<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1997
REGISTRATION NO. 333-6397
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UROHEALTH SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 98-0122944
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification No.)
</TABLE>
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5 CIVIC PLAZA, SUITE 100
NEWPORT BEACH, CALIFORNIA 92660
(714) 668-5858
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
CHARLES A. LAVERTY
CHIEF EXECUTIVE OFFICER
UROHEALTH SYSTEMS, INC.
5 CIVIC PLAZA, SUITE 100
NEWPORT BEACH, CALIFORNIA 92660
(714) 668-5858
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
ROBERT M. MATTSON, JR., ESQ.
MORRISON & FOERSTER LLP
19900 MACARTHUR BOULEVARD
SUITE 1200
IRVINE, CALIFORNIA 92612
(714) 251-7500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] ____________________
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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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 25, 1997
PROSPECTUS
8,728,020 SHARES
UROHEALTH SYSTEMS, INC.
COMMON STOCK
------------------------
The 8,728,020 shares of Common Stock offered hereby are being sold by the
Selling Stockholders. See "Selling Stockholders" and "Plan of Distribution."
Urohealth Systems, Inc. ("Urohealth" or the "Company") will not receive any of
the proceeds from the sale of the shares by the Selling Stockholders. The Common
Stock of the Company is listed on The Nasdaq National Market under the symbol
"UROH." On July , 1997, the last reported sale price of the Common Stock was
$ per share. See "Price Range of Common Stock and Dividends."
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
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.
This Prospectus relates to the public offering for resale, which is not
being underwritten, of the following securities of the Company by the holders
thereof (the "Selling Stockholders"): (i) 1,414,827 shares acquired by Avatex
Corporation upon conversion of a convertible note and Series B Convertible
Preferred Stock of the Company owned by Avatex; (ii) 1,572,337 shares of Common
Stock of the Company acquired by a former shareholder of Osbon Medical Systems
Ltd. ("Osbon") in connection with the acquisition of Osbon by the Company; (iii)
110,000 shares of Common Stock of the Company issued to Vista Medical
Technologies, Inc. ("Vista") in connection with an exclusive license of certain
technology granted by Vista to the Company; (iv) 164,384 shares of Common Stock
of the Company issued to Charles Klieman and John Stigglebout in connection with
an exclusive license of certain technology granted to the Company; (v) 1,295,700
shares of Common Stock of the Company issued to former shareholders of X-Cardia
Corporation in connection with the acquisition of X-Cardia by the Company, and
1,000,000 shares of Common Stock issuable to the former shareholders of X-Cardia
under the Merger Agreement upon satisfaction of certain contingencies; (vi)
2,800,000 shares of Common Stock of the Company issued to the former
stockholders of Microsurge, Inc. ("Microsurge") in connection with the
acquisition of Microsurge by the Company; (vii) 192,200 shares of Common Stock
of the Company issued to the former shareholders of PEBB Biopsy Corporation; and
(viii) 178,572 shares of Common Stock of the Company issued to the former
shareholders of Endoscopic Imaging Systems, Inc.
The Selling Stockholders directly, through agents designated from time to
time, or through dealers or underwriters also to be designated may sell the
Common Stock from time to time on terms to be determined at the time of sale.
The effectiveness of the Registration Statement of which this Prospectus
constitutes a part is expected to terminate on the earlier of March 31, 1998 and
the date on which all of the shares have been sold.
To the extent required, the respective purchase prices and public offering
prices, the names of any such agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying Prospectus Supplement or by filing a post-effective amendment to
the registration statement of which this Prospectus is a part. See "Plan of
Distribution."
The Company will not receive any proceeds from this offering. The aggregate
proceeds to the Selling Stockholders from the sale of the Common Stock will be
the purchase price less the aggregate agent's commissions and underwriter's
discounts, if any. The Company by agreement will pay substantially all of the
other expenses of this offering. See "Plan of Distribution" herein for a
description of the indemnification arrangements for the agents, dealers and
underwriters.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Common
Stock may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), and any commissions received by
them and any profit on the resale of the Common Stock purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
THE DATE OF THIS PROSPECTUS IS , 1997.
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AVAILABLE INFORMATION
Urohealth Systems, Inc. ("Urohealth" or the "Company") is subject to the
information requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: Chicago Regional Office, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 75 Park Place, 14th Floor, New York, New York 10017. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at its principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549. In addition, the Commission maintains a site on the World Wide Web
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants, including the Company, that file
electronically with the Commission.
The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained herein concerning the provisions of any
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable document
filed with the Commission. For further information concerning the Company and
the Common Stock offered hereby, reference is made to the Registration
Statement, including the exhibits and schedules thereto. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the Commission's principal office, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part thereof may be obtained
from the Commission's Public Reference Section at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents, which have been filed with the Commission pursuant to the
Exchange Act: (i) the Company's Annual Report on Form 10-K for the year ended
March 31, 1997 (Commission file no. 1-11150); (ii) the Company's Current Report
on Form 8-K, dated April 28, 1997 (Commission file no. 1-11150); and (iii) the
description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A dated November 22, 1996 (Commission file no.
1-11150).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus (excluding exhibits to the
information that is incorporated herein by reference unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to Kevin M. Higgins,
Senior Vice President and General Counsel, Urohealth Systems, Inc., 5 Civic
Plaza, Suite 100, Newport Beach, California 92660; telephone number (714)
668-5858.
Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed
incorporated document or in any accompanying prospectus supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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THE COMPANY
OVERVIEW
Urohealth is a developer, manufacturer and distributor of products for the
urology, minimally invasive and general surgery, and gynecology markets (the
"Target Markets"). The Company has a broad offering of products used by
healthcare professionals for patients suffering from impotence, incontinence and
other gynecological and urological disorders, and other conditions requiring
minimally invasive and general surgery. In October 1994, under the leadership of
new management, the Company adopted and began to implement a strategic plan
which took advantage of consolidation opportunities in the highly fragmented
medical products industry. Management's strategy was to position the Company to
benefit from the competitive advantages and operating efficiencies inherent in
an infrastructure which combines an experienced management team, sophisticated
and efficient manufacturing facilities and a large sales force.
The Company's strategy is to: (i) expand the range of products to its
growing Target Markets; (ii) leverage its sales force to increase sales of its
existing, newly acquired and recently developed products, including sales
through distributors and group purchasing organizations; (iii) further
capitalize on efficiencies and synergies available by continuing to consolidate
manufacturing of existing and acquired products into the Company's existing
manufacturing operations; (iv) continue to acquire and develop additional
innovative products and product lines, including products to serve the
gynecology market; and (v) develop and expand an international sales and
marketing presence to capitalize on opportunities it identifies in selected
developed countries.
