As filed with the Securities and Exchange Commission on February 12, 1999
Registration No. 333-____________
_________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
NEOPATH, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1436093
_______________________________ ______________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8271 - 154th Avenue NE
Redmond, Washington 98052
(425) 869-7284
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
ALAN C. NELSON
Chairman, President and Chief Executive Officer
NeoPath, Inc.
8271 - 154th Avenue NE
Redmond, Washington 98052
(425) 869-7284
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
_____________________
Copies to:
MICHAEL E. STANSBURY
Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
(206) 583-8888
_____________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes
effective.
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 of 1933,
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 of 1933, check the following box
and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
_____________________
CALCULATION OF REGISTRATION FEE
______________________________________________________________________
Proposed
Maximum
Aggregate
Title of Each Class Offering Amount of
of Securities to Be Registered Price(1) Registration Fee
______________________________ ___________ ________________
Common Stock, par value $.01 $15,225,000 $4,233
per share
_____________________________________________________________________
(1) Computed in accordance with Rule 457(o) under the
Securities Act of 1933.
_____________________
The registrant hereby undertakes to amend 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 this Registration Statement shall
become effective on such date as the SEC, acting pursuant to said
Section 8(a), may determine.
<PAGE>
The information in this prospectus is not complete and may be
changed. The selling shareholders may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to
buy these securities in any state where the offer of sale is not
permitted.
Subject to completion, dated February 12, 1999
2,900,000 Shares
NEOPATH, INC.
Common Stock
_____________________
Certain shareholders of NeoPath may offer for sale up to 2,900,000
shares of common stock at various times at market prices prevailing at
the time of sale or at privately negotiated prices. The selling
shareholders may sell the common stock to or through broker-dealers,
who may receive compensation in the form of discounts, concessions or
commissions.
NeoPath will not receive any proceeds from the sale of the shares by
the selling shareholders. NeoPath will pay all expenses (other than
selling commissions and fees and stock transfer taxes) of the
registration and sale of the shares.
The common stock trades on the Nasdaq National Market ("Nasdaq") under
the symbol "NPTH." On February 9, 1999, the last reported sales price
of the common stock on Nasdaq was $5.125 per share.
Investing in the common stock involves a high degree of risk. See
"Risk Factors" beginning on page 4.
_____________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
_____________________
<PAGE>
TABLE OF CONTENTS
FORWARD-LOOKING INFORMATION 3
HOW TO OBTAIN MORE INFORMATION 3
THE COMPANY 4
Recent Events 4
RISK FACTORS 4
History of Losses 5
Need for Additional Capital 5
Uncertainty of Market Acceptance 5
Market Consolidation; Concentration 6
Uncertainty of Product Regulatory Clearance 6
Limited Marketing, Sales and Service Experience 6
Risks Inherent in International Transactions 6
Sole or Limited Source of Supply 6
Governmental Regulation of Manufacturing 7
Competition 7
Dependence on Reimbursement 7
Dependence on Single Product Line 8
Product Liability 8
Dependence on Patents and Proprietary Rights; Risk of
Third-Party Claims of Infringement 8
Dependence on Key Personnel 9
Highly Volatile Stock Price; Potential Fluctuations in
Future Quarterly Results 9
Year 2000 Issue 9
SELLING SHAREHOLDERS 10
PLAN OF DISTRIBUTION 11
VALIDITY OF COMMON STOCK 11
EXPERTS 12
- -2-
<PAGE>
FORWARD-LOOKING INFORMATION
This prospectus includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The
Act provides a "safe harbor" for forward-looking statements to
encourage companies to provide prospective information about
themselves so long as they identify these statement as forward-looking
and provide meaningful cautionary statements identifying important
factors that could cause actual results to differ from the projected
results. All statements other than statements of historical fact we
make in this Prospectus or in any document incorporated by reference
are forward-looking. In particular, the statements herein regarding
industry prospects and our future results of operations or financial
position are forward-looking statements. Forward-looking statements
reflect our current expectations and are inherently uncertain. Our
actual results may differ significantly from our expectations. The
section entitled "Risk Factors" describes some, but not all, of the
factors that could cause these differences.
