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PROSPECTUS
FIRST SCIENTIFIC, INC.
7,210,780 Shares of Common Stock
First Scientific, Inc. is a development stage company engaged in the
research, development and commercialization of unique formulations for sale in
the professional health care, food handling, hospitality, government, education,
e-commerce, retail and other niche markets. We resulted from a merger in
September 1998 with Linco Industries, Inc. ("Linco"). We are primarily engaged
in commercializing two patent-pending formulations originally developed by
Linco. The first is a moisturizing, antimicrobial (kills microorganisms
including bacteria, yeast, viruses and fungi or suppresses their growth or
reproduction) formula that combines skin-softening emollients and botanicals
proven to soothe and condition, while eliminating up to 99.999% of bacteria.
This formulation can be packaged as an antimicrobial handwash, antimicrobial
lotion, antibacterial (destroys bacteria or suppresses their growth or
reproduction) spray and antibacterial towelettes. The second product is a skin
protection formula that brings together dimethicone with skin-conditioning
emollients and botanical oils to create a solution for the treatment and
prevention of rashes. This product, in towelette form, is used for the treatment
and prevention of skin rashes caused by infant and adult incontinence. We
currently supply the skin protection formula to a third-party manufacturer,
which produces a waterless, patient-bathing product for the marketing and sale
by ConvaTec, a division of Bristol-Myers Squibb Company.
The primary purpose of this offering is to register for resale shares of
the Company's Common Stock which are issuable upon the conversion of shares of
Series 2000-A Preferred Stock and the exercise of Series A Warrants, as well as
to register for resale shares of the Company's Common Stock issued prior to
September 15, 1998. Of these shares, we will receive funds only upon the
exercise of the\ Series 2000-A Warrants. Such funds will be used for the
expansion of marketing and sales, research and development costs and other
expenses. We are registering for resale a total of 7,210,780 shares of Common
Stock.
This Prospectus supersedes all prior registrations. Prior to this offering,
there has been no public market for our shares.
Investing in the Common Stock involves a high degree of risk. You should
purchase shares only if you can afford a complete loss of your investment. See
"Risk Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This Prospectus is dated August 31, 2000.
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TABLE OF CONTENTS
Page
Available Information........................................................2
Prospectus Summary...........................................................2
The Company..................................................................2
Documents Incorporated by Reference..........................................3
Risk Factors ...............................................................4
Use of Proceeds.............................................................10
Securityholders Registering Shares..........................................11
Description of Securities ..................................................18
Plan of Distribution........................................................20
Experts.....................................................................20
Legal Matters...............................................................20
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AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, file reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information filed by us can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices at Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511, and at 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549
at prescribed rates. In addition, the Commission maintains a web site at
http:/www.sec.gov containing reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission,
including our company.
We have filed with the Commission a Registration Statement (together
with all amendments and exhibits) on Form S-3 under the Securities Act of 1933,
as amended with respect to the shares of Common Stock offered pursuant to this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any agreement or other document referred to
herein are not necessarily complete and reference is made to the copy of such
agreement or to the Registration Statement and to the exhibits and schedules
filed therewith. Copies of the material containing this information may be
obtained from the Commission upon payment of the prescribed fee.
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. It may
not contain all of the information that is important to you. To understand this
offering fully, you should read the entire prospectus carefully, including the
risk factors.
THE COMPANY
We develop and market proprietary chemical formulations that we believe
will have worldwide sales opportunities. We are currently marketing our products
to private label companies that are major distributors in the over-the-counter,
medical, health care, retail, food handling and multi-level arenas, with nominal
sales being made by a small distributor of our branded products. Future
development of our own brands, especially in medical markets, will be pursued on
a case-by-case basis as profitable opportunities arise. We have developed three
unique proprietary formulations: two are moisturizing antimicrobial sanitizing
formulations that remove up to 99.999% of bacteria from the skin without the
harsh effects of alcohol or iodine (these products can be delivered in wipes,
spray, lotion and lotion-soap forms) and the third, a topical rash prevention
and treatment formulation that cleanses and moisturizes the skin for treatment
against skin rashes caused by incontinence and other irritations (in wipe form).
The potential worldwide market for our products has grown significantly
in recent years according to industry analysts, who project its continued growth
at an aggressive rate. The growth in demand for our antimicrobial formulation is
primarily due to the increase in bacteria related disease, sickness and death
from methicillin-resistant staph and other bacteria, the demands of government
and health care agencies/providers to create a healthier treatment environment
and the insistence of the public in general for healthier living and working
conditions. Increasing market growth for our diaper and other rash formulation
is primarily a function of the significant growth rate of the incontinent
geriatric population, as baby boomers grow older, and the product's application
for the infant market. Through PureSoft Solutions, LLC, which we recently
acquired, we also market a fourth complimentary product, an antimicrobial
hard-surface cleaner that is E.P.A. registered for use.
Our management believes the markets for our products will continue to
expand and that the potential for becoming a significant participant in such
markets is a reasonable expectation; however, we have not generated significant
sales during our history. The $2,000,000 funding First Scientific received in
the third quarter of 1998 provided a strong base for expanded and focused
marketing and sales efforts. These efforts are backed up by additional
management and staff, new executive offices, the upgrading of existing research
and development, mixing and storage facilities and expanded testing
accommodations. During the fourth quarter of 1999, we initiated a second Private
Placement through which we raised $1,777,001 from accredited investors through
June 1, 2000. During the second quarter of 2000 we raised $3 million, less
offering costs of $300,000, through the sale of Series 2000-A Convertible
Preferred Stock to our institutional investor, who has committed to purchase an
additional $1 million aggregate worth of series 2000-A Convertible Preferred
Stock in blocks at 30 day intervals through mid-September-2000. Funds raised
through this private placement are planned to be used to expand our sales and
marketing efforts, to build out a state-of-the-art research and development
laboratory, to provide adequate manufacturing capacity, to acquire complimentary
products, to expand distribution and to provide sufficient capital to bring us
to a positive working capital position. We maintain our own web page, which can
be found at 'www.firstscientific.com.'
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The Offering
Securities Offered................... The resale of 7,210,780 shares of
Common Stock, consisting of the resale
of 2,000,000 shares of Common Stock
issuable upon the conversion of the
Series 2000-A Convertible Preferred
Stock (the "Series 2000-A Preferred
Stock"), the resale of 2,000,000
shares of Common Stock issuable upon
the exercise of the Series 2000-A
Warrants, and the resale of 3,210,780
shares of Common Stock issued on or
before September 15, 1998. See
"Securityholders Registering Shares"
and "Description of Securities."
Common Stock outstanding
prior to the offering ................ 20,978,770 shares.
Common Stock outstanding
after the offering(1) ................. 28,978,770 shares.
Preferred shares outstanding.......... 3,000 shares.
Use of Proceeds........................
All funds received by us upon the
exercise of the Warrants will be used
for the expenses of our marketing and
sales, research and development costs,
and other expenses. We will not receive
any proceeds from the conversion of the
Series 2000-A Preferred Stock or the
shares of Common Stock issued on or
before September 15, 1998. See "Use
of Proceeds."
Risk Factors/Dilution................. The offering involves a high degree of
risk. See "Risk Factors."
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1. Assumes the conversion of all the shares of Series 2000-A Preferred
Stock into 2,000,000 shares of Common Stock and the exercise of all the
Series 2000-A Warrants into 2,000,000 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by us with the Commission are incorporated
herein by reference:
1. Annual Report on Form 10-KSB for the fiscal year ended December
31, 1999;
2. Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000;
3. Report on Form 8-K, as filed on March 30, 2000;
4. Report on Form 8-K, as filed on May 31, 2000;
5. Report on Form 8-K, as filed on June 8, 2000;
6. Report on Form 8-K/A, as filed on June 13, 2000;
7. Definitive Proxy Statement for the Company's 1999 Annual Meeting
of Shareholders, as filed on September 23, 1999.
All documents subsequently filed by us with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended and prior to the termination of this offering, shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained 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 that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
We will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
that have been incorporated herein by reference, other than Exhibits to such
documents (unless such Exhibits are specifically incorporated by reference
therein). Requests for such copies should be directed to: Randall L. Hales,
President and Chief Executive Officer, 1877 West 2800 South, Suite 200, Ogden,
Utah 84401.
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RISK FACTORS
Before you invest in our Common Stock you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the other information included in this
registration statement before you decide to purchase Shares of our Stock. No
investment should be made by any person who is not in a position to lose the
entire amount of his investment.
Some of the information in this Registration Statement may contain
forward-looking statements. Such statements can be identified by the use of
forward-looking terminology such as Amay,@ Awill,@ Aexpect,@ Aanticipate,@
Aestimate,@ Acontinue@ or other similar words or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other Aforward-looking@ information. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this Registration Statement. The risk factors noted in this
section and other factors noted throughout this Registration Statement,
including certain risks and uncertainties, could cause our actual results to
differ materially from those contained in any forward-looking statement.
Limited Working Capital; Limited Operating History; Accumulated Deficit;
Anticipated Losses.
As of March 31, 2000, we had limited working capital of $909,139. We
also have a limited operating history. Most of our current sales are related to
product testing, raw materials sales and a licensing fee from a major customer,
as well as from minimal product sales. We are still a development stage company.
As of March 31, 2000, our cumulative deficit since inception was $6,930,127, of
which $3,766,440 was attributable to a non-recurring charge for acquiring
research and for development. These losses have resulted primarily from costs
incurred in connection with research and development, including FDA compliance
of our proprietary products. Prior to 1999, our revenues have been sporadic.
