AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1997
REGISTRATION NO. 333-26237
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 2
To
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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MILESTONE SCIENTIFIC INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-309811
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
220 South Orange Avenue
Livingston Corporate Park
Livingston, New Jersey 07039
(201) 535-2717
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Executive Offices)
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Leonard Osser
Milestone Scientific Inc.
220 South Orange Avenue
Livingston Corporate Park
Livingston, New Jersey 07039
(201) 535-2717
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Please send copies of all correspondence to:
Stephen A. Zelnick, Esq.
Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue
New York, New York 10022-2605
Telephone No. (212) 838-8040
Fax No. (212) 838-9190
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
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If the only securities being registered on this Form are to be 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|.
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, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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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.
SUBJECT TO COMPLETION, DATED JULY 23, 1997
PROSPECTUS
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2,274,976 Shares
MILESTONE SCIENTIFIC INC.
Common Stock, $.001 Par Value
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This Prospectus relates to the public offering of shares (the "Shares") of
Common Stock (the "Common Stock") of Milestone Scientific Inc. (the "Company")
which may be offered by certain stockholders and warrant-holders (collectively
the "Selling Stockholders"). Certain of the Shares offered are issuable to
Selling Stockholders upon exercise of various warrants (collectively referred to
as "Warrants") to purchase Shares of the Company. Sales of the Shares may be
effected from time to time in transactions (which may include block
transactions) on the Nasdaq SmallCap Market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale or at negotiated prices. None of
the Selling Stockholders has entered into agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
Shares. The Selling Stockholders may effect such transactions by selling their
Shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholders and/or
the purchasers of the Shares for whom such broker/dealers may act as agents or
to whom they sell as principals, or both (which compensation as to a particular
broker/dealer might be in excess of customary commissions). See "Plan of
Distribution."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company; however, the Company will receive
the exercise price of any Warrants that are exercised. There is no assurance
that any Warrants will be exercised resulting in any proceeds to the Company.
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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
See "Risk Factors" at page 5.
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The Shares are traded over-the-counter and are quoted through the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on the
SmallCap Market System under the symbol "WAND." On July 22, 1997 the last sales
price of the Shares on the NASDAQ SmallCap System was
$6.875.
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The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, as amended (the "Securities Act"). The Selling Stockholders may agree to
indemnify any agent, dealer, or broker-dealer that participates in transactions
involving sales of the securities against certain liabilities, including
liabilities arising under the Securities Act.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is July , 1997.
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No person has been authorized to give any information or to make any
representations other than those contained in this prospectus in connection with
the offering made hereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or by any other person. Neither the delivery of this prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy the shares to any person or by anyone in any jurisdiction in which such
offer or solicitation may not lawfully be made.
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AVAILABLE INFORMATION
The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, Suite 1300, New York, New York 10048. Such
reports, proxy statements and other information may also be obtained from the
web site that the Commission maintains at http://www.sec.gov. Copies of these
materials can also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal offices in Washington, D.C., set
forth above.
The Company has filed a Registration Statement on Form S-3 (including all
amendments and supplements thereto, the "Registration Statement") with the
Commission under the Securities Act with respect to the Shares offered hereby.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits filed therewith, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained herein
concerning the provisions of such documents are not necessarily complete and, in
each instance, reference is made to the Registration Statement or to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference. Copies of the Registration Statement and the exhibits thereto
can be obtained upon payment of a fee prescribed by the Commission or may be
inspected free of charge at the public reference facilities and regional offices
referred to above.
REPORTS TO SECURITY HOLDERS
The Company intends to furnish to its stockholders annual reports
containing audited financial statements. In addition, the Company is required to
file periodic reports on Forms 8-K, 10-QSB and 10-KSB with the Commission and
make such reports available to its stockholders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
(1) Annual Report on Form 10-KSB, as amended (the "Form 10-KSB") for the
fiscal year ended December 31, 1996 filed pursuant to the Exchange
Act;
(2) Current Report on Form 8-K, dated March 13, 1997 filed pursuant to
the Exchange Act; and
(3) Quarterly Report on Form 10-QSB for the quarter ended March 31, 1997
filed pursuant to the Exchange Act.
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Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the date of the filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document incorporated
by reference in this Prospectus (other than exhibits unless such exhibits are
specifically incorporated by reference in such documents). Requests should be
directed to Milestone Scientific Inc., 220 South Orange Avenue, Livingston
Corporate Park, Livingston, New Jersey 07039, (201) 535-2717 Attention: Leonard
Osser, President.
THE COMPANY
The Company was organized in August 1989 under the laws of Delaware. Its
principal executive office is located at 220 South Orange Avenue, Livingston
Corporate Park, Livingston, New Jersey 07039, telephone number (201) 535-2717.
FORWARD-LOOKING STATEMENTS
Certain statements made in or incorporated by reference to this
Registration Statement on Form S-3 are "forward-looking statements" (within the
meaning of the Private Securities Litigation Reform Act of 1995) regarding the
plans and objectives of management for future operations. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. The forward-looking statements made
in or incorporated by reference to this Form are based on current expectations
that involve numerous risks and uncertainties. The Company's plans and
objectives are based, in part, on assumptions involving the growth and expansion
of business. Assumptions relating to the foregoing involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements made in or incorporated by reference to this Form will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements made in or incorporated by reference to this Form,
particularly in view of the Company's early stage of operations, the inclusion
of such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be achieved.
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RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk.
Prospective investors should carefully consider, among other things, the
following factors before a decision is made to purchase any Shares.
All references in this Registration Statement to the Company refer to
Milestone Scientific Inc. (formerly U.S. Opportunity Search, Inc.), its wholly
owned subsidiaries, Princeton PMC, Inc. ("Princeton PMC") and Sagacity I, Inc.,
doing business in the United States as the Wisdom Toothbrush Co. ("Wisdom"), and
its 69% owned subsidiary, Spintech, Inc. ("Spintech"), unless the context
otherwise indicates.
Limited Operating History; History of Losses; Accumulated Deficit. The
Company has operated only since November 1995, when it acquired a 65% interest
in Spintech. Since that date, revenues have been limited and were $3,473 for the
fiscal year ended December 31, 1995 and $302,388 for the fiscal year ended
December 31, 1996. Revenues for the three months ended March 31, 1997 were
$760,123 compared to $74,358 for the three months ended March 31, 1996. The
Company sustained losses of $619,831 and $1,949,528 for the years ended December
31, 1995 and 1996, respectively, and losses of $333,442 and $696,028 for the
three months ended March 31, 1996 and 1997, respectively. The Company had an
accumulated deficit of 3,432,380 at March 31, 1997.