HOW TO OBTAIN MORE INFORMATION
We file reports, proxy statements and other information with the
Securities and Exchange Commission. You may read any document we file
at the SEC's public reference rooms in Washington, D.C., Chicago,
Illinois and New York, New York. Please call the SEC toll free at 1-
800-SEC-0330 for information about its public reference rooms. You
may also read our filings at the SEC's web site at http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3
under the Securities Act. This prospectus does not contain all of the
information in the registration statement. We have omitted certain
parts of the registration statement, as permitted by the rules and
regulations of the SEC. You may inspect and copy the registration
statement, including exhibits, at the SEC's public reference
facilities or web site. Our statements in this prospectus about the
contents of any contract or other document are not necessarily
complete. You should refer to the copy of each contract or other
document we have filed as an exhibit to the registration statement for
complete information.
The SEC allows us to "incorporate by reference" into this
prospectus the information we file with it. This means that we can
disclose important information to you by referring you to those
documents. This information we incorporate by reference is considered
a part of this prospectus, and later information we file with the SEC
will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 and 15(d)
of the Securities Exchange Act of 1934 until this offering is
completed:
1. NeoPath's Annual Report on Form 10-K for the year ended
December 31, 1997;
2. NeoPath's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998;
3. The description of the common stock in NeoPath's
Registration Statement on Form 8-A effective as of November
30, 1994, including any amendment or report filed to update
the description; and
4. All other documents filed by NeoPath 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.
You may obtain copies of these documents (other than exhibits)
free of charge by contacting NeoPath's corporate secretary at our
principal offices, which are located at 8271 - 154th Avenue NE,
Redmond, Washington 98052, telephone number (425) 869-7284.
You should rely only on the information incorporated by reference
or provided in this prospectus or any prospectus supplement. We have
not authorized anyone else to provide you with different information.
The selling shareholders are not making an offer of these securities
in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any prospectus supplement
is accurate as of any date other than the date on the front of the
document.
- -3-
<PAGE>
THE COMPANY
NeoPath develops and markets visual intelligence technology to
increase accuracy in medical testing. NeoPath's initial products
include two automated screening systems that integrate proprietary
high-speed morphology computers, video imaging technology and
sophisticated image interpretation software to capture and analyze
thousands of microscopic images from a Papanicolaou ("Pap") smear
slide for the early detection of cervical cancer.
The FDA approved our AutoPap(R) 300 QC Automatic Pap Screener
System (the "AutoPap QC") in 1995. The AutoPap QC is a rescreening
device used for quality control and rescreening of previously screened
Pap smear slides. Clinical studies have shown that the AutoPap QC
detects a significantly higher proportion of undetected abnormal
slides than procedures typically employed by clinical laboratories to
meet federal rescreening requirements.
The FDA approved our AutoPap(R) Primary Screening System (the
"AutoPap Screener") in May 1998. The AutoPap Screener uses the
same hardware components as the AutoPap QC, but uses enhanced software
to perform the initial screening of Pap smear slides and to classify
up to 25% of such slides as requiring no further review. Clinical
studies have shown that the AutoPap Screener provides superior
sensitivity and specificity when compared to existing laboratory
practice. Currently it is the only instrument approved by the FDA
that allows Pap smear slides to bypass human review. We believe that
this feature of the AutoPap Screener provides customers with an
economic incentive to adopt the technology.
The "AutoPap System" refers to the AutoPap Screener and the
AutoPap QC together.
Recent Events
In the quarter ended December 31, 1998, we wrote off $3.1 million
of intangible assets related to our Pathfinder System product line.
The write-off did not involve any cash expenditure. NeoPath acquired
the Pathfinder System product line in June 1997 for a total purchase
price of $4.6 million, including transaction-related expenses. As a
result of the purchase, we recognized $4.3 million in intangible
assets that were to be amortized over five years. In accordance with
required accounting practices, however, we compared the carrying value
of these intangible assets to expected future discounted cash flows
applicable to the Pathfinder product and, as a result of the analysis,
wrote off the remaining balance of intangible assets. Pathfinder
product sales accounted for 3 percent of total revenues in 1998.
On February 9, 1999, NeoPath completed a $14.5 million private
equity transaction in which we issued 2.9 million shares of common
stock to investors at a price of $5.00 per share. On February 9,
1999, the last reported sale price of the common stock on Nasdaq was
$5.125. NeoPath must file a shelf registration statement on Form S-3
allowing resale of the newly issued shares and use its best efforts to
keep that registration statement effective for two years. In
connection with the financing, NeoPath issued to Invemed Associates,
Inc., an investment banking firm, five-year warrants to purchase
100,000 shares of common stock at an exercise price of $5.89 per
share.