RECENT DEVELOPMENTS
Pending Acquisition of Imagyn. On April 19, 1997, the Company entered into
an agreement to acquire Imagyn Medical, Inc. ("Imagyn") in a stock-for-stock
merger. Imagyn is a developer of micro-invasive systems to diagnose and treat
gynecological and reproductive disorders. Imagyn's products enable physicians to
atraumatically access and visualize all the organs of the female reproductive
system. Imagyn's primary platform, the MicroLap System, is a microendoscopy
system. MicroLap is a 2 mm microlaparoscope with resolution and light efficiency
characteristics which rival the conventional laparoscopes used in hospitals,
thereby allowing physicians to perform a wide range of gynecological procedures
in all clinical settings. Imagyn's MicroSpan microhysteroscopy system, which
incorporates the same high resolution optics found in Imagyn's MicroLap
microlaparoscopy system, includes a 1.6 mm hysteroscope and a MicroSpan Sheath
designed to allow atraumatic access to the uterus without cervical dilation.
Imagyn's third platform is the Ovation System, which is used for visual
evaluation of the fallopian tubes. The acquisition is subject to approval by the
stockholders of the Company and Imagyn and to other customary closing
conditions. If the Merger is consummated, the Company will issue approximately
11.4 million shares of its Common Stock in exchange for the outstanding Imagyn
Common Stock.
Placement of Senior Subordinated Notes. On April 10, 1997, the Company
completed the private placement (the "Note Offering") of $110 million aggregate
principal amount of its 12.5% Senior Subordinated Notes due 2004 (the "Notes").
The purchaser of the Notes also received warrants to purchase 2% of the
fully-diluted common equity of the Company, and the right to receive an
additional 2% if certain financial performance thresholds are not achieved by
the Company. The Company used a portion of the proceeds from the Note Offering
to repay its existing bank credit facility, and at the same time the Company
entered into a new $50.0 million revolving credit facility (the "Credit
Facility") which is secured by all of the Company's assets.
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RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider
carefully the following factors, together with the other information contained
in or incorporated by reference in this Prospectus, prior to purchasing the
Common Stock offered hereby.
Significant Leverage. The Company has substantial indebtedness and
significant debt service obligations. At March 31, 1997, on a pro forma basis
(to reflect the Note Offering), the Company would have had approximately $171.9
million of indebtedness outstanding, approximately $192.8 million of total
assets, approximately $143.1 million of total tangible assets and approximately
$(14.6) million of stockholders' equity. The Company's annual debt service
obligations, pro forma to reflect the Note Offering and the application of the
net proceeds therefrom, are approximately $19 million per year.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control, as well as the availability of
borrowings under the Credit Facility or successor credit facilities. The Company
will require substantial amounts of cash to fund scheduled payments of principal
and interest on its outstanding indebtedness as well as future capital
expenditures and any increased working capital requirements. The Company
historically and, on a pro forma basis for the year ended March 31, 1997, has
had negative cash flow from operations. In order to have positive cash flow from
operations and meet its various financial requirements, including debt service,
the Company must experience substantial growth and improvements in its results
of operations. There can be no assurance that the Company will have positive
cash flow from operations in the future. If the Company is unable to meet its
cash requirements out of cash flow from operations or from available borrowings,
there can be no assurance that it will be able to obtain alternative financing
or that it will be permitted to do so under the terms of the Credit Facility,
the indenture relating to the Notes (the "Note Indenture"), or other debt
instruments. In the absence of such financing, the Company's ability to respond
to changing business and economic conditions, to make future acquisitions, to
absorb adverse operating results or to fund capital expenditures or research and
development may be adversely affected. Finally, it is anticipated that in order
to pay the principal balance of the Notes due at maturity, the Company will have
to obtain alternative financing.
The Company's high degree of leverage could have important consequences
including, without limitation, the following: (i) a substantial portion of the
Company's net cash provided by operations will be committed to the payment of
the Company's interest expense and principal repayment obligations and will not
be available to the Company for its operations, capital expenditures,
acquisitions or other purposes; (ii) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures or
acquisitions may be limited; (iii) the Company will be more highly leveraged
than certain of its competitors, which may place it at a disadvantage and limit
the Company's flexibility in reacting to changes in its business; and (iv) the
Company's borrowings under the Credit Facility would bear interest at variable
rates, which could result in higher interest expense if interest rates rise.
Operating Losses; No Assurance of Profitability; Liquidity. The Company
reported net losses for its fiscal year ended June 30, 1995, for the nine months
ended March 31, 1996 and for the year ended March 31, 1997 of $24.8 million,
$23.0 million, and $86.5 million, respectively. There can be no assurance that
the Company will be profitable in any future period. The net cash used in
operating activities by the Company for is fiscal year ended June 30, 1995, for
the nine months ended March 31, 1996 and for the year ended March 31, 1997 was
$12.9 million, $16.9 million and $55.0 million, respectively. There can be no
assurance that the operating activities of the Company will generate sufficient
cash flow to meet the Company's needs in any future period. The Company's future
capital requirements will depend upon many factors, including the success of the
Company's sales and marketing efforts, new product development, and future
acquisitions of companies and products. The Company believes that the net
proceeds from the Note Offering, together with borrowings under the Credit
Facility and funds expected to be generated from operations will be adequate to
fund its operations for the next 12 months. There can be no assurance, however,
that the Company will not require additional financing during such time.
Further, there can be no assurance that any additional financing will be
available to the Company on acceptable terms, if at all. In addition, other than
certain permitted
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indebtedness (under the Note Indenture), including indebtedness under the Credit
Facility, the Company will need improvement in results of operations in order to
incur additional indebtedness under the terms of the Note Indenture. If adequate
funds are not available, the Company may be required to delay, scale back or
eliminate its acquisition and product development efforts, which could have a
material adverse effect on the Company's business, results of operations or
financial condition.
Limitations Imposed by Certain Indebtedness. The documents governing the
indebtedness of the Company outstanding upon consummation of the Note Offering
(including the Note Indenture and the Credit Facility) contain significant
covenants that limit the Company's and its subsidiaries' ability to engage in
various transactions and, in the case of the Credit Facility, require
satisfaction of specified financial performance criteria. In addition, under
each of the foregoing documents, the occurrence of certain events (including,
without limitation, failure to comply with the foregoing covenants, material
inaccuracies of representations and warranties, certain defaults under or
acceleration of other indebtedness and events of bankruptcy or insolvency)
would, in certain cases after notice and grace periods, constitute an event of
default permitting acceleration of the indebtedness covered by such documents.
The limitations imposed by the documents governing the outstanding indebtedness
of the Company and its subsidiaries are substantial, and failure to comply with
them could have a material adverse effect on the Company and its subsidiaries.
Future Operating Results Dependent on Products. The future operating
results of the Company will be dependent upon its ability to increase sales of
its existing medical products and the continued acceptance of such products by
the medical community and third-party payors as useful and cost-effective.
Historically, the Company has been highly dependent on the sale of vacuum
erection devices for the treatment of male impotence. The market for medical
products is characterized by rapid technological change and product
obsolescence. In particular, competition in the market for treatment of male
impotence is especially intense and has increased substantially in recent years.
Competitors and others may develop and introduce new products, devices or
approaches for treatment of the conditions targeted by the Company that could
render one or more of the Company's products obsolete or noncompetitive. The
Company's future operating results will also be dependent, therefore, upon the
Company's ability to develop or acquire new products that are competitive in the
markets it serves. Product acceptance will depend upon many factors, including
the continued demonstration of the utility and cost-effectiveness of the
Company's products, the maintenance of regulatory clearance in the United States
and elsewhere and the continued availability of third-party reimbursement.
