As filed with the Securities and Exchange Commission on April 5, 2000
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
VASOMEDICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2871434
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
180 Linden Avenue D. Michael Deignan, President
Westbury, New York 11590 Vasomedical, Inc.
(516) 997-4600 180 Linden Avenue
(Address, including zip code and Westbury, New York 11590
telephone number, including area code, (516) 997-4600
of registrant's principal executive (Name address and telephone number,
offices) including area code, of agent for
service)
--------
Copy to:
David H. Lieberman, Esq.
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
(516) 822-4820
Approximate date of commencement of proposed sale to 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 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 []
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Aggregate Amount of
Registered Registered Price Per Security (1) Offering Price (1) Registration Fee
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.001
per share (2) 100,000 shs. $6.41 $641,000 $278
- ----------------------------------------------------------------------------------------------------
<FN>
(1) Estimated solely for the purpose of calculating the registration fee, based
on the closing price of the common stock reported in the consolidated
reporting system on March 29, 2000.
(2) Represents 100,000 shares of common stock issuable upon the exercise of
common stock purchase warrants.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
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>
Preliminary Prospectus
SUBJECT TO COMPLETION
Dated April 5, 2000
VASOMEDICAL, INC.
100,000 Shares of Common Stock
Vasomedical, Inc. is selling 100,000 shares of common stock. The shares are
to be issued upon the exercise of Vasomedical's outstanding common stock
purchase warrants issued to a selling securityholder. Each warrant represents
the right to purchase one share of common stock at an exercise price of $1.44
per share until February 26, 2001.
Vasomedical will bear the expenses in connection with the offering,
including filing fees and Vasomedical's legal and accounting fees, estimated at
$10,000.
Vasomedical's common stock is traded on the Nasdaq National Market System
under the symbol VASO. On March 29, 2000, the last reported sale price of the
common stock as reported by the Nasdaq National Market System was $6.41 per
share.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Prospectus dated _______, 2000
<PAGE>
TABLE OF CONTENTS
Page
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Risk Factors .............................................................. 2
The Company ............................................................... 4
Use of Proceeds ........................................................... 14
Price Range of Common Stock ............................................... 15
Dividend Policy ........................................................... 15
Performance Chart ......................................................... 16
Description of Securities ................................................. 16
Plan of Distribution ...................................................... 18
Legal Matters ............................................................. 18
Experts ................................................................... 18
Where You Can Find More Information ....................................... 19
Incorporation of Certain Documents by Reference ........................... 19
You should rely only on the information contained in this document or to which
Vasomedical, Inc. has referred you. Vasomedical, Inc. has not authorized anyone
to provide you with information that is different. This document may only be
used where it is legal to sell these securities. The information in this
document may only be accurate on the date of this document.
<PAGE>
RISK FACTORS
In evaluating whether to buy the securities offered by this prospectus, you
should consider carefully the following factors.
The following information, in addition to other information in this
Prospectus and in the documents incorporated herein by reference, should be
considered carefully by potential purchasers in evaluating Vasomedical, its
business and an investment in shares of the Common Stock offered hereby.
1. Need for Additional Funds. Management believes that its working capital
position at February 29, 2000, and the ongoing commercialization of EECP , will
make it possible for Vasomedical to support its internal overhead expenses and
to implement its new development and business plans at least through February
28, 2001. While Vasomedical intends to finance its future cash requirements from
the sale and lease of EECP systems, there is no assurance that Vasomedical can
be successful in these efforts.
2. Dependence on Limited Products. Currently, EECP is Vasomedical's only
product. Vasomedical is concentrating substantially all of its efforts on EECP ,
which was recently approved for Medicare reimbursement, and is incurring sales
and marketing expenses. Although Vasomedical generated revenue from EECP since
fiscal 1996, there is no assurance that Vasomedical will continue to generate
enough revenue to fund internal working capital requirements beyond February
2001.
3. Historical Losses. Vasomedical was incorporated in July 1987 and, to
date, has had limited revenues. For the nine months ended February 29, 2000 and
the years ended May 31, 1999 and 1998, Vasomedical recorded net income of
$574,000, and sustained net losses of $3,892,000 and $5,031,000, respectively.
Vasomedical recognized $9,154,000,$6,024,000 and $5,225,000 in revenues for the
nine months ended February 29, 2000 and the years ended May 31, 1999 and 1998,
respectively.
4. Uncertainty of Market Acceptance of Vasomedical's Products. With respect
to EECP , management believes that it represents a new and innovative treatment
for patients suffering from coronary heart disease. Additional efforts will be
required to acquaint potential purchasers, such as doctors, hospitals, suppliers
of medical equipment and other potential purchasers of the device. Vasomedical
cannot guarantee acceptance by the medical community.
5. Dependence on Key Personnel. Vasomedical is substantially dependent upon
the efforts of its executive officers. However, Vasomedical maintains limited
key-man life insurance. There are no assurances that Company's key executives
will continue their employment with Vasomedical.
6. Technological Obsolescence. Vasomedical is engaged in an area
characterized by extensive research and development activities. New developments
are expected to continue at a rapid pace and there can be no assurance that new
discoveries will not render Vasomedical's products, processes and devices
uneconomical or obsolete. The likelihood of success for Vasomedical's products
must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered in connection with the
development of new medical processes, devices and products and their level of
acceptance by the medical community.
7. Competition. There are other companies engaged in development,
manufacture and/or marketing of products intended for the same uses as
Vasomedical's products, processes and devices. These companies' products may
receive more widespread commercial acceptance than Vasomedical's EECP because of
greater financial resources and marketing capabilities.
<PAGE>
8. Future Sales of Common Stock. Of Vasomedical's Common Stock currently
outstanding, approximately 2,538,683 shares are "restricted securities" as that
term is defined in Rule 144 under the Securities Act and, under certain
circumstances, may be sold without registration pursuant to that Rule. An
additional 35,755,589 shares are covered by currently effective registration
statements, of which 20,161,143 shares are included in Vasomedical's outstanding
shares at March 29, 2000. The restricted securities, the previously registered
securities, as well as the 100,000 shares of Common Stock registered hereunder
represent approximately 35% of Vasomedical's outstanding Common Stock on a
fully-diluted basis. Their sale, or even potential sale, pursuant to Rule 144,
its prior registration statements, this registration statement or otherwise,
would likely have an adverse effect on the market price of Vasomedical's Common
Stock.
9. Government Regulation. The development, testing, production and
marketing of Vasomedical's products are subject to regulation by the FDA as
devices under 1976 Medical Device Amendments to the Federal Food, Drug and
Cosmetic Act. Additionally, Vasomedical's products may be subject to regulation
by similar agencies in other states and foreign countries. While Vasomedical
believes that it has complied with all applicable laws and regulations, no
assurance can be given that continued compliance with such laws or regulations,
including any new laws or regulations, will not impose additional costs on
Vasomedical which could adversely affect its financial performance and results
of operations.
Forward-Looking Statement
Except for historical information contained in this Prospectus, the matters
discussed are forward looking statements that involve risks and uncertainties.
When used in this Prospectus, words such as "anticipate", "believe", "estimate",
"expect" and "intend" and similar expressions, as they relate to Vasomedical or
its management, identify forward-looking statements. Such forward-looking
statements are based on the beliefs of Vasomedical's management, as well as
assumptions made by and information currently available to Vasomedical's
management. Among the factors that could cause actual results to differ
materially are the following: the effect of business and economic conditions;
the impact of competitive products and pricing; capacity and supply constraints
or difficulties; product development, commercialization or technological
difficulties; the regulatory and trade environment; and the risk factors
reported from time to time in Vasomedical's SEC reports. Vasomedical undertakes
no obligation to update forward-looking statements as a result of future events
or developments.
<PAGE>
THE COMPANY
General
Vasomedical, incorporated in Delaware in July 1987, is engaged in the
commercialization of the EECP enhanced external counterpulsation ("EECP ")
system, a computer-based medical device for the noninvasive, atraumatic
treatment of patients with coronary artery disease. The EECP system is marketed
worldwide to hospitals, clinics and other cardiac health care providers.
