 shares of Common
Stock, including 2,991,598
shares of outstanding Common
Stock which may be sold by
Selling Securityholders, up to
4,379,787 shares of Common
Stock which may be sold by the
holders of outstanding Warrants
following exercise of such
Warrants, and up to 60,000
shares of Common Stock which
may be sold by the holders of
the outstanding Stock Options
following the exercise of such
Stock Options.
Rights of Common Stock ..........................The shares of Common Stock
share equally in all rights of
the Common Stock, including,
without limitation, dividend
and voting rights.
Quotation .......................................The Common Stock is quoted on
the Nasdaq Small-Cap Market.
Trading Symbol .................................."SHPI"
3
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
The following data have been derived from the Company's consolidated
financial statements. The information set forth below is not necessarily
indicative of the results of future operations and should be read in conjunction
with the consolidated financial statements and related notes appearing in the
Company's Form 10-K for the year ended December 31, 1997:
<TABLE>
<CAPTION>
Period Ended
-----------------------------------------------------------------------------------
Nov. 19, 1993
Dec. 31, Dec. 31, Dec. 31, Dec. 31, (Inception) to
1997 1996 1995 1994 Dec. 31, 1997
------------ ------------ ------------ ------------- -------------
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Net Product Sales................. $ 182,363 $ 74,563 $ 447,844 $ 33,256 $ 738,026
Development Fees.................. 250,000 -- -- -- 250,000
------------ ------------ ------------ ------------- -------------
Total revenues........... 432,363 74,563 447,844 33,256 988,026
Cost of Product Sales............. 141,857 70,257 294,171 21,669 527,954
------------ ------------ ------------ ------------- -------------
Gross profit ............ 290,506 4,306 153,673 11,587 460,072
------------ ------------ ------------ ------------- -------------
Operating Expenses:
Selling, general and
administrative.............. 3,311,222 2,901,434 2,133,021 620,022 8,969,149
Research and development..... 1,191,857 1,264,186 804,639 290,950 3,551,632
Write-off of operating
assets..................... 92,557 72,363 255,072 -- 419,992
------------ ------------ ------------ ------------- -------------
Total operating expenses. 4,595,636 4,237,983 3,192,732 910,972 12,940,773
------------ ------------ ------------ ------------- -------------
Operating loss........... (4,305,130) (4,233,677) (3,039,059) (899,385) (12,480,701)
Net other income (expense)........ 31,127 140,289 119,570 (7,563) 283,423
------------ ------------ ------------ ------------- -------------
Net loss................. (4,274,003) (4,093,388) (2,919,489) (906,948) (12,197,278)
Dividends on preference stock..... -- -- (11,389) (16,780) (28,169)
------------ ------------ ------------ ------------- -------------
Net loss attributable to common
stockholders.................... $(4,274,003) $(4,093,388) $ (2,930,878) $ (923,728) $(12,225,447)
============ ============ ============ ============= =============
Net loss per common share (basic
and diluted) (1)............... $ (.47) $ (.48) $ (.69) $ (.75)
============ ============ ============ =============
Weighted average common shares
outstanding (1).............. 9,170,541 8,589,952 4,269,131 1,224,074
============ ============ ============ =============
Balance Sheet Data (at year end):
Working capital (deficit)......... $ 609,962 $ 30,754 $ 4,194,568 $ (287,723)
Total assets...................... 3,285,413 1,848,839 5,950,728 656,865
Long-term debt, less current
maturities...................... -- -- -- 458,333
Total stockholders' equity
(deficit)....................... 540,248 1,513,217 5,369,805 (355,878)
</TABLE>
(1) Net loss per common share is based on the weighted average number of common
shares outstanding. Stock options and warrants, and preferred shares prior
to conversion, are not included in the calculation because this inclusion
would be anti-dilutive and reduce the net loss per common share.
4
<PAGE>
RISK FACTORS
An investment in the Securities of the Company is speculative in
nature, involves a high degree of risk and should only be made by an investor
who can afford the loss of his entire investment. The following factors should
be considered carefully by potential purchasers in evaluating an investment in
the Common Stock of the Company offered hereby.
History of Losses/Profitability Uncertain. The Company is in the
development stage and has reported losses each year since its inception in 1993.
At December 31, 1997, it had an accumulated deficit of $12,225,447. The
Company's products are in various stages of production, pre-production,
development and research. The Company has made only limited sales of its sharps
container products and the ExtreSafe(R) Lancet Strips, the only products it was
selling as of December 31, 1997. Sales of the Company's Safety Cradle(R) sharps
container products commenced in March 1997 pursuant to the Becton Dickinson and
Company Sharps Disposal Systems ("BDSDS") Distribution Agreement. Limited
commercial sales of the ExtreSafe(R) Lancet Strip, which the Company produced
manually until automated production equipment was put in place in November 1997,
also commenced in March 1997. There is no assurance that the Company's products
will be commercially viable and no assurance can be given that the Company will
become profitable. In addition, prospects for the Company's profitability will
be affected by expenses, operational challenges and other factors frequently
encountered in the development of a business enterprise in a competitive
environment, many of which factors may be unforeseen and beyond the Company's
control.
Need for Additional Funds. Due to the development stage status of the
Company and the uncertainty of future profits, the Report of Independent Public
Accountants relating to the Company's 1997 audited financial statements contains
a "going concern" explanatory paragraph. The Company believes that its existing
funds, license fees and funds generated from sales will be sufficient to support
the Company's operations and planned capital expenditures at least through
December 31, 1998. The Company's future need for capital will depend on a number
of factors, including the rate at which demand for products expands, the level
of sales and marketing activities for the Safety Cradle(R) sharps container and
ExtreSafe(R) Lancet Strip products, and the level of expenditures needed to
develop and commercialize the ExtreSafe(R) medical needle withdrawal technology,
intravenous flow gauge, blood collection devices, and the Imaging Technology.
Moreover, the Company's business plans may change or unforeseen events may occur
which may affect the amount of additional funds required by the Company. If
additional funds are not obtained if and when required, the lack thereof could
have a material adverse effect on the Company. Further, there is no assurance
that the terms on which any funds obtained by the Company will be favorable to
stockholders of the Company at that time.