Limited Financial Resources; Need for Additional Financing. The Company's
capital requirements have been and will continue to be significant. The Company
did not operate profitably in 1996 and there can be no assurance that the
Company will be able to generate cash flows in the future which will be
sufficient to fund its operations. Assuming no change in the business operations
of the Company, it is expected that the $3,505,964 proceeds (after certain
offering expenses) from the private placement consummated on March 13, 1997 (the
"Private Placement") will be sufficient to meet its working capital requirements
until, at least, April 1998. However, no assurance can be given that the
Company's current working capital will be adequate for its planned operations or
that circumstances will not change and result in the need for additional working
capital. If additional financing is needed, the Company will be required to
borrow funds or, sell additional equity securities, or may be required to
curtail or reduce its activities. The Company has no current arrangements for
future additional financing. There can be no assurance that any sources of
additional financing will be available to the Company on acceptable terms, or at
all. To the extent that any future financing involves the sale of the Company's
equity securities, the ownership interest of the Company's then-stockholders
could be substantially diluted.
Highly Competitive Industry; Technological and Product Obsolescence. The
Company faces intense competition from many companies in the medical and dental
device industry, including well-established academic institutions, possessing
substantially greater financial, marketing, personnel, and other resources. Most
of the Company's competitors have established reputations, stemming from their
success in the development, sale, and service of their competing medical
products. Further, rapid technological change and extensive research and
development characterize the industry. Current or new competitors could, at any
time, introduce new or enhanced products with features that render the Company's
products less marketable, or even obsolete. Therefore, the Company must devote
substantial efforts and financial resources to enhance its existing products, to
bring its developmental products to market, and to develop new products for its
related markets. In order to compete successfully, the Company must establish an
effective distribution network. Several regulatory authorities must also approve
the Company's products before they may be marketed. There can be no
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assurance that the Company will be able to compete successfully, that its
competitors will not develop technologies or products that render the Company's
products less marketable or obsolete, or that the Company will be able to
successfully enhance its existing products, effectively develop new products, or
obtain required regulatory approval therefor.
Integration of Wisdom. Although the Company acquired Wisdom and its United
States distribution system for clinically oriented dental products and Wisdom is
an ongoing business with established revenues, there can be no assurance that
the Company will successfully integrate it into its current operations and
operate it profitably.
Future Revenue Growth Dependent on Proprietary Products. The Company
believes that its future growth in revenues will be dependent on its proprietary
products, The Sharps Disposal System ("SDS"), "SplatrFree(TM)" disposable prophy
angle and "The Wand(TM)", a computer controlled "painless" injection system. The
Company only has had limited sales of the SDS and the "SplatrFree(TM)" prophy
angle. The sale and use of the SDS unit and its precursor the TAPS unit and the
disposal of medical waste after processing by these units is subject to varying
degrees of federal, state, local and foreign regulation. Although the Company
has made sales of these units in the past, and believes that it will be able to
sell the SDS unit in the future, because of these regulations, no assurance can
be given that the SDS unit will be available for sale in a particular
jurisdiction or may be used by a purchaser, and no assurance can be given that
the Company will generate any significant revenues from this product in the
future. Further, there can be no assurance that the Company will be able to
successfully market these product lines, that demand exists at levels or prices
at which the Company can operate profitably, or that the products will meet user
expectations. The Company is still developing the commercial version of "The
Wand(TM)" and intends to launch this product at the Fall 1997 American Dental
Association Trade Show. No assurance can be given that "The Wand(TM)" will be
successfully marketed by the Company or accepted by the market place.
Uncertainty of Market Acceptance. Achieving market acceptance for the
Company's proprietary products will require substantial marketing efforts and
expense. As with any new technology, there is substantial risk that the
marketplace will not accept the potential benefits of such technology or be
willing to pay for any cost differential with the existing technologies. Market
acceptance of these current and proposed products will depend, in large part,
upon the ability of the Company to educate potential customers, including
third-party distributors, of the distinctive characteristics and benefits of its
products. There can be no assurance that current or proposed products will be
accepted by the end users or that any of the current or proposed products will
be able to compete effectively against current and alternative products.
Limited Distribution; Establishing Distribution Channels. The Company has
only a limited number of independent domestic sales representatives and did not
have a direct sales force until its acquisition of Wisdom in December 1996. Its
sales force remains limited. In December 1996, the Company began distribution of
the SDS and in February 1997 began distribution of its prophy angles through its
Wisdom subsidiary. In addition, while the Company has an exclusive distribution
agreement for the marketing of the SDS in Taiwan, it does not expect any
material sales pursuant thereto until that system is approved for sale in
Taiwan. The Company's future success is dependent upon its ability to establish
an effective sales organization for its proprietary products or to enter into
distribution arrangements with other entities selling to its target markets. No
assurances can be given that the Company will be able to hire and retain its own
sales force or enter into appropriate distribution arrangements.
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Patent and Intellectual Property Protection. The Company holds U.S.
patents applicable to the SDS and "The Wand(TM)" and has made application for a
U.S. patent on the "SplatrFree(TM)" prophy angle. The Company relies on a
combination of patent, trade secret, and trademark laws and employee and
third-party nondisclosure agreements to protect its intellectual property
rights. Despite the precautions taken by the Company to protect its products,
unauthorized parties may attempt to reverse engineer, copy, or obtain and use
its products and other information the Company regards as proprietary.
Litigation may be necessary to protect the Company's intellectual property
rights and could result in substantial cost to, and diversion of effort by, the
Company with no guarantee of success. The failure of the Company to protect its
proprietary information, and the expense of doing so, could have a material
adverse effect on the Company's operating results and financial condition.
Although the Company has received no claims of infringement, it is possible that
infringement of existing or future patents or proprietary rights of others may
occur. In the event that the Company's products infringe patent or proprietary
rights of others, the Company may be required to modify its processes or to
obtain a license. There can be no assurance that the Company would be able to do
so in a timely manner, upon acceptable terms and conditions, or at all. The
failure to do so would have a material adverse effect on the Company.
Dependence on Manufacturers; Quality Control Problems. The SDS units and
"SplatrFree(TM)" prophy angles are manufactured by separate domestic contract
manufacturers, Arbutus Electronics, Inc. ("Arbutus") and Team Technologies, Inc.
