As filed with the Securities and Exchange Commission on October 6, 2000
Registration No. 333-39784
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1
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 of (I.R.S. Employer
Incorporation or Organization) Identification No.)
220 South Orange Avenue
Livingston Corporate Park
Livingston, New Jersey 07034
(Address, including zip code, and telephone number, including
area code, of registrant's executive offices)
------------
LEONARD OSSER
Chief Executive Officer
Milestone Scientific Inc.
220 South Orange Avenue
Livingston Corporate Park
Livingston, New Jersey 07034
(973) 716-0087
(Name, address, including zip code, and telephone number, including
area code of agent for service)
------------
Copies to:
Stephen A. Zelnick, Esq.
Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue
New York, New York 10022
(212) 838-8040
(212) 838-9190 (Facsimile)
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
[LEGEND]
PROSPECTUS
2,127,873 Shares
Common Stock
Par Value $.001
MILESTONE SCIENTIFIC INC.
The selling stockholders named in this prospectus are offering to sell up
to an aggregate of 2,127,873 shares of our common stock as follows:
1,800,000 shares issued upon conversion and in full payment and
satisfaction of our 3% senior convertible notes;
142,857 shares which may be issued upon exercise of warrants to buy
shares of our common stock;
88,000 shares issued as part of a litigation settlement;
50,000 shares which may be issued if we pay interest on our 10% senior
secured promissory notes, in shares of our common stock;
47,016 shares issued in payment of interest on our 3% senior
convertible notes
We will not receive any of the proceeds from the sale of these shares. The
shares are being registered for resale by the selling stockholders.
Shares of our common stock are traded on the American Stock Exchange under
the symbol "MS". On October 1, 2000, the closing price was $________ per share.
See "Risk Factors" beginning on Page 5 for the factors you should consider
before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission or other regulatory body has approved or disapproved of these
securities or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is October, 2000
<PAGE>
TABLE OF CONTENTS
Page
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Where You Can Find More Information.......................................... 3
Reports to Security Holders.................................................. 3
Incorporation of Documents by Reference...................................... 3
The Company.................................................................. 4
Forward-Looking Statements................................................... 4
Risk Factors................................................................. 5
Use of Proceeds.............................................................. 9
Selling Security Holders..................................................... 9
Plan of Distribution......................................................... 11
Recent Developments.......................................................... 12
Provisions of our Certificate of Incorporation............................... 14
Legal Matters................................................................ 15
Experts...................................................................... 15
You may rely only on the information contained in this Prospectus,
including the documents incorporated in this Prospectus by reference.. We have
not authorized anyone to provide information that is different from that
contained in this Prospectus. This Prospectus may only be used where it is legal
to sell these securities. The information in this Prospectus may not be accurate
after the date appearing on the cover.
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational and reporting requirements of the
Securities Exchange Act of 1934, as amended, and, in accordance with that
statute, have filed various reports, proxy statements and other information with
the Securities and Exchange Commission. You may inspect these reports, proxy
statements and other information at the public reference facilities of the
Securities and Exchange Commission at its principal offices at Judiciary Plaza,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional
offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, Suite 1300, New York, New York 10048. You
can get copies of these reports, proxy statements and other information from
these offices upon payment of the required fees. These reports, proxy statements
and other information can also be accessed from the web site maintained by the
Securities and Exchange Commission at http://www.sec.gov. The public may obtain
information on operations of the public reference room by calling the Securities
and Exchange Commission at (800) SEC-0330.
We have filed two Registration Statements on Form S-3 with the Securities
and Exchange Commission under the Securities Act with respect to the shares
offered by this Prospectus. This Prospectus, which forms a part of those
Registration Statements, provides information as to the shares covered by the
later filing and consolidates and brings forward information as to the unsold
shares covered by the earlier filing. However, this prospectus does not contain
all of the information included in the Registration Statement and the
accompanying exhibits. Statements contained in this Prospectus regarding the
contents of any document is not necessarily complete and are qualified in their
entirety by such reference. You should refer to the actual document as filed
with the Securities and Exchange Commission. You can get copies of the
Registration Statement and the accompanying exhibits from the Securities and
Exchange Commission upon payment of the required fees or it may be inspected
free of charge at the public reference facilities and regional offices referred
to above.
