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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1996
REGISTRATION NO. 333-07681
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ACCUMED INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 36-4054899
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(State of other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
</TABLE>
900 N. Franklin Street, Suite 401
Chicago, Illinois 60610
(312) 642-9200
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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PETER P. GOMBRICH
Chief Executive Officer
AccuMed International, Inc.
900 N. Franklin Street, Suite 401
Chicago, Illinois 60610
(312) 642-9200
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPY TO:
GILLES S. ATTIA, ESQ.
Graham & James LLP
400 Capitol Mall, Suite 2400
Sacramento, California 95814
(916) 558-6700
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If 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 on continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, Par Value $0.01..................... 255,000 shares $6.44 $1,641,563 $566
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933, as amended, based on $6.44 per share, the average of the high and low
sales prices reported for the Common Stock on July 1, 1996.
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 THE 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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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JULY , 1996
PROSPECTUS
255,000 SHARES
ACCUMED INTERNATIONAL, INC.
COMMON STOCK
This Prospectus relates to 255,000 (the "Shares") of Common Stock, par value
$0.01 per share (the "Common Stock"), of AccuMed International, Inc. (the
"Company" or "AccuMed"). The Company will not receive any of the proceeds from
any sales of the Shares. The Registration Statement of which this Prospectus
forms a part has been filed pursuant to contractual registration rights of the
Shares. (Holders Shares are referred to as the "Selling Stockholders.") See
"Selling Stockholders."
The Shares of Common Stock may be offered and sold from time to time by the
Selling Stockholders through ordinary brokerage transactions in the
over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of the sale or at negotiated prices (this
"Offering"). See "Risk Factors," "Selling Stockholders" and "Plan of
Distribution."
The closing price for the Common Stock on July 1, 1996, as reported on the
National Association of Securities Dealers Automated Quotation System
("Nasdaq"), was $6.75 per share.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS."
------------------------
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.
------------------------
No underwriting commissions or discounts will be paid by the Company in
connection with this Offering. Estimated expenses payable by the Company in
connection with this Offering are approximately $70,000.
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THIS DATE OF THIS PROSPECTUS IS JULY , 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
regional offices: New York Regional Office, 7 World Trade Center, Room 1400, New
York, New York 10048 and Chicago Regional Office, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Common Stock is quoted on the
Nasdaq SmallCap Market and reports and other information regarding the Company
may be inspected at the National Association of Securities Dealers, Inc. at 1735
K Street, N.W., Washington, D.C. 20006.
Additional information regarding the Company and the securities offered
hereby is contained in the Registration Statement on Form S-3 (Registration No.
333-07681) of which this Prospectus forms a part, and the exhibits thereto filed
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). For further information pertaining to the Company and the
securities offered hereby, reference is made to the Registration Statement and
the exhibits thereto, which may be inspected without charge at, and copies may
be obtained at prescribed fees from, the office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549.
The Company furnishes stockholders with annual reports containing audited
financial statements and other periodic reports as the Company may deem to be
appropriate or as required by law or the rules of the National Association of
Securities Dealers, Inc.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have heretofore been filed by the Company with
the Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are incorporated by reference herein and shall be deemed to be
a part hereof:
(1) The Company's Annual Report on Form 10-KSB for the year ended September
30, 1995.
(2) The Company's Current Report on Form 8-K filed with the Commission on
January 16, 1996.
(3) The Company's Current Report on Form 8-K filed with the Commission on
January 17, 1996.
(4) The Company's Current Report on Form 8-K filed with the Commission on
January 19, 1996.
(5) The Company's Amendment No. 1 to the Current Report on Form 8-K/A filed
with the Commission on January 24, 1996.
(6) The Company's Transition Report on Form 10-KSB for the transition period
ended December 31, 1995.
(7) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996.
(8) The description of Common Stock contained in the Company's Registration
Statement on Form 8-A filed with the Commission on September 18, 1992 by
which the Common Stock of the Company was registered under Section 12 of
the Exchange Act, and the description of the Common Stock incorporated
therein by reference to the Registration Statement on Form S-1 (Regis.
No. 33-48302) filed with the Commission on June 3, 1992 and amended on
June 25, 1992, July 23, 1992 and September 10, 1992, under the caption
"Description of Securities" therein.
(9) The description of the Common Stock contained in the Company's Amendment
No. 1 to Registration Statement on Form 8-A/A filed with the Commission
on January 2, 1996.
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All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this Offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement incorporated by reference herein 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 which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference in this Prospectus (not including
exhibits and other information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Requests for
such documents should be directed to AccuMed International, Inc., located at 900
N. Franklin Street, Suite 401, Chicago, Illinois 60610, Attn: Chief Financial
Officer, telephone (312) 642-9200.
The following are tradenames and trademarks of the Company: the "Alamar"
logo and name, READar-TM-, PIPETar-TM-, alamarBlue-TM-, AccuMed, Inc., AccuMed
International, Inc., the "AccuMed" logo and name, AcCell-TM-, TracCell-TM-,
Sensititre-Registered Trademark-, SensiTouch-Registered Trademark-,
SensiLink-TM-, Aris-TM-, JustOne-TM-, MicroBact-TM-, Sensi-Cal-TM-, Amco AEPA-
1-Registered Trademark- and Diascan-TM-.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE, INCLUDING INFORMATION UNDER
"RISK FACTORS," AND IN THE INFORMATION AND DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. THE STATEMENTS THAT ARE NOT HISTORICAL FACTS OR STATEMENTS OF CURRENT
STATUS CONTAINED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS (AS DEFINED
IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO, THE RISKS SET FORTH IN "RISK
FACTORS." ACTUAL RESULTS MAY DIFFER MATERIALLY.
THE COMPANY
AccuMed International, Inc. ("AccuMed" or the "Company") designs,
manufactures and markets diagnostic and screening products for the clinical
diagnostic laboratory, pharmaceutical and veterinary markets. The Company's
products use innovative proprietary technology designed to improve quality and
productivity and reduce costs in the cytopathology and microbiology laboratory.
The Company's cytopathology products provide automated support and enhancement
of the human screener in the analysis of cytopathology specimens. The Company's
initial products for the cytopathology laboratory market are the AcCell 2000 and
the AcCell 2001 automated slide handling and microscopy workstations for the
analysis of cervical Pap smears (collectively, the "AcCell 2000/2001"). The
Company is developing a set of related products, including the TracCell 2000
specimen mapping workstation, designed to work in concert with the AcCell
2000/2001 to offer the cytopathology laboratory a family of high performance
tools that provide comprehensive support during initial critical phases of the
Pap smear analysis process. The Company has recently granted exclusive
distribution rights in the Western Hemisphere for the AcCell 2000/2001 and the
TracCell 2000 to Olympus America Inc. ("Olympus"). Marketing of the TracCell
2000 is subject to additional testing and, for the U.S. market, FDA clearance
under a 510(k) Notification. The Company also offers the microbiology laboratory
a variety of FDA-cleared products for the identification and minimum inhibitory
concentration ("MIC/ID") testing of bacteria suspected of causing infections and
their susceptibility to antibiotics under the tradenames Sensititre and Alamar.
AccuMed is developing a low cost Kirby-Bauer reading instrument for the
microbiology market and is researching a potential new MIC/ID testing system
combining certain of the Company's proprietary technologies.
The Pap smear is currently the most widely-used screening test for the early
detection of cancer in the United States. It is estimated that laboratories in
the U.S. alone will process over 55 million Pap smears in 1996, with over 120
million processed worldwide. Although cervical cancer is one of the most common
cancers afflicting women throughout the world, survival rates can reach 90% if
detected early. Although the conventional manual Pap smear test is highly
effective, the test and process has limitations, including human
cytotechnologist error due to high volumes, habituation and fatigue, and
burdensome administrative requirements. False negative Pap smear diagnoses rates
range from between 5% to 30%, and both false negative and false positive
diagnoses lead to significant liability issues to the laboratory and possible
health issues to the patient, while at the same time adding significant cost to
the process. The AcCell system directly addresses these issues by eliminating a
large portion of the manual work ancillary to slide analysis, guaranteeing 100%
slide review and automatically recording and reporting what has been done on the
AcCell data management system.
The Company's cytopathology products are designed to improve the quality of
cell analysis, increase accuracy and productivity in the laboratory, and reduce
the time and costs associated with analysis, but without requiring significant
changes from standard laboratory practice. Rather than developing costly and
risky fully automated primary screening systems that eliminate the need for a
trained cytotechnologist, the Company is focused on providing a comprehensive
family of proprietary, technologically-advanced, application-driven products
offering seamless support of medical professionals in the analysis and diagnosis
of Pap smears and other cell samples. Initially applied to Pap test analysis,
the AcCell system is expected to have a broad range of cytopathology, pathology
and histology applications.
4
<PAGE>
The Company's microbiology division focuses on developing, manufacturing and
marketing in vitro diagnostic tests for the clinical laboratory, veterinary and
pharmaceutical markets. The Company markets, and is developing, a variety of
proprietary MIC/ID testing products, both manual and automated, focused on
testing for bacterial infections. AccuMed's microbiology product lines include a
series of disposable test kits and a wide range of automated instruments used to
identify infectious organisms, such as bacteria, and determine the
susceptibility of such organisms to antimicrobial agents, such as antibiotics.
The use of MIC/ID testing by hospitals and laboratories assists physicians and
other health care professionals in determining the most effective course of
treatment earlier and more efficiently, potentially shortening patient hospital
stays, resulting in more accurate diagnoses and reducing overall healthcare
costs. For the three months ended March 31, 1996 the Company generated revenues
of $1,179,000 from sales of microbiology products.
The Company and its predecessor companies have consistently pursued a
strategy of developing or acquiring early detection products that reduce, or
potentially reduce, overall healthcare costs while enhancing or maintaining
current levels of effectiveness. The Company believes that the current pressures
in the healthcare industry for reduced costs and increased efficiencies are
better addressed by products that work within and enhance established practices.
Products that seek to revolutionize established practices often face regulatory
and market acceptance hurdles that are difficult if not impossible to overcome.
The Company is also focused on integrated product designs that the Company
believes are demanded by a market that seeks individualized products and the
ability to expand product capability as the customer's business changes.
AccuMed's objective is to establish the AcCell system as the premier microscopy
workstation for the primary screening of Pap smears, exploit other applications
for the AcCell technology such as histology and pathology laboratory work and
enhance its position in the MIC/ID testing market through development of new
products based on proprietary technology. The key elements of the Company's
strategy include (i) continuing to establish the AcCell system through OEM
agreements with major microscope manufacturers, such as the agreement with
Olympus already in place, (ii) focusing on international market opportunities,
(iii) enhancing the Accell system through research and development of new
products, (iv) establishing a recurring revenue base by charging TracCell 2000
users "by the test", (v) integrating the Company's proprietary microbiology
technologies into new MIC/ID products, (vi) continuing to seek out acquisition
candidates with compatible technologies and (vii) setting up new channels of
sales and distribution.
AccuMed is headquartered at 900 N. Franklin Street, Suite 401, Chicago,
Illinois 60610, with additional facilities in Westlake, Ohio and East Grinstead,
Sussex, England. Previously, the Company was incorporated under the laws of the
State of California as "Alamar Biosciences, Inc." On December 29, 1995, AccuMed,
Inc., an Illinois corporation, merged (the "Merger") with and into Alamar
Biosciences, Inc. and the surviving entity was renamed AccuMed International,
Inc. and reincorporated under Delaware law. The Company has one wholly-owned
subsidiary, AccuMed International, Ltd. ("AccuMed U.K." or "Sensititre")
5
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THE OFFERING
<TABLE>
<S> <C>
Common Stock offered............... 255,000 shares offered by the Selling Stockholders.