("TTI"), respectively. The Company has no on-going agreement for the manufacture
of the SDS units, although it expects Arbutus to continue to manufacture such
units. In July 1995, the Company entered into an agreement with TTI for the
production of "SplatrFree(TM)" prophy angles, pursuant to which commercial
quantities were to be delivered commencing in late September. Quality control
problems experienced at TTI delayed delivery of commercial quantities of product
until February 1997 when the Company began to receive prophy angles for
distribution. Termination of the manufacturing relationship with Arbutus or TTI
could significantly and adversely affect the Company's ability to produce and
sell its SDS units and prophy angle, respectively. Though alternate sources of
supply exist and new manufacturing relationships could be established by the
Company for the SDS and prophy angle, the Company would need to recover its
existing tools and dies or have new tools and dies produced. Establishment of
new manufacturing relationships could involve significant expense and delay. Any
curtailment or interruptions of the supply of SDS units from Arbutus, or prophy
angles from TTI, whether or not as a result or termination of the relationship,
would adversely affect the Company. Additionally, the Company has not
established manufacturing relationships for "The Wand(TM)".
Product Liability. The Company is engaged in a business which could expose
it to possible claims for personal injury from the use of its dental and medical
products. The Company maintains liability insurance in the aggregate amount of
$2,000,000 with a per-occurrence limit of $1,000,000 which the Company believes
to be adequate. Although no claims have been made against the Company or any of
the customers using its products, there can be no assurance that such claims
will not arise in the future or that the insurance coverage will be sufficient
to pay such claims. A partially or completely uninsured claim, if successful and
of significant magnitude, could have a material adverse effect on the Company.
Reliance Upon Management. The Company is dependent upon the personal
efforts and abilities of Leonard Osser, its President, Chief Executive Officer
and Chief Financial Officer and Gregory Volok, Executive Vice President and
Chief Operating Officer. Messrs. Osser and Volok have entered into employment
agreements with the Company, as amended, expiring in March 2000 and October
2001, respectively, and each providing for non-competition periods at the
expiration of the
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terms. The Company has obtained key man life insurance in the amounts of
$3,000,000 and $1,000,000 on the lives of Messrs. Osser and Volok, respectively.
While the Company expects that such policies will issue in due course, no
assurances can be given that such policies will be obtained.
Litigation; Change in Officers. On April 10, 1997, the Board of Directors
of Spintech terminated the employment of Dr. Ronald Spinello as its Chairman and
Director of Research. The action by the Board follows the bringing by Milestone
and Spintech of legal action against Dr. Spinello in which the plaintiffs seek,
among other things, a declaratory judgment that Dr. Spinello has no personal
rights to certain technology developed while he was employed as Director of
Research of Spintech relating to the design and production of ancillary
components of "The Wand(TM)" and a declaratory judgment that plaintiffs have not
breached Dr. Spinello's employment agreement. Milestone, as principal
stockholder of Spintech, also removed Dr. Spinello and Glenn Spinello as
directors of Spintech. On May 21, 1997, Dr. Spinello filed an Answer and
Counterclaim to the above legal action denying the material allegations of the
complaint and making certain counterclaims, including recovery for breach of Dr.
Spinello's employment agreement. On May 28, 1997, Milestone and Spintech filed a
reply to the counterclaim denying any liability. Milestone has been advised by
its patent counsel that all technology developed by Dr. Spinello while employed
by Spintech is owned by Spintech. Further, the Company believes that ownership
of the technology relating to these ancillary components which are the subject
of this litigation is not required for the manufacture and sale of its
anesthetic delivery system at economically viable prices. See "RECENT
DEVELOPMENTS- Change in Officers" and Item 3 of the Form 10-KSB.
No Dividends. The Company has never paid a cash dividend on its Common
Stock. Payment of dividends on the Common Stock is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition, and other relevant factors. The Company
does not currently intend to declare any dividends on its Common Stock in the
foreseeable future.
Control by Certain Persons. The members of the Board of Directors own
46.6% of the currently outstanding Common Stock. Accordingly, by reason of their
stockholdings, and their control of the means for soliciting stockholder votes,
the directors will be able to exercise control of the Company and, in all
likelihood, will be able to continue to elect all directors.
Limitation of Director Liability. The Company's Certificate of
Incorporation provides that a director of the Company will not be personally
liable to the Company or its stockholders for monetary damages for breach of the
fiduciary duty of care as a director, including breaches which constitute gross
negligence, subject to certain limitations imposed by the Delaware General
Corporation Law. Thus, under certain circumstances, neither the Company nor the
stockholders will be able to recover damages even if directors take actions
which harm the Company.
Government Regulation and FDA Clearance. The manufacture and sale of the
Company's "SplatrFree(TM)" prophy angles and "The Wand(TM)", are subject to
extensive regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic
Act ("FDC Act"), and by other federal, state and foreign authorities. Under the
FDC Act, these medical devices must receive FDA clearance before they can be
commercially marketed in the United States. Some products must undergo rigorous
pre-clinical and clinical testing and an extensive FDA approval process before
they can be marketed. These processes can take a number of years and require the
expenditure of substantial resources. The time required for completing such
testing and obtaining such approvals is uncertain, and FDA clearance may never
be obtained. Delays or rejections may be encountered based upon changes in FDA
policy during
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the period of product development and FDA regulatory review of each submitted
application. Similar delays may also be encountered in other countries. While
the "SplatrFree(TM)" prophy angle and "The Wand(TM)" have received FDA marketing
clearance there can be no assurance that all of the Company's products under
development will obtain the required regulatory clearance on a timely basis, or
at all. If regulatory clearance of a product is granted, such clearance may
entail limitations on the indicated uses for which the product may be marketed.
In addition, modifications may be made to the Company's products to incorporate
and enhance their functionality and performance based upon new data and design
review. There can be no assurance that the FDA will not request additional
information relating to product improvements, that any such improvements would
not require further regulatory review thereby delaying the testing, approval and
commercialization of the Company's development products or that ultimately any
such improvements will receive FDA clearance. FDA regulations also require
manufacturers of medical devices to adhere to certain "Good Manufacturing
Practices" ("GMP"), which include testing, design, quality control and
documentation procedures. Compliance with applicable regulatory requirements is
subject to continual review and will be monitored through periodic inspections
by the FDA. Later discovery of previously unknown problems with a product,
manufacturer, or facility may result in restrictions on such product or
manufacturer, including fines, delays or suspensions of regulatory clearances,
seizures or recalls of products, operating restrictions and criminal prosecution
and could have a material adverse effect on the Company. See "Business -
Government Regulation."
