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ORTEC INTERNATIONAL, INC.
1,705,698 SHARES OF COMMON STOCK
This prospectus covers 1,705,698 shares of common stock, par value $.001
per share, for sale by our shareholders. Our common stock is traded on the
NASDAQ SmallCap Market System under the symbol "ORTC." On August 22, 2000, the
last reported sale price of the common stock was $7.81.
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SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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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 AUGUST 23, 2000
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In this prospectus, references to the "Company," "Ortec,", "we,""us" and "our"
refer to Ortec International, Inc.
TABLE OF CONTENTS
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Page
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Prospectus Summary..................................................3
Risk Factors........................................................5
Disclosure Regarding Forward-Looking Statement......................9
Use of Proceeds.....................................................9
Selling Shareholders...............................................10
Description of Securities..........................................11
Plan of Distribution...............................................12
Incorporation of Certain Information by Reference................. 13
Legal Matters......................................................13
Experts........................................................... 14
Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................................14
Where You Can Find More Information................................15
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PROSPECTUS SUMMARY
All of the information in this summary is qualified in its entirety by the
more detailed information appearing elsewhere in this prospectus, including
information under "Risk Factors."
ORTEC INTERNATIONAL, INC.
We are a development stage biomaterial and cell culture biotechnology
company that has developed a patented technology which we call Composite
Cultured Skin. Our Composite Cultured Skin acts as a biologically active
dressing that stimulates the repair, replacement and regeneration of human skin.
When our Composite Cultured Skin is applied to the wound site, it produces a mix
of growth factors that stimulate wound closure.
Our product is intended to be utilized for the treatment of numerous skin
wounds, such as venous stasis ulcers, autograft donor sites, diabetic ulcers and
epidermolysis bullosa. With the approval of the United States Food and Drug
Administration we are currently conducting clinical trials of the use of our
Composite Cultured Skin in the treatment of venous stasis ulcers and diabetic
ulcers and have completed clinical trails for the treatment of autograft donor
sites and epidermolysis bullosa. We are still conducting follow up studies of
the patients of the autograft donor site trials to determine the effectiveness
of our Composite Cultured skin in that clinical trial. Venous stasis ulcers
are open lesions on the legs which result from the poor circulation of blood
returning from the legs to the heart. An autograft donor site is an area of a
patient's body from which the patient's skin was taken to cover a wound at
another part of such patient's body. Epidermolysis bullosa is a disease with
a small patient population.
We have developed the technology for the cryopreservation of our product
without diminishing its effectiveness. Cryopreservation means the freezing of
our product to give it a shelf life of approximately six months, as opposed to a
few days when our product is not cryopreserved. We plan to use our product in
its cryopreserved form in our clinical trials for the treatment of venous stasis
ulcers and diabetic ulcers.
Our immediate focus is to use our Composite Cultured Skin to treat acute
and chronic skin wounds and associated diseases. However, we believe that there
is an opportunity to apply our core technologies to repair selected structural
tissues such as tendon, ligament, cartilage, bone and blood vessels. See
"Disclosure Regarding Forward Looking Information."
As a development stage company we have not yet sold any products. Our
activities have been limited to human clinical tests of our Composite Cultured
Skin and research and development. From the creation of Ortec in March 1991
through June 30, 2000, we have spent an aggregate of $11,368,034 for human
clinical trials and research and development, which figure does not include
employee salaries. From inception in March 1991 through June 30, 2000 we have
sustained a net loss of $36,602,094.
Ortec was organized in 1991 under the laws of the State of Delaware for the
purpose of acquiring our skin replacement product and to develop, test and
market it. Our executive offices are located at 3960 Broadway, New York, New
York, and our telephone number is (212) 740-6999.
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THE OFFERING
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Securities offered 1,705,698 shares of common stock
Sellers The shares are being offered by our shareholders
and not by us.
Offering prices Prices then available on the Nasdaq SmallCap
Market or in individually negotiated transactions.
Common stock to be outstanding
after the offering(1) 8,432,884 shares
Use of proceeds We will not receive any proceeds from
the sale of the shares.
Risk factors An investment in the shares involves a high degree
of risk. See "Risk Factors."