Failure of one or more of the Company's products to continue to be accepted by
the medical community or its inability to develop new products could have a
material adverse effect on the Company. Substantially all of the Company's
medical product sales are derived from medical products of companies that the
Company acquired. As the Company has acquired businesses and technologies, it
has acquired a number of related products under development which will require
additional research and development efforts by the Company in an attempt to
bring products to market. While members of management of the Company have
experience in developing products internally, the Company has not historically
developed a significant number of medical products internally. There can be no
assurance that the Company's medical products will be successfully developed and
marketed, that required regulatory approvals from the Food and Drug
Administration ("FDA") or equivalent foreign authorities for any indication will
be obtained or that any products, if produced, will be capable of being produced
in commercial quantities at reasonable costs, that such future products will be
brought to market in a timely manner or that existing products will generate
significant sales, the failure of any of which could have a material adverse
effect on the Company's business, operating results or financial condition.
Concentration of Credit Risk; Extended Payment Terms. The Company sells
several lines that are considered "capital equipment" by hospitals and other
purchasers. From time to time, the Company offers certain customers extended
payment terms to facilitate sales of these products. The Company may in the
future grant similar extended payment terms. For the year ended March 31, 1997,
sales that the Company made pursuant to extended payment terms were
approximately 7% of total sales. The Company's typical payment terms require
payment from 30 to 90 days. As of March 31, 1997, the Company had a total of
$4.3 million of accounts receivable on extended payment terms with Integrated
Medical Resources, Inc. ("IMR") for sales of the Company's Rigiscan product
pursuant to terms under which the payments are due
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over 15-36 months. Over the year ended March 31, 1997, the Company sold
approximately $5.8 million of products to IMR on extended payment terms. IMR is
a public company traded on the NASDAQ stock market under the symbol "IMRI." For
its most recent fiscal year ended December 31, 1996, IMR reported a loss of $6.5
million. Bruce Hazuka, Executive Vice President and Chief Operating Officer of
the Company, is a member of the board of directors of IMR.
Uncertainty Relating to Third-Party Reimbursement. In the United States,
health care providers, such as hospitals and physicians, that purchase
Urohealth's products and other medical devices, generally rely on third-party
payors, including private health insurance plans and federal Medicare and state
Medicaid, to reimburse all or part of the cost of the procedure in which the
medical device is being used. Reimbursement has traditionally been available in
the United States for vacuum erection devices manufactured by Urohealth and sold
by prescription to patients under a specific reimbursement code. The majority of
the remaining Urohealth products are used in procedures for which reimbursement
is generally available, however, there are no specific reimbursement codes for
Urohealth's products. There can be no assurance that reimbursement will be
available for procedures performed using Urohealth's existing products or future
products. In the event that reimbursement is not available for procedures using
such products, the market acceptance for such products in the United States
could be materially and adversely affected. 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 covered
individual. Urohealth is unable to predict what changes will be made in the
reimbursement methods utilized by third-party health care payors, and Urohealth
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 its products are used. Failure by
physicians, hospitals and other users of Urohealth's products to obtain
sufficient reimbursement from health care payors for procedures in which their
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 Urohealth's business, financial condition and results of
operations.
Market acceptance of Urohealth's products in international markets may 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 and private health insurance. There can be no assurance that any
international reimbursement approvals will be obtained in a timely manner, or at
all. Failure to receive international reimbursement approvals could have a
material adverse effect on market acceptance of Urohealth's products in
international markets and therefore could have a material adverse effect on
Urohealth's business, financial condition and results of operations.
Management of Growth. The Company's growth has placed, and is expected to
continue to place, significant demands on its financial, operational and
management resources. In addition, in order to meet expected growth, the Company
expects to add administrative and other personnel and manufacturing capacity,
and make additional investments in operations and systems. There can be no
assurances that the Company will be able to find and train such personnel, or to
do so on a timely basis, or to expand its operations and manufacturing capacity
to the extent and in the time required. Continued growth in sales, including
sales under new group purchasing organization and distributor agreements, would
require the Company to carefully manage production capacity and inventory
levels, as well as quality controls, to meet increasing product demand and new
product introductions. The Company has already experienced rapid growth in its
inventory levels in anticipation of increased sales. Inaccuracies in demand
forecasts could result in insufficient or excessive capacity or inventories and
disproportionate overhead expenses. Failure to adequately manage growth,
including any unexpected costs, delays, quality control issues or inefficiencies
incurred or encountered in connection with such management of growth could have
a material adverse effect on the Company's business, operating results or
financial condition.
Integration of Acquired Operations. The Company recently acquired X-Cardia
and Microsurge. The Company currently intends to integrate the operations of
those acquired entities with its own operations. No assurance can be given that
the benefits expected from such integration will be realized. In addition, the
Company will be subject to the risks that such recently acquired operations and
future acquisitions will not
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perform as expected and that the earnings from such operations will not be
sufficient to support the capital expenditures needed to develop such operations
in conformity with the Company's strategy. Any delays or unexpected costs
incurred in connection with such integration could have a material adverse
effect on the Company's business, operating results or financial condition.
Future Acquisitions. An important element of the Company's strategy is to
identify and acquire businesses and product lines. The Company actively seeks
acquisition opportunities in the regular course of its business and is engaged
in ongoing evaluations of and discussions with third parties regarding potential
acquisitions certain of which, if consummated, could be material. Since July
1995, the Company has acquired a number of medical product companies and product
lines and has acquired or licensed additional technology. As a result of those
acquisitions, the Company has experienced rapid growth. The Company expects to
continue to acquire additional products and companies in the future. There can
be no assurance that the Company will be able to implement or sustain its
acquisition strategy or that its strategy will ultimately prove profitable to
the Company. The Company will likely be required to issue additional shares of
Common Stock, incur additional debt or to use a portion of its cash balances to
make such future acquisitions. In addition, the terms of the Note Indenture and
the terms of other indebtedness may restrict the Company's ability to pursue and
consummate future acquisitions.
Reliance on Patents and Proprietary Rights. The commercial success and
future revenue growth of the Company will depend, in part, on its ability to
operate without infringing on the rights of others both in the United States and
abroad and not breaching technology licenses that cover technology used in the
Company's products. The Company owns or has authority to use United States and
foreign patent rights with respect to some of its medical products and has
filed, and expects in the future to file, additional patent applications. It is
uncertain whether any third party patents will require the Company to develop
alternative technology or to alter its products or processes, obtain licenses or
cease certain activities. If such licenses are required, there can be no
assurance that the Company will be able to obtain such licenses on commercially
favorable terms, if at all. Failure by the Company to obtain a license to any
technology that it may require to commercialize its products could have a
material adverse effect on the Company. The Company recently acquired X-Cardia
which has filed patent applications with respect to its cardiac output
monitoring technology. There can be no assurance as to the breadth or degree of
the protection that may be afforded by such patent, or whether such applications
ultimately may be approved resulting in the issuance of patents. The Company
believes that some measure of patent protection with respect to its products
will be required to allow it to compete with large medical products companies.