The Company will not receive any proceeds from the
sales of Shares by the Selling Stockholders.
Common Stock to be outstanding
after this offering............... 18,631,453 shares(1).
Nasdaq Common Stock symbol......... "ACMI"
</TABLE>
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(1) Represents shares outstanding at July 1, 1996 plus shares to be sold by the
Company in this Offering. Excludes: (i) an aggregate of 5,969,333 shares
reserved for issuance upon exercise of outstanding warrants at exercise
prices ranging from $0.25 to $5.00 per share, with a weighted average
exercise price of $3.21 per share; (ii) an aggregate of 1,657,982 shares
reserved for issuance upon the exercise of stock options outstanding at July
1, 1996 at exercise prices between $0.63 and $8.38 per share, with a
weighted average exercise price of $2.13 per share; and (iii) an aggregate
of 196,631 shares reserved for issuance upon exercise of options available
for future grant under the Company's Amended and Restated 1990 Stock Option
Plan, Amended and Restated 1992 Stock Option Plan and 1995 Stock Option
Plan.
RISK FACTORS
The statements that are not historical facts or statements of current status
contained in this Prospectus are forward-looking statements (as defined in the
Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties, including, but not limited to, the risks set forth in "Risk
Factors." Actual results may differ materially. The decision of whether to make
an investment in the Common Stock involves an analysis of certain risks,
including but not limited to, the risk factors set forth in this Prospectus.
Each potential investor is urged to carefully consider the risks inherent in the
Company's significant and continuing operating losses, the regulatory
environment in which the Company operates, and the volatility of the Company's
stock price. See "Risk Factors."
6
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RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING, BUT
NOT NECESSARILY 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. THE STATEMENTS THAT ARE NOT HISTORICAL FACTS OR STATEMENTS
OF CURRENT STATUS CONTAINED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, THE FACTORS
SET FORTH BELOW. ACTUAL RESULTS MAY DIFFER MATERIALLY.
LIMITED RELEVANT OPERATING HISTORY; SIGNIFICANT OPERATING LOSSES;
ACCUMULATED DEFICIT; SUBSTANTIAL COSTS OF INTEGRATION AND CONSOLIDATION. The
Company's predecessor was formed in 1988 and was engaged primarily in research
and development of microbiology products until early 1994. The Company's
predecessor never realized any significant revenues from product sales. AccuMed,
Inc., which was merged into the Company in December 1995, was incorporated in
February 1994 and in February 1995 acquired the Sensititre microbiology
business. Until such acquisition, AccuMed, Inc. had no revenues and operations
consisted of a limited amount of research and development. Accordingly, although
the Sensititre business had a significant operating history and revenues from
sales, AccuMed, Inc., as a separate entity, had very limited operating history
prior to the Merger. Upon consummation of the Merger on December 29, 1995, the
operations of the Company and AccuMed, Inc. were combined and the resulting
company began to develop, manufacture and sell the Alamar and the Sensititre
microbiology products and the AccuMed cytopathology products. Thus, the combined
Company has a limited relevant operating history upon which an evaluation of
it's prospects can be made. Such prospects must be considered in light of the
risks, expenses and difficulties frequently encountered in establishing a new
business in a continually evolving industry with an increasing number of market
entrants and intense competition and the risks, expenses and difficulties
encountered in the shift from development to commercialization of new products
based on innovative technology.
The Company has incurred significant operating losses in each fiscal quarter
since its inception. For the years ended September 30, 1994 and 1995, and the
three months ended December 31, 1995 and March 31, 1996, the Company's operating
losses were approximately $3,146,000, $3,707,000, $5,662,000 and $2,649,000,
respectively. The costs of integrating and consolidating the recently merged
companies as a single enterprise have been substantial and account for
approximately $4,000,000 and $3,500,000 of the losses for the three months ended
December 31, 1995 and March 31, 1996, respectively. As of March 31, 1996, the
Company had an accumulated deficit of approximately $25,410,000. Such losses are
expected to continue for the foreseeable future until such time, if any, as the
Company is able to attain sales levels sufficient to support its operations.
There can be no assurances that the Company will be able to implement
successfully its operating strategy, generate increased revenues or ever achieve
profitable operations.
SIGNIFICANT CAPITAL REQUIREMENTS; POSSIBLE NEED FOR ADDITIONAL CAPITAL;
SUBSTANTIAL ACCOUNTS PAYABLE. The Company intends to expend substantial funds
for research and product development, expansion of sales and marketing
activities, expansion of manufacturing capacity and other working capital and
general corporate purposes. Although the Company believes that internally
current resources and generated funds will be sufficient to fund the Company's
projected operations through the next 12 months, no assurances to that effect
can be given. The Company's future liquidity and capital requirements will
depend upon numerous factors, including the costs and timing of expansion of
manufacturing capacity, the costs, timing and success of the Company's product
development efforts, the costs and timing of expansion of sales and marketing
activities, the extent to which the Company's existing and new products gain
market acceptance, competing technological and market developments, the progress
of commercialization efforts of the Company's distributors, the costs involved
in preparing, filing, prosecuting, maintaining, enforcing and defending patent
claims and other intellectual property rights, developments related to
regulatory and third party reimbursement matters and CLIA, and other factors. In
the event that additional financing is needed, the Company may seek to
7
<PAGE>
raise additional funds through public or private financing, collaborative
relationships or other arrangements. The Company currently has no commitments
with respect to sources of additional financing, and there can be no assurances
that any such financing sources, if needed, would be available to the Company or
that adequate funds for the Company's operations, whether from the Company's
revenues, financial markets, collaborative or other arrangements with corporate
partners or from other sources, will be available when needed or on terms
attractive to the Company. The failure of the Company to obtain adequate
additional financing may require the Company to delay, curtail or scale back
some or all of its research and development programs, sales and marketing
efforts, manufacturing operations, clinical studies and regulatory activities
and, potentially, to cease its operations. Moreover, the inability of the
Company to grant licenses to third parties to commercialize products or
technologies that the Company would otherwise develop itself, and the terms of
such licenses may be less favorable than if the Company were negotiating from a
stronger position. Any additional equity financing may involve substantial
dilution to the Company's then-existing stockholders.
Of the approximately $2,146,000 of accounts payable as of May 31, 1996,
approximately $1,690,000 represent amounts payable for over 30 days. Amounts
owed to various vendors and suppliers may be subject to late charges of up to
approximately 1.5% per month. If the Company is unable to increase cash
resources, significant demand for payment of payables in excess of cash
resources could cause the Company to liquidate assets, issue additional equity
securities, curtail existing programs or make other arrangements that could have
a material adverse effect on the business, financial condition and results of
operations of the Company.
PROTECTION OF INTELLECTUAL PROPERTY. The Company holds a United States
patent, and has received a notice of intent to grant a related European patent,
with respect to a portion of the Alamar microbiology technology. The Company has
obtained licenses on several United States and foreign patents and other
intellectual property rights regarding aspects of the technology embodied in the
Sensititre product line and in March 1996 entered into a letter of intent to
acquire certain image analysis patents from Accuron Corporation. The Company
owns, or has been assigned, six United States patent applications covering blood
cultures, and certain technologies embodied in the AcCell and TracCell systems.
During 1996, the Company has applied for eight additional United States patents
relating to the optical imaging technology. None of such applications have been
granted as of the date of this Prospectus and there can be no assurances that
any such patent applications will result in issued patents. The Company may, in
the future, file additional patent applications; however, there can be no
assurances that the Company will be successful in obtaining approval of any
future patent applications it files with respect to its technologies.
There can be no assurances that the aforementioned patents, patent
applications and licenses will adequately protect the Company from potential
infringers. Such patents, patent applications and licenses may cover only
portions of the Company's technologies. Other portions may be in the public
domain or protectable only under trade secret laws. In addition, since patent
applications in the United States are maintained in secrecy until patents issue,
and since publications of discoveries in the scientific or patent literature
tend to lag behind actual discoveries by several months, the Company cannot be
certain that the Company or the original patent application filer, was the first
creator of inventions covered by pending patent applications or that such
companies were the first to file patent applications for such inventions.
From late 1994 until early 1996, the Company was party to patent and trade
secret litigation both asserting and defending its rights relating to part of
the Alamar microbiology technology covered in its existing United States patent.
Despite the successful resolution of such litigation, there can be no assurances
that the Company will not become a party to future litigation involving other
parties in connection with its intellectual property rights.
8
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The Company also relies for protection of its intellectual property on trade
secret law and nondisclosure and confidentiality agreements with its employees,
consultants, distributors, researchers and advisors. There can be no assurances
that such agreements will provide meaningful protection for the Company's trade
secrets or proprietary know-how in the event of any unauthorized use or
disclosure of such trade secrets or know-how. In addition, others may obtain
access to, or independently develop, technologies or know-how similar to that of
the Company.
The Company's success will also depend on its ability to avoid infringement
of patent or other proprietary rights of others. The Company is not aware that
it is infringing any such rights of a third-party, nor is it aware of
proprietary rights of others for which it will be required to obtain a license
in order to develop its products. However, there can be no assurances that the
Company is not infringing proprietary rights of others, or that the Company will
be able to obtain any technology licenses it may require in the future.
DELAYED OR UNSUCCESSFUL PRODUCT DEVELOPMENT. The Company will be required
to undertake time-consuming and costly development activities and seek
regulatory approval for these new products. There can be no assurances that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these new products, that
regulatory clearance or approval of these or any new products will be granted by
the FDA on a timely basis, if at all, or that the new products will adequately
meet the requirements of the applicable market or achieve market acceptance.
Although the Company believes that the TracCell 2000 will require a pre-market
clearance under Section 510(k) ("510(k)") of the Federal Food, Drug and Cosmetic
Act of 1938, as amended, for marketing in the United States, a requirement that
the Company file a pre-market approval ("PMA") application for the product would
significantly delay the Company's ability to market such test and significantly
increase the costs of development. The Company believes that the TracCell 3000
may require a PMA. The Company's growth and profitability will depend, in part,
upon its ability to complete development of and successfully introduce new
products including the TracCell 2000 and the TracCell 3000. The Company's
proposed TracCell 3000 mapping system is in an early stage of development and
there can be no assurances that it will be successfully developed. The
completion of the development of the Company's cytopathology products remain
subject to all the risks associated with the commercialization of new products
based on innovative technologies, including unanticipated technical or other
problems and the possible insufficiency of the funds allocated for the
completion of such development, which could result in a change in the design,
delay in the development, or abandonment of such applications and products.
Consequently, there can be no assurances that the Company's proposed
cytopathology products will be successfully developed or manufactured, or that
if developed and manufactured, that such products will meet price or performance
objectives, be developed on a timely basis or prove to be as effective as
competing products. The inability to successfully complete development of a
product or application or a determination by the Company, for financial,
technical or other reasons, not to complete development of any product or
application, particularly in instances in which the Company has made significant
capital expenditures, could have a material adverse affect on the Company.
Pursuant to a Research and Development Agreement between the Company and
RADCO Ventures, Inc., the Company and RADCO are attempting to develop a new
automated microbiology product line combining Sensititre and Alamar
technologies. The Company is also developing a new microbiology system for the
susceptibility market segment to automatically analyze the zone size using the
disk diffusion ("Kirby Bauer") method. If such development projects do not
result in one or more commercially viable products obtaining FDA pre-market
approval, the Company may reassess its business strategy with respect to the
Microbiology Division. Such reassessment could lead to changes in the Company's
overall business plan, including the relative allocation of resources between
the Microbiology Division and Cytopathology Division and the relative emphasis
on current, as well as future, products in each division.
