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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
LIFEQUEST MEDICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2559866
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9601 MCALLISTER FREEWAY, SUITE 1120
SAN ANTONIO, TEXAS 78216
(210) 366-2100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------------
HERBERT H. SPOON
PRESIDENT
AND CHIEF EXECUTIVE OFFICER
LIFEQUEST MEDICAL, INC.
9601 MCALLISTER FREEWAY, SUITE 1120
SAN ANTONIO, TEXAS 78216
(210) 366-2100
(Name, address, including zip code and telephone number, including area code,
of agent for service)
-------------------------
Copy to:
PHILLIP M. RENFRO
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
(210) 224-5575
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
Proposed Proposed
Title of each maximum maximum
class of offering aggregate Amount
securities to be Amount to be price per offering of registration
registered registered security(1) price(1) fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.001 par value per
share . . . . . . . . 140,000 $3.00 $420,000 $128
========================================================================================================================
</TABLE>
(1) Pursuant to Rule 457(c), the maximum offering price per security and
maximum aggregate offering price of the Common Stock have been
calculated on the basis of the average of the high and low sale prices
of the Common Stock as reported in the NASDAQ Small-Cap Market System
on February 4, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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P R O S P E C T U S
140,000 SHARES
LIFEQUEST MEDICAL, INC.
COMMON STOCK
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This Prospectus has been prepared for use in connection with the
proposed sale or distribution by certain stockholders (the "Selling
Stockholders") of an aggregate of 140,000 shares (the "Shares") of common
stock, par value $.001 per share ("Common Stock"), of LifeQuest Medical, Inc.
(the "Company"). The Shares may be sold from time to time by or for the
account of the Selling Stockholders in the over-the-counter market, on the
National Association of Securities Dealers Automated Quotation System, Inc.
("NASDAQ") or otherwise at prices and on terms then prevailing or at prices
related to the then current market price, or in negotiated transactions. The
Shares may be sold by any one or more of the following methods: (a) a block
trade (which may involve crosses) in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) privately
negotiated transactions.
The Common Stock is traded on the Small-Cap Market System ("SCMS") of
NASDAQ under the symbol "LQMD." On February 4, 1997, the last reported sale
price for the Common Stock on the NASDAQ/SCMS was $3.00 per share.
The Company will receive no portion of the proceeds of the sale of the
Shares offered hereby and will bear all costs and expenses incident to their
registration. See "Plan of Distribution."
The Shares have not been registered for sale under the securities laws
of any state or jurisdiction as of the date of this Prospectus. Brokers or
dealers effecting transactions in the Shares should confirm the registration
thereof under the securities laws of the states in which such transactions
occur, or the existence of any exemption from registration.
------------------------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET
FORTH UNDER THE CAPTION "RISK FACTORS."
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 7, 1997
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") in Washington, D.C., a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered by this Prospectus.
Certain of the information contained in the Registration Statement is omitted
from this Prospectus, and reference is hereby made to the Registration
Statement and exhibits and schedules relating thereto for further information
with respect to the Company and the securities offered by this Prospectus. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the SEC. Such
reports, proxy statements and other information are available for inspection
and copies of such materials may be obtained upon payment of the fees
prescribed therefor by the rules and regulations of the SEC from the SEC, at
its principal offices located at Judiciary Plaza, 450 Fifth Street, Room 1024,
Washington, D.C., and at the following regional offices of the SEC: Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and
at Seven World Trade Center, Suite 1300, New York, New York 10048, and copies
of all or any part of the Registration Statement may be obtained from the
Public Reference Section of the SEC, at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 upon the payment of the fees prescribed by the
SEC. The SEC maintains a WorldWide Web site on the Internet at
http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996, and September 30, 1996, are
hereby incorporated herein by reference.
The description of the Company's Common Stock, which is contained
under the caption "Description of Capital Stock" in the Registration Statement
on Form S-1 dated August 19, 1992 (Registration No. 33-49196), as
post-effectively amended by the Registration Statement on Form S-1 dated August
20, 1992 (Registration No. 33-51046), and the description of the Company's
Common Stock Purchase Rights set forth in the Registration Statement on Form
8-A dated June 20, 1995, are hereby incorporated herein by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act, after the date of this Prospectus and prior to
the termination of the Registration Statement of which this Prospectus is a
part with respect to registration of the Shares, shall be deemed to be
incorporated by reference in this Prospectus and be a part hereof from the date
of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus, or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference, modifies or replaces such statement.
The Company undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon written or oral request
of any such person, a copy of any or all of the documents incorporated by
reference herein, other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference into the information that this
Prospectus incorporates. Written or oral requests for such copies should be
directed to: LifeQuest Medical, Inc., 9601 McAllister Freeway, Suite 1120, San
Antonio, Texas 78216, Attention: Randall K. Boatright, telephone (210)
366-2100.