RISK FACTORS
This prospectus and the documents we incorporate by reference
contain forward-looking statements that involve risks and
uncertainties. The statements in this prospectus that are not purely
historical are forward-looking statements. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks,"
estimates," and similar expressions identify forward-looking
statements. But the absence of these words does not mean the
statement is not forward-looking. We cannot guarantee these
statements, which are subject to risks, uncertainties and assumptions
that are difficult to predict. Our actual results may differ
materially from those we forecast in forward-looking statements due to
a variety of factors, including those set forth in the following risk
factors, elsewhere in this prospectus and in the documents we have
incorporated by reference. We will not update any forward-looking
statements due to new information, future events or otherwise. Before
investing in the common stock, you should consider carefully the
following factors, as well as the information contained in the rest of
this prospectus and in the documents we incorporate by reference.
- -4-
<PAGE>
History of Losses
We have incurred substantial losses since we began doing
business. As of September 30, 1998, our accumulated deficit was
$105.8 million. We first began recognizing product revenue in 1996.
For 1996, 1997 and the first nine months of 1998, we incurred losses
of $59.4 million on revenues of $23.6 million. We expect continued
losses in 1999 as we market the AutoPap Screener primarily under a fee-
per-use strategy in the United States, continue product development
initiatives (including additional clinical studies), and expand our
manufacturing capability. We cannot guarantee that our business will
ever become profitable.
Need for Additional Capital
We expect negative cash flow from operations to continue at least
through 1999. At December 31, 1998, NeoPath had approximately
$9 million in cash and, although we received an additional
$14.5 million in a recently closed equity financing, we may require
additional funds to produce AutoPap Systems for our fee-per-use
program and cover continuing losses. Our future capital requirements
will depend on numerous factors, including:
- - sales of AutoPap Systems and fee-per-use revenues;
- - research and development programs for the development of enhanced
products;
- - additional clinical trials;
- - relationships with existing and future corporate collaborators,
if any;
- - competing technological and market developments;
- - the time and costs involved in obtaining regulatory approvals;
- - the costs involved in filing, prosecuting, defending and enforcing
patent claims; and
- - the time and costs of manufacturing scale-up and commercialization
activities.
We estimate that our existing cash and cash equivalents will meet
our capital requirements through 1999. We cannot guarantee that the
assumptions underlying our estimates will prove to be accurate. We
intend to seek additional funding through private debt financing to
provide additional resources to support AutoPap System production.
Adequate funds, whether obtained through financial markets or from
collaborative or other arrangements with corporate partners or other
sources, may not be available when needed or may not be available on
favorable terms, if at all. If we raise additional funds by issuing
equity securities, existing shareholders will suffer dilution of their
interest in NeoPath. In addition, if we obtain additional funds
through arrangements with collaborative partners, we may have to
relinquish rights to certain of our technologies or potential products
that we would otherwise seek to develop or commercialize ourselves.
Uncertainty of Market Acceptance
Our products may never be commercially successful. NeoPath's
growth depends on market acceptance of the AutoPap System by clinical
laboratories, healthcare providers, third-party healthcare payers and
patients. Our success also depends on customers' acceptance of our
fee-per-use and sale programs. Even if our products gain market
acceptance, the availability of reimbursement from third-party
healthcare payers such as government and private insurance plans may
limit our revenues.
- -5-
<PAGE>
Market Consolidation; Concentration
Medical community or third-party healthcare payers may delay
acceptance of an automated Pap smear screening or rescreening system
that replaces or supplements current laboratory Pap smear review
practices. Moreover, due to consolidation in the clinical laboratory
industry, we expect that the number of potential domestic customers
for our products will decrease. A significant proportion of our sales
is concentrated among a relatively small number of customers, and this
likely will be true for the foreseeable future. For the year ended
December 31, 1998, approximately 28% of our revenues were from two
customers. These factors increase our dependence on sales to the
largest clinical laboratories and the bargaining power of those
potential customers.
Uncertainty of Product Regulatory Clearance
The U.S. government extensively regulates the manufacture and
sale of medical diagnostic devices for commercial use. Government
agencies in certain other countries impose similar requirements. The
AutoPap Screener and AutoPap QC have been cleared for
commercialization in the United States and in Japan, Canada,
Australia, New Zealand, The Netherlands, Italy, Hong Kong, Korea, and
Taiwan.