There can be no assurance that the Company will continue to develop or acquire
products or processes that are patentable or that patents applied for will be
issued or that any patents issued to or licensed by the Company will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will provide it with competitive advantages. In addition, the Company could
incur substantial costs in defending its proprietary rights and there can be no
assurance that a competitor's technology or product would be found to infringe
such rights. Although the Company believes that its patents are valid, there can
be no assurance that the validity of any patent will be upheld if asserted by
the Company against any party. Further, there can be no assurances as to the
breadth and degree of protection that will be afforded the Company's patent
rights or that other companies will not independently develop similar but
non-infringing competitive products. Moreover, the laws of some foreign
countries may not protect the Company's proprietary rights to the same extent as
the laws of the United States. In addition, there is currently pending before
Congress legislation providing for changes to the patent law which may adversely
affect pharmaceutical, biopharmaceutical and biomedical firms. If such pending
legislation is adopted, the extent to which such changes would affect the
operations of the Company cannot be ascertained.
The patents or proprietary rights of others may have an adverse effect on
the ability of the Company to do business in the future. The Company may be
required to obtain licenses to patents or proprietary rights of other parties in
order to produce and sell certain of its products. No assurance can be given
that the Company's technology can be developed and commercialized without a
license to such patents or proprietary rights or that any licenses required
under any such patent or proprietary rights would be made available on terms
acceptable to the Company, if at all. If the Company does not obtain or maintain
such licenses, it could encounter delays in product introductions while it
attempts to design around or contest the validity of such
7
<PAGE> 9
patents, or the Company could find that the development, manufacture or sale of
products requiring such licenses could be foreclosed, any of which could have a
material adverse effect on the Company. Furthermore there can be no assurance
that competitors or potential competitors will not independently develop similar
or alternative products to those of the Company, duplicate any of the Company's
products or technologies, or design around the patented technologies developed
by the Company or its licensors, any of which could have a material adverse
effect on the Company's business, results of operations or financial condition.
The Company also relies on trade secrets, know-how, continuing
technological innovations and licensing opportunities to develop and maintain
its competitive position. There can be no assurance that others will not
independently create substantially equivalent proprietary information or
otherwise gain access to or disclose such information of the Company. It is the
Company's policy to require certain of its employees, contractors and
consultants to execute confidentiality agreements to protect its unpatented
proprietary technology and know-how. There can be no assurance that such
confidentiality agreements will not be breached, that the Company would have
adequate remedy for such breach, or that the Company's trade secrets will not
otherwise become known through independent discovery by competitors. Moreover,
in the absence of patent protection, the Company's business may be adversely
affected by competitors who independently develop substantially equivalent
technology.
Regulatory Matters. Most of the Company's medical products are subject to
regulation for safety and efficacy by, among other governmental entities, the
FDA and corresponding agencies of state and foreign countries in which the
Company sells its products. The process of receiving governmental approval may
take a number of years and the expenditure of substantial resources. There can
be no assurance that even after such time and expenditures, regulatory approval
will be obtained for any of the products developed by the Company. If regulatory
approval of a product is granted, such approval may entail limitations on the
indicated uses for which the product may be marketed. Further, discovery of
previously unknown problems with a product, manufacturer or its manufacturing
facilities may result in restrictions on such product or manufacturer, including
withdrawal of the product from the market. The Federal Food, Drug and Cosmetic
Act, the Public Health Services Act and other federal statutes and regulations
govern or influence the testing, manufacture, safety, labeling, storage,
recordkeeping, approval, advertising and promotion of such products. Product
development and approvals within this regulatory framework take a number of
years and involve the expenditure of substantial resources. Noncompliance with
applicable requirements may have a material adverse effect on the Company and
can result in fines, warning letters, recall or seizure of products, total or
partial suspension of production, refusal by the government to approve product
license applications or allow the Company to enter into supply contracts, and
criminal prosecution. The FDA also has the authority to revoke product licenses
and establishment licenses previously granted. Failure to comply with present or
future regulatory requirements, or respond to the new information reflecting on
the safety or effectiveness of an approved product, can lead the FDA to withdraw
its approval to market a product. The Company incurs substantial costs in
complying with regulatory requirements.
The FDA requires that a manufacturer introducing a new medical device or a
new indication for use of an existing medical device obtain either a 510(k)
premarket notification clearance or a premarket approval ("PMA") prior to being
introduced into the market. The 510(k) premarket notification clearance process
is significantly quicker and less costly than the PMA process. Substantially all
of the Company's FDA marketing clearances have been obtained through the FDA's
510(k) process; however, certain other products will require PMAs. The PMA
process is significantly more complex and time consuming than the 510(k)
notification process. The PMA process may take several years or longer and
requires the submission of extensive supporting data and clinical information.
The Company believes that it is in material compliance with the FDA's 510(k)
requirements for new and modified devices. The FDA has announced a program to
review approvals (510(k)s and PMAs) for certain devices. There can be no
assurance that upon any such review the FDA will agree with the Company's
determination regarding its 510(k)s. If the FDA were to disallow a 510(k)
marketing clearance for any device, the Company could be required to file
appropriate applications, either 510(k) or PMA, with the FDA or to take the
products in question off the market. If the FDA were to require suspension of
the sale of one or more of the products pending receipt of 510(k) clearance or
if the FDA were to refuse to grant 510(k) clearance, the Company's business,
results of operations and financial
8
<PAGE> 10
condition could be materially and adversely affected. There can be no assurance
that the Company will obtain timely regulatory approval for its future products,
or that existing approvals will not be withdrawn. Moreover, regulatory
approvals, if granted, may include significant limitations on the indicated uses
for which a product may be marketed.
Competition. The markets in which the Company operates are very competitive
and are characterized by rapidly evolving technology and product obsolescence.
The Company believes that its ability to develop and commercialize new products
and product enhancements is and will be critical to its continued growth. There
are a substantial number of medical products companies and such companies could
develop or offer products which would compete with products which the Company
currently markets or intends to market. Some of these companies have marketing
and distribution capabilities, and many of them have capital resources and
research and development staffs, substantially greater than those of the
Company. Moreover, it is reasonable to expect additional entrants into the
field. Any of these companies could introduce competing products, which could
cause a decline in sales or loss of market acceptance of existing or future
products of the Company. There can be no assurances that technological change
will not place one or more of the Company's existing or future products at a
competitive disadvantage. In addition, increased competitive pressure could lead
to intensified price-based competition that could materially adversely affect
the Company's business, results of operations or financial condition. There can
be no assurance that the Company will be able to compete successfully in the
future.
Dependence on Management. The success of the Company will depend on its
ability to attract and retain highly qualified personnel. In particular, the
loss of Charles A. Laverty, the Company's Chief Executive Officer, could have a
material adverse effect on the Company's business if a suitable replacement
could not be found. The Company has an employment agreement with Mr. Laverty
that provides for a three-year term expiring on April 1, 1999. The agreement
automatically renews for additional three-year terms if not terminated by either
party by prior notice. The Company has "key person" insurance on the life of Mr.
Laverty in the amount of $5.0 million; however, there can be no assurance that
such insurance would be sufficient to compensate the Company for his absence.
There can be no assurance that the Company will be successful in attracting or
retaining key personnel.