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THE COMPANY
LifeQuest Medical, Inc., a Delaware corporation (the "Company"), and
its subsidiaries, LifeQuest Endoscopic Technologies, Inc., a Nevada corporation
("LQET"), Klein Medical, Inc., a Nevada corporation ("KMI"), Val-U-Med, Inc., a
Nevada corporation ("VMI"), and ValQuest Medical, Inc., a Nevada corporation
("ValQuest"), are engaged in the development, manufacture and distribution of
instruments, equipment and surgical supplies used in minimally invasive surgery
("MIS").
Minimally invasive surgery, a rapidly growing field, involves surgical
procedures, accomplished without a major incision, through strategically placed
punctures in a patient's body. These procedures generally result in reduced
patient discomfort, reduced risks of infection and greatly shortened
hospitalization, thereby decreasing overall costs. MIS products include a wide
variety of reusable and disposable items such as endoscopes, trocars, trocar
sleeves/cannulas, video systems, mechanical and laser-related cutting devices,
stapling systems, electrocautery systems, suction and irrigation systems,
graspers and dissectors and hand-operated retractors. The products are used by
surgeons in hospitals and outpatient surgery facilities.
The Company acquired Klein Medical, Inc., a Texas corporation
("Klein"), in November 1996 and Val-U-Med, Inc., a Georgia corporation
("Val-U-Med"), in December 1996, private companies located in San Antonio,
Texas and Atlanta, Georgia, respectively. Both companies, which are wholly
owned subsidiaries of the Company, distribute instruments, equipment and
surgical supplies used in MIS.
In February 1996, the Company completed the merger of GM Engineering,
Inc., a California corporation ("GM Engineering"), with and into LQET, a wholly
owned subsidiary of the Company. LQET develops and manufactures MIS products
at its facilities located in La Verne, California.
In May 1994, the Company and Valdor Fiber Optics of San Jose,
California, formed a corporate venture, ValQuest, which is an 82% owned
subsidiary of the Company. ValQuest's patented Impact Mount(TM) technology is
being used to develop proprietary, autoclavable (heat sterilizable), flexible,
fiber optic endoscopes which are expected to have applications in the MIS
field.
The Company intends to continue to allocate its resources toward
becoming a more significant competitor in the MIS market by utilizing the
combined capabilities of its subsidiaries to expand its geographical
distribution coverage in the U.S. and add relevant new products to its existing
line through internal development, licensing and acquisition.
The Company was incorporated on December 23, 1988 as a Delaware
corporation and commenced operations on January 1, 1989. In August 1992, the
Company completed its initial public offering of Common Stock which is quoted
on the NASDAQ/SCMS. The Company's executive offices are located at 9601
McAllister Freeway, Suite 1120, San Antonio, Texas 78216, and its telephone
number is (210) 366-2100.
RISK FACTORS
Each investor should carefully examine this entire Prospectus and
should give particular attention to the risk factors set forth below.
HISTORY OF LOSSES. PROFITABILITY UNCERTAIN. The Company has
experienced operating losses since its inception on January 1, 1989. As of
September 30, 1996, the Company had an accumulated deficit of approximately
$13.8 million. Prior to the acquisitions of GM Engineering, Klein and
Val-U-Med, the Company was a development stage company focused primarily on
obtaining FDA approval of two medical devices. However, the Company has
determined not to initiate any further work on obtaining FDA approval of the
devices unless an appropriate corporate partner can be identified. Primarily
as a result of its acquisitions in fiscal year 1996, the Company generated
revenues of approximately $662,000 during the period ended September 30, 1996.
In the future, the Company expects to have increased cash outflow
requirements as a result of expenditures related to expansion of sales and
marketing capability, expansion of manufacturing capacity, research and
development activities, compliance with regulatory requirements, and possible
investment
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in or acquisition of additional complementary products, technologies or
businesses. The timing and amounts of these expenditures will depend upon many
factors, such as the progress of the Company's research and development, and
will include factors that may be beyond the Company's control, such as the
results of product trials, the requirements for and the time required to obtain
regulatory approval for existing products and any other products that may be
developed or acquired and the market acceptance of the Company's products. The
cash needs of the Company have changed significantly as a result of the
acquisitions completed during 1996 and the support requirements of the added
business focus areas. There can be no assurance that the Company will not
continue to incur losses, that the Company will be able to raise cash as
necessary to fund operations or that the Company will ever achieve
profitability.
LIMITED SALES, MARKETING AND DISTRIBUTION EXPERIENCE. The Company
began commercial sales of its first MIS access product in the first quarter of
1996 following the merger of GM Engineering, a California based MIS device
manufacturing company with LQET, and, therefore, has limited sales, marketing
and distribution experience. In the fourth quarter of 1996, the Company
completed the acquisition of Klein and Val-U-Med. Both are companies
specialized in the sales, marketing and distribution of MIS devices. Through
its KMI and VMI subsidiaries, the Company is marketing its MIS access products
as well as the MIS Products of other manufacturers, to hospitals and surgeons
throughout the United States. In the United States, the Company markets MIS
products primarily through direct representatives who are employed by the
Company or its subsidiaries within selected geographical areas and independent
sales representatives who typically sell other complementary MIS products to
the same customer base. If the need arises, the Company may expand its sales
force, which will require recruiting and training additional personnel. There
can be no assurance that the Company will be able to recruit and train such
additional personnel in a timely fashion. Loss of a significant number of the
Company's current sales personnel or independent sales representatives, or
failure to attract additional personnel, could have a material adverse effect
on the Company's business, financial condition and results of operations.