Market Overhang. At commencement of this Offering, there will be (a)
12,271,440 shares of Common Stock outstanding (11,983,440 shares of which may be
sold pursuant to a current registration statement or an exemption from
registration), and (b) warrants and stock options exercisable for 10,259,537
shares of Common Stock (all of such shares of Common Stock underlying said
warrants and stock options may be sold pursuant to a current registration
statement). Thus, upon completion of this Offering, assuming that all of the
warrants and stock options are exercised, there will be 22,530,977 shares of
Common Stock outstanding, of which 22,242,977 shares will be registered or
effectively free trading. The sale of a some of these securities could adversely
affect the market price of the Common Stock, which may hinder any future efforts
of the Company to raise capital. See "Principal and Selling Securityholders."
Manufacturing Strategy/Dependence on Single Manufacturers. The Company
intends to subcontract the manufacture of certain of its products. This strategy
could result in various problems that could have a materially adverse effect on
the Company. Further, the Company may not be able to arrange for the manufacture
of its products through other companies which could delay sales and result in
increased expenses if the Company establishes its own manufacturing capability.
This could have a material adverse effect on the Company. The Company's Safety
Cradle(R) sharps containers and ExtreSafe(R) Lancet Strip are its only products
currently available for sale. The Safety Cradle(R) sharps containers are
produced by a single manufacturer. The Company has made arrangements for the
manufacture of the ExtreSafe(R) Lancet Strip to be performed by a single
manufacturer. If one of the Company's manufacturers fails to perform its
obligations in a timely and satisfactory manner, or if there is a change in the
Company's manufacturers, it could have a material adverse effect on the Company.
There can be no assurance that the Company would be successful in replacing its
5
<PAGE>
current manufacturers on terms favorable to the Company. Also, there can be no
assurance that the Company will be successful in finding additional
manufacturers to manufacture future products on favorable terms.
Marketing Strategy/Dependence on Single Distributors. The Company
generally intends to market and distribute its products through distribution
and/or licensing arrangements with larger medical products companies having
established sales forces and marketing capabilities. There is no assurance that
the Company will be successful in establishing such relationships or that such
relationships, if established, will achieve the Company's financial goals. In
addition, such arrangements create certain risks for the Company, including (i)
reliance for sales of products on other parties, and therefore reliance on the
other parties' marketing ability, marketing plans and credit-worthiness; (ii) if
the Company's products are marketed under other parties' labels, goodwill
associated with use of the products may inure to the benefit of the other
parties rather than the Company; (iii) the Company may have only limited
protection from changes in manufacturing costs and raw materials costs; and (iv)
if the Company is reliant on other parties for all or substantially all of its
sales, the Company may be limited in its ability to negotiate with such other
parties upon any renewals of their agreements. Further, because such
arrangements are generally expected to provide the Company's marketing partners
with certain elements of exclusivity with respect to the products to be marketed
by those partners, the Company's success will be highly dependent on the results
obtained by its partners.
Negative Pricing Pressures on the Company's Safety Products. Prices for
the Company's safety products may be higher than for competing conventional
products which are not designed to provide the safety protection afforded by the
Company's products. The Company's prices, however, are expected to be
competitive with those of competing safety products. Continuing pressure from
third-party payors to reduce costs in the health care industry as well as
increasing competition from safety products made by other companies, could
adversely affect the Company's selling prices. Reductions in selling prices
could adversely affect operating margins if the Company cannot achieve
corresponding reductions in manufacturing costs.
Rapidly Changing Technology. The Company is in various stages of
production, pre-production, development and research with respect to its Safety
Cradle(R) sharps containers, ExtreSafe(R) Lancet Strip, ExtreSafe(R) medical
needle technology, intravenous flow gauge, blood collection devices, filmless
digitized imaging technology and other products. There is no assurance that
development of superior products by competitors or changes in technology will
not eliminate the need for the Company's products. The introduction of competing
products using different technology could adversely affect the Company's
attempts to develop and market its products.
Potential Lack of Market Acceptance. The use of safety medical
products, including the Company's products, is relatively new. The Company's
products may not be accepted by the market and their acceptance will depend in
large part on (i) the Company's ability (directly or through its marketing
partners) to demonstrate the operational advantages, safety, efficiency, and
cost-effectiveness of its products in comparison with competing products and
(ii) its ability to distribute its products through major medical products
companies. There can be no assurance that the Company's products will achieve
market acceptance or that major medical products companies will sell the
Company's products.
Dependence on Continued Research and Development. The ExtreSafe(R)
medical needle withdrawal technology, intravenous flow gauge, phlebotomy device
and Imaging Technology are still in various stages of development. The Company
is also exploring additional applications for all of its products. The continued
development of its products and development of additional applications and new
products is important to the long-term success of the Company. There can be no
assurance that such applications or products will be developed or, if developed,
that they will be successful.
Dependence on Patents and Proprietary Rights. The Company's future
success depends in part on its ability to protect its intellectual property and
maintain the proprietary nature of its technology through a combination of
patents and other intellectual property arrangements. There can be no assurance
that the protection provided by patents, if issued, will be broad enough to
prevent competitors from introducing similar products or that such patents, if
challenged, will be upheld by the courts of any jurisdiction. Patent
infringement litigation, either to enforce the Company's patents or defend the
Company from infringement suits, would be expensive and, if it occurs, could
divert Company resources from other planned uses. Any adverse outcome in such
litigation could have a material adverse effect on the Company. Patent
applications filed in foreign countries and patents in such countries are
subject to laws and procedures that differ from those in the United States.
6
<PAGE>
Patent protection in such countries may be different from patent protection
under U.S. laws and may not be as favorable to the Company. The Company also
attempts to protect its proprietary information through the use of
confidentiality agreements and by limiting access to its facilities. There can
be no assurance that the Company's program of patents, confidentiality
agreements and restricted access to its facilities will be sufficient to protect
the Company's proprietary technology.
Ability to Manage Expanding Operations. The Company intends to pursue a
strategy of rapid growth although there can be no assurance that any growth will
be achieved. The Company plans to significantly expand its product lines and to
devote substantial resources to support operations, research and development,
marketing and administrative functions. There can be no assurance that the
Company will obtain sufficient manufacturing capacity on favorable terms,
arrange for the marketing and distribution of its products, attract qualified
personnel or effectively manage expanded operations. The failure to properly
manage growth could have a material adverse effect on the Company.
