As filed with the Securities and Exchange Commission on August 7, 1997
Registration No. 333-26795
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------
POST-EFFECTIVE AMENDMENT NO. 3 TO
REGISTRATION STATEMENT ON FORM SB-2
FILED ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
Saliva Diagnostic Systems, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
91-1549305
(I.R.S. Employer Identification No.)
11719 NE 95th Street
Vancouver, Washington 98682
(360) 696-4800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Kenneth J. McLachlan, President
Saliva Diagnostic Systems, Inc.
11719 NE 95th Street
Vancouver, Washington 98682
(360) 696-4800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all correspondence to:
LaDawn Naegle, Esq.
Bryan Cave LLP
700 13th Street, N.W., Suite 700
Washington, D.C. 20005-3960
(202) 508-6000
Approximate date of commencement of proposed sale to public: From time to
time after this Registration Statement becomes effective.
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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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PROSPECTUS
SALIVA DIAGNOSTIC SYSTEMS, INC.
2,457,974 Shares of Common Stock
Saliva Diagnostic Systems, Inc. (the "Company") is registering for resale
2,457,974 shares of common stock, $.01 par value (the "Common Stock"), which
include (i) 2,368,422 shares which have been and may be issued in connection
with the conversion of $1,500,000 in principal amount of the Company's 7.5%
Convertible Debentures due February 28, 1999 (the "Debentures"); and (ii) 89,552
shares which may be issued upon the exercise of warrants granted to Grayson &
Associates, Inc. (the "Grayson Warrants"). All of the Common Stock offered
hereby is being offered for the account of certain shareholders of the Company
which acquired their securities as a result of a private placement conducted by
the Company. See "Selling Shareholders." Additional shares that may become
issuable as a result of the anti-dilution provisions of the Grayson Warrants are
offered hereby pursuant to Rule 416 under the Securities Act of 1933, as amended
(the "Securities Act"). The Company will not receive any of the proceeds from
the sale of the Common Stock being offered hereby (the "Offering"), but will
receive the exercise price payable upon the exercise of the Grayson Warrants.
There can be no assurance that all or any part of the Grayson Warrants will be
exercised or that they will be exercised for cash.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT
BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE 4.
---------------------
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.
Proceeds to Selling
Price to Public(1) Shareholders(1) (2)
------------------ -------------------
Per share of Common Stock $1.00 $1.00
Total (3) $2,457,974 $2,457,974
(1) Estimated based upon the average of the high and low sales prices for the
Common Stock on July 10, 1997 as reported by Nasdaq.
(2) Excludes regular brokerage commissions and other expenses, including
expenses of counsel, if any, for the Selling Shareholders, which will be paid by
the Selling Shareholders. The other expenses of the offering are estimated to be
approximately $41,000, all of which will be paid by the Company.
(3) Assumes all shares registered will be issued to the Selling Shareholders
and will be sold in this offering.
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The date of this Prospectus is August __, 1997
<PAGE>
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 and other information with the Securities and Exchange
Commission (the "Commission"). Such reports 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 the
Commission's regional offices at Room 1204, 219 South Dearborn Street, Chicago,
Illinois 60604; Room 1028, 7 World Trade Center, New York, New York 10007; and
Suite 500 East, 5757 Wilshire Boulevard, Los Angeles, California 90036. Copies
of such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Commission maintains an internet web site that contains reports, proxy
statements and other materials filed electronically by the Company through the
Commission's Electronic Data, Gathering, Analysis and Retrieval (EDGAR) system.
This web site can be accessed at http://www.sec.gov. The Common Stock is traded
on The Nasdaq Small Cap Market ("Nasdaq") under the symbol "SALV," and copies of
reports and other information are also available for inspection at The Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement or the exhibits thereto.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information contained or incorporated by reference in the
Registration Statement. For further information, reference is hereby made to the
Registration Statement and exhibits thereto, copies of which may be inspected at
the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
or obtained from the Commission at the same address at prescribed rates.
The Company furnishes Annual Reports to the holders of its securities which
contain financial information which have been examined and reported upon, with
an opinion expressed by, its independent certified public accountants.
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INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
(1) Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996, filed on March 31, 1997 (File No. 000-21284) pursuant
to Section 13(a) of the Exchange Act, as amended on Form
10-KSB/A, filed on June 10, 1997 (File No. 000-21284) (the "1996
Annual Report");
(2) Quarterly Report on Form 10-QSB for the fiscal quarter ended
March 31, 1997, filed on May 15, 1997 (File No. 000-21284)
pursuant to Section 13(a) of the Exchange Act;
(3) Definitive Proxy Statement, filed on April 29, 1997 (File No.