RELIANCE ON FUTURE PRODUCTS AND NEW APPLICATIONS: UNCERTAINTY OF
TECHNOLOGY CHANGES. The medical device industry is characterized by innovation
and technological change. There can be no assurance that the Company will be
able to successfully develop new products or technologies, manufacture new
products in commercial volumes, obtain regulatory approvals on a timely basis
or gain market acceptance of its products or the products of others. Delays in
development, manufacturing, regulatory approval or market acceptance of new or
enhanced products could have a material adverse impact on the Company's
business, financial condition and results of operations. The future success of
the Company will also depend upon, among other factors, its ability to develop
and gain regulatory clearance for new and enhanced versions of products in a
timely fashion.
INTENSE COMPETITION. The primary industry in which the Company
competes, minimally invasive surgery, is dominated by two large,
well-positioned entities that are intensely competitive and frequently offer
substantial discounts as a competitive tactic. The United States Surgical
Corporation ("U.S. Surgical") is primarily engaged in developing, manufacturing
and marketing surgical wound management products, and has historically been the
firm most responsible for providing products that have led to the growth of the
industry. U.S. Surgical supplies a broad line of products to the MIS industry,
including products which facilitate access, assessment and treatment. Ethicon
Endo- Surgery ("Ethicon"), a Johnson & Johnson company, has made a major
investment in the MIS field in recent years and is one of the leading suppliers
of hospital products in the world. Furthermore, U.S. Surgical and Ethicon each
utilize purchasing contracts that link discounts on the purchase of one product
to purchases of other products in their broad product lines. Substantially all
of the hospitals in the United States have purchasing contracts with one or
both of these entities. Accordingly, customers may be dissuaded from
purchasing access products from the Company rather than U.S. Surgical or
Ethicon to the extent it would cause them to lose discounts on products that
they regularly purchase from U.S. Surgical or Ethicon.
The Company faces a formidable task in successfully gaining
significant revenues within the MIS access market. In order to succeed,
management believes that the Company will need to objectively demonstrate
substantial product benefits, and its sales effort must be able to effectively
present such benefits to both clinicians and health care administrators. The
MIS access market is dominated by U.S. Surgical and Ethicon. Both entities
introduced new access devices, trocars with added features, during the past two
years. A number of other entities participate in various segments of the MIS
access market.
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There can be no assurance that the Company will be able to
successfully compete in the MIS access market, and failure to do so would have
a material adverse effect on the Company's business, financial condition and
results of operations.
PRODUCTS SUPPLY: DEPENDENCE ON KEY SUPPLIERS. The ability of the
Company to obtain particular products or product lines in the required
quantities to fulfill customer orders for MIS devices on a timely basis is
critical to the Company's success. In most cases, the Company has no
guaranteed price or delivery agreements with its MIS device suppliers. As a
result, the Company may experience short-term inventory shortages. In
addition, manufacturers of MIS devices who currently distribute their products
through the Company may decide to distribute, or to substantially increase
their existing distribution through other distributors, their own dealer
networks, or directly to resellers. There can be no assurance that suppliers
will be able to maintain an adequate supply of products to fulfill the
Company's customer orders on a timely basis or that the Company will be able to
obtain particular products or that a product line currently offered by
suppliers will continue to be available. Failure of the Company to obtain
particular products or product lines in the required quantities or to fulfill
customer orders on a timely basis could have a material adverse effect on its
business, financial condition or results of operation.
The Company's ability to achieve increases in net sales or to sustain
current net sales levels depends in part on the ability and willingness of the
Company's suppliers to provide products in the quantities the Company requires.
Although the Company has written distribution agreements with many of its
suppliers, these agreements usually provide for non-exclusive distribution
rights and often include territorial restrictions that limit the geographical
area in which the Company is permitted to distribute the products. The
agreements are also generally short-term, subject to periodic renewal and often
contain provisions permitting termination by either party without cause upon
relatively short notice. The termination of an agreement may have a material
adverse impact on the Company's business, financial condition or result of
operations.
