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PURSUANT TO RULE 424(b)(3)
SECURITIES ACT FILE NO. 333-59579
PROSPECTUS
MEDJET INC.
1,647,425 SHARES OF COMMON STOCK AND 107,143 CLASS A
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to the offer and sale of 1,232,143 shares of Common
Stock, par value $.001 per share ("Common Stock"), of Medjet Inc. ("Medjet" or
the "Company") issuable upon the exercise of 1,232,143 Class A Redeemable Common
Stock Purchase Warrants (the "IPO Warrants") issued in connection with the
Company's initial public offering (the "IPO") of securities. As part of the IPO,
1,071,429 Units (each unit consisting of one share of Common Stock and one IPO
Warrant) were issued on August 6, 1996 and 160,714 Units were issued on
September 13, 1996 in connection with the exercise of the underwriter's
overallotment option. The Units became separable on November 6, 1996. As a
result, the Common Stock and the IPO Warrants trade separately. Each IPO Warrant
entitles the holder thereof to purchase one share of Common Stock at a price of
$10.00 per share, subject to adjustment in certain circumstances. The IPO
Warrants are exercisable until November 6, 1999. The Company may redeem the IPO
Warrants at any time upon 30 days prior written notice, if the market price of
the Common Stock equals or exceeds $13.00 for any 10 consecutive trading days
within a period of 30 trading days ending within five days prior to the date of
notice of redemption.
This Prospectus also relates to 182,724 shares of Common Stock issuable
upon conversion of the Company's outstanding Series A Convertible Preferred
Stock, par value $.01 per share (the "Preferred Stock"), and 18,272 shares of
Common Stock issuable upon exercise of a warrant (the "Placement Agent's
Warrant") issued to a representative of the placement agent engaged by the
Company in connection with its sale in April 1998 of Preferred Stock. The
110,000 shares of Preferred Stock issued and outstanding as of the date hereof
will automatically convert into 182,724 shares of Common Stock upon the
effective date of the registration statement of which this Prospectus forms a
part. No additional consideration will be paid by the holders of the Preferred
Stock in connection with the conversion thereof. The Placement Agent's Warrant,
which entitles the holder thereof to purchase 18,272 shares of Common Stock at a
purchase price per share equal to the lesser of: (i) $7.47 or (ii) 110% of the
average closing bid price for the Common Stock as quoted on the National
Association of Securities Dealers, Inc. ("NASD") OTC Bulletin Board for a 20
trading day period ending on the last trading day immediately prior to an
automatic conversion event (as defined in the warrant agreement), is
exercisable, in whole or in part, until April 19, 2002. The exercise price of
the Placement Agent's Warrant is subject to adjustment in certain circumstances
and may be paid in either cash or shares of Common Stock through the utilization
of a cashless exercise provision set forth in the Placement Agent's Warrant.
Additionally, this Prospectus relates to 107,143 shares of Common Stock and
107,143 IPO Warrants issuable upon exercise of the Unit Purchase Option (the
"Underwriter's Option") issued by the Company to an affiliate of the underwriter
in connection with the IPO and 107,143 shares of Common Stock issuable upon
exercise of the IPO Warrants underlying the Underwriter's Option. The exercise
price of the Underwriter's Option is $6.72 per Unit. Such exercise price is
subject to adjustment in certain circumstances.
The total gross proceeds to the Company from this offering may range from
zero to $14,249,352 (assuming that the exercise price of the Placement Agent's
Warrant is $7.47 and that the exercise price is paid in cash) if the IPO
Warrants, Placement Agent's Warrant, the Underwriter's Option and the IPO
Warrants underlying the Underwriter's Option are each exercised in full.
The Company will pay all expenses incurred in connection with this
offering. Additionally, the Company has also agreed to pay to the underwriter of
the IPO, a fee in the amount of 8.0% of the exercise price of any of the IPO
Warrants exercised beginning as of August 6, 1997, if (a) the market price of
the Common Stock on the date the IPO Warrant is exercised is greater than the
exercise price of the IPO Warrant, (b) the exercise of the IPO Warrant is
solicited by such NASD member and such NASD member is designated in writing by
the holder of such IPO Warrant as the soliciting broker, (c) the IPO Warrant is
not held in a discretionary account, (d) disclosure of the compensation
arrangement is made upon the sale and exercise of the IPO Warrants, (e)
soliciting by such NASD member of the exercise of the IPO Warrant is not in
violation of Regulation M promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and (f) solicitation of the exercise is in
compliance with the regulations and rules of the NASD. The legal, accounting and
other fees and expenses related to offer and sale of the securities contemplated
hereby are estimated to be $47,000. This offering is not being underwritten.
The Common Stock and IPO Warrants are quoted on the OTC Bulletin Board.
Quotes for OTC Bulletin Board securities are not listed in the financial
sections of newspapers. On September 23, 1998, the last reported per share bid
and ask prices of the Common Stock on the OTC Bulletin Board were $4.00 and
$4.5625 respectively, and the last reported bid and ask prices of the IPO
Warrants on the OTC Bulletin Board were $.25 and $.46875, respectively.
THE IPO WARRANTS ISSUABLE UPON EXERCISE OF THE UNDERWRITER'S OPTION, THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THE PREFERRED STOCK AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF EACH OF THE IPO WARRANTS, THE PLACEMENT AGENT'S
WARRANT AND THE IPO WARRANTS UNDERLYING THE UNDERWRITER'S OPTION INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7 HEREOF FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE SECURITIES OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October 9, 1998.
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No person is authorized in connection with the offering made hereby to give
any information or to make any representation not contained in this Prospectus.
If given or made, such information or representation must not be relied upon as
having been authorized by the Company. Neither the delivery of this Prospectus
nor any offer or sale made hereunder shall under any circumstances create any
implication that the information contained herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities in any jurisdiction to
any person to whom it would be unlawful to make such an offer or solicitation in
such jurisdiction.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and at Seven World
Trade Center, 13th Floor, New York, New York 10048. In addition, the Company is
required to file electronic versions of these documents through the Commission's
Electronic Data Gathering, Analysis and Retrieval system (EDGAR). The Commission
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Copies of such material may also
be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C.
20549. The Common Stock and IPO Warrants are quoted on the OTC Bulletin Board.
The Company intends to furnish its stockholders with annual reports containing
audited financial statements and such other periodic reports as the Company
deems appropriate or as may be required by law.