Competition/Potential Inability to Compete. The Company is engaged in a
highly competitive business and will compete directly with firms that have
longer operating histories, more experience, substantially greater financial
resources, greater size, more substantial research and development and marketing
organizations, established distribution channels and that are better situated in
the market than the Company. The Company's competitors and potential competitors
include Baxter International, Inc., Becton Dickinson and Company, Devon
Industries, Inc., Johnson & Johnson Medical, Inc., Sage Products, Inc.,
Surgicutt, Inc., Miles, Inc., Diagnostic Corporation, Boehringer Mannheim, Inc.,
Sherwood Medical Company, Inc. and Terumo Medical Corporation. Such competitors
may use their economic strength to influence the market to continue to buy their
existing products. The Company does not have an established customer base and is
likely to encounter a high degree of competition in developing a customer base.
One or more of these competitors could use their resources to improve their
current products or develop new products that may compete more effectively with
the Company's products. New competitors may emerge and may develop products
which compete with the Company's products. No assurance can be given that the
Company will be successful in competing in this industry.
Product Liability. The sale of medical devices entails an inherent risk
of liability in the event of product failure or claim of harm caused by product
operation. There can be no assurance that the Company will not be subject to
such claims, that any claim will be successfully defended or, if the Company is
found liable, that the claim will not exceed the limits of the Company's
insurance. The Company's current insurance coverage is in the amount of $1
million per occurrence and $2 million in aggregate. There is no assurance that
the Company will maintain product liability insurance on acceptable terms in the
future or that such insurance will be available. Product liability claims could
have a material adverse effect on the Company.
Adverse Effect of Regulation Relating to Medical Products. Regulation
is a significant factor in the development and marketing of the Company's
products and in the Company's ongoing manufacturing and research and development
activities. The process of obtaining required regulatory clearances or approvals
can be time-consuming and expensive, and compliance with the FDA's Quality
System Regulation ("QSR") regulations and other regulatory requirements can be
burdensome. Moreover, there can be no assurance that required regulatory
clearances will be obtained, and such clearances, if obtained, may impose
significant limitations on the uses of the products in question. In addition,
changes in existing regulations or guidelines or the adoption of new regulations
or guidelines could make regulatory compliance by the Company more difficult or
expensive in the future. An affiliate of the Company (see "--Joint Venture
Risks") must also meet FDA requirements before marketing products using its
filmless digitized imaging technology. The failure to comply in all material
respects with applicable regulations could result in fines, delays or
suspensions of clearances, seizures or recalls of products, operating
restrictions and criminal prosecutions, and would have a material adverse effect
on the Company.
Future regulations may be imposed which might have a material adverse
effect on the Company and/or one or more of its products. Furthermore, since the
FDA continually regulates and inspects medical devices and their manufacture,
any actual or potential product failure could result in the imposition of
administrative and/or judicial sanctions, including product recall, which might
have a material adverse effect on the Company.
The Company's Safety Cradle(R) sharps containers are subject to the
general controls of the FD&C Act and the additional controls applicable to Class
II devices. The Company has received a clearance on a 510(k) Notification for
7
<PAGE>
its sharps containers which includes all areas of use for the Safety Cradle(R)
sharps container. The Company has received FDA clearance on a 510(k)
notification on a phlebotomy device.
OSHA also requires, in part, that sharps containers be closable,
disposable, puncture-resistant, leak proof on the sides and bottom and
appropriately labeled. The Company's Safety Cradle(R) sharps containers are in
compliance with present OSHA regulations. Future regulations, however, may be
imposed which could have a material adverse effect on the Company.
The Company's ExtreSafe(R) Lancet Strip is a Class I Tier I device. The
ExtreSafe(R) Lancet Strip is exempt from pre-market notification requirements.
The Company must adhere to QSR regulations, however, in connection with its
manufacture of the ExtreSafe(R) Lancet Strip.
The Company's follow-on products (i.e., other products based on its
ExtreSafe(R) medical needle withdrawal technology, intravenous flow gauge and
blood collection device) are still in the development stage. In March 1995, the
FDA issued a draft guidance document on 510(k) Notifications for medical devices
with sharps injury prevention features, a category that would cover most of the
Company's ExtreSafe(R) technology products. The draft guidance provisionally
placed this category of products into Class II Tier 3 for purposes of 510(k)
review, meaning that such products will be subject to the FDA's most
comprehensive and rigorous review for 510(k) products. The draft guidance also
states that in most cases, the FDA will accept, in support of a 510(k)
Notification, data from tests involving simulated use of such a product by
health care professionals, although in some cases the agency might require
actual clinical data.
The Company expects its other follow-on products (i.e., intravenous
flow gauge and blood collection device) to be categorized as Class II devices.
The Company also expects that these follow-on products will not require
pre-market approval applications but will be eligible for marketing clearance
through the 510(k) Notification procedure based upon their substantial
equivalence to previously marketed devices.
In March 1995, the FDA issued a draft guidance document on 510(k)
notifications for medical devices with sharps injury prevention features, a
category that would cover the Company's follow-on products. The draft guidance
provisionally placed this category of products into Class II Tier 3 for purposes
of 510(k) review, meaning that such products will be subject to the FDA's most
comprehensive and rigorous review for 510(k) products. However, review under
this classification is expedited. The draft guidance also states that in most
cases, FDA will accept, in support of a 510(k) notification, data from tests
involving simulated use of such a product by healthcare professionals, although
in some cases that agency might require actual clinical data.
If any of the Company's follow-on products do not qualify for the
510(k) procedure (either because it is not substantially equivalent to a legally
marketed device or because it is a Class III device), the FDA must approve a
pre-market approval ("PMA") application before marketing of such product can
begin. PMA applications must demonstrate, among other things, that the medical
device is safe and effective. A PMA application is typically a complex
submission, usually including the results of clinical studies, and preparing an
application is a detailed, time-consuming and expensive process. Once a PMA
application has been submitted, the FDA's review may be lengthy and may include
requests for additional data. By statute and regulation, the FDA may take 180
days to review a PMA application, although such time may be extended.
Furthermore, there can be no assurance that a PMA application will be reviewed
within 180 days or that a PMA application will be approved by the FDA.
Distribution of the Company's products in countries other than the
United States is subject to regulation in those countries. There can be no
assurance that the Company will obtain the approvals necessary to market any of
its products outside the United States.