DEPENDENCE UPON INDEPENDENT SHIPPING COMPANIES. The Company relies
heavily on arrangements with independent shipping companies for the delivery of
its products. In order to meet customer demand, products are shipped from
suppliers through independent shipping companies. Currently, United Parcel
Service delivers the substantial majority of the Company's products to its
customers. The termination of the Company's relationship with United Parcel
Service, or the failure of one or more other independent shipping companies to
deliver products from suppliers to the Company or products from the Company to
its customers could have a material adverse effect on the Company's business,
financial condition or results of operations. For instance, an employee work
stoppage or slow-down at one or more of these independent shipping companies
could materially impair the shipping company's ability to perform the services
required by the Company. There can be no assurance that the services of these
independent shipping companies will continue to be available to the Company on
terms as favorable as those currently available or that these companies will
choose or be able to perform the required shipping services for the Company.
PATENTS AND PROPRIETARY RIGHTS. The Company's success will depend in
part on its ability to obtain patent protection for products and processes, to
preserve its trade secrets and to operate without infringing the proprietary
rights of third parties. Although the Company has obtained certain patents and
applied for additional United States and foreign patents covering certain
aspects of its technology, no assurance can be given that any additional
patents will be issued or that the scope of any patent protection will exclude
competitors or provide a competitive advantage, or that any of the Company's
patents will be held valid if subsequently challenged. The validity and
breadth of claims covered in medical technology patents involves complex legal
and factual questions and therefore may be highly uncertain. The Company also
relies upon unpatented trade secrets, and no assurance can be given that others
will not independently develop or otherwise acquire substantially equivalent
trade secrets. In addition, whether or not the Company's patents are issued,
others may hold or receive patents and contain claims having a scope that
covers products developed by the Company.
There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry and companies in
the medical device industry have used litigation to gain competitive advantage.
Litigation involving the Company would result in substantial cost and diversion
of management attention from the day-to- day operation of the business, but
could be necessary to enforce patents issued to the Company, to protect trade
secrets and other specialized knowledge unknown to
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outside parties, to defend the Company against claimed infringement of the
rights of others or to determine the scope and validity of the proprietary
rights of others. An adverse determination in litigation could subject the
Company to significant liabilities to third parties, could require the Company
to seek licenses from third parties under less favorable terms than might
otherwise be possible and could prevent the Company from manufacturing, selling
or using its products, any of which could have a material adverse effect on the
Company's business, financial condition or results of operations.
GOVERNMENT REGULATION. As a manufacturer of medical devices, the
Company is subject to regulation by, among other governmental entities, the FDA
and the corresponding agencies of states and foreign countries in which the
Company sells its products. These regulations govern the introduction of new
medical devices, the observance of certain standards with respect to the
manufacture and labeling of such devices, the maintenance of certain records
and the reporting of potential product defects and other matters. Failure to
comply with such regulations may have a material adverse effect on the Company.
Manufacturers of medical devices marketed in the United States are
required to adhere to applicable regulations setting forth detailed Good
Manufacturing Practices ("GMP") requirements, which include testing, control
and documentation requirements. Manufacturers also must comply with Medical
Device Reporting ("MDR") requirements which require that a firm report to the
FDA certain adverse events associated with the Company's devices. The Company
is subject to routine inspection by the FDA and certain state agencies for
compliance with GMP requirements, MDR requirements and other applicable
regulations. The FDA is using its statutory authority more vigorously during
inspections of companies and in other enforcement matters. The FDA has
promulgated new GMP regulations and MDR regulations, both of which will likely
increase the cost of compliance with GMP requirements. The Company also is
subject to numerous federal, state and local laws relating to matters such as
safe working conditions, manufacturing practices, environmental protection,
fire hazard control and disposal of hazardous or potentially hazardous
substances. Changes in existing requirements or adoption of new requirements
could have a material adverse effect on the Company's business, financial
condition or results of operations. Although the Company believes that it is
in compliance with all applicable regulations of the FDA and the State of
California, current regulations depend heavily on administrative interpretation
and there can be no assurance that the Company will not incur significant costs
to comply with laws and regulations in the future or that laws and regulations
will not have a material adverse effect upon the Company's business, financial
condition or results of operations. In addition, the potential effects on the
Company of heightened enforcement of federal and state regulations cannot be
predicted.
With the enactment of the Medical Device Amendments in May 1976 to the
Federal Food, Drug and Cosmetic Act (the "FDC Act"), the FDA classified medical
devices in commercial distribution into three classes, Class I, II or III.
This classification is based on the controls necessary to reasonably ensure the
safety and effectiveness of the medical device. Class I devices are those
devices whose safety and effectiveness can reasonably be ensured through
general controls such as adequate labeling, premarket notification and
adherence to GMP regulations. Some Class I devices are further exempted from
some of the general controls. Class II devices are those devices whose safety
and effectiveness can reasonably be ensured through the use of special controls
such as performance standards, post-market surveillance, patient registries and
FDA guidelines. Class III devices are devices which must receive premarket
approval by the FDA pursuant to a Premarket Approval ("PMA") application to
ensure their safety and effectiveness. Generally, Class III devices are
limited to life-sustaining, life-supporting or implantable devices.