The Company has filed with the Commission a Registration Statement on Form
S-3, as amended (the "Registration Statement"), under the Securities Act of
1933, as amended (the "Securities Act") with respect to the securities being
offered by this Prospectus. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits thereto. For further information
with respect to the Company and the offer and sale of the securities, reference
is made to the Registration Statement and the exhibits thereto. Statements
contained in this Prospectus concerning the provisions of documents filed with
the Registration Statement as exhibits are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus:
(a) Annual Report on Form 10-KSB for the fiscal year ended December
31, 1997;
(b) Annual Report on Form 10-KSB/A No. 1 for the fiscal year ended
December 31, 1997;
(c) Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1998 and June 30, 1998, including any amendments thereto;
(d) The Company's definitive Proxy Statement pursuant to Schedule 14A
filed with the Commission on June 3, 1998; and
(e) The description of the Common Stock offered hereby contained in
the Company's Registration Statement on Form 8-A which was
declared effective by the Commission on August 6, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 (other than, in the case of the Company's Proxy Statement, portions thereof
not deemed to be "filed" for the purposes of Section 18 of the Exchange Act) and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities to be made hereunder shall be
deemed to be incorporated herein by reference and shall be a part hereof from
the date of filing of such documents. 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 which
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 the
Registration Statement or this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of such
person, a copy of the documents incorporated herein or in the Registration
Statement by reference (other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference into the information the
Registration Statement so incorporates). Written or telephone requests for such
documents should be directed to Investor Relations Department, Medjet Inc., 1090
King Georges Post Road, Suite 301, Edison, New Jersey 08837, telephone (732)
738-3990.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this Prospectus and in the documents incorporated
herein constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act and Section 2B of the Exchange Act. For this purpose, any
statements contained herein or incorporated herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "plans," "expects" and similar expressions
are intended to identify forward-looking statements. There are a number of
important factors, including those set forth under the caption "Risk Factors"
and elsewhere in this Prospectus, that could cause the actual results of the
Company to differ materially from those indicated by such forward-looking
statements.
THE COMPANY
Medjet Inc. (the "Company"), incorporated in Delaware in December 1993,
is engaged in the research and development of medical technology with a current
emphasis on ophthalmic surgical technology and equipment, and has developed a
proprietary technology and derivative devices for corneal surgery. The basic
technology is based on a hair thin, circular beam of saline water solution
moving in varying excess of supersonic speed, depending on the specific
application. In each application, the waterjet beam substitutes for a
conventional, oscillating metal or diamond blade. In combination with other
elements of the device, it is capable of removing the epithelium (the front
surface layer of the cornea of the eye) in a procedure known as epithelial
keratoplasty, or shaving thin shaped layers from the cornea, in a procedure
known as lamellar keratoplasty. The device normally used to perform lamellar
keratoplasty is known as a microkeratome. The Company's waterjet-based
microkeratome is known as the HydroBlade(TM) Keratome. The procedure with the
new device may, subject to regulatory approval, be used to treat diseases of the
cornea as well as to correct vision deficiencies such as nearsightedness
("myopia"), farsightedness ("hyperopia") or astigmatism. Layers of the cornea,
either parallel or shaped (resembling contact lenses), are excised in order to
reshape the anterior cornea surface to achieve close-to-ideal focusing. In
combination with a proprietary template of prescribed dimensions, the shape of
the layer to be removed can be determined in advance.
The Company has demonstrated that its technology can be used to remove
the epithelium, a procedure called hydro-epithelial keratoplasty ("HEK") or to
treat diseased cornea in a procedure known as hydro-therapeutic keratoplasty
("HTK"), in which diseased corneal tissue is removed. HEK may be used to treat
diseases of the epithelium or damage to the epithelium that sometimes occurs.
Epithelial removal is often the first step in surgery of the cornea. It may be
used beneficially as the first step in the currently-used laser refractive
surgery technique known as photo-refractive keratectomy ("PRK"). Management
believes that the HEK procedure is superior to currently used techniques. The
device to carry out HEK procedures, the Company's HydroBrush(TM) Keratome, has
been cleared for marketing by the U.S. Food and Drug Administration (the "FDA").
Approximately 45,000 corneal procedures, primarily full transplants, are
performed annually in the United States. The Company believes that HTK will make
feasible partial transplants, which would be more desirable and safer than
currently performed corneal procedures. HTK may also be used to create a uniform
thickness flap of corneal tissue as the first step in a current modification of
the PRK technique known as the light ablation system for in-situ keratomileusis
("LASIK"). Currently, blade-based microkeratomes are used to make the flap and
in management's view are somewhat unsafe, difficult to learn and have limited
the use of LASIK as an alternate to PRK.
HEK is performed with a device known as the HydroBrush(TM) Keratome,
which precisely and safely debrides the epithelial layer of the cornea (with a
minimum of debris or residue) down to the Bowman's layer (the layer of the
cornea below the epithelium), in a discrete circular region with a well defined
boundary. There is no discernible damage to the Bowman's layer using high
magnification scanning electron microscope imaging. In contrast, knife blade
scrapes to debride the epithelium leave substantial debris and damage to
Bowman's layer. On rabbits, the regrowth of the epithelium is observed to be
about one-third faster (typically two days instead of three) when the cornea is
debrided with the HydroBrush(TM) Keratome than when blade scraping is used. In
addition, in contrast to blade scraping, which takes a few minutes, the
HydroBrush(TM) debriding process takes a few seconds and requires minimal
training or experience, and no initial dehydration is observed. Thus, the
Company believes that HEK should be ideal for use with PRK procedures.
The HydroBrush(TM) Keratome utilizes a waterjet brush, a thin, high
speed, linear jet about 2 mm wide of sterile, saline water solution flowing on
and along the underside of a transparent applanator plate. A circular, passive,
globe alignment device (the "EyeMask") is placed against the anterior corneal
surface and an insert in the EyeMask defines the circular region, up to 8 mm in
diameter, to be debrided. The applanator, which directs the flow of water, is
brought into light contact with the corneal upper surface at the apex of the
cornea. The applanator is simply slid by hand across the EyeMask and the
waterjet brush gently removes the epithelium. The spent water is directed to an
absorbent material shroud placed against the nose.
The sterile, saline water solution comes from a small, flexible,
sterile, 15 ml plastic bottle in the high pressure apparatus. When the device is
activated by pressurizing a working fluid around the outside of the bottle, the
bottle is pressurized, squeezed and emptied by the external hydrostatic pressure
of about 6000 pounds per square inch to produce a circular, 100 micron diameter,
constant, high speed saline waterjet which runs for 8 seconds, and then shuts
off automatically when the bottle is empty. The saline waterjet is converted to
the linear HydroBrush(TM) keratome on the underside of the applanator plate.
The high hydrostatic pressure to activate the device is produced by a
miniature water pressure intensifier driven by a liquid CO2 air-gun type
cartridge. A small diameter, flexible tube carries high pressure water to the
device handle. The CO2 cartridge, the sterile saline bottle, the EyeMask inserts
and the spent water catcher constitute an inexpensive set of disposables.
The HydroBrush(TM) Keratome is intended to become the first
commercially available product using the Company's waterjet technology and would
be both an early source of revenue for the Company and the basis for additional
applications to the FDA for permitted uses of the device. An application for use
in removal of pteryguim is in process. Pterygium afflicts over 100 million
people worldwide and is difficult to treat surgically with a low rate of
recurrence. If it can be demonstrated that pterygium recurrence rate is reduced
by using this product the procedure rate could be several million per year. No
arrangements for commercial marketing of any HydroBrush(TM) application have
been finalized to date.
The Company's HydroBlade(TM) Keratome, which consists of a waterjet
nozzle and a globe fixation device, is used with a miniature high pressure
system similar to that used for the HydroBrush(TM) Keratome. However, it
operates at a pressure of 20,000 psi. In this case, scanning is accomplished by
sliding the nozzle along tracks on the globe fixation device.
