As filed with the Securities and Exchange Commission on June 1, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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EXACTECH, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2603930
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2320 N.W. 66TH COURT
GAINESVILLE, FLORIDA 32653
(352) 377-1140
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
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TIMOTHY J. SEESE
PRESIDENT
2320 N.W. 66TH COURT
GAINESVILLE, FLORIDA 32653
(352) 377-1140
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of communications to:
FERN S. WATTS, ESQ.
GREENBERG TRAURIG, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
(305) 579-0500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (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. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value.......................... 198,254 shares 11.375 2,255,139.25 626.93
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(1) Determined pursuant to Rule 457 under the Securities Act of 1933, as
amended, for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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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.
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PROSPECTUS
EXACTECH, INC.
198,254 SHARES OF COMMON STOCK
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The selling shareholders are offering 198,254 shares of our common
stock under this prospectus. The shares of common stock offered constitute
shares issuable upon the exercise of (1) warrants originally issued by us to the
underwriter of our initial public offering, (2) warrants issued by us to a
shareholder in connection with the purchase of certain software, (3) warrants
issued by us in connection with our Series A Preferred Stock and (4) warrants
issued by us in connection with our 8% Debentures.
Our common stock trades on the Nasdaq National Market under the symbol
"EXAC." On May 28, 1999, the closing price of one share of common stock on the
Nasdaq National Market was $11.00.
The selling shareholders may offer the shares of common stock through
public or private transactions, on or off the Nasdaq National Market, at
prevailing market prices or at privately negotiated prices. They may make sales
directly to purchasers or to or through agents, dealers or underwriters. We will
not receive any proceeds from the sale of the shares by the selling
shareholders.
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YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 2 IN
THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SHARES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The date of this Prospectus is _____________, 1999.
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THE COMPANY
This summary highlights selected information and does not contain all
the information that is important to you. You should carefully read the
prospectus and the documents we have referred you to in "Where You Can Find More
Information" on page 14 for information about our company and our financial
statements.
Exactech, Inc. develops, manufactures, markets and sells orthopaedic
implant devices and related surgical instrumentation to hospitals and physicians
in the United States and overseas. Early in our history, revenues were
principally derived from sales of our primary hip replacement systems. During
1995, we introduced Optetrak(R), a total primary knee replacement system, which
had been in development for three years. The Optetrak(R) knee system was
conceived by us in collaboration with the Hospital for Special Surgery, an
internationally known hospital for orthopaedic surgery. The Optetrak(R) system
represents a highly differentiated product based on precision manufacturing
techniques and a design which reduces articular contact stress. The Optetrak(R)
system is the most modern rendition of a series of knee implants which were
first introduced in 1974 and which are still being marketed by some of our
competitors. We have entered into an agreement with the Hospital for Special
Surgery which gives us a non-exclusive option with respect to future knee
systems developed at the Hospital for Special Surgery.
In 1997, we scaled up marketing and sales of the AuRA(R) Hip System.
AuRA(R) is a comprehensive system that provides solutions for a broad range of
patient problems. It is specifically designed to support the needs of a maturing
generation of more active patients. The AuRA(R) Hip System is comprised of a new
primary total hip replacement system as well as revision components which
include calcar replacement and long stems. It can also be used for fracture and
tumor applications. All AuRA(R) components have a common proximal geometry which
affords the surgeon reproducibility of results regardless of which stem is
selected. AuRA(R) components can be implanted using a single set of surgical
instruments which makes the system more cost effective.
Currently, the principal products in our line of hip implant devices
consist of three primary total hip implant systems, the Opteon(R) Cemented Hip
System, the MCS(R) Porous Coated Total Hip System and the AuRA(R) System, and
several partial hip implant systems, the AuRA(R) Revision hip implant, the
unipolar implant and the bipolar implant.
OPTEFORM(TM), a newly developed biologic material for grafting and
repairing bone defects, supplied by Regeneration Technologies, Inc., was
introduced in the fourth quarter of 1998. OPTEFORM(TM) is expected to become
increasingly important in our product line as production increases.
Our company was founded by an orthopaedic surgeon in November 1985, and
is incorporated under the laws of the State of Florida.
RISK FACTORS
THE SHARES OF COMMON STOCK OFFERED ARE SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK, INCLUDING, BUT NOT NECESSARILY LIMITED TO, THE RISK FACTORS
DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
INHERENT IN AND AFFECTING OUR BUSINESS AND THIS OFFERING BEFORE MAKING AN
INVESTMENT DECISION.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION.