LIMITED SALES, MARKETING AND DISTRIBUTION EXPERIENCE; DEPENDENCE ON THIRD
PARTY DISTRIBUTORS. In order for the Company to increase revenues and achieve
profitability, the Company's products, particularly
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its cytopathology products, must achieve a significant degree of market
acceptance. The Company has only limited experience marketing and selling its
cytopathology products. The Company intends to distribute these products
primarily through a limited number of distributors. [The Company has only
recently entered into an OEM distribution arrangement with a national
distributor, Olympus. The Company may be required to enter into additional
distribution arrangements in order to achieve broad distribution of its
products. There can be no assurance that the Company will be able to maintain
the recently established distribution relationship with Olympus or that the
Company will be able to enter into and maintain arrangements with additional
distributors on a timely basis, if at all. The Company will be dependent upon
these distributors to assist it in promoting market acceptance of its products
and creating demand for the Company's products. The risks associated with
dependence upon distributors will be exacerbated by the Company's intention to
rely on a limited number of distributors, with the result that sales to these
distributors will account for a significant portion of the Company's revenues.
There can be assurance that these distributors will devote the resources
necessary to provide effective sales and marketing support to the Company. In
addition, the Company's distributors may give higher priority to the products of
other medical suppliers, thus reducing their efforts to sell the Company's
products. If the Company is unable to establish appropriate arrangements with
distributors or if the Company's distributors become unwilling or unable to
promote, market and sell its products, the Company's business, financial
condition and results of operations would be materially adversely affected.
GOVERNMENT REGULATION. The Company's products and manufacturing processes
are subject to extensive regulation by state and federal agencies, including the
United States Food and Drug Administration (the "FDA") and comparable agencies
in certain states and other countries. United States regulatory requirements
promulgated under the Federal Food, Drug, and Cosmetic Act (the "FD&C Act")
provide that many of the Company's products may not be shipped in interstate
commerce without prior authorization from the FDA. Such authorization is based
on a review of the products' safety and effectiveness for their intended uses.
The Company's products which require FDA authorization prior to marketing may be
authorized by the FDA for marketing either pursuant to a premarket notification
under Section 510(k) of the FD&C Act (a "510(k) Notification") or a premarket
approval ("PMA"). The process of obtaining FDA and other required regulatory
clearances or approvals can be time-consuming, expensive and uncertain,
frequently requiring several years from the commencement of clinical trials to
the receipt of regulatory approval.
A 510(k) Notification, among other things, requires an applicant to show
that its products are "substantially equivalent" in terms of safety and
effectiveness to existing products which are currently permitted to be marketed.
An applicant is permitted to begin marketing a product as to which it has
submitted a 510(k) Notification at such time as the FDA issues a written finding
of "substantial equivalence." Requests for additional information may delay the
market introduction of certain of an applicant's products and, in practice,
initial approval of products can take substantially longer than the statutorily
prescribed period of 90 days.
A PMA consists of information sufficient to establish independently that a
device is safe and effective for its intended use. A PMA application must be
supported by extensive data, including preclinical and clinical trial data, to
demonstrate the safety and efficacy of the device for the intended uses
specified in the PMA application. By statute, the FDA is required to respond to
a PMA within 180 days from the date of its submission, however, the approval
process usually takes substantially longer. Commercial distribution in foreign
countries is also subject to regulatory requirements and no assurances can be
given that the Company can obtain the required regulatory approvals on a timely
basis, or at all.
Regulatory approvals, if granted, may include significant limitations on the
intended uses for which a product may be marketed. FDA enforcement policy
strictly prohibits the promotion by the Company, and any of its distributors, of
approved medical devices for off-label uses. In addition, product approvals may
be withdrawn for failure to comply with regulatory standards or the occurrence
of unforeseen problems following initial marketing.
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The TracCell 2000 mapping system, currently under development and not yet
marketed, will require FDA approval prior to marketing in the United States At
the present time, it is the opinion of management that a full PMA will not be
required for this mapping device and that the 510(k) Notification process will
be applicable. There can be no assurances that the Company will be able to
utilize a 510(k) Notification rather than a full PMA process or that the Company
will receive FDA marketing approval for such product or, if received, that such
approval will not be withdrawn. Marketing of the TracCell 2000 mapping system,
if developed, outside of the United States will not require FDA clearance or
approval, but other regulatory bodies may submit the technology to additional
testing.
The AcCell 3000, currently in the initial stages of development, may not be
sold in the United States unless, and until, the Company has obtained FDA
approval of a PMA submission. Management estimates that the entire process of
receiving pre-market approval of the complete system could take more than two
years after submission of initial clinical data. There can be no assurances that
the Company will receive FDA marketing approval for such product or, if
received, that such approval will not be withdrawn. Marketing of the AcCell 3000
outside of the United States will not require FDA clearance or approval, but
other regulatory bodies may submit the technology to additional testing.
The Company has secured the services of an independent devices and
diagnostics consulting company to guide the process of design, implementation
and monitoring of field trials and submission of documentation for these
cytopathology products to the FDA.
Marketing of the Company's minimum inhibitory concentration/identification
("MIC/ID") microbiology products in the United States requires the submission to
the FDA of a 510(k) Notification. With respect to the Company's Alamar product
line, 510(k) Notifications must be filed and cleared with respect to each
antibiotic used. To date, the Company has submitted 510(k) Notifications, and
obtained findings of "substantial equivalence," for 32 antibiotics commonly used
to fight "gram negative" bacteria and 21 antibiotics commonly used to fight
"gram positive" bacteria. The Company has also received marketing clearance for
four separate 510(k) Notifications with respect to the READar system. The
Company may submit applications to add individual antibiotics to those
previously cleared, as the market warrants. However, there can be no assurances
that clearances will continue to be obtained.
The Company is developing a new microbiology system for the susceptibility
market segment to automatically analyze the zone size using the Kirby Bauer
method. The Company licensed the software algorithm technology from a Spanish
firm and will integrate the software into the hardware developed by the Company.
The complete system will require submission of a 510(k) Notification. There can
be no assurances that the Company can develop the hardware nor that the licensed
software is adequate to submit a 510(k) Notification or that the Company will
receive the FDA marketing clearance. Marketing of the new disk diffusion
product, if developed, outside the United States will not require any FDA
submissions, clearances or approvals, but other regulatory bodies may submit the
technology to additional testing.
Pursuant to a Research and Development Agreement with RADCO Ventures, Inc.,
a research and development company ("RADCO"), RADCO and the Company are
attempting to develop a new automated microbiology product line using Sensititre
and Alamar technologies. Such a product will require the submission of a 510(k)
Notification. Management estimates that the entire process of receiving approval
of the complete system could take up to 12 months after the submission of
initial clinical data. There can be no assurances that the Company will receive
FDA marketing approval for such a product or, if received, that such approval
will not be withdrawn. Marketing of the new automated microbiology product line
outside the United States will not require any FDA submissions, clearances or
approvals, but other regulatory bodies may submit the technology to additional
testing.
The Company also intends to seek ISO 9001 registration, an international
manufacturing quality standard, and to seek the "CE" mark for its AcCell and
TracCell products. The CE mark is recognized by countries that are members of
the European Union and the European Free Trade Association and,
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effective in 1998, will be required to be affixed to all medical devices sold in
the European Union. The AcCell 2000/2001 successfully completed all safety
evaluations required to obtain UL, CSA and international certifications on June
18, 1996. Compliance testing against FCC emissions standards and the EMC
Directive was initiated on June 19, 1996 and is expected to be completed before
August 1, 1996. The AcCell 2000/2001 is expected to be certified as complying
with CE Mark requirements upon completion of this process. No assurances can be
given that the Company will obtain the CE mark its AcCell or TracCell products
or satisfy ISO 9001 standards, or that any product which the Company may develop
or commercialize will obtain the CE mark, or will be able to obtain any other
required regulatory clearance or approval on a timely basis, or at all.
There can be no assurances that the Company will be able to obtain necessary
regulatory approvals or clearances in the United States, or internationally, on
a timely basis, or at all. Delays in receipt of, or failure to receive, such
approvals or clearances, the loss of previously received approvals or
clearances, or failure to comply with existing or future regulatory requirements
would have a material adverse effect on the Company's business, financial
condition and results of operations.
In addition, the Company is subject to certain FDA registration,
record-keeping and reporting requirements, is obligated to follow FDA "Good
Manufacturing Practices" ("GMP") regulations and is subject to periodic FDA
inspection. The manufacturing facility used to manufacture the Company's
microbiology kits currently meets applicable GMP guidelines and FDA regulations.
The Company's cytopathology manufacturing facility has been designed to meet GMP
standards, although such compliance is not required and the facility has not
been audited for compliance. There can be no assurances, however, that the
facilities used to manufacture the Company's products will continue to meet GMP
guidelines. Future changes in regulations or enforcement policies could impose
more stringent requirements on the Company, compliance with which could
adversely affect the Company's business.
UNCERTAINTY OF MARKET ACCEPTANCE AND INITIAL HIGHER COST OF CYTOPATHOLOGY
PRODUCTS. The Company has generated limited revenues from the sale of its
cytopathology products to date. The Company's success, growth and profitability
will depend on market acceptance of the AcCell 2000/2001 and the TracCell 2000,
if approved for marketing by the FDA, for use in connection with cervical cancer
screening by clinical laboratories and health care providers. Market acceptance
will depend on the Company's ability to demonstrate to these parties that there
are limitations associated with conventional patient data management of Pap
smear samples, slide handling and mapping, and documentation of slide review and
that the Company's products can substantially mitigate these shortcomings by
increasing efficiency, diagnostic accuracy and documenting the scope of sample
review. The initial cost of equipping a clinical laboratory with the Company's
products for use in connection with cervical cancer screening will increase a
laboratory's equipment expenditures. There can be no assurances that the Company
can demonstrate to such parties that the higher cost of equipping existing
laboratories with the AcCell 2000/2001 and TracCell 2000, if approved for
marketing by the FDA, will be offset by a reduction in costs associated with
increased efficiency and decreased malpractice liability risks resulting from
more accurate diagnostics and better document slide review procedures. The
Company believes that many clinical laboratories offer Pap tests at lower gross
margins than other tests in order to receive orders for other, higher margin,
laboratory tests. As a result, clinical laboratories may be reluctant or
unwilling to accept the additional costs related to installing and utilizing the
AcCell 2000/2001 and the TracCell 2000.
LIMITED NUMBER OF CUSTOMERS. Due in part to a recent trend toward
consolidation of clinical laboratories, the Company expects that the number of
potential domestic customers for its cytopathology products will decrease. Due
to the relative size of the largest United States laboratories, it is likely
that a significant portion of the sales of AcCell 2000/2001 and TracCell 2000,
if approved for marketing by the FDA, sales will be concentrated among a
relatively small number of customers. The Company will need to foster an
awareness of and acceptance by these potential customers of the AcCell 2000/2001
and the TracCell 2000, for patient data management, slide handling, mapping and
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slide review documentation and the benefits of such systems over conventional
methods. The Company's dependence on sales to large laboratories may strengthen
the purchasing leverage of these potential customers. There can be no assurances
that the Company will be successful in selling its products, or that any such
sales will result in sufficient revenue to allow the Company to become
profitable.