In fiscal 1992, Vasomedical, through the purchase of a 55% interest in Vaso
Interim Corp. ("Vaso Interim"), acquired the worldwide exclusive marketing
rights (except in China) to the EECP system and agreed to fund the research and
development activities of Vasogenics, Inc. ("Vasogenics"), its joint-venture
partner in Vaso Interim and sole minority shareholder. Vasogenics held the
intellectual property rights to the EECP technology, including patents and
manufacturing rights.
In January 1995, Vasomedical acquired all the capital stock of Vasogenics for
stock consideration and the assumption of certain liabilities. In connection
with the acquisition, Vasomedical retained certain key employees of Vasogenics
who had been involved in the development of the EECP technology. Vasogenics and
Vaso Interim were subsequently merged into Vasomedical.
EECP received marketing clearance from the Food and Drug Administration
("FDA") under a 510(k) premarket notification in February 1995 and received a
national payment level and coverage policy from Medicare in January 2000.
The EECP Enhanced External Counterpulsation System
General Discussion
According to the American Heart Association, coronary heart disease ("CHD") is
the single largest killer of American males and females. CHD caused 481,287
deaths in the United States in 1995. A major complication of CHD is angina
pectoris, from which millions of Americans suffer. It is caused by obstruction
of arteries which supply the heart muscle with blood. The pain associated with
angina pectoris can be disabling, and conventional therapy, when medication
fails, consists of invasive procedures, such as percutaneous transluminal
coronary angioplasty ("PTCA") and coronary artery bypass grafting ("CABG").
According to a Report of the American College of Cardiology/American Heart
Association Task Force on Assessment of Diagnostic and Therapeutic
<PAGE>
Cardiovascular Procedures, re-occlusion of dilated vessels occurs within six
months of PTCA interventions in 30% to 40% of cases (Journal of the American
College of Cardiology Vol. 22, No. 7, December 1993:2033-2054) and localized or
diffuse narrowings occur in half of vein grafts by ten years after CABG
(Circulation Vol. 83, No. 3, March 1991:1125-1173).
In March 1989, Vasogenics received 510(k) marketing clearance from the FDA for
the MC1 model of the EECP system. In February 1995, Vasomedical received 510(k)
marketing clearance for its EECP- MC2 model, which incorporated technological
improvements of external counterpulsation. Marketing clearance was for use of
the EECP procedure in the treatment of patients suffering from stable or
unstable angina pectoris, acute myocardial infarction and cardiogenic shock.
Vasomedical decided, however, to focus initially only on the stable angina
pectoris indication.
The System
EECP is an advanced treatment system utilizing fundamental hemodynamic
principles to relieve angina pectoris. Treatment involves the inflation and
deflation of a series of compressive air cuffs applied to the patient's lower
extremities - the calves, lower thighs, and upper thighs, including the
buttocks. Timing for inflation and deflation is regulated by a microprocessor
running electrocardiogram ("ECG") signals through sets of algorithms that
monitor safety and precision.
Upon diastole, the cuffs are inflated sequentially and rapidly from the calves
proximally, creating a retrograde arterial pressure wave that increases systemic
aortic diastolic pressure, coronary perfusion pressure and blood flow.
Compression of the vascular beds of the legs also increases venous return.
Instantaneous decompression of all cuffs at the onset of systole lowers vascular
impedance, thereby decreasing ventricular workload. This latter effect, when
coupled with the augmented venous return, can raise cardiac output by as much as
63%.
Patients usually begin to experience symptomatic relief of angina after 15 or
20 hours of a 35-hour treatment regimen. Positive effects are sustained between
treatments and usually persist years after completion of a full course of
therapy, as reported in the April 15, 1995 issue of the American Journal of
Cardiology.
The mechanism by which EECP produces long-term patient benefits remains
uncertain, but thallium-201 and exercise stress test results combined are
strongly indicative of an improvement in myocardial perfusion and resolution of
reversible ischemic defects. The most logical explanation for these observations
is that EECP in some way stimulates collateral vessel recruitment and/or growth.
Collateral vessels may be regarded as one of the heart's emergency systems, and
can be called upon to open up and also to be extended, in response to ischemia.
The results of studies carried out at the State University of New York's
University Medical Center at Stony Brook ("Stony Brook"), supported by previous
experience in China, provided the first indication that EECP therapy may
stimulate collateral flow in coronary artery disease patients. In support of
this hypothesis is the observation that the presence of one or more vascular
conduits without significant stenosis appears to be predictive of a favorable
response to EECP therapy. In fact, effectiveness has been shown to be directly
related to the number of patent coronary vessels in the treated patients. The
explanation appears to be that a proximally patent conduit is necessary to allow
transmission of augmented diastolic pressure and flow to distal coronary
vessels, by which collateral recruitment or development is promoted.
<PAGE>
Clinical Studies
Early experiments with counterpulsation at Harvard in the 1950s demonstrated
that this technique markedly reduces the workload, and thus oxygen consumption,
of the left ventricle. This basic effect has been demonstrated over the past 40
years in both animal experiments and in patients. The clinical benefits of
external counterpulsation were not consistently achieved in early studies
because the equipment used then lacked some of the features found in the EECP
system, such as the computer-controlled operating system that makes sequential
cuff inflation possible. As the technology improved, however, it became apparent
that both internal and external forms of counterpulsation were capable of
improving survival in patients with cardiogenic shock following myocardial
infarction. Later, in the 1980s, Dr. Zheng and colleagues in China reported on
their extensive experience in treating angina using the newly developed enhanced
sequential device - EECP . Not only did a course of treatment with EECP reduce
the frequency and severity of anginal symptoms during normal daily functions and
also during exercise, but the improvements were sustained for years after
therapy.
These results prompted a group of investigators at Stony Brook to undertake
studies with EECP to reproduce the Chinese results, using both subjective and
objective endpoints. The first study group consisted of 18 patients with chronic
stable angina, despite medical and surgical intervention, as well as evidence,
assessed by thallium-201 perfusion imaging, of ischemia during an exercise
stress test. EECP treatment was administered for one hour daily for a total of
36 hours over approximately seven weeks. During the course of treatment, all 18
patients experienced substantial subjective improvements in symptoms, and 16
were completely free of angina during normal daily activities. Looking at
objective measures of benefit, a comparison of maximal stress test results
before and after treatment showed that EECP produced a significant increase
(19%) in exercise tolerance in the total patient population.
Intriguingly, results of thallium-201 scans before and after treatment also
showed a complete resolution of perfusion defects in 12 patients (67%) and a
decrease in the size of the ischemic zone in another two. Thus, 14 of 18
patients (78%) experienced a reduction in ischemia as assessed by radionuclide
imaging.
Subsequent data from a group of 50 angina patients who were treated with EECP
are consistent with the above results. All of these patients reported a
reduction in symptoms and 80% demonstrated improvement by radionuclide testing.
Patients with one- or two-vessel disease were significantly more likely to
respond than those with three-vessel disease.
Seventeen of the original 18 patients studied, including 13 of the 14 patients
who had previously shown a reduction in myocardial ischemia, were followed up
for an average of three years. One of these 13 patients suffered a myocardial
infarction, and another underwent a revascularization procedure during the
intervening period. Of the remaining 11 patients, all remained free of limiting
angina. Ten patients underwent repeat stress thallium testing. In these
patients, the mean double product at three years was not significantly different
from the baseline value; however, eight patients (80%) demonstrated persistent
improvements in the results of thallium scintigraphy.
Another study of 27 patients with angina pectoris indicated that EECP
outpatient therapy appears to exert effects on the heart similar to those
achieved by exercise training. After receiving EECP , approximately 80% of the
patients studied achieved an increase in exercise time as measured during
thallium stress tests. Although exercise usually causes increases in the heart
rate and blood pressure, these patients exhibited lower than expected heart rate
increases and no significant increases in blood pressure during their stress
tests. This indicates that they achieved similar conditioning benefits from EECP
as might be expected from engaging in a regular program of exercise.