Nasdaq SmallCap System
trading symbol "ORTC"
</TABLE>
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(1) Does not include (i) 14,325 shares reserved by us for issuance for three
warrants already exercised; (ii) 1,188,600 shares reserved by us for
issuance upon the exercise of our publicly traded Class B Warrants at $15
per share and expiring September 28, 2000; (iii) 2,989,750 shares reserved
by us for issuance upon the exercise of stock options included in our 1996
Stock Option Plan, of which options to purchase 1,237,650 shares at prices
ranging from $6.00 to $21-3/8 have already been granted by us ; and (iv)
714,773 shares reserved by us for issuance upon the exercise of other
outstanding warrants granted by us, at prices ranging from $7.70 to $15.00
and expiring at various times from March 10, 2001 to March 10, 2005.
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RISK FACTORS
The purchase of the shares involves a high degree of risk, including, but
not necessarily limited to, the risks described below. Before purchasing the
shares, you 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.
1. WE DO NOT HAVE SUFFICIENT FUNDS TO BRING OUR PRODUCT TO MARKET, WHICH MAY
IMPACT OUR CONTINUED VIABILITY.
We anticipate that our cash on hand is sufficient to meet our cash
requirements through approximately March 2001, assuming that we will not incur
unexpected costs. Before the end of that period we will be required to raise
additional funds to complete our human clinical trials and produce and market
our Composite Cultured Skin. We may seek additional funds through sale of our
securities to the public and through private placements, debt financing or short
term loans. Our failure to obtain additional financing will have a material
adverse effect on us and on our operations. We have no current commitments from
any persons that they will provide any additional financing. Additional
financing may result in dilution for then current shareholders.
2. WE ARE A DEVELOPMENT STAGE COMPANY AND BECAUSE WE HAVE NEVER REALIZED
OPERATING REVENUES OR EXPECT TO REALIZE SUFFICIENT OPERATING REVENUES FOR A
WHILE, UNLESS WE SECURE ADDITIONAL FINANCING WE WILL NOT BE ABLE TO CONTINUE TO
OPERATE OUR BUSINESS.
Ortec was organized in March 1991. We have no products approved for
commercial sale and we have not realized any operating revenues. We do not
expect our Composite Cultured Skin to be available for commercial sale until the
latter part of 2000 at the earliest and then only for a disease with a very
small patient population. We will need to secure additional financing to
complete our other human clinical trials and to produce and market our Composite
Cultured Skin for use by larger patient populations for other wounds. We may not
be able to secure such financing nor may we be able to reach that larger
marketing stage with funds that we may be able to raise. We are also 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.
3. WE MAY NOT BE ABLE TO OBTAIN FDA APPROVAL FOR COMMERCIAL SALE OF OUR
PRODUCT SO THAT WE MAY NEVER RECEIVE ANY REVENUES.
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. Our Composite Cultured Skin
is regulated as a medical device. We must receive premarket approval by the FDA
for any commercial sale of our product. Before receiving such approval we must
provide proof in human clinical trials of the nontoxicity, safety and efficacy
of our Composite Cultured Skin. Premarket approval is a lengthy and expensive
process. We may not be able to obtain FDA approval for any commercial sale of
our product. We will not generate any revenues until we obtain FDA approval to
sell our product in commercial quantities for human application. Even if such
FDA approval is obtained, we may not be able to make sales of our product on a
profitable basis.
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4. EVEN IF WE OBTAIN FDA APPROVAL FOR COMMERCIAL SALE OF OUR PRODUCT, THE
MANUFACTURE AND SALE OF OUR PRODUCT WILL CONTINUE TO BE REGULATED BY THE FDA.
IF WE DO NOT COMPLY WITH THE FDA'S MANUFACTURING AND RECORD KEEPING REGULATIONS,
WE MAY NOT BE ABLE TO START OR CONTINUE SELLING OUR PRODUCT.
There will be periodic FDA inspections of the facilities used to
manufacture our Composite Cultured Skin and of our records. Such manufacturing
facilities must meet the FDA's good manufacturing processes standards. We will
also always have to comply with the FDA's recordkeeping, reporting, product
testing, design, safety and labeling requirements. Such regulatory compliance
will increase our operating costs. More important, non-compliance will prevent
us from making commercial sales of our product.
5. THE SUCCESSFUL MARKETING OF OUR PRODUCT WILL DEPEND ON ITS ACCEPTANCE BY
THE MEDICAL COMMUNITY. SECURING SUCH ACCEPTANCE WILL REQUIRE SUBSTANTIAL
EFFORT AND EXPENSE AND IF SUCH ACCEPTANCE BY THE MEDICAL COMMUNITY IS NOT
SECURED WE WILL NOT BE ABLE TO SUCCESSFULLY MARKET OUR PRODUCT.