Uncertainty in the Health Care Industry. The health care industry is
subject to changing political, economic and regulatory influences that may
affect the procurement practices and operations of health care facilities.
During the past several years, the health care industry has been subject to
increased government regulation of reimbursement rates and capital expenditures.
Among other things, third-party payors are increasingly attempting to contain
health care costs by limiting both coverage and reimbursement levels for health
care products and procedures. Because prices of the Company's products may
exceed the price of conventional products, the cost control policies of
third-party payors, including government agencies, may adversely affect use of
8
<PAGE>
the Company's products. The Company believes that the costs associated with
accidental needlesticks, however, exceed the procurement costs of safety
products such as those of the Company.
There are numerous proposals to reform the U.S. health care system and
the health care systems of various states. Many of these proposals seek to
increase government involvement in health care, lower reimbursement rates,
contain costs and otherwise change the operating environment for the Company's
prospective customers. Health care providers may react to these proposals and
the uncertainty surrounding such proposals by curtailing or deferring
investments in new technology and new products, including those of the Company.
The Company cannot predict what impact, if any, such proposals or health care
reforms might have on the Company's financial condition and results of
operations.
Management/Dependence on Key Personnel/Board of Directors. The success
of the Company depends upon the skills, experience and efforts of its management
and other key personnel. Should the services of one or more members of its
present management or other key personnel become unavailable to the Company for
any reason, the business of the Company could be adversely affected. There is no
assurance that the Company will be able to retain existing employees or attract
new employees of the caliber needed to achieve the Company's objectives. The
Company has noncompetition agreements in place with its key personnel. The Board
of Directors currently consists of five members, three of whom are employed by
the Company.
Market Volatility. Market prices of securities of medical technology
companies are highly volatile from time to time. The trading price of the
Company's securities may be significantly affected by factors such as the
announcement of new product or technical innovations by the Company or its
competitors, proposed changes in the regulatory environment, or by other factors
that may or may not relate directly to the Company. Sales of substantial amounts
of Common Stock (including stock which may be issued upon exercise of warrants
or stock options), or the perception that such sales may occur, could adversely
affect the trading price of the Common Stock.
Potential Negative Impact of Earn-Out Shares. In 1995, the Company
entered into an agreement with a former Director, the President and a Vice
President of the Company, whereby these three individuals have the opportunity
to receive up to an aggregate of 2,000,000 additional shares of common stock.
These individuals have the right to divide the earn-out shares among themselves
or their assigns, if earned, based on performance, contributions to the Company
and/or other factors relating to the business success of the Company. The
Company expects that the issuance of earn-out shares will be deemed to be the
payment of compensation to the recipients and will result in a charge to the
earnings of the Company in the year the earn-out shares are earned, in an amount
equal to the fair market value of the earn-out shares. This charge to earnings
could have a substantial negative impact on the earnings of the Company in the
year or years in which the compensation expense is recognized.
The Company has agreed to file a registration statement under the
Securities Act with respect to the earn-out shares, if and when issued. The
issuance of the earn-out shares, or the perception that the issuance of such
stock may occur, could adversely affect prevailing market prices for the Common
Stock. The issuance of the earn-out shares could have a material adverse effect
on the Company's results of operations for any period in which such shares are
issued. As a result, the Board of Directors is working with a consulting firm to
discuss equitable modifications to the earn-out program to address this matter
and expect to make changes with respect thereto.
No Assurance of Dividends. The Company has never paid dividends on its
Common Stock. The payment of dividends, if any, on the Common Stock in the
future is at the discretion of the Board and will depend upon the Company's
earnings, if any, capital requirements, financial condition and other relevant
factors. The Board of Directors does not intend to declare any dividends on the
Common Stock in the foreseeable future.
Limitations on Director Liability. The Company's Certificate of
Incorporation provides, as permitted by Delaware law, that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for any action or failure to take any action, with certain
exceptions. These provisions may discourage stockholders from bringing suit
against a director for breach of duty and may reduce the likelihood of
derivative litigation brought by stockholders on behalf of the Company against a
director. In addition, the Company has agreed and its Certificate of
Incorporation and Bylaws provide, for mandatory indemnification of directors and
officers to the fullest extent permitted by Delaware law and it has entered into
9
<PAGE>
contracts with its directors and officers providing for such indemnification.
The Company and it directors and officers are also covered by liability
insurance coverage.
Illiquidity/Possible Delisting of Securities from Nasdaq System. The
Company's common stock is currently traded on the Nasdaq Small-Cap Market
System. In order to continue to qualify its stock for quotation on the Nasdaq
Small-Cap Market under recently adopted rules, a company must have, among other
things, $2 million in net tangible assets, a market capitalization of $35
million or annual net income of $500,000. The Company is also required to have a
minimum of two independent directors and an audit committee, a majority of which
are independent directors, and a minimum bid price of at least $1. The Company
believes it is currently in compliance with Nasdaq Small-Cap Market listing
requirements. There is no assurance that the Company will continue to qualify
for listing.
From time to time the Company has failed to meet the Nasdaq Small-Cap
Market listing requirements. If the Company was to fall out of compliance with
such requirements it could be delisted. In the event of delisting, trading, if
any, in the Company's securities would be expected to be conducted in the
over-the-counter market in what is commonly referred to as the "pink sheets" or
the "Electronic Bulletin Board." As a result, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the price of the
Company's securities. The loss of continued price quotations as provided by the
Nasdaq System could also cause a decline in the price of the Common Stock, a
loss of news coverage of the Company and difficulty in obtaining subsequent
financing.
No Control Over Market Making. Market making involves the buying or
selling of securities for others or for one's own account to facilitate and
attempt to profit from market activity in a particular security. Market making
does not in and of itself support or restrict the price of the security. No
person or broker-dealer is under any obligation to make a market in the
Company's Common Stock and any person or broker-dealer making a market in the
Common Stock may discontinue market making activities at any time without
notice. There can be no assurance that an active trading market for the Common
Stock will exist at any time in the future.