The development, testing, labeling, distribution, marketing and
manufacture of medical devices, including reconstructive implant products, are
subject to extensive and rigorous regulation in the United States and other
countries. Failure to obtain approvals and clearances for new products and/or
modifications to existing products on a timely basis would likely have a
material adverse effect on our business and financial results. The primary
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regulatory authority in the United States is FDA. The process of obtaining
approval or clearance from government authorities for the sale and marketing of
new products is timeconsuming, expensive and uncertain. In addition, government
approval or clearance of products can subsequently be withdrawn due to failure
to comply with regulatory standards or the occurrence of unforeseen problems
following initial marketing. FDA has the power to ban products manufactured or
distributed by us as well as to require the recall, repair, or replacement of or
refund for our products. A significant recall of one or more of our products
could have a material adverse effect on us. We will be required to apply for
approval or clearance to market new products and certain modifications to
existing products. There can be no assurance that such clearances will be
granted or that review by government authority will not involve delays
materially adversely affecting the marketing and sale of our products.
WE FACE UNCERTAINTY RELATING TO THE AVAILABILITY OF THIRD-PARTY REIMBURSEMENT
FOR OUR PRODUCTS.
In the United States, health care providers that purchase our products,
generally rely on third-party payors, principally federal Medicare, state
Medicaid and private health insurance plans, to pay for all or a portion of the
cost of joint reconstructive procedures and products utilized in those
procedures. There can be no assurance that third-party reimbursement for our
products will continue to be available. We could be materially adversely
affected by changes in reimbursement policies of governmental or private health
care payors that restrict reimbursement for procedures in which our products are
used. In addition, some health care providers have adopted or are considering a
managed care system in which the providers contract to provide comprehensive
health care for a fixed cost per person. Health care providers may attempt to
control costs by authorizing fewer elective surgical procedures, including joint
reconstructive surgeries, or by requiring the use of the least expensive implant
available. We are unable to predict the changes that will be made in the
reimbursement methods or utilization policies utilized by third-party health
care payors or managed care providers. Our quality specifications limit our
ability to compete with the least expensive products available and, accordingly,
requirements of third-party payors that the least expensive product be used
could materially adversely affect us. In addition, market acceptance of our
products in international markets is dependent, in part, upon the availability
of reimbursement health care payment systems. Reimbursement and health care
payment systems in international markets vary significantly by country, and
include both government sponsored health care and private insurance. Failure by
physicians, hospitals and other users of our products to obtain sufficient
reimbursement from health care payors for procedures in which our products are
used or adverse changes in governmental and private payors' policies toward
reimbursement for such procedures would have a material adverse effect on our
business and financial results.
WE NEED TO MAINTAIN SUBSTANTIAL INVENTORY LEVELS.
Because orthopaedic surgeons require immediate access to a broad range
of sizes and types of reconstructive implant products, we are required to
maintain substantial levels of inventory. The maintenance of relatively high
levels of inventory requires us to incur significant expenditures of our
resources. There can be no assurance that we will be able to maintain the levels
of inventory of our products necessary to support the expansion of our business.
The failure to maintain required levels of inventory could have a material
adverse effect on our expansion. As a result of the need to maintain substantial
levels of inventory, we are subject to the risk of inventory obsolescence. In
the event that a substantial portion of our inventory becomes obsolete, it would
have a material adverse effect on us.
WE FACE SIGNIFICANT COMPETITION.
The orthopaedic implant industry is highly competitive and dominated by
a number of companies with substantially greater financial and other resources
than us and competition is expected to intensify. Competitive factors consist
primarily of:
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o product features and design,
o innovation,
o service,
o the ability to maintain new product flow,
o relationships with key orthopaedic surgeons and hospitals,
o strength of distribution network, and
o price.
While price, as opposed to surgeon preference, is becoming increasingly
important in the hip market, we believe that the primary basis of competition in
the knee market remains physician preference. From time to time, we and some of
our competitors have offered significant discounts as a competitive tactic, and
may be expected to continue to do so. We believe that price will become an
increasingly important competitive factor. Our quality specifications limit our
ability to compete with the least expensive products available. Our marketing
targets surgeons and hospitals. Traditionally, the surgeon made the decision as
to which orthopaedic implant to use. As a result of changes in the health care
industry, sales representatives may also make presentations to hospital
administrators, material management personnel, purchasing agents or review
committees that may influence the final decision. Many hospitals restrict
qualified vendors to those with more complete product lines than ours.
Manufacturers of medical devices, including orthopaedic implants, are
increasingly attempting to enter into contracts with hospital chains or
hospitals pursuant to which the hospital chains or hospitals agree to purchase
their products exclusively from such manufacturers, usually in exchange for
discounted prices. If our competitors are successful in securing such contracts,
our ability to compete may be materially adversely affected. In addition, we
face competition for regional sales representatives within the medical
community. There can be no assurance that we will be able to compete
successfully. In addition, there can be no assurance that new medical treatments
and products will not be developed that are more effective or cost-effective
than our products or that would render our products obsolete or uncompetitive.