Our Composite Cultured Skin must be accepted by the medical community as an
effective skin regeneration product in order for us to make any significant
commercial sales. Securing such acceptance will require substantial effort. We
do not have any experience marketing to the medical community and will either
have to employ persons experienced in securing such acceptance or rely on other
companies which have such marketing expertise. We may not be able to secure the
services of such experienced persons or any company having such expertise.
6. SINCE WE HAVE DEVELOPED ONLY ONE PRODUCT, OUR FAILURE TO SELL THAT PRODUCT
ON A PROFITABLE BASIS MIGHT LIMIT OUR ABILITY TO CONTINUE OUR OPERATIONS.
To date, we have developed only one product, our Composite Cultured Skin.
In the event we fail to develop additional products and our product does not
obtain FDA approval for commercial distribution, or even if FDA approval is
obtained, our product is not viewed favorably by the medical community or it
becomes obsolete, we will be unable to become profitable and we may be required
to discontinue our operations.
7. MANY OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER
RESOURCES THAN WE DO. SOME ARE ALREADY MAKING COMMERCIAL SALES OF THEIR SKIN
REPLACEMENT PRODUCTS.
Many companies and academic institutions have developed, or are capable of
developing products based on other technologies that are or may be competitive
with our Composite Cultured Skin. Our competitors include Organogenesis, Inc.,
Genzyme Tissue Repair, Inc., Advanced Tissue Sciences, Inc., Life Cell
Corporation and Integra Life Sciences. Many of those competitors have skin
replacement products that are being commercially sold or are available for
commercial sale. Organogenesis has licensed Novartis, Inc. to distribute its
skin replacement product and Advanced Tissue Sciences has licensed Smith &
Nephew, Plc to distribute its skin replacement product. Many of those and other
potential competitors, and particularly Novartis and Smith & Nephew, are well
established, are much larger than we are and have substantially greater
financial and other resources than we have. In addition, the biomedical field is
undergoing rapid and significant technological change. Such companies and
academic institutions may succeed in developing other products that are more
effective than our Composite
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Cultured Skin. Our success will depend on our ability to establish and maintain
a competitive position in this marketplace, which we may not be able to do.
8. WE MAY NOT BE ABLE TO DEVELOP AND SELL OUR PRODUCT IF SOME OF OUR SUPPLIERS
DISCONTINUE OR ARE DELAYED IN SUPPLYING US WITH THE MATERIALS NECESSARY TO
MANUFACTURE OUR PRODUCT.
We currently purchase bovine collagen sponges, a key component of our
Composite Cultured Skin, from one supplier who produces the sponges to our
specifications. We have no written agreement with that supplier obligating the
supplier to supply sponges to us. If we are required to secure another source
for bovine collagen sponges, we would encounter additional delay and expense in
continuing our human clinical trials and, consequently, in marketing our
Composite Cultured Skin.
We will continue to rely on a limited number of outside suppliers to supply
other materials that we use in producing and testing our Composite Cultured
Skin. Replacing all or some of our suppliers could delay our clinical trials and
create additional expense for us.
9. WHILE WE RELY ON OUR PATENTS TO PROTECT OUR PROPRIETARY INTEREST IN OUR
TECHNOLOGY, WE COULD LOSE THAT PROTECTION IF OUR PATENTS ARE SUCCESSFULLY
CHALLENGED IN FUTURE COURT PROCEEDINGS OR IF OUR TECHNOLOGY IS RENDERED
OBSOLETE BY NEW TECHNOLOGIES DEVELOPED BY OTHERS.
Our U.S. patent expires in 2011. We have also been granted a European
patent for most of Europe, as well as patents in Australia, New Zealand,
Ireland, Israel, Japan, Thailand and South Africa. We are prosecuting patent
claims in Canada, the Russian Federation, Brazil and China. One of our
competitors filed an opposition with the European Patent Office challenging the
validity of our patent in Europe. The opposition in Europe is now being
considered and may not be resolved for at least another year. While the result
in Europe will not affect the validity of our patent in the United States, our
patents might be successfully challenged in court proceedings. In addition, our
United States and foreign patents may not provide us with any commercial
benefits if our product is not effective or if new technologies makes our
product obsolete.