Anti-Takeover Provisions of Certificate and Bylaws. The Certificate of
Incorporation of the Company provides for the division of the Board into three
classes substantially equal in number. At each annual meeting of stockholders
one class of directors is to be elected for a three-year term. Amendments to
this provision must be approved by a two-thirds vote of all the outstanding
stock entitled to vote; the number of directors may be changed by a majority of
the entire Board or by a two-thirds vote of the outstanding stock entitled to
vote. Meetings of stockholders may be called only by the Board, the Chief
Executive Officer or the President of the Company, and stockholder action may
not be taken by written consent. These provisions could have the effect of (i)
discouraging attempts at non-negotiated takeovers of the Company which may
provide for stockholders to receive a premium price for their stock or (ii)
delaying or preventing a change of control of the Company which some
stockholders may believe is in their interest.
Effect of the Issuance of Preferred Stock. The Company has an
authorized class of preferred stock, shares of which may be issued with the
approval of its Board on such terms and with such rights, preferences and
designations as the Board may determine. Issuance of additional series of
preferred stock, depending upon the rights, preferences and designations
thereof, may have the effect of delaying, deterring or preventing a change in
control of the Company. In addition, certain "anti-takeover" provisions of the
Delaware General Corporation Law, among other things, may restrict the ability
of stockholders to effect a merger or business combination or obtain control of
the Company and may be considered disadvantageous by some stockholders.
Management of the Company presently does not intend to issue any shares of
preferred stock. Preferred stock may, however, be issued at some future date
which stock might have substantially more than one vote per share or other
provisions designed to deter a change in control of the Company. The issuance of
such stock to a limited group of management stockholders may vest in such
persons absolute voting control of the Company, including, among other things,
the ability to elect all of the directors, control certain matters submitted to
a vote of stockholders and prevent any change in management despite their
performance. Also, preferred stock may have the right to vote upon certain
matters as a separate class.
Current Litigation. In April 1997, the Company entered into an
agreement with Leerink Swann & Company ("Leerink"), whereby Leerink agreed to
assist the Company in raising funds in a private placement of equity securities.
Sufficient funding was deposited into escrow to hold an initial closing, but the
closing did not occur. Leerink alleges that the Company refused to close on the
10
<PAGE>
placement. The Company alleges that the closing did not occur because Leerink,
as a condition precedent to closing, made certain pre-closing demands that went
beyond the terms of the agreement and which demands Company management believes
were not in the best interests of the Company or its stockholders. In August
1997, Leerink filed suit in the United States District Court for the District of
Massachusetts alleging breach of contract and violation of M.G.L. c.93A, ss.11.
Leerink is seeking compensatory damages exceeding $230,000, 113,251 warrants to
purchase 113,251 shares of the Company's Common Stock, treble damages and
reasonable attorneys' fees and costs. In October 1997, the Company filed a
counterclaim alleging breach of contract and violation of M.G.L. c.93A, ss.11.
The Company is seeking in excess of $60,000 in money damages, treble damages,
reasonable attorneys' fees and costs.
The Company believes that Leerink's claims are without merit and that
the Company will ultimately prevail. The litigation is in the early stages, is
subject to all of the risks and uncertainties of litigation and the outcome
cannot presently be predicted. Specifically, there is no assurance that the
Company will be successful in this lawsuit or that the lawsuit will be resolved
on acceptable terms, and the Company may incur significant costs in asserting
its claims and defenses.
Joint Venture Risks. On the date hereof, Specialized Health Products,
Inc. ("SHP"), a wholly owned subsidiary of the Company, and Zerbec, Inc.
("Zerbec") are equal owners of Quantum Imaging Corporation ("QIC"). SHP has an
obligation to provide QIC with $10,000 per month to finance QIC. In addition, if
QIC has not received $3 million in funding prior by September 30, 1998, then
Zerbec has an option to acquire two-thirds of SHP's current fifty percent (50%)
interest in QIC for one dollar (the "QIC Option"). QIC estimates that between
$3,000,000 and $6,000,000 in new funding will be required by QIC for it to
achieve its objectives. There is no assurance that QIC will receive the needed
funding, that such funding, if available, will be on terms that are favorable to
QIC, or that the QIC Option will not be exercised.
Future Results. When used in this Form S-3 or other filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases or other public or shareholder communications, or in oral statements
made with the approval of an authorized officer of the Company's executive
officers, the words or phrases "would be", "will allow", "intends to", "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, and advises
readers that forward-looking statements involve various risks and uncertainties,
including but not limited to risk of product demand, market acceptance, economic
conditions, competitive products and pricing, difficulties in product
development, commercialization, and technology, and other risks. Furthermore,
manufacturing delays may result from additional mold redesigns or delays may
result from the failure to timely obtain FDA approval to sell future products.
In addition, sales through distributors and/or licensees may not commence as
anticipated due to delays by distributors and/or licensees or otherwise. If and
when such sales commence, the sales may not be as substantial as anticipated. As
a result, the Company's actual results for future periods could differ
materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims any
obligation to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statement.
USE OF PROCEEDS
The Company will receive no proceeds from the sale of the Securities by
the Selling Securityholders hereunder, but the Company has agreed to bear
certain expenses of registration of such Securities under federal and state
securities laws. The Company will receive proceeds when and if the Warrants are
exercised.
11
<PAGE>
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue up to 50,000,000 shares of Common
Stock, $.02 par value. All such shares have equal voting rights and are fully
paid and non-assessable. Voting rights with respect to the Common Stock are not
cumulative. Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities and after the
satisfaction of all claims by the holders of preferred stock, if any, will be
distributed pro rata to the holders of the Common Stock. The holders of the
Common Stock do not have preemptive rights to subscribe for any securities of
the Company and have no right to require the Company to redeem or purchase their
shares. Holders of Common Stock are entitled to share equally in dividends when,
as and if declared by the Board of Directors of the Company out of funds legally
available therefor after payment of any dividends to the holders of the
Company's preferred stock.
PRINCIPAL AND SELLING SECURITYHOLDERS
Principal Securityholders
The following table sets forth certain information with respect to the
beneficial ownership of the common stock of the Company as of April 13, 1998,
for: (i) each person who is known by the Company to beneficially own more than
five percent of the Company's common stock, (ii) each of the Company's
directors, (iii) each of the Company's Named Executive Officers (defined below),
and (iv) all directors and executive officers as a group. As of April 13, 1998,
the Company had 12,271,440 shares of common stock outstanding.
