As filed with the Securities and Exchange Commission on June 12 , 1996
Registration No.______________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
PALOMAR MEDICAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
04-3128178
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(I.R.S. employer identification number)
66 Cherry Hill Drive, Beverly, Massachusetts 01915 (508) 921-9300
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Douglas L. Baraw
Corporate Controller
Palomar Medical Technologies, Inc.
66 Cherry Hill Drive
Beverly, Massachusetts 01915
(508) 921-9300
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: from
time to time after the effective date of this Registration Statement as
determined by market conditions.
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------- ------------------- --------------------- ------------------- ------------------------------
Title of Shares Amount to be Proposed Proposed
to be Registered Registered Maximum Maximum Amount of Registration
Offering Price Aggregate Fee
Per Share Offering Price
- ---------------------------------- ------------------- --------------------- ------------------- ------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 4,143,574 $14.75 $61,117,717 $21,075
share.
- ---------------------------------- ------------------- --------------------- ------------------- ------------------------------
</TABLE>
The Common Stock being registered consists of (i) 1,445,741 shares
underlying Series E Convertible Preferred Stock (the "Preferred Stock") issued
to GFL Advantage Fund Limited, (ii) 304,259 shares underlying a stock purchase
warrant issued to GFL Advantage Fund Limited, and (iii) 115,000 shares issued in
payment of brokerage commissions, (iv) 428,574 shares issued in connection with
financing activities, and (v) 1,850,000 shares underlying various stock purchase
warrants issued in connection with consulting agreements, compensation, an
agreement for release and settlement, and financing activities, all as described
in the Selling Stockholders and Plan of Distribution sections of the Prospectus.
The registration fee is calculated pursuant to Rule 457(c) of the
Securities Act of 1933 by taking the average of the bid and ask price of the
registrant's Common Stock, par value $.01 per share, on June 10, 1996, as
reported on the NASDAQ SmallCap Market.
Pursuant to Rule 416, there are also registered hereby such additional
indeterminate number of shares of such Common Stock as may become issuable to
prevent dilution resulting from stock splits, stock dividends or similar
transactions as set forth in the terms of the Preferred Stock and the warrants
referred to above.
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION DATED JUNE 12, 1996
PROSPECTUS
PALOMAR MEDICAL TECHNOLOGIES, INC.
4,143,574 Shares of Common Stock
consisting of:
1,445,741 shares underlying Series E Convertible Preferred Stock; and
304,259 shares underlying a stock purchase warrant
115,000 shares issued in payment of brokerage commissions
428,574 shares issued to certain persons and entities
1,850,000 shares underlying various stock purchase warrants
This Prospectus relates to shares of Common Stock, $.01 par value,
("Common Stock" or the "Shares") of Palomar Medical Technologies, Inc. (the
"Company", the "Registrant" or "Palomar") consisting of: (i) 1,445,741 shares
underlying Series E Convertible Preferred Stock (the "Preferred Stock") issued
to GFL Advantage Fund Limited , (ii) 304,259 shares underlying a stock purchase
warrant issued to GFL Advantage Fund Limited, (iii) 115,000 shares issued in
payment of brokerage commissions, (iv) 428,574 shares issued in connection with
financing activities, and (v) 1,850,000 shares underlying various stock purchase
warrants issued in connection with consulting agreements, compensation,
agreement for release and settlement, and financing activities. All shares to be
registered hereby are to be offered by the selling stockholders listed herein
(the "Selling Stockholders") and the Company will receive no proceeds from the
sale of such shares. The Company has agreed to indemnify certain of the Selling
Stockholders against certain liabilities, including certain liabilities under
the Securities Act of 1933, as amended (the "Securities Act"), or to contribute
to payments which such Selling Stockholders may be required to maka in respect
thereof. See "Plan of Distribution".
The Company's Common Stock, par value $.01 per share, is listed on the
National Association of Securities Dealers Automated Quotation, System
("NASDAQ") and traded on the NASDAQ SmallCap Market. The last reported bid price
of the Common Stock on the NASDAQ SmallCap Market on June 10, 1996 was $14.75
per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGES 7 THROUGH 15.
It is anticipated that usual and customary brokerage fees will be paid
by the Selling Stockholders on the sale of the Common Stock registered hereby.
The Company will pay the other expenses of this offering. See "Plan of
Distribution". The offer of 4,143,574 shares of Common Stock by the Selling
Stockholders as described in this Prospectus is referred to as the "Offering".
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The date of this Prospectus is June 12, 1996.
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No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with the offer
contained in this Prospectus, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Company
or the Selling Stockholders. 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. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof.
AVAILABLE INFORMATION
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 Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, Room 1024 and at the public
reference facilities maintained by the Commission on the 14th Floor, 75 Park
Place, New York, New York 10007; Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661; and Suite 500 East, Securities and
Exchange Commission Building, 5757 Wilshire Boulevard, Los Angeles, California
90036. Copies can be obtained from the Commission at prescribed rates by writing
to the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
reports, proxy statements and similar information can also be inspected and
copied at the National Association of Securities Dealers, 1735 K Street, N.W.,
Washington, DC 20006-1500. This prospectus, which constitutes part of a
Registration Statement filed by the Company with the Commission under the
Securities Act omits certain of the information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the Exhibits
relating thereto for further information with respect to the Company and the
Securities offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such documents filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-KSB for its fiscal year ended
December 31, 1995, the Company's Quarterly Report on Form 10-QSB for its quarter
ending March 31, 1996, the Company's Form 8-K filed with the commission on May
16, 1996, as amended by Form 8-K/A filed June 11, 1996, and the description of
the Company's Common Stock contained in its Registration Statement on Form 8-A
filed with the Commission on June 6, 1992, as amended by Form 8 on December 17,
1992, all of which have been previously filed with the Commission, are
incorporated in this Prospectus by reference. All documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date hereof and prior to the termination of the offering made
hereby are also incorporated by reference herein and made a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference herein is modified or superseded for all purposes to
the extent that a statement contained in this Prospectus or in any other
subsequently filed document which is incorporated by reference modifies or
replaces such statement. The Company will provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon the written or oral request of such person, a copy of all documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in such
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documents). Requests for such copies should be directed to: Deborah R. Randazza,
Palomar Medical Technologies, Inc., 66 Cherry Hill Drive, Beverly, Massachusetts
01915; telephone number (508) 921 - 9300.
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
<TABLE>
<S> <C>
THE COMPANY........................................ Palomar Medical Technologies, Inc. (the "Company") has two business
segments: medical products and electronic products. The medical
products are under various stages of development and clinical
trials. The Company does derive revenue from the sale of medical
products by its acquired subsidiaries Spectrum Medical Technologies,
Inc. and Tissue Technologies, Inc. The flexible circuit board
business, of the electronic products segement, is the principal
source of the Company's revenues.
RISK FACTORS....................................... The Offering involves substantial risk. See "Risk Factors".
SECURITIES OFFERED................................. 4,143,574 shares of Company Common Stock, par value $.01 per share.
OFFERING PRICE..................................... All or part of the Shares offered hereby may be sold from time to
time in amounts and on terms to be determined by the Selling
Stockholders at the time of sale.
USE OF PROCEEDS.................................... The Company will receive no part of the proceeds from the sale of the
shares registered pursuant to this Registration Statement.