Most medical instruments introduced to the United States market are
required by the FDA, as a condition of marketing, to secure either clearance of
a premarket notification pursuant to Section 510(k) of the FDC Act (a "510(k)
Notification") or an approved PMA. Obtaining PMA can take several years. In
contrast, the process of obtaining a 510(k) Notification clearance requires the
submission of substantially less data and generally involves a shorter review
period.
In general, clearance of a 510(k) Notification may be obtained if a
manufacturer or distributor of medical devices can establish that a new device
is "substantially equivalent" to a legally marketed medical device. The 510(k)
Notification and the claim of substantial equivalence may have to be supported
by various types of information indicating that the device is as safe and
effective for its intended use as a legally marketed predicate device. In
addition to requiring clearance for new products,
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FDA rules typically require a filing and a waiting period prior to marketing
modified versions of existing products. The Company anticipates that most of
its products will be eligible for the 510(k) Notification procedure. At this
time, the FDA typically responds to a submission of a 510(k) Notification
within 180 to 360 days. Market clearance may take three to 12 months or
longer. In the event that the shorter 510(k) Notification procedure is not
available, the Company will be required to file a PMA.
Under the Safe Medical Devices Act of 1990 ("SMDA"), the FDA is
directed to adopt new 510(k) Notification regulations which could potentially
make the approval process for the Company's products more time-consuming,
difficult and expensive. The SMDA includes new provisions relating to
post-market surveillance requirements for certain types of devices and
authorizes the FDA to adopt new controls to be applied to certain devices such
as some currently being developed by the Company, including the promulgation of
a performance standard, requirements for patient registries, distributor and
purchaser reporting and imposition of guidelines.
The process of obtaining necessary government approvals can be
time-consuming and expensive. There can be no assurance that the necessary
approvals will be obtained by the Company or, if they are obtained, that they
will be obtained on a timely basis. Furthermore, the Company or the FDA may
suspend clinical trials at any time upon a determination that the subjects or
patients are being exposed to an unacceptable health risk. The FDA may also
require post-approval testing and surveillance programs to monitor the effects
of the Company's products and the products it distributes as a condition of
approval. Approvals that have been or may be granted are subject to continual
review and surveillance programs required by regulatory agencies, and later
discovery of previously unknown problems may result in product labeling
restrictions or withdrawal of products from marketing.
International sales of medical devices are subject to the regulatory
agency requirements of each country, and more recently in Europe, the
regulations of the European Economic Community. The regulatory review process
varies from country to country. In addition, international sales of medical
devices not cleared by the FDA for distribution in the United States may be
subject to FDA export requirements, which require the Company to document that
the sale of the device is not in violation of that country's medical device
laws. This documentation is then submitted to the FDA with a request for a
permit for export to that country. The Company intends to apply for regulatory
approval, import approval and export approval for its products for sales in
countries comprising the major foreign market.
In addition to the statutes and regulations enforced by the FDA, the
Company is also subject to regulation under the Occupational Safety and Health
Act, the Environmental Protection Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act and other present and potential future
federal, state and local statutes, regulations and ordinances, including those
promulgated by the Environmental Protection Act and the Department of Labor.
Regulations regarding the manufacture and sale of the Company's products are
subject to change. The Company cannot predict what impact, if any, such
changes might have on its business.
UNCERTAINTY RELATING TO THIRD-PARTY REIMBURSEMENT. In the United
States, health care providers, such as hospitals and physicians, that purchase
medical devices, such as the Company's products, generally rely on third-party
payors, principally federal Medicare, state Medicaid and private health
insurance plans, to reimburse all or part of the cost of the procedure in which
the medical device is being used. In addition, certain health care providers
are moving toward a managed care system in which such providers contract to
provide comprehensive health care for a fixed cost per person. Managed care
providers are attempting to control the cost of health care by authorizing
fewer elective surgical procedures. The Company is unable to predict what
changes will be made in the reimbursement methods utilized by third- party
health care payors. Furthermore, the Company could be adversely affected by
changes in reimbursement policies of governmental or private health care
payors, particularly to the extent any such changes affect reimbursement for
procedures in which the Company's products are used. Failure by physicians,
hospitals and other users of products sold by the Company to obtain sufficient
reimbursement from health care payors for procedures in which the Company's
products are used or adverse changes in governmental and private third-party
payors' policies toward reimbursement for such procedures would have a material
adverse effect on the Company's business, financial condition or results of
operations.
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If the Company obtains the necessary foreign regulatory approvals,
market acceptance of the products sold by the Company in international markets
would be dependent, in part, upon the availability of reimbursement within
prevailing health care payment systems. Reimbursement and health care payment
systems in international markets vary significantly by country, and include
both government-sponsored health care and private insurance. The Company
intends to seek international reimbursement approvals, although there can be no
assurance that any such approvals will be obtained in a timely manner, if at
all, and the effect on market acceptance of the Company's products in the
international markets in which such approvals are sought.