WE MAY NEED ADDITIONAL FINANCING.
Our business is capital intensive and our capital requirements are
expected to increase significantly in connection with our continued expansion.
We anticipate, based on currently proposed plans and assumptions relating to our
operations (including the costs associated, with, and the timetable for,
expansion), that projected cash flow from operations and borrowings under our
existing credit facilities, will be sufficient to satisfy our contemplated cash
requirements for at least the next 12 months. In the event that our plans change
or our assumptions change or prove to be inaccurate, or if cash flow proves to
be insufficient (due to unanticipated expenses, lower than anticipated sales or
profit margins or otherwise), we may be required to seek additional financing or
curtail our growth activities. To the extent that we incur additional
indebtedness, we will be subject to risks associated with incurring substantial
indebtedness, including the risks, that interest rates may fluctuate and cash
flow may be insufficient to pay principal and interest on the indebtedness. We
have no current arrangements with respect to, or sources of, additional
financing. There can be no assurance that additional financing will be available
to us on acceptable terms, or at all.
WE ARE SUBJECT TO RISKS RELATING TO OUR GROWTH STRATEGY.
Our growth strategy contemplates the expansion of our product line and
our network of sales representatives and distributors. We have achieved moderate
growth to date and have limited experience in effectuating rapid expansion. The
failure to successfully implement our growth strategy could have a material
adverse effect on our business and financial results. Our continued expansion
will be dependent on, among other things, our ability to:
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o obtain governmental clearances for new products,
o increase market acceptance of our products,
o expand our network of domestic sales representatives and
foreign distributors,
o hire and retain qualified scientific and technical personnel,
and
o successfully manage growth, including monitoring operations,
controlling costs and maintaining effective regulatory
compliance procedures.
Our operating expenses can be expected to increase significantly in
connection with our efforts to grow. Increases in those expenses may have a
negative effect on operating results until that time, if ever, as these expenses
are offset by increased revenues. There can be no assurance that our growth
strategy will ultimately be successful.
WE FACE UNCERTAINTY OF MARKET ACCEPTANCE.
Our ability to successfully market new and improved products will
depend on gaining market acceptance of those products. The failure of our
products to gain market acceptance would be likely to have a material adverse
effect on our business and financial results. We have not yet begun marketing
our modular hip revision system or our improved acetabular system. Furthermore,
we are currently developing new products, as well as improvements to our
existing implant products. There can be no assurance that new or improved
products will gain market acceptance.
WE ARE SUBJECT TO ANTI-KICKBACK AND SELF-REFERRAL LAWS.
Federal anti-kickback laws and regulations prohibit any knowing and
willful offer, payment, solicitation or receipt of any form of remuneration,
either directly or indirectly, in return for, or to induce:
o referral of an individual for a service or product for which
payment may be made by Medicare, Medicaid or another government
sponsored health care program, or
o purchasing, leasing, ordering or arranging for, or recommending
the purchase, lease or order of, any service or product for which
payment may be made by a government-sponsored health care
program.
Federal physician self-referral laws are applicable to inpatient and
outpatient hospital services. Subject to some exceptions, these laws prohibit
Medicare or Medicaid payments for services or products furnished by an entity
pursuant to a referral by a physician who has a financial relationship with the
entity through ownership, investment or a compensation arrangement. Possible
sanctions for violation of these anti-kickback and self-referral laws include
monetary fines, civil and criminal penalties, exclusion from Medicare and
Medicaid programs and forfeiture of amounts collected in violation of such
prohibitions. Some states in which we market our products have similar
anti-kickback, anti-fee splitting and self-referral laws, imposing substantial
penalties for violations. The scope and enforcement of these laws is uncertain
and subject to rapid change, especially in light of the lack of applicable
precedent and regulations. There can be no assurance that federal or state
regulatory authorities will not challenge our current or future activities under
these laws. Any challenge by those regulatory authorities could have a material
adverse effect on our business or financial results. Any state or federal
regulatory review of our company, regardless of the outcome, would be both
costly and time consuming. Additionally, changes in these laws and the
enforcement of these laws by regulatory agencies are likely. We cannot predict
the impact on our company of these changes.
UNCERTAIN PROTECTION OF PATENTS AND PROPRIETARY TECHNOLOGY; RISK OF
INFRINGEMENT.