SELLING STOCKHOLDERS............................... The Shares being offered hereby are being offered for the account of
the Selling Stockholders specified under the caption "Selling
Stockholders".
NASDAQ TRADING SYMBOL.............................. PMTI
</TABLE>
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RISK FACTORS
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND
SHOULD NOT BE MADE BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. THE FOLLOWING FACTORS, IN ADDITION TO THOSE DISCUSSED ELSEWHERE IN
THIS PROSPECTUS, SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND
ITS BUSINESS.
HOLDING COMPANY STRUCTURE. The Company has no significant operations
other than those incidental to its ownership of the capital stock of its
subsidiaries. As a holding company, the Company is dependent on dividends or
other intercompany transfers of funds from its subsidiaries to meet the
Company's debt service and other obligations. Claims of creditors of the
Company's subsidiaries, including trade creditors, will generally have priority
as to the assets of such subsidiaries over the claims of the Company and the
holders of the Company's indebtedness.
LIMITED OPERATING HISTORY. Many of the Company's subsidiaries have
limited operating histories and are in the development stage, and the Company is
subject to all of the risks inherent in the establishement of a new business
enterprise. Historically, most of the Company's revenues have been generated by
its flexible circuit board component business; however, with the acquisition of
Spectrum Medical Technologies, Inc. ("Spectrum"), in April 1995, 18% of the
Company's revenues in 1995 have been generated by Spectrum. The Company acquired
Comtel Electronics, Inc. ("Comtel") in March 1996 and Tissue Technologies, Inc.
("Tissue") in May 1996. Both Comtel and Tissue have had limited operating
histories. The likelihood of success of the Company must be considered in light
of the problems, expenses, difficulties, complications and delays frequently
encountered in connection with the establishment of a new business and
development of new technologies in the medical products and electronic products
industries. These include, but are not limited to, government regulation,
competition, the need to expand manufacturing capabilities and market expertise,
and setbacks in production, product development, market acceptance and sales and
marketing.
HISTORY OF LOSSES OF SUBSIDIARIES' PRIOR TO ACQUISITION BY THE COMPANY.
Dynaco Corp. ("Dynaco"), Star Medical Technologies, Inc. ("Star"), CD Titles,
Inc. ("CD Titles"), Dynamem, Inc. ("Dynamem"), Comtel and Tissue each have had a
history of losses prior to acquisition by the Company. There can be no assurance
that these companies will achieve profitable operations or that profitable
operations will be sustained if achieved.
FINANCIAL CONDITION AND CONTINUING LOSSES. The Company incurred a net
loss of $10,650,975 for the year ended December 31, 1995 and a net loss of
$5,552,263 for the three month period ended March 31, 1996. In addition, the
Company's supplemental financial statements filed as part of the Form 8-K/A to
reflect a retroactive effect of the acquisiton of Tissue which occurred on May
3, 1996 and is being accounted for as a pooling-of-interest method reflects that
the Company incurred a net loss of $12,620,678 and $7,369,462 for the year end
December 31, 1995 and three months ended March 31, 1996, respectively. These
losses are expected to continue for the near term and there can be no assurance
that the Company will achieve profitable operations or that profitable
operations will be sustained if achieved. At March 31, 1996, the Company's
accumulated deficit was $33,477,242 as reflected on the supplemental financial
statements. The Company anticipates incurring substantial research and
development expenses, which will reduce cash available to fund current
operations. The Company must continue to secure additional financing to complete
its research and development activities, commercialize its current and proposed
medical products, expand its current non-medical business, execute its
acquisition business plan and fund ongoing operations. The Company believes that
the cash generated to date from its financing activities and amounts available
under its credit agreement will be sufficient to satisfy its working capital
requirements through the next twelve months. However, there can be no assurance
that events in the future will not require the Company to seek additional
financing sooner. The Company continues to
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investigate several financing alternatives, including additional government
research grants, strategic partnerships, additional bank financing, private debt
and equity financing and other sources. While the Company is regularly reviewing
potential funding sources in relation to its ongoing and proposed research
projects, there can be no assurance that the current levels of funding or
additional funding will be available, or if available, on terms satisfactory to
the Company.
MANAGEMENT OF GROWTH. Depending on the extent of its future growth, the
Company may experience a significant strain on its management, operational and
financial resources. The Company's ability to manage its growth effectively may
require it to continue to implement and improve its operational and financial
systems and may require the addition of new management personnel. The failure of
the Company's management team to effectively manage growth, should it occur,
could have a material adverse effect on the Company's financial condition and
results of operations.
HIGHLY COMPETITIVE INDUSTRIES. The medical, electronic and personal
computer industries are characterized by intense competition.
The medical laser industry is highly competitive and is characterized
by the frequent introduction of new products. The Company competes in the
development, manufacture, marketing and servicing of laser technology products
with numerous other companies, some of which may have financial or marketing
resources greater than those of the Company. In addition, the Company's medical
products face competition from alternative medical products and procedures, such
as dermabrasion, chemical peels and pharmaceutical treatment among others. There
can be no assurance that the Company will be able to differentiate its products
from the products of its competitors or that the marketplace will consider the
Company's products to be superior to competing products or medical procedures.
There can be no assurance that competitors will not develop products or that new
technologies will not be developed that render the Company's products obsolete
or less competitive. In addition, to the extent that the Company enters areas of
business in which it has little prior existence, such as the opening of laser
treatment center, the Company may not be able to compete successfully with
competitors that are more established in such areas.
In the electronics market, the Company competes with FCI, Packard
Hughes Interconnect, Parlex Corporation and Teledyne EM, among others, and
expects to compete with Adflex in the near future. Many if not most of the
Company's current and prospective competitors are substantially larger in size
and have substantially greater financial, managerial, technical, manufacturing,
marketing and other resources than the Company and may introduce additional
products that compete with those of the Company. There can be no assurance that
the Company's products will compete favorably with the products of its
competitors or that the Company will have the resources necessary to compete
effectively against such companies.
In the personal computer market, the Company expects to compete with a
host of large, well-established companies, including Compaq, IBM, Packard Bell,
Apple Computer, Dell Computers and Gateway. As a result of the intense
competition in the personal computer market, the Company expects that gross
margins on sales of its upgradeable personal computers will be extremely narrow
and will require the Company to monitor its cost of goods sold with a degree of
care of which the Company may not be capable. There can be no assurance that the
Company will be able to contain its cost of goods sold to the degree necessary
for sales of upgradeable computer products to generate significant gross
margins. The Company expects to place significant reliance on independent
distributors and resellers for the distribution and marketing of its products.
The inability to maintain a network of independent distributors and resellers,
or a reduction in sales efforts, could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
there can be
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no assurance as to the viability or financial stability of the the Company's
independent distributors and resellers. The computer industry has been
characterized from time to time by financial difficulties of distributors and
resellers; any such problems could lead to reduced sales and could have a
material adverse effect on the Company's financial condition and results of
operations. There can be no assurance that the Company's products will compete
favorably with the products of its competitors or that the Company will have the
resources necessary to compete effectively against such companies.
POSSIBLE FLUCTUATIONS IN QUARTERLY PERFORMANCE. The Company's results
of operations have fluctuated substantially and can be expected to contiune to
vary significantly. The Company's quarterly operating results depend on a number
of factors, including the timing of the introduction or acceptance of new
products offered by the Company or its competitors, changes in the mix of
products sold by the Company, changes in regulations affecting the medical
products or electronics industry, changes in the Company's operating expenses,
personnel changes and general economic conditions. Fluctuations in operating
results may result in volatility in the price of the Company's Common Stock.