000-21284) pursuant to Section 14(a) of the Exchange Act;
(4) Current Report on Form 8-K dated May 30, 1997, filed on May 30,
1997 (File No. 000-21284) pursuant to Section 13(a) of the
Exchange Act, as amended on Form 8-K/A dated May 30, 1997, filed
on June 9, 1997 (File No. 000-21284); and
(5) Current Report on Form 8-K dated July 5, 1997, filed on July 30,
1997 (File No. 000-21284) pursuant to Section 13(a) of the
Exchange Act.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
shall hereby be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of such documents. See "Available
Information." Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document incorporated or deemed to be
incorporated herein by reference modifies or supersedes such statement. Any
statement contained herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in any
subsequently filed document incorporated or deemed to be incorporated herein by
reference 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.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING EXHIBITS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED BY FIRST CLASS MAIL WITHOUT
CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST BY SUCH PERSON TO SHAREHOLDER RELATIONS, SALIVA DIAGNOSTIC SYSTEMS,
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INC., 11719 NE 95TH STREET, VANCOUVER, WASHINGTON 98682 (TELEPHONE NUMBER (360)
696-4800).
No person has been authorized in connection with this offering to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company,
the Selling Shareholders or any other person. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, any
securities other than those to which it relates, nor does it constitute an offer
to sell or a solicitation of an offer to purchase by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
CAUTIONARY STATEMENT
This prospectus, as well as information incorporated by reference herein,
contains forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include,
but are not limited to, those statements relating to development of new
products, the ability to obtain new distribution agreements and increase
distribution for products under existing distribution agreements, approval of
the Company's products as and when required by the Food and Drug Administration
("FDA") in the United States and similar regulatory bodies in other countries,
and the scale-up of manufacturing in the United States and attendant FDA
approvals. These forward-looking statements are subject to the business and
economic risks faced by the Company and the Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "Risk Factors"
below, under "Item 1 - Business" and "Item 6 - Management's Discussion and
Analysis or Plan of Operation" in the 1996 Annual Report, and in the other
documents incorporated by reference herein.
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk, including, but not limited to, the risk factors described below. Each
prospective investor should carefully consider the following risk factors
inherent in and affecting the business of the Company and this offering before
making an investment decision.
1. Limited Operating History. Since July 1990, the Company has been engaged
primarily in research and development activities focused on developing
proprietary collection devices and rapid assays. To date, sales of the Company's
products have been to a limited customer base. The Company has a limited
operating history upon which an evaluation of the Company's prospects can be
made. Such prospects must be considered in light of the risks,
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expenses and difficulties frequently encountered in the establishment of a
new business in a continually evolving, heavily regulated industry,
characterized by an increasing number of market entrants and intense
competition, as well as the risks, expenses and difficulties encountered
in the shift from development to commercialization of new products based on
innovative technology. There can be no assurance that the Company will be
able to implement successfully its marketing strategy, obtain necessary
regulatory approval, generate increased revenues or ever achieve profitable
operations.
2. Significant Operating Losses; Accumulated Deficit; Explanatory Paragraph
in Report of Independent Certified Public Accountants. The Company has incurred
significant operating losses since its inception, resulting in an accumulated
deficit of $21,914,246 and $23,089,147 at December 31, 1996 and March 31, 1997,
respectively, and a shareholders' equity of $1,160,632 and $350,265 at December
31, 1996 and March 31, 1997, respectively. The Company has incurred additional
operating losses through the date of this Prospectus. Such losses are expected
to continue for the foreseeable future and until such time, if ever, as the
Company is able to attain sales levels sufficient to support its operations. The
Company's independent certified public accountants have included an explanatory
paragraph in their report stating that the Company's significant operating
losses and significant capital requirements raise substantial doubt about the
Company's ability to continue as a going concern.
3. Significant Capital Requirements; Need for Additional Financing. The
Company's capital requirements have been and will continue to be significant.
The Company has been dependent on private placements of its debt and equity
securities and on a public offering of securities in March 1993 to fund such
requirements. The Company is dependent upon its other efforts to raise capital
resources, including proceeds received from the exercise of warrants, to finance
the costs of manufacturing, marketing and conducting clinical trials and
submissions for FDA approval of its products and continuing the design and
development of the Company's new products. Marketing, manufacturing and clinical
testing may require capital resources substantially greater than the resources
currently available to the Company. There can be no assurance that the Company
will be able to obtain additional capital resources necessary to permit the
Company to implement or continue its programs. There can be no assurance that
such financing will be available on commercially reasonable terms or at all. Any
additional equity financing may involve substantial dilution to the interests of
the Company's shareholders, which dilution also has occurred in the past.