<PAGE>
In this study, 26 men and one woman received 35 hours of EECP . A maximal
radionuclide stress test was performed prior to entry into the study. Upon
completion of the EECP treatment course, patients were again tested to the same
cardiac workload and to maximum effort. The radionuclide imaging results were
similar to those reported in previous studies with 78% of patients having a
partial or complete resolution of perfusion defects indicating better or
normalized blood flow to ischemic areas of the heart.
Only those who had improved post-EECP radionuclide images demonstrated
meaningful increases in maximal exercise times. However, in the "unimproved"
group, there was a significant decrease in post- EECP double product, indicating
a useful decrease in peripheral vascular resistance. The authors concluded that
the two proposed mechanisms of EECP , improved stress perfusion of the ischemic
myocardium and decreased peripheral vascular resistance, are complementary and
may explain the improved exercise tolerance and symptomatic relief sometimes
seen in patients with unchanged stress perfusion imaging.
A five-year follow-up study of morbidity and mortality in 33 angina patients
treated with EECP was reported by the Stony Brook center in April 1997. These
patients had received 35 hours of EECP between 1989 and 1996, had documented CHD
and had undergone pre- and post-exercise testing. The initial group of 18
patients previously reported at three years of follow-up was included in this
expanded cohort. Cardiac angiography had been performed in 18 patients, with 16
of these patients having multi-vessel disease; ten of 33 patients treated had
prior myocardial infarction and 13 had undergone either CABG or PTCA, with eight
having undergone both treatments. Of the 33 patients treated, 4 died 1-5 years
after initial treatment with EECP , and complete follow-up data concerning
cardiac events was obtained in the 29 surviving patients. Although nine patients
required interim hospitalizations for one or more cardiac conditions, which
consisted of acute myocardial infarcts (4), new CABG or PTCA (6), other cardiac
surgery (1) or unstable angina (1), 20 of the 33 patients treated experienced
none of the above 4-7 years post-EECP treatment. Since over 60% of the original
cohort of 33 patients with advanced CHD are alive and well and without new
events, this five-year follow-up study suggests that EECP is effective both in
the short- and long-term therapy of chronic angina pectoris.
In 1995, Vasomedical began a large randomized, controlled and double-blinded
multicenter clinical study ("MUST-EECP") in four leading university hospitals in
the United States to confirm at other sites the patient benefits observed in
open studies conducted at the Stony Brook center and to provide scientific
evidence of this treatment's effectiveness. The University of California San
Francisco, Columbia University College of Physicians & Surgeons at the
Columbia-Presbyterian Medical Center in New York, Beth Israel Deaconess
Hospital, a teaching affiliate of Harvard Medical School, and Yale University
School of Medicine were the institutions that participated in the study. These
institutions were later joined by Loyola University, University of Pittsburgh
and Grant/Riverside Methodist Hospitals. MUST-EECP was completed in July 1997
and results were announced at the annual meeting of the American Heart
Association in November 1997 and of the American College of Cardiology in March
1998. The results of MUST-EECP were published in the Journal of the American
College of Cardiology, a major peer-review medical journal, in June 1999.
This study shows that EECP therapy is a safe and effective choice for more
than seven million patients suffering from angina pectoris, a common symptom of
CHD. This study provides scientific evidence of this novel treatment's
effectiveness, even in patients on maximal medication and for whom invasive
revascularization procedures are no longer an option. Results of MUST-EECP
confirm clinical benefits shown in previous open trials: a decline in anginal
frequency, an increase in the ability to exercise and a decrease in
exercise-induced signs of myocardial ischemia.
<PAGE>
MUST-EECP was conducted from May 1995 to July 1997. One hundred and
thirty-nine (139) patients suffering from chronic angina pectoris and on maximal
medication were randomized to receive treatment or sham. The sham group was
treated in a manner identical in every way to the treatment group except that
cardiovascular hemodynamics were not affected. Neither patients nor physicians
involved with the study knew to which group an individual patient belonged.
Participants were representative of patients with severe CHD. Average age
was 63 years (range 40- 81 years): 88% were males; 58% had undergone either CABG
or PTCA; and 49% had experienced prior myocardial infarctions. In addition,
among those who benefited, 74% were in Canadian Class II or III, and 55% had
"residual" multivessel coronary artery disease despite revascularization.
Despite a considerable amount of medication prior to and during treatment,
patients in the treated group still were able to show improvement averaging 11%
in the time before the onset of ischemia demonstrated by stress ECG. Those in
the sham (control) group showed no improvement at all. Additionally, even in the
maximally medicated patients, exercise duration increased 10% in the average
participant receiving treatment as measured by exercise treadmill; exercise
duration increased only 6% in the sham group. Study participants followed a four
to seven week treatment program. The protocol required patients to undergo EECP
in one-hour sessions, until they had completed 35 hours of treatment.
In fiscal 1999, Vasomedical completed a long-term quality-of-life study
with EECP in the same institutions and with the same patients that participated
in MUST-EECP. The positive results of this study have already been presented at
major scientific meetings, and a publication in a major peer-review journal is
expected during 2000.
In pursuit of its claim expansion program, Vasomedical applied for and
received FDA approval in April 1998 to study, under an Investigational Device
Exemption protocol, the application of EECP in the treatment of congestive heart
failure ("CHF"), a disabling condition affecting nearly 5 million Americans and
the most frequent cause of hospitalization for those over 65 years of age. The
study is being conducted simultaneously at the University of Pittsburgh, the
University of California San Francisco and the Grant Hospital in Columbus,Ohio,
and is expected to be completed in April 2000. Favorable preliminary results
have been presented at major scientific meetings, including The Heart Failure
Society of America in September 1999 and The American College of Cardiology in
March 2000. CHF occurs when the heart is unable to pump blood well enough to
meet the body's needs. The circulatory system becomes congested when the heart
fails to empty its chambers sufficiently, leading to an accumulation in the
chest and lower limbs. According to the American Heart Association, 2.5 million
men and 2.4 million women in the United States have CHF. About 400,000 new cases
of the disease occur each year. The need to find new and effective methods to
treat CHF is pressing, since the prevalence of the disease is growing rapidly as
a result of the aging population and the improved survival rate of heart
attacks, while deaths caused by the disease increased 116% from 1979 to 1995.
<PAGE>
Vasomedical's Plans
Vasomedical's short- and long-term plans are to:
- - Establish EECP therapy as a new standard of care in CHD.
- - Publish the results of its long-term quality-of-life outcomes study in a
major peer-review medical journal in 2000.
- - Engage in educational campaigns designed to highlight the
cost-effectiveness and quality-of-life advantages of EECP therapy to State
Welfare (Medicaid) agencies, commercial insurance companies, and managed
care organizations.
- - Complete a feasibility study for the use of EECP in CHF and present
preliminary results in 2000.
- - Initiate a pivotal multicenter study for the use of EECP in CHF in 2000.
- - Complete the development of an upgraded EECP system and initiate its
in-house assembly in fiscal 2000.
- - Continue to establish a distribution network in international markets.
- - Continue to establish and support academic reference centers in the United
States and overseas in order to accelerate the growth and prestige of EECP
therapy and to increase the number and diversity of clinical and
mode-of-action studies, as well as the number of presentations,
publications, speakers and advocates
- - Create new products for use in noninvasive cardiovascular medicine.