VOLATILITY OF STOCK PRICE. The Company believes that factors such as
announcements of developments related to the Company's business, announcements
by competitors, quarterly fluctuations in the Company's financial results and
other factors could cause the price of its Common Stock to fluctuate, perhaps
substantially. In addition, the stock market has experienced extreme price and
volume fluctuations that have particularly affected the market price for many
high technology companies and that have often been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of the Common Stock. The trading prices of many high
technology companies stocks, including the Common Stock, are at or near their
historical highs, and reflect price/earnings ratios substantially above
historical norms. There can be no assurance that the trading price of the Common
Stock will remain at or near its current level.
GOVERNMENT REGULATION. The Company's medical business segment and, to a
lesser degree, its electronics business segment are subject to regulation in the
United States and abroad. Failure to comply with applicable regulatory
requirements can result in fines, denial or suspension of approvals, seizures or
recall of products, operating restrictions and criminal prosecutions.
Furthermore, changes in existing regulations or adoption of new regulations
could prevent the Company from obtaining, or affect the timing of, future
regulatory approvals.
MEDICAL SEGMENT
All medical devices, including those sold by the Company, are subject
to regulation by the United States Food and Drug Administration (the "FDA")
under the Medical Device Amendments of the United States Food, Drug and
Cosmetics Act (the "Act"). The Company's business, financial condition and
operations are critically dependent upon timely receipt of FDA regulatory
approvals.
FDA APPROVAL STATUS FOR COSMETIC LASER PRODUCTS
Other than the Ruby laser sold by Spectrum and the Tru-Pulse laser sold
by Tissue, the Company's medical products have not received approval from the
FDA. In September 1995, the Company filed an application for clearance with the
FDA to commercially market its EpiLaseTM system pursuant to section 510 (k) of
the Act. Management believes the information submitted to the FDA is adequate
for the review process, however, the Company has yet to be notified as to the
formal status of the 510(k) filing. In the event the
9
Company changes laser specifications of its laser, it may be required to obtain
FDA clearance pursuant to a new 510 (k) application.
The Company is also investigating other applications in dermatology for
its laser systems. It will be required to obtain FDA clearance before
commercially marketing any other application. The Company believes that it will
be able to seek such clearance under the 510 (k) application process; however,
no assurance can be given that the FDA will not require the Company to follow
the more extensive and time-consuming Pre-Market Approval ("PMA") process. FDA
review of a 510 (k) application currently averages about seven to twelve months
and requires limited clinical data, while a PMA review can last for several
years and require substantially more clinical data.
The FDA also imposes various requirements on manufacturers and sellers
of products under its jurisdiction, such as labeling, good manufacturing
practices, record keeping and reporting requirements. The FDA also may require
post-market testing and surveillance programs to monitor a product's effects.
There can be no assurance that the appropriate clearances from the FDA will be
granted, that the process to obtain such clearances will not be excessively
expensive or lengthy or that the Company will have sufficient funds to pursue
such clearances.
No assurance can be given that FDA approval will be obtained for the
Company's current or proposed medical products on a timely basis, if at all. The
medical products segment of the Company's business, is, and will continue to be,
critically dependent upon FDA approval of its current and proposed medical
products. Delays or failure to obtain such approval would have a material
adverse effect on the Company.
OTHER GOVERNMENT APPROVALS FOR MEDICAL PRODUCTS
In order to be sold outside the United States, the Company's products
are subject to FDA permit requirements that are conditioned upon clearance by
the importing country's appropriate regulatory authorities. Many countries also
require that imported products comply with their own or international electrical
and safety standards. In November 1992, the Company obtained approval certifying
compliance with certain international electrical and safety regulations
applicable to its pulsed dye laser. Additional approvals may be required in
other countries. The Company has yet to apply for international approval for its
diode laser for use in cosmetic surgery and dermatology.
The Company is subject to the laser radiation safety regulations of the
Act administered by the National Center for Devices and Radiological Health
("CDRH") of the FDA. These regulations require a laser manufacturer to file new
product and annual reports, to maintain quality control, product testing and
sales records, to distribute appropriate operation manuals, to incorporate
certain design and operating features in lasers sold to end-users and to certify
and label each laser sold to end-users as one of four classes of lasers (based
on the level or radiation from the laser). In addition, various warning labels
must be affixed on the product and certain protective devices must be installed
depending upon the class of product. Under the Act, the Company is also required
to register with the FDA as a medical device manufacturer and is subject to
inspection on a routine basis by the FDA for compliance with Good Manufacturing
Practice ("GMP") regulations. The GMP regulations impose certain procedural and
documentation requirements upon the Company relevant to its manufacturing,
testing and quality control activities. The CDRH is empowered to seek fines and
other remedies for violations of these regulatory requirements. The Company
believes that it is currently in compliance with these regulations.
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No assurance can be given that required governmental approvals will be
obtained for the Company's current or proposed medical products on a timely
basis, if at all. The medical products segment of the Company's business, is,
and will continue to be, critically dependent upon such approvals. Delays or
failure to obtain such approvals would have a material adverse effect on the
Company.
ELECTRONIC SEGMENT
A significant percentage of the total sales of the flexible circuit
board component business of the Company, which accounts for most of the sales of
the Company, are the result of either a subcontract or a direct contract for
government programs funded by the U.S. military. Generally, government contracts
and subcontracts are terminable for the convenience of the government. Cutbacks
in military spending for certain programs or lack of military spending in
general could have a material adverse effect on the sales of the flexible
circuit board component business of the Company.
Flexible circuit board component sales to the U.S. military are subject
to certain military certifications. These certifications are based upon
compliance with specification standards set by the U.S. military. The Company is
subject to periodic audit and review from U.S. government agencies to ensure
compliance under criteria set forth by these agencies. Failure to meet or exceed
criteria set forth could result in a suspension or disqualification of certain
certifications. Such suspension or disqualification could have a material
adverse effect on the Company.
COMPUTER PRODUCTS ARE SUBJECT TO CERTAIN FCC
GUIDELINES
The computer products manufactured by the Company are subject to
certain guidelines promulgated by the Federal Communications Commission. Failure
to meet criteria set forth could have a material adverse effect on the Company's
flexible computer products business.
UNCERTAIN MARKET ACCEPTANCE. The Company has developed new products in
the medical products segment and the electronic products segment. As with any
new products , there is substantial risk that the marketplace may not accept or
be receptive to the potential benefits of such products. Market acceptance of
the Company's current and proposed products will depend, in large part, upon the
ability of the Company or any marketing partners to demonstrate to the
marketplace the advantages of the Company's products over other types of
products. There can be no assurance that applications or uses for the Company's
current and proposed products will be accepted by the marketplace or that any of
the Company's current or proposed products will be able to compete effectively.
UNCERTAINTY IN THE HEALTHCARE INDUSTRY. The healthcare industry is
subject to changing political, economic and regulatory influences that may
affect the procurement practices and operation of healthcare industry
participants. During the past several years, state and federal government
regulation or reimbursement rates and capital expenditures in the United States
healthcare industry has increased. Lawmakers continue to propose programs to
reform the United States healthcare system, which may contain programs to
increase governmental involvement in healthcare, lower Medicare and Medicaid
reimbursement rates or otherwise change the operating environment for the
Company's customers. Healthcare industry participants may react to these
proposals by curtailing or deferring investments, including investments in the
Company's products.