TECHNOLOGICAL CHANGE AND COMPETITION. The Company's AcCell 2000/2001
currently faces, and the TracCell 2000 mapping system, if successfully developed
and approved by the FDA, will face competition from companies that may be
developing competing systems. The Company believes that many of the Company's
existing and potential competitor companies possess substantially greater
financial, marketing, sales, distribution and technical resources than the
Company, and more experience in research and development, clinical trials,
regulatory matters, manufacturing and marketing. The Company is aware of two
companies which currently market imaging systems to re-examine or rescreen
conventional Pap smears previously diagnosed as negative as was another company
that is developing devices for the production and analysis of Pap smear slides.
If either company marketing rescreening products receives FDA approval for one
as a primary screening system to replace conventional Pap smears or if automated
analysis systems are developed and receive FDA approval, the Company's business
financial condition and results of operations could be materially and adversely
affected.
The market for the Company's microbiology products is highly competitive,
and the Company competes with numerous well-established foreign and domestic
companies, most of which possess substantially greater financial, technical,
marketing, personnel and other resources than the Company and have established
reputations for success in the development, sale and service of manual and/ or
automated in vitro diagnostic testing products. A significant portion of the
MIC/ID testing market in the United States is controlled by two companies,
Microscan and bioMerieux Vitek. These companies market a broad range of
medically related products and have resources far greater than those of the
Company. Difco Laboratories, Inc. ("Difco") has been issued a United States
patent covering technology similar to the Alamar technology covered in one of
the Company's patents. The Company's patent is intended to provide protection
for the relevant Alamar technology when used in conjunction with a "poising"
agent used to stabilize the bacterial susceptibility process. The Company is not
aware of Difco's plans, if any, to exploit the patent. There can be no
assurances that Difco, which has substantially greater resources and experience
in research, development, manufacturing and marketing than the Company, will not
use its patented technology to develop products that will compete directly with
the Alamar microbiology products. In addition, the Company is aware of several
potential competitors with similar competitive advantages in markets that the
Company intends to enter in the future. There can be no assurances that other
technologies or products, which are functionally similar to those of the
Company, are not currently available or under development, or that other
companies with expertise and resources that would encourage them to attempt to
develop and market competitive products will not develop new products directly
competitive with the Company's products.
The cytopathology and medical diagnostic industries are characterized by
rapid product development and technological advances. The Company's products
could be rendered obsolete or uneconomical by the introduction and market
acceptance of competing products, technological advances of the Company's
current or potential competitors, or by other approaches. There can be no
assurances that the Company will be able to compete successfully against current
or future competitors or that competition, including the development and
commercialization of new products and technology, will not have a material
adverse effect on the Company's business, financial condition or results or
operations.
RISK OF LITIGATION; PRODUCT LIABILITY INSURANCE; POTENTIAL UNAVAILABILITY OF
INSURANCE. The commercial screening of Pap smears has been characterized by
significant malpractice litigation. The Company faces a risk of exposure to
product liability, errors and omissions or other claims in the event that the
use of its AcCell 2000/2001 or other future potential products including the
TracCell 2000, if approved
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for marketing by the FDA, is alleged to have resulted in a false negative
diagnosis. While the AcCell 2000/2001 is a slide handling and patient data
management instrument and the TracCell 2000 is being designed to facilitate
slide mapping and human review that do not purport to diagnose any slide, there
can be no assurances that the Company will avoid significant liability. The
Company currently maintains a product liability insurance policy providing
maximum coverage of $10,000,000 and per occurrence coverage of $10,000,000. The
medical device industry in general has experienced increasing difficulty in
obtaining and maintaining reasonable product liability coverage, and substantial
increases in insurance premium costs in many cases have rendered coverage
economically impractical. There can be no assurances that the Company's existing
product liability insurance will be adequate or continue to be available, or
that additional product liability insurance will be available to the Company
when needed or at a reasonable cost. An inability to maintain insurance at
acceptable costs or otherwise protect against potential product liability could
prevent or inhibit the continued commercialization of the Company's products. In
addition, a product liability claim in excess of relevant insurance coverage or
product recall could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company also faces the
possibility that defects in designs or manufacture of its products could result
in product recall.
POTENTIAL FLUCTUATIONS IN FUTURE QUARTERLY RESULTS. The Company expects
that its operating results will fluctuate significantly from quarter to quarter
in the future and will depend on the timing and level of market acceptance of
the Company's products, the level of expenditures associated with product
development activities, the results of factors, many of which are outside the
Company's control. These factors include the timing of these activities,
including the TracCell 2000 and TracCell 3000, the effectiveness of the OEM
distributor in the sale of the AcCell 2000/2001 and, possibly, future
cytopathology products, the likelihood and timing and costs in obtaining
necessary regulatory approval of the timing and level of expenditures associated
with expansion of sales and marketing activities and overall operations, the
Company's ability to cost effectively expand manufacturing capacity and maintain
consistently acceptable yields, the timing of establishment of strategic
distribution arrangements and the success of the activities conducted under such
arrangements, changes in demand for its products, order cancellations,
competition, changes in government regulation and other factors, the timing of
significant orders from and shipments to customers, and general economic
conditions. These factors are difficult to forecast, and these and or other
factors could have a material adverse effect on the Company's business,
financial condition and results of operations. Fluctuations in quarterly demand
for products may adversely affect the continuity of the Company's manufacturing
operations, increase uncertainty in operational planning, disrupt cash flow from
operations and contribute to the volatility of the Company's stock price. The
Company's expenses are based in part on the Company's expectations as to future
revenue levels and to a large extent are fixed in the short term. If revenues do
not meet expectations, the Company's business, financial condition and results
of operations could be materially adversely affected. The Company believes that
period to period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
As a result of the foregoing factors, it is likely that in some future quarter
the Company's revenue or operating results will be below the expectations of
public market analysts and investors. In such event the price of the Company's
Common Stock could be materially adversely affected. Company's products
requiring such approval.
ENVIRONMENTAL REGULATION. The Company is subject to a variety of local,
state and federal and foreign government regulations relating to the storage,
discharge, handling, emission, generation, manufacture and disposal of toxic,
infectious or other hazardous substances used to manufacture the Company's
products. The failure to comply with current or future regulations could result
in the imposition of substantial fines against the Company, suspension of
production, alteration of its manufacturing processes or cessation of
operations. There can be no assurances that the Company will not be required to
incur significant costs to comply with any such laws and regulations in the
future, or that such laws or regulations will not have a material adverse effect
on the Company's business, financial condition and results of operations. Any
failure by the Company to control the use, disposal, removal or storage of, or
to adequately restrict the discharge of, or assist in the cleanup of,
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hazardous chemicals or hazardous, infectious or toxic substances could subject
the Company to significant liabilities, including joint and several liability
under certain statutes. The imposition of such liabilities would have a material
adverse effect on the Company's business, financial condition and results of
operations.
UNCERTAINTY OF PROFITABLE MANUFACTURING. At the end of 1995, the Company
acquired Sensititre's manufacturing facility near London, England. Sensititre
has been manufacturing Sensititre products for many years in the U.K. and since
July 1995, has been manufacturing Alamar products at such facility. Prior to
July 1995, however, the Company manufactured Alamar products at a facility in
Sacramento, California. The Company was unable to reduce manufacturing costs at
the Sacramento facility to a level that would have allowed for profitable
operations. While it is expected that consolidation of the Alamar product line
manufacturing effort in the U.K. facility may result in certain economies of
scale, there can be no assurances that the Company's Alamar product line will
ever be manufactured in a cost-effective manner.
The Company's Cytopathology Division has only recently begun assembling of
the AcCell 2000 and AcCell 2001 at its Chicago location. In June 1996, the
Company entered into its first OEM Agreement, for the exclusive distribution of
certain cytopathology products in the Western Hemisphere. There can be no
assurances that the Company will be able to sell sufficient numbers of systems
or develop volume manufacturing processes, that will lead to a
profitable/cost-effective manufacture of the AcCell products.
The Company's semi-automated and fully-automated instruments for reading
results of microbiology diagnostic test kits, READar, PIPETar and ARIS, are
manufactured for the Company by the developers of such products or by other
outside vendors. There can be no assurances that any of these developers or
vendors will be able to manufacture the Alamar product line's current and
proposed automated reading or related products in a cost-effective manner.
DEPENDENCE ON SUPPLIERS. Certain key components and raw materials used in
the manufacturing of the Company's products are currently provided by
single-source vendors. Although the Company believes that alternative sources
for such materials and raw materials are available, any supply interruption in a
single-sourced component or raw material would have a material adverse effect on
the Company's ability to manufacture products until a new source of supply were
qualified. There can be no assurance that the Company would be successful in
qualifying additional sources on a timely basis or at all, which would have a
material adverse effect on the Company's business. In addition, an uncorrected
impurity or supplier's variation in a raw material, either unknown to the
Company or incompatible with the Company's manufacturing process, could have a
material adverse effect on the Company's ability to manufacture products.
IMPACT OF MEDICARE, MEDICAID AND OTHER THIRD-PARTY REIMBURSEMENT. In the
United States, many Pap smears and MIC/ID testing are currently paid for by the
patient, and the level of reimbursement by third-party payers that do provide
reimbursement varies considerably. Third-party payers (Medicare/ Medicaid,
private health insurance, health administration authorities in foreign countries
and other organizations) may affect the demand, pricing or relative
attractiveness of the Company's products and services by regulating the
frequency and maximum amount of reimbursement for Pap screenings and MIC/ID
testing provided by such payers or by not providing any reimbursement at all.
Restrictions on reimbursement for Pap screenings and MIC/ID testing may limit
the price which the Company can charge for its products or reduce the demand for
them. In addition, if Medicare and Medicaid do not provide for reimbursement for
Pap screenings and MIC/ID testing, or if the level of such reimbursement is
significantly below the amount laboratories and hospitals charge patients to
perform Pap screenings and MIC/ID testing, respectively, the size of the
potential market available to the Company may be reduced. There can be no
assurances that the level of reimbursement to laboratories for Pap screenings
and MIC/ID testing will achieve or be maintained at levels necessary to permit
the Company to generate substantial revenues or be profitable.
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In the international market, reimbursement by private third-party medical
insurance providers, including governmental insurers and providers, varies from
country to country. In certain countries, the Company's ability to achieve
significant market penetration may depend upon the availability of third-party
or governmental reimbursement.
UNCERTAINTY AND POSSIBLE NEGATIVE EFFECTS OF HEALTH CARE REFORM. The health
care industry is undergoing fundamental changes that are the result of
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to control the escalation of
health care expenditures within the economy. Reforms that have been, and may be,
considered include controls on health care spending through limitations on the
increase in private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups and fundamental
changes to the health care delivery system. Health care reform could, for
example, result in a reduction in the recommended frequency of Pap tests or
limitations on reimbursement based on the frequency of Pap tests and MIC/ID
testing, which would likely reduce the demand for the Company's cytopathology
products in connection with Pap smear screening and microbiology products, as
the case may be. The Company anticipates that Congress and state legislatures
will continue to review and assess cost containment measures, alternative health
care delivery systems and methods of payment, and public debate of these issues
will likely continue. Due to uncertainties regarding the outcome of health care
reform initiatives and their enactment and implementation, the Company cannot
predict what reforms will be proposed or adopted or the effect such proposal or
adoption may have on the Company. There can be no assurances that future health
care legislation or other changes in the administration or interpretation of
government health care or third-party reimbursement programs will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
INTERNATIONAL SALES AND OPERATIONS RISKS. The Company sells microbiology
products and intends to sell its cytopathology and any future products to
customers both in the United States and internationally. International sales and
operations may be limited or disrupted by the imposition of government controls,
export license requirements, political instability, trade restrictions, changes
in tariffs or difficulties in staffing and managing international operations.