Glossary of Terms
Acute Myocardial heart attack
Infarction
Angina Pectoris literally "chest pain"
Cardiogenic shock severe reduction in blood pressure owing to weak pumping
action of the heart
Collateral the use (recruitment) of small supplemental, usually unused
circulation channels through which blood can be made to flow when normal
blood supply is impeded because of obstructions in coronary
arteries
Coronary Artery a surgical transplant of a vein to connect the aorta with an
Bypass Graft obstructed coronary artery
or CABG
Coronary arteries those that supply blood to the heart muscle
Diastole rest period during which the heart chambers fill with blood
and the heart muscle receives most of its supply of oxygen
and other nutrients
Enhanced External "Enhanced" describes Vasomedical's proprietary system which
Counterpulsation increases the level of diastolic augmentation by 40-50% over
or EECP that of earlier devices
<PAGE>
Ischemia lack of blood supply
Occlusion blockage of blood vessels
Percutaneous
Transluminal
Coronary
Angioplasty
or PTCA insertion of a wire into a coronary artery to which a
balloon or other instrument is attached for the purpose of
widening a narrowed vessel
Stenosis the narrowing of a blood vessel's diameter
Systole contracting period during which the heart is pumping blood
to the rest of the body
Thallium an imaging medium used to detect areas of ischemia within
the heart muscle
Sales and Marketing
Domestic Operations
Vasomedical's direct sales and marketing team consists of eight (8) regional
and territory sales managers, four (4) clinical application specialists,
customer support and communications managers, and directors of sales and
marketing. Their efforts are supplemented by those of a network of independent
manufacturers' representatives. Sales and marketing personnel are expected to
increase in fiscal 2000.
Marketing activities are designed to support Vasomedical's direct sales team
and independent representatives, and include journal advertising, newsletters,
physician educational programs, exhibits at trade shows and seminars at
professional association meetings.
Vasomedical has developed a multi-day, on-site clinical training program for
physicians and therapists. After initial customer training, these clinical
applications specialists provide routine on- and off-site customer support,
including the review of clinical charts, certification of new personnel and
updating of customers on new clinical developments.
Vasomedical employs service technicians responsible for the installation of
EECP systems and, in many instances, on-site training of a customer's biomedical
engineering personnel. Vasomedical provides a one-year warranty that includes
parts and labor. Vasomedical intends to offer extended service to our customers
under annual service contracts or on a fee-for-service basis.
In fiscal 1999 and 1998, Vasomedical had sales to Parimist Funding Corp. and
HPSC, Inc. (medical equipment financing firms) in each period, accounting for
21% and 10% of Vasomedical's revenues, respectively.
<PAGE>
International Operations
Vasomedical's key objective is to appoint distributors in exchange for
exclusive marketing rights to EECP in their respective countries. Vasomedical
currently has distribution agreements for Japan, and some European and Latin
American countries. Each distribution agreement contains a number of
requirements that must be met for the distributor to retain exclusivity,
including minimum performance standards. In most cases, foreign distributors
must either obtain an FDA-equivalent marketing clearance or establish
confirmation clinical evaluations conducted by local opinion leaders in
cardiology. Each distributor is responsible for obtaining any required approval.
There can be no assurance that any of Vasomedical's distributors will be
successful in obtaining proper approvals for the EECP system in their respective
countries or that these distributors will be successful in their marketing
efforts. Vasomedical plans to enter into additional distribution agreements to
enhance its international distribution base. There can be no assurance that
Vasomedical will be successful in entering into any additional distribution
agreements.
To date, revenues from international operations have not been significant.
International sales may be subject to certain risks, including export/import
licenses, tariffs, other trade regulations and local medical regulations. Tariff
and trade policies, domestic and foreign tax and economic policies, exchange
rate fluctuations and international monetary conditions have not significantly
affected Vasomedical's business to date.
Competition
Presently, Vasomedical is aware of only one competitor with an external
counterpulsation device on the market. While Vasomedical believes that this
competitor's involvement in the market is limited, there can be no assurance
that this company will not become a significant competitive factor. Further,
there can be no assurance that other companies will not enter the market
intended for EECP systems. Such companies may have substantially greater
financial, manufacturing and marketing resources and technological expertise
than those possessed by Vasomedical and may, therefore, succeed in developing
technologies or products that are more efficient than those offered by
Vasomedical and that would render Vasomedical's technology and existing products
obsolete or noncompetitive.
Government Regulations
The EECP system is subject to extensive regulation by the FDA. Pursuant to the
Federal Food, Drug and Cosmetic Act, as amended, the FDA regulates and must
approve the clinical testing, manufacture, labeling, distribution and promotion
of medical devices in the United States.
If a medical device manufacturer can establish that a newly developed device
is "substantially equivalent" to a device that was legally marketed prior to May
28, 1976, the date on which the Medical Device Amendments of 1976 was enacted,
the manufacturer may seek marketing clearance from the FDA to market the device
by filing a 510(k) premarket notification. The 510(k) premarket notification
must be supported by appropriate data establishing the claim of substantial
equivalence to the satisfaction of the FDA. Pursuant to recent amendments to the
law, the FDA can now require clinical data or other evidence of safety and
effectiveness. The FDA may have authority to deny marketing clearance if the
device is not shown to be safe and effective even if the device is
"substantially equivalent" to a device marketed prior to May 28, 1976.
Vasomedical's EECP system can be marketed in the United States based on the
FDA's determination of substantial equivalence. There can be no assurance that
Vasomedical's EECP system will not be reclassified in the future by the FDA and
subject to additional regulatory requirements.
<PAGE>
If substantial equivalence cannot be established or if the FDA determines that
more extensive efficacy and safety data are in order, the FDA will require the
manufacturer to submit a premarket application ("PMA") for full review and
approval. Management does not believe that the EECP system will ultimately
require PMA approval for continued commercialization; however, Vasomedical so
designed the protocol for MUST-EECP as to be able to generate some of the data
needed in the event that a PMA is required at some future date.
Typically it takes one year from the date of filing to complete the PMA review
and approval process. There can be no assurance that the FDA would not take more
than one year to review and approve a PMA for EECP and there can be no assurance
that EECP would receive PMA approval.
In most countries to which Vasomedical seeks to export the EECP system, it must
first obtain documentation from the local medical device regulatory authority
stating that the marketing of the device is not in violation of that country's
medical device laws. The regulatory review process varies from country to
country. Presently, Vasomedical is in the process of obtaining regulatory
approval of the EECP system overseas.
There can be no assurance that all the necessary FDA clearances, including
approval of any PMA that may eventually be required, and overseas approvals will
be granted for EECP , its future-generation upgrades or newly developed
products, on a timely basis or at all. Delays in receipt of or failure to
receive such clearances could have a material adverse effect on Vasomedical's
financial condition and results of operations.
In June 1998, the EECP system was awarded the CE Mark, which satisfies the
regulatory provisions for marketing in all 15 countries of the European Union.
The CE Mark was awarded by DGM of Denmark, an official notified regulatory body,
under the European Council Directive concerning medical devices. The CE Mark, in
combination with the ISO 9001 certification awarded by Underwriter's
Laboratories (UL) in February 1998, places Vasomedical in full compliance with
requirements for the marketing of the EECP system in the countries of the
European Union. The ISO 9001 Certificate covers Vasomedical's design and
manufacturing operation for the EECP system and recognizes that Vasomedical has
established and operates a world-class quality system.
Compliance with current Good Manufacturing Practices ("GMP") regulations is
necessary to receive FDA approval to market new products and to continue to
market current products. Vasomedical's manufacturing (including its contract
manufacturer), quality control and quality assurance procedures and
documentation are currently in compliance, but will be inspected and evaluated
periodically in the future by the FDA.
Third-Party Reimbursements
Health care providers, such as hospitals and physicians, that purchase or
lease medical devices, such as the EECP system, for use on their patients
generally rely on third-party payers, principally Medicare, Medicaid and private
health insurance plans, to reimburse all or part of the costs and fees
associated with the procedures performed with these devices. Even if a device
has FDA approval, Medicare and other third- party payers may deny reimbursement
if they conclude that the device is not cost-effective, is experimental or is
used for an unapproved indication.
<PAGE>
In February 1999, the Health Care Financing Administration ("HCFA"), the
federal agency that administers the Medicare program for more than 38 million
beneficiaries, issued a national coverage policy for the use of the EECP system
for patients with disabling angina pectoris who, in the opinion of a
cardiologist or cardiothoracic surgeon, are not readily amenable to surgical
interventions, such as balloon angioplasty and cardiac bypass. In July 1999,
HCFA communicated payment instructions for the EECP therapy to its contractors
around the country, stipulating coverage for services provided on or after July
1, 1999. These instructions were subsequently modified whereby HCFA established
a specific code and national payment level effective January 1, 2000.