Limitation of Tax Loss Carryforward Benefits. As of November 13, 1995,
when the Company acquired a controlling interest in Spintech, the amount of net
operating loss of Spintech available to be carried forward to offset future
taxable income for United States tax purposes ("NOLs") was approximately
$1,890,000. These NOLs expire on various dates through December 31, 2009. The
Company believes that its acquisition of a controlling interest in Spintech
resulted in an "ownership change," as defined in Section 382 of the Internal
Revenue Code of 1986, as amended (the "Code"). As a consequence, the Company
believes that Spintech's NOLs to offset United States taxable income are, in
addition to the carryforward limitations described above, subject to an annual
limitation equal to the fair market value of Spintech immediately before the
ownership change, multiplied by the "long-term tax-exempt rate" as defined in
Section 382 of the Code, or approximately $235,750 per year. The limitation on
the utilization of the NOLs could increase the federal income taxes payable by
the Company if Spintech operates profitably, as to which no assurance can be
given.
Restricted Securities; Possible Volatility of Market Price; Limited Public
Market Trading. The Common Stock is currently traded on The Nasdaq SmallCap
Market. From time to time the market prices of dental and medical product
companies have been affected by various factors, including adverse publicity.
There can be no assurance that the market price of the Common Stock will not be
volatile as a result of factors such as the Company's financial results,
possible adverse publicity resulting from any infractions of governmental
regulations and various other factors affecting dental and medical product
companies or the market generally. In recent years the stock market has
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. Although the Common Stock has been listed on The
Nasdaq SmallCap Market since November 1995, there can be no assurance that a
regular trading market will be sustained. Further, in order to continue to trade
on The Nasdaq SmallCap Market, the Company must meet The Nasdaq SmallCap
Market's standards for continued listing. If, at any time, the Company's Common
Stock were delisted from The Nasdaq SmallCap Market, the Company's securities
would become subject to the "penny stock rules" applicable to non-Nasdaq
companies whose common stock trades at less than $5.00 per share or which have
tangible net worth of less than $5,000,000 ($2,000,000 if the Company has been
operating for three or more years). Such rules require, among other things, that
brokers who
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trade "penny stocks" to persons other than "established customers" complete
certain documentation, make suitability inquiries of investors and provide
investors with certain information concerning trading in the security, including
a risk disclosure document and quote information under certain circumstances.
Many brokers have decided not to trade "penny stock" because of the requirements
of the penny stock rules and, as a result, the number of broker-dealers willing
to act as market makers in such securities is limited.
Effect of Outstanding Warrants and Options. The Company currently has
outstanding the following options and warrants: (i) Warrants to purchase an
aggregate of 150,000 Shares at $6.00 per share issued to the underwriter in the
Company's November 1995 public offering and two bridge lenders (the "1995
Warrants"); (ii) Warrants to purchase 250,000 Shares granted to GKN Securities
Corp. ("GKN") for services rendered to the Company (the "1996 Warrants"); (iii)
Warrants to purchase 852,262 Shares issued to investors in the Private Placement
(the "Private Placement Warrants"); (iv) an option (the "Purchase Option") to
purchase 85,226 units (each unit containing one Share and one Warrant to
purchase one Share (the "Units")) granted to GKN, as placement agent (the
"Placement Agent") in the Private Placement (defined below) and its designees;
and (v) incentive and non-qualified stock options issued to officers, directors
and consultants to purchase 355,000 shares of Common Stock at prices ranging
from $5.125 to $6.50 per share until March 2002. All of the foregoing securities
represent the right to acquire Common Stock of the Company during various
periods of time and at various prices. Holders of all the foregoing securities
are given the opportunity to profit from a rise in the market price of the
Common Stock and are likely to exercise their securities at a time when the
Company would be able to obtain additional equity capital on more favorable
terms. Thus, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of outstanding
options and warrants can be expected to exercise them at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than the exercise terms provided by such outstanding
securities. The Company has not granted any registration rights with respect to
any shares of Common Stock or other securities that are "restricted securities"
or that underlie outstanding warrants or options, other than the registration
rights granted to investors in the Private Placement, to the Placement Agent, to
the holders of the 1996 Warrants and to the holders of the 1995 Warrants.
USE OF PROCEEDS
All 2,274,976 Shares offered hereby are being registered for the account
of the Selling Stockholders. The Company will not receive any of the proceeds
from the sale of the Shares.
10
<PAGE>
RECENT DEVELOPMENTS
Private Offering.
On March 13, 1997, the Company completed a private equity offering (the
"Private Placement") to 76 accredited investors of 852,262 Units pursuant to an
Agency Agreement (the "Agency Agreement") with the Placement Agent. The per-Unit
offering price was $4.72, and each Unit consisted of one Share and one Warrant
to purchase one Share at an exercise price of $4.72 per Share until March 13,
2000. The Company received net proceeds of $3,505,964.
Each subscriber in the Private Placement had agreed not to sell any Shares
acquired in the Private Placement or upon exercise of the Private Placement
Warrants for a period ending on March 13, 1998 without the prior written consent
of the Placement Agent, which could be withheld for any reason in its sole
discretion. The Placement Agent, prior to the effective date of the Registration
Statement of which this Prospectus forms a part, released all of the subscribers
from this restriction on the sale of their Shares.
The Company is unable to estimate the number of Warrants included herein
that may be exercised. The Company believes that the exercise of the Warrants
will be dependent primarily on the market price of a share of Common Stock at
the time of exercise and its relation to their exercise price. However, if all
the Warrants to purchase Shares included herein are exercised the Company will
issue: 852,262 Shares upon exercise of the Private Placement Warrants, 85,226
Shares upon exercise of the Purchase Option for the purchase of 85,226 Units,
85,226 Shares upon exercise of Warrants underlying the Purchase Option, 250,000
Shares upon exercise of the 1996 Warrants and 150,000 Shares upon exercise of
the 1995 Warrants and receive aggregate gross proceeds of $7,352,210. See
"Selling Stockholders."
Registration Rights.
Under the terms of the Agency Agreement and the subscription agreement
with each investor in the Private Placement, the Company has agreed to register
the re-offer and re-sale of the Shares included in the Units and the Shares
underlying the Warrants included in the Units, and certain other securities of
the Company described below, by filing the Registration Statement of which this
Prospectus is a part under the Securities Act with the Commission and the
securities laws of states reasonably selected by the Placement Agent. The
Company will bear all the expenses and pay all the fees incurred in connection
with the preparation, filing and modification or amendment of the Registration
Statement
Agency Agreement.