The Company believes that the HydroBlade(TM) Keratome, through the use
of a procedure known as hydro-refractive keratoplasty ("HRK"), has the potential
to reduce or eliminate a patient's dependence on eyeglasses or contact lenses by
modifying the shape of the anterior corneal surface to correct inherent vision
deficiencies. Based on feasibility studies on enucleated eyes and animal
studies, the Company believes that the HydroBlade(TM) Keratome cuts more
precisely, more quickly and with less tissue damage than the sharpest metal,
diamond or laser scalpels and that the HRK microkeratome, if cleared by the FDA,
will result in a safer, more accurate and more stable corneal adjustment that is
less painful for patients than other refractive surgery procedures currently
available. The Company anticipates, based on its studies, that HRK could cost
less than other such procedures, although the cost to the patient is determined
by the surgeon.
The Company believes that the HydroBlade(TM) Keratome, when used in
HTK, would be used similarly to other microkeratomes but would allow for safe
removal of layers of corneal tissue of a predetermined shape and thickness with
a higher degree of accuracy and far less tissue damage. This has already been
demonstrated on cadaver eyes. The Company intends to file an investigational
device exemption to perform clinical trials and then submit a Section 510(k)
notification for a ruling of substantial equivalence to current microkeratomes,
resulting in permission for the Company to market the HydroBlade(TM) Keratome
for HTK.
A subsequent and potentially more commercially valuable use of the
HydroBlade(TM) Keratome is for refractive surgery through HRK. Subsequent to the
permitted marketing of the HydroBlade(TM) Keratome for HTK, the Company intends
to seek FDA clearance to market the device for HRK.
Upon clearance or other marketing approval by the FDA of its
HydroBlade(TM) Keratome for HRK, the Company intends to market this product to
individual or affiliated groups of ophthalmologists for treatment of patients in
a clinical setting. The Company expects to derive a significant part of its
revenue by selling a basic system and selling disposables. In addition to
standard templates for standard refractive corrections, the Company expects to
make available custom templates for individual patient treatment as required.
The Company believes that its proprietary waterjet technology has
additional surgical applications. However, only limited studies of such
applications have been carried out. The Company's current focus is on
applications to ophthalmology.
The Company is in the development stage and has not sold any products
or generated any revenues. As of the date of this Prospectus, the Company's
research and development activities have been limited to constructing and
testing experimental versions of the keratome and conducting a limited number of
feasibility studies using porcine, rabbit and human cadaver eyes and live
animals to prove that a hair-thin beam of water can smoothly incise and shape
the anterior surface of the cornea and that the cornea will heal properly after
the surgery. Human clinical trials are currently being performed.
The FDA has recommend to the Company that it seek permission to market
the HTK microkeratome through a Section 510(k) notification together with a
limited number of clinical trials, and it is the intention of the Company to
file a notification with the FDA in the second half of 1998 relating to two uses
of the HTK microkeratome. Although there can be no assurance that this will
prove to be the case, permission granted to the 510(k) notifications should
enable the Company to commence its marketing efforts sooner than if the Company
had to submit to the FDA a pre-market approval ("PMA") application. To obtain
FDA clearance of the 510(k) notification, a company must demonstrate, among
other matters, that the device is safe and easy to use. Human clinical trial
data is sometimes required to be submitted with a 510(k) notification. A PMA
application is typically a more complex submission which usually includes the
results of clinical studies to demonstrate safety and effectiveness, and
preparing an application is a detailed and time-consuming process. Once a PMA
application has been submitted, the FDA's review may be lengthy and may include
requests for additional data.
Although the therapeutic uses described above are the Company's initial
intended uses for its two devices, the Company recognizes that other uses may
eventually be made of the waterjet microkeratome. One such use, for which the
Company believes the potential market could be significant, is for refractive
surgical correction. Therefore, the later phase of the Company's FDA strategy
relates to the HRK microkeratome. Although the Company believes that the HRK
microkeratome may be considered for permission to market by the FDA through a
510(k) notification based upon the similarities of the microkeratome between the
HTK use and the HRK use, obtaining such permission for the HRK microkeratome is
likely to be somewhat more complicated than for HTK. There can be no assurance
that either the HTK use or the HRK use will be permitted for marketing by the
FDA. The differences between the two uses are found in the components, other
than the waterjet scalpel, which comprise the microkeratome. For the HRK
microkeratome, the Company may be required to show that the procedure is
effective, stable and does not decrease visual acuity to any significant extent.
The Company believes that, based on two features of the HRK
microkeratome, it may also be considered for 510(k) notification by the FDA.
First, based on the preliminary experimentation conducted with waterjet
microkeratomes, there are no known or anticipated physical or chemical processes
that would impact on the safety of the HRK procedure. The waterjet microkeratome
cuts by mechanisms similar to that of conventional scalpels (although at speeds
of more than 100 times greater), except that the Company believes that HRK would
not produce certain side effects incident to other refractive surgery
procedures. Such side effects include the inferior cut produced by the
oscillating blade used in conventional microkeratomes, and the potential
carcinogenic effects, dehydration from overheating and high amplitude shock
waves to the eye resulting from the high energy, pulsed radiation used in the
PRK procedure. PRK could represent the strongest competition to HRK. As a result
of the anticipated safety issues, the FDA approval process for PRK involved
numerous clinical studies on human eyes and took several years to complete. The
Company believes that the FDA approval process for the HRK microkeratome should
be shorter and entail fewer clinical studies in light of the expected higher
level of safety and lack of anticipated side effects, in comparison to other
previously permitted products, but there can be no assurances that this will be
the case.
The second feature of the HRK microkeratome is the benign nature of the
waterjet cut. While a conventional scalpel tears the lamellae (layers of the
stroma) and PRK completely or partially destroys the surface lamellae, the
waterjet beam has a unique cutting action which separates the various lamellae
prior to cutting the targeted tissue, thereby preserving the integrity of the
remaining lamellae and both localizing and minimizing the damage to the lamellae
generally. The healing process following a waterjet cut is expected to be less
traumatic than that following a conventional scalpel cut or a PRK cut, as
observed in rabbits, although improved healing process has not yet been
demonstrated in human eyes.
The Company intends to continue the research and development of its
technology and related manufacturing processes and to commence human clinical
trials of the HRK microkeratome. If the HTK microkeratome or the HRK
microkeratome is permitted to be marketed or otherwise approved for marketing in
the United States, the Company will be required to establish a marketing
organization and production facilities, which will require additional financing,
unless the Company identifies third parties to perform such functions under
license or other arrangements. No assurance can be given that the Company's
research and development efforts will be successfully completed, or that the HTK
microkeratome or HRK microkeratome will prove to be safe and effective for the
purposes intended, will be permitted to be marketed or otherwise approved for
marketing by the FDA or any other regulatory agency or will be commercially
successful.
The Company was incorporated under the laws of the State of Delaware in
December 1993. Its offices are located at 1090 King Georges Post Road, Suite
301, Edison, New Jersey 08837; its telephone number is (732) 738-3990.
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS,
THE FOLLOWING FACTORS CONCERNING THE BUSINESS OF THE COMPANY AND THE SECURITIES
OFFERED HEREBY, AND SHOULD CONSULT INDEPENDENT ADVISORS AS TO THE TAX, BUSINESS
AND LEGAL CONSIDERATIONS REGARDING AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY.