Governmental regulatory agencies in the United States or
elsewhere may not approve future commercial enhancements to the
AutoPap System on a timely basis, if at all. Even if these agencies
clear the enhanced products for sale, they may not confer the clinical
indications we request, or the approval may contain significant
limitations, such as warnings, precautions or contraindications,
requests for postmarket studies, or additional regulatory
requirements. Our regulatory applications may be delayed or rejected
based on changes in regulatory policies or regulations. Although the
FDA has inspected our manufacturing operations for compliance with FDA
quality systems regulations, we remain subject to ongoing FDA quality
systems regulation and inspection.
Limited Marketing, Sales and Service Experience
We market, sell, service, and support the AutoPap System through
a direct sales force (primarily in North America) and independent
foreign distributors. We have limited marketing, sales and service
experience, and may find it difficult to recruit and retain skilled
sales, marketing, service or support personnel or foreign
distributors. Our marketing and sales efforts may not be successful.
Risks Inherent in International Transactions
We rely primarily on third-party distributors to place AutoPap
Systems internationally. International transactions pose a number of
risks, including regulatory delays or disapprovals with respect to our
products, expenses and delays due to compliance with government
controls, export license requirements, uncertain sales and collections
due to political instability, reduced revenues due to price controls,
reduced sales due to trade restrictions, changes in tariffs, and
difficulties with foreign distributors.
Sole or Limited Source of Supply
We purchase all components for the AutoPap System from outside
vendors. A major component of the AutoPap System, the slide tray
motion system, is supplied by a sole-source vendor. Certain other
components, such as the video cameras, are currently supplied by
single source vendors, and components provided by additional or
replacement suppliers would require some modification to be used in
the AutoPap System. We would be unable to quickly establish
additional or replacement sources of supply for many AutoPap System
components. In addition, we may need to obtain regulatory approval to
substitute certain components. We cannot be sure of obtaining the
necessary approvals. If one of our vendors becomes unable to supply
acceptable components in a timely manner and in the quantity required
we may need to delay or halt our manufacturing process. Any delay or
cessation of manufacturing could adversely affect our business.
- -6-
<PAGE>
Governmental Regulation of Manufacturing
Manufacturers of medical diagnostic devices face strict federal
regulations regarding the quality of manufacturing. For example, the
FDA periodically inspects the manufacturing facilities of diagnostic
device manufacturers to determine compliance with regulations. Our
current and future manufacturing and design operations must comply
with these and all other applicable regulations, including regulations
imposed by other governments. If we fail to comply with quality
systems regulations we could face civil or criminal penalties or
enforcement proceedings. These proceedings may require us to recall a
product or to stop placing our products in service or selling our
products. Similar results could occur if we violate foreign
regulations. We may not be able to attain or maintain compliance with
quality systems requirements. Any failure to comply with the
applicable manufacturing regulations would have a material adverse
effect on our business.
Competition
Competition in the medical device industry is intense. To
effectively compete, we must keep pace with the rapid product
development and technological change in our industry. The AutoPap
System competes with existing manual methods of screening Pap smears
and with semi-automated systems. To compete effectively, the AutoPap
System must demonstrate accuracy and cost effectiveness that equals or
exceeds manual review of Pap smears. We are aware of three potential
direct competitors:
- - AutoCyte, Inc., which is developing a semi-automated system to
prepare and analyze liquid-based Pap smears (a potential alternative
to conventional Pap smears);
- - Morphometrix Technologies Inc., which is developing an automated
system to analyze monolayer Pap smears; and
- - Neuromedical Systems, Inc. ("Neuromedical"), which has obtained
regulatory approval for a semi-automated system that rescreens
conventional Pap smears and may be developing a semi-automated primary
screener.
We also face indirect competition from companies that manufacture
liquid-based or monolayer slide preparation systems and devices that
automate various aspects of cytology. Cytyc Corporation is approved
to market its ThinPrep System that prepares slides for cervical cancer
screening using a liquid-based sampling and preparation technique as a
replacement for the conventional Pap smear method.
We believe that the AutoPap System must remain competitive in
accuracy and effectiveness, cost (including both charges by us to the
laboratory and the laboratory's labor and overhead costs),
convenience, perception among influential cytopathologists and
laboratories, and processing speed and reliability.
Our competitors may develop new technologies and products that
prove to be more effective than the AutoPap System in any of these
ways. Furthermore, other companies may purchase or develop
technologies that compete with the AutoPap System or render it
obsolete. These competitors may manufacture, market and sell their
products or services more successfully than us, which could adversely
affect our business.