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DEPENDENCE ON OTHERS FOR TECHNOLOGY, DEVELOPMENT AND LICENSING. The
Company has entered into a number of research agreements with recognized
research hospitals and clinical laboratories. These research institutions
include the Oregon Medical Laser Center at the Heart Institute of St. Vincent
Hospital and Medical Center in Portland, Oregon (the "Heart Institute"), the
Wellman Labs at Massachusetts General Hospital and the Otolaryngology Research
Center for Advanced Endoscopic Applications at New England Medical Center ("New
England Medical Center"), Boston, Massachusetts. The Company provides research
funding, laser technology and optics know-how in return for licensing agreements
with respect to specific medical applications and patents. Management feels that
this method of conducting research and development provides a higher level of
technical and clinical expertise than it could provide on its own and in a more
cost efficient manner. There can be no assurance, however, that these research
agreements will provide the Company with marketable products in the future or
that any of the products developed under these agreements will be profitable for
the Company.
TECHNOLOGICAL OBSOLESCENCE. Both the medical products segment and the
electronics segment are characterized by extensive technological developments
and the rapid pace experienced over the past few decades is expected to
continue. The Company's failure to develop products in a timely manner in
response to changes in the industry, whether for financial, technological or
other reasons, will have a material adverse effect on the Company's business,
financial condition and results of operations.
The medical industry is characterized by extensive research and
development and rapid technological change. The flexible circuit board component
industry is characterized by large capital investments in new automated
processes and state of the art fabrication techniques. Development by others of
new or improved products, processes or technologies may make the Company's
products or proposed products obsolete or less competitive. The Company will be
required to devote continued efforts and financial resources to enhancement of
its existing products and development of new products for the medical
marketplace. There can be no assurance that the Company will have the financial
resources or the technological capability necessary to carry out such product
enhancement and development.
In order to participate effectively in either the electronics
interconnect or the personal computer industries, the Company must continue to
make large capital investments in new automated processes and state-of-the-art
fabrication techniques. Development by others of new or improved products,
processes or technologies may make the Company's products or proposed products
obsolete or less competitive. The Company will be required to devote continued
efforts and financial resources to enhance its existing products and develop new
products. There can be no assurance that the Company will have the financial
resources or the technological capability necessary to carry out such product
enhancement and development.
POSSIBLE PATENT INFRINGEMENTS. In the medical products segment, the
Company is aware of patents relating to laser technologies used in certain
applications that the Company intends to pursue, which, if valid and
enforceable, may be infringed by the Company. The Company has obtained opinions
of counsel that the Company is not infringing on patents held by others, however
these opinions have not been challenged in the courts. If the Company's current
or proposed products are, in the opinion of patent counsel, infringing on any of
these patents, the Company intends to seek non-exclusive, royalty-bearing
licenses to such patents, but there can be no assurance that any such license
would be available on favorable terms, or at all. In the electronic products
segment, the Company has not been notified that it is currently infringing on
any patents nor has it been subject of any patent infringment action. No
assurance can be given that infringement claims will not be made or that the
Company would prevail in any legal action with respect thereto. Defense of a
claim of infringement would be costly and could have a material adverse effect
on the Company's business, even if the Company were to prevail.
12
LACK OF PATENT PROTECTION. The Company intends to pursue various
avenues that it deems appropriate to protect its technology. There can be no
assurance, however, that the Company will file any additional patent
applications or that any patent applications that have been, or may be, filed
will result in issued patents, or that any patent, patent application, know-how,
license or cross license will afford any protection or benefit to the Company.
The medical device market has been characterized by substantial
litigation regarding patent and other intellectual property rights. In both the
medical products and the electronic products segments, litigation, which could
result in substantial cost to and diversion of effort by the Company, may be
necessary to protect trade secrets or know-how owned by or licensed to the
Company or to determine the enforceability, scope and validity of the
proprietary rights of others. Adverse determination in litigation or
interference proceedings could subject the Company to significant liabilities to
third parties, require the Company to seek licenses from third parties and could
prevent the Company from manufacturing and selling its products, all of which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
ATTRACTION AND RETENTION OF QUALIFIED PERSONNEL. The Company's ability
to develop, manufacture and market all of its products, and to attain a
competitive position within the medical products, personal computer and flexible
circuit board component industries, will depend, in large part, on its ability
to attract and retain qualified personnel. Competition for qualified personnel
in these industries is intense and the Company will be required to compete for
such personnel with companies having substantially greater financial and other
resources. The Company's inability to attract and retain such personnel could
have a material adverse effect upon its business.
ISSUANCE OF PREFERRED STOCK COULD AFFECT RIGHTS OF COMMON STOCKHOLDERS.
The Company is authorized to issue up to 5,000,000 shares of Preferred Stock,
$.01 par value. The Preferred Stock may be issued in one or more series, the
terms of which may be determined at the time of issuance by the Board of
Directors, without further action by stockholders, and may include voting rights
(including the right to vote as a series on particular matters), preferences as
to dividends and liquidation, conversion and redemption rights and sinking fund
provisions. In February 1996, the Company issued 6,000 shares of Series D
Convertible Preferred Stock at a price of $1,000 per share, which is convertible
into Common Stock at 80% of the daily mean average closing price of the common
stock on the ten preceding trading days, but in no event less than $4.50 or more
than $6.00. The Board of Directors has reserved 1,333,333 shares of Common Stock
for issuance upon conversion of the Series D Preferred Stock. As of the date of
this Offering, none of the Series D Preferred Stock has been converted. In April
1996, the Company issued 10,000 shares of Series E Preferred Stock at a price of
$1,000 per share. The Series E Convertible Preferred Stock, together with any
accrued but unpaid dividends, can be converted into shares of Common Stock at
85% of the average closing bid price for the three trading days immediately
preceding the conversion date, but in no event less than $7.50 or more than
$11.50. The Board of Directors has reserved 1,400,000 shares of Common Stock for
issuance upon conversion of the Series E Preferred Stock. As of the date of this
Offering, none of the Series E Preferred Stock has been converted. The issuance
of any such Preferred Stock could affect the rights of the holders of Common
Stock, and therefore, reduce the value of the Common Stock. In particular,
specific rights granted to future holders of Preferred Stock could be used to
restrict the Company's ability to merge with or sell its assets to a third
party, thereby preserving control of the Company by the existing control group.
ISSUANCE OF RESERVED SHARES. As of May 29, 1996, the Company had
26,243,761 shares of Common Stock outstanding. The Company has reserved an
additional 10,977,910 Shares as follows: (1) 1,464,400 shares
13
of Common Stock for issuance to key employees, officers, directors, consultants
and advisors pursuant to the Company's Stock Option Plans; (2) 254,115 Shares
for issuance to employees, officers and directors pursuant to the Company's
401(k) Plan; (3) 6,480,321 shares for issuance upon exercise of three, four and
five year Warrants issued to certain lenders, investors, consultants, directors,
officers and a principal stockholder (a portion of which are subject to certain
anti-dilutive adjustment; (4) 1,333,333 shares for issuance upon conversion of
the 6,000 shares of Series D Preferred Stock; and (5) 1,445,741 shares for
issuance upon conversion of the 10,000 shares of Series E Preferred Stock. All
of the foregoing reserved Shares are, or the Company intends for them shortly to
be, registered with the Commission and therefor freely saleable on Nasdaq or
elsewhere. The existence of such reserved Shares may prove to be a hindrance to
future financing by the Company and the existence and/or sale into the market of
such Shares may have a depressive effect on the market price of the Shares in
the future.