Only during the fiscal quarter ended September 30, 1999, did we finally execute
a significant sales order. Revenues from that sales order have not yet been
significant. Our ability to become profitable largely depends on successfully
marketing our products and developing new formulations and products. The
problems and expenses fre quently encountered in developing new products and the
competitive industry in which we operate will impact whether we are successful.
We may never achieve profitability. Furthermore, we may encounter substantial
delays and unexpected expenses related to research, development, production,
marketing, regulatory matters or other unforeseen difficulties.
Future Capital Needs.
We may require substantial funds for various reasons, including
continuing research and development, expanded testing, primarily the FDA
shelf-life testing process for our products, and manufacturing and marketing our
existing products. In the short term, based on past financial needs and on
currently planned programs, we anticipate that the funds on hand and funds
committed from the sale of preferred stock, together with funds generated from
future product sales, should be adequate, even if at the minimum level, to
satisfy our capital requirements for approximately 12 months. This estimate is
based on certain assumptions and there can be no assurance that available funds
will be sufficient to satisfy our capital requirements for that period. Adequate
funds may not be available when needed or on terms acceptable to us.
Insufficient funds may require us to delay, scale back or eliminate certain or
all of our research and development programs or to license third parties to
commercialize products or technologies that we would otherwise seek to develop
ourselves, which may materially adversely affect our continued operations.
Need of Additional Financing.
While we have just completed financings through the sale of common
and preferred stock, we may not be able to fully expand or operate our business
as planned without obtaining additional financing within the next 12 months. If
such financing is not available or obtainable, investors may lose a substantial
portion or all of their investment and our business may be inadequately funded
to satisfy our capital requirements, expand our clinical trials, fund our
research and development, and sustain the contract manufacturing, marketing and
sales of our existing products. We currently have no immediate means for
obtaining this additional financing. Consequently, we cannot assure investors
that additional financing, when necessary, will be available on acceptable
terms, or at all.
Technological Uncertainty and Early Stage of Product Development.
The science and technology of products for the health care and
personal hygiene markets, including antimicrobial preparation, is rapidly
evolving. Our products may require significant further research, development,
testing and regulatory compliance efforts. They are also subject to the risks of
failure inherent in the development of products based on innovative
technologies. These risks include the possibility that any or all of the future
products will prove to be ineffective or unsafe, that the proposed products are
uneconomical, that others hold proprietary rights which preclude us from
marketing such products, or that others market better products. Accordingly, we
are unable to predict whether its research and development activities will
result in any new commercially profitable products. Further, due to the extended
testing process required, we may be unable to sell certain new products in the
future. There is also no guarantee that we will be able to sell our proprietary
formulation in sustained, profitable volumes.
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Lack of Production Facilities.
Small batches of concentrate for our products are now being mixed at
facilities off our premises and shipped to a manufacturer designated by our
major customer, where the products are mixed and packaged. Management believes
that a portion of the profit related to the sale of each product unit is
foregone because we lack our own production facility. There is no assurance that
such an eventual acquisition would be affordable or be as successful as
projected, or that we could develop the capacity to manufacture and package our
products in house, since we have no experience in large scale manufacturing. In
addition, we may be unsuccessful in developing the necessary facilities or
recruiting trained personnel to achieve profitable manufacturing and packaging
capacities.
Small Volume Experience
We may encounter scale-up difficulties as anticipated sales require us
to produce larger commercial volume batches of our products. In the event we
were to receive sales orders larger than we or our contract manufacturers and
suppliers can fill within a reasonable time, we would face the alternative of
either turning down such orders, being late in fulfilling them or being
constrained to subcontract the production out on terms less favorable to us. In
either of the first two events, we could lose credibility with existing or
potential customers, which could result in the loss of future business. In all
three of these eventualities, our anticipated revenues and earnings would
probably be materially adversely effected.
Government Regulation; and Compliance with FDA Monographs.
We are subject to certain United States and international laws and
regulations regarding the development, production, transportation and sale of
our products. As a result, we may be required to comply with certain restrictive
regulations, or potential future regulations, rules, or directives. Such
potential regulatory conditions or compliance with such regulations may increase
our cost of operations or decrease our ability to generate income.
We are subject to certain regulation by the Food and Drug
Administration (FDA) and other federal and state regulatory agencies. FDA
monographs require us to use only approved ingredients, and to conduct efficacy,
shelf-life and stability testing. Any changes in existing FDA requirements may
materially and adversely affect us.
Lack of Operating Experience.
Management believes that business skills and experience are
transferrable from one industry to another and one company to another. However,
none of our executives has direct experience in managing a company which
utilizes research and medical care technology to such a high degree.
Potential Obsolescence from Rapid Technological Change.
Our market is subject to rapid technological change. Development by
others of new or improved products, formulation, processes or technologies may
make our products obsolete or less competitive. Accordingly, we must continue
investing in research and development on our existing products and to develop
new products. Despite such investment, our current or proposed products may be
unsuccessful.
Risks of Industry Competition and Reduction of Revenue and Loss of Market Share.
Our products compete with other antimicrobial and skin protection
products currently on the market. The professional health care and personal
hygiene industry is dominated by a small number of large competitors that are
well established in the marketplace, have experienced management, are well
financed, and have well recognized trade names related to their respective
product lines. We may be unable to penetrate the existing market and acquire a
sufficient market share to be profitable. Significant competitive factors which
will affect future sales include performance, pricing, timely product shipment,
safety, customer support, convenience of use and general market acceptance.
Competition among hand care products is strong and presents a
significant barrier to entry by new products such as the ones we produce.
Consumers tend to purchase and use products produced or distributed by
manufacturers with recognizable names. We have not yet developed such a
recognizable name in the marketplace. In addition, we have identified a number
of competitors who offer products that appear substantially similar to ours, a
number of which are significantly larger and more experienced in the healthcare
marketplace than we are. Furthermore, we face competition from companies that
currently market, or are developing products similar to those we offer. Many of
these companies have significantly greater marketing, financial and managerial
resources than we do. In the face of such competition, our products may become
obsolete and our business may fail.
Business Development Risks.
New ventures, particularly those involved in a highly technical industry
such as the healthcare and personal hygiene industry, have substantial inherent
risks. These risks are in the general, technical and human areas.
Notwithstanding any pre-production planning, new products can incur unexpected
problems in full-scale production, which cannot always be foreseen or accurately
predicted. Formulas can become unworkable, for unpredicted reasons. Quality
control and component sourcing failures can also be expected from time to time.
Any business, including ours,
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is substantially dependent upon the capabilities and performance of both
management and sales personnel. Mistakes in judgment or performance can be
costly and, in certain instances, disabling. Therefore, management skill,
experience, character and reliability are of significant importance.
Dependence on Key Personnel.
Due to the highly technical nature of our business, we are dependent on
certain key personnel. Our success will be largely dependent on the decisions
made by members of management. The loss of services of one or more of these
employees could have a material adverse effect on our Company, including the
development and sale of proprietary formulations. We are especially dependent
upon the efforts and abilities of certain of our senior management and
consultants, particularly Dr. Edward B. Walker, Director of Research and
Development. We have a five-year consulting agreement with Dr. Walker. The loss
of any of our key executives could have a material adverse effect on us and our
operations and prospects, although the loss of Dr. Walker could have a more
significant adverse effect. We have $2,000,000 of key man insurance coverage on
Dr. Walker.
Furthermore, we believe that our future success will depend, in part,
upon our ability to attract, retain and motivate qualified personnel with
competitive compensation packages, equity participation and other benefits which
may reduce the working capital available for our operations. Management may also
seek to obtain outside independent professionals to assist in assessing the
merits and risks of any business proposals as well as assisting in the
development and operation of any projects. There is no assurance, however, that
we will be successful in attracting and retaining such personnel.
Limited Independent Market Testing.
We believe that there is substantial commercial demand for our
proprietary antimicrobial and skin protection products at a profitable price.
However, this belief is solely based on our management=s experience, judgment
and its inhouse marketing and research, with the exception of the professional
medical market where we have access to detailed industry studies. An independent
marketing study has been conducted by an independent professional marketing firm
with respect to potential demand for our products. However, there is no
assurance that sufficient testing has been completed across all markets to
confirm reliably the extent of this demand, the price ranges within which it
exists, and the amount of promotion necessary to exploit this demand.
No Assurance of Market Acceptance.
Our products may not be accepted in the marketplace. Such acceptance
will depend on a number of factors, including demonstrating the efficacy and
advantages of our products over those of our current and future competitors.
Further, we may be unable to successfully market our products even though they
perform successfully in independent laboratory and clinical testing.
Dependence on Patents and the Protection of Proprietary Technology.
We depend on our ability to license and obtain patents and on the
adherence to confidentiality agreements executed by employees, consultants and
third-parties to maintain the proprietary nature of our technology and to
operate without infringing on the proprietary rights of others. We have applied
for a United States patent for protection on our antimicrobial, and rash
treatment and prevention formulations. The pending patents may not be perfected.
Also, our present or future products may be found to infringe upon the patents
of others. If our products are found to infringe on the patents, or otherwise to
utilize the intellectual property of others without authority, our development,
manufacture and sale of such products could be severely restricted or
prohibited. In such case we might be required to obtain licenses to utilize such
patents or proprietary rights of others, for which acceptable terms may be
unavailable. If we were not able to obtain such licenses, the development,
manufacture or sale of products requiring such licenses would be materially
adversely affected. In addition, we could incur substantial costs in defending
ourselves against challenges to our patents or infringement claims made by third
parties or in enforcing any patents we may obtain.
Limited Nature of Patent Protection.