4. Uncertain Acceptance of Saliva-Based Tests and Rapid Tests as Diagnostic
Tools. The human specimens traditionally used for the diagnostic testing and
quantitative measurement of most physiologically active substances, drugs and
toxins in the body, are blood and urine. Substantially all of the assay-based
diagnostic test kits currently available were approved by the FDA for use with
these testing specimens. Political and social factors may create impediments to
the use of rapid tests as diagnostic tools. These factors include whether
certain diagnostic tests, such as HIV antibody tests, should be conducted
without trained specialists and whether rapid tests in nontraditional testing
environments will lead to invasions of privacy. Although the Company
acknowledges the existence of such considerations, it is committed to developing
rapid testing devices as useful diagnostic tools. Limitations on the Company's
ability to market rapid tests caused by political and social factors could have
a material adverse effect on the Company's operations.
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5. Uncertainty of New Product Development. The design and development of
the Company's rapid testing platforms in their current designs have been
completed and limited revenues have been generated from sales thereof. The
Company will be required to devote considerable additional efforts to finalize
the evaluation of its products. Satisfactory completion of development, testing,
evaluations, obtaining regulatory approvals and achieving sufficient production
levels of such products will be required prior to their being available for
commercial sale. The Company's products remain subject to all the risks inherent
in the introduction of new diagnostic products, including unanticipated
problems, as well as the possible insufficiency of funds to continue design and
development which could result in abandonment of or substantial change in the
design or development of such products. There can be no assurance that such
products will be successfully developed, be developed on a timely basis or prove
to be as effective as products based on existing or newly developed
technologies. The inability to successfully complete development, or a
determination by the Company, for financial or other reasons, not to undertake
to complete development of any product, particularly in instances in which the
Company has made significant capital expenditures, could have a material adverse
effect on the Company.
6. Competition. The market in which the Company operates, saliva and
blood-based collection and diagnostic testing, is highly competitive. The
Company is aware of certain entities, including ChemTrak, Inc., Epitope, Inc.,
Quidel, Inc. and Trinity Biotech, plc and specialized biotechnology firms, as
well as universities and other research institutions, which have developed or
are developing technologies and products which are competitive with Omni-SAL(R)
and the Company's products under development. Many of these competitors are
established and have substantially greater research, marketing and financial
resources than the Company. The Company expects that the number of products
competing with its products will increase as the perceived benefits of
saliva-based testing become more widely recognized. There can be no assurance
the Company will be able to compete successfully.
7. Technological Change and Risk of Technological Obsolescence. The
biotechnology industry and, in particular, saliva and blood-based diagnostic
testing, is subject to rapid and significant technological change. There can be
no assurance that the Company's competitors will not succeed in developing
technologies and products relating to the collection of saliva for diagnostic
testing prior to the Company or that they will not develop technologies and
products that are more effective than any which have been or are being developed
by the Company. In addition, the diagnostic products market is characterized by
changing technology and developing industry standards sometimes resulting in
product obsolescence or short product life cycles. Accordingly, the ability of
the Company to compete will be dependent on its introducing products to the
marketplace in a timely manner and enhancing and improving such products. There
can be no assurance that the Company will be able to keep pace with
technological developments or that its products will not become obsolete.
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8. Government Regulation. The development, manufacture and sale of the
Company's products in the United States are subject to regulation by the FDA and
other governmental agencies. The process of obtaining FDA approval is costly and
time-consuming, and there can be no assurance that any of the Company's products
not yet approved will be approved by the FDA or other regulatory agencies.
Delays in obtaining regulatory approvals may adversely affect the development,
testing or marketing of the Company's products and the ability of the Company to
generate product revenues therefrom. If and when the Company's products are
approved by the FDA, they will be subject to continuing regulation by the FDA
and state and local agencies. The FDA has established a number of requirements
for manufacturers and requirements regarding labeling and reporting. The failure
to comply with these requirements can result in regulatory action, including
warning letters, product seizure, injunction, product recalls, civil fines and
prosecution. An FDA enforcement action could have a material adverse effect on
the Company. The Company is subject to regulation in certain foreign markets.
There can be no assurance that regulatory approvals for any of the Company's
products or for its manufacturing in the United States will be obtained in a
timely manner, or at all.
9. Risks Related to Foreign Activities. The Company and its manufacturers
may be subject to various import duties imposed by foreign governments
applicable to both finished products and components and may be affected by
various other import and export restrictions or duties as well as other
developments having an impact upon international trade. These factors could,
under certain circumstances, have an impact both on the manufacturing cost and
the wholesale and retail prices of such products. To the extent that
transactions relating to foreign sales, manufacturing of the Company's products
and purchases of components involve currencies other than United States dollars,
the operating results of the Company could be adversely affected by fluctuations
in foreign currency exchange rates.
10. Uncertainty of Market Acceptance; Dependence Upon Third Party
Distributors. The Company has limited marketing capabilities and resources.