The Company has filed with the Commission preliminary proxy materials
with repect to a Special Meeting of Shareholders to be held on July 19, 1996, at
which the shareholders of the Company will be requested to approve, amoug other
things, an amendment to the Company's Certificate of Incorporation to increase
the amount of Shares authorized to be issued from the existing amount of
40,000,000 Shares to a proposed amount of 100,000,000 Shares. In the event the
shareholders do not approve the additional number of authorized shares, the
Company's ability to raise additional funds would be materially adversely
affected.
PRODUCT LIABILITY EXPOSURE. Medical product companies face an inherent
business risk of financial exposure to product liability claims in the event
that the use of their products results in personal injury. The Company's
products are and will continue to be designed with numerous safety features, but
it is possible that a patient could be adversely affected by use of one of the
Company's products or that a death could occur. Further, in the event that any
of the Company's products prove to be defective, the Company may be required to
recall and redesign such products. Although the Company has not experienced any
material losses due to product liability claims to date, there can be no
assurance that it will not experience such losses in the future. The Company
maintains liability insurance; however, there can be no assurance that such
coverage will continue to be available on terms acceptable to the Company or
that such coverage will be adequate for liabilities actually incurred. In the
event the Company is found liable for damages in excess of the limits of its
insurance coverage, or if any claim or product recall results in significant
adverse publicity against the Company, the Company's business, financial
condition and results of operations could be materially and adversely affected.
In addition, although the Company's products have been and will continue to be
designed to operate in a safe manner, and although the Company attempts to
educate medical personnel with respect to the proper use of its products, misuse
of the company's products by medical personnel over whom the compete cannot
exert control may result in the filing of product liability claims or
significant adverse publicity against the Company.
DEPENDENCE ON SUPPLIERS. The Company relies on outside suppliers for
substantially all of its manufacturing supplies, parts and components. Although
to date the Company has not encountered any difficulty in obtaining an adequate
supply of these materials, there can be no assurance that the Company will not
encounter such difficulties in the future. Pyralux(R), an integral component of
most of the Company's flexible circuit products, is manufactured exclusively by
E.I. du Pont de Nemours and Company ("DuPont"), a Delaware corporation. Although
the Company has a written agreement with DuPont under which DuPont will supply
the Company with all of its requirements for Pyralux, there can be no assurance
that the Company will be able to obtain a sufficient supply of Pyralux to
fulfill orders for its products in a timely manner, if at all. A shortage of
necessary parts and components or the inability of the Company to obtain such
parts and components would have a material adverse effect on the Company's
business, financial condition and results of operations.
14
In addition, CO2 laser tubes, an integral component of Tissue's Tru
Pulse Laser system, are manufactured exclusively by Pulse Systems, Inc. There
can be no assurance that the Company will be able to obtain sufficient supply of
CO2 laser tubes to fulfill orders for its products in a timely manner, if at
all.
HAZARDOUS SUBSTANCE AND ENVIRONMENTAL CONCERNS. The manufacture of
substrate interconnect products involves numerous chemical solvents and other
solid, chemical and hazardous wastes and materials. Dynaco is subject to a
variety of environmental laws relating to the generation, storage, handling,
use, emission, discharge and disposal of these substances. Dynaco believes that
it operates its facilities in substantial compliance with existing environmental
laws and regulations. In June 1989 and April 1994, Dynaco conducted
environmental studies of its Tempe, Arizona substrate manufacturing facility and
did not discover any contamination requiring remediation.
Failure to comply with proper hazardous substance handling procedures
or violation of environmental laws and regulations would have a material adverse
effect on the Company.
THE COMPANY
The Company was organized to design, manufacture and market lasers,
delivery systems and related disposable products for use in medical cosmetic
procedures. The Company currently operates in two business segments: medical
products and electronic products. In the medical products segment, the Company
manufactures and markets FDA approved ruby lasers and CO2 lasers for skin
resurfacing. The Company also is developing ruby, pulse dye and diode medical
lasers for use in clinical trials and is engaged in the research and development
of additional medical and surgical products. The Company has expanded its
efforts in the cosmetic laser area through a series of product development
activities, acquisitions and strategic alliances that target patient self pay
procedures performed in doctors' offices and clinics. Principal among these are
the development of a ruby laser system for treating unwanted hair which is
pending FDA approval. The laser hair removal and skin resurfacing products are
both significant to the Company's strategic plan. The Company has entered into a
number of research agreements with recognized research hospitals and clinical
laboratories. The Company provides research funding, laser technology and optics
know-how in return for licensing agreements to specific medical applications and
patents. Management feels that this method of conducting research and
development provides a higher level of technical and clinical expertise than it
could provide on its own and in a more cost efficient manner. To date, some of
the Company's medical laser products are undergoing clinical trials and have not
received FDA approval.
In the electronic products segment, the Company manufactures high
density, flexible electronic circuitry for use in industrial, military and
medical devices. The Company is also introducing a number of proprietary
products targeted to service the personal computer industry. Some of the
Company's electronic products are being incorporated into its laser systems.
These new products include a series of proprietary computer memory modules that
double the memory capacity of traditional memory modules using the same
interface as well as a user-friendly upgradable personal computer that
management believes will decrease the level of technical obsolescence found with
most personal computers in the market.
The Company also makes early stage investments in core technologies and
companies that management feels are strategic to the Compay's business or will
yield a higher than average financial return to support the Company's core
business. Some of these investments are with companies that are related to some
of the directors and officers of the Company.
15
In September 1995, the Company established Palomar Electronics
Corporation, a wholly-owned subsidiary, as part of a plan to separate the
electronics and computer segments of the business from the medical laser
segments of the business.
USE OF PROCEEDS
The Company will receive no part of the proceeds from the sale of any
of the Shares by the Selling Stockholders.
16
SELLING STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock by the Selling Stockholders as of the date
of this Prospectus and the number of such shares included for sale in this
Prospectus assuming the sale of all Shares being offered by this Prospectus. A
description of the transactions under which the Selling Stockholders received
the Common Stock being registered herein is set forth under the heading "Plan Of
Distribution" which follows this table. To the best of the Company's knowledge,
except as stated in the Prospectus, the Selling Stockholders have not held any
office or maintained any material relationship with the Company or any of its
predecessors or affiliates over the past three years. The Selling Stockholders
reserve the right to reduce the number of shares offered for sale or to
otherwise decline to sell any or all of the Shares registered hereunder.