Reports to Security Holders
We furnish our stockholders with annual reports containing audited
financial statements. In addition, we are required to file reports on Forms
8-KSB, 10-QSB and 10-KSB with the Securities and Exchange Commission.
INCORPORATION OF THE DOCUMENTS BY REFERENCE
The following documents filed by us with the Securities and Exchange
Commission are incorporated in this Prospectus by reference:
(1) Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999; and
(2) Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000
(3) Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000
(4) Each document filed after the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act but before this
offering terminates is incorporated in this Prospectus by reference and is to be
treated as part of this Prospectus from the date it was filed. Any statement
contained in a document incorporated or deemed to be incorporated in this
Prospectus by reference is modified or superseded to the extent that a statement
contained in this Prospectus or in any
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other subsequently filed document which is incorporated in this Prospectus by
reference modifies or supersedes such statement.
Upon written or oral request, we will provide, without charge, each person
to whom a copy of this Prospectus is delivered, 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, (973) 716-0087
Attention: Thomas Stuckey, Chief Financial Officer.
MILESTONE
We develop, manufacture, market and sell equipment and related disposable
or consumable items and other products for use primarily by the dental
practitioner. Our products focus on practitioner efficiency, patient comfort,
and infection control. Our principal product is the The Wand(R), a computer
controlled "painless" injection system enabling the practitioner to more quickly
and effectively anesthetize patients in the dental applications, which we
introduced at the Fall 1997 American Dental Association Trade Show. We began
selling equipment units of The Wand(R) and an initial supply of disposables in
January 1998. The Wand(R) was originally sold in the U.S. and Canada through
major distributors of dental products. In September 1999 we began selling The
Wand(R) and its disposable directly to dentists in the United States.
We were organized in August 1989 under the laws of Delaware. Our principal
executive office is located at 220 South Orange Avenue, Livingston Corporate
Park, Livingston, New Jersey 07039, telephone number (973) 716-0087.
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RISK FACTORS
You should carefully consider the risk factors described below, as well as
other information appearing in this Prospectus or incorporated by reference,
before purchasing shares of our common stock.
The following factors may affect the growth and profitability of Milestone
and should be considered by any prospective purchaser of Milestone's securities:
Continuing Losses; History of Losses. We are currently losing money and,
based on our history, there is significant risk that losses will continue. Since
our operations commenced in November 1995, we have had losses for each year,
including a loss of approximately $7.0 million for 1999. At December 31, 1999 we
had an accumulated deficit of approximately $27.8 million. We cannot assure you
we will be able to generate operating profits and resultant cash flow sufficient
to fund our operations in the future.
Our future services depends on Greater Market Acceptance of The Wand(R).
We cannot become successful unless dentists in larger numbers buy The Wand(R)
and use it to administer oral anesthesia. This depends, in large part, upon our
ability to educate dentists and other health care providers of the distinctive
characteristics and benefits of The Wand(R) and will require substantial
marketing efforts and expense. Even though a total of approximately 10,500
equipment units have been sold in the domestic market during 1998 and 1999 less
than 950,000 and 1,450,000 disposable handpieces were sold, reflecting a low
level of usage of The Wand(R). We cannot assure you that The Wand(R) will be
accepted by the market.
We need Additional Capital. Our capital requirements continue to be
significant and unless we borrow funds or sell equity securities, we will be
forced to curtail or further reduce our activities. We have no agreement for
future additional financing. We cannot assure you that any sources of additional
financing will be available on acceptable terms, or at all. To the extent that
any future financing involves the sale of our equity securities, the ownership
interest of our stockholders could be substantially diluted.
Need to Expand Distribution Channels. Our future revenues depends on our
ability to successfully market and distribute The Wand(R). Until September 1999
we relied, primarily, on independent dental distributors to sell The Wand(R)
domestically and internationally. Since then we have sought to build a domestic
sales force, but its efforts in marketing The Wand(R) remain quite limited. To
increase marketing of The Wand(R) with our own sales force, that sales force
will require substantial expansion and we will incur significant up-front
expense. We cannot assure you that we will be able to hire and retain our own
adequate sales force or that such force will be able to successfully market and
sell The Wand(R).