Vasomedical continues its dialogue with several large commercial health care
payers for the establishment of positive coverage policies. Vasomedical believes
that its discussions with these third-party payers will, as a minimum, continue
to define circumstances that justify reimbursement on a case-by-case basis and
create a pathway for rapid review of patient data and determination of medical
necessity. To date, there have been many such reimbursements. Vasomedical is
optimistic that, given the recent HCFA coverage and payment decisions, as well
as the publication of the results of MUST-EECP in JACC, many of these
third-party payers will issue positive coverage policies for EECP therapy in
2000. In anticipation of receiving approval for broad-based coverage,
Vasomedical will pursue, through the cardiology profession, the establishment of
a Current Procedural Code ("CPT") specific to the EECP procedure. Although such
code is not essential and although there is no assurance that a new code will be
established, Vasomedical believes that having a CPT code specifically assigned
to EECP will accelerate the processing of reimbursement claims.
Limited availability of third-party coverage or the inadequacy of the
reimbursement level for treatment procedures using the EECP system would
adversely affect Vasomedical's business, financial condition and results of
operations. Moreover, Vasomedical is unable to forecast what additional
legislation or regulation, if any, relating to the health care industry or
Medicare coverage and payment level may be enacted in the future or what effect
such legislation or regulation would have on Vasomedical.
Insurance
Vasomedical currently carries product liability insurance for an aggregate
coverage limit of $5,000,000. However, there can be no assurance that it will be
able to continue to secure such insurance in adequate amounts or at reasonable
premiums. Product liability insurance costs have been increasing rapidly and
dramatically during the last few years and many carriers are reducing coverage,
insisting upon large deductibles and contributions to defense costs, and
abandoning lines. Should Vasomedical be unable to secure adequate product
liability insurance, its business could be seriously damaged by claims arising
out of the allegedly improper manufacture or use of its products.
Patents and Trademarks
A U.S. patent (which expires in 2005) covering EECP design and functions was
issued in June 1988 and it is now owned by Vasomedical. Additional international
and domestic patent applications were filed in May 1993. New US patents were
issued to Vasomedical in October 1996 (which expires in 2013), and December 1999
(which also expires in 2013) and several international patents have been issued
since then. Such international patents expire in 2013. Vasomedical expects
additional international patents to issue during fiscal 2000. Such patents cover
several specific enhancements to the current EECP model.
<PAGE>
Moreover, a trademark has been registered for the name "EECP", and in 1999
Vasomedical filed for registration of additional trademarks, including "Natural
Bypass".
Vasomedical pursues a policy of seeking patent protection, both in the United
States and abroad, for its proprietary technology. There can be no assurance
that Vasomedical's patents will not be violated or that any issued patents will
provide protection that has commercial significance. Litigation may be necessary
to protect Vasomedical's patent position. Such litigation may be costly and
time-consuming, and there can be no assurance that Vasomedical will be
successful in such litigation. The loss or violation of Vasomedical's EECP
patents and trademarks could have a material adverse effect upon Vasomedical's
business.
Employees
As of March 31, 2000, Vasomedical employed thirty-six full-time persons
with ten in sales, four in clinical applications, twelve in manufacturing and
service, three in marketing, and seven in administration (including its four
executive officers). None of Vasomedical's employees are represented by a labor
union. Vasomedical believes that its employee relations are satisfactory.
Manufacturing
Vasomedical currently contracts for the manufacture of its current EECP
system with VAMED Medical Instrument Company Ltd. ("VAMED"), a Chinese company,
subject to certain performance standards, as defined. Vasomedical believes that
VAMED will be able to meet Vasomedical's needs for EECP systems.
USE OF PROCEEDS
Vasomedical will not receive any proceeds this offering, except to the
extent that the common stock purchase warrants are exercised. If all the common
stock purchase warrants are exercised at the exercise price of $1.44 per share,
Vasomedical will receive an aggregate $144,000. Vasomedical intends to use the
proceeds received on any warrant exercise.
<PAGE>
PRICE RANGE OF COMMON STOCK
Vasomedical's common stock is traded in the Nasdaq Small Cap Market under
the symbol VASO. The following table sets forth the high and low sales price as
reported by the Nasdaq Small Cap for the Vasomedical common stock for the
periods indicated:
<TABLE>
<CAPTION>
Common Stock
- ------------
High Low
---- ---
<S> <C> <C>
Fiscal Year 1998
First Quarter $ 2.063 $1.563
Second Quarter $ 3.563 $1.719
Third Quarter $ 2.250 $1.719
Fourth Quarter $ 2.094 $1.500
Fiscal Year 1999
First Quarter $ 1.688 $ .750
Second Quarter $ 1.210 $ .625
Third Quarter $ 2.063 $ .656
Fourth Quarter $ 1.500 $1.000
Fiscal Year 2000
First Quarter $ 2.000 $1.219
Second Quarter $ 1.688 $ .813
Third Quarter $ 3.375 $ .781
Fourth Quarter (through March 29, 2000) $ 14.188 $5.063
</TABLE>
The closing price of the common stock on March 29, 2000 was $6.41. As of
March 29, 2000 there were approximately 924 record holders of the common stock.
DIVIDEND POLICY
Vasomedical has never paid any cash dividends on its Common Stock. There
have been no stock dividends declared or paid by Vasomedical on its common stock
during the past two years. Payment of future dividends, if any, will be
dependent upon the earnings and financial position of Vasomedical and such
factors as the Board of Directors shall deem appropriate.
<PAGE>
PERFORMANCE CHART
The following graph sets forth the cumulative total return* to
Vasomedical's stockholders during the five-year period ended May 31, 1999 as
well as an overall stock market index (NASDAQ Stock Market Index) and
Vasomedical's peer group index (S&P Medical Products and Supplies):
Cumulative Total Return
<TABLE>
<CAPTION>
5/31/94 5/31/95 5/31/96 5/31/97 5/31/98 5/31/99
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Vasomedical, Inc. 100 137 421 284 263 216
NASDAQ Stock Market (US) 100 119 173 195 247 347
S&P Health Care (Medical
Products and Supplies) 100 147 200 248 330 413
<FN>
* $100 invested on 5/31/94 in stock or index - including reinvestment of
dividends.
</FN>
</TABLE>
DESCRIPTION OF SECURITIES
Capital Stock
The Company's authorized capital stock consists of 110,000,000 shares of
common stock, $.001 par value per share ("Common Stock") and 1,000,000 shares of
Serial Preferred Stock, $.01 par value per share, of which 500,000 shares have
been designated as Series A and issued on December 5, 1994, 150,000 shares have
been designated as Series B Convertible Preferred Stock and issued on June 25,
1997, and 175,000 shares have been designated as Series C Convertible Preferred
Stock and issued on April 30, 1998. Common Stock
General. The Company has 110,000,000 authorized shares of common stock,
$.001 par value.
Voting Rights. Each share of Common Stock entitles the holder thereof to
one vote, either in person or by proxy, at meetings of shareholders. The
Company's Board consists of three classes, each of which serves for a term of
three years. At each annual meeting of the stockholders, the directors in only
one class will be elected. The holders are not permitted to vote their shares
cumulatively. Accordingly, the holders of more than fifty percent (50%) of the
issued and outstanding shares of Common Stock can elect all of the directors of
the Company.
<PAGE>
Dividend Policy. All shares of Common Stock are entitled to participate
ratably in dividends when and as declared by the Company's Board of Directors
out of the funds legally available therefor. Any such dividends may be paid in
cash, property or additional shares of Common Stock. The Company has not paid
any cash dividends since its inception and presently anticipates that all
earnings, if any, will be retained for development of the Company's business and
that no dividends on the shares of Common Stock will be declared in the
foreseeable future. Any future dividends will be subject to the discretion of
the Company's Board of Directors and will depend upon, among other things,
future earnings, the operating and financial condition of the Company, its
capital requirements, general business conditions and other pertinent facts.