Achieving market acceptance will require substantial marketing efforts and the
expenditure of significant funds to inform potential consumers and the public of
the perceived benefits of the Company's current and proposed products. Moreover,
the Company does not have the financial or other resources to undertake
extensive marketing and advertising activities. The Company has recently begun
to develop strategic alliances and marketing arrangements, including joint
ventures, license or distribution arrangements. The Company's prospects will be
significantly affected by its ability to successfully develop and maintain its
relationships with its joint venturers, licensors and distributors and upon the
marketing efforts of such third parties. While the Company believes that any
independent distributors and sales representatives with whom it enters into such
arrangements will have an economic motivation to commercialize the Company's
products, the time and resources devoted to those activities generally will be
controlled by such entities and not by the Company. There can be no assurance
that the Company will be able, for financial or other reasons, to develop and
maintain any third party distribution or marketing arrangements or that such
arrangements, if established, will result in the successful commercialization of
any of the Company's products.
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11. Dependence on Manufacturers. The Company relies on arrangements with
third parties for the manufacture of some of its products. Such manufacturers,
if located in the United States or if manufacturing products to be sold in the
United States, must comply with ( the FDA's good manufacturing practices ("GMP")
and pass pre-approval inspections by the FDA and periodic GMP inspections. MML
Diagnostic Packaging, Inc. ("MML") manufactures Omni-Swab and SalivaoSampler for
the Company in the United States and has advised the Company that it is in
compliance with all applicable FDA requirements for such manufacturing. There
can be no assurance that the Company's manufacturer will continue to comply with
GMP, that the Company will be able to locate additional manufacturers that
comply with GMP or secure agreements with such manufacturers on terms acceptable
to the Company. There can be no assurance that MML will be able to meet the
Company's requirements or that MML will continue to manufacture Omni-Swab or
SalivaoSampler on terms acceptable to the Company.
12. Dependence Upon Third-Party Suppliers. The Company believes that most
of the components used in the manufacture of its proposed products are currently
available from numerous suppliers located in the United States, Europe and Asia.
The Company believes, however, that certain components are available from a
limited number of suppliers. Although the Company believes that it will not
encounter difficulties in obtaining these components, there can be no assurance
that the Company will be able to enter into satisfactory agreements or
arrangements for the purchase of commercial quantities of such components. The
failure to enter into agreements or otherwise arrange for adequate or timely
supplies of components and the possible inability to secure alternative sources
of components could have a material adverse effect on the Company's ability to
manufacture its products. In addition, development and regulatory approval of
the Company's products in the United States are dependent upon the Company's
ability to procure certain components and certain packaging materials from
FDA-approved sources. Since the FDA approval process requires manufacturers to
specify their proposed suppliers of certain components in their premarket
approval applications ("PMAs"), if any such component were no longer available
from the specified supplier, FDA approval of a new supplier would be required,
resulting in potential manufacturing delays.
13. Dependence on Small Number of Customers. The Company derives a large
portion of its revenues from sales to a small number of customers. Sales to
three customers accounted for approximately 49% of total product revenues in
1996. Sales to two customers accounted for approximately 50% of total product
revenues in 1995. The loss of sales to any of the Company's major customers
could have a material adverse effect on the Company's financial condition and
results of operations.
14. Dependence on Key Personnel. The success of the Company will be largely
dependent on the personal efforts of Kenneth J. McLachlan, its President and
Chief Executive Officer, and certain key management and scientific personnel.
The loss of Mr. McLachlan's services or the services of other key management or
scientific personnel would have a material adverse effect on the Company's
business and prospects. Competition among biotechnology companies for qualified
employees is intense, and the loss of key personnel or the inability to attract
and retain the additional highly skilled employees required for the Company's
activities
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could adversely affect its business. There can be no assurance that the Company
will be able to hire or retain such necessary personnel.
15. Uncertainty of Patent Protection; Proprietary Information. The Company
has applied for United States patents on certain aspects of its saliva
collection and diagnostic testing devices and has been awarded four of these
patents. To the extent possible, the Company also anticipates filing patent
applications for protection on future products and technology which it develops.
There can be no assurance that patents applied for will be obtained, that any
such patents will afford the Company commercially significant protection of its
technology or that the Company will have adequate resources to enforce its
patents. Inasmuch as the Company intends to sell its products in foreign
markets, it is in the process of seeking foreign patent protection on its
current products and technologies. The patent laws of other countries may differ
from those of the United States as to the patentability of the Company's
products and technologies and the degree of protection afforded. Other companies
may independently develop equivalent or superior products and technologies and
may obtain patent or similar rights with respect thereto. Although the Company
believes that its products and technologies have been independently developed
and do not infringe on the patents of others, there can be no assurance that the
Company's products and technologies do not and will not infringe on the patents
of others. In the event of infringement, the Company would, under certain
circumstances, be required to modify its device or obtain a license. There can
be no assurance that the Company will be able to do either of the foregoing in a
timely manner or upon acceptable terms and conditions, and the failure to do so
could have a material adverse effect on the Company. There can be no assurance
that the Company will have the financial or other resources necessary to
successfully defend a claim of violation of proprietary rights.