We hold United States patents covering one of our femoral stem
components and our bipolar partial hip implant system and some surgical
instrumentation. We also have patent applications pending with respect to some
surgical instrumentation and some implant components and anticipate that we will
apply for additional patents. In
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addition, we hold licenses from third parties to utilize some patents, including
a non-exclusive license to some patents, patents pending and technology utilized
in the design of the Optetrak(R) knee system. As a result of the rapid rate of
development of orthopaedic implant products, we believe that patents generally
have not been a major factor in the orthopaedic industry to date. However,
patents on specific designs and processes can provide a competitive advantage
and we believe that patent protection of orthopaedic products will become more
important as the industry matures. There can be no assurance:
o as to the breadth or degree of protection which existing or
future patents, if any, may afford us,
o that any patent applications will result in issued patents,
o that patents will not be circumvented or invalidated,
o that our competitors will not commence marketing knee implant
systems utilizing some of the technology incorporated in the
Optetrak(R) system for which we have a non-exclusive license, or
o that the parties from whom we have licensed or otherwise acquired
patent rights, proprietary rights and technology have full rights
to those patent rights and technology.
Furthermore, we do not have patents in any foreign countries where our
products are marketed. The medical device industry has been characterized by
extensive litigation regarding patents and other intellectual property rights.
It is possible that we or rights licensed by us from third parties may infringe
on existing or future patents or proprietary rights of others. Some of our
consultants and key employees have employment and other business relationships
with third parties. If technology, concepts or ideas developed by consultants,
key employees or other third parties are incorporated into our products,
disputes with those persons or other parties with whom those persons have
business relationships may arise as to the proprietary rights to that technology
or those concepts or ideas which may not be resolved in our favor. Our inability
to obtain agreements with each of our consultants and those third parties
pursuant to which they assign to us all their intellectual property rights in
the products being developed by us could have a material adverse effect on our
business and financial results. In the event that our products infringe patents
or proprietary rights of others, we may be required to modify the design of our
products or obtain a license. There can be no assurance that we will be able to
do so in a timely manner or upon acceptable terms and conditions or at all. The
failure to modify our products or obtain a license could have a material adverse
effect on our business and financial results. In addition, there can be no
assurance that we will have the financial or other resources necessary to
enforce or defend a patent infringement or proprietary rights violation action.
Furthermore, if our products infringe patents or other proprietary rights of
others, we could become liable for damages, which could have a material adverse
effect on our business and financial results.
In addition to patents, we rely on trade secrets and proprietary
know-how and employ various methods to protect our proprietary information,
including confidentiality agreements and proprietary information agreements.
However, those methods may not provide adequate protection. There can be no
assurance that those confidential or proprietary information agreements will not
be breached, that we would have adequate remedies for any breach, or that our
trade secrets and proprietary know-how will not otherwise become known to or
independently developed by competitors. The failure to protect our proprietary
information could have a material adverse effect on our business and financial
results.
WE ARE REQUIRED TO MAKE SIGNIFICANT ROYALTY PAYMENTS.
We are required to make significant royalty payments in the future. We
are obligated to pay royalties under our license agreement with the Hospital for
Special Surgery with respect to sales of our Optetrak(R) knee implant system and
under our license agreement with Accumed, Inc. with respect to sales of our
bipolar hip prosthesis. In addition, we have employment and consulting
agreements with some members of our design team, under which we are obligated to
pay royalties equal to specified percentages of net sales of some of our
products. During the years ended December 31, 1996, 1997 and 1998, we paid
aggregate royalties of approximately $572,000, $855,000 and $1,216,000,
respectively. There can be no assurance that we will have the funds to make
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those royalty payments or that the payment of those royalties will not have a
material adverse effect on our results of operation.
WE FACE RISK OF TERMINATION OF LICENSE AGREEMENTS.
We license some patents, patents pending and technology utilized in the
design of our Optetrak(R) knee implant system under a license agreement with the
Hospital for Special Surgery. The license agreement provides that the Hospital
for Special Surgery may terminate our license if various events occur, including
our failure to pay the royalties payable to the hospital, our failure to satisfy
quality specifications or our breach of other material terms of the license
agreement. The termination of that license would have a material adverse effect
on our business and financial results.
WE DEPEND ON THIRD-PARTY SALES AND MARKETING ARRANGEMENTS.
We are dependent upon third-party marketing arrangements with
independent sales representatives and distributors for the sale and marketing of
our products. The failure to attract and retain sales representatives would have
a material adverse effect on our business and financial results. We have
contractual arrangements with our sales representatives and distributors that
generally grant them the exclusive right to market our products within their
geographic territories. These arrangements typically do not preclude those sales
representatives and distributors from selling competitive products. Our success
is dependent upon the expertise and relationships of our sale representatives
with customers.
WE DEPEND ON CUSTOMERS.
During the years ended December 31, 1996, 1997 and 1998, approximately
7%, 6% and 7%, respectively, of our sales were made to one customer. There can
be no assurance that we will be able to retain existing customers or attract and
retain new customers. The failure to attract and retain customers would have a
material adverse effect on our business and financial results.