<TABLE>
<CAPTION>
Shares Shares Shares
owned to be owned
Selling prior to sold in after
Stockholders Offering(1) Offering Offering(2)
- ------------ ----------- -------- -----------
<S> <C> <C> <C>
GFL Advantage Fund Limited (3) 1,750,000 1,750,000 0
C/O CITCO
Kaya Flamboyan 9
Curacao, Netherlands Anntilles
Ronald G. Wheeland, MD (4) 400,000 400,000 0
66 Cherry Hill Drive
Beverly, MA 01915
Steven Georgiev (5) 924,154 300,000 624,154 2.3%
66 Cherry Hill Drive
Beverly, MA 01915
Michael H. Smotrich (5) 694,000 250,000 444,000 1.7%
66 Cherry Hill Drive
Beverly, MA 01915
Joseph E. Levangie (5) 464,500 150,000 314,500 1.2%
66 Cherry Hill Drive
Beverly, MA 01915
Joseph P. Caruso (5) 666,826 150,000 516,826 2.0%
66 Cherry Hill Drive
Beverly, MA 01915
Carol A. Smith (7) 150,000 150,000 0
P.O. Box 2012
Santa Fe, NM 87504
17
Arista High-Tech Growth Fund, Ltd. (8) 114,810 114,810 0
Dr. Roy's Drive
Georgetown, Grand Cayman
Cayman Islands, Bristish West
Indies
James Z. Holtz (6) 99,890 99,890 0
66 Cherry Hill Drive
Beverly, MA 01915
John Harbaugh (9) 90,000 90,000 0
41 Kirkby Trail
Fairport, NY 14450
Anthony J. Cataldo (10) 73,000 73,000 0
63 North East Village Road
Concord, NH 03301
Robbert E. Grove (6) 72,648 72,648 0
66 Cherry Hill Drive
Beverly, MA 01915
Stanley Wunderlich (11) 60,000 60,000 0
41 Kirkby Trail
Fairport, NY 14450
Maurice Needham (5) 50,000 50,000 0
66 Cherry Hill Drive
Beverly, MA 01915
Lyle Jensen (5) 50,000 50,000 0
66 Cherry Hill Drive
Beverly, MA 01915
Albert Agbay (5) 50,000 50,000 0
66 Cherry Hill Drive
Beverly, MA 01915
Fritz A. Brauer (12) 50,000 50,000 0
2182 El Camino Real
Suite 209
Oceanside, CA 92054
A.J. Nassar (13) 50,000 50,000 0
210 Town Park Drive
Kennewsaw, GA 30314
18
BlueStone Capital Partners, L.P.(14) 50,000 50,000 0
575 Fifth Avenue
New York, NY 10017
Histon Financial Services, Inc. (15) 45,000 45,000 0
551 Fifth Avenue, Suite 605
New York, NY 10017
Egger & Co. (16) 44,821 44,821 0
c/o The Chase Manhattan Bank, N.A.
P.O. Box 1508
Church Street Station
New York, NY 10008
David C. Mundinger (6) 36,324 36,324 0
66 Cherry Hill Drive
Beverly, MA 01915
Howard Schraub (10) 30,000 30,000 0
6447 Camino De La Costa
LaJolla, CA 92037
Randall Verinhout (10) 8,000 8,000 0
3481 Lakeside Drive
Atlanta, FA 30326-1337
Berkshire International Finance, 6,000 6,000 0
Inc. Pension Plan (15)
551 Fifth Avenue, Suite 605
New York, NY 10017
Michael Hawkins (10) 4,000 4,000 0
990 Hammond Drive, Suite 740
Atlanta, GA 30328
David Holtz (6) 5,449 5,449 0
Adrianna Scheibner (6) 3,632 3,632 0
Totals 6,043,054 4,143,574 1,899,480
</TABLE>
- --------------------------------------------------------------------------------
19
1. Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the ownership of such individual
or group.
2. The amount and (if one percent or more) the percentage of outstanding
Common Stock. The terms of the Series E Convertable Preferred Stock provide
that in no event shall GFL Advantage Fund Limited be entitled to convert
any shares thereof if the issuance of shares of Common Stock upon a
proposed conversion, when the shares to be so issued are counted together
with other shares of Common Stock beneficially owned by GFL Advantage or
any associate or affiliate of or adviser to GFL Advantage (collectively,
the "GFL Persons"), (other than shares so owned through ownership of
Series E Preferred Stock), would result in a GFL Person beneficially owning
more than 4.9% of the outstanding shares of Common Stock.
3. Represents the number of shares of Common Stock reserved for issuance upon
conversion of 10,000 shares of Series E Convertible Preferred Stock and
304,259 shares underlying a Warrant. GFL Advantage Fund Limited acquired
the Preferred Stock at $1,000 per share for an aggregate conversion amount
of $10,000,000. Under the terms of the Certificate of Designation, the
conversion amount of the Preferred Stock, together with any accrued but
unpaid dividends, can be converted into shares of Common Stock at a
conversion price which is the lower of $11.50 or 85% of the average closing
bid price for the three trading days immediately preceding the conversion
date. In any event, the floor conversion price shall be no lower than $7.50
per share. Dividends accrue at the rate of 7% per annum.
4. Represents shares issuable pursuant to a Warrant exercisable for Common
Stock at $9.50 per share and vesting over a three year period as follows:
150,000 shares after the first year, 150,000 shares after the second year,
and 100,000 shares after the third year.
5. Represents shares issuable pursuant to Warrants exercisable for Common
Stock at $6.75 per share through 2/5/01 issued as bonuses and incentives
for management. The following is a disclosure of the Selling Stockholders
who have held office or maintained a material relationship with the
Company:
<TABLE>
<CAPTION>
Person Relationship Company
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Steve Georgiev Chairman of the Board and Chief Executive Officer Palomar Medical
Technoligies, Inc.
Michael H. Smotrich President and Chief Operating Officer Palomar Medical
Technologies, Inc.
Joseph E. Levangie Director Palomar Medical
Technologies, Inc.
Joseph P. Caruso Vice President, Chief Financial Officer and Palomar Medical
Treasurer Technologies, Inc.
Maurice Needham Chairman of the Board Palomar Electronics
Corporation
20
Corporation and Chief Executive Officer Dynaco Corporation
Lyle Jensen President Dynaco Corporation
Albert Agbay President Nexar Corporation
</TABLE>
6. Represents Common Stock issued to own 100% of the stock of Star Medical
Technologies. The following is a disclosure of the Selling Stockholders who
have held office or maintained a material relationship with the Company:
<TABLE>
<CAPTION>
Person Relationship Company
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Jim Z. Holtz President Star Medical
Technoligies, Inc.
Robert E. Grove Vice-President Star Medical
Technologies, Inc.
</TABLE>
7. Represents 150,000 shares issuable pursuant to a Warrant exercisable for
Common Stock at $7.69 per share though 2/7/01 issued in payment of
commissions in connection with market research and consulting.
8. Represents shares of Common Stock issued at $8.16 per share.
9. Represents 90,000 shares issuable pursuant to a Warrant exercisable for
Common Stock at $7.69 per share though 2/7/01 issued in payment of
commissions in connection with market research and consulting.
10. Represents Common Stock issued in payment of fees in connection with
brokerage services.
11. Represents 60,000 shares issuable pursuant to a Warrant exercisable for
Common Stock at $7.69 per share though 2/7/01 issued in payment of
commissions in connection with market research and consulting.
12. Represents 50,000 shares issuable pursuant to a Warrant exercisable for
Common Stock at $7.00 per share though 2/6/99 issued in payment of
commissions in connection with market research and consulting.
13. Represents 50,000 shares issuable pursuant to a Warrant exercisable for
Common Stock at $10.375 per share though 3/29/99 issued in payment of fees
in connection with brokerage services.