Foreign regulatory agencies often establish product standards different from
those in the United States and any inability to obtain foreign regulatory
approvals on a timely basis could have a material adverse effect on the
Company's international business operations. Additionally, the Company's
business, financial condition and results of operations may be adversely
affected by increases in duty rates and difficulties in obtaining required
licenses and permits. There can be no assurances that the Company will be able
to successfully commercialize its products, or any future products, in any
foreign market.
NEED TO MANAGE EXPANDING OPERATIONS. If the Company is successful in
achieving market acceptance for its AcCell 2000/2001 systems and the TracCell
2000 (if regulatory approvals are obtained), the Company will be required to
expand its operations, particularly in the areas of sales and marketing and
manufacturing. As the Company expands its operations in these areas, such
expansion will likely result in new and increased responsibilities for
management personnel and place significant strain upon the Company's management,
operating and financial systems and resources. To accommodate any such growth
and compete effectively, the Company will be required to implement and improve
information systems, procedures and controls, and to expand, train, motivate and
manage its work force. The Company's future success will depend to a significant
extent on the ability of its current and future management personnel to operate
effectively, both independently and as a group. There can be no assurance that
the Company's personnel, systems, procedures and controls will be adequate to
support the Company's future operations. Any failure to implement and improve
the Company's operational, financial and management systems or to expand, train,
motivate or manage employees as required by future growth, if any, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON KEY EMPLOYEES. The Company believes that its success will
depend to a significant extent, upon the efforts and abilities of a small group
of executive, scientific and marketing personnel,
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in particular, Peter P. Gombrich, the Company's Chief Executive Officer,
President and Chairman of the Board. The loss of the services of one or more of
these key personnel could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company's future success will depend upon its ability to continue to attract and
retain qualified scientific and management personnel who are in great demand.
There can be no assurances that the Company will be successful in attracting and
retaining such personnel.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the shares of the
Company's Common Stock, like that of the common stock of many other medical
products and high technology companies, has in the past been, and is likely in
the future to continue to be highly volatile. Factors such as fluctuations in
the Company's operating results, announcements of technological innovations or
new commercial products by the Company or competitors, government regulation,
changes in the current structure of the health care financing and payment
systems, developments in or disputes regarding patent or other proprietary
rights, economic and other external factors and general market conditions may
have a significant effect on the market price of the Common Stock. Moreover, the
stock market has from time to time experienced extreme price and volume
fluctuations which have particularly affected the market prices for medical
products and high technology companies and which have often been unrelated to
the operating performance of such companies. These broad market fluctuations, as
well as general economic, political and market conditions, may adversely affect
the market price of the Company's Common Stock. In the past, following periods
of volatility in the market price of a company's common stock, securities class
action litigations have occurred against the issuing company. There can be no
assurance that such litigation will not occur in the future with respect to the
Company. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
on the Company's business, operating results and financial condition. Any
adverse determination in such litigation could also subject the Company to
significant liabilities.
LACK OF DIVIDENDS. The Company has never paid cash or other dividends on
its Common Stock and does not intend to pay cash or other dividends in the
foreseeable future. See "Dividend Policy."
AUTHORIZATION AND POTENTIAL ISSUANCE OF PREFERRED STOCK. The Company's
Certificate of Incorporation authorizes the issuance of preferred stock with
such designation, rights and preferences as may be determined from time to time
by the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock.
Although the Company does not currently intend to issue any shares of its
preferred stock, in the event of issuance, such shares could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. There can be no assurances that the Company
will not, under certain circumstances, issue shares of its preferred stock.
OUTSTANDING WARRANTS AND OPTIONS. Investors purchasing Shares will incur
dilution to the extent outstanding stock options and warrants are exercised. As
of the date of this Prospectus, there are outstanding immediately exercisable
(i) warrants to purchase 5,969,333 shares of Common Stock at exercise prices
ranging from $0.25 to $5.00 per share with a weighted average exercise price of
$3.21, and (ii) options to purchase 1,652,971 shares of Common Stock at exercise
prices ranging from $0.63 to $8.38 per share.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. As of the date of
this Prospectus, there are 18,631,453 shares of Common Stock outstanding.
Approximately 13,000,000 shares of Common Stock or shares issuable upon exercise
of currently exercisable warrants and options sold or registered for resale
pursuant to registration statements, or for which there exist exemptions from
the registration requirements under the Securities Act, are freely tradeable
without restriction or requirement of further registration, unless such shares
are held by "affiliates" of the Company (as that term is defined in the
Securities Act and the regulations promulgated thereunder) and subject, in
certain
17
<PAGE>
instances, to the prospectus delivery requirements under the Securities Act. The
balance of the shares were sold by the Company in reliance on exemptions from
the registration requirements of the Securities Act. In addition, the Company
has granted certain demand, and/or piggyback registration rights, relating to a
substantial portion of the restricted shares and a substantial number of shares
of Common Stock underlying warrants issued by the Company. Any future exercise
of such registration rights, and sale of such securities, will result in
dilution in the interest of the Company's then existing stockholders.
No prediction can be made as to the effect, if any, that future sales of
additional shares of Common Stock or the availability of such shares for sale,
whether pursuant to exercised registration rights or under Rule 144 or other
applicable exemptions under the Securities Act, will have on the market price of
the Common Stock prevailing from time to time. Nevertheless, the possibility
that substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the ability of the Company to raise capital through the sale of its equity
securities.
18
<PAGE>
DIVIDEND POLICY
The Company has not paid any cash or other dividends on its Common Stock to
date. The Company currently intends to retain future earnings, if any, for its
business and does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market and
quoted on Nasdaq under the symbol "ACMI." The table below sets forth the range
of high and low closing prices for the Common Stock as reported on Nasdaq in
each completed quarter during the Company's two most recently completed fiscal
years, the transition period ended December 31, 1995; each completed quarter
during the current fiscal year and a portion of the current quarter.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
COMMON STOCK
1994 Fiscal Year
First Quarter................................................................................. $ 4.13 $ 2.13
Second Quarter................................................................................ 3.00 1.75
Third Quarter................................................................................. 2.75 1.00
Fourth Quarter................................................................................ 2.63 1.25
1995 Fiscal Year
First Quarter................................................................................. 1.75 0.31
Second Quarter................................................................................ 1.75 0.50
Third Quarter................................................................................. 1.50 0.81
Fourth Quarter................................................................................ 1.50 0.75
Transition Period (1)
Oct. 1, 1995 through December 31, 1995........................................................ 1.69 1.00
1996 Fiscal Year (1)
First Quarter................................................................................. 6.25 1.06
Second Quarter................................................................................ 9.38 4.88
Third Quarter (through July 1, 1996).......................................................... 6.75 6.13
</TABLE>
- ------------------------
(1) On December 31, 1995, the Company changed its fiscal year from October 1
through September 30 to January 1 through December 31. Therefore, the
"Transition Period" includes October 1, 1995 through December 31, 1995.
On July 1, 1996 the closing price of the Common Stock as reported by Nasdaq
was $6.25 per share. At July 1, 1996, the Company had approximately 260
stockholders of record and estimates that it had approximately 560 beneficial
owners.
19
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect of the Merger of Alamar and AccuMed and the purchase of certain
assets and the assumption of certain liabilities from Sensititre US and
Sensititre UK by AccuMed on a purchase basis.
The unaudited pro forma condensed combined statements of operations for the
year ended September 30, 1995 and the three months ended December 31, 1995
assume that the Merger with AccuMed and the purchase of Sensititre US and
Sensititre UK occurred on October 1, 1994.
The pro forma adjustments are based on preliminary assumptions of the
allocation of the purchase price and are subject to substantial revision once
evaluation of the fair value of the assets and liabilities of AccuMed are
completed. Actual purchase accounting adjustments may differ from the pro forma
adjustments presented herein.
THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS THAT ACTUALLY WOULD HAVE OCCURRED IF THE
MERGERS HAD BEEN COMPLETED ON THE ASSUMED DATES NOR ARE THE STATEMENTS
INDICATIVE OF FUTURE COMBINED FINANCIAL POSITION OR EARNING.
The pro forma condensed financial statements should be read in conjunction
with the financial statements of Alamar for the fiscal year ended September 30,
1995 and the financial statements for the transition period ended December 31,
1995.
20
<PAGE>
ACCUMED INTERNATIONAL, INC
(FORMERLY ALAMAR BIOSCIENCES, INC. AND SUBSIDIARIES)
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
HISTORICAL
--------------
ALAMAR YEAR
ENDED
SEPTEMBER 30,
1995
-------------- HISTORICAL
----------------------------------------------------
ACCUMED (1) SENSITITRE US (2) SENSITITRE UK (2)
-------------- ----------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net Revenues.................................... $ 514,776 $ 2,609,233 $ 409,360 $ 639,561
Cost of revenues................................ (1,431,187) (1,510,143) (247,860) (457,056)
-------------- -------------- ----------------- -----------------
(916,411) 1,099,090 161,500 182,505
-------------- -------------- ----------------- -----------------
Operating Expenses
General and Administration.................... 2,094,890 1,040,083 208,420 74,589
Research and Development...................... 386,882 453,277 0 88,872
Sales and Marketing........................... 309,208 1,187,177 0 0
-------------- -------------- ----------------- -----------------
Total operating expenses........................ 2,790,980 2,680,537 208,420 163,461
-------------- -------------- ----------------- -----------------
Income (Loss) from operations................... (3,707,391) (1,581,447) (46,920) 19,044
Interest income................................. 7,949 12,930 0 0
Interest (expense) ............................. (46,657) (40,201) 0 0
Other income ................................... 32,566 1,308 0 0
Other (expense)................................. (45,777) 0 0 0
-------------- -------------- ----------------- -----------------
Earnings (Loss) before income taxes............. (3,759,310) (1,607,410) (46,920) 19,044
Provision for income taxes...................... 800 0 0 0
-------------- -------------- ----------------- -----------------
Net income (loss) .............................. $ (3,760,110) $ (1,607,410) $ (46,920) $ 19,044
-------------- -------------- ----------------- -----------------
-------------- -------------- ----------------- -----------------
Net loss per common and common equivalent share
............................................... $ (0.59) $ (0.92)
-------------- --------------
-------------- --------------
Weighted average shares outstanding............. 6,375,627 1,748,940
-------------- --------------
-------------- --------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
-------------------------------- --------------------------------
ACCUMED ACCUMED AS ALAMAR/ ACCUMED ALAMAR AS
SENSITIVE ADJUSTED, FOR ADJUSTMENTS ADJUSTED, FOR
ADJUSTMENTS THE YEAR ENDED --------------- THE YEAR ENDED
--------------- SEPTEMBER 30, SEPTEMBER 30,
1995 (3) (UNAUDITED) 1995 (4)
(UNAUDITED) --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net Revenues.................................. $ (193,000)(A) $ 3,485,154 $ 0 $ 3,979,930
Cost of revenues.............................. 109,000(B) (2,108,059) 0 (3,537,246)
--------------- --------------- --------------- ---------------
(84,000) 1,359,095 0 442,684
--------------- --------------- --------------- ---------------
Operating Expenses
General and Administration.................. 100,000(C) 1,423,092 284,570(E) 3,602,552
Research and Development.................... 0 542,149 0 929,031
Sales and Marketing......................... 0 1,187,177 0 1,496,385
--------------- --------------- --------------- ---------------
Total operating expenses...................... 100,000 3,152,418 284,570 8,227,968
--------------- --------------- --------------- ---------------
Income (Loss) from operations................. (184,000) (1,793,323) (284,570) (5,785,284)
Interest income .............................. 0 12,930 0 20,679
Interest (expense)............................ (35,475)(D) (75,676) 0 (122,333)
Other income.................................. 0 1,308 0 33,874
Other (expense) .............................. 0 0 0 (45,777)
--------------- --------------- --------------- ---------------
Earnings (Loss) before income taxes .......... (219,475) (1,854,761) (284,570) (5,898,841)
Provision for income taxes.................... 0 0 0 800
--------------- --------------- --------------- ---------------
Net income (loss)............................. $ (219,475) $ (1,854,781) $ (284,570) $ (5,899,441)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Net loss per common and common equivalent
share........................................ $ (1.06) $ (0.60)
--------------- ---------------
--------------- ---------------
Weighted average shares outstanding........... 1,748,940 9,831,582
--------------- ---------------
--------------- ---------------
</TABLE>
- ------------------------
(1) includes the twelve months and nine months ended September 30, 1995 for
AccuMed and Sensititre US/UK, respectively.