WE DEPEND ON THIRD-PARTY MANUFACTURING ARRANGEMENTS AND SUPPLIERS. WE HAVE VERY
LIMITED MANUFACTURING EXPERIENCE.
Historically, we have utilized third-party vendors for the manufacture
of all of our component parts. For the years ended December 31, 1996, 1997 and
1998, we purchased approximately 62%, 72%, and 74%, respectively, of our
component requirements from three manufacturers. Failure by such manufacturers
to continue to supply us with satisfactory components on commercially reasonable
terms, or at all, in the absence of readily available alternative sources, would
have a material adverse effect on our business and financial results. We are
substantially dependent on the ability of our manufacturers, among other things,
to satisfy performance and quality specifications, to comply with all
governmental regulations, to dedicate sufficient production capacity for
components within scheduled delivery times and to produce components on a
cost-effective basis. There can be no assurance that these suppliers will be
able to satisfy our component requirements. We do not maintain supply contracts
with any of our manufacturers and purchase components under purchase orders
placed from time to time in the ordinary course of business. We are dependent on
the availability at reasonable prices of the materials used in the manufacture
of our component parts. No assurance can be given that interruptions in supplies
of the materials used in the manufacture of our component will not occur in the
future. Any such interruption of supply could have a material adverse effect on
our business and financial results. During 1998, we commenced limited
manufacturing of the components of our products, consisting primarily of final
machining of components. We have very little manufacturing experience and there
can be no assurance that we will be successful in manufacturing components on a
cost-effective basis.
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WE MUST DEVOTE SUBSTANTIAL RESOURCES TO RESEARCH AND DEVELOPMENT.
The orthopaedic implant industry is subject to rapid technological
change. In order for us to remain competitive and to retain market share, we
must continually develop new products as well as improve our existing ones.
Accordingly, we must devote substantial resources to research and development.
There can be no assurance that we will be successful in developing competitive
new products and/or improving existing products so that our products remain
competitive and avoid obsolescence.
WE ARE SUBJECT TO LIABILITY CLAIMS FOR PRODUCT LIABILITY FOR WHICH WE MAY NOT BE
FULLY INSURED.
We are subject to potential product liability risks which are inherent
in the design, marketing and sale of orthopaedic implants and surgical
instrumentation. No assurance can be given that we will not face claims
resulting in substantial liability for which we are not fully insured or that we
will be able to maintain adequate levels of insurance on acceptable terms. A
partially or completely uninsured successful claim against us of sufficient
magnitude could have a material adverse effect on our business and financial
results.
WE ARE SUBJECT TO FOREIGN GOVERNMENT REGULATION.
Approximately 15%, 17% and 21% of our sales during the years ended
December 31, 1996, 1997 and 1998, respectively, were to foreign customers. We
are required to obtain various licenses and permits from foreign governments and
to comply with significant regulations that vary by country in order to market
our products in foreign markets. There can be no assurance that we will be able
to obtain and maintain any necessary licenses and permits or comply with
applicable regulations of foreign governments. The failure by us to obtain or
maintain the required licenses, permits or certifications, or comply with those
regulations, could have a material adverse effect on our business and financial
results.
WE HAVE SIGNIFICANT OUTSTANDING INDEBTEDNESS.
We have incurred significant indebtedness in order to finance our
operations. At December 31, 1998, we had outstanding indebtedness of
approximately $3,913,000. Substantially all of our assets are pledged to our
lenders as collateral. Our loan agreements contain provisions which:
o limit or prohibit us from merging or consolidating with another
corporation,
o selling all or substantially all of our assets,
o purchasing all or substantially all of the assets of another
entity,
o permitting or causing any material change in our controlling
ownership or controlling senior management, or
o operating in any material business other than our existing
business.
In the event of a violation by us of our loan covenants or other default by us
under our obligations, the lenders could declare our indebtedness to be
immediately due and payable and foreclose on our assets.
WE DEPEND ON KEY PERSONNEL.
Our success is largely dependent on the personal efforts of William
Petty, our Chairman, Timothy J. Seese, our President, Gary J. Miller, our Vice
President, Research and Development and other key personnel. The loss of the
services of any of these individuals could have a material adverse effect on our
business and financial results. Our success is also dependent on our ability to
continue to attract and retain qualified scientific and technical personnel.
Loss of the services of, or failure to recruit, key scientific and technical
personnel could be detrimental to our product development programs.
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WE DEPEND ON SCIENTIFIC ADVISORS FOR PRODUCT DEVELOPMENT.
In developing new products and improving existing products, we utilize
consultants who serve as members of our Scientific Advisory Board. Accordingly,
we depend, in part, on the efforts of the members of our Scientific Advisory
Board for the development and clinical evaluation of new and improved products.