DEPENDENCE ON KEY PERSONNEL. The success of the Company will be
largely dependent on the efforts of a number of key management and technical
personnel. The loss of the services of one or more key employees could have an
adverse effect on the Company. The Company currently maintains key-man life
insurance on Herbert H. Spoon, President and Chief Executive Officer of the
Company. The Company believes that its future success will depend in large
part upon its ability to hire and retain suitable operating, marketing,
financial and technical personnel. The competition for qualified personnel in
the medical device industry is intense and, accordingly, there can be no
assurance that the Company will be able to hire or retain necessary personnel.
FUTURE ADDITIONAL CAPITAL REQUIREMENTS; NO ASSURANCE FUTURE CAPITAL
WILL BE AVAILABLE. The Company's capital requirements will depend on numerous
factors, including market acceptance and demand for its products; the resources
the Company devotes to the development, manufacture and marketing of its
products; the progress of the Company's clinical research and product
development programs; the receipt of, and the time required to obtain,
regulatory clearances and approvals; the resources required to protect the
Company's intellectual property; the resources expended, if any, to acquire
complementary businesses, products and technologies; and other factors. The
timing and amount of such capital requirements cannot be accurately predicted.
Funds may also be used for the acquisition of businesses, products and
technologies that are complementary to those marketed by the Company.
Consequently, although the Company believes that its revenues and other sources
of liquidity will provide adequate funding for its capital requirements through
at least 1997, the Company may be required to raise additional funds through
public or private financings, collaborative relationships or other
arrangements. There can be no assurance that the Company will not require
additional funding or that such additional funding, if needed, will be
available on terms attractive to the Company or at all. Any additional equity
financings may be dilutive to stockholders, and debt financing, if available,
may involve restrictive covenants.
PRODUCT LIABILITY: CLAIMS IN EXCESS OF INSURANCE COVERAGE. The
development, manufacture and sale of MIS products by the Company entails the
risk of product liability claims, involving both potential financial exposure
and associated adverse publicity. The Company's current product liability
insurance coverage limits are $1,000,000 per occurrence and in the aggregate,
and there can be no assurance that such coverage limits are adequate to protect
the Company from any liabilities it might incur in connection with the
development, manufacture and sale of its current and potential products. In
addition, the insurance is expensive and may not be available in the future on
acceptable terms, or at all. In addition, if such insurance is available,
there can be no assurance that the limits of coverage of such policies will be
adequate. A successful product liability claim in excess of the Company's
insurance coverage could have a material adverse effect on the Company's
business, financial condition or results of operations.
STOCK PRICE VOLATILITY. The stock market in general, and stocks of
medical device companies in particular, have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock. In addition,
the market price of the Common Stock has been and is likely to continue to be
highly volatile. Factors such as fluctuations in the Company's operating
results, announcements of technological innovations or new products by the
Company or its competitors, the FDA and international regulatory actions,
actions with respect to reimbursement matters, developments with respect to
patents of proprietary rights, public concern as to the safety of products
developed or marketed by the Company or others, changes in health care policy
in the United States and internationally, changes in stock market analyst
recommendations regarding the Company, or the medical device industry generally
or general market conditions may have a significant effect on the market price
of the Company's Common Stock.
-8-
<PAGE> 10
SHARES ELIGIBLE FOR FUTURE SALE. Sales of shares of Common Stock by
existing stockholders under Rule 144 of the Securities Act, or through the
exercise of outstanding vested options, could have an adverse effect on the
price of the Common Stock. On the date of this Prospectus, in addition to the
140,000 shares offered hereby, approximately 31,000 shares held by affiliates
of the Company are eligible for sale in the public market upon compliance with
the volume and other limitations contained in Rule 144 of the Securities Act.
In addition, on the date of this Prospectus, there were outstanding options to
acquire up to 250,000 shares under the Company's stock option plan and
outstanding options to acquire up to 102,000 additional shares under option
agreements entered into outside of such plan.
RIGHTS AGREEMENT. On June 21, 1995, the Board of Directors of the
Company declared a dividend of one Common Stock purchase right (a "Right") for
each share of Common Stock outstanding. Each Right entitles the holder to
purchase one share of the Company's Common Stock at an initial exercise price
of $7.00 per share, subject to adjustment, upon the terms and subject to the
conditions set forth in a Rights Agreement dated as of June 20, 1995, between
the Company and American Stock Transfer & Trust Company, as the Rights Agent.
The Rights trade with the Common Stock and will not detach from the Common
Stock or become exercisable until the earlier of (i) ten business days after a
public announcement that a person or group of affiliated or associate persons
("Acquiring Person") has acquired beneficial ownership of 15% or more of the
Company's Common Stock (a "Shares Acquisition Date") and (ii) ten business days
after the commencement of, or the first public announcement of an intention to
make, a tender offer or exchange offer for the Common Stock, the consummation
of which would result in beneficial ownership by a person or group.