NO REVENUES; UNCERTAIN PROFITABILITY; DEVELOPMENT STAGE COMPANY;
HISTORY OF LOSSES. Since its inception, the Company has been principally engaged
in developmental and organizational activities. To date, the Company has
generated no revenues from operations. No revenues are expected from operations
until, and only if, the Company begins commercial marketing of its keratome or
other products, which is not expected to occur before the fourth quarter of
1998. In addition, commercial marketing of the Company's products in the U.S.
will be contingent upon obtaining FDA permission or approval and possibly the
approval of other governmental agencies. To date, only the Company's
HydroBrush(TM) Keratome has been granted 510(k) notification from tHe FDA and is
the Company's only product which has received the regulatory approvals required
prior to the commencement of commercial marketing. The Company is currently
seeking FDA approval of certain of its devices. Regulatory approval procedures
are often extremely time consuming, expensive and uncertain. Accordingly, there
can be no assurance that the Company in the future will be able to generate
sufficient revenues to operate on a profitable basis.
The Company, which was founded in December 1993, is in the development
stage, and its business is subject to all of the risks inherent in the
establishment of a new business enterprise. The likelihood of success of the
Company must be considered in light of the problems, expenses, complications and
delays frequently encountered in connection with the formation of a new
business, the development of new products, the competitive and regulatory
environment in which the Company is operating and the possibility that its
activities will not result in the development of any commercially viable
products. There can be no assurance that the Company's activities will
ultimately result in the development of commercially saleable or useful
products.
The Company has experienced annual operating losses and negative
operating cash flow since inception. At March 31, 1998, the Company had an
accumulated deficit of approximately $4,000,000 excluding approximately
$1,500,000 which was applied to additional paid-in capital when the Company
converted from a subchapter S corporation to a C corporation for federal income
tax purposes in connection with the IPO. Unless and until the Company's product
development and marketing activities are successful and its products are sold,
of which there can be no assurance, the Company will not have any revenues to
apply to operating expenses and the Company will continue to incur losses.
Additionally, as a result of the start-up nature of its business and the fact
that it has not commercially marketed any products, the Company expects to
sustain substantial operating losses in the future.
NEED FOR FUTURE FINANCING. To proceed with its planned research and
development and possible marketing activities, the Company believes that it will
require additional capital before, if ever, it reaches profitability and
positive cash flow. As a result, the Company will be required to raise
additional funds through public or private financing including grants that may
be available for its research and development. In connection with a private
placement offering (the "Private Placement") of the Company's Series A
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"),
commenced in the first quarter of 1998, the Company, through its placement
agent, raised $1,100,000 in the second quarter of 1998. There can, however, be
no assurance that the Company will be able to obtain additional financing on
terms favorable to it or its stockholders, if at all. If adequate funds are not
available to satisfy short-term or long-term capital requirements, the Company
may be required to reduce substantially, or eliminate, certain areas of its
product development activities, limit its operations significantly, or otherwise
modify its business strategy. The failure of the Company to obtain any other
acceptable financing would have a material adverse effect on the operations of
the Company. Without additional financing or the exercise of the Company's
outstanding warrants or otherwise, the Company would become unable to maintain
its current operations and would be unable to carry out its business plan.
Except for currently outstanding warrants and options, the Company has no
current plans, understandings or commitments to obtain any additional financing
from the sale of its securities or otherwise. Additional financing from the sale
of its securities may result in dilution of the Company's then current
stockholders.
DEPENDENCE UPON A KEY OFFICER; ATTRACTION AND RETENTION OF KEY
PERSONNEL. The business of the Company is highly dependent upon the active
participation of its founder and Chief Executive Officer, Dr. Eugene I. Gordon.
The loss or unavailability to the Company of Dr. Gordon would have a material
adverse effect on the Company's business prospects and potential earning
capacity. The recruitment of skilled scientific personnel is critical to the
Company's success. There can be no assurance that it will be able to continue to
attract and retain such personnel in the future. In addition, the Company's
anticipated growth and expansion into areas and activities requiring additional
expertise, clinical testing, governmental approvals, production and marketing of
the Company's products (which would be required if the Company does not enter
into licensing arrangements) is expected to place increased demands upon the
Company's financial resources and corporate structure. The Company expects to
satisfy such demands, if they arise, through the hiring of additional management
personnel and the development of additional expertise by existing management.
UNCERTAINTY OF MARKET ACCEPTANCE; RELIANCE ON SINGLE TECHNOLOGY.
Acceptance of the Company's products is difficult to predict and will require
substantial marketing efforts and the expenditure of significant funds by a
licensee or by the Company. There can be no assurance that the products will be
accepted by the medical community once they are permitted or approved. Market
acceptance of the Company's products will depend in large part upon the
Company's ability to demonstrate the operational advantages, safety and
cost-effectiveness of its products compared to other comparable surgical
techniques. Failure of the products to achieve market acceptance will have a
material adverse effect on the Company's financial condition and results of
operations.
At present, the Company's only products (although still in development
stage) are its keratomes, and the Company expects that its keratomes will be, if
and when commercially available, its sole products for an indefinite period of
time. The Company's present narrow focus on particular products makes the
Company vulnerable to the development of superior competing products and changes
in technology that could eliminate the need for the Company's products. There
can be no assurance that significant changes in the foreseeable future in the
need for the Company's products or the desirability of those products will not
occur.
DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS. The Company's success
will depend in part on whether it successfully obtains and maintains patent
protection for its products, preserves its trade secrets and operates without
infringing the proprietary rights of third parties.
The Company has sought to protect its proprietary interest in its
products by applying for patents in the United States and corresponding patents
abroad. The Company has one issued U.S. patent and one issued foreign patent.
The Company has four U.S. patents pending, three of which have been allowed, and
a number of foreign patents in process. There can be no assurance that any other
patent will be issued to the Company, that any patents owned by or issued to the
Company, or that may issue to the Company in the future, will provide a
competitive advantage or will afford protection against competitors with similar
technology, or that competitors of the Company will not circumvent, or challenge
the validity of, any patents issued to the Company. There also can be no
assurance that any patents issued to or licensed by the Company will not be
infringed upon or designed around by others or would prevail in a legal
challenge, that others will not obtain patents that the Company will need to
license or design around, that the keratomes or any other potential product of
the Company will not inadvertently infringe upon the patents of others, or that
others will not manufacture the Company's patented products upon expiration of
such patents. There can be no assurance that existing or future patents of the
Company will not be invalidated. Additionally, patent applications filed in
foreign countries and patents granted in such countries are subject to laws,
rules and procedures which differ from those in the United States. Patent
protection in such countries may be different from patent protection provided by
United States laws and may not be as favorable to the Company.
Also, there can be no assurance that the Company's non-disclosure
agreements and other safeguards will protect its proprietary information and
trade secrets or provide adequate remedies for the Company in the event of
unauthorized use or disclosure of such information, or that others will not be
able to independently develop such information. As is the case with the
Company's patent rights, the enforcement by the Company of its non-disclosure
agreements can be lengthy and costly, with no guarantee of success. There can be
no assurance that the Company's program of patent protection, internal security
of its proprietary information and non-disclosure agreements will be sufficient
to protect the Company's proprietary technology from competitors.