(2) includes the three months ended December 31, 1994, before the acquisitions
by AccuMed.
(3) AccuMed Consolidated includes AccuMed, Sensititre US, and Sensititre UK,
Ltd. after purchase accounting adjustments
(4) Alamar Consolidated includes Alamar Biosciences Inc., and AccuMed
Consolidated after purchase accounting adjustments. Weighted average shares
outstanding are 9,831,682 which represents 6,375,637 shares for Alamar
before the merger plus the weighted average (3,456,055) of the 4,178,104
shares (6,178,104 shares per the merger agreement less 2,000,000 shares
issued but subject to forfeiture) to be issued in connection with the
AccuMed merger. The weighted average shares outstanding for AccuMed gives
effect to the shares issued by AccuMed during the year ended September 30,
1995 using the exchange ratio of 1.98 to 1. The total shares outstanding at
September 30, 1995 are 15,107,443 (10,929,339 shares of Alamar and 4,178,104
shares issued to AccuMed) which does not include the 2,000,000 shares issued
but subject to forfeiture.
22
<PAGE>
ALAMAR BIOSCIENCES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
ALAMAR BIOSCIENCES, INC., AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1995
(UNAUDITED)
(A) To eliminate intercompany sales from Sensititre UK to Sensititre US.
(B) To eliminate intercompany profit from the cost of product sold from
Sensititre UK to Sensititre US.
(C) To reduce amortization expense ($20,000) for the amortization of the
purchase price of AccuMed, Inc. in excess of the fair market value of
acquired assets, less assumed liabilities, and transaction costs incurred
with the Merger of AccuMed, Inc. amortized over a 10 year life, and to
adjust amortization expense for Sensititre US and Sensititre UK.
Adjustment to reflect a reasonable estimation ($120,000) of corporate
overhead costs for the three months ended December 31, 1994 carve out period
for Sensititre U.S. The estimate is based on a percentage of total sales of
Radiometer America, Inc., (of which Sensititre U.S. was a division) to the
Sensititre US product line.
(D) To adjust interest expense for $35,475, assuming that the $430,000 loan to
finance the Sensititre acquisition occurred on October 1, 1994.
(E) To adjust amortization expense for the amortization of the purchase price of
AccuMed, Inc. in excess of the fair market value of acquired assets, less
assumed liabilities, and transaction costs incurred with the Merger of
AccuMed, Inc. amortized over a 10 year life, and to adjust amortization
expense for Sensititre US and Sensititre UK.
23
<PAGE>
ACCUMED INTERNATIONAL, INC.
(FORMERLY ALAMAR BIOSCIENCES, INC. AND SUBSIDIARIES)
PRO-FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO-FORMA PRO-FORMA PRO-FORMA
---------------- -------------- ---------------- -----------------
ACCUMED ACCUMED INC. ADJUSTMENTS PRO-FORMA
INTERNATIONAL, (ACQUIREE) ---------------- CONSOLIDATED
INC. -------------- -----------------
---------------- (UNAUDITED) (UNAUDITED) (UNAUDITED)
(AUDITED)
<S> <C> <C> <C> <C>
Net Revenues............................. $ 100,130 $ 1,009,376 $ (73,005)(A) $ 1,036,501
Cost of Revenues......................... (338,730) (830,497) 71,892(B) (1,097,335)
---------------- -------------- ---------------- -----------------
(238,600) 178,879 (1,113) (60,834)
Operating Epenses
General and Administration............. 1,418,797 758,066 0 2,176,863
Research and Development............... 3,997,600 338,178 0 4,335,778
Sales & Marketing...................... 7,197 289,360 0 296,557
---------------- -------------- ---------------- -----------------
Total Operating Expenses................. 5,423,594 1,385,604 0 6,809,198
---------------- -------------- ---------------- -----------------
Income (Loss) from operations............ (5,662,194) (1,206,725) (1,113) (6,870,032)
---------------- -------------- ---------------- -----------------
Interest Income.......................... 4,748 0 0 4,748
Interest (expense)....................... (10,862) (1,948) 0 (12,810)
Other.................................... (72,929) 0 0 (72,929)
---------------- -------------- ---------------- -----------------
Loss before income taxes................. (5,741,237) (1,208,673) (1,113) (6,951,023)
Provision for income taxes .............. 800 0 0 800
---------------- -------------- ---------------- -----------------
Net loss................................. $ (5,742,037) $ (1,208,673) $ (1,113) $ (6,951,823)
---------------- -------------- ---------------- -----------------
---------------- -------------- ---------------- -----------------
Net loss per common share ............... $ (0.49) $ (0.10) $ (0.00) $ (0.59)
Weighted average shares outstanding...... 11,742,980 11,742,980 11,742,980 11,742,980
</TABLE>
24
<PAGE>
ACCUMED INTERNATIONAL, INC. (FORMERLY ALAMAR BIOSCIENCES, INC.)
AND SUBSIDIARIES PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
ACCUMED INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
DECEMBER 31, 1995
(UNAUDITED)
(A) To eliminate intercompany sales from AccuMed International Limited (UK) to
AccuMed Inc. (US)
(B) To eliminate intercompany profit from the cost of product sold from AccuMed
International Limited (UK) to AccuMed Inc. (US)
25
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information as of July 1, 1996 (the
"Reference Date") with respect to the beneficial ownership of shares of Common
Stock by each of the Selling Stockholders. At the Reference Date there were
18,631,453 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING (1) SHARES TO OFFERING(1)
----------------- BE SOLD ----------------------
NAME OF BENEFICIAL OWNER NUMBER IN OFFERING NUMBER PERCENT
- ------------------------------------------------------------- ----------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
M. Kingdon Offshore NV (2)................................... 580,000 78,000 502,000 2.7
Nordbanken................................................... 40,000 40,000 0 *
Kingdon Partners, L.P. (2)................................... 163,800 26,000 137,800 *
Kingdon Associates, L.P. (2)................................. 153,000 26,000 0 *
Christiana Fonds SA.......................................... 25,000 25,000 0 *
Saga Securities SA........................................... 10,000 10,000 0 *
Republic New York Securities f/b/o .......................... 75,000 10,000 65,000 *
Samisa Investment Corp.
Republic New York Securities f/b/o .......................... 85,000 10,000 75,000 *
Emerge Capital
Republic New York Securities f/b/o .......................... 10,000 10,000 0 *
Beko Investment Services
Republic New York Securities f/b/o .......................... 5,000 5,000 0 *
Beko Investment Client A/C
Republic New York Securities f/b/o .......................... 5,000 5,000 0 *
Fondspartners SA
Republic New York Securities f/b/o .......................... 4,000 4,000 0 *
Bq. Prive Edmond Rothschild
Republic New York Securities f/b/o .......................... 18,000 3,000 15,000 *
J. Watling
Republic New York Securities f/b/o .......................... 18,000 3,000 15,000 *
Kelebe Investment Corp.
</TABLE>
- ------------------------
* Represents less than 1%.
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock listed as beneficially owned by them. A person is deemed to be
the beneficial holder of securities that can be acquired by such person
within 60 days from the Reference Date upon the exercise of warrants or
options. Each beneficial owner's percentage ownership is determined by
including shares underlying options or warrants which are exercisable by
such person currently or within 60 days following the Reference Date, and
excluding shares underlying options and warrants held by any other person.
(2) Kingdon Capital Management Corp. ("KCMC") is a general partner of Kingdon
Associates, L.P. and Kingdon Partners, L.P. and provides management services
to M. Kingdon Offshore NV (collectively, the "Kingdon Funds"). As a result
of such relationships, KCMC may be deemed to beneficially own the shares
offered for sale by the Kingdon Funds.
The Company has agreed to indemnify certain of the Selling Stockholders and
the Selling Stockholders have agreed to indemnify the Company against certain
civil liabilities, including liabilities under the Securities Act.
Except as noted in the footnotes above, none of the Selling Stockholders has
held any office or maintained any material relationship with the Company during
the past three years.
26
<PAGE>
PLAN OF DISTRIBUTION
The Common Stock offered hereby may be sold by the Selling Stockholders from
time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the then
current market price, or in negotiated transactions. The shares 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; (d) face-to-face transactions between sellers and
purchasers without a broker-dealer; and (e) short sales. In effecting sales,
brokers or dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate. Such brokers or dealers may receive
commissions or discounts from Selling Stockholders in amounts to be negotiated
immediately 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 that qualify for sale pursuant to Rule 144
under the Securities Act might be sold under Rule 144 rather than pursuant to
this Prospectus.
LEGAL MATTERS
The legality of the securities offered by this Prospectus will be passed
upon for the Company by Graham & James LLP, Sacramento, California.
EXPERTS
The balance sheet of AccuMed, Inc as of December 31, 1994, and the
statements of operations, stockholder's deficit, and cash flows for the period
from February 7, 1994 (inception) through December 31, 1994, the balance sheets
of Alamar Biosciences, Inc. as of September 30, 1995 and 1994, and the
statements of operations, stockholder's equity, and cash flows for each of the
three years in the period ended September 30, 1995, and the balance sheet of
Sensititre/Alamar, the Microbiology Division of AccuMed, Inc., as of December
31, 1994 and the statements of net sales, cost of sales, and selling expenses
for the eight months ended December 31, 1994 and for each of the two years in
the period ended April 30, 1994, as incorporated by reference in the
Registration Statement of which this Prospectus forms a part a part, have been
incorporated herein in reliance on the reports, which included explanatory
paragraphs related to AccuMed, Inc.'s and Alamar Biosciences, Inc.'s ability to
continue as going concerns, of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
The balance sheets of AccuMed International Limited as of December 31, 1994,
April 30, 1994 and 1993, and the statements of operations and cash flows for the
eight months ended December 31, 1994, and for each of the two years in the
period ended April 30, 1994, as incorporated by reference in the Registration
Statement of which this Prospectus forms a part, have been incorporated herein
in reliance on the report of Coopers & Lybrand, independent accountants, given
on the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of AccuMed International, Inc. and
subsidiaries as of December 31, 1995, and for the three months ended December
31, 1995, incorporated by reference herein and elsewhere in the Registration
Statement of which this Prospectus forms a part from the Company's Transition
Report of Form 10-KSB for the transition period ended December 31, 1995, have
been included therein and incorporated by reference herein and elsewhere in the
Registration Statement of which this Prospectus forms a part in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
included therein and incorporated herein by reference, and upon the authority of
said firm as experts in accounting and auditing.
27
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any Selling
Stockholder. This Prospectus does not constitute an offer to sell or the
solicitation of any offer to buy any security other than the shares of Common
Stock offered by this Prospectus, nor does it constitute an offer to sell or a
solicitation of any offer to buy the shares of 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 any implication that information contained herein is
correct as of any time subsequent to the date hereof.