Scientific advisors devote only a small portion of their time to the affairs of
our company and have other commitments to, or consulting or advisory agreements
with, other entities which may conflict or compete with their obligations to us.
There can be no assurance that those consultants will devote sufficient time and
attention to the development of our products.
EXECUTIVE OFFICERS AND DIRECTORS CONTROL OUR COMPANY.
Our current executive officers and directors own approximately 50.6% of
our outstanding common stock. In particular, William Petty and the members of
his immediate family own approximately 40.7% of the outstanding common stock.
Accordingly, the current executive officers and directors will be able to
control our company, elect all of our directors, increase the authorized
capital, dissolve, merge, sell our assets and generally direct the affairs of
our business.
WE ARE SUBJECT TO ANTI-TAKEOVER LEGISLATION.
We are incorporated under the laws of the State of Florida. The State
of Florida has enacted legislation that may deter or frustrate takeovers of
Florida corporations. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless such voting rights are approved by a majority vote of a
corporation's disinterested shareholders. The Florida Affiliated Transactions
Act generally requires supermajority approval by disinterested directors or
shareholders of certain specified transactions between a public corporation and
holders of more than 10% of the outstanding voting shares of the corporation (or
their affiliates). Our articles of incorporation authorize the issuance of
2,000,000 shares of "blank check" preferred stock with such designations, rights
and preferences as may be determined from time to time by our board of
directors. Accordingly, the board of directors is empowered, without shareholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights that could adversely affect the voting power or other
rights of the holders of the common stock. The issuance of any series of
preferred stock having rights superior to those of the common stock may result
in a decrease in the value or market price of the common stock. Holders of
preferred stock to be issued in the future may have the right to receive
dividends and certain preferences in liquidation and conversion rights. The
issuance of such preferred stock could make the possible takeover of our company
or the removal of our management more difficult, discourage hostile bids for
control of our company in which shareholders may receive premiums for their
common stock and adversely affect the voting and other rights of the holders of
the common stock. We may in the future issue additional shares of our preferred
stock.
THE MARKET PRICE OF OUR COMMON STOCK IS SUBJECT TO VOLATILITY.
The market price for our common stock may be subject to wide
fluctuations in response to variations in our operating results, announcements
by us or others, developments affecting us, and other events or factors. In
addition, the stock market has experienced a high level of price and volume
fluctuations in recent years. These fluctuations have had a substantial effect
on the market prices for many companies, often unrelated to the operating
performance of such companies, and may adversely affect the market price for the
common stock.
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON MARKET PRICE.
Of the 4,920,979 shares of common stock outstanding as of the date of
this prospectus, 2,968,325 are "restricted securities," as that term is defined
under Rule 144 promulgated under the Securities Act of 1933. All of
9
<PAGE>
such shares are eligible for sale under Rule 144. No prediction can be made as
to the effect, if any, that sales of shares of common stock or the availability
of those shares for sale will have on the market prices prevailing from time to
time. Nevertheless, the possibility that substantial amounts of common stock may
be sold in the public market may adversely affect prevailing market prices for
the common stock and could impair our ability to raise capital through the sale
of our equity securities.
WE DO NOT PAY DIVIDENDS.
We have not paid any cash dividends on our common stock, and do not
expect to declare or pay any cash dividends in the foreseeable future.
This prospectus contains various "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. Those statements represent our expectations or
beliefs concerning future events, including, but not limited to, statements
regarding growth in sales of our products, profit margins and the sufficiency of
our cash flow for our future liquidity and capital resource needs. These forward
looking statements are further qualified by important factors that could cause
actual results to differ materially from those in the forward looking
statements. These factors include, without limitation, the effect of competitive
pricing, our dependence on the ability of our third-party manufacturers to
produce components on a basis which is cost-effective to us, market acceptance
of our products and the effects of governmental regulations. Results actually
achieved may differ materially from expected results included in these
statements as a result of these or other factors.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of
common stock by the selling shareholders. We estimate that our expenses in
connection with this offering will be approximately $15,000.
10
<PAGE>
SELLING SHAREHOLDERS
The following table provides information regarding the ownership of the
common stock by the selling shareholders as of the date of this prospectus and
as adjusted to reflect the sale of all of their shares. Some of the selling
shareholders are participating in this offering pursuant to contractual
registration rights granted to First Equity Corporation of Florida, the
underwriter of our initial public offering. No selling shareholder, other than
First Equity Corporation of Florida and R. Wynn Kearney, M.D., has had any
position, office or other material relationship with us within the past three
years. First Equity Corporation of Florida acted as underwriter for our initial
public offering in June 1996. Dr. Kearney has been a member of our Board of
Directors since 1989.