INFRINGEMENT CLAIMS; LITIGATION. If any of the Company's products are
found to infringe upon the patents or proprietary rights of another party, the
Company may be required to obtain licenses under such patents or proprietary
rights of such other party. No assurance can be given that any such licenses
would be made available on terms acceptable to the Company, if at all. If
required licenses were to be unavailable, the Company could be prohibited from
using, marketing or selling certain technology and devices and such prohibition
could have a material adverse effect on the Company. The use of the
HydroBrush(TM) Keratome to perform HEK may be subject to a claim of infringement
of a U.S. patent assigned to Summit Technology, Inc. ("Summit"). Such patent
claims the use of a fluid jet for removal of a corneal epithelium layer and
requires that the force of the fluid jet be directed towards the eye at an angle
other than tangential. The HydroBrush(TM) Keratome does not use jet force
directly into the eye to effect epithelium removal. If the Summit patent is
found to be valid and the use of the HydroBrush(TM) Keratome for HEK is found to
infringe upon the Summit patent, the Company may be required to obtain a license
under such patent and no assurance can be given that any such license will be
made available on terms acceptable to the Company, if at all. In such case,
although the Company would not be prohibited from performing HRK, it would be
prohibited from using the HydroBrush(TM) Keratome for HEK and such prohibition
could have a material adverse effect on the Company.
On April 21, 1998, the Company was served with a complaint by the New
Jersey Institute of Technology ("NJIT") commencing a lawsuit in the United
States District Court for the District of New Jersey ("U.S. District Court").
Each of the Company, Dr. Gordon, a former employee, certain patent law firms and
an individual lawyer were named as defendants. The complaint alleges that the
defendants, with deceptive intent, failed to name an NJIT professor and/or NJIT
research associate as a co-inventor on the Company's U.S. Patent No. 5,556,406
on the "Lamellar Surgical Device and Procedure" and breached fiduciary duties
and contractual obligations owed to NJIT. The complaint seeks monetary damages
in an undetermined amount from the Company and an order directing that the
Company's patent (and corresponding foreign patents and patent applications) on
the Lamellar Surgical Device and Procedure be assigned and transferred to NJIT.
It further seeks an order that NJIT has not infringed any valid claim of such
patent and a declaratory judgment that all of the Company's claims under such
patent are invalid and unenforceable against NJIT.
NJIT's patent application relating to a refractive correction procedure
based on the use of an isotonic waterjet had previously been denied by the
United States Patent and Trademark Office as inoperable. The three inventors of
the subject of such denied patent application, one of which was Dr. Gordon,
assigned such patent application to NJIT as part of a dispute settlement in
which NJIT agreed to grant an exclusive license to the Company of the patent
rights under such patent application. Prior to being served with the complaint
by NJIT, the Company and Dr. Gordon had filed a complaint on March 27, 1998
against NJIT in the Superior Court of the State of New Jersey, Middlesex County,
seeking a declaratory judgment that NJIT has no ownership or other interest in
the patent rights to the Company's Lamellar Surgical Device and Procedure and
certain monetary damages. NJIT has moved to have the Company's lawsuit remanded
to the U.S. District Court and included in its lawsuit. The Company has moved to
have the NJIT lawsuit dismissed on the basis that NJIT has not been harmed by
the Company's patent and therefore it cannot challenge its validity. As a
result, the Company believes that the lawsuit brought in U.S. Court by NJIT
should be dismissed. Accordingly, the Company believes the probability of an
unfavorable outcome to be low, and therefore no amounts have been accrued, with
respect to this lawsuit.
The Company intends to vigorously defend against the lawsuit commenced
by NJIT and to actively prosecute the suit it has commenced against NJIT. The
litigation between NJIT and the Company may be lengthy in duration and expensive
in nature and will divert certain resources of the Company from other expected
uses. An outcome in this matter that is adverse to the Company would have a
material adverse effect on the Company.
COMPETITIVE TECHNOLOGIES, PROCEDURES AND COMPANIES. The Company is
engaged in a rapidly evolving field. There are many companies, both public and
private, universities and research laboratories engaged in research activities
relating to other vision correction alternatives. Competition from these
companies, universities and laboratories is intense and is expected to increase.
The Company's initial products will compete with other presently existing forms
of treatment for vision disorders, including eyeglasses, contact lenses, corneal
transplants, other refractive surgery procedures and other technologies under
development. Additionally, the Company's products will compete with scalpels in
removing films, such as epithelium or pterygium, from the anterior surface of
the eye. There can be no assurance that persons whose vision can be corrected
with eyeglasses or contact lenses will elect to undergo the surgical procedures
with the Company's products when non-surgical vision correction alternatives are
available.
The Company is aware of ongoing research at certain companies and
institutions into a variety of procedures for corneal adjustment and refractive
surgery, including waterjet technology under development by Visijet (Surgijet)
Inc. Some of these companies and institutions, which may in the future become
competitors of the Company, have substantially greater resources, research and
development staffs and facilities, as well as greater experience in research and
development, obtaining regulatory approval and manufacturing and marketing
medical device products than the Company.
Additionally, there can be no assurance that the Company's competitors
will not succeed in developing technologies, procedures or products that are
more effective or economical than those being developed by the Company or that
would render the Company's technology and proposed products obsolete or
noncompetitive. Furthermore, in connection with the commercial sale of its
products, the Company will also be competing with respect to manufacturing
efficiency and marketing capabilities, areas in which the Company has no
experience.
NO MANUFACTURING EXPERIENCE; DEPENDENCE ON THIRD PARTIES. The Company's
current strategy is to exclusively license its ophthalmology products. As of the
date of this Prospectus, the Company has not entered into any agreement to
license or otherwise commercially market any of its products. If the Company
does not enter into such licensing arrangements, it will need to engage in the
manufacture and marketing of its products. The Company has no volume
manufacturing capacity or experience in manufacturing medical devices or other
products. To be successful, the Company's proposed products must be manufactured
in commercial quantities in compliance with regulatory requirements at
acceptable costs. Production in clinical or commercial-scale quantities will
involve technical challenges for the Company. If the Company is unable or elects
not to pursue collaborative arrangements with other companies to manufacture
certain of its potential products, the Company will be required to establish
manufacturing capabilities. Establishing its own manufacturing capabilities
would require significant scale-up expenses and additions to facilities and
personnel. There can be no assurance that the Company will be able to obtain
necessary regulatory approvals on a timely basis or at all. Delays in receipt of
or failure to receive such approvals or loss of previously received approvals
would have a material adverse effect on the Company. There can be no assurance
that the Company will be able to develop clinical or commercial-scale
manufacturing capabilities at acceptable costs or enter into agreements with
third parties with respect to these activities. The Company's dependence upon
third parties for the manufacture of its products may adversely affect the
Company's profit margins and the Company's ability to develop and deliver such
products on a timely basis. Moreover, there can be no assurance that such
parties will perform adequately, and any failures by third parties may delay the
submission of products for regulatory approval, impair the Company's ability to
deliver products on a timely basis, or otherwise impair the Company's
competitive position and any such failure could have a material adverse effect
on the Company.
