<PAGE> 1
As filed with the Securities and Exchange Commission on May 7, 1998
Registration No.
---------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
REGISTRATION STATEMENT
FILED ON FORM S-3
UNDER THE SECURITIES ACT OF 1933
----------------
ORTEC INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Delaware 8099 11-3068704
- --------------- ----------------- ----------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Code Identification Number)
incorporation) Number)
3960 Broadway, New York, New York 10032 (212) 740-6999
-------------------------------------------------------------
(Address and telephone number of principal executive offices)
DR. STEVEN KATZ
President and Chief Executive Officer
ORTEC INTERNATIONAL, INC.
3960 Broadway, New York, New York 10032 (212) 740-6999
---------------------------------------------------------
(Name, address and telephone number of agent for service)
-----------------
Copies to:
GABRIEL KASZOVITZ, ESQ.
SAUL M. KASZOVITZ, ESQ.
Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP
750 Lexington Avenue, New York, New York 10022-1200
(212) 888-8200
Fax: (212) 888-7776
----------------
Approximate date of proposed sale to the public: Not applicable.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Pursuant to the provisions of Rule 429 under the Securities Act, the
combined Prospectus which forms a part of this Registration Statement relates
to and includes securities of the Registrant which were covered by a
Registration Statement on Form SB-2, declared effective by the Commission on
July 15, 1997 (Registration No. 333-30141).
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
Proposed Proposed
Title of Each Class Amount to be Offering Price Aggregate Amount of
of Securities Being Registered Per Security Offering Registration Fee
Registered (2) (1) Price(1) (1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par 361,928 (registered $ 20.25 $7,329,042 $2,162.67
value $.001 per hereby) (paid on filing
share (2) hereof)
- --------------------------------------------------------------------------------------------------
Common Stock, 1,323,856 Shares(3) $ 8.8125 $ 11,666,481 $ 3,535.29 (paid on
par value $.001 (originally registered June 26, 1997)
per share (2) on June 26, 1997)
==================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457.
(2) Pursuant to Rule 416, this Registration Statement also covers any
additional shares of Common Stock which may become issuable by virtue of
the anti-dilution provisions of any warrants or options to which the
shares of Common Stock being registered hereby are included.
(3) Consists of shares of Common Stock included in the Company's Registration
Statement on Form SB-2 (Registration No. 333-30141) and declared effective by
the Commission on July 15, 1997. Included in such 1,323,856 shares are: (i)
123,250 shares underlying options and/or warrants of the Company which have
expired since July 15, 1997 and which the Company is deregistering hereby; and
(ii) 315,000 shares which have been sold in the public securities markets since
July 15, 1997 by the original holders thereof.
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 an amendment that specifically states that this
Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange
Commission (the "Commission"), acting pursuant to
Section 8(a), may determine.
ii
<PAGE> 3
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.
PRELIMINARY PROSPECTUS DATED ________________, 1998
SUBJECT TO COMPLETION
ORTEC INTERNATIONAL, INC.
1,247,584 SHARES OF COMMON STOCK
This Prospectus covers 1,247,584 shares of Common Stock, par value $.001
per share (the "Common Stock"), of ORTEC INTERNATIONAL, INC., a Delaware
corporation (the "Company"), held by shareholders of the Company, including
415,456 shares issuable by the Company upon the exercise of certain options (the
"Options") and warrants (the "Warrants") granted by the Company, (collectively,
the "Options and Warrants"). Other than the proceeds received by the Company
from the exercise of the Options and/or Warrants, if any, the Company will not
receive any proceeds from the sale of the shares offered hereby. The holders of
the 1,247,584 shares covered by this Prospectus intend to sell the shares
offered hereby from time to time for their own respective accounts in the open
market at the prices prevailing therein or in individually negotiated
transactions at such prices as may be agreed upon. Each such holder will bear
all expenses with respect to the offering of shares by it, him or her, except
the costs associated with preparing and printing this Prospectus. The Common
Stock of the Company is traded on the NASDAQ SmallCap Market System under the
symbol "ORTC." On ________, 1998, the last reported sale price of the Common
Stock was $______.
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE _____ FOR
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
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.
The Date of this Prospectus is __________, 1998
<PAGE> 4
PROSPECTUS SUMMARY
All of the information in this summary is qualified in its entirety by the
more detailed information and financial data appearing elsewhere in this
Prospectus, including information under "Risk Factors." For definitions of
certain terms and abbreviations used in this Prospectus, see the "Glossary" at
page __.
THE COMPANY
ORTEC INTERNATIONAL, Inc. (the "Company") has developed a proprietary
technology which consists of a biologically active dressing to stimulate the
repair and regeneration of human skin. The Company's product is intended to be
utilized for the treatment of severe burn patients as well as for other types of
wound healing and for reconstructive and cosmetic surgery. The Company believes
that the successful regeneration of human skin creates the potential for wide
commercial application.
The Company is a development stage company and to date has not sold any
products. Its activities have been limited to human clinical tests of its
product and research and development relating to the Company's biological
dressing. From March 12, 1991 (inception) to December 31, 1997, the Company
spent an aggregate of $4,533,252 for research and development. Of that total,
$964,864 was spent in 1996, $1,178,836 was spent in 1997.
In order to create a clinically useful biological dressing, the Company
has duplicated the two major layers that form the human skin, the epidermis and
the dermis. Dr. Mark Eisenberg, of Sydney, Australia, an officer, director and a
founder of the Company, has been involved in biochemical and clinical research
at the University of New South Wales in Australia for over twenty years,
focusing primarily in treating the symptoms of a unique disease called
Epidermolysis Bullosa ("EB"). In 1987, through his work on EB, Dr. Eisenberg
first succeeded in growing epidermal layers of human skin, which were
successfully applied as an allograft (a transplant other than with the patient's
own skin) on an EB patient. Dr. Eisenberg has since developed a biologically
active dressing known as "Composite Cultured Skin", consisting of both the
dermal and epidermal layers.
The Company has received approval by the Food and Drug Administration
("FDA") to conduct human clinical trials for the application of its Composite
Cultured Skin in the treatment of burn patients, in the treatment of EB patients
and in the treatment of donor site wounds.
The human clinical trial program for the treatment of burn patients is
being conducted at a number of hospitals. The Company believes that if the use
of its Composite Cultured Skin is effective in these clinical trials, and if the
Company is able to manufacture its Composite Cultured Skin within FDA mandated
requirements, the Company will be able to secure FDA approval for commercially
marketing its product for the treatment of burn patients.