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Percentage of
of Beneficial Owner(1) Owned(2) Total (2) Position
- ---------------------- -------- --------- --------
<S> <C> <C> <C>
David A. Robinson(3) 641,925 5% President, CEO, Chairman of
the Board and Director
Bradley C. Robinson(4) 639,541 5% Vice President - Business
Development and Director
Dr. Gale H. Thorne(5) 381,655 3% Vice President - Product
Development and Director
David T. Rovee -- -- Director
Robert R. Walker(6) 113,000 1% Director
Executive Officers and 1,776,121 14%
Directors as a Group (five
persons)
Capital Growth 938,040 7%
International, LLC(7)
11601 Wilshire Boulevard,
Suite 500
Los Angeles, CA 90025
12
<PAGE>
John T. Clarke 659,806 7%
Thatchetts
Camp Road
Gerrards Cross
Buckinghamshire,
England
Johnson & Johnson 1,000,000 8%
Development Corporation(9)
One Johnson & Johnson
Plaza, New Brunswick, NJ
08933
Asdale Ltd. 750,000 6%
44 Lowndes Street
London, England (10)
- --------------
</TABLE>
(1) Except where otherwise indicated, the address of the beneficial owner is
deemed to be the same address as the Company.
(2) Beneficial ownership is determined in accordance with SEC rules and
generally includes holding voting and investment power with respect to the
securities. Shares of Common Stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for
computing the percentage of the total number of shares beneficially owned
by the designated person, but are not deemed outstanding for computing the
percentage for any other person.
(3) Includes 417,719 shares and stock options to purchase 212,500 shares. Also
includes 11,706 shares purchased through the Company's 401(k) plan. Does
not include the earn-out shares.
(4) Includes 330,219 shares and stock options to purchase 300,000 shares. Also
includes 9,322 shares purchased through the Company's 401(k) plan. Does not
include the earn-out shares.
(5) Includes 18,000 shares, stock options to purchase 115,000 shares, Series A
Warrants to purchase 15,000 shares and SHPI Warrants to purchase 200,000
shares. Also includes 25,000 shares that Dr. Thorne is deemed to
beneficially own through a trust and 8,655 shares purchased through the
Company's 401(k) plan.
(6) Includes stock options to purchase 50,000 shares. Also includes 63,000
shares that Mr. Walker is deemed to beneficially own through a trust.
(7) Includes Series B Warrants to purchase 918,040 shares and stock options to
purchase 20,000 shares.
(8) Includes 115,000 shares, stock options to purchase 300,000 shares and
Series A Warrants to purchase 3,000 shares. Also includes 18,000 shares
that Mr. Clarke is deemed to beneficially own as a result of their being
owned by a controlled entity, 165,965 shares, 18,000 Series A Warrants and
21,841 Series B Warrants owned by his spouse, and 18,000 shares owned by a
minor child, which he is deemed to beneficially own. Does not include the
earn-out shares.
(9) Includes 1,000,000 shares. Does not include 1,000,000 Series D Warrants
that are not exercisable until October 1, 1998.
(10) Includes 750,000 shares. Does not include 750,000 Series D Warrants that
are not exercisable until October 1, 1998.
The Company is not aware of any arrangements, the operation of which
may, at a subsequent date, result in a change in control of the Company.
Selling Securityholders
The following table provides the names of and number of shares of
Common Stock offered for sale by each Selling Securityholder. The Selling
Securityholders may sell all, some or none of their shares of Common Stock. The
13
<PAGE>
following entries to the table represent, respectively, the total number of
shares which each stockholder may sell pursuant to the registration statement.
Assuming that all of the stock offered hereby and in the Company's other
effective S-3 registration statement is sold, no Selling Securityholder would
own more than 1% of the outstanding common stock of the Company. See also
"Principal Securityholders."
The shares of Common Stock offered by this Prospectus may be offered
from time to time by the Selling Securityholders named below. Unless otherwise
noted, no Selling Securityholder is an executive officer of the Company.
<TABLE>
<CAPTION>
Stock Underlying
Percentage of Warrants and Stock
Stock Owned as of Common Stock Owned Stock Offered Options Offered
Name(1) April 13, 1998(2) Before Offering(2) Hereby Hereby
------- ----------------- ------------------- ------ ------
<S> <C> <C> <C> <C>
Amalie AS 50,000 * 50,000 50,000
Asdale Ltd. 750,000 6% 750,000 750,000
Bank Hofmann AG 66,688 * 66,688 100,063
Banyan Investment Company 125,000 1% 41,667 125,000
Roy Barrus(3) -- * -- 10,000
Boyd Financial Corp. 140,829 1% 16,667 50,000
Byte Consult AS 50,000 * 50,000 50,000
Caesar Invest AS 50,000 * 50,000 50,000
Capital Group AS 100,000 * 100,000 100,000
DS Holding AS 75,000 * 75,000 75,000
Alan & Susan Field 46,890 * 8,130 24,390
Francois Gaille 50,000 * 50,000 50,000
John & Karen Freed 18,000 * 6,000 18,000
Paul Freed 9,000 * 3,000 9,000
Robert E. Freed Family Trust 18,000 * 6,000 18,000
Genevalor Trusteeship & Mgmt. 303,904 3% 25,000 75,000
Grange Nominees Lmt. 150,000 1% 150,000 150,000
Julian Hill 21,600 * 6,000 18,000
Johnson & Johnson Development Corp. 1,000,000 8% 1,000,000 1,000,000
J.K. Lewinsohn 130,048 * 25,000 75,000
Max Lewinsohn 141,333 1% 100,000 --
Atle Lygren 25,000 * 25,000 25,000
Metropolitan Finance Limited 53,000 * 18,000 54,000
Naess Investments Limited 50,000 * 16,667 50,000
Gisela Oswald 19,575 * 6,525 19,575
Mark Peterson 100,000 * -- 175,000
Marguerite Piret 260,000 2% 10,000 10,000
Procedo Capital Corp. 135,000 1% 295,000 385,000
Charles D. Roe -- * -- 50,000
Brian Roth 53,663 * 3,788 11,363
Brian & Susan Roth 68,260 * 8,670 26,010
Brian Roth in Trust 1 FBO Laura Jane Roth 13,693 * 1,898 5,693
Brian Roth in Trust 1 FBO Lucie Claire
Jane Roth 13,693 * 1,898 5,693
Solheim Industrier AS 25,000 * 25,000 25,000
Gale H. Thorne, Jr.(3) 5,900 * -- 250,000
Gale H. Thorne, Sr.(3) 51,655 * -- 200,000
Bruce W. Thorne 900 * -- 10,000
Craig N. Thorne 900 * -- 10,000
David L. Thorne(3) 5,900 * -- 300,000
Kendall P. Thorne 900 * -- 10,000
Michael L. Thorne 900 * -- 10,000
Steven D. Thorne 900 * -- 10,000
-------------------- --------------------- -------------------- ---------------------
Totals 4,181,131 2,991,598 4,439,787
</TABLE>
* Less than 1% (rounded to the nearest percentage)
- ---------------
(1) For purposes of this table, ownership with respect to a Securityholder does
not include shares of Common Stock beneficially owned but held by other
persons shown in this table.