Others may sell products similar to ours before we can market our
products adequately. We rely on the protections that we hope to realize under
the United States and foreign patent laws. However, patents provide limited
protection. We have applied for a United States patent on the antimicrobial and
rash treatment and prevention formulations, and applications for various other
domestic and foreign patents are either pending or planned. Similar formulations
and products, however, could be designed that do not infringe on our patent
rights, but which may be similar enough in formulation or effect to compete
against our patented products. Moreover, it is possible that unpatented but
prior existing formulations and products that have never been made public and
therefore are not known to us or the industry in general, may surface. Such a
product could be introduced into the market without infringing on our future
patents. If any such competing, non-infringing products were produced and
distributed, our profit potential would be materially limited, which would
seriously impair our viability.
In addition, we cannot assure investors that any intellectual property
rights eventually issued or exerted by us will not be challenged, invalidated or
circumvented, or that our competitors will not independently develop or patent
technologies that are substantially equivalent or superior to ours. Furthermore,
if an action is brought, a court may find
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that we have infringed on patents owned by others. We may have to go to court to
defend our rights or products, to prosecute infringements, or to defend
ourselves from infringement claims by others. We are, however, not aware of any
such litigation at this time.
Patent litigation is expensive and time-consuming, and well-funded
adversaries can use such actions as part of a strategy for depleting the
resources of a small company such as ours. We cannot assure investors that we
will have sufficient resources to successfully prosecute our interests in any
such litigation that may be brought.
Possible Limitations on Medical Reimbursement.
A major market for our products could also be adversely affected by
recent federal legislation that reduces reimbursements under the capital cost
pass-through system utilized in connection with the Medicare program. Failure by
hospitals and other users of our products to obtain reimbursement from
third-party payors or changes in government and private third-party payors'
policies toward reimbursement for procedures employing our products would have a
material adverse effect on us.
Proposed Health Care Reform.
The Clinton Administration has attempted, and continues to make
proposals to change aspects of the delivery and financing of health care
services. Other legislation to accomplish the same purpose has been or will also
be introduced by members of Congress. Legislation derived from one or more of
these proposals may be enacted in the future. Such legislation to control or
reduce public (Medicare and Medicaid) and private spending on health care, to
reform the methods of payment for health care goods and services by both the
public and private sectors, and to provide universal access to health care may
be passed. We cannot predict what form this legislation may take or the effect
of such legislation on our business. It is possible that the legislation
ultimately enacted by Congress will contain provisions resulting in price limits
and utilization controls which may reduce the rate of increase in the growth of
our market or otherwise adversely affect our business. It is also possible that
future legislation could result in modifications to the nation's public and
private health care insurance systems which may affect reimbursement policies in
a manner adverse to us. We also cannot predict what other legislation relating
to our business or the health care industry may be enacted, including
legislation relating to third-party reimbursement, or what effect legislation
may have on the results of our operations.
Dependence on Outside Suppliers.
We currently purchase all of our chemical components, supplies and
contract manufacturing from third-party suppliers. Substantially all of our
current products are mixed and packaged by companies unrelated to us under
supply agreements. However, if we were required to locate other suppliers or
manufacturers, we could experience increased costs and significant delays in
both locating and switching to new vendors. Although we have access to adequate
supplies of raw materials for our current and foreseeable needs, a significant
disruption in this supply could have a short-term material adverse impact on our
revenue production and financial results. We have sought to mitigate this risk
by entering into contracts with our suppliers to assure a continuing supply of
raw materials for our product. However, long-term hedging opportunities against
price increases for these items are generally not available.
Minimal Marketing Experience.
We have commenced a sales program to market our current and proposed
products. However, we have limited sales experience in the health care and
personal hygiene industries and may need to recruit additional qualified
personnel and/or consultants for this purpose. Our sales program may be
unsuccessful or we may be unable to attract and retain qualified customers and
distributors on favorable terms.
Product Liability Resulting in Losses and Causing Business to Fail.
We have a limited operating history upon which to evaluate the
performance and effects of our products in actual use on consumers. We can
provide no absolute assurance that our product line will operate as designed or
that no injury to persons will result from the use of our products. For example,
there is potential that someone may have an allergic reaction or sustain injury
in some other way after using our antimicrobial hand cleansing, or rash
prevention products. Such individuals may subsequently seek to hold us
responsible for any losses incurred. In such a case, we may experience losses or
other material adverse consequences, which may, in severe cases, cause us to
cease operations.
Product Liability and Possible Insufficiency of Insurance.
The nature of our business, the manufacture, development and marketing
of antimicrobial hand cleansing products, exposes us to the potential risk from
product liability claims and there can be no assurance that we can avoid
significant product liability exposure. We maintain product liability insurance
providing coverage up to $2,000,000 per claim with an aggregate policy limit of
$2,000,000. There is substantial doubt that this amount of insurance would be
adequate to cover potential liabilities in the event that we were to face
significant claims. A successful products liability claim brought against us
could have a material adverse effect on our business, operating results and
financial condition. Further, product liability insurance is becoming
increasingly expensive, and there can be no assurance that we will successfully
maintain adequate product liability insurance at acceptable rates, or at all.
Should we be unable
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to maintain adequate product liability insurance, our ability to market our
products would be significantly impaired. Any losses that we may suffer from
future liability claims or a voluntary or involuntary recall of our products and
the damage that any product liability litigation or voluntary or involuntary
recall may do to the reputation and marketability of our products would have a
material adverse effect on our business, operating results and financial
condition.
Risks Associated with Potential Interactions, Acquisitions or Investments.
We may engage in corporate partnering or other interactions with, or
acquire or make substantial investments in complementary businesses, products,
services or technologies in the future. From time to time, we may have
discussions with other companies regarding such interactions, acquisitions or
investments in, their businesses, products, services or technologies. However,
we have no present understanding or agreement relating to any such transaction.
We cannot assure the investor that we will be able to identify suitable
candidates. Even if we identify suitable candidates, there can be no assurance
that we will be able to close such interactions, acquisitions or investments on
commercially acceptable terms.
In the event that we acquire another company, we could encounter
difficulty in assimilating the acquired company's operations, personnel or
products. In addition, the key personnel of the acquired company may decide not
to work for us. If we make other types of acquisitions, we could have difficulty
in assimilating the acquired products, services or technologies into our
operations. Such difficulties could potentially disrupt our ongoing business,
distract our management and employees, increase our expenses and adversely
affect our results of operations and otherwise dilute the desired financial and
strategic benefits from the acquisition or investment. Future acquisitions and
investments by us also could result in substantial cash expenditures.
Furthermore, we may incur debt or issue equity securities to pay for any future
acquisitions. The issuance of equity securities could potentially dilute the
ownership of our existing stockholders. The incurrence of additional debt and
contingent liabilities, and amortization expenses related to goodwill and other
intangible assets, could have a material adverse effect upon our financial
results.
Dependence on Domestic Markets and Projected Expansion into International
Markets.
While a number of our competitors have diversified their revenues to
include a strong international component, we are currently dependent primarily
on sales generated in the U.S. markets. In order for our unit sales to sustain
growth in the domestic markets we will depend on increased usage of our products
by health care professionals, the food handling industry, hospitality,
government, education, e-commerce, retail and other niche markets. In addition,
we will need to promote innovation and expansion of our product line as well as
capture market share from our competitors. There can be no assurance that we
will succeed in implementing our strategies to achieve such domestic growth.
In order to reduce our dependence on domestic revenues, we have adopted
a strategy to begin penetrating international markets. In implementing this
strategy, we face barriers to entry and the risk of competition from local and
other companies that already have established global businesses. The risks
generally associated with conducting business internationally include: exposure
to currency fluctuations, limitations on foreign investment, import/export
controls, nationalization, unstable governments and legal systems and the
additional expense and risks inherent in operating in geographically and
culturally diverse locations. Because we plan to develop our international
business through joint ventures, co- packaging arrangements, agent and/or other
alliances, we may also be subject to risks associated with such joint venture
arrangements and alliances, including those relating to the marriage of
different corporate cultures and shared decision-making. In addition, since the
current international distribution capabilities are extremely limited, we will
also need to acquire a distribution network or enter into alliances with
existing distributors before we can effectively conduct operations in new
markets. There can be no assurance that we will succeed in increasing our
international business in a profitable manner, and a failure to expand this
business may have a material adverse effect on our business and results of
operation.
At the present time we do not have any registered foreign trademarks or
any pending foreign trademark applications. There can be no assurance that we
will successfully register any foreign trademarks. Furthermore, in the event
that we are successful in registering foreign trademarks on our products and
formulations there can be no assurance that such trademarks will be protected in
the foreign markets in which they are used.
Risks Associated with Projected Expansion into International Markets.
We intend to establish and expand our operations to encompass
international sales and marketing efforts. In order to maximize our expansion
abroad with minimum capital outlay, we may recruit business partners in various
foreign markets to conduct operations, establish local networks and coordinate
sales and marketing efforts. Our success in such markets is directly dependent
on the success of locating good business partners and their dedication of
sufficient resources to our business relationships.
International expansion will subject us to additional exchange risks and
will require management attention and resources. We expect to pursue expansion
through a number of international alliances and to rely extensively on these
business partners initially to conduct operations, register web sites, and
coordinate sales and marketing efforts. Our success in these markets will depend
on the success of our business partners and their willingness to dedicate
sufficient resources to our business relationships. We cannot provide assurances
to investors that we will be successful in our efforts overseas.