NO MARKETING OR SALES EXPERIENCE. If the Company does not enter into
any licensing arrangements, it will undertake the marketing and sale of its own
products. In such event, the Company intends to market and sell its products in
the United States and certain foreign countries, if and when regulatory approval
is obtained, through a direct sales force or a combination of a direct sales
force and distributors. The Company currently has no marketing organization and
has never sold a product. Establishing sufficient marketing and sales capability
will require significant resources. There can be no assurance that the Company
will be able to recruit and retain skilled sales management, direct salespersons
or distributors, or that the Company's marketing or sales efforts will be
successful. To the extent that the Company enters into distribution arrangements
for the sale of its products, the Company will be dependent on the efforts of
third parties. There can be no assurance that such efforts will be successful.
RISK OF PRODUCT LIABILITY LITIGATION; POTENTIAL UNAVAILABILITY OF
INSURANCE. The testing, manufacture, marketing and sale of medical devices
entails the inherent risk of liability claims or product recalls. As a result,
the Company faces a risk of exposure to product liability claims and/or product
recalls in the event that the use of its current or future potential products
are alleged to have caused injury. There can be no assurance that the Company
will avoid significant liability in spite of the precautions taken to minimize
exposure to product liability claims. Prior to the commencement of clinical
testing, the Company intends to procure product liability insurance. It is
expected that such insurance will be in the amounts of $1 million per claim with
an annual aggregate limit of $20 million. After any commercialization of its
products, the Company will seek to obtain an appropriate increase in its
coverage. There can, however, be no assurance that adequate insurance coverage
will be available at an acceptable cost, if at all. Consequently, a product
liability claim, product recall or other claims with respect to uninsured
liabilities or in excess of insured liabilities could have a material adverse
effect on the Company.
SURGICAL RISKS. There can be no assurance that the Company's products
will be successful in providing reliable surgical corrections. As with all
surgical procedures, the procedures for which the Company's products are
intended entail certain inherent risks, including defective equipment or human
error, infection or other injury resulting in partial or total loss of vision.
Such injury could expose the Company to product liability or other claims. The
Company believes competing products have the same risks and have experienced a
small number of these situations without undue impact on the commercial
prospects of such products. There can be no assurance that the Company's product
liability insurance in effect from time to time will be sufficient to cover any
such claim in part or in whole. Any such claim could adversely impact the
commercialization of the Company's products and could have a material adverse
effect on the Company.
NO ASSURANCE OF FDA AND OTHER REGULATORY APPROVAL. As medical devices,
the Company's keratomes are subject to regulation by the FDA under the Federal
Food, Drug, and Cosmetic Act (the "FD&C Act") and implementing regulations.
Pursuant to the FD&C Act, the FDA regulates, among other things, the
development, manufacture, labeling, distribution, and promotion of keratomes in
the United States. If the Company fails to enter into licensing arrangements, it
will be required to pursue FDA approval of or permission to market its products
at its own cost.
The process of obtaining required regulatory clearances or approvals
can be time-consuming and expensive, and compliance with the FDA's Good
Manufacturing Practices regulations and other regulatory requirements can be
burdensome. Moreover, there can be no assurance that the required regulatory
clearances will be obtained, and such clearances, if obtained, may include
significant limitations on the uses of the product in question. In addition,
changes in existing regulations or guidelines or the adoption of new regulations
or guidelines could make regulatory compliance by the Company more difficult in
the future. The failure to comply with applicable regulations could result in
fines, delays or suspensions of clearances, seizures or recalls of products,
operating restrictions and criminal prosecutions, and would have a material
adverse effect on the Company.
Distribution of the Company's products in countries outside the United
States may be subject to regulation in those countries. Foreign regulatory
requirements vary widely from country to country. In addition, export sales of
medical devices that have not received FDA marketing clearance are generally
subject to FDA export permit requirements. There can be no assurance that the
Company will be able to obtain the approvals necessary to market its products
outside the United States.
INTERNATIONAL SALES AND OPERATIONS RISKS. The Company currently plans
to initially sell its products to customers and conduct operating activities
outside of the United States. A number of risks are inherent in international
transactions. International sales and operations may be limited or disrupted by
the imposition of the regulatory approval process, government controls, export
license requirements, political instability, price controls, trade restrictions,
changes in tariffs or difficulties in staffing and managing international
operations. Foreign regulatory agencies have or may establish product standards
different from those in the United States, and any inability to obtain foreign
regulatory approvals on a timely basis could have an adverse effect on the
Company. Additionally, the Company may be adversely affected by fluctuations in
currency exchange rates, increases in duty rates and difficulties in obtaining
export licenses. There can be no assurance that the Company will be able to
successfully commercialize its products in any foreign market.
NO DIVIDENDS. The Company has paid no dividends on the Common Stock
since its inception and does not intend to pay dividends on the Common Stock in
the foreseeable future. Other than dividend obligations on Preferred Stock, any
earnings which the Company may realize in the foreseeable future will be
retained to finance the growth of the Company.
ADVERSE IMPACT ON COMMON STOCK OF ISSUANCE OF PREFERRED STOCK;
ANTI-TAKEOVER PROVISIONS. As of the date of this Prospectus, the Board of
Directors of the Company has issued 110,000 shares of Preferred Stock and has
the authority to issue up to 890,000 additional shares of preferred stock in one
or more series and to determine the number of shares in each series, as well as
the designations, preferences, rights and qualifications or restrictions of
those shares, without any further vote or action by the stockholders of the
Company. The rights of holders of Common Stock are, will be subject to, and may
be adversely affected by, the rights of the holders of the shares of Preferred
Stock or any other series of preferred stock that may be issued in the future,
including that the market price of the Common Stock may be adversely affected by
the issuance of any other series of preferred stock with voting and/or
distribution rights superior to those of the Common Stock. The issuance of any
series of preferred stock could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company. In addition, the Company is subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law. In general, this statute
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
NO ASSURANCE OF CONTINUING PUBLIC TRADING MARKET. The Common Stock and
the IPO Warrants are currently quoted on the OTC Bulletin Board. There can be no
assurance that such trading market will be sustained. The OTC Bulletin Board is
an unorganized, inter-dealer, over-the-counter market which provides
significantly less liquidity than established stock exchanges or the Nasdaq
National Market, and quotes for stocks included on the OTC Bulletin Board are
not listed in the financial sections of newspapers as are those for established
stock exchanges and the Nasdaq National Market. Therefore, prices for securities
traded solely on the OTC Bulletin Board may be difficult to obtain and
purchasers of the securities offered hereby may be unable to resell such
securities at any price. In the event the Company's securities do not continue
to be quoted on the OTC Bulletin Board, quotes for the Company's securities may
be included in the "pink sheets" for the over-the-counter market.
RISK OF LOW-PRICED SECURITIES. The Commission has adopted regulations
which generally define a "penny stock" to be any equity security that has a
market price (as defined in the regulations) of less than $5.00 per share and
that is not traded on a national stock exchange, the Nasdaq SmallCap Market or
the Nasdaq National Market. If the Company's securities are included on the OTC
Bulletin Board and are trading at less than $5.00 per security, such securities
may become subject to rules of the Commission that impose additional sales
practice requirements on broker-dealers effecting transactions in penny stocks.