Products Liability Exposure. The medical products manufactured by the
Company have from time to time become the subject of products liability
litigation initiated by the patients using the products. In addition, as
additional products of the Company enter the market, the Company will be subject
to an increased risk of products liability claims. While the Company believes
that its products have been manufactured in accordance with industry standards,
and believes it has maintained adequate products liability insurance coverage,
any adverse claim or series of claims or adverse publicity resulting from a
claim, regardless of whether such claims are covered by insurance, could have a
material adverse effect on the Company's business, results of operations or
financial condition.
Potential Tax Liability. In connection with the redomestication of the
Company from Canada to the State of Delaware in July 1995, the Company has filed
a final Canadian tax return reporting the "deemed sale" of assets of Davstar
Industries Ltd. (the Canadian parent company). The Company anticipates that the
Canadian tax authorities will review the tax status of the former entity,
Davstar Industries Ltd., as a result of its redomestication from Canada to the
United States and believes that all or at least a significant amount of any
potential Canadian tax liability arising from the redomestication would be
offset against the Company's Canadian loss carryforwards. However, the Canadian
tax authorities could attempt to assign a greater value to the Company than used
in the Company's estimates, which could result in some amount of Canadian tax
that cannot be presently determined being assessed in a future period. No
provision for any liability that may result from the ultimate resolution of this
tax matter has been included in the accompanying consolidated financial
statements.
Limitation on Use of Tax Net Operating Loss Carryovers. As of March 31,
1997, the Company had accumulated net operating loss carryovers for U.S. federal
and state income tax purposes of approximately $92 million and $68 million,
respectively. These loss carryovers would expire, if not previously utilized
against income of the Company, in various years through 2012. The future income
tax benefit of these losses has not
9
<PAGE> 11
been given recognition in the Consolidated Financial Statements. Under Section
382 of the United States Internal Revenue Code of 1986, as amended (the "Code"),
and corresponding provisions of state tax law, certain "ownership changes" with
respect to the stock of a corporation having unused net operating loss
carryovers (a "loss corporation"), or with respect to the stock of its parent
corporation, may result in annual limitations on utilizations of such loss
carryovers against future income of the loss corporation. In connection with the
acquisitions of Osbon Medical Systems Ltd. in December 1995, an ownership change
occurred for purposes of Section 382 of the Code, thereby subjecting the Company
to annual limitations on its ability to offset its existing loss carryovers
against its future income. In connection with the acquisition of Microsurge on
March 31, 1997, an additional ownership change may have occurred. The Company
believes this additional ownership change will not reduce the December 29, 1995
Section 382 limitation, but will place limitations on the maximum annual
utilization of operating loss carryforwards generated subsequent to such date.
Warrants and Options; Potential Dilution and Adverse Impact on Additional
Financing. The Company has a significant number of outstanding options and
warrants. In addition, in May and July 1996, the Company issued $50.0 million of
the Company's 8.75% Convertible Subordinated Debentures due 2006 (the
"Debentures") which are convertible into Common Stock of the Company at a
conversion price, subject to adjustment, of $10.90 per share. The holders of the
Debentures would be entitled to receive 4,587,156 shares of Common Stock if such
holders elected to convert all of the Debentures into Common Stock. To the
extent that the outstanding options and warrants are exercised, or convertible
securities are converted, dilution of the interests of the Company's
stockholders may occur. The existence of such warrants, options and convertible
securities may adversely affect the terms on which the Company can obtain
additional financing, and the holders of such warrants, options and convertible
securities can be expected to exercise them at a time when the Company would, in
all likelihood, be able to obtain additional capital by an offering of its
unissued capital stock on terms more favorable to the Company than those
provided by such warrants, options and convertible securities.
Rights Agreements; Anti-takeover Effects. The Company has adopted a
Preferred Share Purchase Rights Plan, pursuant to a Rights Agreement dated as of
May 20, 1993 (the "Rights Agreement"). The Rights Agreement provides for the
type of plan commonly called a "poison pill." The Rights Agreement is intended
to prevent abusive hostile takeover attempts. However, the Rights Agreement
could have the effect of deterring or preventing an acquisition of the Company
even if a majority of the Company's stockholders would be in favor of such
acquisition, and could also have the effect of making it more difficult for a
person or group to gain control of the Company or to change existing management.
Volatility of Stock Price. The market price of the Company's Common Stock
is subject to significant fluctuations in response to variations in quarterly
operating results, general trends in the market for healthcare products, and
other factors. In addition, broad market fluctuations as well as general
economic or political conditions such as healthcare reform may adversely affect
the market price of the Urohealth Common Stock, regardless of the Company's
actual operating performance. The market price of the Company's Common Stock has
historically been very volatile. See "Price Range of Common Stock and
Dividends."
Absence of Dividends. The Company has never paid any cash dividends and
does not anticipate paying cash dividends in the foreseeable future. In
addition, the Company is restricted in its ability to pay dividends under
outstanding credit facilities.
Forward-Looking Statements. Certain statements contained, or incorporated
by reference, herein, including without limitation, statements containing the
words "believes," "anticipates," "intends," "expects" and words of similar
import, constitute "forward-looking statements." Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company or industry
results to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both domestic and foreign; industry capacity; management of growth;
development of products; proprietary rights; demographic changes; existing
government regulations and changes in, or the failure to comply with, government
regulations; legislative proposals for healthcare reform; liability and other
claims asserted against the Company;
10
<PAGE> 12
competition; the loss of any significant customers; changes in operating
strategy or development plans; the ability to attract and retain qualified
personnel; the significant indebtedness of the Company; the availability and
terms of capital to fund the expansion of the Company's business; and other
factors referenced herein. Given these uncertainties, prospective investors are
cautioned not to place undue reliance on such forward-looking statements.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Urohealth's Common Stock is traded on the Nasdaq National Market under the
symbol "UROH." Prior to November 26, 1996, the Company's Common Stock was traded
on the American Stock Exchange. The following table sets forth the high and low
sales prices per share for the periods indicated. The information in the table
has been adjusted to give effect to the one-for-three reverse stock split that
was effective December 29, 1995. For current price information, prospective
purchasers are encouraged to consult publicly available sources.
<TABLE>
<CAPTION>
HIGH LOW
--- ---
<S> <C> <C>
FISCAL 1996:
First quarter....................................................... $13 7/8 $ 9
Second quarter...................................................... $ 9 3/8 $ 6 3/16
Third quarter....................................................... $13 1/8 $ 8 1/8
FISCAL 1997:
First quarter....................................................... $16 $11 3/4
Second quarter...................................................... $15 1/4 $ 9 1/2
Third quarter....................................................... $13 1/4 $ 7 1/4
Fourth quarter...................................................... $11 7/8 $ 7 1/4
FISCAL 1998:
First quarter....................................................... $10 1/4 $ 4 3/4
</TABLE>
The Company has never paid cash dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future. The present policy of
the Company is to retain earnings, if any, to finance the anticipated growth of
its business. In addition, the Company is restricted from paying cash dividends
under the terms of outstanding indebtedness.
11
<PAGE> 13
SELLING STOCKHOLDERS
The Selling Stockholders are persons who acquired shares in connection with
the acquisitions by the Company of businesses and technology and an entity that
provided debt and equity financing to the Company. The shares covered by this
Prospectus are being registered to permit public secondary trading of the shares
and the Selling Stockholders may offer the shares for resale from time to time.