(2) Does not include Common Stock subject to option or warrants.
(3) Indicates employee or director of the Company or of SHP during the past
three years.
14
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be sold from time to time
by the Selling Securityholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made in the Over-the-Counter market or
on Nasdaq on terms to be determined at the time of such sales. The Selling
Securityholders may also make private sales directly or through a broker or
brokers. Alternatively, the Selling Securityholders may from time to time offer
shares of Common Stock offered hereby to or through underwriters, dealers or
agents, who may receive consideration in the form of discounts and commissions;
such compensation, which may be in excess of normal brokerage commissions, may
be paid by the Selling Securityholders and/or purchasers of the shares of Common
Stock offered hereby for whom such underwriters, dealers or agents may act. The
Selling Securityholders and any dealers or agents that participate in the
distribution of the shares of Common Stock offered hereby may be deemed to be
"underwriters" as defined in the Securities Act and any profit on the sale of
such shares of Common Stock offered hereunder by them and any discounts,
commissions or concessions received by any such dealers or agents might be
deemed to be underwriting discounts and commissions under the Securities Act.
The aggregate proceeds to the Selling Securityholders from sales of the
Securities offered by the Selling Securityholders hereby will be the purchase
price of the Securities less any broker's commissions.
The Common Stock issuable upon exercise of the Warrants and Stock
Options and offered hereby will be issued by the Company to holders of Warrants
and Stock Options from time to time pursuant to exercise of such Warrants and
Stock Options in accordance with the terms thereof.
The Company anticipates keeping this Registration Statement current
until all of the Securities are sold or effectively become freely tradable. The
Company may from time to time notify the Selling Securityholders that the
Registration Statement is not current and that as sales of the Securities may
not occur until the Prospectus is supplemented by sticker or amendment, as is
appropriate.
To the extent required, the specific Securities to be sold, the names
of the Selling Securityholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying Prospectus Supplement or, if appropriate, a
post-effective amendment to the Registration Statement of which this Prospectus
is a part.
The Securities offered hereby may be sold from time to time in one or
more transactions at a fixed price, which may be changed, or at varying prices
determined at the time of such sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
cases Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any person engaged in the
distribution of the Common Stock offered hereby may not simultaneously engage in
market making activities with respect to the Securities for a period of two
business days prior to the commencement of such distribution. In addition,
without limiting the foregoing, the Selling Securityholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of Securities by Selling
Securityholders.
The Company has agreed to indemnify certain Selling Securityholders
against certain liabilities, including liabilities under the Securities Act.
15
<PAGE>
========================================= ===================================
No dealer, sales representative,
or any other person has been
authorized to give any information or
to make any representations in 7,431,385 Shares of Common Stock
connection with this offering other
than those contained in this
Prospectus, and if given or made, such
information or representation must not
be relied upon as having been
authorized by the Company or any of SPECIALIZED HEALTH
the Selling Securityholders. This PRODUCTS INTERNATIONAL, INC.
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;
not does it constitute an offer to
sell, or a solicitation of an offer to
buy, any of the securities covered by
this Prospectus by the Company or any
of the Selling Securityholders in any
state to any person to whom it is
unlawful for the Company of the
Selling Securityholders to make such
offer or solicitation. Neither the
delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create an implication
that there has been no change in the
affairs of the Company or that
information contained herein is
correct as of any time subsequent to
the date hereof.
----------------------
TABLE OF CONTENTS
----------
Page PROSPECTUS
----------
Available Information 2
Incorporation of Certain Documents
by Reference 2
Prospectus Summary 3
The Company 3
The Offering 3
Summary Selected Financial Data 4
Risk Factors 5
Use of Proceeds 11
Description of Common Stock 12
Principal and Selling Securityholders 12
Plan of Distribution 15
----------------------
-------------------
April 20, 1998
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16
<PAGE>
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the fees and expenses payable by the
Company in connection with the issuance and distribution of the shares of Common
Stock:
Securities and Exchange Commission registration fee.......... $3,517
NASDAQ listing fee........................................... --
Blue Sky fees and expenses................................... --
Printing expenses............................................ 1,000
Legal fees and expenses...................................... 7,500
Accounting fees and expenses................................. 5,100
Transfer Agent fees.......................................... 1,000
Miscellaneous................................................ 2,000
========
Total.................................................... $20,117
========
---------------
The Selling Securityholders will pay all applicable stock transfer taxes,
transfer fees and related fees and expenses.
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL")
permits the Company to indemnify its directors, officers, employees and agents,
subject to certain conditions and limitations. Article Ninth of the Company's
Restated Certificate of Incorporation states:
To the fullest extent permitted by the laws of the State of Delaware
now or hereafter in force, no director of this corporation shall be
personally liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or
modification of the foregoing provisions of this Article NINTH shall not
adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal
or modification. The provisions of this Article NINTH shall not be deemed
to limit or preclude indemnification of a director by the corporation for
any liability of a director which has not been eliminated by the
provisions of this Article NINTH.
Article XI of the Company's Bylaws requires the Company to indemnify
officers, employees and agents (collectively "Agents") to the full extent
permitted by the DGCL. The Company has also entered into Indemnity Agreements
with its officers pursuant to which the Company has agreed to indemnify them.
The Indemnity Agreements require payment of any amount which an indemnitee is
legally obligated to pay because of claims relating to his or her service as an
officer, although in many circumstances such indemnification would be
discretionary. The Indemnity Agreements also provide that the Company will have
the burden of proving that the applicable standard of conduct has not been met.
However, Company is not obligated to make any payment prohibited by law or to
pay where payment is made to an indemnitee under an insurance policy or
otherwise.