Inability to protect Patents and Intellectual Property. We hold U.S.
patents applicable to the The Wand(R). We rely on a combination of patents,
trademarks and nondisclosure agreements to protect our intellectual property
rights. Unauthorized parties may attempt to reverse engineer, copy, or obtain
and use our products and other information we regard as proprietary. We may have
to initiate lawsuits to protect our intellectual property rights. These lawsuits
are costly and divert management's time and effort away from our business with
no guarantee of success. Our failure to protect our proprietary rights or the
expense of doing so could have a material adverse effect on our operating
results and financial condition. Also, although we are not involved in any
litigation involving our
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intellectual property and we have not received any claims of infringement, it is
possible that our products may infringe on patent or proprietary rights of
others. If that happens we may have to modify our products or obtain a license.
We cannot assure you that we will be able to do so in a timely manner, upon
acceptable terms and conditions, or at all.
Terminable Relationships with Key Manufacturers. We have informal
terminable arrangements with the manufacturers of The Wand(R) equipment units,
Tricor Systems, Inc., and handpieces, NYPRO, Inc. Termination of the
manufacturing relationship with any of these manufacturers could significantly
and adversely affect our ability to produce and sell our products. Though
alternate sources of supply exist and new manufacturing relationships could be
established, we would need to recover our existing tools or have new tools
produced. Establishing of new manufacturing relationships could involve
significant expense and delay. Any curtailment or interruptions of the supply,
whether or not as a result or termination of the relationship, would increase
our losses or, if we have become profitable, reduce our profits.
Product Liability Claims. We could be subject to claims for personal
injury from the use of our dental and medical products, although we have never
been sued for personal injury claims. We have liability insurance in the
aggregate amount of $2,000,000 with a per-occurrence limit of $1,000,000 which
we believe is adequate, although we cannot assure you that the insurance
coverage will be sufficient to pay such claims should they be made. A partially
or completely uninsured claim, if successful and of significant magnitude, could
jeopardize our viability.
Limitation of Director Liability May Prevent Milestone's Recovery Of
Damages From Its Directors. Our Certificate of Incorporation provides that our
directors are not personally liable to us or any of our stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
including breaches which constitute gross negligence, subject to the limitations
imposed by the Delaware General Corporation Law. Thus, in some instances,
neither we nor our stockholders can recover damages even if directors take
actions which harm us. See "Provisions of our Certificate of Incorporation -
Limitation of Director Liability, Indemnification."
Government Regulation; Need For FDA Clearance. The manufacture and sale of
Milestone's SplatrFree(R) prophy angles, The Wand(R), and The Wand Plus(R) are
subject to regulation by the FDA pursuant to the Federal Food, Drug, and
Cosmetic Act, the 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. Though all products which we
are now marketing, including The Wand(R) and The Wand Plus(R) have FDA marketing
clearance, new warrants of The Wand(R) for medical use will require rigorous and
expensive pre-clinical and clinical testing and FDA approval before they can be
marketed. These processes can take a number of years. The time required for
completing such testing and obtaining such approvals is uncertain, and FDA
clearance may never be obtained. Similar delays may also be encountered in other
countries. Also 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 our products or that ultimately
any such improvements will receive FDA clearance. FDA regulations also require
manufacturers of medical devices to adhere to 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
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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 us.
Forward-Looking Statements. This Prospectus contains forward-looking
statements based on current expectations, assumptions, estimates and projections
about us and the industry in which we operate. We use words such as plan,
believes, expects, future, intends and similar expressions to identify
forward-looking statements. These forward-looking statements involve numerous
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of factors more
fully described elsewhere in this Prospectus. We undertake no obligation to
update any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
USE OF PROCEEDS
All shares of our common stock offered by this Prospectus are being
registered for the account of the selling stockholders. We will not receive any
of the proceeds from the sale of these shares. The shares offered by this
prospectus include 142,857 shares underlying warrants to purchase those shares
at prices ranging from $1.75 per share in the current year to $7.00 per share in
the fifth year after issuance. Assuming the exercise of all of those warrants at
$1.75 per share, we would receive proceeds $249,999.75, which we would use for
additional working capital.