International operations are subject to other inherent risks, including:
the impact of recessions in economies outside the United States; changes in
domestic regulatory requirements, as well as differences between domestic and
foreign regulatory requirements; export restrictions, including export controls
relating to product formulas, reduced protection for intellectual property
rights in some countries; potentially adverse tax consequences; difficulties and
costs
-8-
<PAGE>
of staffing and managing foreign operations; political and economic instability;
tariffs and other trade barriers; and seasonal reductions in business activity
during the summer months in Europe and certain other parts of the world.
Our failure to address these risks adequately could materially and
adversely affect our business, results of operations and financial condition.
World Economic, Political and Exchange Fluctuations.
We anticipate that a significant portion of our future product sales
will be in foreign countries. Because we plan to quote prices for our products
and to accept payment on sales principally in U.S. dollars, any significant
increase in the value of the U.S. dollar against local currencies may make our
products less competitive with foreign products. The economic and political
instability of some foreign countries also may affect the ability of
distributors and customers to purchase and pay for our products, or the ability
of potential customers to pay for them.
Potential Adverse Effects of Future Sales of Stock; Dilution.
As of June 30, 2000, approximately 84.6% or about 17,739,040 of the
total 20,978,770 shares of Common Stock outstanding were "restricted securities"
within the meaning of Rule 144 under the 1933 Act. Ordinarily, under Rule 144, a
person holding restricted securities for a period of one year may, every three
months, sell in ordinary transactions, or in transactions directly with a market
maker an amount equal to the greater of one percent of our then outstanding
Common Stock or the average weekly trading volume during the four calendar weeks
prior to such sale. Purchasers of Securities in this offering will experience
immediate and substantial dilution in net tangible book value of their
investment.
Possible Volatility of Stock Price.
There is currently no public market for our shares. However, should
our shares be traded in the future, factors such as announcements by us of new
products, quarterly variations in our financial results, the gain or loss of
material contracts, changes in management, regulatory changes, trends in the
industry or stock market and announcements by competitors, among other things,
could cause an eventual market price of such securities to fluctuate
significantly.
Potential Adverse Affects of Board of Director's Right to Issue Preferred Stock.
Our Certificate of Incorporation authorizes the issuance of shares of
"blank check" preferred stock, which will have such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval
(but subject to applicable government regulatory restrictions), to issue
preferred stock with dividend, liquidation, redemption, conversion, voting or
other rights which could adversely affect the voting power or other rights of
the holders of our Common Stock. Those terms and conditions may include
preferences on an equal or prior rank to existing series of Preferred Stock.
Those shares may be issued on such terms and for such consideration as the Board
then deems reasonable and such stock shall then rank equally in all aspects of
the series and on the preferences and conditions so provided, regardless of when
issued. In the event of such issuance, the preferred stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in our control.
No Cash Dividends.
The holders of Common Stock are entitled to receive dividends when, and
if declared by the Board of Directors out of funds legally available therefor.
To date, we have not paid any cash dividends. We do not intend to declare any
cash dividends in the foreseeable future, but instead intend to retain all
earnings, if any, for use in our business operations. Since we may be required
to obtain additional financing, it is likely that there will be restrictions on
our ability to declare any dividends.
Broad Discretion as to Use of Proceeds.
All of the net proceeds of the Offering, if any, have been allocated for
the expansion of marketing and sales, research and development, and to gain
control of manufacturing capacity, and for other operating needs (and not
otherwise allocated for a specific purpose) and will be used for such purposes
as management may determine in its sole discretion without the need for
stockholder approval with respect to any such allocations.
Limited Liability for Officers and Directors and Indemnification Matters.
Our Certificate of Incorporation and Bylaws eliminate, in certain
circumstances, the liability of directors and officers for monetary damages for
breach of their fiduciary duties. Delaware law permits a corporation to enter
into indemnification agreements whereby it could provide indemnification of
officers and directors against expenses, including reasonable attorneys' fees,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any civil or criminal action or
administrative proceeding arising out of his performance of his duties as a
director or officer, other than an action instituted by the director or officer.
The indemnification agreements could also require that we indemnify the director
or other party thereto in all cases to the fullest extent permitted by
applicable law. Such agreements could permit the director or officer that were
party thereto to bring suit to seek recovery of amounts due under the agreement
and to recover the expenses of such a suit if he or she were successful. We may
enter into such agreements in the future.
-9-
<PAGE>
Dilution Possibilities.
The Board of Directors has the inherent right under applicable Delaware
law, for whatever value the board deems adequate, to issue additional shares of
Common Stock up to the limit of shares authorized by the Certificate of
Incorporation, and, upon such issuance, all holders of shares of Common Stock,
regardless of when it is issued, thereafter generally rank equally in all
aspects of that class of stock, regardless of when issued. The Board of
Directors likewise has the inherent right, limited only by applicable Delaware
law and provisions of the Certificate of Incorporation to increase the number of
shares of Preferred Stock in a series, to create a new series of Preferred Stock
and to establish preferences and all other terms and conditions in regard to
such newly created series. Any of those actions will dilute the holders of
Common Stock and also affect the relative position of the holders of any series
of any class. Current stockholders have no rights to prohibit such issuances nor
inherent "preemptive" rights to purchase any such stock when offered.
Risks of Forward-looking Statements on Investment Decisions.
Because forward-looking statements are inherently unreliable, investors
should not rely on such assessments in making their investment decisions. The
information contained in this section and elsewhere may at times represent our
best estimates of our future financial and technological performance, based upon
assumptions believed to be reasonable. We make no representation or warranty,
however, as to the accuracy or completeness of any of these assumptions, and
nothing contained in this document should be relied upon as a promise or
representation as to any future performance or events.
Our ability to accomplish our objectives, and whether or not we will be
financially successful is dependent upon numerous factors, each of which could
have a material effect on the results obtained. Some of these factors are within
the discretion and control of management and others are beyond management's
control. Our management considers the assumptions and hypothesis used in
preparing any forward-looking assessments of profitability contained in this
document to be reasonable; however, we cannot assure investors that any
projections or assessments contained in this document, or otherwise made by
management, will be realized or achieved at any level. Prospective investors
should have this prospectus reviewed by their personal investment advisors,
legal counsel or accountants to properly evaluate the risks and contingencies of
purchasing our common stock.
Substantial Penalties for Failure to Maintain the Effectiveness of this
Registration Statement.
We are subject to a registration rights agreement that requires us to
register certain of our Common Stock with the Securities and Exchange
Commission. Under this agreement, we must also maintain this registration until
all of the covered securities are sold or can be sold publicly without benefit
of the registration. If we are unable to obtain or maintain this registration,
we will be subject to substantial monetary penalties.
USE OF PROCEEDS
Holders of Series 2000-A Warrants of First Scientific, Inc. (the
"Company") are not obligated to exercise any of their Warrants. However,
assuming the issuance and exercise of all of the Warrants and the issuance of
the maximum 2,000,000 additional shares of Common Stock issuable upon such
exercise, which are being registered for resale hereunder, the net proceeds from
this Offering to be received by us from the issuance of said maximum shares of
Common Stock upon the exercise of all of the potentially issuable Warrants are
estimated to be $6,000,000. There has been no public market for our shares.
There is no assurance that any of the Warrants will be exercised and,
consequently, the Company may not receive any proceeds from this Offering. The
Company will not receive any proceeds from the issuance of shares of Common
Stock upon conversion of the Series 2000-A Preferred Stock or from the resale by
holders of shares of Common Stock issued prior to September 15, 1998.
The Company currently anticipates that it will use the net proceeds of
this Offering, if any, will be used for the expansion of marketing and sales,
research and development costs, and other expenses. In the event sufficient
proceeds are not received, the Company's short term plan is to meet cash needs
through external financing sources such as bank financing and private offerings
of debt and/or equity. The Company also expects the cash flow from operations
will provide additional funds to the Company as operating revenues increase.
The cost, timing and the amount of funds required for such uses by the
Company cannot be precisely determined at this time and will be based upon,
among other things, competitive developments, the rate of the Company's progress
in product development, and the availability of alternative methods of
financing. In addition, the Company's Board of Directors has broad discretion in
determining how the proceeds of this Offering received by the Company will be
applied.
-10-
<PAGE>
SECURITYHOLDERS REGISTERING SHARES
Of the shares of Common Stock, up to a total of 4,000,000 shares will
be offered and sold by Aspen Capital Resources, LLC, the holder of the Series
2000-A Preferred Stock and of the Series 2000-A Warrants. The remaining
3,210,780 shares of Common Stock are to be offered and sold by holders of shares
issued on or before September 15, 1998. The tables on the page that follows set
forth, as of the date of this Prospectus: (i) the name of each Selling
Shareholder; (ii) certain beneficial ownership information with respect to the
Selling Shareholders; (iii) the number of Shares that may be sold from time to
time by each Selling Shareholder pursuant to this Prospectus, and (iv) the
amount (and, if one percent or more, the percentage) of Common Stock to be owned
by each Selling Shareholder if all Shares are sold. Beneficial ownership is
determined in accordance with securities rules and regulations and generally
includes voting or investment power with respect to securities. Shares of Common
Stock that are issuable upon the exercise of outstanding options, warrants or
other purchase rights, to the extent exercisable within 60 days of the date of
this Prospectus, are treated as outstanding for purposes of computing each
Selling Shareholder's percentage ownership of outstanding Common Stock.
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 2000, by each of the
holders of Series 2000-A Convertible Preferred Stock (the "Selling Series 2000-A
Preferred Stockholder"), assuming the Series 2000-A Preferred Stockholder elects
to exercise its conversion rights to convert the Series 2000-A Convertible
Preferred shares into shares of Common Stock at the minimum conversion price
equal to $2.00 per share of Common Stock, the number of shares of Common Stock
to be sold by each Selling Series 2000-A Preferred Shareholder, and the
percentage of each Selling Series 2000-A Preferred Stockholder after the sale of
Common Stock included in this Prospectus.