Recruitment of patients for the clinical trial program for the treatment
of EB patients has been substantially completed. The patients enrolled in the
trial were treated at Rockefeller University Hospital in New York City pursuant
to that hospital's protocols approved by the FDA. The FDA has designated the
Company's Composite Cultured Skin as a Humanitarian Use Device in the treatment
of EB. The Company may apply to the FDA for a Humanitarian Device Exemption for
its product, which, if granted, will enable the Company to begin commercially
marketing its product for the treatment of EB patients in a shorter time than
normally required for a full FDA pre-market approval.
2
<PAGE> 5
In December 1997, the FDA approved protocols of Washington Hospital Center
in Washington, D.C., for the use of the Company's Composite Cultured Skin in a
pilot clinical trial program for the treatment of patients with donor site
wounds. No patients are being enrolled for this clinical trial program because
the Company now proposes to seek FDA approval for the conduct of a pivotal
clinical trial for donor site wounds using a larger number of patients to be
treated at a number of hospitals. If the use of the Company's product is
effective in the treatment of the patients in such expanded clinical trial, the
time when the Company can seek FDA approval for commercially marketing its
product for the treatment of donor site wounds will be reduced from the time
that would otherwise be required if both the pilot and pivotal trials were
conducted.
The Company believes that its Composite Cultured Skin, if successfully
developed, will have wide commercial application for treatment of severe burn
patients, patients who suffer severe ulcerations and various skin diseases (such
as EB), patients with donor site wounds, venous ulcers and diabetic ulcers, as
well as for reconstructive and cosmetic surgery. There can be no assurance that
the Company's Composite Cultured Skin will be successfully tested in future
human clinical trials or that it can be marketed profitably. See "Forward
Looking Information May Prove Inaccurate."
The Company was organized in 1991 for the purpose of acquiring the
Company's skin product from Dr. Mark Eisenberg and to develop, test and market
such product. The Company's executive offices are located at 3960 Broadway, New
York, New York, and its telephone number is (212) 740-6999.
3
<PAGE> 6
THE OFFERING
Securities Offered 1,247,584 shares of Common Stock
Common Stock to be outstanding
after the Offering(1) 6,280,447 shares
Use of Proceeds Other than the proceeds from the
exercise of the Options and
Warrants, the Company will not
receive any proceeds from the sale
of the shares being registered for
the Selling Shareholders hereby.
Risk Factors An investment in the shares involves
a high degree of risk. See "Risk
Factors."
Nasdaq SmallCap System
Trading Symbol "ORTC"
- ----------
(1) Includes 415,456 shares offered by this prospectus issuable upon exercise
of all the Options and Warrants. Does not include (i) 8,281 shares
reserved for issuance upon exercise of warrants expiring January 19, 2000
exercisable at $1.00 per share; (ii) 1,199,800 shares reserved for
issuance upon the exercise of 1,199,800 publicly traded Class B Warrants
at $15 per share and expiring January 19, 1999; (iii) 346,500 shares
reserved for issuance upon the exercise of stock options included in the
Company's 1996 Stock Option Plan, of which options to purchase 297,000
shares at prices ranging from $6.00 to $18.75 have already been granted;
and (iv) 550,851 shares reserved for issuance upon the exercise of other
outstanding warrants at prices ranging from $6.00 to $14.25 and expiring
at various times from December 31, 1998 to December 1, 2002.
4
<PAGE> 7
RISK FACTORS
The purchase of the shares offered hereby involves a high degree of risk,
including, but not necessarily limited to, the risks described below. Before
purchasing the shares, each prospective investor should consider carefully the
general investment risks enumerated elsewhere in this Prospectus and the
following risk factors, as well as the other information contained in this
Prospectus.
Need for Future Financing. The Company anticipates that its cash on hand
is sufficient to meet its cash requirements through approximately March 2000.
However, there can be no assurance that unexpected costs will not be incurred.
Before the end of that period the Company may be required to raise additional
funds to complete its human clinical trials (if not completed by then) and
produce and market its Composite Cultured Skin. The Company may then seek
additional funds through sale of its securities to the public and through
private markets, debt financing or short term loans. There can be no assurance
that the Company will be able to obtain additional financing on terms acceptable
to it, if at all. The failure of the Company to obtain acceptable additional
financing would have a material adverse effect on the operations of the Company.
The Company has no current understandings or commitments from any persons to
provide any additional financing. Additional financing may result in dilution
for then current shareholders. See "Forward Looking Information May Prove
Inaccurate."
Development Stage Company; Limited Operating History. The Company is a
development stage company organized in March 1991. It has no products approved
for commercial sale and has not realized any operating revenues. The Company is
likely to continue to encounter difficulties which are common to development
stage companies, including unanticipated costs relating to development, delays
in the testing of products, regulatory approval and compliance and competition.
The Company will not, in all likelihood, generate any revenues until it obtains
FDA approval to sell its skin replacement product in commercial quantities for
human application. There can be no assurance that such approval will be
obtained, or if obtained, that sales of the Company's product can be made on a
profitable basis.
Uncertainty of Clinical Trials; Need to Obtain FDA Premarketing Approval;
Government Regulation. Pursuant to the Federal Food Drug and Cosmetic Act and
regulations promulgated thereunder, the FDA regulates the manufacture,
distribution and promotion of medical devices in the United States. The
Company's Composite Cultured Skin is subject to regulation as a medical device.
Prior to commercial release of the Company's product, premarket approval ("PMA")
by the FDA will be required. PMA entails proof of nontoxicity, safety and
efficacy in human clinical trials. Premarket approval is a lengthy and expensive
process and there can be no assurance that FDA approval will be obtained. In
February 1994, the Company received FDA approval to commence human clinical
trials. The human clinical trials are also lengthy and expensive processes, the
successful completion of which cannot be assured. Moreover, even if the Company
obtains FDA approval, the Composite Cultured Skin and any manufacturing
facilities used to manufacture it will continue to be subject to review,
periodic inspections and specific recordkeeping, reporting, product testing,
design, safety and labeling requirements. Accordingly, the Company's business,
financial condition and emergence from the development stage are dependent on
timely FDA approval for its product.