Several of our 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 skin
technologies.
10. WE ARE EXPOSED TO THE RISK OF PRODUCT LIABILITY CLAIMS IN THE EVENT THAT
OUR COMPOSITE CULTURED SKIN CAUSES INJURY OR OTHERWISE RESULTS IN ADVERSE
EFFECTS.
Although we have obtained product liability insurance coverage in the
amount of $2,000,000, such insurance coverage may not be adequate to protect us
against future product liability claims. Product liability insurance may not be
available to us in the future on terms acceptable to us, if at all.
11. WE ARE DEPENDENT ON OUR EXECUTIVE OFFICERS AND CERTAIN OTHER KEY PERSONNEL
FOR MANAGING OUR AFFAIRS AND CONTINUING OUR CLINICAL TRIALS AND RESEARCH AND
DEVELOPMENT ACTIVITIES. THE LOSS OF THEIR SERVICES COULD DELAY OUR CLINICAL
TRIALS AND THE TIME WHEN WE CAN SELL OUR PRODUCT.
The management of our day-to-day operations is handled by our executive
officers. The development of our product is managed by a wide array of
scientific personnel. The loss of the services of
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some of these individuals could cause delays in our ongoing operations,
including delays in the conduct of our clinical trials and the times when we can
start sales of our product for treating different medical conditions.
12. OUR OUTSTANDING OPTIONS AND WARRANTS MAY ADVERSELY AFFECT THE MARKET PRICE
OF OUR COMMON STOCK.
2,900,973 shares that are issuable upon exercise of outstanding warrants
and options at prices ranging from $6.00 to $21-3/8 per share, will be eligible
for immediate sale into the public securities markets after such warrants an
options are exercised. In addition, 240,550 shares that are issuable upon
exercise of other outstanding warrants exercisable at prices ranging from $8.00
to $14.25 are eligible for sale in the public securities markets one or two
years after such warrants and options are exercised. We cannot make any
prediction as to the effect, if any, that sales of those shares, or the
availability of those shares for sale, will have on the market prices of our
common stock prevailing from time to time.
13. THE MARKET PRICE OF OUR COMMON STOCK MAY BE HIGHLY VOLATILE, AS HAS BEEN
THE CASE WITH THE SECURITIES OF OTHER DEVELOPMENT STAGE BIOTECHNOLOGY COMPANIES.
The market price of our common stock has ranged from $5-3/4 to $23 during
the past three years. We believe that in the future factors such as our or our
competitors' announcements 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 our common stock.
14. SINCE WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON STOCK AND DO NOT INTEND
TO DO SO IN THE FORESEEABLE FUTURE, A PURCHASER IN THIS OFFERING WILL ONLY
REALIZE AN ECONOMIC GAIN ON HIS INVESTMENT FROM AN APPRECIATION, IF ANY, IN
THE MARKET PRICE OF OUR COMMON STOCK.
We have never paid, and have no intentions in the foreseeable future to
pay, any dividends on our common stock. Therefore, an investor in this offering,
in all likelihood, will only realize a profit on his investment if the market
price of our common stock increases in value.
15. THE CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK AND CERTAIN CHANGE OF
CONTROL AGREEMENTS WILL DISCOURAGE PURCHASES OF OUR COMMON STOCK BY PERSONS
WHO MIGHT OTHERWISE SEEK TO GAIN CONTROL OF ORTEC.
Our executive officers, directors, founders and affiliated persons
beneficially own 2,053,555 shares of our outstanding common stock representing
approximately 24% of the total of our 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 Ortec's directors, increases in
our authorized capital or the dissolution or merger of Ortec, or sale of our
assets, and otherwise influence the control of our affairs. Such substantial
control by these persons could serve to impede or prevent a change of control of
our Company.
In addition, we will enter into certain agreements with Dr. Steven Katz and
Messrs. Ron Lipstein and Alain Klapholz which provide that, in the event of a
change of control of Ortec, we will be required to (1) pay to such three persons
between 2 and 2.99 times the compensation paid to such three persons in the
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twelve months prior to the date of change of control; (2) extend the expiration
dates of options and warrants held by them so that they expire not less than
three years after such change in control occurs; (3) at their option lend them,
interest free and for a period of three years, the funds needed by them to pay
the exercise prices of warrants and options they exercise; and (4) pay any
special federal excise taxes payable by such three persons on the amounts we
have agreed to pay them and the value of such benefits we have agreed to give
them. Messrs. Katz, Lipstein and Klapholz are all executive officers, directors
and founders of Ortec.