SELLING SECURITY HOLDERS
The following table sets forth the information as to the ownership of our
common stock by the selling stockholders on March 31, 2000. Unless otherwise
indicated, it is assumed that each Selling Stockholder listed below possesses
sole voting and investment power with respect to the shares owned as of such
date by the Selling Stockholder, including those issuable upon exercise of the
warrants. In addition, unless otherwise indicated, none of the Selling
Stockholders has had a material relationship with us or any of our predecessors
or affiliates within the past three years.
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<TABLE>
<CAPTION>
Shares to be Percentage of
Shares Owned Number of Owned Common Stock
Before the Shares that After the Owned After
Selling Stockholder Offering May Be Sold Offering The Offering
------------------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cumberland Partners 1,330,770 (1)(2)(3) 965,970 (1)(2)(3) 364,800 3.4%
Longview Partners 207,250 (1)(2)(3) 105,050 (1)(2)(3) 102,200 *
Longview Partners B,L.P. 167,103 (1)(2)(3) 138,603 (1)(2)(3) 28,500 *
Longview Partners C,L.P. 63,901 (1)(2)(3) 50,401 (1)(2)(3) 13,500 *
K. Tucker Andersen 250,555 (1)(2)(3)(1) 219,555 (1)(2)(3) 31,000 *
Morse, Zelnick Rose and Lander 487,035 (2)(3) 14,286 (2)(3) 472,749 4.4%
LLP(5)
Leonard Osser(6) 2,301,936 (1)(2)(3) 240,875 (1)(2)(3) 2,061,061 19.3%
Mitchell G. Kuhn(7) 23,943 (2)(3) 7,143 (2)(3) 16,800 *
Strategic Restructuring
Partnership LP 203,571 (1)(2)(3) 203,571 (1)(2)(3) 0 0
Daniel Burack 45,643 (2)(3) 7,143 (2)(3) 38,500 *
Ed Schwarz and Sarah Jane Jelin 52,318 (2)(3)(9) 7,143 (2)(3) 45,175 *
Jay Nelson 5,714 (2)(3) 5,714 (2)(3) 0 0
David Birkenruth 8,243 (2)(3) 7,143 (2)(3) 1,100 *
Tricor Systems Incorporated(8) 3,571 (2)(3) 3,571 (2)(3) 0 0
Keith Michael Jereb 1,428 (2)(3) 1,428 (2)(3) 0 0
Ronald Spinello 80,000 (4) 80,000 (4) 0 0
Glenn Spinello 8,000 (4) 8,000 (4) 0 0
</TABLE>
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* Less than 1%
(1) Includes shares issued upon full satisfaction and conversion of the 3%
convertible notes at a price of $1.25 per share.
(2) Includes shares issuable upon exercise of Milestone's Warrants exercisable
at prices ranging from $1.75 to $7.00 per share.
(3) Excludes an undetermined number of shares (estimated for purposes of the
Prospectus at an aggregate of 50,000 shares) that may be issued by
Milestone to the selling stockholders as payment of interest on the 10%
Senior Secured Promissory Notes and may be sold by the selling
stockholders pursuant to this Prospectus.
(4) Includes shares issued upon settlement of litigation with Milestone.
(5) Morse, Zelnick, Rose and Lander LLP is the corporate counsel to Milestone.
(6) Leonard Osser is Milestone's Chairman and Chief Executive Officer.
(7) Mitchell Kuhn is Milestone's President and Chief Operating Officer.
(8) Tricor Systems Incorporated is a supplier of Milestone.
(9) Includes 24, 428 shares held separately by Ed Schwarz, 5,200 shares held
by Ed Schwarz' IRA's, 1,250 shares held by Ed Schwarz 1992 Family Trust
and 14, 297 held separately by Ed Schwarz's wife, Sarah Jane Jelin.
(10) Includes 11,000 shares which are owned by Mr. Andersen's wife and children
and as to which Mr. Andersen disclaims beneficial ownership.
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PLAN OF DISTRIBUTION
Sales of the shares of our common stock covered by this Prospectus may be
effected from time to time in transactions (which may include block
transactions) on the American Stock Exchange (or other markets on which shares
of our common stock are then traded), in negotiated transactions, through put or
call options transactions relating to the shares, through short sales of shares,
or a combination of such methods of sale, at 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, who 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 of 1933 and any commissions received by such broker-dealers
and any profit on the resale of the shares sold by them while acting as
principals might be deemed to be underwriting discounts or commissions under the
Securities Act. We have agreed to indemnify each selling stockholder against a
number of liabilities, including liabilities arising under 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 the liabilities, including liabilities arising under the
Securities Act. As used herein, "selling stockholders" includes donees and
pledgees selling shares received from a named selling stockholder after the date
of this Prospectus.
Selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
We have agreed to keep the Registration Statement, of which this
Prospectus is a part, effective until all the shares covered by this Prospectus
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 state securities laws, the shares
covered by this Prospectus will be offered or sold through registered or
licensed brokers or dealers in those states. In addition, in a number of 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, 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,
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103, 104 and 105 thereof, all of which may affect the marketability of the
shares covered by this Prospectus.
We will pay all of the expenses relating to the registration of the shares
covered by this Prospectus except for selling commissions. These expenses are
estimated at $35,000.
RECENT DEVELOPMENTS
Acceptance of The Wand
Based on our belief that The Wand(R), is a major advance in dentistry and
may ultimately become the accepted method for delivering local dental
anesthesia, we continue to take steps aimed at growing and strengthening
the end user base thereby gaining greater acceptance of The Wand(R) and
translating to increased revenue through higher disposable handpiece
usage. On October 1, 1999, we began selling the Wand(R), disposable
handpieces and dental needles directly to dentists in the United States.
We also began offering quantity discounts on disposable handpieces and
dental needles under certain monthly buying programs. During the six
months ended June 30, 2000, we increased our sales force and customer
service staff to handle its new sales programs. Further, we continue to
o provide assistance to dental and dental hygiene schools which
include The Wand(R) in their curriculum;
o visit, obtain feedback and provide further support to current
Wand(R) users;
o distribute The Wand(R) technique videos and technical
bulletins to its current users;
o sell additional units to current Wand(R) users and
o develop its market overseas.
Sales of units and handpieces in the six months ended June 30, 2000 were
$$2,933,798 compared to $1,534,154 in the same period in 1999. Increased sales
reflect increasing acceptance of The Wand(R) in both domestic and foreign
markets. For example, sales of The Wand(R) units in Canada are expected to more
than quadruple in the current year from a base of 19 units in 1999.
Private Offerings
In January 31, 2000 we sold, at face amount, $1 million principal amount,
of our 10% Senior Secured Promissory Notes due June 30, 2001 and five-year
warrants to purchase an aggregate amount of 142,857 shares of our common stock,
par value $001. At its option, Milestone may pay interest on the 10% senior
secured promissory Notes in shares of its common stock and this Prospectus also
covers the resale of an estimated 50,000 shares of common stock payable as such
interest, assuming that future market prices used in determining the number of
shares issued for such purpose are at current levels. In addition, our 3% senior
convertible notes were converted into 1,800,000 shares of our common stock in
full payment and satisfaction of the $2,250,000 face amount thereof.
Since the end of the first quarter of this year we have operated with less
than adequate working capital. At June 30, 2000, we had $48,938 in cash and
negative working capital of $538,807. Several steps have been taken to improve
liquidity and meet our working capital needs:
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o In April 2000, Leonard Osser, Chairman and CEO, agreed to provide the
following financing to Milestone:
o a $200,000 line of credit under which funds can be borrowed until
December 31, 2000 with a maturity of February 1, 2001. Borrowed funds bear
interest at a 9% annual interest rate;
o payment guarantees on year 2000 sales to certain foreign countries
through two specified distributors; and
o the option, should the line of credit be insufficient, to defer
payment of his full salary until January 3, 2001.
o A deferral of all interest and principal payments, until January
3, 2001, on $250,000 face amount of 10% Senior Secured Promissory Notes
which he holds.
o In July 2000, we borrowed the $200,000 under this line of credit.
o On June 19, 2000, Mr. Osser remitted $50,584 to us, pursuant to his
distributor payment guarantee.