Dependence on Reimbursement
Third-party healthcare payers in the United States are
increasingly sensitive to containing healthcare costs and heavily
scrutinize new technology as a primary factor in increased healthcare
costs. Third-party payers may influence the pricing or perceived
attractiveness of our products and services by regulating the maximum
amount of reimbursement they provide or by not providing any
reimbursement.
- -7-
<PAGE>
Restrictions on reimbursement may limit the price we can charge
for AutoPap System screening or reduce the demand for AutoPap System
screening. If these payers do not reimburse for the AutoPap System
screening, or provide reimbursement significantly below the amount
laboratories charge patients to perform AutoPap System screening, our
potential market will be significantly reduced. AutoPap System
screening may never become widely reimbursed, and AutoPap
reimbursement may not be sufficient to permit us to generate
substantial revenue. Future healthcare legislation or other changes
in the administration or interpretation of government healthcare or
third-party reimbursement programs may also adversely affect our
business. Third-party reimbursement also may not be available for the
AutoPap System under foreign reimbursement systems.
Dependence on Single Product Line
To date, we have concentrated on development of the AutoPap
System. We have performed only limited research on other applications
of our core technology. Accordingly, our success will depend
primarily on the successful development and marketing of the AutoPap
System to generate revenues. The AutoPap System may never be a
commercial success.
Product Liability
The commercial screening of Pap smears has generated significant
malpractice litigation. As a result, we face product liability,
errors and omissions or other claims if our products are alleged to
have caused a false-negative diagnosis. Although we have product
liability insurance, it will become increasingly difficult for us to
obtain and maintain reasonable product liability coverage.
Substantial increases in insurance premium costs often make coverage
economically impractical. We may not be able to obtain adequate
product liability insurance at a reasonable cost. Thus, product
liability claims may adversely affect our business.
Dependence on Patents and Proprietary Rights; Risk of Third-Party
Claims of Infringement
We rely on a combination of patents, trade secrets and
confidentiality agreements to protect our proprietary technology,
rights and know-how. We hold 6 foreign patents, 54 U.S. patents
(issued or allowed), and have 24 additional U.S. patents pending.
Pending patent applications may not ultimately issue as patents or, if
patents do issue, may not be sufficiently broad to protect our
proprietary rights. Competitors may challenge or circumvent our
patents or pending applications. Our patents may never provide us
with any competitive advantages. Our confidentiality agreements with
employees and other parties may not protect the confidentiality of our
trade secrets and proprietary information or provide meaningful
protection for our confidential information. In addition, our
competitors could independently develop our trade secrets or
proprietary information.
On July 15, 1996, Neuromedical filed a lawsuit against NeoPath,
Inc. in the United States District Court for the Southern District of
New York. The complaint alleged patent infringement, unfair
competition, false advertising, and related claims. On September 5,
1996, we filed our answer and counter claims. In May 1998, a judge in
the United States District Court for the Southern District of New York
denied Neuromedical's motion for a preliminary injunction against us.
The parties have agreed to dismiss their claims and counterclaims on
all but the patent issues, and Neuromedical accordingly served an
amended complaint on July 27, 1998 asserting only patent infringement
claims. This lawsuit is still in the discovery stage, and a trial
date has not been set. We believe NeoPath has a strong position in
this action, and we will defend against these claims vigorously.
On March 31, 1997, NeoPath filed a patent infringement lawsuit
against Neuromedical in the United States District Court for the
Western District of Washington. Our complaint alleges patent
infringement and seeks permanent injunctions against Neuromedical. In
March and April 1998 this lawsuit was amended, and NeoPath filed an
additional related patent lawsuit against Neuromedical. Neuromedical
filed a motion for summary judgment, which the court denied in April
1998. In October 1998, Neuromedical filed another motion for summary
judgment that the court denied. We expect trial on the first
Washington lawsuit to begin in April 1999. The second Washington
lawsuit is currently in the discovery stage.
We cannot predict the outcome of this patent litigation. An
unfavorable resolution of any of these issues could adversely affect
our business.
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<PAGE>
Dependence on Key Personnel
We depend heavily on the principal members of our management and
scientific staff. The loss of their services might impede achievement
of our strategic objectives or research and development. Our success
depends on our ability to retain key employees and to attract
additional qualified employees. Competition for highly skilled
scientific and management personnel is intense. The failure to
recruit such personnel or the loss of existing personnel could
adversely affect our business. We do not carry key person life
insurance on our executives or other key personnel.