<TABLE>
<CAPTION>
Number of Shares Beneficially
Shares Beneficially Shares Owned
Owned Prior to Being After
Stockholder Offering Offered Offering (1)
------------------- ---------- --------------------
Number Percent(2) Number Percent
<S> <C> <C> <C> <C> <C>
Aspen Capital Resources, LLC 2,000,000(3) 8.1% 2,000,000(3) -0- *
------------------------
</TABLE>
* Less than 1%.
(1) Assuming the sale by the Selling Series 2000-A Preferred Stockholder of
all of its shares of Common Stock offered hereunder by such Selling Series
2000-A Preferred Stockholder. There can be no assurance that any of the
Shares of Common Stock offered hereby will be sold.
(2) The percentages set forth above have been computed assuming the number of
shares outstanding equals the sum of (a) 20,978,770, which is the number
of shares of Common Stock actually outstanding on June 30, 2000, and (b)
shares of Common Stock subject to conversion rights and warrants held by
the person(s) with respect to which such percentage is calculated.
(3) Includes up to 2,000,000 shares of Common Stock representing the shares
issuable by the Company upon the conversion of Series 2000-A Preferred
Stock pursuant to a Securities Purchase Agreement between the Company and
Aspen Capital Resources, LLC, whereby the Selling Series 2000-A Preferred
Stockholder has purchased 3,000 shares of Series 2000-A Preferred Stock
and up to a maximum of 500,000 Series 2000-A Warrants for $3,000,000 less
offering expenses of $300,000 and may, but is not required to, purchase up
to an additional 1,000 shares of Series 2000-A Preferred Stock and up to a
maximum of 500,000 additional Warrants for $1,000,000. Upon conversion of
all 4,000 such preferred shares, a maximum of 2,000,000 shares of Common
Stock could be issuable to the Selling Series 2000-A Preferred
Stockholder. The actual number of shares of Common Stock that will be
issued to the Selling Series 2000-A Preferred Stockholder in the event of
conversion pursuant to the Securities Purchase Agreement will vary, and
may vary materially from the aggregate of 2,000,000 shares registered
under the Registration Statement.
There can be no assurance that any of the shares of Common Stock will be
issued to the Selling Series 2000-A Preferred Stockholder pursuant to the
Securities Purchase Agreement and therefore that any of the Shares of Common
Stock offered hereby by the Selling Series 2000-A Preferred Stockholder will be
sold.
-11-
<PAGE>
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 2000, by the holder of
Series 2000-A Warrants (the "Selling Warrantholder"), assuming the Selling
Warrantholder elects to exercise the Warrants held by it to purchase shares of
Common Stock at an exercise price of $3.00 per share, the number of shares to be
sold by said Selling Warrantholder, and the percentage of said Selling
Warrantholder after the sale of the shares included in this Prospectus.
<TABLE>
<CAPTION>
Number of Shares Beneficially
Shares Beneficially Shares Owned
Owned Prior to Being After
Warrantholder Offering Offered Offering (1)
------------------- ---------- --------------------
Number Percent(2) Number Percent
<S> <C> <C> <C> <C> <C>
Aspen Capital Resources, LLC 2,000,000(3) 8.1% 2,000,000(3) -0- *
------------------------
</TABLE>
* Less than 1%.
(1) Assuming the sale by the Selling Warrantholder of all of its shares of
Common Stock issuable upon exercise of the Warrants and offered hereunder
for resale by such Selling Warrantholder. There can be no assurance that
any of the Shares of Common Stock offered hereby will be sold.
(2) The percentages set forth above have been computed assuming the number of
shares outstanding equals the sum of (a) 20,978,770, which is the number
of shares of Common Stock actually outstanding on June 30, 2000, and (b)
shares of Common Stock subject to conversion rights and warrants held by
the person(s) with respect to which such percentage is calculated.
(3) Includes up to 2,000,000 shares of Common Stock representing the shares
issuable by the Company upon the exercise of Series 2000-A Warrants
pursuant to a Securities Purchase Agreement between the Company and Aspen
Capital Resources, LLC, whereby the Selling Warrantholder has purchased
3,000 shares of Series 2000-A Preferred Stock and up to a maximum of
1,500,000 Series 2000-A Warrants for $3,000,000 less offering expenses of
$300,000 and may, but is not required to, purchase up to an additional
1,000 Series 2000-A shares of Preferred Stock and up to a maximum of
500,000 additional Warrants for $1,000,000 less offering expenses of
$100,000. Upon exercise of all Series 2000-A Warrants, a maximum of
2,000,000 shares of Common Stock could be issuable to the Selling
Warrantholder. The actual number of shares of Common Stock that will be
issued to the Selling Warrantholder in the event of exercise pursuant to
the Securities Purchase Agreement will vary, and may vary materially from
the aggregate of 2,000,000 shares registered under the Registration
Statement.
There can be no assurance that any of the shares of Common Stock will be
issued to the Selling Warrantholder pursuant to the Securities Purchase
Agreement and therefore that any of the Shares of Common Stock offered hereby by
the Selling Warrantholder will be sold.
--------------------------------------------------
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 2000, by each of the
holders of shares of Common Stock issued on or before September 15, 1998 (the
"Selling Shareholders"), assuming each of the Selling Shareholders elects to
sell his or her shares of Common Stock, at an exercise price of $3.00 per share,
the number of shares to be sold by each Selling Shareholder and the percentage
of each Selling Shareholder after the sale of the shares included in this
Prospectus.
<TABLE>
<CAPTION>
Shares Beneficially Number of Shares Beneficially
Owned Prior to Shares Being Owned After
Offering Offered(2) Offering
-------------------- ------------- ---------------------
Stockholders Number Percent Number Percent
<S> <C> <C> <C> <C> <C>
Alfred C. Adams & Kathie B. Adams,
JTWROS(3) 13,333 * 8,333 0 M *
Kathie B. Adams, Custodian for Kristina L.
Adams 2,500 * 2,500 0 *
Kathie B. Adams, Custodian for Zackary C.
Adams 2,500 * 2,500 0 *
Chris Allison 163,869 * 3,167 160,702 *
American Pension Services FUB, Custodian
for Nikki R. Blackham(5) 38,000 * 38,000 0 *
American Pension Services FUB, Custodian
for Heath T. Birchall Roth, IRA(6) 7,500 * 7,500 0 *
American Pension Services FUB, Custodian
for Keri F. Burrows Roth, IRA 7,500 * 7,500 0 *
American Pension Services FUB, Custodian
for Merlin V. Fish Keogh(5) 100,000 * 100,000 0 *
American Pension Services FUB, Custodian
-12-
<PAGE>
for Marci C. Fish Roth, IRA 7,500 * 7,500 0 *
American Pension Services FUB, Custodian
for Candace L. Fish Roth, IRA(3) 7,500 * 7,500 0 *
American Pension Services FUB, Custodian
for Kevin B. Fish Roth, IRA(3) 7,500 * 7,500 0 *
American Pension Services FUB, Custodian
for Jane Mendenhall Roth, IRA 1,690 * 1,690 0 *
American Pension Services FUB, Custodian
for Ryan Taylor Roth, IRA 10,000 * 10,000 0 *
American Pension Services FUB, Custodian
for Jennie Curtis Roth, IRA 1,000 * 1,000 0 *
American Pension Services FUB, Custodian
for Kent Curtis Roth, IRA 1,000 * 1,000 0 *
American Pension Services FUB, Custodian
for Steven C Pinegar, IRA 7,000 * 7,000 0 *
American Pension Services FUB, Custodian
for Ryan A. Fish Roth, IRA 7,500 * 7,500 0 *
American Pension Services FUB, Custodian
for Marshall S. Blackham Roth, IRA 10,000 * 10,000 0 *
American Pension Services FUB, Custodian
for Todd K. Hewlett Roth, IRA 25,000 * 25,000 0 *
American Pension Services FUB, Custodian
for Stefanie F. Hewlett Roth, IRA 25,000 * 25,000 0 *
American Pension Services FUB, Custodian
for Julia F. Thompson Roth, IRA 7,500 * 7,500 0 *
American Pension Services FUB, Custodian
for Melvin G. Fish Roth, IRA 8,000 * 8,000 0 *
Clyde Argyle 1,000 * 1,000 0 *
Reza John Azimi 45,000 * 5,000 40,000 *
James N Bahan and Mary Bahan Trust (4) 121,646 * 63,000 58,646 *
Paul Bang and Cornelia Bang, JTWROS 4,000 * 4,000 0 *
Bruce Banks 1,000 * 1,000 0 *
The Barebones Charitable Remainder
Unitrust (5) 100,000 * 100,000 0 *
Evan R. Barton 2,000 * 2,000 0 *
Michael D. Bearden 500 * 500 0 *
Paul L. Beckett 2,000 * 2,000 0 *
William Beifuss III 3,333 * 3,333 0 *
Marci L. Fish (6) 98,225 * 23,500 74,725 *
Lori F. Birchall Custodian for Candace L.