16. Product Liability; Insurance Coverage. The Company may be exposed to
potential product liability claims by consumers. The Company maintains product
liability insurance coverage in an amount up to $1,000,000 per occurrence, up to
a maximum of $2,000,000 in the aggregate, with excess umbrella liability
insurance coverage of $4,000,000. In the event of a product liability claim,
there can be no assurance that such insurance will be sufficient to cover all
possible liabilities. In the event of a successful suit against the Company,
insufficiency of insurance coverage would have a material adverse effect on the
Company.
17. Possible Removal of Securities from Nasdaq System; Disclosure Relating
to Low-Priced Stocks. If the Company should continue to experience losses from
operations, it may be unable to maintain the standards for continued quotation
on Nasdaq and the Common Stock could be subject to removal from the Nasdaq
system. Upon the filing by the Company of its Form 10-QSB for the period ended
March 31, 1997, Nasdaq issued a letter to the Company asking the Company to
demonstrate that it currently meets all Nasdaq listing requirements and can
continue to meet those requirements. In order to continue to be included in
Nasdaq, a company must maintain $2,000,000 in total assets, a $200,000 market
value of the public float and $1,000,000 in total capital and surplus. In
addition, continued inclusion requires two market-makers and a minimum bid price
of $1.00 per share; provided, however, that if a company falls below such
minimum bid price, it will remain eligible for continued inclusion in Nasdaq if
the market value of the public float is at least $1,000,000 and the Company has
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$2,000,000 in capital and surplus. The Company's total capital and surplus was
$1,160,632 at December 31, 1996 and $350,265 at March 31, 1997. On June 5, 1997,
the Company caused the early conversion of $800,000 of the 7.5% Convertible
Debentures due February 28, 1999 (the "Debentures") to Common Stock to
demonstrate current compliance with the Nasdaq continued inclusion requirements
and submitted to Nasdaq on June 4, 1997, its plan to sustain compliance with the
Nasdaq continued inclusion requirements with Nasdaq requirements. By letter
dated July 16, 1997, Nasdaq advised the Company of its acceptance of the
Company's plan to sustain compliance upon certain conditions. To date, the
Company has performed in accordance with such conditions. If the Company is
removed from the Nasdaq system, trading, if any, in the Common Stock would
thereafter be conducted in the over-the-counter market on an electronic bulletin
board established for securities that do not meet the Nasdaq inclusion
requirements or in what are commonly referred to as the "pink sheets". As a
result, an investor would find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities. In addition,
if the Company's securities were removed from the Nasdaq system, they would be
subject to so-called "penny stock" rules that impose additional sales practice
requirements on broker-dealers who sell such securities. Consequently, removal
from the Nasdaq system, if it were to occur, could affect the ability or
willingness of broker-dealers to sell the Company's securities and the ability
of purchasers of the Company's securities to sell their securities in the
secondary market. There is no assurance that the Company will continue to remain
eligible for continued inclusion of the Common Stock on Nasdaq.
18. No Dividends. To date, the Company has not paid any dividends on its
Common Stock and does not expect to declare or pay any dividends in the
foreseeable future.
19. Significant Outstanding Options and Warrants. As of July 30, 1997,
there were outstanding (i) stock options to purchase an aggregate of 1,568,999
shares of Common Stock at exercise prices ranging from $0.43 to $5.50 per share;
(ii) warrants to purchase 1,380,000 shares of Common Stock which were issued in
the Company's initial public offering, are exercisable at $3.00 per share, and
expire December 31, 1997 unless extended by the Company; and (iii) warrants to
purchase 533,104 shares which are exercisable at prices ranging from $1.00 to
$4.00 per share.
To the extent that outstanding options or warrants are exercised, dilution
to the Company's shareholders will occur. Moreover, the terms upon which the
Company will be able to obtain additional equity capital may be adversely
affected since the holders of outstanding options and warrants can be expected
to exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms more favorable to the Company than the
exercise terms provided by such outstanding securities.
20. Litigation. The Company is currently involved in litigation brought by
Luc Hardy against the Company and former officer and directors, Ronald Lealos
and Eugene Seymour, and Richard Kalin. This matter involves allegations against
the Company and the individual defendants arising from Mr. Hardy's termination
by the Company in 1994. A jury verdict for the plaintiff, which is not a final
judgment, was rendered on July 25, 1997 in the approximate amount of $740,000.
The Company plans to file with the court motions to set aside the jury verdict
10
<PAGE>
and to move for a new trial. There can be no assurance such motions will be
granted or that the final judgment in this case will not have a material adverse
effect on the Company.