Uncertainty of Market Acceptance; Reliance on One Product. Acceptance of
the Company's product is difficult to predict and will require substantial
marketing efforts and the expenditure of
5
<PAGE> 8
significant funds. There can be no assurance that the Company's product will be
successful in providing viable skin replacement on a commercial basis or that it
will be accepted by the medical community. In addition, the Company's only
product is its Composite Cultured Skin. The Company does not expect its product
to be available for commercial sale for at least two years. The Company expects
that its Composite Cultured Skin will likely be, if and when commercially
available, its sole product for an indefinite period of time. Failure of the
Company's product to achieve market acceptance will have a material adverse
impact on the Company's financial condition.
Technological Change; Highly Competitive Industry. The biomedical field is
undergoing rapid and significant technological change. The Company's success
will depend on its ability to establish and maintain a competitive position in
this marketplace. Many companies and academic institutions have developed, or
are capable of developing products based on other technologies that are or may
be competitive with the Company's product. The Company's competitors include
Organogenesis, Inc., Genzyme Tissue Repair, Inc., Advanced Tissue Sciences,
Inc., Life Cell Corporation and Integra Life Sciences. Many of those and other
potential competitors are well established, are much larger than the Company and
have substantially greater financial and other resources than the Company and
have skin replacement products that are being commercially sold or are available
for commercial sale. Such companies and academic institutions may succeed in
developing other products that are more effective than the Company's Composite
Cultured Skin.
Anticipated Dependence on Third Parties for Marketing; Limited Marketing
Experience. The Company intends to sell its product primarily through its own
efforts and may use third party distributors on a limited basis. The Company has
no marketing experience and has limited financial and other resources to
undertake extensive independent marketing activities. There can be no assurance
that the Company will be able to market its Composite Cultured Skin successfully
or enter into agreements with third parties on acceptable terms for such
services.
Limited Supplies of Materials. The Company is currently purchasing bovine
collagen sponges, a key component of its product, from one supplier who produces
the sponges to the Company's specifications. The Company has no written
agreement with that supplier obligating the supplier to supply sponges to the
Company. If the Company were required to secure another source for its bovine
collagen sponges, the Company would encounter considerable additional delay and
expense in continuing its human clinical trials and, consequently, in marketing
its Composite Cultured Skin.
The Company will continue to rely on a limited number of outside suppliers
to supply other materials that it uses in producing and testing its Composite
Cultured Skin. No assurance can be given that the Company or its suppliers will
continue to have access to a sufficient supply of these materials.
Limitations of Patent Protection. Dr. Mark Eisenberg, an officer and
director of the Company, who developed the Company's Composite Cultured Skin has
been granted patents, which he has assigned to the Company, for the Company's
Composite Cultured Skin in the United States and in several foreign countries
and is prosecuting patent claims for it in others. There can be no assurance
that the United States patent will not be successfully challenged in court
proceedings. Nor can there be any assurance that any United States or foreign
patents will provide any commercial benefits to the Company.
6
<PAGE> 9
Several of the Company's competitors, including Organogenesis, Inc.,
Advanced Tissue Sciences, Inc., Genzyme Tissue Repair Inc., Integra Life
Sciences and LifeCell Corporation have been granted patents relating to their
particular artificial skin technologies.
Product Liability. The Company is exposed to the risk of product liability
claims in the event that its product causes injury or otherwise results in
adverse effects. Although the Company has obtained product liability insurance
coverage in the amount of $1,000,000, there can be no assurance that such
insurance coverage will be adequate to protect the Company against future
product liability claims or that product liability insurance will be available
to the Company in the future on terms acceptable to the Company, if at all.
Dependence on Key Personnel. The Company is dependent on Dr. Steven Katz,
the Company's President, for managing the affairs of the Company. The loss of
Dr. Katz' services could adversely affect the Company.
Future Sale of Unregistered Securities. 1,381,300 shares of the Company's
presently outstanding shares of Common Stock are "restricted securities," as
that term is defined under Rule 144 ("Rule 144") promulgated under the
Securities Act of 1933, as amended (the "Act"). In general, under Rule 144 a
person who owns any restricted shares of Common Stock for at least one year may
sell in the public securities markets, within any three month period, such
number of those restricted shares that does not exceed the greater of one
percent of the total number of outstanding shares of the same class or the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least three months
immediately preceding the sale and who owns shares of Common Stock that have
been held for a period of at least two years is entitled to sell such shares
under Rule 144 without regard to any volume limitations. 1,912,256 additional
shares that are issuable upon exercise of outstanding warrants and options will
be eligible for immediate sale into the public securities markets after such
warrants and options are exercised. These are 1,199,800 shares issuable upon
exercise (at a price of $15.00 per share) of the Company's publicly traded Class
B warrants, 297,000 issuable upon exercise of options (at prices ranging from
$6.00 to $18.75) granted under the Company's 1996 Stock Option Plan and 415,456
shares offered by this Prospectus issuable upon the exercise (at prices ranging
from $1.00 per share, for 175,456 shares, to $24.75, for 120,000 shares) of the
Options and Warrants. In addition, 559,132 shares that are issuable upon
exercise of other outstanding warrants and options exercisable at prices ranging
from $1.00 (for 8,281 shares) to $14.25, are eligible for sale in the public
securities markets one or two years after such warrants and options are
exercised.
No prediction can be made as to the effect, if any, that sales of those
shares of Common Stock, or the availability of those shares for sale, will have
on the market prices of the Common Stock prevailing from time to time.
Possible Volatility of Securities Prices. The market price of the
Company's Common Stock may be highly volatile, as has been the case with the
securities of other development stage biotechnology companies. Factors such as
announcements by the Company or its competitors concerning technological
innovations, new commercial products or procedures, proposed government
regulations and developments or disputes relating to patents or proprietary
rights may have a significant impact on the market price of the Company's Common
Stock.
7
<PAGE> 10
State Blue Sky Registrations. The shares offered hereby may be sold in
certain states and the purchaser of such shares may then resell such shares in
the public securities markets (or otherwise) in such states only if such Common
Stock is then qualified for sale or exempt from qualification under applicable
state securities laws of the jurisdictions in which such purchasers reside.
Although the Company's Common Stock is qualified for sale or exempt from
qualification in a number of states, there can be no assurance that the shares
purchased in this Offering can be sold in every state. The failure of the
Company to meet the state securities law requirements of a state in which a
purchaser in this Offering seeks to resell the shares purchased in this
Offering, will cause the resale or disposition of the Common Stock purchased in
this Offering to become unlawful in that state.