Fish, UGMA UT(5)(7) 92,443 * 49,050 43,393 *
Lori F. Birchall Custodian for Kevin B. Fish,
UGMA UT(5)(7) 92,293 * 48,900 43,393 *
Lori F. Birchall and Heath T. Birchall,
JTWROS(7) 344,262 1.4% 16,800 327,462 1.6%
Rachael Bird(8) 1,500 * 500 1,000 *
Randall C. Bird(8) 1,500 * 1,000 500 *
Lowell I. Black 129,458 * 27,858 101,600 *
Angus U. Blackham and Lula Belle
Blackham, JT TEN 20,000 * 20,000 0 *
Marshall S. Blackham(9) 250,892 1.0% 134,333 116,559 *
Blue Cavern Investments LLC(10) 70,999 * 24,333 46,666 *
Beth Borup 500 * 500 0 *
J. Russ Bradshaw 9,667 * 3,000 6,667 *
J. Larry Bradshaw 2,000 * 2,000 0 *
Willard T. Brannen 1,500 * 1,500 0 *
Claud Tracy Bronson 500 * 500 0 *
Jane Burrows 1,000 * 1,000 0 *
Megan Burrows 1,000 * 1,000 0 *
-13-
<PAGE>
Brian Burrows 1,000 * 1,000 0 *
Steve Burrows 1,500 * 1,500 0 *
Matthew Burrows and Keri Burrows Family
Trust 97,759 * 8,700 89,059 *
Grant S. Burrows Sr. 1,000 * 1,000 0 *
B W LLC (4) 33,646 * 33,646 0 *
Jennifer Call 5,000 * 5,000 0 *
Randy Carlson 5,000 * 5,000 0 *
Larry Carson and Sandee Carson,
JTWROS 32,667 * 26,000 6,667 *
R. Wade Carson 3,000 * 3,000 0 *
Jason Carter 500 * 500 0 *
Adam G. Chapman(11) 1,000 * 1,000 0 *
Cadi Chapman(11) 2,000 * 2,000 0 *
Gloria Chapman 10,500 * 10,500 0 *
Richard G. Chapman 1,000 * 1,000 0 *
Thomas G. Chapman(11) 159,219 * 25,666 133,553 *
Jack R. Christianson 500 * 500 0 *
Jane H. Clark 18,300 * 18,300 0 *
Jeffrey Paul Clark and Jane Ann Clark,
JTWROS 2,500 * 2,500 0 *
Douglas R. Clark 2,500 * 2,500 0 *
Brian P. Clark 2,500 * 2,500 0 *
Stuart T. Clark 500 * 500 0 *
Scott C. Clark 500 * 500 0 *
Byron N. Clark 250 * 250 0 *
N. Palmer Clark 250 * 250 0 *
Michelle T. Clegg and Trent K. Clegg 1,000 * 1,000 0 *
Jerry Craven 1,000 * 1,000 0 *
Robert Shannon Cummings and Lorri Kay
Cummings, JTWROS 26,000 * 26,000 0 *
Kent Curtis and Jennie Curtis, JTWROS 15,000 * 13,000 0 *
Garrett C. Davis 400 * 400 0 *
Curtis De Young 1,000 * 1,000 0 *
Devon Denler 833 * 833 0 *
Doug Denning 400 * 400 0 *
Jamie Dillman(12) 5,000 * 2,500 0 *
Robert Dillman(12) 5,000 * 2,500 0 *
David H. Dimond 1,000 * 1,000 0 *
Heather Disbrow(13) 5,000 * 2,500 2,500 *
Jared Disbrow(13) 5,000 * 2,500 2,500 *
Sharon O. Drakos 5,000 * 5,000 0 *
Richard Dunbar 2,500 * 2,500 0 *
Cindy L. Dunkin and Jeffrey L. Dunkin,
JTWROS 20,000 * 20,000 0 *
Robert H. Eagar 572 * 572 0 *
Frank Eubank and Candy Eubank 700 * 700 0 *
Steve Faerber and Vera Faerber, JT TEN 500 * 500 0 *
David M. Fairbourn and Margie N. Fairbourn 1,000 * 1,000 0 *
Jacob C. Fish 14,333 * 5,000 9,333 *
Judith Fish & Stanley L. Fish, JTWROS 4,000 * 4,000 0 *
Melvin G. Fish 41,000 * 33,000 0 *
Tyler Fish 3,500 * 3,500 0 *
Jessica Fish 3,500 * 3,500 0 *
-14-
<PAGE>
Gregory M. Fish 100,559 * 32,000 68,559 *
Marlene K. Fish 7,000 * 7,000 0 *
Patricia B. Fish(5) 996,859 4.0% 532,690 464,169 2.2%
Ryan A. Fish 89,495 * 13,436 76,059 *
Marlene Fish Custodian for Adam Fish 11,500 * 11,500 0 *
Marlene Fish Custodian for Amberly Fish 11,500 * 11,500 0 *
Marlene Fish Custodian for Micheal Fish 11,500 * 11,500 0 *
John Foster 10,000 * 10,000 0 *
Shelly S. French 100 * 100 0 *
Pomera M. Fronce 300 * 300 0 *
R. Quinn Gardner 133,333 * 133,333 0 *
Nolan D. Gerber 500 * 500 0 *
David O. Gifford 2,000 * 2,000 0 *
Ryan W. Gill 1,200 * 1,200 0 *
Kenneth Goggia 5,000 * 5,000 0 *
Natalie C. Gordon 500 * 500 0 *
Brandon Greenwood 6,250 * 6,250 0 *
George Hacking and Sydney Hacking 5,000 * 5,000 0 *
Don Hacking 20,000 * 20,000 0 *
Jehu Hand(14) 150,000 * 150,000 0 *
Matt Hanks 4,000 * 4,000 0 *
Adam K. Heindorff 500 * 500 0 *
Paul Heiner 1,000 * 1,000 0 *
Daniel Hemmert 1,667 * 1,667 0 *
Suzanna Hewlett 4,000 * 4,000 0 *
Mona F. Hewlett 23,000 * 23,000 0 *
Sandra A. Hewlett 5,000 * 5,000 0 *
Stefanie Hewlett(15) 331,804 1.3% 86,245 245,559 1.2%
Todd Hewlett(15) 331,804 1.3% 150,000 181,804 *
Matthew S. Hewlett 2,500 * 2,500 0 *
Robert Higginson 15,000 * 15,000 0 *
Rachael W. Hirschi and Brent Morgan
Hirschi, JTWROS 15,750 * 15,750 0 *
Melissa Hobaugh 125 * 125 0 *
David R. Hodson 300 * 300 0 *
Brett Hughes 1,500 * 1,500 0 *
Jared Hutchings 450 * 450 0 *
Aaron S. Inouye 2,000 * 2,000 0 *
Annette Irwin 6,667 * 6,667 0 *
Romm Jackson 800 * 800 0 *
Richard D. Jarvis 1,000 * 1,000 0 *
Michael P. Jensen 20,000 * 20,000 0 *
Paul V. Johnson 500 * 500 0 *
Pattie M. Johnson 500 * 500 0 *
Brian M. Johnson 500 * 500 0 *
Rick K. Johnson 500 * 500 0 *
Christine C. Jones 2,500 * 2,500 0 *
Rod Jorgensen and Gayle Jorgensen 1,000 * 1,000 0 *
Joel G. Judd 500 * 500 0 *
Kelly B. Kading 7,500 * 7,500 0 *
Stan Kauffman 500 * 500 0 *
Ronnie L. Kilgrow 250 * 250 0 *
-15-
<PAGE>
Richard C. Knudson 3,000 * 3,000 0 *
John Bruce Kochevar(16) 1,250 * 625 0 *
Jeffery Bruce Kochevar(16) 1,250 * 625 0 *
W. Matthew Lallatin 10,000 * 10,000 0 *
Brock Laubhan 1,500 * 1,500 0 *
Ryan Lee 4,445 * 4,445 0 *
Kim LeGrande 20,000 * 20,000 0 *
Allan Loretz 2,500 * 2,500 0 *
Nanette Loveday 500 * 500 0 *
Randall Lunt 1,000 * 1,000 0 *
Cory H. Maxwell 500 * 500 0 *
Cameron D. McClure 1,500 * 1,500 0 *
Ryan S. Napierski 500 * 500 0 *
Dru R. Nielson and Laurel Nielson, JTWROS 70,000 * 70,000 0 *
Jason R. Nokes 3,000 * 3,000 0 *
Brent Olson 36,666 * 10,000 26,666 *
Collete Parker 500 * 500 0 *
Marianne Peck 2,650 * 250 0 *
Marianne R. Peck 2,650 * 100 0 *
Mark R. Peck and Marianne R. Peck,
JT TEN(17) 2,650 * 2,000 0 *
Marianne R. Peck, Custodian for Elizabeth
Peck 100 * 100 0 *
Marianne R. Peck, Custodian for Mckenzie
Peck, UGMA UT 100 * 100 0 *
Marianne R. Peck, Custodian for Connor M.