THE COMPANY
The Company is primarily engaged in the development, manufacturing and
marketing of rapid in vitro assays for use in the detection of infectious
diseases and other conditions, proprietary specimen collection devices and other
diagnostic devices. The Company's principal executive offices are located at
11719 NE 95th Street, Vancouver, Washington, 98682 and its telephone number is
(360) 696-4800.
The Company develops rapid immunoassays utilizing immunochromatography for
the detection of antibodies to selected pathogens, such as the HIV, the virus
that causes AIDS, and Helicobacter pylori, a bacteria linked to peptic ulcers
and gastric cancer. The Company's immunoassays are designed to require only a
few simple steps and minutes to use. The tests produce visual results in under
20 minutes, and may be used without special equipment, storage or training. The
Company's data and independent evaluations demonstrate that its HemaoStrip HIV
and SerooStrip HIV tests are generally equivalent in performance to widely used
FDA-licensed tests for HIV.
To date, the Company has developed three rapid HIV tests: SerooStrip HIV,
HemaoStrip HIV and SalivaoStrip HIV, and a rapid H. pylori test: StatoSimple.
The Company has under development several rapid tests for hepatitis. The Company
has commenced production and marketing of three medical specimen collectors:
Omni-SAL(R), SalivaoSampler and Omni-Swab. In addition, the Company has
conducted preliminary research that indicates its rapid test format may be
expanded to detect other diseases, such as tuberculosis, measles, malaria,
rubella, tetanus, herpes, chlamydia, mumps, influenza, parvovirus, pertussis,
certain cancers, tumor markers and cardiac disease.
SELLING SHAREHOLDERS
The Selling Shareholders are (i) the Tail Wind Fund Limited ("Tail Wind")
and Joseph Kaufman, the purchasers of $1,100,000 and $400,000, respectively, in
principal amount of the Company's 7.5% Convertible Debentures due February 28,
1999 (the "Debentures"); and (ii) Grayson & Associates, Inc. ("Grayson"), the
owner of warrants to purchase 89,552 shares of Common Stock (the "Grayson
Warrants") acquired in connection with the private placement of the Debentures.
The foregoing entities and individual are collectively referred to as the
"Selling Shareholders."
11
<PAGE>
All of the shares of Common Stock that have been or may be acquired by the
Selling Shareholders upon conversion of the Debentures or exercise of the
Grayson Warrants are being registered pursuant to the Registration Statement of
which this Prospectus forms a part, and are being offered hereby.
The Company will not receive any proceeds from the sale of the Selling
Shareholders' Common Stock. Sales of any shares of Common Stock by the Selling
Shareholders, or even the existence of the right to acquire additional shares of
Common Stock by reason of the Debentures, or to acquire Common Stock upon the
exercise of the Grayson Warrants, may depress the price of the Common Stock.
On June 5, 1997, Tail Wind and Kaufman converted an aggregate $800,000 in
principal amount of Debentures for a total of 833,598 shares of Common Stock. On
June 30, 1997, Tail Wind and Kaufman converted an aggregate $700,000 in
principal amount of Debentures for a total of 903,226 shares of Common Stock. As
of the date of this Prospectus, Tail Wind has converted $1,100,000 in principal
amount of the Debentures for a total of 1,276,739 shares of Common Stock and
Kaufman has converted $400,000 in principal amount of the Debentures for a total
of 460,085 shares of Common Stock. On July 14, 1997, the Company issued to each
of Tail Wind and Kaufman 20,242 and 7,362 shares of Common Stock, respectively,
in payment of interest on the Debentures. Each of Tail Wind and Kaufman may
receive additional shares of Common Stock pursuant to the terms of the
Debentures if, (i) in the case of the conversion on June 5, 1997, at any time
during the 120-day period (and only one time for each of Tail Wind and Kaufman)
following effectiveness of the registration statement covering such shares, the
Conversion Price at that time is less than the early Conversion Price; and (ii)
in the case of the conversion on June 30, 1997, during any monthly period prior
to January 1, 1998, the average daily bid price for each day during such period
is less than the early Conversion Price. The "Conversion Price" is the lesser of
(i) $1.9191, and (ii) 80% of the Current Market Price (as defined below) on the
applicable conversion date. The "Current Market Price" per share of Common Stock
on any date is the average of the closing bid prices of the Common Stock for the
five consecutive trading days ending on the trading day immediately prior to the
date in question, as reported by the Nasdaq Small Cap Market.
Each of Tail Wind and Grayson participated in a private placement by the
Company in June 1997, pursuant to which Tail Wind purchased 412,905 shares of
Common Stock for an aggregate purchase price of $300,000 and Grayson purchased
200,000 shares of Common Stock for an aggregate purchase price of $100,000. Each
of Tail Wind and Grayson will acquire certain warrants to purchase up to 100,000
and 226,632 shares of Common Stock, respectively, in connection with the June
1997 private placement. Kaufman owns no shares of Common Stock other than as set
forth above.