Highly Volatile Stock Price; Potential Fluctuations in Future
Quarterly Results
The market price of our common stock has been, and may continue
to be, highly volatile. The future price of the common stock is
likely to be significantly influenced by results of our sales and
marketing programs, the outcome of clinical trials by us or our
competitors, concern about the safety or efficacy of our products
or our competitors' products, announcements of technological
innovations or new products, changes in governmental regulation,
changes in healthcare legislation, developments in our patent
or other proprietary rights or the rights of our competitors,
fluctuations in our operating results, and general market and economic
conditions.
We expect our operating results to fluctuate significantly
from quarter to quarter in the future. A number of factors may cause
this fluctuation, including the rate and extent of domestic
and international market acceptance of the AutoPap Screener; the
mixture of fee-per-use and sale contracts; the timing and scope of
clinical studies and corresponding regulatory submissions; the
timing of domestic and foreign regulatory approvals; the level of
research and development spending required for product enhancements
and development of new technologies; the timing of approvals
for AutoPap reimbursement; and the introduction and market acceptance
of competing products or technologies.
Year 2000 Issue
We need to modify or replace certain portions of our internal
systems and product software and certain hardware so that those
systems will properly recognize dates beyond December 31, 1999.
However, we have identified no significant Year 2000 issues that
cannot be resolved through software or hardware upgrades that are
currently available or expected to be available soon. We are using
our existing internal resources to reprogram or replace noncompliant
internal systems and product hardware and software. We do not expect
the total cost of the Year 2000 project to be material. We plan to
complete the project by mid-1999.
We have asked our significant suppliers and subcontractors about
their Year 2000 compliance status. To date, we are not aware of any
external agent with Year 2000 problems that would materially affect
our results of operations, liquidity, or capital resources. However,
we have no means of ensuring that these agents will be Year 2000
ready. If our suppliers and subcontractors do not complete their Year
2000 resolution process in a timely fashion we could face significant
business interruptions that could harm our business. We cannot
accurately predict the effect of non-compliance by external agents.
We believe that we have developed an effective program to resolve
the Year 2000 issues within our control in a timely manner. With
modifications to NeoPath's products, existing internal software and
conversions to new software, the Year 2000 Issue should not pose
significant operational problems for our computer systems. However,
if we or others do not make necessary modifications and conversions,
or do not complete them on time, the Year 2000 Issue could disrupt
NeoPath's operations and materially affect its business, financial
condition, and results of operations.
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<PAGE>
SELLING SHAREHOLDERS
The following table presents information regarding the selling
shareholders and the number of shares they may offer by this
prospectus.
Shares That May Shares Beneficially
Be Sold Owned After Offering
____________________ _____________________
Shares Percentage Percentage
Benefic- of of
ially Owned Common Common
Prior to Stock Stock
Name of Shareholder Offering Amount Outstanding Amount Outstanding
__________________ _________ _________ ___________ _______ ___________
The Kaufmann Fund, 2,071,000 1,821,000 10.5% 250,000 1.4%
Inc.
Capital Research 1,121,400 500,000 2.9% 621,400 3.6%
and Management
Company on behalf
of SmallCap World
Fund, Inc.
The Jenifer Altman 21,000 7,000 * 14,000 *
Foundation
Alza Corporation 21,000 6,000 * 15,000 *
Retirement Plan
Dean Witter 21,000 6,000 * 15,000 *
Foundation
The Ferris Hamilton 15,000 5,000 * 10,000 *
Family Trust
John J. & Catherine 4,000 4,000 * -- *
H. Kayola
Arthur D. Little 160,000 60,000 * 100,000 *
Employee Investment
Plan
The Magee/Bernhard LLC 43,000 18,000 * 25,000 *
The Meehan Investment 16,000 4,000 * 12,000 *
Partnership I, L.P.
Margaret M. Legacy 21,000 6,000 * 15,000 *
NFIB Employee 32,000 12,000 * 20,000 *
Pension Trust
NFIB Corporate 28,000 15,000 * 13,000 *
Account
Norwalk Employees' 72,000 12,000 * 60,000 *
Pension Plan
Public Employee 270,000 120,000 * 150,000 *
Retirement System
of Idaho
Roanoke College 26,000 6,000 * 20,000 *
The A & JS Family LLC 27,000 11,000 * 16,000 *
City of Stamford 53,000 18,000 * 35,000 *
Firemen's Pension
Fund
State of Oregon 840,000 240,000 1.4% 600,000 3.5%
PERS/ZCG
Van Loben Sels 21,000 5,000 * 16,000 *
Foundation
The A & SW Family LLC 27,700 12,000 * 15,700 *
Wells Family LLC 31,000 6,000 * 25,000 *
Wolfson Investment 26,000 6,000 * 20,000 *
Partners LP
_________ _________ _____ _________ _____
4,968,100 2,900,000 16.7% 2,068,100 11.9%
_________
* Less than 1%
- -10-
<PAGE>
None of the selling shareholders has had any material
relationship with NeoPath or its affiliates within the past three
years. The selling shareholders purchased all of the shares from
NeoPath in a private transaction on February 9, 1999. All of the
shares were "restricted securities" under the Securities Act prior to
this registration.