14. Represents shares issuable pursuant to Warrants exercisable for Common
Stock at $5.00 per share through 10/18/98 issued as compensation for market
research and consulting.
15. Represents shares of Common Stock issued at $8.40 per share.
16. Represents shares of Common Stock issued at $10.04 per share.
PLAN OF DISTRIBUTION
21
Of the 4,143,574 shares being registered herein for sale by the Selling
Stockholders, (a) 1,445,741 shares underlie 10,000 shares of Series E
Convertible Preferred Stock, which are convertible to Common Stock as described
in footnote 3 to the Selling Stockholders table above, (b) 304,259 shares
underlie a Warrant, as described in footnote 3 to the Selling Stockholders table
above, and (c) 115,000 shares were issued in payment of brokerage commissions as
described in footnote 10 to the Selling Stockholders table above, (d) 428,574
shares were issued in connection with financing activities as described in
footnote, 6, 8, 15 and 16 to the Selling Stockholders table above, and (e)
1,850,000 shares underlying various stock purchase warrants issued in connection
with consulting agreements, compensation and financing activities as described
in footnotes 4, 5, 7, 9, 11, 12, 13 and 14 to the Selling Stockholders table
above.
The Selling Stockholders may sell the Common Stock registered in
connection with this Offering on the NASDAQ market system or otherwise. There
will be no charges or commissions paid to the Company by the Selling
Stockholders in connection with the issuance of the Shares. It is anticipated
that usual and customary brokerage fees will be paid by the Selling Stockholders
upon sale of the Common Stock offered hereby. The Company will pay the other
expenses of this Offering. The Shares may be sold from time to time by the
Selling Stockholders, or by pledges, donees, transferees or other successors in
interest. Such sales may be made on one or more exchanges or in the
over-the-counter market, or otherwise at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Shares may be sold by one or more of the following: (a) a
block trade in which the broker so engaged will attempt to sell the Shares 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)
an exchange distribution in accordance with the rules of NASDAQ; and (d)
ordinary brokerage transactions. In effecting sales, brokers or dealers engaged
by the Selling Stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this Prospectus.
The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including certain liabilities under the Securities Act, or
to contribute to payments which the Selling Stockholders will be required to
make in respect thereof.
EXPERTS
The audited financial statements incorporated by reference in this
Prospectus and elsewhere in the registration statement, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein upon the authority of said
Firm as experts in giving said reports.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Foley, Hoag & Eliot, One Post Office Square,
Boston, Massachusetts 02109.
22
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
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.
23
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
Common Stock to be registered are estimated (except for the Securities and
Exchange Commission filing fee) below. All such expenses will be paid by the
Registrant.
Securities and Exchange Commission Filing Fee $21,075
Accounting Fees and Expenses 2,500
Legal Fees and Expenses 4,000
Blue Sky Filing Fees and Expenses 500
Printing and Mailing Costs 100
Transfer Agent Fees 500
Miscellaneous 500
--------------------
Total Expenses $29,175
====================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware General Corporation Law, Section 102(b)(7), enables a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders to eliminate or limit personal liability of
members of its Board of Directors for violations of a director's fiduciary duty
of care. However, the elimination or limitation shall not apply where there has
been a breach of the duty of loyalty, failure to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was deemed illegal or obtaining an improper
personal benefit. The Company's Certificate of Incorporation includes the
following language:
"To the maximum extent permitted by Section 102(b)(7) of the General Corporation
Laws of Delaware, a director of this corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit."
Section 145 of the General Corporation Law of the State of Delaware
generally provides that a corporation may indemnify any director, officer,
employee or agent against expenses, judgments, fines and amounts paid in
settlement in connection with any action against him by reason of his being or
having been such a director, officer, employee or agent, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action, had no
reasonable cause to believe his conduct was unlawful. No indemnification shall
be made, however, if he is adjudged liable for negligence or misconduct in the
performance of his duty to the corporation, unless a court determines that he is
nevertheless entitled to indemnification. If he is successful on the merits or
otherwise in defending the action, the corporation must indemnify him against
expenses actually and reasonably incurred by him. Article IX of the Company's
Bylaws provides indemnification as follows:
24
INDEMNIFICATION
SECTION 1. Actions, Etc. Other Than by or in the Right of the Corporation. The
Corporation shall, to the full extent legally permissible, 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, whether civil, criminal,
administrative or investigative, including a grand jury proceeding, and all
appeals (but excluding any such action, suit or proceeding by or in the right of
the Corporation), by reason of the fact that such person is or was a director,
executive officer (as hereinafter defined) or advisory council member of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct in question was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that such person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that the conduct in
question was unlawful. As used in this Article IX, an "executive officer" of the
Corporation is the president, treasurer, a vice president given the title of
executive vice president, or any officer designated as such pursuant to vote of
the Board of Directors.
SECTION 2. Actions. Etc. by or in the Right of the Corporation. The Corporation
shall, to the full extent legally permissible, indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit, including appeals, by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that such
person is or was a director or executive officer of the Corporation as defined
in Section 1 of this Article, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. Determination of Right of Indemnification. Any indemnification of a
director or officer (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that such
indemnification is proper in the circumstances because the director or executive
officer has met the applicable standard of conduct as set forth in Sections 1
and 2 hereof. Such a determination shall be reasonably and promptly made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) (if such a
quorum is not obtainable, or, even if obtainable if a quorum of disinterested
directors so directs) by independent legal counsel in a written opinion, or
(iii) by the stockholders.
25
SECTION 4. Indemnification Against Expenses of Successful Party. Notwithstanding
any other provision of this Article, to the extent that a director or officer of
the Corporation has been successful in whole or in part on the merits or
otherwise, including the dismissal of an action without prejudice, in defense of
any action, suit or proceeding or in defense of any claim, issue or matter
therein, such person shall be indemnified against all expenses incurred in
connection therewith.
SECTION 5. Advances of Expenses. Expenses incurred by a director or officer in
any action, suit or proceeding shall be paid by the Corporation in advance of
the final disposition of thereof, if such person shall undertake to repay such
amount in the event that it is ultimately determined, as provided herein, that
such person is not entitled to indemnification. Notwithstanding the foregoing,
no advance shall be made by the Corporation if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum of
disinterested directors, or (ii) (if such a quorum is not obtainable or, even if
obtainable, if a quorum of disinterested directors so directs) by independent
legal counsel in a written opinion, that, based upon the facts known to the
Board of Directors or such counsel at the time such determination is made, such
person has not met the relevant standards set forth for indemnification in
Section 1 or 2, as the case may be.
SECTION 6. Right to Indemnification Upon Application: Procedure Upon
Application. Any indemnification or advance under Sections 1, 2, 4 or 5 of this
Article shall be made promptly, and in any event within ninety days, upon the
written request of the person seeking to be indemnified, unless a determination
is reasonably and promptly made by the Board of Directors that such person acted
in a manner set forth in such Sections so as to justify the Corporation's not
indemnifying such person or making such an advance. In the event no quorum of
disinterested directors is obtainable, the Board of Directors shall promptly
appoint independent legal counsel to decide whether the person acted in the
manner set forth in such Sections so as to justify the Corporation's not
indemnifying such person or making such an advance. The right to indemnification
or advances as granted by this Article shall be enforceable by such person in
any court of competent jurisdiction, if the Board of Directors or independent
legal counsel denies the claim therefor, in whole or in part, or if no
disposition of such claim is made within ninety days.