See "Plan of Distribution."
Except as described below, none of the Selling Stockholders has had a
material relationship with the Company within the past three years other than as
a result of the ownership of the Common Stock and other securities of the
Company.
The following table sets forth certain information with respect to the
number of shares owned by certain Selling Stockholders prior to and after the
offering (assuming each Selling Stockholder elects to sell all of its shares
being registered). The shares shown below as being owned by "Other X-Cardia
Shareholders" and "Other Microsurge Stockholders" are beneficially owned by a
number of individuals none of whom own 1% or more the outstanding shares of
Urohealth Common Stock. The "X-Cardia Contingent Shares" included in the table
below will be distributed, if at all, to the former X-Cardia shareholders in
proportion to their ownership interest in X-Cardia as of the closing date upon
achievement of certain milestones.
<TABLE>
<CAPTION>
SHARES PERCENT SHARES PERCENT
BENEFICIALLY BENEFICIALLY NUMBER BENEFICIALLY BENEFICIALLY
OWNED PRIOR OWNED PRIOR OF SHARES OWNED AFTER OWNED AFTER
TO OFFERING TO OFFERING(1) OFFERED OFFERING OFFERING(1)
----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Avatex Corporation.................. 2,464,827(2) 8.4% 1,414,827 1,050,000 3.6%
Julian W. Osbon..................... 1,572,337 7.1 1,572,337 -- --
Vista Medical Technologies, Inc..... 110,000 * 110,000 -- --
Charles Klieman..................... 123,288 * 123,288 -- --
John Stigglebout.................... 41,096 * 41,096 -- --
Gerald J. Sanders(3)................ 321,479 1.1 321,479 -- --
Ascher Shmulewitz(3)................ 328,677 1.2 328,677 -- --
Other X-Cardia shareholders......... 645,544 2.0 645,544 -- --
X-Cardia contingent shares.......... 1,000,000 3.5 1,000,000 -- --
Allstate Insurance Company Entities
(4)(5)............................ 454,563 1.7 454,563 -- --
Domain Partners II LP(5)............ 289,261 1.0 289,261 -- --
Highland Capital Partners LP(5)..... 340,922 1.2 340,922 -- --
Medical Science Partners LP(5)...... 209,500 * 209,500 -- --
Menlo Ventures VI LP(5)............. 360,633 1.3 360,633 -- --
Other Microsurge stockholders....... 1,145,121 4.0 1,145,121 -- --
Elliot Kornberg, M.D................ 115,680 * 115,680 -- --
William Tarello..................... 76,520 * 76,520 -- --
Stephen J. Shapiro.................. 66,965 * 66,965 -- --
Alan Schempp........................ 44,643 * 44,643 -- --
Leon Daykhovsky..................... 22,321 * 22,321 -- --
Stephen A. Sonowski................. 44,643 * 44,643 -- --
</TABLE>
- ---------------
* Less than 1%.
(1) Includes outstanding options and warrants and the Company's 8.75%
Convertible Subordinated Debentures due 2006 (the "Convertible Debentures").
The Convertible Debentures vote with the Common Stock of the Company on an
"as converted" basis, and if all converted would convert into 4,587,156
shares of Common Stock.
(2) Includes 1,414,827 shares of Common Stock and warrants to purchase 1,050,000
shares of Common Stock which are currently exercisable. Abbey Butler and
Melvyn Estrin, each of whom serves as a director of Urohealth, are the Co-
Chairman and Co-Chief Executive Officers of Avatex Corporation, and may be
deemed to be the beneficial owners of the shares owned by Avatex
Corporation.
(3) Former shareholder of X-Cardia Corporation.
(4) Includes shares owned by Allstate Insurance Company and Allstate Life
Insurance Company. These entities are affiliates under common control.
(5) Former stockholder of Microsurge, Inc.
12
<PAGE> 14
In March and July 1995, the Company sold to Avatex Corporation (formerly
FoxMeyer Corporation) ("Avatex") a total of 60,000 shares of Series B Preferred
Stock for an aggregate purchase price of $4,000,000. The Series B Preferred
Stock had an aggregate redemption value and conversion value of $6,000,000. The
Series B Preferred Stock was entitled to dividends at a rate per annum of $6.25
per share for dividends paid by issuing additional shares of Series B Preferred
Stock. The Series B Preferred Stock was convertible into Common Stock of the
Company at $6.00 per share.
In March 1995 Avatex also purchased from the Company for $1,000,000 a
Convertible Note with a face principal amount of $2,000,000. The note bore
interest at a rate per annum equal to 6.250% with respect to interest payments
made by delivering additional notes. The Convertible Note was convertible into
Common Stock of the Company of $6.00 per share.
In May 1996, Avatex converted all of the Series B Preferred Stock and the
Convertible Note described above into Common Stock of the Company. In connection
with that transaction, the Company replaced existing warrants to purchase
800,000 shares of Common Stock of the Company with a new warrant to purchase
800,000 shares of Common Stock at a blended exercise price of $6.875 per share.
In addition, the Company issued Avatex a warrant to purchase 250,000 shares of
Common Stock at an exercise price of $10.00 per share. The Company also agreed
to use its reasonable best efforts to maintain the two board seats currently
held by Avatex nominees as a result of their ownership of Series B Preferred
Stock for the next two years.
In December 1995, the Company acquired Osbon in a transaction pursuant to
which Julian Osbon acquired the shares of Common Stock listed in the above
table. In connection with that transaction, Mr. Osbon was granted certain
registration rights with respect to the shares acquired. Julian W. Osbon
previously served as a director of Urohealth.
In connection with the consummation of the Osbon merger, the Company
entered into a three-year employment agreement with Julian W. Osbon which
provided for a minimum annual salary of $400,000. Urohealth engages from time to
time Charter Advertising, a company wholly-owned by Julian W. Osbon, to perform
advertising services with respect to the Osbon products at rates and for
services which are competitive with rates and services for similar services
available from third parties.
Under the terms of the Osbon Merger Agreement, Urohealth has agreed to
continue the funding of a non-profit, public benefit corporation established by
Geddings Osbon Sr. The non-profit corporation currently receives funding from
Osbon, and Julian W. Osbon serves on the Board of Directors of the non-profit
corporation. The minimum funding obligations of Urohealth under the Osbon Merger
Agreement are: (i) $500,000 for the first full fiscal year after the Osbon
Merger; and (ii) 2% of pre-tax profits with respect to Osbon operations for the
second, third and fourth fiscal years after the Osbon Merger.
In December 1996, the Company obtained an exclusive license from Vista
Medical Technologies, Inc. ("Vista") with respect to certain patented and other
technology. Pursuant to the license agreement, the Company paid Vista a
licensing fee of $1,000,000 and issued Vista 110,000 shares of Common Stock of
the Company. In addition, the Company is obligated to pay Vista a royalty based
on products sold which use the licensed technology. Through June 30, 1997, no
royalties had been paid under the terms of the agreement.