The selling shareholders have represented to us that they
purchased the shares for their own account for investment only and not
with a view towards selling or distributing them, except pursuant to
sales registered under the Securities Act or exemptions. NeoPath
agreed with the selling shareholders to file the registration
statement to register the resale of the shares. NeoPath agreed to
prepare and file all necessary amendments and supplements to the
registration statement to keep it effective until the earlier of (1)
February 9, 2001 and (2) the date on which the selling shareholders
have sold all the shares.
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling
shareholders and their successors (including donees and pledgees, who
may sell shares they receive from the selling shareholders after the
date of this prospectus). The selling shareholders or their
successors may sell all of the shares from time to time in
transactions in the over-the-counter market through Nasdaq, or on one
or more other securities markets and exchanges, in privately
negotiated transactions or through writing options on the shares.
They may sell the shares at fixed prices that may change, at market
prices prevailing at the time of sale, at prices relating to
prevailing market prices or at negotiated prices. The selling
shareholders may sell the shares to or through broker-dealers. These
broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the selling shareholders and/or the
purchasers.
The selling shareholders have advised us that they have not
entered into any agreements, understandings or arrangements for the
sale of the shares with any underwriters or broker-dealers and that no
underwriter or coordinating broker is now acting in connection with
the proposed sale of shares.
NeoPath will not receive any proceeds from the sale of the shares
by the selling shareholders. NeoPath may suspend use of this
prospectus under certain circumstances.
The selling shareholders and broker-dealers who assist in the
sale of the shares may be "underwriters" within the meaning of
Section 2(11) of the Securities Act. Any commissions or profit they
earn on any resale of the shares may be underwriting discounts and
commissions under the Securities Act. Selling shareholders who are
"underwriters" within the meaning of Section 2(11) of the Securities
Act will be subject to the prospectus delivery requirements of the
Securities Act. We have informed the selling shareholders that the
anti-manipulative provisions of Regulation M of the Exchange Act may
restrict their sales in the market.
NeoPath will pay all expenses (other than selling commissions and
fees and stock transfer taxes) of the registration and sale of the
shares. NeoPath also has agreed to indemnify the selling shareholders
and broker-dealers who assist in the sale of the shares against
certain liabilities, including liabilities under the Securities Act.
The selling shareholders may indemnify any agent, dealer or broker-
dealer that assists them in selling the shares against certain
liabilities, including liabilities arising under the Securities Act.
We cannot guarantee that the selling shareholders will sell any
or all of the shares.
VALIDITY OF COMMON STOCK
Perkins Coie LLP, Seattle, Washington, will provide NeoPath with
an opinion as to legal matters in connection with the common stock
offered by this prospectus.
- -11-
<PAGE>
EXPERTS
The financial statements of NeoPath, Inc. incorporated by
reference in NeoPath, Inc.'s Annual Report (Form 10-K) for the year
ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon
incorporated by reference therein and incorporated herein by
reference. Such financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
- -12-
<PAGE>
======================================================================
We have not authorized any person to give you any information or to
make any representations other than those contained in this
prospectus. You should not rely on any information or representations
other than this prospectus. This Prospectus is not an offer to sell
or a solicitation of an offer to buy any securities other than the
common stock. It is not an offer to sell or a solicitation of an
offer to buy securities if the offer or solicitation would be
unlawful. The affairs of NeoPath may have changed since the date of
this prospectus. You should not assume that the information in this
prospectus is correct at any time subsequent to its date.
____________________
======================================================================
2,900,000 Shares
NEOPATH, INC.
Common Stock
______________
PROSPECTUS
______________
February 12, 1999
=================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts payable, by the registrant in connection with
the sale of common stock being registered. All amounts are estimates
except the SEC registration fee and the Nasdaq National Market
additional listing fee.