Peck, UGMA UT 100 * 100 0 *
Brian Peterson 6,225 * 6,225 0 *
John R. Peterson 32,000 * 32,000 0 *
Stanley A. Peterson 5,000 * 5,000 0 *
Edward L. Platt 8,000 * 8,000 0 *
John Prevatt 125,000 * 25,000 100,000 *
Kristy Pulley 1,000 * 1,000 0 *
Devin Elwood Rhoton 1,000 * 1,000 0 *
Derick Rhoton 1,350 * 1,350 0 *
Scott Rice 1,000 * 1,000 0 *
John Rice 20,000 * 20,000 0 *
Byron Riches and Colleen Riches, Trustee
for the Riches Family Trust DTD 1/9/87 1,000 * 1,000 0 *
Stewart Ritchie 375 * 375 0 *
Richard K. Robins 1,000 * 1,000 0 *
Gene B. Robison 5,000 * 5,000 0 *
Angela Romeril 1,000 * 1,000 0 *
Mark C Sanderson 8,572 * 8,572 0 *
Welster M. Santos and Colleen I. Santos,
JT TEN 1,250 * 1,250 0 *
Bethany Schlensker(18) 13,000 * 2,000 0 *
Louise A. Schlensker(18) 13,000 * 9,000 0 *
Scott D. Schlensker 2,000 * 2,000 0 *
Todd Schlensker(18) 13,000 * 2,000 0 *
Laurie A. Schlensker 2,000 * 2,000 0 *
Dave Schofield 1,000 * 1,000 0 *
Monte F. Shelley 68,500 * 1,500 67,000 *
Cally J. Smith 500 * 500 0 *
-16-
<PAGE>
Societe Financiere du Seujet, S.A.(19) 200,000 * 200,000 0 *
Calvin R. Stephens(20) 21,000 * 5,000 0 *
RaNae Stephens(20) 21,000 * 500 0 *
Rod W. Stephens and Pamela W. Stephens,
JTWROS (20) 21,000 * 15,000 0 *
Roy J. Stephens(20) 21,000 * 500 0 *
Shane C. Stephens and Michelle Stephens,
JTWROS 20,000 * 20,000 0 *
Ronald E. Strobelt 6,000 * 6,000 0 *
Dale Strum 5,000 * 5,000 0 *
James Swain 1,000 * 1,000 0 *
Juno L. Taylor 4,500 * 4,500 0 *
David D. Thompson and Julia F. Thompson,
JTWROS 149,759 * 73,700 76,059 *
Kenyon Titus 2,500 * 2,500 0 *
Brian Tolman(21) 29,000 * 1,000 0 *
JoAnn H. Tolman(21) 29,000 * 28,000 0 *
Thomas L. Tyler 500 * 500 0 *
James L. Warr and Myrna F. Warr, JTWROS 8,000 * 8,000 0 *
The Watchman Trust(22) 48,000 * 48,000 0 *
Peter S. Watkins 700 * 700 0 *
Gary Webb 1,580 * 1,580 0 *
Robert Webster 445 * 445 0 *
Kenneth Weidrich 12,500 * 12,500 0 *
Shelby West 500 * 500 0 *
Douglas A. Whitaker and Valerie B.
Whitaker, JTWROS(23) 30,000 * 24,000 6,000 *
Melanie A. Whitaker(23) 2,000 * 2,000 0 *
Douglas A. Whitaker, Custodian for Scott U.
Whitaker(23) 2,000 * 2,000 0 *
Douglas A. Whitaker, Custodian for Camille
B. Whitaker(23) 1,000 * 1,000 0 *
Douglas A. Whitaker, Custodian for Ashlee
M. Whitaker(23) 1,000 * 1,000 0 *
John Wilding 4,589 * 4,589 0 *
Kevin Williams 5,000 * 5,000 0 *
Aaron T. Williams(24) 1,000 * 1,000 0 *
Brant Williams 1,000 * 1,000 0 *
Channing R. Williams 1,000 * 1,000 0 *
Lyle T. Williams and Lois Fish Williams,
JTWROS(24) 12,000 * 11,000 1,000 *
Gregory Wilson 500 * 500 0 *
Kevin A. Wilson 572 * 572 0 *
Louis Wong 4,500 * 4,500 0 *
Stuart Wright 15,000 * 15,000 0 *
----------- ----- --------- ---------- -----
Totals 5,933,430 23.9% 3,210,780 2,577,800 12.4%
=========== ===== ========= ========== =====
--------------------------------------
</TABLE>
* Less than 1%.
(1) The Company is advised that American Pension Services ("APS")
acts as administrator of self directed IRAs and other fiduciary
investments and has no control or discretion over the accounts
administered by it.
(2) Only includes shares that were originally issued by the Company
prior to September, 15 1998.
(3) Includes shares held beneficially in the names of their children,
Kristina L. Adams and Zackary C. Adams.
(4) Includes beneficial ownership of 33,646 shares held by BW LLC.
(5) Merlin V. Fish is trustee of The Barebones Charitable Remainder
Unitrust and is beneficial owner of shares held in the name
American Pension Services FUB Custodian for Merlin V. Fish Keogh.
Merlin V. Fish and Patricia B. Fish are husband and wife and live
in the same household as Candace L. Fish and Kevin B. Fish.
-17-
<PAGE>
(6) Includes shares held by American Pension Services in the account
of Marci L. Fish Roth, IRA.
(7) Lori F. Birchall and Heath Birchall are husband and wife and Lori
F. Birchall is custodian for Candace L. Fish and Kevin B. Fish.
(8) Randall Bird is the father of and lives in the same household as
Rachael Bird.
(9) Marshall S. Blackham and Nikki Blackham are husband and wife.
(10) Ryan Taylor is the owner of Blue Cavern Investments LLC. Includes
shares held in Roth IRA account managed by American Pension
Services.
(11) Adam Chapman and Cadi Chapman are son and daughter of Thomas G.
Chapman.
(12) Robert Dillman and Jamie Dillman are husband and wife and live in
the same household.
(13) Jared Disbrow and Heather Disbrow are husband and wife and live
in the same household.
(14) Mr. Hand was the former President and a director of the Company
and its principal founder.
(15) Todd K. Hewlett and Stephanie F. Hewlett are husband and wife and
live in the same household.
(16) John Bruce Kochevar is the father of Jeffrey Bruce Kochevar.
(17) Mark R. Peck and Marianne R. Peck are husband and wife and
parents to Elizabeth, Mckenzie, and Connor M. Peck and all live
in the same household.
(18) Louise A. Schlensker is the mother of Todd Schlensker and Bethany
Schlensker, all live in the same household.
(19) Societe Financiere du Seujet, S.A. is controlled by Ricardo
Mortara.
(20) Calvin R. Stephens is the father of Roy, Rod and ReNae Stephens
and all live in the same houshold.
(21) JoAnn Tolman is the mother of Brian Tolman.
(22) The beneficiary of The Watchman Trust is Raymond Potter.
(23) Douglas A. Whitaker and Valerie B. Whitaker are the parents of
and live in the same household as Melanie, Scott, Camille and
Ashley Whitaker.
(24) Lyle T. Williams and Lois Fish Williams are the parents and live
in the same houshold of Aaron T. Williams.
There can be no assurance that any of the shares of Common
Stock offered hereby by the Selling Shareholders will be sold.
DESCRIPTION OF SECURITIES
First Scientific's authorized capital stock consists of 50,000,000
shares of Common Stock, $.001 par value per share, and 1,000,000 shares of
Preferred Stock, $.001 par value per share. The Company has created one class of
Preferred Stock, designated as Series A-2000 Preferred Stock.
Common Stock. The holders of Common Stock are entitled to one vote for
each share held of record on all matters to be voted on by stockholders. The
holders of Common Stock are entitled to receive such dividends, if any, as may
be declared from time to time by the Board of Directors in its discretion from
legally available funds. Upon liquidation or dissolution of First Scientific,
Inc. the holders of Common Stock are entitled to receive, pro rata, assets
remaining available for distribution to stockholders. The Common Stock has no
cumulative voting, preemptive or subscription rights and is not subject to any
future calls. There are no conversion or redemption rights applicable to the
shares of Common Stock. All the outstanding shares of Common Stock are fully
paid and non-assessable.
Preferred Stock. The Board of Directors is authorized without further
action by the stockholders, to issue, from time to time, up to a total of
1,000,000 shares of Preferred Stock in one or more classes or series, and to fix
or alter the designations, power and preferences and relative participation,
option or other rights, if any, and qualifications, limitations or restrictions
thereof, including, without limitation, dividend rights (and whether dividends
are cumulative), conversion rights, if any, voting rights (including the number
of votes, if any, per share), redemption rights (including sinking fund
provisions, if any), and liquidation preferences of any unissued shares or
wholly unissued series of preferred stock, and the number of shares constituting
any such class or series and its designation and to increase or decrease the
number of such class or series subsequent to the issuance of shares of such
class or series, but not below the number of shares of such class or series then
outstanding. The issuance of any series of preferred stock under certain
circumstances could have the effect of delaying, deferring or preventing a
change in control and could adversely affect the rights of the holders of the
Common Stock. As of the date of this Memorandum, First Scientific has created
and issued shares of one class of preferred stock, which is more fully discussed
below.
Series 2000-A Preferred Stock. The Board of Directors has authorized
the issuance of a total of 4,500 shares of Series 2000-A Preferred Stock. The
$1,000 stated value of each share of Series 2000-A Preferred Stock, together
with accrued and unpaid dividends, is convertible into shares of Common Stock at
a rate equal to 80% of the fair market value, which is, as provided in the
Securities Purchase Agreement for such shares, $3.00 per share until said Common
Stock is quoted on the Nasdaq Stock Market System or reported on the NASD's OTC
bulletin board during the 15 trading days preceding the date of conversion,
subject to maximum and minimum conversion prices of $4.00 and $2.00 per share,
respectively. Shares of Company Common Stock are not now quoted or listed, nor
are they otherwise traded. However, the Securities Purchase Agreement pursuant
to which the holder of the Series 2000-A Preferred Stock and Series 2000-A
Warrants acquired said shares and warrants obligates the Company to register the
shares of Common Stock into which the Series 2000-A Preferred Stock are
convertible or which underlie the Warrants and to trade beginning no later than
September 12, 2000. If, as and when the Common Stock is quoted on the Nasdaq
Stock Market System or reported on the NASD's OTC Bulletin Board, fair market
value will then be equal to the average of the three lowest closing bid prices
for the Common Stock during the 15 trading days preceding the date of
conversion, subject to minimum and maximum conversion prices of $2.00 and $4.00
per share, respectively.