In most instances, unless the purchaser is either (i) an institutional
accredited investor, (ii) the issuer, (iii) a director, officer, general partner
or beneficial owner of more than 5% of any class of equity security of the
issuer of the penny stock that is the subject of the transaction or (iv) an
established customer of the broker-dealer, the broker-dealer must make a special
suitability determination for the purchaser of such securities and have received
the purchaser's prior written consent to the transaction. Changes currently
proposed by the NASD and subject to approval by the Commission would allow only
those companies that report their current financial information to the
Commission, banking, or insurance regulators to be quoted on the OTC Bulletin
Board. Also, broker-dealers would be required to review current financial
statements on a company they are recommending on an OTC Bulletin Board
transaction, and the proposed changes would further require that prior to the
actual purchase of an OTC Bulletin Board security, investors receive a standard
disclosure statement emphasizing the differences between OTC securities and
other market-listed securities. Additionally, for any transaction involving a
penny stock, the rules of the Commission require, among other things, the
delivery, prior to the transaction, of a disclosure schedule prepared by the
Commission relating to the penny stock market and the risks associated
therewith. The broker-dealer also must disclose the commissions payable to both
the broker-dealer and its registered representative and current quotations for
the securities. Finally, among other requirements, monthly statements must be
sent to the purchaser of the penny stock disclosing recent price information for
the penny stock held in the purchaser's account and information on the limited
market in penny stocks. Consequently, the penny stock rules may affect the
ability of a purchaser to resell the securities offered hereby.
INFLUENCE BY CURRENT STOCKHOLDER. Assuming payment in cash of the
exercise price of the Placement Agent's Warrant and the exercise in full of each
of the IPO Warrants, the Placement Agent's Warrants, the Underwriter's Option
and the IPO Warrants underlying the Underwriter's Option, Dr. Gordon will own
1,591,687 shares of Common Stock, representing approximately 29.8% of the issued
and outstanding shares (without giving effect to 330,550 shares of Common Stock
reserved for issuance pursuant to outstanding options under the Company's stock
option plan and 97,389 shares of Common Stock reserved for issuance pursuant to
certain outstanding warrants). Accordingly, Dr. Gordon may be able to influence
the election of all the Company's directors the affairs of the Company. Dr.
Gordon's influence over the affairs of the Company could have the effect of
delaying or preventing a change of control of the Company.
FUTURE SALE OF UNREGISTERED SECURITIES; REGISTRATION RIGHTS. Assuming
payment in cash of the exercise price of the Placement Agent's Warrant and the
exercise in full of each of the IPO Warrants, the Placement Agent's Warrants,
the Underwriter's Option and the IPO Warrants underlying the Underwriter's
Option, the Company will have outstanding 5,333,705 shares of Common Stock. As
of the date of this Prospectus, options to purchase 330,550 shares of Common
Stock have been granted pursuant to the stock option plan and additional
warrants to purchase 97,389 shares of Common Stock have also been granted.
The Company has granted certain piggyback registration rights to certain
of its existing stockholders with respect to 703,595 shares of Common Stock. The
holders of all of such shares have agreed to waive such registration rights
through November 6, 1998. Shares of Common Stock issuable upon exercise of stock
options granted under the stock option plan may be registered under the
Securities Act commencing August 6, 1998 or such earlier date as consented to by
the underwriter of the IPO. The sale or the availability for sale of any or all
of such shares of Common Stock could have an adverse effect on the market price
of the Common Stock prevailing from time to time.
DEPRESSIVE EFFECT ON MARKET PRICE OF OUTSTANDING SECURITIES RESULTING
FROM FUTURE EXERCISE OF OPTIONS AND WARRANTS. Sales of Common Stock upon
exercise of outstanding options and warrants may have a depressive effect on the
price of the Company's securities and the issuance of additional shares of
Common Stock upon the exercise of outstanding options, the IPO Warrants, the
Placement Agent's Warrant, the Underwriter's Option, the IPO Warrants underlying
the Underwriter's Option or otherwise will also dilute the proportionate
ownership of the then current stockholders of the Company.
CONTINGENT ISSUANCE OF ADDITIONAL SHARES. The Company has outstanding the
IPO Warrants, the Placement Agent's Warrant and the Underwriter's Option. If
each of the IPO Warrants, the Placement Agent's Warrant, the Underwriter's
Option and IPO Warrants underlying the Underwriter's Option are exercised in
full (and in the case of the Placement Agent's Warrants, the exercise price is
paid in cash), the issuance of 1,647,425 additional shares of Common Stock
offered hereby would result. The price which the Company may receive for the
Common Stock issued upon exercise of such securities may be less than the market
price of the Common Stock at the time of such exercise. For the life of such
securities, the holders are given the opportunity to profit from a rise in the
market price for the Common Stock. So long as such securities are not exercised,
the terms under which the Company could obtain additional equity may be
adversely affected. Moreover, the exercise of such securities might be expected
to occur at a time when the Company would, in all likelihood, be able to obtain
capital by a new offering of its securities on terms more favorable than those
provided by such outstanding securities. Additionally, should all or
substantially all of such outstanding securities be exercised, the resulting
increase in the number of shares of Common Stock in the trading market may have
an adverse effect on the market price of Common Stock.
REDEMPTION OF IPO WARRANTS. The IPO Warrants are subject to redemption,
at a price of $0.01 per IPO Warrant upon 30 days prior written notice, provided
that the closing bid price of the Common Stock for any 10 consecutive trading
days within a period of 30 trading days ending within five days prior to the
date of the notice of redemption exceeds $13.00. On September 23, 1998, the last
reported per share bid and ask prices of the Common Stock on the OTC Bulletin
Board were $4.00 and $4.5625, respectively. In the event the Company exercises
the right to redeem the IPO Warrants, a holder would be forced either to
exercise the IPO Warrant or accept the redemption price.
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
THE WARRANTS. Holders of the IPO Warrants will be able to exercise such warrants
only if a current prospectus relating to the Common Stock underlying such
warrants is then in effect, and only if such Common Stock is qualified for sale
or exempt from qualification under applicable state securities law of the state
in which the holders of such IPO Warrants reside.
The IPO Warrants are separately transferable. Although the Units were
not knowingly sold to purchasers in jurisdictions in which the Units were not
registered or otherwise qualified for sale, purchasers may buy IPO Warrants in
the after market in, or may move to, jurisdictions in which the shares
underlying the IPO Warrants are not so registered or qualified during the period
that the IPO Warrants are exercisable. In this event, the Company would be
unable to issue shares of Common Stock to those persons desiring to exercise the
IPO Warrants, and holders of IPO Warrants would have no choice but to attempt to
sell the IPO Warrants in a jurisdiction where such sale is permissible or allow
them to expire unexercised.
USE OF PROCEEDS
If the IPO Warrants, the Placement Agent's Warrant, the Underwriter's
Option and the IPO Warrants underlying the Underwriter's Option are exercised in
full (and the exercise price of the Placement Agent's Warrant is $7.47 and such
exercise price is paid in cash rather than by means of a cashless exercise
provision set forth in the Placement Agent's Warrant), of which there can be no
assurance, the Company could realize up to $14,249,352, before deducting the
estimated expenses related to this offering. The Company currently intends to
use any proceeds it may receive for working capital and general corporate
purposes, including research and development.