SEC registration fee $ 4,233
Nasdaq National Market listing fee 17,500
Legal fees and expenses 15,000
Accounting fees and expenses 5,000
Miscellaneous fees and expenses 10,000
________
Total $ 51,733
========
Item 15. Indemnification of Directors and Officers
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board
of directors to grant, indemnification to directors and officers on
terms sufficiently broad to permit indemnification under certain
circumstances for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act"). Section 10 of the
registrant's Bylaws provides for indemnification of the registrant's
directors, officers, employees and agents to the maximum extent
permitted by Washington law.
Section 23B.08.320 of the Washington Business Corporation Act
authorizes a corporation to limit a director's liability to the
corporation or its shareholders for monetary damages for acts or
omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate
loans or distributions, or any transaction from which the director
personally receives a benefit in money, property or services to which
the director is not legally entitled. Article 8 of the registrant's
Articles of Incorporation contains provisions implementing, to the
fullest extent permitted by Washington law, such limitations on a
director's liability to the registrant and its shareholders.
<PAGE>
Item 16. Exhibits
5.1 Opinion of Perkins Coie LLP, counsel to the registrant,
regarding the legality of the Common Stock
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Perkins Coie LLP (contained in Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
Item 17. Undertakings
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating
to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
D. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this 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
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, 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, thereunder duly authorized, in the City of Redmond, State
of Washington, on the 12th day of February, 1999.
NeoPath, Inc.
/s/ ALAN C. NELSON
___________________
By: Alan C. Nelson
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby
authorizes Alan C. Nelson and Robert C. Bateman, or either of them, as
attorneys-in-fact with full power of substitution, to execute in the
name and on the behalf of each person, individually and in each
capacity stated below, and to file, any and all amendments to this
Registration Statement, including any and all post-effective
amendments, and any related Rule 462(b) Registration Statement and any
amendment thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 12th day of February, 1999.
Signature Title
_________ _____
/s/ ALAN C. NELSON Chairman, President, Chief
_______________________ Executive Officer, and Director
Alan C. Nelson (Principal Executive Officer)
/s/ ROBERT C. BATEMAN Vice President, Finance, Chief
_______________________ Financial Officer, Treasurer and
Robert C. Bateman Secretary (Principal Financial and
Accounting Officer)
/s/ THOMAS A. BONFIGLIO Director
_______________________
Thomas A. Bonfiglio
/s/ CRISTINA H. KEPNER Director
_______________________
Cristina H. Kepner
/s/ WALTER L. ROBB Director
_______________________
Walter L. Robb
/s/ WILLIAM L. SCOTT Director
_______________________
William L. Scott
/s/ DAVID A. THOMPSON Director
_______________________
David A. Thompson
/s/ GAIL R. WILENSKY Director
_______________________
Gail R. Wilensky
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3) and related
Prospectus of NeoPath, Inc. for the registration of 2,900,000 shares
of its common stock and to the incorporation by reference therein of
our report dated January 21, 1998, with respect to the financial
statements of NeoPath, Inc. incorporated by reference in its Annual
Report (Form 10-K) for the year ended December 31, 1997, filed with
the Securities and Exchange Commission.
ERNST & YOUNG LLP
Seattle, Washington
February 12, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
Number
_____
5.1 Opinion of Perkins Coie LLP, counsel to the
registrant, regarding the legality of the Common
Stock
23.1 Consent of Ernst & Young LLP, independent
auditors
23.2 Consent of Perkins Coie LLP (contained in
Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
[Perkins Coie LLP Letterhead]
February 12, 1999
NeoPath, Inc.
8271 - 154th Avenue NE
Redmond, WA 98052
Ladies and Gentlemen:
We have acted as counsel to you in connection with the
proceedings for the authorization and issuance by NeoPath,
Inc. (the "Company") of 2,900,000 shares (the "Shares") of the
Company's common stock, $.01 par value per share (the "Common
Stock"), and the preparation and filing of a registration
statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"),
which you are filing with the Securities and Exchange
Commission with respect to the resale of the Shares.
We have examined the Registration Statement and such
documents and records of the Company and other documents as we
have deemed necessary for the purpose of this opinion. Based
on and subject to the foregoing, we are of the opinion that
the Shares have been duly authorized and are validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and any amendment
thereto, including any and all post-effective amendments and
any registration statement relating to the same offering that
is to be effective upon filing pursuant to Rule 462(b) under
the Securities Act, and to the reference to our firm in the
Prospectus of the Registration Statement under the heading
"Validity of Common Stock." In giving such consent, we do not
thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Perkins Coie LLP
____________________