-18-
<PAGE>
At any time after May 16, 2001, the Company may, at its sole option,
redeem all of the then outstanding shares of Series 2000-A Preferred Stock at a
price equal to 125% of stated value per share, plus accrued and unpaid
dividends, if any. The holders of shares of Series 2000-A Preferred Stock are
entitled to cumulative preferred dividends at the rate of 8% of the stated value
per annum per share, payable in cash or common stock, at the election of the
holder, on or before the end of each calendar quarter, commencing June 30, 2000.
In an event of noncompliance as defined in the Certificate of Designation, the
cumulative preferred dividend rate becomes 21% per annum.
The Series 2000-A Preferred Stock has priority rights to dividends over
the Common Stock, but will not participate in any dividends payable to the
holders of shares of Common Stock. No dividends will be paid to holders of
shares of Common Stock unless and until all dividends on shares of Preferred
Stock have been paid in full for the same period. In the event of any
liquidation, dissolution or winding-up of the company, the holders of shares of
Series 2000-A Preferred Stock are entitled to receive, prior and in preference
to, any distribution of any of the assets or surplus funds of the company to the
holders of shares of Common Stock or any other stock of First Scientific ranking
on liquidation junior or subordinate to the Series 2000-A Preferred Stock, an
amount equal to the $1,000 stated value per share, plus accrued and unpaid
dividends, if any.
The holder of shares of Series 2000-A Preferred Stock has voting rights
equal to the number of shares of the Company's Common Stock into which said
holder's shares of Series 2000-A Preferred Stock are convertible, except in
those instances required by Delaware law.
As of June 30, 2000, there were a total of 3,000 shares of Series
2000-A Preferred Stock issued and outstanding. It is anticipated that the
Company will sell to the preferred stockholder, although said preferred
stockholder is not required to purchase, an additional total of 1,000 shares of
Series 2000-A Preferred Stock for $1,000 per share, in phases at 30 day
intervals through September 16, 2000. A total of 2,000,000 shares of Common
Stock has been set aside and reserved in the event that the holder of the now
and subsequently issued shares of Series 2000-A Preferred Stock elects to
convert those shares into shares of Common Stock. As of June 30, 2000, no shares
of Series 2000-A Preferred Stock have been converted into shares of Common
Stock.
Series 2000-A Warrants. Each Series 2000-A Warrant entitles the holder
to purchase one share of Common Stock at an exercise price of $3.00 per share.
The number of Series 2000-A Warrants ultimately issued will vary depending on
the conversion price of the Series 2000-A Preferred Stock. The Warrantholder
will be entitled to receive one warrant for every share of Common Stock received
on the conversion of the Series 2000-A Preferred Stock. Since this number is
variable, the number of Series 2000-A Warrants to be issued to the Warrantholder
is also variable. However, the number of such Warrants to be issued to the
Warrantholder will be fixed no later than November 16, 2000, assuming no event
of default has occurred. The Securities Purchase Agreement provides that the
ultimate number of warrants shall be determined by dividing the aggregate stated
value of the shares of Series 2000-A Preferred Stock by the conversion price (as
defined in the Certificate of Designation) of such preferred shares, determined
as of the earlier of November 16, 2000, the date on which the Warrantholder
converts its shares of Series 2000-A Preferred Stock, or the date on which said
preferred shares are redeemed.
The Warrants are exercisable from December 1, 2000, or earlier upon the
occurrence of an event of default or a change in control of the Company. Series
2000-A Warrants are exercisable through the anniversary date of their issuance
in 2004, provided that at the time of exercise a current prospectus relating to
the Common Stock is then in effect and the Common Stock is qualified for sale or
exempt from qualification under applicable state securities laws.
The Series 2000-A Warrants are not subject to early redemption by the Company.
The Series 2000-A Warrants may be exercised upon surrender of the
certificate(s) therefore on or prior to the expiration or the redemption date at
the offices of Colonial Stock Transfer Company, 544 E. 400 S. Suite 100, Salt
Lake City, Utah 84111, the Company's warrant agent (the "Warrant Agent") with
the subscription form on the reverse side of the certificate(s) completed and
executed as indicated, accomplished by payment (in the form of a certified or
cashier's check payable to the order of the Company) of the full exercise price
for the number of warrants being exercised.
The Securities Purchase Agreement provides that the Warrantholder may
exercise by paying for the underlying shares of Common Stock in cash or by means
of a cashless exercise, whereby, if applicable, the requisite number of shares
of Common Stock to be issued on such exercise would be reduced as if they had
been sold and the excess proceeds applied to cover the exercise price of the
remaining shares of Common Stock.
The Series 2000-A Warrants contain provisions that protect the holders
thereof against dissolution by adjustment of the exercise price per share and
the number of shares issuable upon exercise thereof upon the occurrence of
certain events including issuances of Common Stock (or options or securities
convertible, exchangeable or exercisable into Common Stock) at less than market
value, stock dividends, stock splits, mergers, sale of substantially all of the
Company's assets, and for other extraordinary events; provided, however, that no
such adjustment shall be made upon, among other things (i) the issuance or
exercise of options or other securities under employee benefit plans (ii) the
sale or exercise of outstanding Series 2000-A Warrants, or (iii) the conversion
of shares of the Company's Preferred Stock to Common Stock.
The holder of Series 2000-A Warrants will not possess any right as a
shareholder of the Company unless or until it exercises the Series 2000-A
Warrants. It is anticipated that, through September 16, 2000, the Warrantholder
will purchase, although it is not required to, additional shares of Series
2000-A Preferred Stock, whereupon the Company will issue to the Warrantholder
additional Series 2000-A Warrants, which, together with such warrants it
currently holds, could be adjusted to as many as 2,000,000 such warrants.
Therefore, the Company has reserved a total of 2,000,000
-19-
<PAGE>
shares of Common Stock in the event the holder of the now and subsequently
issued and adjusted Series 2000-A Warrants elects to exercise the same and
thereby to purchase Common Stock. As of June 30, 2000, no Series 2000-A Warrants
have been exercised.
Certain Provisions of Certificate of Incorporation. The Company's
Certificate of Incorporation provides that to the fullest extent permitted by
Delaware law, its directors shall not be liable to the Company. The Certificate
of Incorporation also contains provisions entitling the officers and directors
to indemnification by the Company to the fullest extent permitted by the
Delaware General Corporation Law.
Indemnification Agreements. The Company has entered into
Indemnification Agreements with its officers and directors. Such Indemnification
Agreements provide that the Company will indemnify its officers and directors
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement arising out of threatened, pending or completed legal action
against any officer or director to the fullest extent permitted by the Delaware
General Corporate Law.
Transfer and Warrant Agent. The Company's transfer agent and registrar
for its Common Stock and the Series 2000-A Preferred Stock and the Warrant Agent
for the Series 2000-A Warrants is Colonial Stock Transfer Co., 544 East 400
South, Suite 100, Salt Lake City, Utah 84111.
PLAN OF DISTRIBUTION
Selling Securityholders may effect sales by selling their shares of
Common Stock directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase securities as
principals and thereafter sell the Common Stock from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers for whom such broker-dealers act as agents or to whom they may sell
as principals or otherwise (which compensation as to a particular broker-dealer
may exceed customary commissions). The Selling Securityholders will pay all
commissions, transfer taxes, and other expenses associated with the sale of
Common Stock by them.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sales may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities by them might be deemed to be
underwriting discounts and commissions under the Securities Act. We have agreed
to indemnify the Series 2000-A Preferred Stockholders and Warrantholders against
certain liabilities under the Securities Act.
From time to time this Prospectus will be supplemented and amended as
required by the Securities Act of 1933, as amended. During any time when a
supplement or amendment is so required, the Selling Securityholders are to cease
sales until the Prospectus has been supplemented or amended. Pursuant to the
registration rights granted to certain of the Selling Securityholders, we have
agreed to update and maintain the effectiveness of this Prospectus. Certain of
the Selling Securityholders also may be entitled to sell their Shares without
the use of this Prospectus, provided that they comply with the requirements of
Rule 144 promulgated under the Securities Act.
We do not plan to solicit the holder of Series 2000-A Preferred Stock
regarding the conversion of its Series 2000- A Preferred shares into shares of
Common Stock which have been registered for resale upon conversion, or the
holder of Series 2000-A Warrants regarding the exercise of its Warrants into
shares of Common Stock which have been registered for resale upon exercise.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1999 and 1998, and for the years then ended, appearing in the Company's Annual
Report (Form 10-K) for the year ended December 31, 1999, filed with the
Securities and Exchange Commission on March 14, 2000 and incorporated by
reference in this Prospectus, have been included therein and incorporated herein
by reference in reliance upon the report of Hansen, Barnett & Maxwell,
independent certified public accountants, given upon the authority of such firm
as experts in auditing and accounting.
The financial statements of PureSoft Solutions, L.L.C. as of December
31, 1999 and for the period from February 10, 1999 through December 31, 1999,
appearing in the Company's current report on Form 8-K\A filed with the
Securities and Exchange Commission on June 13, 2000 and incorporated by
reference in reliance upon the report of Hansen, Barnett & Maxwell, independent
certified public accountants, given upon the authority of such firm as experts
in auditing and accounting.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby and certain other legal matters in connection with this offering have
been passed upon for us by Mackey Price & Williams, Salt Lake City, Utah.
-20-
<PAGE>
No dealer, salesman or any other person has been authorized to give information
or to make any representations other than those contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or the Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy any of the securities offered hereby by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so or to anyone to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof.
---------------------
7,210,780 Shares of Common Stock
FIRST SCIENTIFIC, INC.
-----------------
PROSPECTUS
-----------------
August 31, 2000
II-1