If any person or group which acquires beneficial ownership of 15% or
more of the outstanding shares of the Company's Common Stock, each Right (other
than the Rights held by the Acquiring Person, which shall be void), will
entitle its holder to purchase at the exercise price an additional number of
shares of Common Stock equal to the amount determined by dividing the exercise
price by 50% of the then current market price of the Common Stock.
In addition, if following the Shares Acquisition Date, the Company is
acquired in a merger or other business- combination transaction, or sells more
than 50% of its assets or earning power to any person, each Right (other than
those beneficially held by an Acquiring Person) will entitle its holder to
purchase at the existing exercise price a number of shares of common stock of
the acquiring company having twice the value of the exercise price.
The Company may redeem the Rights at $.02 per Right at any time on or
prior to the tenth business day following the first public announcement of the
acquisition by a person of 15% or more of its Common Stock or the commencement
of a tender offer or exchange offer for such 15% ownership.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group who attempts to acquire the Company
without conditioning the offer on a substantial number of Rights being
acquired. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors of the Company since the Board
of Directors may, at its option, at any time prior to the close of business on
the tenth business day after the Shares Acquisition Date, redeem all the then
outstanding Rights at a price of $.02 per Right.
AUTHORIZATION OF PREFERRED STOCK. The Company's Certificate of
Incorporation authorizes the issuance of preferred stock with designations,
rights and preferences determined from time to time by its Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or
other rights that could adversely affect the voting power or other rights of
the holders of the Common Stock. In the event of issuance, the preferred stock
could be used, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company. Although the
Company has no present intention to issue any additional shares of its
preferred stock, there can be no assurance that it will not do so in the
future.
NO DIVIDENDS. The Company does not anticipate paying cash dividends
on its Common Stock in the foreseeable future.
-9-
<PAGE> 11
USE OF PROCEEDS
The Shares to be sold pursuant to the Prospectus are owned by certain
stockholders of the Company. The Company will not receive any of the proceeds
from the sale of the Shares. See "Selling Stockholders."
SELLING STOCKHOLDERS
The following table sets forth the beneficial ownership of Common
Stock held by certain stockholders of the Company (the "Selling Stockholders")
immediately prior to and upon completion of this offering. Except as otherwise
specified, the named beneficial owner has sole voting and investment power over
the shares listed.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before the Offering After the Offering
----------------------------- -----------------------------
Number Percentage Shares to Number Percentage
Name of Shares of Class be Sold of Shares of Class
---- ---------------- ----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Gregory M. Miles(1) 343,008 6.0% 40,000 303,008 5.3%
Richard H. Klein(2) 600,000 10.6% 100,000 500,000 8.8%
</TABLE>
================================================================================
(1) Mr. Miles served from February 1996 through January 1997 as the Vice
President - Research and Development of the Company and as a director.
Includes 15,000 shares of Common Stock issuable upon exercise of stock
options granted under the Non-Qualified Stock Option Agreement dated
February 13, 1996, between the Company and Mr. Miles, and 8,000 shares of
Common Stock issuable upon exercise of stock options granted under the
Employment Agreement dated February 13, 1996, between the Company and
Mr. Miles.
(2) Mr. Klein is President of KMI, a Vice President of the Company and
a director.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by or for the account of the
Selling Stockholders in the over-the-counter market, on the NASDAQ/SCMS or
otherwise at prices and on terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Shares may be
sold by any one or more of the following methods: (a) a block trade (which may
involve crosses) in which the broker or dealer so engaged will attempt to sell
the securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and (d) privately negotiated transactions. The
Selling Stockholders may effect such transactions by selling Shares through
broker-dealers, and such broker-dealers may receive compensation in the form of
commissions from the Selling Stockholders (which commissions will not exceed
those customary in the types of transactions involved). The Selling
Stockholders and any broker-dealers who participate in the distribution of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act in connection with such sales, and any profit on the sale of Shares by it
and any commissions received by any such broker-dealers may be deemed to be
underwriting discounts and commissions.
The Company will receive no portion of the proceeds of the sale of the
Shares offered hereby and will bear all costs and expenses incident to their
registration.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Fulbright & Jaworski L.L.P., San Antonio, Texas.
-10-
<PAGE> 12
EXPERTS
The consolidated financial statements included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 incorporated by
reference in this Prospectus and elsewhere in this Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports dated March 1, 1996 with respect thereto, and are
incorporated herein in reliance upon the authority of such firm as experts in
accounting and auditing in giving said reports.
-11-
<PAGE> 13
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
================================================================================
================================================================================
140,000 SHARES
LIFEQUEST MEDICAL, INC.
COMMON STOCK
-------------------------
P R O S P E C T U S
FEBRUARY 7, 1997
-------------------------
================================================================================
<PAGE> 14
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering are:
<TABLE>
<S> <C>
SEC registration fee $ 128
Legal fees and expenses 5,000*
Miscellaneous 1,872*
------
Total $7,000*
-------------------- ======
* Estimated
</TABLE>
The Company has agreed to pay all the costs and expenses of this
offering.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers the
Registrant to, and the Bylaws of the Registrant provide that it shall,
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that he is or was a director, officer, employee or agent of the
Registrant, or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest
of the Registrant, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful; except that, in the
case of an action or suit by or in the right of the Registrant, no
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Registrant unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine that such person is fairly and reasonably entitled
to indemnity for proper expenses.