o In April 2000, a director and holder of $50,000 face amount of 10% Senior
Secured Promissory Notes agreed to defer all interest and principal
payments, until January 3, 2001
o In August 2000, we reached agreement with a major existing investor, under
which he loaned us $500,000 and will provide an additional $500,000 line
of credit. The $500,000 loan is due on June 30, 2003 and any additional
loans under the line of credit are due December 31, 2003. The initial loan
and any additional loans bear interest at 8% per annum. The investor
received warrants for 70,000 shares exercisable at the fair market value
of a share on the date of grant and will receive warrants for an
additional 20,000 shares, exercisable at the fair market value of the
shares at the time the warrant is issued, for each additional $100,000
borrowed under the line of credit. At our option, we can force conversion
of $300,000 of the initial loan into equity in connection with defined
future financings.
o In August 2000, we reached agreement with a fund manager and major
existing investor, for a $1,000,000 2-year secured loan, bearing interest
at 20% per year and payable in kind. The loan is prepayable in cash at any
time and is prepayable, with accrued interest, in Milestone common stock
after March 31, 2001. Stock issued in payment of this debt will be valued
at a small discount from then market prices, subject to a maximum price.
In addition, we continue to explore other equity and debt financings
and is currently holding discussions with several additional potential
investors. However, there can be no assurances that any of the financings
now under discussion, or the unconsummated portion of the financings
specifically described above will be consummated. Unless one or more of
these or other financings is consummated, or we are able to generate
sufficient positive cash flow from operations, we may be unable to pay our
obligations as they mature. Failure to do so could force us to scale back
or discontinue operations.
Registration Rights
We agreed to register the re-offer and re-sale of the shares of our common
stock underlying the warrants, the shares reserved for issuance as payment of
interest on the 10% senior secured promissory notes, the shares issued upon
conversion and in full payment and satisfaction of the 3% senior convertible
notes, the shares issued as part of the settlement of the Spinello litigation
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(described below), and the shares issued in payment of interest on the 3% senior
convertible notes by filing the Registration Statements of which this Prospectus
is a part under the Securities Act and the securities laws of the states. We
agreed to pay all the expenses and fees incurred in connection with the
preparation, filing and modification or amendment of the Registration
Statements.
Legal Proceedings
Spinello Lawsuits
In January 2000, prior to trial, Milestone settled its previously pending
lawsuits with Dr. Spinello DDS, and former Chairman and Director of
Research of Spintech, and Glenn Spinello in the United States District
Court of New Jersey and in the Court of Common Pleas, York County
Pennsylvania, respectively. As part of the settlement, Dr. Spinello and
Glenn Spinello, each conveyed to Milestone all of their equity interests
in Spintech. Additionally, Dr. Spinello assigned to Milestone any rights
which he had to technology relating to "The Wand(R)" handpiece or
technology developed while he was employed at Spintech and agreed to
cooperate in filing and to assign to Milestone any future patent
applications covering that technology. In return for the conveyance of
Spintech equity, the assignment of technology, and the resolution of all
disputes between the parties, including the discontinuance with prejudice
of all legal actions, Milestone paid $25,000 to Dr. Spinello and issued to
him 80,000 shares (with a market value of approximately $80,000 at the
time agreement was reached) and issued 8,000 shares to Glenn Spinello.
Glenn Spinello, Ronald Spinello's son, was the controller and a director
of Spintech, prior to April 1997.
Class Action Lawsuit
In June 2000, the previously pending class action lawsuit in the United
States District Court of New Jersey was dismissed by the Court, with prejudice,
for failure to state a claim. No appeal was filed by the plaintiff prior to the
expiration of the time for filing such an appeal.
Derivative Action Lawsuit
In August 2000, the previously pending derivative action in the Court of
Chancery of the State of Delaware in Newcastle County, was dismissed upon
application by the plaintiff and approved by the Court. The dismissal was
without cost or expense to any party.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION
Limitation of Director Liability; Indemnification
Our Certificate of Incorporation provides that a director will not be
personally liable to us or to our stockholders for monetary damages for breach
of the fiduciary duty of care as a director, including breaches which constitute
gross negligence. This provision does not eliminate or limit the liability of a
director:
o for breach of his or her duty of loyalty to us or to our
stockholders,
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o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o under Section 174 of the Delaware General Corporation Law (relating
to unlawful payments or dividends or unlawful stock repurchases or
redemptions),
o for any improper benefit or
o for breaches of a director's responsibilities under the Federal
securities laws.