As a result, potential purchasers may not seek to acquire control of our
Company through the purchase of common stock which may tend to reduce the market
price of our common stock. In addition, we are 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.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. For example, statements included in this prospectus
regarding the future clinical trials for our one product, approvals by the
United States Food and Drug Administration and other plans and objectives for
the future and assumptions and predictions about future supply, manufacturing,
costs and marketing are all forward looking statements. When we use words like
"intend," "anticipate," "believe," "estimate," "plan" or "expect," we are making
forward looking statements. We believe that the assumptions and expectations
reflected in such forward looking statements are reasonable, based on
information available to us on the date of this prospectus, but we cannot assure
you that these assumptions and expectations will prove to have been correct or
that we will take any action that we may presently be planning. We have
disclosed certain important factors that could cause our actual results to
differ materially from our current expectations under "Risk Factors" elsewhere
in this prospectus. You should understand that forward looking statements made
in connection with this offering are necessarily qualified by these factors. We
are not undertaking to publicly update or revise any forward looking statement
if we obtain new information or upon the occurrence of future events or
otherwise.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares covered by this
prospectus.
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SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of July 10, 2000 by each selling shareholder.
Except as indicated in the footnotes to this table, we believe that 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.
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AMOUNT AND
NATURE OF SHARES BENEFICIALLY
NAME OF BENEFICIAL REGISTERED OWNED
BENEFICIAL OWNER OWNERSHIP* FOR SALE AFTER SALE*
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Pequot Partners Fund, L.P. 826,239(1)(2) 440,000 386,239(1)(2)
Pequot International Fund, Inc. 806,285(1)(3) 404,845 401,440(1)(3)
Pequot Healthcare Offshore
Fund, L.P. 278,445(1) 242,745 35,700(1)
Pequot Healthcare Fund, L.P. 232,638(1)(4) 185,138 47,500(1)(4)
Yale University 134,900 134,900 --
SG Partners LP 85,336 85,336 --
Core Technology Fund, Inc. 55,900 55,900 --
Sci-Tech Investment Partners LP 38,300 38,300 --
Executive Technology LP 21,800 21,800 --
Yale University Retirement Plan
for Staff Employees 15,500 15,500 --
Matrix Technology Group NV 11,900 11,900 --
HCI Healthcare Investments, Ltd. 82,867 66,667 16,200
Roberts Mitani Capital, LLC 2,667(5) 2,667(5) --
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* The number of shares of common stock beneficially owned by each person or
entity is determined under rules promulgated by the United States
Securities and Exchange 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 July 10, 2000. The
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inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of such shares.
Except for information in our records and reports filed by them with us, we
have no knowledge of whether any of the selling shareholders own any other
shares of our common stock or options or warrants to purchase shares of our
common stock. We believe that none of the selling shareholders will own 1%
or more of our outstanding shares if they sell all of their shares
registered for sale, except that funds and other entities controlled by
Pequot Capital Management, Inc., which will own 10.4%, (see Note 1).
(1) We believe that Pequot Capital Management, Inc. has sole or shared
investment and/or voting power for these shares and for an additional 7,200
shares owned by two other entities.
(2) Includes 40,076 shares issuable upon exercise of outstanding warrants.
(3) Includes 40,077 shares issuable upon exercise of outstanding warrants.
(4) Includes 1,000 shares issuable upon exercise of outstanding warrants.
(5) Consists of shares issuable upon exercise of outstanding warrants.
DESCRIPTION OF SECURITIES
COMMON STOCK
We are currently authorized to issue 25,000,000 shares of common stock, par
value $.001 per share, of which 8,430,217 shares were issued and outstanding as
of August 22, 2000.
The holders of our 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 the 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 our board of directors out of legally available funds. In
the event of liquidation, dissolution or winding up of Ortec, the holders of
common stock are entitled to 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.
OPTIONS AND WARRANTS
The following options and warrants to purchase shares of our common stock
which we have granted are presently outstanding.
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CLASS B WARRANTS. These warrants are publicly traded, are exercisable at a
price of $15.00 per share and expire on September 28, 2000. There are 1,188,600
Class B Warrants outstanding.