In March 1997, the Company obtained an exclusive license from Charles
Klieman and John Stiggelbout ("Licensors") with respect to certain patented and
other technology relating to pivotal endoscopic surgical instruments. Pursuant
to the license agreement, the Company paid a licensing fee of $1,500,000 and
issued 164,384 shares of Common Stock of the Company. In addition, the Company
is obligated to pay Licensors a royalty based on products sold which use the
licensed technology. Through June 30, 1997, no royalties had been paid under the
terms of the agreement.
In February 1997, the Company acquired X-Cardia Corporation ("X-Cardia")
pursuant to a merger of X-Cardia with and into a wholly-owned subsidiary of the
Company. Pursuant to the merger agreement all of the outstanding shares of
capital stock of X-Cardia were converted into the shares of Common Stock of the
Company. In addition, under the merger agreement the former X-Cardia
shareholders are entitled to receive additional cash and stock based on
achievement of certain milestones. The former X-Cardia shareholders are also
entitled to receive an earn-out amount based on sales of X-Cardia products
during the four years after first
13
<PAGE> 15
commercial introduction of a product using X-Cardia technology. The former
X-Cardia shareholders received a total of 1,295,700 shares of Common Stock of
the Company, and upon resolution of future contingencies are entitled to receive
a combination of stock and cash in the amount of $21 million, excluding amounts
due under the earn-out arrangement. As of June 30, 1997, the contingent
milestones had not been achieved and, therefore, no milestone payments have been
made, and no royalties have been paid under the terms of the agreement. Messrs.
Sanders and Shmulewitz are former X-Cardia shareholders and the shares of
Urohealth Common Stock reflected in the above table were acquired in connection
with the X-Cardia Merger. None of the other former X-Cardia shareholders
acquired in the X-Cardia Merger one percent or more of the outstanding Urohealth
Common Stock.
In March 1997, the Company acquired Microsurge pursuant to a merger of a
wholly-owned subsidiary of the Company with and into Microsurge. Pursuant to the
merger agreement, Microsurge became a wholly-owned subsidiary of the company and
all of the outstanding shares of capital stock of Microsurge were converted into
shares of Common Stock of the Company. The Company issued or will issue
approximately 2,800,000 shares of Common Stock in the Microsurge merger. The
shares reflected in the above table as owned by Allstate Insurance Company,
Allstate Life Insurance Company, Domain Partners II LP, Highland Capital
Partners LP, Medical Science Partners LP and Menlo Ventures VI LP were acquired
by those stockholders in the Microsurge merger. None of the other former
Microsurge stockholders acquired in the Microsurge merger one percent or more of
the outstanding Urohealth Common Stock.
In March 1997, the Company acquired PEBB Biopsy Corporation ("PEBB") in a
transaction pursuant to which PEBB merged with and into a wholly-owned
subsidiary of the Company. In the merger, all of the outstanding shares of
capital stock of PEBB were converted into an aggregate of $1,200,000 and 192,000
shares of Common Stock of the Company. In connection with the transaction, Dr.
Kornberg, a former shareholder of PEBB, entered into a five-hear consulting
agreement with the Company pursuant to which the Company pays Dr. Kornberg
$100,000 per year. The shares reflected in the above table as owned by Dr.
Kornberg and Mr. Tarello were acquired in the PEBB merger.
Messrs. Shapiro, Schampp, Daykhovsky and Sonowski acquired an aggregate of
178,572 shares of Common Stock of the Company in connection with the acquisition
of Endoscopic Imaging Systems, Inc. ("EIS") by the Company in May 1996. Under
the Merger Agreement, the former EIS shareholders received the shares of Common
Stock of the Company listed above in exchange for all of the issued and
outstanding shares of EIS capital stock. In addition, the former EIS
shareholders are entitled to an earn-out payment based on future sales of
products acquired by the Company from EIS as a result of the merger. Dr. Shapiro
is also an employee of, and acts as a consultant to, the Company.
PLAN OF DISTRIBUTION
The Common Stock offered hereby may be sold from time to time to purchasers
directly by any of the Selling Stockholders. Alternatively, any of the Selling
Stockholders may from time to time offer the Common Stock through underwriters,
dealers or agents who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of Common Stock for whom they may act as agent. The Selling
Stockholders and any underwriters, dealers or agents participating in the
distribution of Common Stock may be deemed to be underwriters, and any profit on
the sale of Common Stock by them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. At the time a
particular offer of Common Stock is made, if required, a Prospectus Supplement
will be distributed which will set forth the aggregate amount of Common Stock
being offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, any discounts, commissions and other items
constituting compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or reallocated or paid to dealers, including
the proposed selling price to the public. The Company will not receive any of
the proceeds from the sale by the Selling Stockholders of the Common Stock
offered hereby.
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<PAGE> 16
The Common Stock may be sold from time to time in one or more transactions
at a fixed offering price, which may be changed, or at varying prices determined
at the time of sale or at negotiated prices. Such prices will be determined by
the Selling Stockholders or by agreement between the Selling Stockholders and
underwriters or dealers.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of any of the Common Stock may not simultaneously
engage in market activities with respect to any of the Common Stock for a period
of nine business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of any of the Common
Stock by the Selling Stockholders. All of the foregoing may affect the
marketability of the Common Stock.
Pursuant to agreements with the Selling Stockholders, the Company will pay
substantially all of the expenses incident to the registration, offering and
sale of the Common Stock to the public other than commissions and discounts of
underwriters, dealers or agents, and has agreed to indemnify the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act.
In order to comply with certain states' securities laws, if applicable, the
Common Stock will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Common Stock may not be sold
unless the Common Stock has been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied
with.
The Company has agreed to keep the Registration Statement of which this
Prospectus forms a part continuously effective until March 31, 1998 or such
shorter period which will terminate when all Common Stock covered by the
Registration Statement has been sold.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Kevin M.
Higgins, Esq.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report on Form 10-K, as of March 31, 1996 and 1997 and
for the year ended June 30, 1995, for the nine months ended March 31, 1996 and
for the year ended March 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such reports are based in part on the reports
of Coopers & Lybrand L.L.P., independent auditors and, as to the year ended June
30, 1995, the report of KPMG Peat Marwick LLP, independent accountants. The
consolidated financial statements and schedule referred to above are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The financial statements of Microsurge, Inc. as of March 31, 1996 and 1997
and for the year ended December 31, 1995, the nine months ended March 31, 1996
and the year ended March 31, 1997 (not separately included or incorporated
herein) have been audited by Coopers & Lybrand L.L.P., independent accountants,
as set forth in their report appearing in the Company's Annual Report on Form
10-K for the period ended March 31, 1997. Such report is incorporated by
reference herein given upon the authority of that firm as experts in accounting
and auditing.
15
<PAGE> 17
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. 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 COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Risk Factors.......................... 4
Price Range of Common Stock and
Dividends........................... 11
Selling Stockholders.................. 12
Plan of Distribution.................. 14
Legal Matters......................... 15
Experts............................... 15
</TABLE>
======================================================
======================================================
8,728,020 SHARES
UROHEALTH
SYSTEMS, INC.