No Dividends. The Company has not paid any dividends on its shares and
does not intend to do so in the foreseeable future. It is the present intention
of the Company's Board of Directors to retain all earnings, if any, for use in
the Company's business operations.
Concentration of Ownership; Delaware Corporate Law Provisions. The
Company's executive officers, directors, founders and affiliated persons
beneficially own 2,047,930 shares of the Common Stock representing approximately
35% of the total outstanding shares before the exercise of any outstanding
warrants and options. Accordingly, such persons will be able to exercise
substantial control in the election of the directors of the Company, increases
in the authorized capital or the dissolution, merger, or sale of the assets of
the Company and otherwise influence the control of the Company's affairs. Such
substantial control of the Company by these persons could serve to impede or
prevent a change of control of the Company. As a result, potential purchasers
may not seek to acquire control of the Company through the purchase of Common
Stock which may tend to reduce the market price of the Common Stock. In
addition, the Company is subject to provisions of the General Corporation Law of
the State of Delaware respecting business combinations which could, under
certain circumstances, also hinder or delay a change in control.
The Year 2000 Problem. At the time computer programs were first being
written, two digits were used instead of four to define years on such programs.
For example, the year "1998" was written within such computer program as "98."
As a result, at the onset of the new millennium, any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. This potential difficulty is commonly referred to as the "Year
2000" problem. The Company believes that the Year 2000 problem will not have any
material effect on its operations.
USE OF PROCEEDS
Other than the proceeds received by the Company from the exercise of the
Options and Warrants, the Company will not receive any proceeds from the sale of
shares covered by this Prospectus.
Any proceeds received by the Company from the exercise of any or all of
the Options and Warrants may be used for general working capital purposes,
including research and development and human clinical trials. The Company has
not specifically allocated the proceeds among these uses, and actual
expenditures will depend on a number of factors. The use of any proceeds from
the exercise of the Options and Warrants, of which there is no assurance, and
the timing of such use, will depend on the
8
<PAGE> 11
availability of cash from other sources. Proceeds not immediately required for
the purposes described above will be invested principally in United States
government securities, short term certificates of deposit, money market funds or
other short term, interest bearing investments.
9
<PAGE> 12
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Company's Certificate of Incorporation provides that the personal
liability of the directors of the Company shall be limited to the fullest extent
permitted by the provisions of Section 102(b)(7) of the General Corporation Law
of the State of Delaware (the "DGCL"). Section 102(b)(7) of the DGCL generally
provides that no director shall be liable personally to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that the Certificate of Incorporation does not eliminate the liability
of a director for (i) any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; (iii) acts or
omissions in respect of certain unlawful dividend payments or stock redemptions
or repurchases; or (iv) any transaction from which such director derives
improper personal benefit. The effect of this provision is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of her or his fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. The limitations
summarized above, however, do not affect the ability of the Company or its
stockholders to seek nonmonetary remedies, such as an injunction or rescission,
against a director for breach of her or his fiduciary duty. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission (the "Commission"), such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
In addition, the Certificate of Incorporation provides that the Company
shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify all
persons whom it may indemnify pursuant to Section 145 of the DGCL. Section 145
of the DGCL permits a company to indemnify an officer or director who was or is
a party or is threatened to be made a party to any proceeding because of his or
her position, if the officer or director acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The Company maintains a directors' and officers' liability insurance
policy covering certain liabilities that may be incurred by directors and
officers in connection with the performance of their duties. The entire premium
for such insurance is paid by the Company.
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<PAGE> 13
SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of May 4, 1998 by each Selling
Shareholder. Except as indicated in the footnotes to this table, the persons
named in this table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
Amount and Percentage of
Nature of Outstanding Shares Beneficially
Name and Address Beneficial Shares Owned Registered Owned
of Beneficial Owner Ownership** Prior to Sale** For Sale After Sale**
- ------------------- ----------- --------------- -------- ------------
<S> <C> <C> <C> <C>
Ron Lipstein* 347,606(1) 5.9% 35,000(2) 312,606
Joseph Stechler 927,266(3) 15.1% 79,206 848,060(3)
15 Engle Street
Englewood, NJ 07631
Home Insurance Company 288,818(4) 4.8% 127,707(7) 161,111
59 Maiden Lane
New York, NY 10038
Dawson-Samberg Capital 542,679(5) 9.2% 311,526 231,153
Management, Inc.
354 Pequot Avenue
Southport, CT 06490
The Travelers Indemnity
Company 307,692 5.2% 307,692 --
One Tower Square
Hartford, CT 06183
Judah Wernick 252,500(6) 4.1% 240,000(6) 12,500
Patterson Travis, Inc.