The Company paid the Placement Agent a commission of $402,250 (10% of the
offering price of the Units) and a non-accountable expense allowance of $120,675
(3% of the offering proceeds). The Company has issued to the Placement Agent and
its designees for $100.00 a five-year Purchase Option to purchase 85,226 Units.
The Purchase Option is exercisable at any time in whole or in part until March
13, 2002, at a price per Unit of $4.72. The Units underlying the Purchase Option
contain identical terms, conditions and rights as those Units sold in the
Private Placement. All Shares underlying the Purchase Option are being included
in the Registration Statement.
11
<PAGE>
The Placement Agent has been granted a right of first refusal to
underwrite any public or private sale of debt or equity securities of the
Company or any subsidiary or successor of the Company until March 13, 1999. In
addition, pursuant to the Agency Agreement, all of the officers and directors of
the Company, and affiliates of such persons ("Insiders") have agreed that until
March 13, 1999, the Placement Agent has the right, in certain circumstances, to
purchase for its account or sell for the account of the Insiders, any securities
sold by such persons. The Agency Agreement provides that for a period of three
years from March 13, 1997, the Company will recommend and use its best efforts
to elect a designee of the Placement Agent as a member of its Board of
Directors. The Placement Agent has not exercised its right to designate such a
person. Such designee will receive no more or less compensation than is paid to
other non-management directors of the Company and such designee or
representative will be entitled to receive reimbursement for all reasonable
costs incurred in attending such meeting.
The Company has engaged the Placement Agent, on a non-exclusive basis, as
its agent for the solicitation of the exercise of the Private Placement
Warrants. To the extent not inconsistent with the guidelines of the NASD and the
rules and regulations of the Commission, the Company has agreed to pay the
Placement Agent for bona fide services rendered, a commission equal to 5% of the
exercise price for each Private Placement Warrant and each Warrant underlying
the Purchase Option exercised if the exercise was solicited by the Placement
Agent. In addition to soliciting, either orally or in writing, the exercise of
the Private Placement Warrants, such services may also include disseminating
information, either orally or in writing, to Private Placement Warrant holders
about the Company or the market for the Company's securities, and assisting in
the processing of the exercise of the Private Placement Warrants. No
compensation will be paid to the Placement Agent in connection with the exercise
of the Private Placement Warrants if the market price of the underlying Shares
is lower than the exercise price, the Private Placement Warrants are held in a
discretionary account, the Private Placement Warrants are exercised in an
unsolicited transaction, the Private Placement Warrant holder has not confirmed
in writing that the Placement Agent solicited such exercise or the arrangement
to pay the commission is not disclosed to Private Placement Warrant holders at
the time of exercise. In addition, unless granted an exemption by the Commission
from Regulation M, while it is soliciting exercise of the Private Placement
Warrants, the Placement Agent will be prohibited from engaging in any market
activities or solicited brokerage activities with regard to the Company's
securities unless the Placement Agent has waived its rights to receive a fee for
the exercise of the Private Placement Warrants.
Change in Officers
On April 10, 1997, the Board of Directors of Spintech, Inc. ("Spintech"),
a subsidiary of Milestone Scientific Inc., terminated the employment of Dr.
Ronald Spinello as its Chairman and Director of Research. The action by the
Board follows the bringing by Milestone and Spintech of a declaratory judgment
action against Dr. Spinello filed in U.S. District Court for New Jersey.
Milestone, as principal shareholder of Spintech, also terminated Dr. Spinello
and Glenn Spinello as directors of Spintech. See Item 3. of the Form 10-KSB.
On May 21, 1997, Dr. Spinello filed an Answer and Counterclaim in the
legal action brought by Milestone and Spintech, which denies the material
allegations of the complaint and seeks recovery for breach of Dr. Spinello's
employment agreement, initiates a derivative action against Milestone with
respect to various expenditures and actions for which Dr. Spinello, on behalf of
Spintech, seeks an amount in excess of $75,000, alleges civil conspiracy against
Milestone with respect to certain of those
12
<PAGE>
matters and the entry into the employment agreement with Dr. Spinello and seeks
indemnification for expenses, including attorneys fees, in the pending action.
On May 28, 1997, Milestone and Spintech filed a reply to the counterclaim
denying any liability.
Appointment of New Directors.
On March 20, 1997 the Company expanded the Board of Directors from six to
nine members and elected, effective as of April 2, 1997, the following directors
for terms expiring at the next Annual Meeting and the election and qualification
of their successors:
Paul Gregory has been a business and insurance consultant at Innovative
Programs Associates Inc. and Paul Gregory Associates since January 1995 and
January 1986, respectively, where he services, among other entities, foreign and
domestic insurance groups, law and accounting firms and international
corporations. From January 1992 to January 1993, Mr. Gregory served as an
appointed Advisor to the Commissioner of Insurance of the state of Louisiana
regarding liquidations, rehabilitations, insurance policy risk transfers and
reinsurance. Mr. Gregory is 62 years old.
Louis I. Margolis has been a General Partner of Pine Street Associates,
L.P., a private investment partnership that invests in other private limited
partnerships, since January, 1994. In January 1997, Mr. Margolis formed and is
the President and sole shareholder of Chapel Hill Capital Corp., a financial
services company. From 1991 through 1993 he was a Member of the Management
Committee of Nomura Securities International. From 1993 through 1995 he was
Chairman of Classic Capital Inc., a registered investment advisor. Mr. Margolis
has been a member of the Financial Products Advisory Committee of the Commodity
Futures Trading Commission since its formation in 1986, a Trustee of the Futures
Industry Institute since 1991 and a Trustee of Saint Barnabas Hospital in
Livingston, NJ since 1994. Mr. Margolis is 53 years old.
Leonard M. Schiller has been a partner in the law firm of Schiller, Klein
& McElroy, P.C. since 1977 and has practiced law in the State of Illinois for
over 25 years. He is also President of The Dearborn Group, a residential
property management and real estate acquisition company. Mr. Schiller is 55
years old. Mr. Schiller is also a member of the Board of Directors of AccuMed
International, Inc., a laboratory diagnostic company.
In accordance with the Company's policy, upon election to the Board of
Directors each of Messrs. Gregory, Margolis and Schiller was granted options to
purchase 20,000 Shares at a price of $5.125 per share (the fair market value on
the date of their election).