None of the Selling Shareholders nor any of their affiliates has held any
position or office within the Company or has had any other material relationship
with the Company, except that Grayson received a cash fee in the amount of
$120,000 and the Grayson Warrants as compensation for assisting the Company in
the $1,500,000 Debenture financing and a cash fee of $104,800 and warrants to
purchase up to 226,632 shares of Common Stock in connection with the June 1997
private placement. In addition, Grayson has been engaged by the Company to
provide certain capital raising services through September 1997.
12
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the shares in one or more transactions
(which may involve one or more block transactions) on the over-the-counter
markets on the Nasdaq and upon terms then prevailing or at prices related to the
then current market price, or in separately negotiated transactions or in a
combination of such transactions. The Common Stock offered hereby may be sold by
one or more of the following methods, without limitation: (a) a block trade in
which a broker or dealer 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) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face transactions between sellers and purchasers without a
broker-dealer. The Selling Shareholders may be deemed to be underwriters of the
shares offered hereby within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
In effecting sales, brokers or dealers engaged by the Selling Shareholders
may arrange for other brokers or dealers to participate. Such broker or dealers
may receive commissions or discounts from the Selling Shareholders in amounts to
be negotiated. All other expenses incurred in connection with this offering will
be borne by the Company other than the Selling Shareholders' legal fees, except
that the Company has agreed to pay the first $10,000 of Tail Wind's legal fees.
Such brokers and dealers and any other participating brokers or dealers may, in
connection with such sales, be deemed to be underwriters within the meaning of
the Securities Act. Any discounts or commissions received by any such brokers or
dealers may be deemed to be underwriting discounts and commissions under the
Securities Act.
The Company has agreed to indemnify Tail Wind, Kaufman and Grayson, and
Tail Wind, Kaufman and Grayson have agreed to indemnify the Company against
certain civil liabilities, including certain liabilities under the Securities
Act.
LEGAL MATTERS
The validity of the securities being offered will be passed upon for the
Company by Bryan Cave LLP, 700 Thirteenth Street, Washington, D.C. 20005.
EXPERTS
The financial statements of the Company for the fiscal years ended December
31, 1996 and 1995 have been audited by Hollander, Gilbert & Co., independent
certified public accountants, to the extent and for the periods set forth in
their report with respect thereto, and are
13
<PAGE>
included the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, and are incorporated herein by reference, in reliance upon
such report given upon the authority of said firm as experts in auditing and
accounting.
14
<PAGE>
No dealer, sales representative or other individual has been authorized to
give any information or make any representation not contained in this Prospectus
in connection with this offering other than those contained in this Prospectus
and if given or made, such information or representation must not be relied upon
as having been authorized by the Company. This Prospectus does not constitute an
offer to sell or solicitation of an offer to buy the Common Stock by anyone in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that the information contained herein is
correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
Available Information..........................................................2
Information Incorporated By Reference..........................................3
Cautionary Statement...........................................................4
Risk Factors...................................................................4
The Company...................................................................11
Selling Shareholders..........................................................11
Plan of Distribution..........................................................13
Legal Matters.................................................................13
Experts.......................................................................13
Until September __, 1997 (40 days after the date of the Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to deliver
a Prospectus when acting as Underwriter and with respect to their unsold
allotments or subscriptions.
SALIVA DIAGNOSTIC SYSTEMS, INC.
2,457,974 shares of Common Stock
Prospectus
August __, 1997
<PAGE>
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
securities being registered hereby will be borne by the Company and are
estimated to be as follows:
Registra............................................................$ 733.13
Legal Fees.......................................................... 30,000.00*
Accounting Fees..................................................... 5,000.00*
Miscellaneous....................................................... 5,000.00*
Total.......................................................... 40,733.13*
- ---------------------
* Estimated
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers
provided that this provision shall not eliminate or limit the liability of a
director (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) arising
under Section 174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Delaware Corporation Law provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's by-laws, any
agreement, vote of shareholders or otherwise.
Article Ten of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 145
of the Delaware Corporation Law.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he 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 his conduct was unlawful.
II-1
<PAGE>
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED 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.
Item 16. Exhibits.
Exhibit No. Description
- ----------- -----------
4.1 Specimen of Certificate epresenting Common Stock, incorporated
by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (Registration No. 33-46648).
4.2 7.5% Convertible Debenture due February 28, 1999, issued by the
Company to The Tail Wind Fund, Ltd. on March 11, 1997,
incorporated by reference to Exhibit 4 to the Company's
Quarterly Report on Form 10-QSB for its fiscal quarter ended
March 31, 1997.