255,000 SHARES
ACCUMED
INTERNATIONAL,
INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the issuance and distribution of the securities being registered hereunder.
All of the amounts shown are estimates (except for the SEC registration fee).
<TABLE>
<S> <C>
SEC registration fee............................................. $ 566
Printing and engraving expenses.................................. 3,000
Accounting fees and expenses..................................... 2,000
Legal fees and expenses.......................................... 3,000
Blue Sky fees and expenses....................................... 500
Miscellaneous.................................................... 934
---------
TOTAL........................................................ $ 10,000
---------
---------
</TABLE>
None of these expenses will be paid by the Selling Stockholders pursuant to
the terms of the agreements under which the shares of Common Stock to be sold
hereby were issued.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has provisions in its Certificate of Incorporation which
eliminate the liability of the Company's directors to the Company and its
stockholders for monetary damages to the fullest extent permissible under
Delaware law and provisions which authorize the Company to indemnify its
directors and agents by bylaws, agreements or otherwise, to the fullest extent
permitted by law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission. The Company's
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by Delaware law.
The Company's officers and directors are covered by a director's and
officer's liability insurance policy maintained by the Company. Under the
insurance policy, the Company is entitled to be reimbursed for indemnity
payments that it is required or permitted to make to its directors and officers.
ITEM 16. EXHIBITS
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
<S> <C>
<CAPTION>
4.1 Certificate of Incorporation of the Registrant (incorporated by reference to the Registrant's
Transition Report of Form 10-KSB for the transition period ended December 31, 1995 (the
"Transition Report")).*
<S> <C>
4.2 Specimen Certificate for Common Stock (incorporated by reference to the Transition Report).*
4.3 Bylaws of the Registrant (incorporated by reference to Transition Report).*
4.4 Form of Securities Purchase Agreement by and between AccuMed International, Inc. and certain
non-U.S. persons.*
4.5 May 31, 1996 Securities Purchase Agreement by and among AccuMed International, Inc. and Kingdon
Associates, L.P., Kingdon Partners, L.P. and M. Kingdon Offshore N.V.*
4.6 Registration Rights Agreement
5.1 Opinion of Graham & James LLP, counsel to the Registrant, regarding the legality of the securities
offered hereby.*
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
<S> <C>
23.1 Consent of Graham & James LLP (contained in Exhibit 5.1 filed herewith.)
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Coopers & Lybrand (UK).
23.4 Consent of KPMG Peat Marwick LLP.
24.1 Powers of Attorney (contained in the signature page to this Registration Statement, page II-5).
</TABLE>
- ------------------------
* Indicates Exhibit previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
additional or changed material information with respect to the plan of
distribution.
(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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the 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 whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on July 29, 1996.
ACCUMED INTERNATIONAL, INC.
By: /s/ PETER P. GOMBRICH
-------------------------------------
Peter P. Gombrich,
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Peter P. Gombrich and
Mark L. Santor, and each of them, attorneys-in-fact for the undersigned, each
with the power of substitution, for the undersigned in any and all capacities,
to sign any and all amendments to this Registration Statement (including
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming that each of said attorneys-in-fact
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------- ----------------
<C> <S> <C>
Chairman of the Board and
/s/ PETER P. GOMBRICH Chief Executive Officer
------------------------------------------- (Principal Executive July 29, 1996
(Peter P. Gombrich) Officer)
Vice President, Finance
/s/ MARK L. SANTOR and Chief Financial
------------------------------------------- Officer (Principal July 29, 1996
(Mark L. Santor) Financial and Accounting
Officer)
------------------------------------------- Director , 1996
(John H. Abeles)
/s/ HAROLD S. BLUE
------------------------------------------- Director July 29, 1996
(Harold S. Blue)
/s/ JACK H. HALPERIN
------------------------------------------- Director July 29, 1996
(Jack H. Halperin)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------- ----------------
<C> <S> <C>
------------------------------------------- Director , 1996
(Paul F. Lavallee)
/s/ JOSEPH W. PLANDOWSKI
------------------------------------------- Director July 29, 1996
(Joseph W. Plandowski)
/s/ LEONARD M. SCHILLER
------------------------------------------- Director July 25, 1996
(Leonard M. Schiller)
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ---------------------------------------------------------------------------------------------------
<S> <C>
<CAPTION>
4.1 Certificate of Incorporation of the Registrant (incorporated by reference to the Registrant's
Transition Report of Form 10-KSB for the transition period ended December 31, 1995 (the "Transition
Report")).*
<S> <C>
4.2 Specimen Certificate for Common Stock (incorporated by reference to the Transition Report).*
4.3 Bylaws of the Registrant (incorporated by reference to Transition Report).*
4.4 Form of Securities Purchase Agreement by and between AccuMed International, Inc. and Subscriber.*
4.5 May 31, 1996 Securities Purchase Agreement by and among AccuMed International, Inc. and Kingdon
Associates, L.P., Kingdon Partners, L.P. and M. Kingdon Offshore N.V.*
4.6 Registration Rights Agreement
5.1 Opinion of Graham & James LLP, counsel to the Registrant, regarding the legality of the securities
offered hereby.*
23.1 Consent of Graham & James LLP (contained in Exhibit 5.1 filed herewith.)
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Coopers & Lybrand (UK).
23.4 Consent of KPMG Peat Marwick LLP.
24.1 Powers of Attorney (contained in the signature page to this Registration Statement, page II-5).
</TABLE>
- ------------------------
* Indicates Exhibit previously filed.
II-5
<PAGE>
EXHIBIT A
TO
SECURITIES
PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 31, 1996
by and among ACCUMED INTERNATIONAL, INC., a Delaware corporation, with
headquarters located at 920 N. Franklin Street, Chicago, Illinois 60610 (the
"COMPANY"), and the undersigned investors (together with their affiliates and
any assignee or transferee of all of their rights hereunder, the "INITIAL
INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors an aggregate of 170,000
shares of Common Stock, par value $.01 per share, of the Company (the "SHARES");
and
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTOR" means the Initial Investors and any transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering
<PAGE>
securities on a continuous basis ("RULE 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Shares, as well as any
capital stock issued as a dividend or distribution on, or in exchange,
replacement or otherwise in respect of, the Shares.
(iv) "REGISTRATION STATEMENT" means a registration statement of
the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, on or
prior to the date which is fifteen (15) days after the date of the closing under
the Securities Purchase Agreement (the "CLOSING DATE"), file with the SEC a
Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the Registrable Securities, which Registration Statement, to the
extent allowable under the 1933 Act and the Rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement also covers
such indeterminate number of additional shares of Common Stock to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the reasonable approval of) the Initial Investors and their counsel
prior to its filing or other submission.
b. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of the
Initial Investor, shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.
c. PAYMENTS BY THE COMPANY. If (i) the Registration Statement
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not declared effective by the SEC within sixty (60)
days after the Closing Date (other than by reason of any act or failure to act
by the Investors) or if, after the Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to the Registration
Statement (by reason of stop order, or the Company's failure to update the
Registration Statement), or (ii) the Common Stock is not listed or included for
quotation on the NASDAQ Small Cap ("NASDAQ SMALL CAP") or
2
<PAGE>
NASDAQ National Market (the "NASDAQ-NMS"), the New York Stock Exchange (the
"NYSE") or the American Stock Exchange (the "AMEX"), then the Company will make
payments to the Investors in such amounts and at such times as shall be
determined pursuant to this Section 2(c) as partial relief for the damages to
the Investors by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall pay to each
holder of Registerable Securities an amount equal to $780,000 multiplied by
three hundredths (.03) times the sum of: (i) the number of months (prorated for
partial months) after the end of such 60-day period and prior to the date the
Registration Statement is declared effective by the SEC, provided, however, that
there shall be excluded from such period any delays which are attributable to
changes required by the Investors in the Registration Statement, including,
without limitation, changes resulting from the assignment of rights hereunder
pursuant to Section 9 below, changes to the plan of distribution, or to the
failure of the Investors to conduct their review of the registration statement
pursuant to Section 2(a) above in a reasonably prompt manner; (ii) the number of
months (prorated for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective; and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the NASDAQ Small Cap or
NASDAQ-NMS, NYSE or AMEX after the Registration Statement has been declared
effective. (For example, if the Registration Statement becomes effective one
(1) month after the end of such 60-day period, the Company would pay $23,400
until any subsequent adjustment; if thereafter, sales could not be made pursuant
to the Registration Statement for an additional period of one (1) month, the
Company would pay an additional $23,400. Such amounts shall be paid in cash or,
if such cash amounts are not paid within ten (10) days of the date when due in
accordance with the penultimate sentence of this paragraph, at each Investor's
option, such cash amounts may be converted into Common Stock at a 35% discount
to the average closing bid prices for the Common Stock on NASDAQ Small Cap for
the ten (10) trading days preceding the Investor's notice to the Company that it
desires to so convert. Any shares of Common Stock issued upon conversion of
such amounts shall be Registrable Securities. Payments of cash pursuant hereto
shall be made within five (5) days after the end of each period that gives rise
to such obligation, provided that, if any such period extends for more than
thirty (30) days, interim payments shall be made for each such thirty (30) day
period. If such cash amounts are not paid within ten (10) days of the date when
due, and the Investors elect to convert such amounts into Common Stock, the
Company shall deliver Common Stock in accordance with the terms of this
paragraph as promptly as practicable.
d. PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall send to each Investor who is
entitled to registration rights under this Section 2(d) written notice of such
determination and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration
3
<PAGE>
Statement all or any part of the Registrable Securities such Investor requests
to be registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion
hereunder. Any exclusion of Registrable Securities shall be made pro rata among
the Investors seeking to include Registrable Securities, in proportion to the
number of Registrable Securities sought to be included by such Investors;
PROVIDED, HOWEVER, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and PROVIDED, FURTHER, HOWEVER, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(d) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
e. ELIGIBILITY FOR FORM S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner and shall maintain such listings of the Common Stock so as to
maintain such eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC not
later than fifteen (15) days after the Closing Date, a Registration Statement
with respect to the number of Registrable Securities provided in Section 2(a),
and thereafter to use its best efforts to cause each Registration Statement
relating to Registrable Securities to become effective as soon as possible after
such filing, and keep the Registration Statement effective pursuant to Rule 415
at all times until such date as is the earlier of (i) the date on which all of
the Registrable Securities have been sold and (ii) the date on which the
Registrable Securities (in the opinion of counsel to the Initial Investor, in
form,
4
<PAGE>
substance and scope reasonably acceptable to the Company) may be immediately
sold without registration (the "REGISTRATION PERIOD"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; PROVIDED, HOWEVER, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause more than nominal expense or burden to the Company, or (e) make any change
in its charter
5
<PAGE>
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.
e. In the event Investors who hold a majority in interest of the
Registrable Securities being offered in the offering (with the approval of the
Initial Investor) select underwriters for the offering, the Company shall enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request; provided, that, not more than once in any twelve month period, for up
to a period of thirty (30) days, the Company may delay the disclosure of
material non-public information concerning the Company the disclosure of which
at the time is not, in the good faith opinion of the Board of Directors of the
Company, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required (an "ALLOWED DELAY"); provided, further, that
the Company shall promptly (i) notify the Investors in writing of the existence
of material non-public information giving rise to an Allowed Delay and (ii)
advise the Investors in writing to cease all sales under the Registration
Statement until the end of the Allowed Delay. Notwithstanding the first proviso
of the immediately preceding sentence, the provisions of Section 2(c) shall be
applicable during the period of an Allowed Delay. Upon expiration of the
Allowed Delay, the Company shall again be bound by the first sentence of this
Section 3(f) with respect to the information giving rise thereto.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
h. The Company shall permit a single firm of counsel designated by
the Initial Investor to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering
6
<PAGE>
a twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
j. At the request of the Initial Investor or any Investor or group
of Investors holding Registrable Securities having a Market Price of at least
$500,000, the Company shall furnish, on the date that Registrable Securities are
delivered to an underwriter, if any, for sale in connection with the
Registration Statement or, if such securities are not being sold by an
underwriter, on the date of effectiveness thereof (i) an opinion, dated as of
such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters, if any, and the
Investors and (ii) solely in the case of an underwritten offering, a letter,
dated such date, from the Company's independent certified public accountants in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investor, (iv) one firm of attorneys and
one firm of accountants or other agents retained by all other Investors, and (v)
one firm of attorneys retained by all such underwriters (collectively, the
"INSPECTORS") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "RECORDS"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; PROVIDED, HOWEVER, that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
7
<PAGE>
l. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by the Registration Statement to be listed on
a national securities exchange and on each additional national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure designation and
quotation of all the Registrable Securities covered by the Registration
Statement on the NASDAQ-NMS or, if, despite the Company's best efforts to
satisfy the preceding clause (i) or (ii), the Company is unsuccessful in
satisfying the preceding clause (i) or (ii), to secure the inclusion for
quotation on the NASDAQ Small Cap for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as EXHIBIT 1 and an opinion of such counsel in the form
attached hereto as EXHIBIT 2.