One Battery Park Plaza
New York, NY 10004
Daniel E. Strauss 7,788 *** 7,788 --
411 Hackensack Avenue
Hackensack, NJ 07601
</TABLE>
11
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C>
Morris and Lynda Feldman 18,600 *** 18,600 --
138-33 78th Road
Flushing, NY 11367
Alan Abrams 793 *** 793 --
593 Candace Lane
Villanova, PA 19085
Jonathan Altman 1,983(7) *** 1,983(7) --
55 Pine Road
Briarcliff, NY 10516
Gary Apfel 991 *** 991 --
313 South McCadden Place
Los Angeles, CA 90020
Ron Apfel 1,983(7) *** 1,983(7) --
1664 Hanover Street
Teaneck, NJ 07666
Willy Apfel 991(7) *** 991(7) --
895 West End Avenue
New York, NY 10025
Ron Balshine 3,458(7) *** 3,458(7) --
1103-518 Moberley Road
Vancouver, B.C
Canada V5Z 4G3
Balshine Foundation Ltd. 4,204 *** 4,204 --
1103-518 Moberley Road
Vancouver, B.C
Canada V5Z 4G3
Bentex Trimmings, Inc. 2,110 *** 2,110 --
c/o David G. Weiss
100-11 67th Drive
Forest Hills, NY 08817
Joseph Bijou 3,966 *** 3,966 --
c/o Quick Quality
P.O. Box 3145
Edison, NJ 08817
Edward Blanco 1,047 *** 1,047 --
1179 Elberon Avenue
Elberon, NJ 07740
Elliot Y. Braun 1,983 *** 1,983 --
566 Westgate Drive
Edison, NJ 08820
Stephen Cheseldine 1,983(7) *** 1,983(7) --
1015 Fitzwater Street
Philadelphia, PA 19147
Frank J. A. Cilluffo 3,966 *** 3,966 --
179 Pleasant Street
Portsmouth, NH 03801
CSM Partners L.P. 1,983(7) *** 1,983(7) --
26 Broadway
New York, NY 10019
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
Rollin M. Dick 3,966(7) *** 3,966(7) --
9085 E. SR 334
Zionsville, IN 46077
Arthur W. Eckman 1,983 *** 1,983 --
2 Cow Lane
Kings Point, NY 11024
Anthony J. Forte 2,380 *** 2,380 --
28 Grand Teton Avenue
Howell, NJ 07731
David Frager 1,983 *** 1,983 --
11 Judith Lane
Monsey, NY 10952
Sherman Frager 2,617 *** 2,617 --
330 Cynwyd Road
Bala Cynwyd, PA 19066
Azriel Genack 2,142 *** 2,142 --
66 West 94th Street
New York, NY 10025
Menachem Genack 14,622 *** 1,983 12,639
129 Meadowbrook Road
Englewood, NJ 07631
Joseph Giamanco 1,983 *** 1,983 --
4 White Rock Terrace
Holmdel, NJ 07733
Marc Goldstein 2,094(7) *** 2,094(7) --
407 East 91st Street
New York, NY 10178
Shalom Greenbaum 3,966 *** 3,966 --
1175 Park Avenue
New York, NY 10028
Leonard C. Griff 2,094(7) *** 2,094(7) --
1545 Appletree Road
Harrisburg, PA 17110
James J. Hain 3,966 *** 3,966 --
526 Rutland Avenue
Teaneck, NJ 07666
Morris Handler 1,983 *** 1,983 --
60 East 42nd Street
New York, NY 10165
Ben Jakobovitz 991(7) *** 991(7) --
223 S. Alta Vista Blvd
Los Angeles, CA 90036
Estate of Ludwig Jesselson 5,949 *** 5,949 --
1301 Avenue of the Americas
New York, NY 10019
Grandchildren 12/18/80 Trust 3,966 *** 3,966 --
1301 Avenue of the Americas
New York, NY 10019
David J. Katz 991 *** 991 --
583 Winthrop Road
Teaneck, NJ 07666
</TABLE>
13
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C>
Mathew J. Maryles 991 *** 991 --
981 East 18th Street
Brooklyn, NY 11230
Mindy Orlinsky 8,043(7) *** 8,043(7) --
586 Sunderland Road
Teaneck, NJ 07666
Steven Resnick & Martha Resnick 2,380 *** 2,380 --
8 Warrick Road
Great Neck, NY 11023
Resource Trust Co. f/b/o
C. Andrew Salzburg (NY)
Profit Sharing Plan 1 2,094(7) *** 2,094(7) --
WCMC Burn Center
Valhalla, NY 10595
Albert K. Sara
c/o Gabriel A. Sara, M.D 2,110(7) *** 2,100(7) --
27 Meadow View Court
Leonia, NJ 07605
Marcia Schlacht 1,547 *** 1,547 --
219 Narrow Lane
Woodmere, NY 11598
Gilda Shapiro, TTEE 7,932(7) *** 7,932(7) --
2000 South Ocean Boulevard
Palm Beach, FL 33480
Sally and Marlene Silvera
as Tenants in Common
c/o Leon Silvera 2,380 *** 2,380 --
19 West 34th Street
New York, NY 10016
Wendell M. Starke, as Trustee
under Declaration of Trust dated
10/2/91 Nations Bank Trust Dept.,
Attn: Lareecia Phillips, Custodian
for Wendell M. Starke Custody
Account 162660 3,966(7) *** 3,966(7) --
Nationsbank Plaza
600 Peachtree Street
Atlanta, GA 30308
David Sutton 2,094 *** 2,094 --
1937 East 3rd Street
Brooklyn, NY 11223
Solomon A. Sutton 1,983 *** 1,983 --
2036 East 5th Street
Brooklyn, NY
Jorge A. Urzua 2,078(7) *** 2,078(7) --
762 Eighth Avenue
New York, NY 10030
Marcel Weissman 1,983 *** 1,983 --
70-24 170th Street
Flushing, NY 11365
</TABLE>
14
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C>
W I A F Investors 1,983 *** 1,983 --
466 Arbuckle Avenue
Cedarhurst, NY 11516
Lionel and Lydia Zuckier 1,983 *** 1,983 --
263 Ogden Avenue
Teaneck, NJ 07666
</TABLE>
- ----------
* The address of Mr. Lipstein is at the Company's offices, 3960 Broadway,
New York, NY 10032.
** The number of Shares of Common Stock beneficially owned by each person or
entity is determined under rules promulgated by the Commission. Under such
rules, beneficial ownership includes any shares as to which the person or
entity has sole or shared voting power or investment power. Included among
the shares owned by such person are any shares which such person or entity
has the right to acquire within 60 days after April 23, 1998. Unless
otherwise indicated, each person or entity referred to above has sole
voting and investment power with respect to the shares listed. The
inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of such shares.
Except for information in its records and reports filed by them with the
Company, the Company has no knowledge of whether any of the Selling
Shareholders who are not directors of the Company own any other shares of
the Company or options or warrants to purchase the Company's shares. The
Company believes that none of the Selling Shareholders will own 1% or more
of the Company's outstanding shares if they sell all of their shares
registered for sale, except Ron Lipstein, who will own 5.3%, Joseph
Stechler, who will own 13.8%, Home Insurance Company, who will own 2.7%,
and Dawson-Samberg Capital Management, Inc., who will own 3.9%.
*** Less than 1%, based upon information available to the Company.
(1) Includes 35,000 shares registered hereby for sale by Dollspart Supply Co.,
Inc. (a corporation of which Mr. Lipstein is the sole shareholder). Also
includes 36,000 shares owned by Mr. Lipstein's minor children. Mr.
Lipstein disclaims any beneficial interest in such 36,000 shares. Also
includes 60,000 shares issuable to Mr. Lipstein upon his exercise of
outstanding options and warrants.
(2) Consists of shares owned by Dollspart Supply Co., Inc., a corporation of
which Mr. Lipstein is the sole shareholder.