SECTION 7. Other Right and Remedies: Continuation of Rights. The indemnification
and advancement of expenses provided by this Article shall not be deemed
exclusive of any other rights to which any person seeking indemnification or
advancement of expenses may be entitled under any Bylaw, agreement, Vote of
stockholders or disinterested directors, the General Corporation Law of the
State of Delaware or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office. All
rights to indemnification or advancement under this Article shall be deemed to
be in the nature of contractual rights bargained for and enforceable by each
director and executive officer as defined in Section 1 of this Article who
serves in such capacity at any time while this Article and other relevant
provisions of the General Corporation Law of the State of Delaware and other
applicable laws, if any, are in effect. All right to indemnification under this
Article or advancement of expenses shall continue as to a person who has ceased
to be a director or executive officer, and shall inure to the benefit of the
heirs, executors and administrators of such a person. No repeal or modification
of this Article shall adversely affect any such rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts. The Corporation shall also indemnify any
person for attorneys' fees, costs, and expenses in connection with the
successful enforcement of such person's rights under this Article.
26
SECTION 8. Other Indemnities. The Board of Directors may, by general vote or by
vote pertaining to a specific officer, employee or agent, advisory council
member or class thereof, authorize indemnification of the Corporation's
employees and agents, in addition to those executive officers and to whatever
extent it may determine, which may be in the same manner and to the same extent
provided above.
SECTION 9. Insurance. Upon resolution passed by the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, advisory council member or agent of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article.
SECTION 10. Constituent Corporations. For the purposes of this Article,
reference to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporations (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers so that any person who is or was a director or officer of
such a constituent corporation or is or was serving at the request of such
constituent corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
SECTION 11. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, executive officer,
advisory council member, and those employees and agents of the Corporation
granted indemnification pursuant to Section 3 hereof as to expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding, and all appeals, and any
action by the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated or by any other
applicable law.
SECTION 12. Other Enterprises, Fines, and Serving at Corporation's Request. For
purposes of this Article, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to any employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of any employee benefit plan
shall be deemed to have acted in a manner not opposed to the best interests of
the Corporation" as referred to in this Article.
27
ITEM 16. EXHIBITS
The following documents have been previously filed as Exhibits
and are incorporated herein by reference except those exhibits indicated with an
asterisk which are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4(a) Certificate of Incorporation, as Amended, incorporated by reference to Exhibit No. 4(a) of the
Company's Registration Statement on Form S-3 [Reg. No. 33-97760] filed October 4, 1995
4(b) Certificate of Designation, incorporated by reference to Exhibit No. 4(b) of the Company's
Registration Statement on Form S-3 [Reg. No. 33-99792] filed on October 13, 1995
4(c) Certificate of Designation, incorporated by reference to Exhibit No. 4(c) of the Company's
Registration Statement on Form S-3 [Reg. No. 33-99792] filed on November 9, 1995
4(d) Certificate of Designation, incorporated by reference to Exhibit No. 4(d) of the Company's
Registration Statement on Form S-3 [Reg. No. 333-000140] filed on February 1, 1996.
4(e) Certificate of Designation, incorporated by reference to Exhibit No. 4(e) of the Company's
Registration Statement on Form S-3 [Reg. No. 333-3424] filed on April 9, 1996.
4(f) Certificate of Designation, incorporated by reference to Exhibit No. 4(f) of Amendment
No. 1 to the Company's Registration Statement on Form S-3 [Reg No. 333-0013424]
filed on May 3, 1996.
4(g) Bylaws of the Registrant incorporated by reference to Exhibit No. 3(b) of the Company's
Amendment No. 8 to Registration Statement on Form S-1 [Reg. No. 33-47479] filed December 17,
1992
4(h) Form of Common Stock Certificate incorporated by reference to Exhibit No. 4(b) of the Company's
Amendment No. 8 to Registration Statement on Form S-1 [Reg. No. 33-47479] filed December 17,
1992
5* Opinion of Foley, Hoag & Eliot regarding legality of shares registered hereunder
23(a)* Consent of Arthur Andersen LLP, independent public accountants
23(b)* Consent of Foley, Hoag & Eliot (included in Exhibit 5)
</TABLE>
28
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;
(i) 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 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) 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.
29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Beverly, Commonwealth of Massachusetts, on June 11,
1996.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Steven Georgiev
-----------------------------
Steven Georgiev, Chairman
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/ Steven Georgiev Chairman of the Board, Chief June 11, 1996
- -------------------------------------- Executive Officer and Director
Steven Georgiev (Principal Executive Officer)
/s/ Dr. Michael H. Smotrich President, Chief Operating Officer, June 11, 1996
- -------------------------------------- Director
Dr. Michael H. Smotrich
/s/ Joseph P. Caruso Vice President, Chief Financial June 11, 1996
- -------------------------------------- Officer, Treasurer (Principal Financial
Joseph P. Caruso and Accounting Officer)
/s/ Joseph E. Levangie Director June 11, 1996
- --------------------------------------
Joseph E. Levangie
</TABLE>
30
FOLEY, HOAG & ELIOT LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109-2170
TELEPHONE: (617) 832-1000
CABLE ADDRESS "FOLEYHOAG"
FACSIMILE (617) 832-7000
TELEX 940693
http://www.fhe.com
IN WASHINGTON, D.C.
1615 L STREET, N.W.
SUITE 850
WASHINGTON, D.C. 20036
TELEPHONE (202) 775-0600
June 11, 1996
Palomar Medical Technologies, Inc.
66 Cherry Hill Drive
Beverly, Massachusetts 01915
Gentlemen:
We are familiar with the Registration Statement on Form S-3 (the "S-3
Registration Statement") to which this opinion is an exhibit, to be filed by
Palomar Medical Technologies, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended. The S-3 Registration Statement relates to the proposed public offering
by certain securityholders of the Company of a total of 4,143,574 shares (the
"Shares") of the Company's Common Stock, $.01 par value per share ("Common
Stock"), to be issued to such securityholders upon conversion of the Series E
Convertible Preferred Stock of the Company.
In arriving at the opinion expressed below, we have examined and relied
on the following documents:
(1) the Certificate of Incorporation and By-Laws of the
Company, each as amended as of the date hereof; and
(2) the records of meetings and consents of the Board of
Directors and stockholders of the Company provided to us by the
Company.
In addition, we have examined and relied on the originals or copies certified or
otherwise identified to our satisfaction of all such corporate records of the
Company and such other instruments and other certificates of public officials,
officers and representatives of the Company and such other persons, and we have
made such investigations of law, as we have deemed appropriate as a basis for
the opinion expressed below.
Based upon the foregoing, it is our opinion that the Company has
corporate power adequate for the issuance of the Shares issued and to be issued
in the manner set forth in the S-3 Registration Statement and offered pursuant
to the S-3 Registration Statement. The
Palomar Medical Technologies, Inc.
June 11, 1996
Page 2
Company has taken all necessary corporate action required to authorize the
issuance and sale of the Shares, and when certificates for the Shares have been
duly executed and countersigned and delivered, such shares will be legally
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
S-3 Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT
By /s/ Dave Broadwin
-------------------------------
A Partner
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made part of the registration
statement.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 5, 1996