DESCRIPTION OF SECURITIES
The following description of the IPO Warrants is a summary and is
subject to and qualified in its entirety by the detailed provisions of the
Warrant Agreement, which is an exhibit to the Registration Statement of which
this Prospectus forms a part.
Each IPO Warrant entitles the holder thereof to purchase, until 5:00
p.m. on November 6, 1999, at a price of $10.00, one share of Common Stock,
unless such IPO Warrant is redeemed by the Company prior to such expiration
date. The exercise price of the IPO Warrants and the number of shares of Common
Stock or other securities or property to be obtained upon exercise of the IPO
Warrants, are subject to adjustment under certain circumstances, including, but
not limited to, certain sales by the Company of its shares of Common Stock for a
price per share less than the then market price of the Common Stock, or issuance
by the Company of any shares of its Common Stock as a dividend, or subdivision
or combination of the Company's outstanding shares of Common Stock into a
greater or lesser number of shares.
The IPO Warrants are redeemable by the Company in whole but not in part
for $.01 per IPO Warrant, upon 30 days' prior written notice, if the market
price of the Common Stock equals or exceeds $13.00 per share. On September 23,
1998, the last reported per share bid and ask prices of the Common Stock on the
OTC Bulletin Board were $4.00 and $4.5625, respectively. In the event that the
Company gives notice of its intention to redeem the IPO Warrants, holders would
be forced to exercise their IPO Warrants or accept the redemption price. For
purposes of redemption, market price means (i) the average closing bid price for
any 10 consecutive trading days within a period of 30 consecutive trading days,
ending within five days of the date of the notice of redemption, of the Common
Stock as reported by the OTC Bulletin Board or (ii) the average of the last
reported sale price for the 10 consecutive business days ending within five days
of the date of the notice of redemption, on the primary exchange on which the
Common Stock is traded, if the Common Stock is traded on a national securities
exchange.
The IPO Warrants may be exercised by completing and signing the
appropriate notice of exercise form attached to the IPO Warrant and mailing or
delivering it (together with the IPO Warrant) to Continental Stock Transfer &
Trust Company of New York, New York, the Warrant Agent (the "Warrant Agent") in
time to reach the Warrant Agent prior to the time fixed for termination or
redemption of the IPO Warrants, accompanied by payment of the full exercise
price therefor.
Holders of the IPO Warrants are not entitled to vote, receive
dividends, or exercise any of the rights of the holders of shares of Common
Stock for any purpose until the IPO Warrants have been duly exercised and
payment of the IPO Warrant exercise price has been made. The IPO Warrants are
currently quoted on the OTC Bulletin Board. On September 23, 1998, the last
reported per share bid and ask prices of the IPO Warrants on the OTC Bulletin
Board were $.25 and $.46875, respectively.
In connection with the IPO, the Company sold for a nominal
consideration, the Underwriter's Options for the purchase of 107,143 Units to an
affiliate of the underwriter. Each of the Underwriter's Options is exercisable
to purchase one Unit at $6.72 per Unit at any time during a period of four years
which began August 6, 1997. The securities constituting each Unit, one share of
Common Stock and one IPO Warrant, trade separately. The exercise price of the
Underwriter's Option and the number of Units covered thereby are subject to
adjustment to protect the holders against dilution in certain events.
PLAN OF DISTRIBUTION
The IPO Warrants issuable upon exercise of the Underwriter's Option,
the Common Stock issuable upon conversion of the Preferred Stock and the Common
Stock issuable upon exercise of each of the IPO Warrants, the Placement Agent's
Warrant, the Underwriter's Option and the IPO Warrants underlying the
Underwriter's Option may be sold from time to time by the holders thereof or by
pledgees, donees, transferees or other successors in interest. Such sales may be
made in any one or more transactions (which may involve block transactions) on
the OTC Bulletin Board, or any exchange on which the IPO Warrants or Common
Stock, as the case may be, may then be listed, in the over-the-counter market or
otherwise in negotiated transactions or a combination of such methods of sale,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The holders of IPO Warrants
underlying the Underwriter's Option, the Common Stock issuable upon conversion
of the Preferred Stock and the Common Stock issuable upon exercise of each of
the IPO Warrants, the Placement Agent's Warrant and the IPO Warrants underlying
the Underwriter's Option may effect such transactions by selling such securities
to or through broker-dealers, and such broker-dealers may sell such securities
as agent or may purchase such securities as principal and resell them for their
own account. Such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the holders and/or
purchasers of the IPO Warrants underlying the Underwriter's Option, the Common
Stock issuable upon conversion of the Preferred Stock and the Common Stock
issuable upon exercise of each of the IPO Warrants, the Placement Agent's
Warrant and the IPO Warrants underlying the Underwriter's Option for whom they
may act as agent (which compensation may be in excess of customary commissions).
In connection with such sales, the holders and any participating brokers or
dealers may be deemed to be "underwriters" as defined in the Securities Act.
The Company has also agreed to pay to the underwriter of the IPO, a fee
in the amount of 8.0% of the exercise price of any of the IPO Warrants exercised
beginning as of August 6, 1997, if (a) the market price of the Common Stock on
the date the IPO Warrant is exercised is greater than the exercise price of the
IPO Warrant, (b) the exercise of the IPO Warrant is solicited by an NASD member
and such NASD member is designated in writing by the holder of such IPO Warrant
as the soliciting broker, (c) the IPO Warrant is not held in a discretionary
account, (d) disclosure of the compensation arrangement is made upon the sale
and exercise of the IPO Warrants, (e) soliciting by such NASD member of the
exercise of the IPO Warrant is not in violation of Regulation M promulgated
under the Exchange Act, and (f) solicitation of the exercise is in compliance
with the regulations and rules of the NASD.
EXPERTS
The financial statements for the periods ended December 31, 1996 and
December 31, 1997 incorporated by reference in this Prospectus and elsewhere in
the registration statement have been audited by Rosenberg Rich Baker Berman &
Company, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
LEGAL MATTERS
Certain legal matters in connection with the legality of the securities
offered hereby have been passed upon for the Company by Kelley Drye & Warren
LLP, 101 Park Avenue, New York, New York 10178, and Two Stamford Plaza, 281
Tresser Boulevard, Stamford, Connecticut 06901.
* * * * *
<PAGE>
NO DEALER, SALESPERSON OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO MEDJET INC.
ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO 1,647,425
CHANGE IN THE AFFAIRS OF THE COMPANY Shares
SINCE THE DATE HEREOF OR THAT THE Common Stock
INFORMATION CONTAINED HEREIN IS ($.001 par value)
CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
--------------------
107,143
Class A Redeemable Common
Stock Purchase Warrants
TABLE OF CONTENTS PROSPECTUS
PAGE
Available Information................ 2
Incorporation of Certain Documents
by Reference...................... 2
Special Note Regarding Forward-
Looking Information............... 3
The Company.......................... 3
Risk Factors......................... 7
Use of Proceeds...................... 15
Description of Securities............ 5
Plan of Distribution................. 16
Experts.............................. 17
Legal Matters........................ 17