15
<PAGE> 18
(3) Includes shares owned by Stechler & Company. Also includes 287,430 shares
to be issued by the Company to Mr. Stechler or Stechler & Company upon
their exercise of outstanding options or warrants. Does not include
1,049,500 shares held in investment accounts for clients of Stechler & Co.
Stechler & Co.'s investment power over such investment accounts may be
terminated at any time by such clients.
(4) Includes 127,707 shares (registered hereby) to be issued by the Company to
Home Insurance Company upon Home Insurance Company's exercise of
outstanding warrants, exercisable at $1.00 per share and expiring January
19, 2000.
(5) Shares held by two investment funds. The Company believes that
Dawson-Samberg Capital Management, Inc. has sole or shared investment
and/or voting power for these shares. Includes 31,153 shares issuable upon
exercise of outstanding warrants which are not included among the shares
registered for sale.
(6) Shares beneficially owned and registered include 240,000 shares issuable
upon exercise of options and warrants. Shares beneficially owned but not
registered include 12,500 shares issuable upon exercise of a warrant. Does
not include approximately 530 shares of Common Stock held in the trading
account of Patterson Travis, Inc., with whom Mr. Wernick is affiliated.
Also does not include 17,100 shares of Common Stock issuable upon the
exercise of Class B Warrants held in the trading account of Patterson
Travis, Inc. Mr. Wernick disclaims any beneficial interest in the shares
and warrants held by Patterson Travis, Inc.
(7) Consists of shares issuable upon exercise of warrants at $1.00 per share,
expiring January 19, 2000.
16
<PAGE> 19
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $.001 per share, of which 5,864,991 shares were issued and outstanding as
of May 4, 1998.
The holders of Common Stock are entitled to one vote per share for the
election of directors and with respect to all other matters to be voted on by
shareholders. Shares of Common Stock do not have cumulative voting rights.
Therefore, the holders of more than 50% of such shares voting for the election
of directors can elect all of the directors if they choose to do so and, in that
event, the holders of the remaining shares will not be able to elect any
directors. The holders of Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors out of legally available funds. In
the event of liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to
17
<PAGE> 20
share ratably in all assets remaining available for distribution to them after
payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the Common Stock. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
General Corporation Law Provisions
A Delaware statute prevents an "interested stockholder" (defined generally
as a person owning 15% or more of a corporation's voting stock) from engaging in
a "business combination" with the Delaware corporation for three years following
the date the person became an interested stockholder unless generally speaking,
the transaction is approved by the Company's Board of Directors and the vote of
two thirds of the outstanding shares not owned by such interested stockholder.
This statute could have the effect of discouraging, delaying or preventing
hostile takeovers, including those that might result in the payment of a premium
over market price or changes in control or management of the Company.
Transfer and Warrant Agent
The transfer agent for the Common Stock and the warrant agent for the
Company's publicly traded Class B Warrants is Jersey Transfer and Trust Co.,
whose address is 201 Bloomfield Avenue, P.O. Box 36, Verona, New Jersey 07044.
PLAN OF DISTRIBUTION
All of the shares of Common Stock offered pursuant to this Prospectus are
being offered by the holders thereof (collectively, the "Holders"), and,
therefore, the Company will not receive any proceeds resulting from the sale of
any of such shares, except for any proceeds from the exercise, if any, of the
Options and Warrants.
The shares of Common Stock included herein may be sold from time to time
to purchasers directly by the Holder thereof. Alternatively, the Holders of any
such shares may from time to time offer the shares of Common Stock through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Holders and any
underwriters, dealers or agents who participate in the distribution of such
shares may be deemed to be "underwriters" under the Securities Act, and any
discounts, commissions or concessions received by any such persons might be
deemed to be underwriting discounts and commissions under the Securities Act.
SHARES ELIGIBLE FOR FUTURE SALE
1,381,300 shares of the Company's presently outstanding shares of Common
Stock are "restricted securities," as that term is defined under Rule 144 ("Rule
144") promulgated under the Act. In general, under Rule 144 a person who owns
any restricted shares of Common Stock for at least one year may sell in the
public securities markets, within any three month period, such number of those
restricted shares that does not exceed the greater of one percent of the total
number of
18
<PAGE> 21
outstanding shares of the same class or the average weekly trading volume during
the four calendar weeks preceding the sale. A person who has not been an
affiliate of the Company for at least three months immediately preceding the
sale and who owns shares of Common Stock that have been held for a period of at
least two years is entitled to sell such shares under Rule 144 without regard to
any volume limitations. 1,912,256 additional shares that are issuable upon
exercise of outstanding warrants and options will be eligible for immediate sale
into the public securities markets after such warrants and options are
exercised. These are 1,199,800 shares issuable upon exercise (at a price of
$15.00 per share) of the Company's publicly traded Class B warrants, 297,000
issuable upon exercise of options (at prices ranging from $6.00 to $18.75)
granted under the Company's 1996 Stock Option Plan and 415,456 shares offered by
this Prospectus issuable upon the exercise (at prices ranging from $1.00 per
share, for 175,456 shares, to $24.75, for 120,000 shares) of the Options and
Warrants. In addition, 559,132 shares that are issuable upon exercise of other
outstanding warrants and options exercisable at prices ranging from $1.00 (for
8,281 shares) to $14.25, are eligible for sale in the public securities markets
one or two years after such warrants and options are exercised.
No prediction can be made as to the effect, if any, that sales of those
shares of Common Stock, or the availability of those shares for sale, will have
on the market prices of the Common Stock prevailing from time to time.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997.
(b) The description of the Common Stock set forth in the Company's
Registration Statement on Form 8-A filed December 5, 1995, including any
amendment or report filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
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 contained herein or in a document incorporated or
deemed to be 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
incorporated or 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.
LEGAL MATTERS
The legality of the Common Stock included in this Prospectus has been
passed upon for the Company by Feder, Kaszovitz, Isaacson, Weber, Skala & Bass
LLP, New York, New York. Gabriel Kaszovitz, a member of such firm, is a
shareholder of the Company and is the owner of a warrant expiring April 1, 2000
for the purchase of 10,000 shares of Common Stock at $6.00 per share.