13
<PAGE>
SELLING STOCKHOLDERS
The 2,274,976 Shares offered hereby consist of the following (1) 852,262
Shares issued in the Private Placement; (2) 852,262 Shares underlying the
Private Placement Warrants; (3) 85,226 Shares issuable by the Company upon the
exercise of the Purchase Option, (4) 85,226 Shares underlying the Warrants
included in the Purchase Option, (5) 250,000 Shares underlying the 1996 Warrants
and (6) 150,000 Shares underlying 1995 Warrants. The following table sets forth
certain information as of June 30, 1997 and is adjusted to reflect the issuance
of all of the above Shares and the sale of all of the Shares offered hereby.
Unless otherwise indicated, the Selling Stockholders each possess sole voting
and investment power with respect to the Shares shown and none of the Selling
Stockholders has had a material relationship with the Company or any of its
predecessors or affiliates within the past three years.
Percentage
Number of Common Stock to of Common
Shares be Owned Stock Owned
Shares that May After the After
Selling Stockholders Owned (1) Be Sold Offering the Offering
- -------------------- --------- ------- -------- ------------
Ackerman, Richard 10,594 10,594 0 *
ALSA, INC. 21,188 21,188 0 *
Baim, Jerry 10,594 10,594 0 *
Berger, Daniel & 21,188 21,188 0 *
Carolyn
JTWROS
Berland, Joseph 21,188 21,188 0 *
Betoff, Neil (5) 500(2) 500 0 *
Blum, Stanley H. 10,594 10,594 0 *
Buonocore, Richard(5) 2,500(2) 2,500 0 *
Coventry, Brian(5) 1,000(2) 1,000 0 *
Crocker, Thomas J. 10,594 10,594 0 *
Davidson, Jeffrey 10,594 10,594 0 *
de Kanter, Stephen 10,594 10,594 0 *
A. & Charlotte B.
JTWROS
Delaware Charter 10,594 10,594 0 *
Guarantee & Trust
The FBO David
Allan Miller IRA
Rollover
Delaware Charter 10,594 10,594 0 *
Guarantee & Trust
Cust. Lewis M.
Sugarman IRA
c/o James P. Meade
& Associates.
Endelson, Kenneth M. 10,594 10,594 0 *
Etra, Steven 63,560 63,560 0 *
Etra, Jean 10,594 10,594 0 *
Etra, Richard, 21,188 21,188 0 *
Steven, Kenneth &
Bernard
JTWROS
Falabrino, Michael L. 42,374 42,374 0 *
14
<PAGE>
Percentage
Number of Common Stock to of Common
Shares be Owned Stock Owned
Shares that May After the After
Selling Stockholders Owned (1) Be Sold Offering the Offering
- -------------------- --------- ------- -------- ------------
Farber, David E. 15,890 15,890 0 *
Feldman, Charles 21,188 21,188 0 *
Fine, Derek & Debra 5,298 5,298 0 *
JTWROS
Fink, David H. 21,188 21,188 0 *
Fisher, Mark B. 21,188 21,188 0 *
Frazier, Russel K. & 10,594 10,594 0 *
Marjorie D.
JTWROS
Frazier, Susan 10,594 10,594 0 *
Furst, Henry F. 10,594 10,594 0 *
Giebel, Henry & Wilda 10,594 10,594 0 *
JTWROS
GKN Securities 167,728(4) 167,728 0 *
Corp.(3)
Gladstone, Robert (5) 33,522(6) 33,522 0 *
Gladstone, Roger(5) 33,522(6) 33,522 0 *
Goldman, Jay(5) 117,612(7) 117,612 0 *
Goldstein, Nathan(5) 17,046(8) 17,046 0 *
Gottdiener, Ernest 21,188 21,188 0 *
Habberstad Jr., 10,594 10,594 0 *
Howard
Haimovitch, Larry 12,712 12,712 0 *
Hazeltine, Nelson 4,238 4,238 0 *
Hudders, Andrew D. 8,476 8,476 0 *
Jacobs, Norman 10,594 10,594 0 *
Jacobs, Robert L. 21,188 21,188 0 *
Jansen, Raymond(5) 7,500(2) 7,500 0 *
Jelin, Sarah Jane 10,594 10,594 0 *
Kaufman, Richard C. 21,188 21,188 0 *
& Lenart, Elaine J.
JTWROS
Kobren, Steven 10,594 10,594 0 *
Kremins, Michael F. 4,238 4,238 0 *
Kumbatovic, Thomas J. 16,950 16,950 0 *
Landman, David I. 21,188 21,188 0 *
Lauchlan, Alex 10,594 10,594 0 *
Layton, Alan C. & 10,594 10,594 0 *
Penny
JTWROS
Lazarus, Andrew(5) 1,000(2) 1,000 0 *
Lee, Daniel 42,374 42,374 0 *
Link, Richard & 10,594 10,594 0 *
Leslie
JTWROS
Mancino, Thomas E. 10,594 10,594 0 *
Mannix, Kevin 21,188 21,188 0 *
15
<PAGE>
Percentage
Number of Common Stock to of Common
Shares be Owned Stock Owned
Shares that May After the After
Selling Stockholders Owned (1) Be Sold Offering the Offering
- -------------------- --------- ------- -------- ------------
Mark Friedman DDS 81,188(13) 21,188 60,000 1%*
M/P/P & Trust,
Mark J. & Denise
J. Friedman
Trustees
Maybaum, Scott 10,594 10,594 0 *
McIntyre, Alexandra 10,594 10,594 0 *
Meisles, Allen 31,780 31,780 0 *
Moore, Arden D. & 31,780 31,780 0 *
Barbara A.
JTWROS
Morrison, Gerald N. 10,594 10,594 0 *
Nash, Ronald(9) 50,000(10) 50,000 0 *
Novic, Deborah(5) 5,000(2) 5,000 0 *
Nussbaum, David(5) 33,522(6) 33,522 0 *
Patterson Travis, 50,000(10) 50,000 0 *
Inc.(11)
Pequot Scout Fund, LP 105,934 105,934 0 *
Reid, Thomas H. 4,238 4,238 0 *
Renna, Robert & 42,374 42,374 0 *
Marie
JTWROS
Rosen, Andrew 10,594 10,594 0 *
Roth, Ronald H. 21,188 21,188 0 *
Saccomano, Thomas 10,594 10,594 0 *
Schiller, Leonard M. 43,094(12) 10,594 32,5000 *
Schiller, Philip J. 10,594 10,594 0 *
Schiller, Lance M. & 21,188 21,188 0 *
Schwartz, Edward
Tenants in Common
Schwarz, Edward 6,356 6,356 0 *
Shockley, Edward J. 10,594 10,594 0 *
Siegel, Carl E. 10,594 10,594 0 *
Slotnick, Robert 10,594 10,594 0 *
Slucker, Rudy 63,560 63,560 0 *
Some, Steven E. & 10,594 10,594 0 *
Richard M.