Therefore, there can be no assurance that any dividends on the Common Stock will
be paid in the future.
Share Purchase Rights. In March 1995, the Company's Board of Directors
approved a Shareholder Rights Plan, under which a dividend distribution of one
Right for each outstanding share of the Company's Common Stock is authorized.
Each Right entitles shareholders to purchase one-half share of Common Stock at a
50% discount to market price if a person or group acquires 20% or more of the
Company's outstanding stock. At present, the Company is not aware of any such
person or group seeking to acquire 20% or more of the Company's outstanding
Common Stock.
Miscellaneous Rights and Provisions. Holders of Common Stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of the liquidation of dissolution, whether
voluntary or involuntary, of the Company, each share of Common Stock is entitled
to share ratably in any assets available for distribution to holders of the
equity of the Company after satisfaction of all liabilities; subject to the
rights of holders of Preferred Stock.
Serial Preferred Stock
The Board of Directors is authorized by the Company's Certificate of
Incorporation to authorize and issue one or more series of Serial Preferred
Stock, $.01 par value. To date, 500,000 shares of Series A Preferred Stock have
been issued by the Company, which shares have been converted to 1,000,000 shares
of Common Stock, 150,000 shares have been designated and issued as Series B
Convertible Preferred Stock, which shares have been converted to 2,135,946
shares of Common Stock, and 175,000 shares have been designated and issued as
Series C Convertible Preferred Stock, which shares have been converted into
3,095,612 shares of Common Stock. No additional shares of Preferred Stock have
been authorized for issuance by the Board and the Company has no present plans
to issue any such shares. In the event that the Board of Directors does issue
additional Preferred Stock, it may exercise its discretion in establishing the
terms of the Preferred Stock. In the exercise of such discretion, the Board of
Directors may determine the voting rights, if any, of the series of Preferred
Stock being issued, which could include the right to vote separately or as a
single class with the Common Stock and/or other series of Preferred Stock; to
have more or less voting power per share than that possessed by the Common Stock
or other series of Preferred Stock; and to vote on certain specified matters
presented to the stockholders or on all of such matters or upon the occurrence
of any specified event or condition. On liquidation, dissolution or winding up
of the Company, the holders of Preferred Stock may be entitled to receive
preferential cash distributions fixed by the Board of Directors when creating
the particular series thereof before the holders of the Common Stock are
entitled to receive anything. Preferred Stock authorized by the Board of
Directors could be redeemable or convertible into shares of any other class or
series of stock of the Company.
<PAGE>
The issuance of Preferred Stock by the Board of Directors could adversely
affect the rights of holders of shares of Common Stock by, among other things,
establishing preferential dividends, liquidation rights or voting power. The
issuance of Preferred Stock could be used to discourage or prevent efforts to
acquire control of the Company through the acquisition of shares of Common
Stock.
PLAN OF DISTRIBUTION
The shares of common stock are traded on the Nasdaq Small Cap Market System
under the symbol VASO. The shares may be sold from time to time directly by the
selling securityholder. Alternatively, the selling securityholder may from time
to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the selling securityholder may be effected in one
or more transactions that may take place on the Nasdaq Small Cap Market System,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the selling
securityholder in connection with such sales of securities.
At the time a particular offer of securities is made by or on behalf of the
selling securityholder, to the extent required, a prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for shares purchased from the
selling securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon for
Vasomedical by Blau, Kramer, Wactlar & Lieberman, P.C., Jericho, New York 11753.
EXPERTS
The financial statements included in this prospectus and elsewhere in the
registration statement have been audited by Grant Thornton LLP, independent
public accountants, as set forth in their reports. The financial statements
referred to above have been included herein in reliance upon the authority of
those forms as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
Vasomedical has filed with the Securities and Exchange Commission,
Washington, D.C., a registration statement under the Securities Act of 1933,
with respect to the common stock offered by this prospectus. This prospectus
does not contain all the information set forth in the registration statement and
its exhibits. For further information about Vasomedical and the common stock
offered by this prospectus, reference is made to the registration statement and
its exhibits. Statements in this prospectus about the contents of any contract
or other document are not necessarily complete and in each instance Vasomedical
refers you to the copy of such contract or other document filed as an exhibit to
the registration statement for a full statement of the provisions of that
contract or document.
<PAGE>
Vasomedical is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with the Exchange Act,
Vasomedical files reports, proxy statements and other information with the
Commission. You may read and obtain copies of any materials filed by Vasomedical
with the Commission at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's Regional Offices at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, New York, New York 10048. You may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. Copies of such material can also be obtained from
the Securities and Exchange Commission's Web site at the address
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Vasomedical with the Commission
pursuant to the Exchange Act, are incorporated by reference in this prospectus
and shall be deemed to be a part of this prospectus:
(1) Vasomedical's Annual Report on Form 10-K for the fiscal year ended May
31, 1999.
(2) Vasomedical's Quarterly Reports on Form 10-Q for the quarters ended
August 31, 1999, November 30, 1999 and February 29, 2000.
All documents filed 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
this offering shall be deemed to be incorporated by reference in this prospectus
and to be part of this prospectus from the date they are filed.
Any statement contained 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 in
this prospectus or in any subsequently filed document that also is or is deemed
to be incorporated by reference in this prospectus modifies or supersedes that
statement. Any statement which is modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
Vasomedical will provide without charge to each person to whom a copy of
this prospectus is delivered, upon the written or oral request of that person, a
copy of any or all of the documents incorporated by reference; except that
Vasomedical will not provide exhibits to the documents incorporated by reference
unless the exhibits are specifically incorporated by reference. Requests for
copies should be directed to the Secretary, Vasomedical, Inc., 180 Linden
Avenue, Westbury, New York 11590, (516) 997-4600.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
Securities and Exchange Commission
Filing Fee ......................................... $ 300
Legal and Accounting Fees .......................... 9,500
Miscellaneous ...................................... 200
-------
Total .............................................. $10,000
=======
</TABLE>
<PAGE>
Vasomedical will pay all of these expenses.
Item 15. Indemnification of Directors and Officers
Under provisions of the By-Laws of Vasomedical, each person who is or was a
director or officer of Vasomedical may be indemnified by Vasomedical to the full
extent permitted or authorized by the General Corporation Law of Delaware.
Under such law, to the extent that such person is successful on the merits
of defense of a suit or proceeding brought against him by reason of the fact
that he is a director or officer of Vasomedical, he shall be indemnified against
expenses (including attorneys' fees) reasonably incurred in connection with such
action.
If unsuccessful in defense of a third-party civil suit or if a criminal
suit is settled, such a person may be indemnified under such law against both
(1) expenses (including attorneys' fees) and (2) judgements, fines and amounts
paid in settlement if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of Vasomedical, and
with respect to any criminal action, had no reasonable cause to believe his
conduct was unlawful.
If unsuccessful in defense of a suit brought by or in the right of
Vasomedical, or if such suit is settled, such a person may be indemnified under
such law only against expenses (including attorneys' fees) incurred in the
defense or settlement of such suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of
Vasomedical except that if such a person is adjudged to be liable in such suit
for negligence or misconduct in the performance of his duty to Vasomedical, he
cannot be made whole even for expenses unless the court determines that he is
fairly and reasonably entitled to indemnity for such expenses.
Vasomedical and its officers and directors of Vasomedical are covered by
officers and directors liability insurance. The policy coverage is $5,000,000,
which includes reimbursement for costs and fees. There is a maximum deductible
under the policy of $75,000 for each claim. Vasomedical has entered into
Indemnification Agreements with certain of its officers and directors. The
Agreements provide for reimbursement for all direct and indirect costs of any
type or nature whatsoever (including attorneys' fees and related disbursements)
actually and reasonably incurred in connection with either the investigation,
defense or appeal of a Proceeding, as defined, including amounts paid in
settlement by or on behalf of an Indemnitee.