Our Certificate of Incorporation also provides that we indemnify and hold
harmless each of our directors and officers to the fullest extent authorized by
the Delaware 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
Section 203 of the Delaware General Corporation Law prohibits us 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 interested stockholder, unless the transaction is approved in a
prescribed manner. As a result, potential acquirors may be discouraged from
attempting to effect acquisition transactions with us thereby possibly depriving
our stockholders of opportunities to sell or otherwise dispose of their
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 pursuant to
our Certificate of Incorporation, Bylaws and the Delaware General Corporation
Law, we have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy and is, therefore,
unenforceable.
LEGAL MATTERS
Morse, Zelnick, Rose & Lander, LLP, 450 Park Avenue, New York, New York
10022 will deliver an opinion that the issuance of the shares covered by this
Prospectus has been approved by our Board of Directors and that such shares,
when issued, will be fully paid and non-assessable under Delaware law. Members
of and counsel to Morse, Zelnick, Rose & Lander, LLP own, in the aggregate, the
following securities: 168,083 shares of our common stock; options or warrants to
purchase 152,286 shares of our common stock, all of which are currently
exercisable; and warrants to purchase 83,333 units, each unit consisting of one
share of our common stock and a warrant to purchase one share of our common
stock.
EXPERTS
Our financial statements for the year ended December 31, 1999 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.
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================================================================================
2,127,873 Shares
Common Stock
MILESTONE SCIENTIFIC INC.
-------------------
PROSPECTUS
-------------------
October ___, 2000
================================================================================
<PAGE>
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 ..................................... $ 1,439.51
Printing expenses ........................................ $ 2,500.00
Accounting fees and expenses ............................. $ 10,000.00
Legal fees and expenses .................................. $ 15,000.00
Miscellaneous expenses ................................... $ 6,060.49
-------------
Total ............................................... $ 35,000.00
=============
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law grants to Milestone
the power to indemnify the officers and directors of Milestone, under the
circumstances and subject to the 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 Milestone and, with respect to any criminal action or
proceeding, have no reasonable cause to believe their conduct was unlawful.
Milestone'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 fullest extent
authorized by the General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any
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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.
(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
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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 Purchase Agreement dated March 2, 1999**
4.3 Form of 3% Senior Convertible Note dated March 2, 1999**
4.4 Form of Registration Rights Agreement dated March 2, 1999**
4.5 Form of Purchase Agreement dated January 31, 2000
4.6 Form of Registration Rights Agreement dated January 31, 2000.
4.7 Form of Security Agreement dated January 31, 2000.
4.8 Form of Agreement to convert 3% Senior convertible notes dated
January 31, 2000.
4.9 Form of Warrant dated January 31, 2000.
4.10 Form of 10% Senior Promissory Note dated January 31, 2000.
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)
24.1 Power of Attorney (included in signature page)
----------
* Incorporated by reference to Milestone's registration statement on Form
SB-2 No. 33-92324.
** Previously filed with Milestone's registration statement on Form S-3, No.
333-76497.
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Item 17. Undertakings
A. The undersigned Registrant hereby undertakes to:
(1) File, during any period in which offers or sales are being made, 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 Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit of proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in Act and will be governed by the final adjudication of
such issue.
C. The 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 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in New York, New York on the 6th day of October, 2000.
MILESTONE SCIENTIFIC INC.
By: /s/ Leonard Osser
-------------------------------------
Chairman 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.
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 October 6, 2000.
Signatures Title
/s/ Leonard Osser Chairman and Chief Executive Officer
-----------------
Leonard Osser
/s/ Thomas Stuckey Chief Financial Officer
------------------
Thomas Stuckey
/s/ Mitchell Kuhn President and Chief Operating Officer and
----------------- Director
Mitchell Kuhn
/s/ Stephen A. Zelnick Director
----------------------
Stephen A. Zelnick
/s/ Paul Gregory Director
----------------
Paul Gregory
/s/ Louis I. Margolis Director
---------------------
Louis I. Margolis
/s/ Leonard M. Schiller Director
-----------------------
Leonard M. Schiller
/s/ Daniel R. Martin Director
--------------------
Daniel R. Martin
* By: /s/ Stephen A. Zelnick
----------------------------
Stephen A. Zelnick
Attorney-in-Fact
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