EXPERTS
The financial statements of the Company at December 31, 1997 and for each
of the two years then ended and the period from March 12, 1991 inception through
December 31, 1997, incorporated by reference in this Prospectus from the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997, have been incorporated herein in reliance on the report of Grant Thornton
LLP, Independent Certified Public Accountants, given on the authority of the
firm as experts in accounting and auditing.
FORWARD LOOKING INFORMATION MAY PROVE INACCURATE
This Prospectus contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of Management,
as well as assumptions made by and information currently available to the
Company. When used in this document, the words "anticipate," "believe,"
"estimate," and "expect" and similar expressions, as they relate to the Company,
are intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions, including those described in this
Prospectus. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially
19
<PAGE> 22
from those described herein as anticipated, believed, estimated or expected. The
Company does not intend to update these forward-looking statements.
AVAILABLE INFORMATION
Since January 20, 1996, the Company has been subject to the reporting
requirements of the Exchange Act. In accordance with the Exchange Act, the
Company has and will continue to file reports, proxy statements and other
information with the Commission. Reports and other information filed by the
Company may be inspected and copied at the public reference facilities of the
Commission in Washington, D.C. Copies of such materials can be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549, at
prescribed rates. In addition, the Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Company's Common Stock is listed on the NASDAQ SmallCap Market
and reports and information concerning the Company can also be inspected through
such exchange. The Company intends to furnish its shareholders with annual
reports containing audited financial statements and such other periodic reports
as the Company deems appropriate or as may be required by law.
The Company will provide without charge to each person who receives this
Prospectus, upon written or oral request of such person, a copy of any of the
information that is incorporated by reference unless the exhibits are themselves
specifically incorporated by reference. Such requests should be directed by mail
to Mr. Ron Lipstein, Secretary, Ortec International, Inc., 3960 Broadway, New
York, NY 10032, or by telephone at (212) 740-6999.
The Company has filed with the Commission a Registration Statement on Form
SB-3 and all schedules and exhibits thereto under the Securities Act with
respect to the Common Stock offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
Offering, reference is made to such Registration Statement, including the
exhibits filed therewith, which may be inspected without charge at the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the Registration Statement may be obtained from the Commission at its
principal office upon payment of prescribed fees. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and, where the contract or other document has been filed as
an exhibit to the Registration Statement, each such statement is qualified in
all respects by reference to the applicable document filed with the Commission.
20
<PAGE> 23
GLOSSARY
The following Glossary defines certain technical terms and abbreviations
used in this Prospectus.
Allograft -- Replacement of damaged skin with materials, synthetic or
natural, other than a patient's own skin.
Collagen -- An insoluble fibrous protein that occurs in vertebrates as the
chief constituent of connective tissue fibrils and in bones.
Composite Cultured Skin -- The Company's product. Produced from cells
derived from human infant foreskins obtained during routine infant circumcisions
which are separated into dermal and epidermal cells, reproduced and the dermal
cells are then grown onto a cross linked bovine collagen sponge and the
epidermal cells are grown on top of that sponge to form the Composite Cultured
Skin.
Dermal -- The lower layer of human skin, beneath the epidermis. A thick
fibroelastic layer that consists of cells that generate such fibroelastic
material and provide a framework for the support of blood vessels that flow
through such layer.
Donor Site Wounds -- Those areas of the body from which healthy skin is
taken in an autograft skin transplant procedure.
EB -- Epidermolysis Bullosa -- A congenitally inherited disorder
characterized by fragile skin that breaks down easily, leading to infections,
ulcerations and contracture that cause deformities of the limbs.
Epidermal -- The upper layer of human skin. A thin multi-layered cellular
sheet of cells approximately 0.5 mm in thickness that is constantly being
regenerated through cell division.
Humanitarian Device Exemption -- An approval for marketing medical devices
used in treating a condition which has a limited patient population and for
which no other products with proved efficacy in treatment are available. The
granting of the exemption generally requires human clinical tests on a small
number of patients to prove that the device is safe and that the probable
benefits of the device to patients outweighs the probable risks. Except for
proof of efficacy, the
21
<PAGE> 24
requirements for a Humanitarian Device Exemption are the same as for granting
pre-market approval. The exemption has to be renewed every eighteen months.
PMA Application -- Premarket approval application submitted to the FDA for
the sale of a new proposed medical device that is not substantially equivalent
to an already cleared device.
22
<PAGE> 25
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 on as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to sell or a
solicitation of an offer to buy any security other than the Common Stock offered
by this Prospectus, or an offer to sell or a solicitation of an offer to buy any
security, by any person in any jurisdiction in which such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, imply that the information
in this Prospectus is correct as of any time subsequent to the date of this
Prospectus.
-----------------
TABLE OF CONTENTS
Page
----
Prospectus Summary..........................................
Risk Factors................................................
Use of Proceeds.............................................
Disclosure of Commission Position on Indemnification
for Securities Liabilities.................................
Selling Shareholders........................................
Description of Securities...................................
Plan of Distribution........................................
Shares Eligible for Future Sale.............................
Incorporation of Certain Information By Reference...........
Legal Matters...............................................
Experts ....................................................
Forward Looking Information May
Prove Inaccurate...........................................
Available Information.......................................
Glossary....................................................
================================================================================
ORTEC
INTERNATIONAL,INC.
1,247,584 Shares
of Common Stock
==============
PROSPECTUS
==============
_______________, 1998
================================================================================
<PAGE> 26
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that the personal
liability of the directors of the Company shall be limited to the fullest extent
permitted by the provisions of Section 102(b)(7) of the General Corporation Law
of the State of Delaware (the "DGCL"). Section 102(b)(7) of the DGCL generally
provides that no director shall be liable personally to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that the Certificate of Incorporation does not eliminate the liability
of a director for (i) any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; (iii) acts or
omissions in respect of certain unlawful dividend payments or stock redemptions
or repurchases; or (iv) any transaction from which such director derives
improper personal benefit. The effect of this provision is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of her or his fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. The limitations
summarized above, however, do not affect the ability of the Company or its
stockholders to seek nonmonetary remedies, such as an injunction or rescission,
against a director for breach of her or his fiduciary duty. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission (the "Commission"), such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
In addition, the Certificate of Incorporation provides that the Company
shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify all
persons whom it may indemnify pursuant to Section 145 of the DGCL. Section 145
of the DGCL permits a company to indemnify an officer or director who was or is
a party or is threatened to be made a party to any proceeding because of his or
her position, if the officer or director acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
II - 1
<PAGE> 27
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
It is expected that the following expenses will be incurred in connection
with the issuance and distribution of the Common Stock being registered in this
registration statement.