8
<PAGE>
p. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three
(3) business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information ("REQUESTED
INFORMATION") the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in the
Registration Statement. If at least one (1) business day prior to the filing
date the Company has not received the Requested Information from an Investor,
then the Company shall not be responsible to such Investor for the failure to
include such Requested Information or for any inaccuracies in respect thereof.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable Securities being registered (with the approval of the Initial
Investor) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented
9
<PAGE>
or amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed
by the Company, such Investor shall deliver to the Company (at the expense of
the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Initial Investor pursuant to Section 2(b) hereof (up to
a maximum of $10,000, inclusive of the Initial Investors' expenses payable by
the Company pursuant to Section 4(f) of the Securities Purchase Agreement),
shall be borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), if any, and (iii) any
underwriter (as defined in the 1933 Act) for the Investors; and the directors,
officers, partners, employees and each person who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act, if any, (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or
10
<PAGE>
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advise, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably
11
<PAGE>
incurred by them in connection with investigating or defending any such Claim;
PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld; PROVIDED, FURTHER, HOWEVER, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim as does
not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; PROVIDED,
HOWEVER, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as applicable,
and such legal counsel shall be selected by Investors holding a majority-in-
interest of the Registrable Securities included in the Registration Statement
to which the Claim relates (with the approval of the Initial Investor if it
holds Registrable Securities included in such Registration Statement), if the
Investors are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
12
<PAGE>
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment,
13
<PAGE>
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein, (v) such transfer
shall have been made in accordance with the applicable requirements of the
Securities Purchase Agreement, and (vi) such transferee shall be an "ACCREDITED
INVESTOR" as that term defined in Rule 501 of Regulation D promulgated under the
1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, the Initial
Investor and Investors who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission or other means)
or sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid,
if to the Company:
AccuMed International, Inc.
920 N. Franklin Street
Chicago, Illinois 60610
Attention: Peter Gombrick, CEO
14
<PAGE>
With copy to:
Jack Halperin, Esq.
711 Third Avenue
Suite 1505
New York, New York 10017
If to the Buyers:
c/o Kingdon Capital Management Corp.
152 West 57th Street
New York, New York 10019
Attention: Dr. David Present
With copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Wayne D. Bloch, Esq.
and if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b), and shall be
effective, when personally delivered, upon receipt and, when so sent by
certified mail, four days after deposit with the United States Postal Service.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein
15
<PAGE>
and therein. This Agreement and the Securities Purchase Agreement supersede all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. Kingdon Capital Management Corp. shall have exclusive authority
to act on behalf of the Initial Investors with respect to the matters
contemplated by this Agreement and any such action shall be binding upon the
Initial Investors.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed.
ACCUMED INTERNATIONAL, INC. KINGDON ASSOCIATES, L.P.
By: Kingdon Capital Management Corp.,
its general partner
By:/s/ Peter P. Gombrich
-------------------------------
Name: Peter P. Gombrich
-----------------------------
Its: CEO By: /s/M. Kingdon
------------------------------ ----------------------------------
Name: Mark Kingdon
Title: President
KINGDON PARTNERS, L.P.
By: Kingdon Capital Management Corp.,
its general partner
By: /s/M. Kingdon
----------------------------------
Name: Mark Kingdon
Title: President
M. KINGDON OFFSHORE NV
By: Kingdon Capital Management Corp.,
its investment advisor
By: /s/M. Kingdon
----------------------------------
Name: Mark Kingdon
Title: President
<PAGE>
EXHIBIT I
TO
REGISTRATION
RIGHTS
AGREEMENT
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen;
This letter shall serve as our irrevocable authorization and direction
to you to transfer or re-register the certificates for the shares of Common
Stock, $.01 par value (the "COMMON STOCK"), of ACCUMED INTERNATIONAL, INC., a
Delaware corporation (the "COMPANY"), represented by certificate numbers ____
for an aggregate of ____ shares (the "OUTSTANDING SHARES") of Common Stock
presently registered in the name of [Name of Investor] (which shares were
previously issued pursuant to the terms of the Securities Purchase Agreement,
dated as of May 31, 1996, by and among Accumed International, Inc. and each of
the purchasers set forth therein upon surrender of such certificates to you (or
evidence of loss, theft or destruction thereof), notwithstanding the legend
appearing on such certificates. The transfer or re-registration of the
certificates for the Outstanding Shares by you should be made at such time as
you are requested to do so by the record holder of the Outstanding Shares. The
certificate issued upon such transfer or re-registration should be registered in
such name as requested by the holder of record of the certificate surrendered to
you and should not bear any legend which would restrict the transfer of the
shares represented thereby. In addition, you are hereby directed to remove any
stop-transfer instruction relating to the Outstanding Shares.
Contemporaneous with the delivery of this letter, the Company is
delivering to you an opinion of ________________ as to registration of the
Outstanding Shares under the Securities Act of 1933, as amended.
<PAGE>
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
ACCUMED INTERNATIONAL, INC.
By:
------------------------
Name:
Title:
Enclosures:
cc: [Name of Investor]
- 2-
<PAGE>
EXHIBIT 2
TO
REGISTRATION
RIGHTS
AGREEMENT
[Date]
[Name and address
of transfer agent]
RE: ACCUMED INTERNATIONAL, INC.
Ladies and Gentlemen:
We are counsel to ACCUMED INTERNATIONAL, INC., a Delaware corporation
(the "COMPANY"), and we understand that [Name of Investor] (the "HOLDER") has
purchased from the Company shares of the Company's Common Stock, par value
$.01 (the "COMMON STOCK"). The Common Stock was purchased by the Holder
pursuant to a Securities Purchase Agreement, dated as of May 31, 1996,
between the Holder and the Company (the "AGREEMENT"). Pursuant to a
Registration Rights Agreement, dated as of May 31, 1996, between the Company
and the Holder (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed with
the Holder, among other things, to register the Registrable Securities (as
that term is defined in the Registration Rights Agreement) under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), upon the terms
provided in the Registration Rights Agreement. In connection with the
Company's obligations under the Registration Rights Agreement, on _____,
1996, the Company filed a Registration Statement on Form S-__ (File No.
33-______)(the "REGISTRATION STATEMENT") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities, which names
the Holder as a selling stockholder thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
<PAGE>
[Other appropriate language to be included.]
Very truly yours,
cc: [Name of investor]
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to the Registration Statement on Form S-3 (SEC File No.
333-07681) to be filed with the Securities and Exchange Commission on or about
July 24, 1996, by AccuMed International, Inc. and subsidiaries of our report,
which includes an explanatory paragraph related to substantial doubt about the
ability of AccuMed, Inc. to continue as a going concern, dated September 29,
1995, on our audit of the balance sheet of AccuMed, Inc. as of December 31,
1994, and for the period from February 7, 1994 (inception) through December 31,
1994, appearing in the Registration Statement on Form S-4 (SEC File No.
33-99680) of Alamar Biosciences, Inc. filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 as incorporated by reference
in the Current Report on Form 8-K dated December 29, 1995. We also consent to
the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand, L.L.P.
Sacramento, CA
July 24, 1996
<PAGE>
EXHIBIT 23.2
(CONTINUED)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to the Registration Statement on Form S-3 (Reg. No. 333-07681)
to be filed with the Securities and Exchange Commission on or about July 24,
1996, by AccuMed International, Inc. and subsidiaries of our report dated
September 14, 1995, on our audit of the balance sheet of Sensititre/Alamar, the
Microbiology Division of AccuMed, Inc., as of December 31, 1994, and the net
sales, cost of sales and selling expenses for the eight months ended December
31, 1994, and the years ended April 30, 1994 and 1993, appearing in the
Registration Statement on Form S-4 (SEC File No. 33-99680) of Alamar
Biosciences, Inc. filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933 as incorporated by reference in the Current Report on
Form 8-K dated December 29, 1995. We also consent to the reference to our firm
under the caption "Experts."
/s/ Coopers & Lybrand, L.L.P.
Sacramento, CA
July 24, 1996
<PAGE>
EXHIBIT 23.2
(CONTINUED)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to the Registration Statement on Form S-3 (SEC File No.
333-07681) to be filed with the Securities and Exchange Commission on or about
July 24, 1996, by AccuMed International, Inc. and subsidiaries of our report,
which includes an explanatory paragraph related to substantial doubt about the
ability of Alamar Biosciences, Inc. to continue as a going concern, dated
November 19, 1995, on our audits of the financial statements of Alamar
Biosciences, Inc. as of September 30, 1995 and 1994, and for the years ended
September 30, 1995, 1994 and 1993, which report is included in the Annual Report
on Form 10-KSB for the year ended September 30, 1995. We also consent to the
reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand, L.L.P.
Sacramento, CA
July 24, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to the Registration Statement on Form S-3 (Reg. No. 333-07681)
to be filed with the Securities and Exchange Commission on or about July 22,
1996, by AccuMed International, Inc. and subsidiaries of our report dated
December 8, 1995, on our audit of the balance sheets of AccuMed International
Limited as of December 31, 1994, April 30, 1994 and 1993, and related statements
of operations and cashflows for the eight months ended December 31, 1994, and
the years ended April 30, 1994 and 1993, appearing in the Registration Statement
on Form S-4 (SEC File No. 33-99680) of Alamar Biosciences, Inc. filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933 as
incorporated by reference in the Current Report on Form 8-K dated December 29,
1995.
/s/ Coopers & Lybrand
Croydon
United Kingdom
July 3, 1996
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
AccuMed International, Inc.
We consent to incorporation by reference in the registration statement on
Form S-3 of AccuMed International, Inc. of our report dated April 5, 1996,
relating to the consolidated balance sheet of AccuMed International, Inc. and
subsidiaries as of December 31, 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for the three months ended
December 31, 1995, which report appears in the December 31, 1995 transition
report on Form 10-KSB of AccuMed International, Inc.
KPMG Peat Marwick LLP
Chicago, Illinois
July 19, 1996