<TABLE>
<CAPTION>
OWNERSHIP PRIOR OWNERSHIP AFTER
TO THE OFFERING NUMBER OF SHARES THE OFFERING
-------------------- ---------------- ----------------------
NAME AND ADDRESS SHARES PERCENTAGE OFFERED SHARES PERCENTAGE
- ------------------------------------------ ------ ---------- ---------------- ------ ----------
<S> <C> <C> <C> <C> <C>
First Equity Corporation of Florida(1).... 48,000 *% 48,000 -- *%
William R. Fusselmann(1).................. 33,000 * 32,000 1,000 *
Karl Bishopric(1)......................... 6,531 * 4,831 1,700 *
Jesus Oquendo(1).......................... 2,767 * 2,767 -- --
George Fisher(1).......................... 2,895 * 1,895 1,000 *
Peter Howard(1)........................... 18,521 * 17,721 800 *
Richard Davis(1).......................... 2,794 * 2,794 -- *
Pablo Hoffman(1).......................... 937 * 937 -- *
James Grant(1)............................ 7,603 * 7,603 -- --
Joseph Smith(1)........................... 6,172 * 6,172 -- --
Roy D. Neal(1)............................ 75 * 75 -- --
Mauricio Forero(1)........................ 229 * 229 -- --
Ronald Stein(1)........................... 2,976 * 2,976 -- --
Alan S. Pareira(2)........................ 40,550 * 32,000 8,550 *
R. Wynn Kearney, M.D.(3).................. 25,755 * 25,755 -- --
Michael M. Kearney, M.D.(4)............... 6,439 * 6,439 -- --
Walter Reid(5)............................ 3,810 * 3,810 -- --
Ivan Gradisar, M.D.(6).................... 2,250 * 2,250 -- --
- -------------------------
</TABLE>
* Represents ownership of less than 1%.
(1) 444 Brickell Avenue, Suite P-6, Miami, Florida 33131.
(2) 1221 Brickell Avenue, Suite 1820, Miami, Florida 33131.
(3) 2320 N.W. 66th Court, Gainesville, Florida 32653.
(4) 309 Holly Lane, Mankato, Minnesota 56002.
(5) 503 Oak Place, Suite 575, Atlanta, Georgia 30349.
(6) Crystal Clinic, Akron, Ohio 44333.
11
<PAGE>
PLAN OF DISTRIBUTION
GENERAL
TRANSACTIONS. The selling shareholders may offer and sell the shares of
common stock in one or more of the following transactions:
o on the Nasdaq National Market,
o in the over-the-counter market,
o in negotiated transactions, or
o in a combination of any of these transactions.
PRICES. The selling shareholders may sell their shares of common stock
at any of the following prices:
o fixed prices which may be changed,
o market prices prevailing at the time of sale,
o prices related to prevailing market prices, or
o negotiated prices.
DIRECT SALES; AGENTS, DEALERS AND UNDERWRITERS. The selling
shareholders may effect transactions by selling the shares of common stock in
any of the following ways:
o directly to purchasers, or
o to or through agents, dealers or underwriters designated from time to
time.
Agents, dealers or underwriters may receive compensation in the form of
underwriting discounts, concessions or commissions from the selling shareholders
and/or the purchasers of shares for whom they act as agent or to whom they sell
as principals, or both. The selling shareholders and any agents, dealers or
underwriters that act in connection with the sale of shares might be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any discount or commission received by them and any profit on the resale of
shares as principal might be deemed to be underwriting discounts or commissions
under the Securities Act.
SUPPLEMENTS. To the extent required, we will set forth in a supplement
to this prospectus filed with the SEC the number of shares to be sold, the
purchase price and public offering price, the name or names of any agent, dealer
or underwriter, and any applicable commissions or discounts with respect to a
particular offering.
STATE SECURITIES LAW. Under the securities laws of some states, the
selling shareholders may only sell the shares in those states through registered
or licensed brokers or dealers. In addition, in some states the selling
shareholders may not sell the shares unless they have been registered or
qualified for sale in that state or an exemption from registration or
qualification is available and is satisfied.
EXPENSES; INDEMNIFICATION. We will not receive any of the proceeds from
the sale of the shares of common stock sold by the selling shareholders under
this prospectus. We will bear all expenses related to the registration of this
offering but will not pay for any underwriting commissions, fees or discounts,
if any. The expenses we will pay include:
o all registration and filing fees,
o all fees and expenses of complying with state blue sky or securities
laws,
o all costs of preparation of the registration statement, and
o all fees and disbursements of our counsel and independent auditors.
12
<PAGE>
We will indemnify the selling shareholders against some civil
liabilities, including some liabilities which may arise under the Securities
Act.