<PAGE>
Item 16. Exhibits
4.1 Warrant Agreement
5 Opinion of Blau, Kramer, Wactlar & Lieberman, P.C.
23.1 Consent of Grant Thornton LLP
23.2 Consent of Blau, Kramer, Wactlar & Lieberman, P.C. (included in
Exhibit 5 hereof)
24 Power of Attorney (included on Signature Page).
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Act"), 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.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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.
(c) The undersigned Registrant hereby undertakes:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of a registration
statement in reliance upon Rule 430A and contained in a form of prospectus filed
by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act
shall be deemed to be part of the registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus 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.
<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 Westbury, New York on the 4th day of April, 2000.
VASOMEDICAL, INC.
By:/s/ D. Michael Deignan
-----------------------------
D. Michael Deignan
President, Chief Executive Officer and Director
Principal Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on April 4, 2000, by the following
persons in the capacities indicated. Each person whose signature appears below
also constitutes and appoints Abraham E. Cohen and Michael Diegnan, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent 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 said attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Signature Title
--------- -----
/s/ Alexander G. Bearn Director
- -----------------------------
Alexander G. Bearn
/s/ David S. Blumenthal Director
- -----------------------------
David S. Blumenthal
Chairman of the Board
- -----------------------------
Abraham E. Cohen
/s/ D. Michael Deignan President, Chief Executive Officer and
- ----------------------------- Director (Principal Executive Officer)
D. Michael Deignan
/s/ Joseph A. Giacalone
- ----------------------------- Chief Financial Officer (Principal Financial
Joseph A. Giacalone and Accounting Officer)
/s/ John C.K. Hui
- ----------------------------- Senior Vice President, R&D and Manufacturing
John C.K. Hui and Director
/s/ Kenneth W. Rind Director
- -----------------------------
Kenneth W. Rind
/s/ E. Donald Shapiro Director
- -----------------------------
E. Donald Shapiro
/s/ Anthony Viscusi Director
- -----------------------------
Anthony Viscusi
Director
- -----------------------------
Zhen-sheng Zheng
Exhibit 4.1
These securities may not be publicly offered or sold unless at the time of such
offer or sale, the person making such offer of sale delivers a prospectus
meeting the requirements of the Securities Act of 1933 forming a part of a
registration statement, or post-effective amendment thereto, which is effective
under said act, or unless in the opinion of counsel to the Company, such offer
and sale is exempt from the provisions of Section 5 of said Act.
W A R R A N T
-------------
For the Purchase of Common Stock, Par Value $.001 per Share of
VASOMEDICAL, INC.
(Incorporated under the Laws of the State of Delaware)
VOID AFTER 5 P.M. FEBRUARY 26, 2001
(unless otherwise extended as provided herein)
Warrant to Purchase
100,000 Shares
THIS IS TO CERTIFY that, for value received, Peter F. Cohn is entitled,
subject to the terms and conditions set forth, until 5 P.M., New York City Time,
on February 26, 2001 to purchase the number of shares set forth above of Common
Stock, par value $.001 per share (the "Common Stock"), of VASOMEDICAL, INC., a
Delaware corporation (the "Company"), from the Company at a purchase price per
share of $1.44 if and to the extent this Warrant is exercised, in whole or in
part, during the period this Warrant remains in force, subject in all cases to
adjustment as provided in Section 2 hereof, and to receive a certificate or
certificates representing the shares of Common Stock so purchased, upon
presentation and surrender to the Company of this Warrant, with the form of
subscription attached hereto duly executed, and accompanied by payment of the
purchase price of each share purchased either in cash or by certified or bank
cashier's check payable to the order of the Company.
1. The rights represented by this Warrant are exercisable at the option of
the holder hereof in whole at any time, or in part from time to time, within the
period above specified at the price specified on page 1 hereof. In case of the
purchase of less than all the shares as to which this Warrant is exercisable,
Company shall cancel this Warrant upon the surrender hereof and shall execute
and deliver a new Warrant of like tenor for the balance of the shares
purchasable hereunder.
2. Adjustments to Exercise Price and Number of Securities.
2.1 Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
2.2 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 2, the number of
shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
2.3 Definition of Common Stock. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Certificate of Incorporation of the Company as may be amended as of the
date hereof, or (ii) any other class of stock resulting from successive changes
or reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
2.4 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
<PAGE>
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the company for which such warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 2. The above provisions of this
Subsection shall similarly apply to successive consolidations or mergers.
3. Registration Rights.
3.1(a) Demand Registration Rights. The Company agrees that it will, at
the written request of the Warrantholder on and after February 26, 1997, and at
the Company's expense pursuant to subparagraph (b) of this Section, file with
the Securities and Exchange Commission (sometimes the "SEC") and other
appropriate commissions and agencies a registration statement on the appropriate
forms under the Securities Act of 1933, as amended (the "Act" or the "Securities
Act"), and such state, district or territorial securities laws as the
Warrantholder shall reasonably request, registering or qualifying the Common
Stock underlying the Warrants for distribution or public offering, and the
Company agrees to cause the above filings to become effective at the earliest
practicable date and remain effective for no less than the longer of (x) nine
months after such registration statement's effective date, or (y) sixteen months
after the date of the most recently audited balance sheet of the Company filed
as part of the registration statement's financial statements; provided, however,
if the Warrantholder shall be required by the Company or any regulatory
authority to discontinue the sale or disposition of any Underlying Stock
registered pursuant to this paragraph for any period for any reason
("Discontinuance Period"), the period of time during which the Company shall be
required to maintain the registration statement effective shall be extended by
an amount of time equal to such Discontinuance Period. If any registration
statement requested to be filed pursuant to this section is not promptly filed
or is either withdrawn or fails to become effective for any reason, such request
shall not be counted as a request under this Section. Notwithstanding the
foregoing, the Company may satisfy its obligation hereunder by filing such
registration subsequent to February 2, 1996 without having received the
Warrantholder's written request.
(b) Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, shall be borne by the Company whether or not
any of the registration statements or notifications become effective, including
fees with respect to filings required to be made with the SEC and National
Association of Securities Dealers, Inc., fees and expenses for compliance with
securities or blue sky laws, and fees and disbursements of counsel for the
Company and of independent certified public accountants of the Company,
securities acts liability insurance (if the Company so desires) and fees and
expenses of other persons retained by the Company (all such expenses being
herein called "Registration Expenses").
3.2 Indemnification Provisions.
(i) Indemnification by Company. Whenever pursuant to this
paragraph a registration statement or notification relating to the Underlying
Stock is filed under the Act or any state "Blue Sky" securities law, or is
amended or supplemented, the Company will indemnify and hold harmless the
Warrantholder, and each underwriter (within the meaning of the Act) of such
securities and each person, if any, who controls (within the meaning of the Act)
any such underwriter, against any losses, claims, damages or liabilities, joint
or several, to which the Warrantholder, any such controlling person or any such
underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arise out of the Company's breaching any
of its obligations hereunder, or the inaccuracy of any of the Company's
representations and warranties hereunder; and the Company will reimburse the
Warrantholder and each underwriter for any legal or other expenses reasonably
incurred by the Warrantholder or such underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement in said registration
statement, said preliminary prospectus, said final prospectus or said amendment
or supplement in reliance upon and in conformity with written information
furnished by the Warrantholder for use in the preparation thereof.
<PAGE>
(ii) Indemnification by the Warrantholder. The Warrantholder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed said registration statement or notification and such
amendments and supplements thereto, and each person, if any, who controls the
Company (within the meaning of the Act) against any losses, claims, damages or
liabilities that arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in said registration statement, said
preliminary prospectus, said final prospectus, or said amendment or supplement,
or that arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished by the Warrantholder
for use in the preparation thereof; and will reimburse the Company or any such
director, officer or controlling person for any legal or other expenses
reasonably incurred by him or them in connection with investigating or defending
any such loss, claim, damage, liability or action. Notwithstanding the
foregoing, the maximum amount which may be recovered from the Warrantholder
shall be limited to the amount of proceeds received by such person in said
Registration Statement from the sale of the Underlying Stock.