STOCK OPTION PLAN. We have reserved 2,989,750 shares for issuance upon the
exercise of stock options included in our 1996 Stock Option Plan. Options to
purchase 1,237,650 shares at prices ranging from $6.00 to $21 3/8 have been
granted by us and are currently outstanding.
OTHER WARRANTS. We have reserved 714,773 shares for issuance upon the
exercise of other warrants granted by us. Such warrants are exercisable at
prices ranging from $7.70 to $15.00 per share and expire at various times from
March 10, 2001 to March 10, 2005.
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 Ortec'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 for our shares of a
premium over market price or changes in control or management of Ortec.
TRANSFER AND WARRANT AGENT
The transfer agent for our common stock and the warrant agent for our
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
We are registering 1,705,698 shares of our common stock covered by this
prospectus on behalf of the selling shareholders. We will pay the costs and fees
of registering our common stock, but the selling shareholders will pay any
brokerage commissions, discounts or other expenses relating to the sale of their
common stock.
The selling shareholders may, from time to time, sell all or a portion of
such shares of our common stock on any market upon which the common stock may be
quoted, in privately negotiated transactions or otherwise, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to the prevailing market prices, or at negotiated prices.
In effecting sales, brokers and dealers engaged by the selling shareholders
may arrange for other brokers or dealers to participate. Brokers and dealers may
receive commissions, discounts or concessions for their services from the
selling shareholders or, if any such broker-dealer acts as agent for the
purchaser of such shares, from such purchaser, in amounts to be negotiated.
These commissions or discounts are not expected to exceed those customary in the
types of transactions involved.
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Any broker, dealer, agent or other person involved in the sale or resale of
the common stock may qualify as "underwriters" within the meaning of Section
2(a)(11) of the Securities Act of 1933, as amended, and a portion of any
proceeds of sale and the broker's, dealer's or agent's commissions, discounts,
or concessions may be deemed to be underwriter's compensation under the
Securities Act.
In addition to selling their common stock under this prospectus, the
selling shareholders may transfer their common stock in other ways not involving
market makers or established trading markets, including directly by gift,
distribution, or other transfer; and the sale of such shares may be made by such
transferees in the public securities markets by delivery of this prospectus to
the buyers in such transactions.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by us with the Securities and Exchange
Commission (the "Commission") are incorporated by reference in this prospectus.
Our Commission file number to be used to locate these documents is 0-27368.
(1) Our Annual Report on Form 10-K for the year ended December 31, 1999.
(2) Our Quarterly Report on Form 10-Q for the quarter ended June 30,
2000.
(3) Our Current Report on Form 8-K filed with the Commission on July 6,
2000.
(4) The description of our common stock set forth in our 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 us 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 of this prospectus 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.
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EXPERTS
The financial statements of the Company, incorporated by reference in this
prospectus, from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, have been incorporated herein in reliance on the report
of Grant Thornton LLP, Independent Certified Public Accountants, given on the
authority of that firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our certificate of incorporation provides that the personal liability of
our directors 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 us or our shareholders for monetary damages for
breach of fiduciary duty as a director, provided that our certificate of
incorporation does not eliminate the liability of a director for (i) any breach
of the director's duty of loyalty to us or our shareholders; (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 our rights and the rights of our shareholders through
stockholders' derivative suits on our behalf, 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 our or our shareholders ability to seek
nonmonetary remedies, such as an injunction or rescission, against a director
for breach of her or his fiduciary duty.
In addition, our certificate of incorporation provides that we shall, to
the fullest extent permitted by Section 145 of the DGCL, indemnify all persons
who we 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 such
company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
We maintain a directors' and officers' liability insurance policy covering
certain liabilities that may be incurred by our directors and officers in
connection with the performance of their duties. The entire premium for such
insurance is paid by us.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors and officers, and to persons controlling Ortec
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
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WHERE YOU CAN FIND MORE INFORMATION
Since January 20, 1996, we have been subject to the reporting requirements
of the Exchange Act. In accordance with the Exchange Act, we have and will
continue to file reports, proxy statements and other information with the
Commission. Reports and other information filed by us 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. Our common stock is listed on the
NASDAQ SmallCap Market and reports and information concerning us can also be
inspected through such exchange. We intend to furnish our shareholders with
annual reports containing audited financial statements and such other periodic
reports as we deem appropriate or as may be required by law.
We 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.
We have filed with the Commission a registration statement on Form S-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 us 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.
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