LEGAL MATTERS
Some legal matters with respect to the shares of common stock offered
under this prospectus will be passed upon for Exactech by Greenberg Traurig,
P.A., Miami, Florida.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from our Annual Report on Form 10-K
for the year ended December 31, 1998 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated in this
prospectus by reference, and have been incorporated in reliance upon the report
of that firm given upon their authority as experts in accounting and auditing.
13
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms located at 450 5th Street, N.W., Washington,
D.C. 20549, at Seven World Trade Center, 13th Floor, New York, New York 10048
and at Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from the SEC's web site at: http://www.sec.gov. The common stock
trades on the Nasdaq National Market. You can also inspect reports, proxy
statements and other information concerning our company at the offices of the
Nasdaq Stock Market, Inc., Reports Section, 1735 K Street, N.W., Washington,
D.C. 20006.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act.
(1) Our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
(2) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999;
(3) Our proxy statement for our 1999 annual meeting of shareholders; and
(4) The description of the common stock contained in our Registration
Statement on Form 8-A (File No. 333-28420) filed with the SEC under
Section 12 of the Exchange Act on April 17, 1996, as amended,
including any amendments or reports filed for the purpose of
updating such description.
We will provide without charge to each person, including any beneficial
owner, to whom a Prospectus is delivered, upon written or oral request of that
person, a copy of any and all of the information that has been incorporated by
reference in this prospectus (excluding exhibits unless specifically
incorporated by reference into those documents). Please direct such requests to
us at the following address:
Exactech, Inc.
2320 N.W. 66th Court
Gainesville, Florida 32653
Attention: Chief Financial Officer
This prospectus is part of a registration statement we filed with the
SEC. You should only rely on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling shareholders are not
offering the common stock in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the front of those documents.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the offering are as follows:
Securities and Exchange Commission Registration Fee............. $ 654.49
Legal Fees and Expenses......................................... $ 5,000.00
Accounting Fees and Expenses.................................... $ 2,000.00
Printing and Engraving Expenses................................. $ 2,500.00
Registrar and Transfer Agents Fees and Expenses................. $ 2,000.00
Miscellaneous................................................... $ 2,845.51
------------
Total....................................................... $ 15,000.00
============
All amounts except the Securities and Exchange Commission registration
fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided in such statute. The Registrant's Articles of Incorporation provide
that the Registrant may indemnify its executive officers and directors to the
fullest extent permitted by law whether now or hereafter. The Registrant has
entered into an agreement with each of its directors and certain of its officers
wherein it has agreed or will agree to indemnify each of them to the fullest
extent permitted by law.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for or
assenting to an unlawful distribution; and (d) willful misconduct or a conscious
disregard for the best interests of the Registrant in a proceeding by or in the
right of the Registrant to procure a judgment in its favor or in a proceeding by
or in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -------------------------------------------------------------
5.1 Opinion of Greenberg Traurig, P.A.*
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Greenberg Traurig, P.A. (to be included in Exhibit 5.1)
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement: (i) to include any prospectus
II-1
<PAGE>
required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in
the prospectus any facts or events arisingafter the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; (2) that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof, and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been, settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Form S-3 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Gainesville, State of Florida, on May 27, 1999.
EXACTECH, INC.
By: /s/ WILLIAM PETTY, M.D.
--------------------------------------------
William Petty, M.D.
Chairman of the Board and Chief Executive
Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this registration statement has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM PETTY, M.D.
- ---------------------------- Chairman of the Board and May 27, 1999
William Petty, M.D. Chief Executive Officer
(principal executive officer)
/s/ TIMOTHY J. SEESE President, Chief Operating Officer May 27, 1999
- ---------------------------- and Director
Timothy J. Seese
/s/ JOEL C. PHILLIPS Chief Financial Officer May 27, 1999
- ---------------------------- (principal financial officer and
Joel C. Phillips principal accounting officer)
/s/ GARY J. MILLER, PH.D.
- ---------------------------- Vice President and Director May 27, 1999
Gary J. Miller, Ph.D.
/s/ R. WYNN KEARNEY, JR., M.D.
- ------------------------------ Director May 27, 1999
R. Wynn Kearney, Jr., M.D.
/s/ E. RONALD PICKARD
- ---------------------------- Director May 27, 1999
E. Ronald Pickard
/s/ PAUL METTS
- ---------------------------- Director May 27, 1999
Paul Metts
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
--------- ---------------
23.1 Consent of Deloitte & Touche LLP
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Exactech, Inc. on Form S-3 of our report dated February 12, 1999,
appearing in the Annual Report on Form 10-K, of Exactech, Inc. for the year
ended December 31, 1998 and to the reference to us under the heading "Experts"
in the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
- ------------------------------------
Deloitte & Touche LLP
Certified Public Accountants
Jacksonville, Florida
May 25, 1999