JTWROS
Spellman, Eric H. 42,374 42,374 0 *
Steiner, Alan B. 5,294 5,294 0 *
Stone, Joel A. 42,374 42,374 0 *
Supera, Michael 21,188 21,188 0 *
Thalheim, David 21,188 21,188 0 *
The Richard J. 21,188 21,188 0 *
Rosenstock
Rev. Lvg Trust
DTD 03/05/96
Trokel, Michael 31,780 31,780 0 *
16
<PAGE>
Percentage
Number of Common Stock to of Common
Shares be Owned Stock Owned
Shares that May After the After
Selling Stockholders Owned (1) Be Sold Offering the Offering
- -------------------- --------- ------- -------- ------------
Tullman, Philip & 10,594 10,594 0 *
Nancy
JTWROS
Weiss, Ronald (9) 50,000(10) 50,000 0 *
Woodland Partners 42,374 42,374 0 *
Zelin, Leonard B. 84,746 84,746 0 *
The Aries Domestic 74,154 74,154 0 *
Fund, L.P.
The Aries Trust 137,712 137,712 0 *
- ----------
* Less than 1%
(1) Unless otherwise indicated by footnote, half of the Shares owned by each
Selling Stockholder are issuable upon exercise of Private Placement
Warrants at $4.72 per share.
(2) Consists of Shares issuable upon exercise of the 1996 Warrants
(exercisable at $6.50 per Warrant).
(3) Does not include any Shares held in the trading account of the Placement
Agent or by its executive officers.
(4) Consists of (i) 85,228 Shares issuable upon exercise of (A) 42,614
Purchase Options for the purchase of Units consisting of one Share and one
Warrant (exercisable at $4.72 per-Unit) and (B) 42,614 Warrants
(exercisable at $4.72 per-Warrant) contained in the Units and (ii) 82,500
Shares issuable upon exercise of 82,500 1996 Warrants (exercisable at
$6.50 per-Warrant).
(5) Affiliate or associate of GKN. Excludes Shares held by GKN.
(6) Consists of (i) 8,522 Shares issuable upon exercise of (A) 4,261 Purchase
Options for the purchase of Units (exercisable at $4.72 per-Unit)
consisting of one Share and one Warrant and (B) 4,261 Warrants
(exercisable at $4.72 per-Warrant) contained in the Units and (ii) 25,000
Shares issuable upon exercise of 25,000 1996 Warrants (exercisable at
$6.50 per-Warrant).
(7) Consists of (i) 42,612 Shares issuable upon exercise of (A) 21,306
Purchase Options for the purchase of Units (exercisable at $4.72 per-Unit)
consisting of one Share and one Warrant and (B) 21,306 Warrants
(exercisable at $4.72 per-Warrant) contained in the Units and (ii) 75,000
Shares issuable upon exercise of 75,000 1996 Warrants (exercisable at
$6.50 per-Warrant).
(8) Consists of (i) 17,046 Shares issuable upon exercise of (A) 8,523 Purchase
Options for the purchase of Units (exercisable at $4.72 per-Unit)
consisting of one Share and one Warrant and (B) 8,523 Warrants
(exercisable at $4.72 per-Warrant) contained in the Units.
(9) Loaned $100,000 to the Company, which was repaid from the proceeds of the
November 1995 public offering. The 1995 Warrants were received as
additional consideration for this loan.
(10) Consists of Shares subject to the 1995 Warrants to purchase Shares at
$6.00 per share.
(11) Patterson Travis, Inc. was the underwriter in the Company's November 1995
public offering.
(12) Includes 22,500 shares of Common Stock issuable upon currently exercisable
options to purchase shares of Common Stock at $5.125 per share and 5,297
Shares issuable upon exercise of Private Placement Warrants at $4.72 per
share.
(13) Includes 10,594 Shares issuable upon exercise of Private Placement
Warrants at $4.72 per share.
17
<PAGE>
PLAN OF DISTRIBUTION
Sales of the Shares may be effected from time to time in transactions
(which may include block transactions) on the Nasdaq SmallCap Market, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, or
at negotiated prices. None of the Selling Stockholders has entered into
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their Shares. The Selling Stockholders may
effect transactions by selling their Shares directly to purchasers or to or
through broker-dealers (including GKN), which may act as agents or principals.
Such broker-dealers may receive compensation in the form of discounts,
concessions, or commissions from the Selling Stockholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agents or to whom they
sell as principal, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). The Selling Stockholders and any
broker-dealers that act in connection with the sale of the Shares might be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act. The Selling Stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
securities against certain liabilities, including liabilities arising under the
Securities Act.
The Company has agreed to keep the Registration Statement, of which this
Prospectus is a part, effective until all the Shares are sold or can be sold
freely under an appropriate exemption from the securities laws of the United
States and the states, without limitation.
In order to comply with the applicable securities laws of certain states,
if any, the Shares will be offered or sold through registered or licensed
brokers or dealers in those states. In addition, in certain states the Shares
may not be offered or sold unless they have been registered or qualified for
sale in such states or an exemption from such registration or qualification
requirement is available and such offering or sale is in compliance therewith.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not simultaneously engage in market
making activities with respect to such securities for a period beginning when
such person becomes a distribution participant and ending upon such person's
completion of participation in a distribution, including stabilization
activities in the Common Stock to effect syndicate covering transactions, to
impose penalty bids or to effect passive market making bids. In addition and
without limiting the foregoing, in connection with transactions in the Shares,
the Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Rule 10b-5 and, insofar as the Selling Stockholders are distribution
participants, Regulation M and Rules 100, 101, 102, 103, 104 and 105 thereof.
All of the foregoing may affect the marketability of the Shares.
GKN is one of 11 current market makers for the Common Stock. There have
been as many as 19 market makers for the Common Stock in 1997. During the
offering period for the Private Placement, GKN complied with Regulation M by
ceasing its market making activities and expects to withdraw as a market maker
from time to time in the future if required by Regulation M.
The Company will pay all of the expenses, including, but not limited to,
fees and expenses of compliance with state securities or "blue sky" laws,
incident to the registration of the Shares other than selling commissions. The
expenses payable by the Company are estimated to be $34,000.
18
<PAGE>
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION
Limitation of Director Liability; Indemnification
The Company's Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
including breaches which constitute gross negligence. By its terms and in
accordance with the Delaware General Corporation Law, however, this provision
does not eliminate or limit the liability of a director of the Company (i) for
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law (relating to unlawful payments or dividends or
unlawful stock repurchases or redemptions), (iv) for any improper benefit or (v)
for breaches of a director's responsibilities under the Federal securities laws.