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
, 1997
======================================================
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the offer and sale of the securities being
registered, other than underwriting discounts and commissions, are estimated as
follows:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee.......................................................... $ 26,484
Legal Fees and Expenses................................................... 15,000
Blue Sky Fees and Expenses................................................ 5,000
Accounting Fees and Expenses.............................................. 20,000
Printing and Engraving Expenses........................................... 30,000
Transfer Agent and Registrar Fees......................................... 3,000
Miscellaneous............................................................. 10,516
---------
Total................................................................... $ 110,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Section 145 ("Section 145") of the General Corporation
Law of the State of Delaware (the "DGCL") which provides for indemnification of
directors and officers in certain circumstances.
The Company's Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director of the Company
except for liability (i) for any breach of such director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the DGCL (unlawful payment of dividends), or (iv) for any
transaction from which such director derived an improper personal benefit.
The Company is empowered by Section 145 of the DGCL, subject to the
procedures and limitations stated therein, to indemnify any person against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in the defense of any
threatened, pending or completed action, suit or proceeding in which such person
is made a party by reason of his or her being or having been a director or
officer of the Company. The statute provides that indemnification pursuant to
its provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the full extent permitted by law.
The Registrant has entered into agreements with certain directors and
officers that require the Registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts to the fullest extent permitted
by law incurred in connection with any proceeding to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of the Registrant or any of its affiliated enterprises.
There are directors' and officers' liability insurance policies presently
in force insuring directors and officers of the Registrant and its subsidiaries.
II-1
<PAGE> 19
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ----------------------------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation of Urohealth Systems, Inc., as amended through May 9,
1996. Incorporated by reference to Exhibit 3.1 of the Company's Annual Report on
Form 10-K for the fiscal period ended March 31, 1996.
4.1 Form of Certificate for Common Stock. Incorporated by reference to Exhibit 4.1 of
the Company's Annual Report on Form 10-K for the fiscal period ended March 31,
1996.
4.2 Rights Agreement. Incorporated by reference to Exhibit 4.1 to the Registrant's
Current Report on Form 8-K dated May 20, 1993 (the "May 20, 1993 Form 8-K").
4.3 Form of Rights Certificate. Incorporated by reference to Exhibit 4.2 to the
Registrant's May 20, 1993 Form 8-K.
5.1 Opinion of Kevin M. Higgins, Esq.**
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Coopers & Lybrand L.L.P.
23.10 Consent of Kevin M. Higgins, Esq. (included in Exhibit 5.1)**
24.1 Power of Attorney of certain officers and directors (included in Part II to the
Registration Statement).**
</TABLE>
- ---------------
** Previously filed
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Act"), each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act of 1934 (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities
II-2
<PAGE> 20
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) 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;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered) and any
deviation from the low or high and the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) 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.
provided, however, that paragraphs (d)(1)(i) and (d)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference 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 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.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of this chapter at the start of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Act need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements
and information required by Section 10(a)(3) of the Act or Rule 3-19 of
this chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Form F-3.
II-3
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 4 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Newport Beach, State of California, on July 24,
1997.
UROHEALTH SYSTEMS, INC.
By: /s/ CHARLES A. LAVERTY
------------------------------------
Charles A. Laverty
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- --------------------------------- --------------
<C> <S> <C>
/s/ CHARLES A. LAVERTY Chairman of the Board and Chief July 24, 1997
- --------------------------------------------- Executive Officer (Principal
Charles A. Laverty Executive Officer)
/s/ JOSEPH T. ARTINO Assistant Treasurer (Acting July 24, 1997
- --------------------------------------------- Principal Financial Officer and
Joseph T. Artino Acting Principal Accounting
Officer)
* Director July 24, 1997
- ---------------------------------------------
Abbey J. Butler
* Director July 24, 1997
- ---------------------------------------------
John Chamberlin
* Director July 24, 1997
- ---------------------------------------------
Robert N. Elkins
* Director July 24, 1997
- ---------------------------------------------
Melvyn J. Estrin
* Director July 24, 1997
- ---------------------------------------------
C. Sage Givens
* Director July 24, 1997
- ---------------------------------------------
Lawrence Goelman
* Director July 24, 1997
- ---------------------------------------------
Michael S. Gross
Director , 1997
- ---------------------------------------------
Richard R. Newhauser
Director , 1997
- ---------------------------------------------
Francis J. Tedesco
*By: /s/ CHARLES A. LAVERTY
- ---------------------------------------------
Charles A. Laverty
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- --------------------------------------------------------------------- -------------
<C> <S> <C>
3.1 Certificate of Incorporation of Urohealth Systems, Inc., as amended
through May 9, 1996. Incorporated by reference to Exhibit 3.1 of the
Company's Annual Report on Form 10-K for the fiscal period ended
March 31, 1996.
4.1 Form of Certificate for Common Stock. Incorporated by reference to
Exhibit 4.1 of the Company's Annual Report on Form 10-K for the
fiscal period ended March 31, 1996.
4.2 Rights Agreement. Incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated May 20, 1993 (the "May
20, 1993 Form 8-K").
4.3 Form of Rights Certificate. Incorporated by reference to Exhibit 4.2
to the Registrant's May 20, 1993 Form 8-K.
5.1 Opinion of Kevin M. Higgins, Esq.**
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Coopers & Lybrand L.L.P.
23.10 Consent of Kevin M. Higgins, Esq. (included in Exhibit 5.1)**
24.1 Power of Attorney of certain officers and directors (included in Part
II to the Registration Statement).**
</TABLE>
- ---------------
** Previously filed
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 4 to the Registration Statement (Form S-3 No. 333-6397) and related
Prospectus of Urohealth Systems, Inc. for the registration of 8,728,020 shares
of its common stock and to the incorporation by reference therein of our reports
dated July 8, 1997, with respect to the consolidated financial statements and
schedule of Urohealth Systems, Inc. included in its Annual Report (Form 10-K)
for the year ended March 31, 1997, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
Orange County, California
July 21, 1997
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
UROHEALTH Systems, Inc.
We consent to incorporation by reference in the Registration Statement (No.
333-6397) on Form S-3 of our report dated October 10, 1995, relating to the
consolidated statements of operations, stockholders' equity and cash flows for
the fiscal year ended June 24, 1995 for Dacomed Corporation and to the reference
to our Firm under the heading "Experts" in the Registration Statement.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 21, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Urohealth Systems, Inc. on Form S-3 of our report on Microsurge, Inc., which
includes an explanatory paragraph related to the Company's ability to continue
as a going concern, dated March 14, 1997 on our audits of the financial
statements of Microsurge, Inc. as of December 31, 1996 and 1995 and for the
three years in the period ended December 31, 1996, which report is included in
the Current Report on Form 8-K/A as amended on April, 28, 1997 of Urohealth
Systems, Inc. We also consent to the incorporation by reference in this
Registration Statement of Urohealth Systems, Inc. on Form S-3 of our report
dated May 9, 1997 included in Urohealth Systems, Inc.'s Annual Report on Form
10-K on our audits of the financial statements of Microsurge, Inc. as of March
31, 1997 and 1996 and for the year ended March 31, 1997, the nine months ended
March 31, 1996 and the year ended December 31, 1995 (not separately included
therein). We also consent to the reference to our firm under the caption
"Experts."
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 22, 1997