The Company's Bylaws, together with the Indemnity Agreements, expand
the Company's indemnity obligations to the full extent permitted by law. While
Delaware law contemplates some expansion of indemnification beyond what is
specifically authorized by the DGCL, the courts have not yet established the
boundaries of permissible indemnification.
The Company and its directors and officers are also covered by
liability insurance coverage.
Item 16. Exhibits.
(a) Exhibits.
The following is a complete list of Exhibits filed or incorporated by
reference as part of this Registration Statement.
II-1
<PAGE>
Exhibit No. Description Page
4.1 Form of Series D Warrant (Incorporated by reference
to Exhibit 4.3 of the Company's Annual Report on Form
10-K, dated December 31, 1997.)
4.2 Form of SHPI Warrant Certificate (Incorporated by
reference to Exhibit 4.4 of the Company's Annual
Report on Form 10-K, dated December 31, 1997.)
5.1 Opinion of Blackburn & Stoll, LC
23.1 Consent of Arthur Andersen LLP, Independent
Public Accountants
23.2 Consent of KPMG Peat Marwick LLP, Independent
Certified Public Accountants
23.3 Consent of Blackburn & Stoll, LC (included in
Exhibit 5.1 hereto)
24.1 Powers of Attorney (included in Part II of this
Registration Statement)
---------------
(b) Financial Statement Schedules.
None.
Item 17. Undertakings.
(a) 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:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) 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;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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.
II-2
<PAGE>
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by ss.210.3-19 of this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, provided that the
registrant includes in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the prospectus is
at least as current as the date of those financial statements. Notwithstanding
the foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements and
information required by Section 10(a)(3) of the Act or ss.210.3-19 of this
chapter if such financial statements and information are contained in periodic
reports filed with or furnished to the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Form F-3.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 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 appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Bountiful, State of Utah,
on April 20, 1998.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.:
By /s/ David A. Robinson
-----------------------------------------------
David A. Robinson, President, Chief Executive
Officer and Director
We the undersigned, directors and officers of Specialized Health
Products International, Inc. (the "Company"), do hereby severally constitute and
appoint David A. Robinson and Bradley C. Robinson, and each of them, our true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign and all amendments or post-effective amendments to this
Registration Statement, and to file the same with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each or any of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that the said
attorneys-in-fact and agents, and each of them, or his 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 has been signed below by the following persons on behalf
of the registrant in the capacities and on the dates indicated.
Signature Title Date
/s/ Bradley C. Robinson Director and Vice President April 20, 1998
- -----------------------
Bradley C. Robinson
/s/ Charles D. Roe Vice President, Chief Financial April 20, 1998
- ----------------------- Officer, Treasurer and Secretary
Charles D. Roe (Principal Financial and Accounting
Officer)
/s/ Gale H. Thorne Director and Vice President April 20, 1998
- -----------------------
Gale H. Thorne
/s/ Robert R. Walker Director April 20, 1998
- -----------------------
Robert R. Walker
[LETTERHEAD]
Charles M. Bennett
Michael D. Blackburn BLACKBURN & STOLL, LC
David J. Castleton Attorneys at Law Telephone (801) 521-7900
Henry K. Chai II 77 West 200 South, Suite 400 Fax (801) 521-7965
Paul C. Droz Salt Lake City, Utah
Michael E. Dyer
Jerry D. Fenn
Paul J. Graf
Bryce D. Panzer
Dori K. Petersen
Stuart L. Poelman
Eric L. Robinson
Stanley K. Stoll
Tomas C. Sturdy
April 20, 1998
Specialized Health Products International, Inc.
655 East Medical Drive
Bountiful, Utah 84010
Re: Legality of Securities to be Registered under
Registration Statement on Form S-3
Ladies and Gentlemen:
This opinion is delivered in our capacity as counsel to Specialized
Health Products International, Inc. (the "Company") in connection with the
Company's registration statement on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, relating to up to 7,431,385 shares of the Company's common
stock, $.02 par value per share (the "Common Stock"), consisting of 2,991,598
shares of Common Stock held by the Company's stockholders (the "Outstanding
Shares") and 4,439,787 shares of Common Stock (the "Warrant Stock") issuable
upon the exercise of outstanding warrants (the "Warrants") and stock options
(the "Options").
We have examined the Restated Certificate of Incorporation and
Certificate of Amendment of Certificate of Incorporation of the Company on file
with the Secretary of State of the State of Delaware, the Second Amended and
Restated Bylaws of the Company, such records of corporate proceedings of the
Company as we have deemed appropriate for the purposes of this opinion, the
Registration Statement and the exhibits thereto and a certificates of facts from
the chief executive officer and chief financial officer of the Company.
Based upon the foregoing and our reliance, as to factual matters, upon
the representations in the certificate of facts, we are of the opinion that:
(A) The Outstanding Shares have been authorized for issuance
and are validly issued and outstanding, fully paid and nonassessable.
(B) The Warrants and Options have been authorized for issuance
and are validly issued and outstanding, and are valid and binding
obligations of the Company enforceable in accordance with their terms.
(C) The shares of Warrant Stock have been authorized for
issuance and reserved by the Company and will be, when issued and
delivered against the exercise price therefor in accordance with the
terms set forth in the Registration Statement and in the warrant or
option agreement, validly issued, fully paid and nonassessable.
The opinions set forth above are subject to the qualifications that (i)
the enforceability is subject to bankruptcy and insolvency laws, and (ii) the
availability of equitable remedies and is subject to equitable defenses and the
discretion of the court before which any proceeding therefor may be brought,
whether at law or in equity.
<PAGE>
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Blackburn & Stoll, LC
BLACKBURN & STOLL, LC
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-3 of our report dated
February 2, 1998 included in Specialized Health Products International, Inc.'s
Form 10-K for the year ended December 31, 1997 and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
April 17, 1998
Independent Auditors' Consent
The Board of Directors
Specialized Health Products International, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-3 of Specialized Health Products International, Inc. of our report dated
February 2, 1996, relating to the consolidated statements of operations,
stockholders' equity (deficit), and cash flows of Specialized Health Products
International, Inc. and Subsidiary for the year ended December 31, 1995 and the
period from November 19, 1993 (date of inception) to December 31, 1995, which
report appears in the December 31, 1997 Form 10-K of Specialized Health Products
International, Inc.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Salt Lake City, Utah
April 17, 1998