(iii) Notice of Claim. Promptly after receipt by an indemnified
party under this paragraph (iii) of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party, give the indemnifying party notice of the commencement
thereof; but the omission to so notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this paragraph (iii).
(iv) Defense of Claim. If any such action is brought against any
indemnified party, and the indemnified party notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and to assume the defense thereof, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof. If the indemnifying party determines that
it cannot assume the defense of such action for any reason, the indemnifying
party will pay all reasonable attorney's fees and disbursements incurred by the
indemnified party in connection with such action. Nothing herein shall prevent
the indemnified parties from retaining their own counsel at their own expense in
connection with any such action. No indemnified party shall settle any claim or
action without the prior written consent of the indemnifying party.
4. The Company agrees at all times to reserve or hold available a
sufficient number of shares of Common Stock to cover the number of shares
issuable upon the exercise of this and all other Warrants of the same class. The
Company hereby represents and warrants that this Warrant has been duly
authorized by the Company and has been validly executed and delivered by the
Company and the Warrant constitutes the legal, valid and binding agreement of
the Company, enforceable in accordance with its terms, except to the extent that
the enforceability hereof or thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect and affecting the rights of creditors generally, (b) limitations upon the
power of a court to grant specific performance or any other equitable remedy,
and (c) a finding by a court of competent jurisdiction that the indemnification
provisions herein are in violation of public policy. The Common Stock issuable
upon exercise of this Warrant has been duly authorized and, when issued and paid
for in accordance with the terms hereof, will be validly issued, fully paid and
non- assessable; the holders thereof are not and will not be subject to personal
liability solely by reason of being such holders; the Warrants and the Common
Stock are not and will not be subject to the preemptive rights of any
stockholder of the Company; and all corporate action required to be taken for
the authorization, issuance and sale of the Warrants and the Underlying Common
Stock has been duly and validly taken by the Company.
5. This Warrant shall not entitle the holder hereof to any voting rights or
other rights as a shareholder of the Company, or to any other rights whatsoever
except the rights herein expressed, and no dividends shall be payable or accrue
in respect of this Warrant or the interest represented hereby or the shares
purchasable hereunder until or unless, and except to the extent that, this
Warrant shall be exercised.
6. This Warrant has been issued in connection with services performed by
the Warrantholder.
7. This Warrant is exchangeable upon the surrender hereof by the holder
hereof to the Company for new Warrants of like tenor representing in the
aggregate the right to purchase the number of shares purchasable hereunder, each
of such new Warrants to represent the right to purchase such number of shares as
<PAGE>
shall be designated by the holder hereof at the time of such surrender. This
Warrant may be transferred in whole or in part to officers, directors,
shareholders, partners or affiliates (as such term is defined in the Securities
Act of 1934, as amended) of the Company.
8. The Company will transmit to the holder of this Warrant such
information, documents, and reports as are generally distributed to shareholders
of the Company concurrently with the distribution thereof to such shareholders.
9. Notices to be given to the holder of this Warrant shall be deemed to
have been sufficiently given if delivered personally or sent by overnight
courier or messenger or sent by registered or certified mail (air mail if
overseas), return receipt requested, or by telex, facsimile transmission,
telegram or similar means of communication. Notices shall be deemed to have been
received on the date of personal delivery, facsimile transmission, or if sent by
certified or registered mail, return receipt requested, shall be deemed to be
delivered on the third business day after the date of mailing. The address of
the Company is 180 Linden Avenue, Westbury, NY 11590, and the Company shall give
written notice of any change of address to the holder hereof.
10. The Company consents to the jurisdiction of any court of the State of
New York and of any federal court located in New York. The Company waives
personal service of any summons, complaint or other process in connection with
any such action or proceeding and agrees that service thereof may be made, by
certified mail directed to the Company or, in the alternative, in any other form
or manner permitted by law.
11. This Warrant shall be governed, construed and interpreted under the
laws of the State of New York without giving effect to the rules governing
conflicts of law.
12. This Warrant shall not be assignable or transferable by the
Warrantholder without the written consent of the Company other than by will or
by the laws of descent or distribution, and is exercisable during the lifetime
of the Warrantholder only by the Warrantholder. Upon the death of the
Warrantholder during the term of this agreement, this Warrant shall be
exercisable, to the extent it has vested in accordance with its terms at the
time of death of the Warrantholder, by his personal representative or him, as
the case may be, within the twelve-month period next succeeding the death of the
Warrantholder or prior to the earlier date on which the option expires in
accordance with its terms.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
the signature of its President and its seal affixed and attested by its
Secretary.
Dated as of: February 26, 1996
VASOMEDICAL, INC.
By: /s/ Anthony Viscusi
-----------------------------
[Corporate Seal] Anthony Viscusi, President
ATTEST:
/s/ Joseph A. Giacalone
- ------------------------------
Joseph A. Giacalone, Secretary
<PAGE>
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise ______________
Warrants represented by this Warrant Certificate and to purchase
________________ shares of Common Stock issuable upon the exercise of said
Warrants, and requests that certificates for such shares be issued and delivered
as follows:
ISSUE TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
(SOCIAL SECURITY OR OTHER TAX IDENTIFICATION NUMBER)
DELIVER TO:
(NAME)
at
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrants hereby exercised is less than all the Warrants
represented by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full Warrants not exercised be
issued and delivered as set forth below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$__________ in cash or by certified or cashier's check payable in United States
currency to the order of Vasomedical, Inc.
Dated: _______________, 19___
Name of Warrantholder:
______________________________________
Address:
______________________________________
______________________________________
Signature:
______________________________________
EXHIBIT 5
[Letterhead of Blau, Kramer, Wactlar & Lieberman, P.C.]
April 3, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have acted as counsel to Vasomedical, Inc., a Delaware corporation (the
"Company"), in connection with the Registration Statement on Form S-3 of the
Company, to be filed with the Securities and Exchange Commission on April 3,
2000 (the "Registration Statement"), relating to the registration under the
Securities Act of 1933, as amended, of 100,000 shares of the Company's Common
Stock, par value $.001 per share (the "Shares") to be sold pursuant to such
Registration Statement by certain security holders described in the Registration
Statement.
In this connection, we have reviewed: (i) the Warrant Agreement between the
Company and Peter F. Cohn dated February 26, 1996; (ii) the Registration
Statement; (iii) certain resolutions adopted by the Board of Directors of the
Company; and (iv) such other documents, records and other matters as we have
deemed necessary or appropriate in order to give the opinions set forth herein.
We are familiar with the proceedings heretofore taken by the Company in
connection with the authorization, registration, issuance and sale of the
Shares. We have, with your consent, relied as to factual matters on certificates
or other documents furnished by the Company or its officers and by governmental
authorities and upon such other documents and data that we have deemed
appropriate. We have assumed the authenticity of all documents submitted to us
as originals and the conformity to original documents of all documents submitted
to us as copies.
We are members of the Bar of the State of New York and express no opinion
as to the laws of any jurisdiction other than the laws of the State of New York
and the General Corporation Law of the State of Delaware.
Based on such examination and review and subject to the foregoing, we are
of the opinion that under New York and Delaware law, including, but not limited
to, statutory law; the Shares, when sold in the manner set forth in the
Registration Statement, will be legally issued, fully paid and nonassessable.
We consent to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to us under the caption "Legal Matters" in the
Prospectus that is a part of the Registration Statement. In giving such consent,
we do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ BLAU, KRAMER, WACTLAR
& LIEBERMAN, P.C.
BLAU, KRAMER, WACTLAR
& LIEBERMAN, P.C.
Exhibit 23.1
Consent of Independent Certified Public Accountants
We have issued our report dated August 3, 1999, accompanying the consolidated
financial statements of Vasomedical, Inc. and Subsidiary appearing in the Annual
Report of the Company to its shareholders and accompanying the schedule included
in the Annual Report on Form 10-K for the year ended May 31, 1999 which is
incorporated by reference in this Registration Statement. We consent to the
incorporation by reference in the Registration Statement of the aforementioned
report and to the use of our name as it appears under the caption "Experts".
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Melville, New York
April 4, 2000