4.3 Common Stock Purchase Warrant for 89,552 shares, issued by
the Company to Grayson & Associates on March 14, 1997.*
4.4 Convertible Securities Subscription Agreement, dated as of
March 11, 1997, between the Company and The Tail Wind Fund Ltd.*
4.5 Registration Rights Agreement, dated as of March 11, 1997,
between the Company and The Tail Wind Fund Ltd.*
4.6 Letter Agreement dated May 28, 1997 between the Company
and The Tail Wind Fund Ltd., incorporated by reference to
Exhibit 4.9 to the Company's Current Report on Form 8-K dated
June 5, 1997.
4.7 Letter Agreement dated June 27, 1997 between the Company
and The Tail Wind Fund Ltd., incorporated by reference to
Exhibit 4.10 to the Company's Current Report on Form 8-K dated
June 5, 1997.
5 Opinion of Bryan Cave LLP*
23.1 Consent of Hollander, Gilbert & Company.
23.2 Consent of Bryan Cave LLP (included in Exhibit 5).
- --------------------
* Previously filed
II-2
<PAGE>
Item 17. Undertakings
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions or otherwise, the Company 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 Company of expenses incurred or
paid by a director, officer or controlling person of the Company 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 Company 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 of 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.
(b) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10 (a)(3) of the Securities
Act;
(ii) reflect in the prospectus any facts or events arising after the
effective date of this 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 this Registration Statement;
(iii) include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, 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) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of a Registration
Statement in reliance upon Rule 430A and contained in the form of Prospectus
filed by Registrant pursuant to Rule 424 (b)(1) or (4) under the Securities Act
shall be deemed to be part of the Registration Statement as of the time it was
declared effective.
II-3
<PAGE>
(5) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment No. 3 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Vancouver,
State of Washington, on August 7, 1997.
SALIVA DIAGNOSTIC SYSTEMS, INC.
By: /s/ Kenneth J. McLachlan
-------------------------------------
Kenneth J. McLachlan
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 3 to Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Eric F. Stoer * Director, President, Chief Executive August 7, 1997
- ----------------------- Officer, Chief Financial Officer and
Kenneth J. McLachlan Chief Accounting Officer
/s/ Eric F. Stoer Director August 7, 1997
- -----------------------
Eric F. Stoer
/s/ Eric F. Stoer * Director August 7, 1997
- -----------------------
Hans R. Vauthier
/s/ Eric F. Stoer * Chief Operating Officer and August 7, 1997
- ----------------------- Vice President of Marketing
Paul D. Slowey
/s/ Eric F. Stoer * Vice President of Operations August 7, 1997
- -----------------------
Michael Grant
- -------------------
* Attorney-in-fact
<PAGE>
SALIVA DIAGNOSTIC SYSTEMS, INC.
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Specimen of Certificate Representing Common Stock, incorporated
by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (Registration No. 33-46648).
4.2 7.5% Convertible Debenture due February 28, 1999, issued by
the Company to The Tail Wind Fund, Ltd. on March 11, 1997,
incorporated by reference to Exhibit 4 to the Company's Quarterly
Report on Form 10-QSB for its fiscal quarter ended March 31,
1997.
4.3 Common Stock Purchase Warrant for 89,552 shares, issued
by the Company to Grayson & Associates on March 14, 1997.*
4.4 Convertible Securities Subscription Agreement, dated as of
March 11, 1997, between the Company and The Tail Wind Fund Ltd.*
4.5 Registration Rights Agreement, dated as of March 11, 1997,
between the Company and The Tail Wind Fund Ltd.*
4.6 Letter Agreement dated May 28, 1997 between the Company
and The Tail Wind Fund Ltd., incorporated by reference to
Exhibit 4.9 to the Company's Current Report on Form 8-K dated
June 5, 1997.
4.7 Letter Agreement dated June 27, 1997 between the Company
and The Tail Wind Fund Ltd., incorporated by reference to Exhibit
4.10 to the Company's Current Report on Form 8-K dated June 5,
1997.
5 Opinion of Bryan Cave LLP*
23.1 Consent of Hollander, Gilbert & Company.
23.2 Consent of Bryan Cave LLP (included in Exhibit 5).
- --------------------
* Previously filed.
Exhibit 23.1
Consent of Independent Accountants
To the Board of Directors
Saliva Diagnostic Systems, Inc.
We consent to the incorporation by reference in the Post-Effective
Amendment No. 3 to Registration Statement on Form SB-2 filed on Form S-3 of
Saliva Diagnostic Systems, Inc. (Registration No. 333-26795), of our report
dated March 21, 1997 relating to the consolidated financial statements of Saliva
Diagnostic Systems, Inc. and its subsidiaries, and to the reference to our Firm
under the caption "Experts" in the Prospectus.
/s/ Hollander, Gilbert & Co.
Hollander, Gilbert & Co.
Los Angeles, California
August 4, 1997