ITEM 16. EXHIBITS.
Exhibit No. Exhibit
5 Opinion of Fulbright & Jaworski L.L.P. regarding legality.
24.1 Consent of Fulbright & Jaworski L.L.P. (contained in Exhibit 5).
24.2 Consent of Arthur Andersen LLP.
25 Power of Attorney (included on signature page).
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post- effective amendment shall be deemed to
be a new registration statement relating to the
II-1
<PAGE> 15
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that, insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all 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 the City of San Antonio and State of Texas the 5th day of
February, 1997.
LIFEQUEST MEDICAL, INC.
By: /s/ Herbert H. Spoon
----------------------------------
Herbert H. Spoon
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Herbert H. Spoon and Randall K.
Boatright, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same and all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting said
attorney-in-fact and agent, and each of them, full power and authority to do
and perform each and every act and thing requisite and 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
attorney-in-fact and agent or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Herbert H. Spoon President, Chief Executive February 5, 1997
- ---------------------------------- Officer and a Director
Herbert H. Spoon (Principal Executive Officer)
/s/ Randall K. Boatright Vice President and February 5, 1997
- ---------------------------------- Chief Financial Officer
Randall K. Boatright (Principal Financial
Officer and Principal
Accounting Officer)
/s/ Robert B. Johnson Director February 5, 1997
- ----------------------------------
Robert B. Johnson
/s/ Jeffrey H. Berg Director February 5, 1997
- ----------------------------------
Jeffrey H. Berg
/s/ Richard H. Klein Director February 5, 1997
- ----------------------------------
Richard H. Klein
</TABLE>
II-3
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE
- ---------- ------- ----
<S> <C> <C>
5 Opinion of Fulbright & Jaworski L.L.P. regarding legality . . . . . . . . II-5
24.1 Consent of Fulbright & Jaworski L.L.P. (contained in Exhibit 5) . . . . . II-5
24.2 Consent Arthur Andersen LLP . . . . . . . . . . . . . . . . . . . . . . . II-6
25 Power of Attorney (included on signature page) . . . . . . . . . . . . . . II-3
</TABLE>
II-4
<PAGE> 1
[FULBRIGHT & JAWORSKI LETTERHEAD]
February 7, 1997
LifeQuest Medical, Inc.
9601 McAllister Freeway, Suite 1120
San Antonio, Texas 78216
Dear Sirs:
We refer to the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by LifeQuest Medical, Inc. (the
"Company") under the Securities Act of 1933, as amended, relating to an
aggregate of 140,000 shares of Common Stock, $.001 par value ("Common Stock"),
to be sold by certain selling stockholders listed in the Registration Statement
(the "Selling Stockholders").
As counsel for the Company, we have examined such corporate
records, documents and such questions of law as we have considered necessary or
appropriate for the purposes of this opinion and, upon the basis of such
examination, advise you that in our opinion the 140,000 shares of Common Stock
to be sold by the Selling Stockholders have been duly and validly authorized,
have been legally issued, and are fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the prospectus contained therein and elsewhere in the Registration
Statement and prospectus. This consent is not to be construed as an admission
that we are a party whose consent is required to be filed with the Registration
Statement under the provisions of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
<PAGE> 1
[FULBRIGHT & JAWORSKI LETTERHEAD]
February 7, 1997
LifeQuest Medical, Inc.
9601 McAllister Freeway, Suite 1120
San Antonio, Texas 78216
Dear Sirs:
We refer to the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by LifeQuest Medical, Inc. (the
"Company") under the Securities Act of 1933, as amended, relating to an
aggregate of 140,000 shares of Common Stock, $.001 par value ("Common Stock"),
to be sold by certain selling stockholders listed in the Registration Statement
(the "Selling Stockholders").
As counsel for the Company, we have examined such corporate
records, documents and such questions of law as we have considered necessary or
appropriate for the purposes of this opinion and, upon the basis of such
examination, advise you that in our opinion the 140,000 shares of Common Stock
to be sold by the Selling Stockholders have been duly and validly authorized,
have been legally issued, and are fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the prospectus contained therein and elsewhere in the Registration
Statement and prospectus. This consent is not to be construed as an admission
that we are a party whose consent is required to be filed with the Registration
Statement under the provisions of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
<PAGE> 1
EXHIBIT 24.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated March 1, 1996,
included in LifeQuest Medical, Inc.'s Form 10-K for the year ended December 31,
1995, and to all references to our Firm included in this Registration
Statement.
/s/ Arthur Andersen LLP
San Antonio, Texas
February 6, 1997