The Company' Certificate of Incorporation also provides that each director
or officer of the Corporation serving as a director or officer shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law, against all expense liability and
loss (including attorney's fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith.
Section 203 of Delaware General Corporation Law
The Company is governed by the provisions of Section 203 of the General
Corporation Law of Delaware, an anti-takeover law enacted in 1988. In general,
the law prohibits a Delaware public corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interest stockholder,
unless it is approved in a prescribed manner. As a result of Section 203,
potential acquirors of the Company may be discouraged from attempting to effect
acquisition transactions with the Company thereby possibly depriving holders of
the Company's Securities of certain opportunities to sell or otherwise dispose
of such securities at above-market prices pursuant to such transactions.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Morse, Zelnick, Rose & Lander, LLP, 450 Park Avenue, New York, New
York 10022. Members of the firm own in the aggregate 105,000 shares of Common
Stock of the Company and options to purchase 70,000 shares of Common Stock of
the Company, 45,000 of which are currently exercisable.
19
<PAGE>
EXPERTS
The financial statements of the Company for the year ended December 31,
1996 incorporated in this Prospectus by reference to the Form 10-KSB have been
so incorporated in reliance on the report of Grant Thornton LLP, independent
accountants, given on the authority of such firms as experts in accounting and
auditing.
20
<PAGE>
No dealer, salesperson or any
other person has been authorized to
give any information or to make any
representation not contained in this
Prospectus with respect to the offering
made hereby. This Prospectus does not 2,274,976
constitute an offer to sell or a Shares of Common Stock
solicitation of an offer to buy any of
the securities offered hereby to any
person or by anyone in any jurisdiction
in which such offer or solicitation may
not lawfully be made. Neither the
delivery of this Prospectus nor any sale
made hereunder shall, under any
circumstances, create any implication
that there has been no change in the
information set forth herein or in the
business of the Company since the date
hereof.
-----------------
TABLE OF CONTENTS
Page
Available Information............... 3
Reports to Security Holders......... 3
Incorporation of Certain Documents
by Reference...................... 3 Milestone Scientific Inc.
The Company......................... 4
Forward-Looking Statements.......... 4
Risk Factors........................ 5 ----------------------
Use of Proceeds.....................10
Recent Developments.................10
Selling Stockholders................14 PROSPECTUS
Plan of Distribution................18
Certain Provisions of the Certificate ----------------------
of Incorporation and By-Laws......19
Legal Matters.......................19 July ___, 1997
Experts.............................20
21
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Expenses in connection with the issuance and distribution of the
securities being registered hereunder other than underwriting commissions and
expenses, are estimated below. The Selling Stockholders will not pay any of
these expenses.
SEC Registration Fee........................................$ 3,403.85
NASD Fee....................................................$ 1,623.26
Printing expenses...........................................$ 300.00*
Accounting fees and expenses................................$ 3,000.00*
Legal fees and expenses.....................................$ 25,000.00*
Miscellaneous expenses......................................$ 672.89*
----------------
Total.................................................$ 34,000.00*
================
* estimated
Item 15. Indemnification of Directors and Officers
Sections 145 of the Delaware General Corporation Law grants to the Company
the power to indemnify the officers and directors of the Company, under certain
circumstances and subject to certain conditions and limitations as stated
therein, against all expenses and liabilities incurred by or imposed upon them
as a result of suits brought against them as such officers and directors if they
act in good faith and in a manner they reasonably believe to be in or not
opposed to the best interests of the Company and, with respect to any criminal
action or proceeding, have no reasonable cause to believe their conduct was
unlawful.
The Company's certificate of incorporation provides as follows:
"NINTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
TENTH: (a) Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the
<PAGE>
fullest extent authorized by the General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that, except as provided in paragraph (b) hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law requires, the payment of such
expenses incurred by a director or officer (in his or her capacity as a director
or officer and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard or conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
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(d) Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the General Corporation Law."
Item 16. Exhibits
Exhibit No. Description
- ----------- -----------
4.1 Specimen Stock Certificate *
4.2 Form of Subscription Agreement.**
5.1 Opinion of Morse, Zelnick, Rose & Lander, LLP as to
legality of the securities being registered.**
23.1 Consent of Grant Thornton LLP***
23.2 Consent of Morse, Zelnick, Rose & Lander, LLP (included
in Exhibit 5.1)
25.1 Power of Attorney**
99.1 Form of Warrant Agreement dated as of March 13, 1997.**
99.2 Agency Agreement dated February 4, 1997.**
99.3 Form of Purchase Option granted to the Placement Agent
and Designees dated as of March 13, 1997.**
- ----------
* Incorporated by reference to the Company's registration statement on
Form SB-2 No. 33-92324.
** Filed previously.
*** Filed herewith.
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Item 17. Undertakings
A. The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
B. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer 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 small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit of proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the small business issuer 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 Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in New York, New York on
the 23rd day of July 1997.
MILESTONE SCIENTIFIC INC.
/s/ Leonard Osser
-------------------------------------
By: /s/ Leonard Osser
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Leonard Osser, Stephen A. Zelnick, or either one
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 pre- or post-effective amendments to
this Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
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Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on July 23, 1997.
Signatures Title
- ---------- -----
/s/ Leonard Osser President, Chief
- ----------------- Executive,
Leonard Osser Chief Financial Officer
and Director
- ----------*---------- Director
Gregory Volok
- ----------*---------- Director
Michael J. McGeehan
- --------------------- Director
Giovanni Montoncello
- --------------------- Director
David Sultanik
- ----------*---------- Director
Stephen A. Zelnick
- ----------*---------- Director
Paul Gregory
- ----------*---------- Director
Louis I. Margolis
- ----------*---------- Director
Leonard M. Schiller
*By: /s/ Leonard Osser
-------------------
Leonard Osser
Attorney-in-fact
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EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated February 5, 1997, except for Notes J and P as
to which the dates are February 26, and February 20, 1997, accompanying the
consolidated financial statements of Milestone Scientific Inc. and subsidiaries
appearing in the Annual Report on Form 10-KSB for the year ended December 31,
1996 which are incorporated by reference in the Registration Statement. We
consent to the incorporation by reference in the Registration Statement of the
aforementioned reports and to the use of our name as it appears under the
caption "Experts."
/s/ Grant Thornton LLP
New York, New York
July 23, 1997