<TABLE>
<S> <C>
SEC Registration fee......................................... $ 2,162.67
*Printing.................................................... 2,000.00
*Accountants' fees and expenses.............................. 2,500.00
*Attorneys' fees and expenses................................ 10,000.00
*Miscellaneous............................................... 337.33
----------
*Total....................................................... $17,000.00
==========
</TABLE>
- ----------
*Estimated
II - 2
<PAGE> 28
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit Number Description
- -------------- -----------
3.1 Agreement of Merger of the Skin Group, Ltd. and the Company
dated July 9, 1992(1)
3.2 Original Certificate of Incorporation(1)
3.3 By-Laws(1)
4.1 Form of Certificate evidencing shares of Common Stock(1)
5.1 Opinion of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP,
counsel for the registrant*
23.1 Consent of Grant Thornton LLP*
Consent of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP
23.2 (included in Exhibit 5.1)*
- ----------
* Filed herewith
(1) Filed as an exhibit to the Company's Registration Statement on Form SB-2
(File No. 33- 96090), or Amendment 1 thereto, and incorporated herein by
reference.
ITEM 28. UNDERTAKINGS
The Registrant hereby undertakes:
1. That for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
2. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution.
II - 3
<PAGE> 29
3. To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.
4. Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Registrant's Certificate of Incorporation, indemnification
agreement, insurance or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II - 4
<PAGE> 30
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly authorized this
Registration Statement or amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on May 6, 1998.
ORTEC INTERNATIONAL, INC.
By: /s/ Steven Katz
---------------------
Steven Katz, PhD
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Steven Katz President, Chief Executive Officer May 6, 1998
- ----------------------- and Chairman (Principal Executive
Steven Katz, PhD Officer)
Senior Vice President, Research and ______, 1998
- ----------------------- Development, and Director
Dr. Mark Eisenberg
/s/ Ron Lipstein Chief Financial Officer, Secretary, May 6, 1998
- ----------------------- Treasurer and Director (Principal
Ron Lipstein Financial and Accounting Officer)
/s/ Alain M. Klapholz Vice President, Operations, and May 6, 1998
- ----------------------- Director
Alain M. Klapholz
/s/ Joseph Stechler Director May 6, 1998
- -----------------------
Joseph Stechler
/s/ Steven Lilien
- ----------------------- Director May 6, 1998
Steven Lilien, PhD
II-5
<PAGE> 31
Exhibit Index
Exhibit Number Description
- -------------- -----------
3.1 Agreement of Merger of the Skin Group, Ltd. and the Company
dated July 9, 1992(1)
3.2 Original Certificate of Incorporation(1)
3.3 By-Laws(1)
4.1 Form of Certificate evidencing shares of Common Stock(1)
5.1 Opinion of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP,
counsel for the registrant*
23.1 Consent of Grant Thornton LLP*
23.2 Consent of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP
(included in Exhibit 5.1)*
- ----------
* Filed herewith
(1) Filed as an exhibit to the Company's Registration Statement on Form SB-2
(File No. 33- 96090), or Amendment 1 thereto, and incorporated herein by
reference.
<PAGE> 1
May 7, 1998
Ortec International, Inc.
3960 Broadway
New York, NY 10032
Re: Registration Statement No. 333-30141 on Form SB-2
and Registration Statement on Form S-3 to be Filed
Ladies and Gentlemen:
We have acted as counsel for Ortec International, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing by
the Company of (i) Registration Statement No. 333-30141 on Form SB-2, which
became effective on July 15, 1997 (the "1997 Registration Statement"), relating
to the offering of 1,323,856 shares of the Company's Common Stock, par value
$.001 per share (the "Common Stock"), and (ii) a Registration Statement on Form
S-3 filed on or about the date hereof with the Securities and Exchange
Commission (the "1998 Registration Statement") (the 1997 Registration Statement
and the 1998 Registration Statement shall sometimes be referred to collectively
as the "Registration Statements") relating to the offering of 361,928 additional
shares of the Company's Common Stock and the deregistering of 123,250 shares of
Common Stock originally included in the 1997 Registration Statement. The
1,247,584 shares in aggregate included in the Registration Statements which have
not yet been sold, or which are not being deregistered, may be sold by certain
selling stockholders of the Company from time to time for their own accounts.
We have examined the Certificate of Incorporation and the By-Laws of the
Company, the minutes of the various meetings and consents of the Board of
Directors of the Company, a representative form of the certificate representing
the Common Stock, originals or copies of such records of the Company,
agreements, certificates of public officials, certificates of officers and
representatives of the Company and others, and such other documents,
certificates, records, authorizations, proceedings, statutes and judicial
decisions, as we have deemed necessary to render the opinions expressed below.
In such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
originals of all documents submitted to us as copies thereof.
Based on the foregoing, we are of the opinion that 832,128 of the 1,247,584
shares of Common Stock included in the Registration Statements which have not
yet been sold or which are not being deregistered, and which may be sold by
certain selling stockholders of the Company from time to time for their own
accounts, have been duly authorized, validly issued and outstanding, and fully
paid and non-assessable, and the remaining 415,456 shares of such 1,247,584
shares have been duly authorized and reserved for issuance and, when paid for
upon the exercise of outstanding warrants and options, will be validly issued,
fully paid and non-assessable.
We hereby consent to be named in the 1998 Registration Statement and the
prospectus, which is a part of the 1998 Registration Statement, as attorneys who
have passed upon legal matters in connection with the offering of the securities
offered thereby under the caption "Legal Matters."
We further consent to your filing a copy of this opinion as an exhibit to
the 1998 Registration Statement.
Very truly yours,
FEDER, KASZOVITZ, ISAACSON,
WEBER, SKALA & BASS LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report, dated February 27, 1998, accompanying the financial
statements and schedules of Ortec International, Inc. (a development stage
enterprise) incorporated by reference in this Registration Statement and
Prospectus on Form S-3. We hereby consent to the incorporation by reference of
the aforementioned report in the Registration Statement of Ortec International,
Inc. on Form S-3, and to the use of our name as it appears under the caption
"Experts".
/s/ Grant Thorton LLP
- ---------------------
GRANT THORTON LLP
New York, New York
April 29, 1998
