As filed with the Securities and Exchange Commission on December 19, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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APPLIED BIOMETRICS, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1508112
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 East Highway 13, Suite 108
Burnsville, Minnesota 55337
(612) 890-1123
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive office)
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Joseph A. Marino
Chief Executive Officer
Applied Biometrics, Inc.
501 East Highway 13, Suite 108
Burnsville, Minnesota 55337
(612) 890-1123
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
Patrick Delaney, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Telephone: (612) 371-3281
Approximate date of commencement of proposed sale to public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Proposed Proposed
Maximum Maximum
Amount to be Offering Price Aggregate Amount of
Title of Each Class of Registered Per Unit Offering Price Registration
Securities to be Registered Fee
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Common Stock, $.01 par value.............................. 85,000 $6.750 $573,750 $170.00
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(1) Estimated solely for the purpose of determining the registration fee
based on the last reported sales price of the Company's Common Stock on
the Nasdaq SmallCap Market on December 17, 1997 pursuant to Rule
457(c).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
================================================================================
SUBJECT TO COMPLETION, DATED DECEMBER 19, 1997
PROSPECTUS
APPLIED BIOMETRICS, INC.
85,000 SHARES OF
COMMON STOCK
This Prospectus relates to the offering of up to 85,000 shares of
Common Stock, $.01 par value per share (the "Shares"), of Applied Biometrics,
Inc. (the "Company") which may be offered from time to time by the shareholders
named herein or their transferees, pledgees, donees, or other successors in
interest (the "Selling Shareholders"). The Company will not receive any proceeds
upon the sale of the Shares by the Selling Shareholders. See "Use of Proceeds."
The Company will bear all expenses of the offering hereunder other than
underwriting discounts and commissions incurred in connection with the sale of
the Shares by the Selling Shareholders. The Company's Common Stock is traded on
the Nasdaq SmallCap Market under the symbol "ABIO." The last reported sale price
of the Company's Common Stock on December 17, 1997 was $6.750, as reported by
Nasdaq.
The Shares were originally issued by the Company to the Selling
Shareholders on November 2, 1997. The Selling Shareholders have advised the
Company that they intend to sell the Shares from time to time in transactions on
the Nasdaq SmallCap Market at prices prevailing at the time of the sale or
otherwise as set forth below. See "Plan of Distribution." The filing by the
Company of this Prospectus in accordance with the requirements of Form S-3 is
not an admission that any person whose Shares are included herein is an
"affiliate" of the Company.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" ON PAGES 5 THROUGH 8 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the shares offered
hereby. This Prospectus does not contain all of the information set forth in
such Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or as previously filed with the Commission and incorporated herein by
reference. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to such Registration Statement, exhibits
and schedules.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Reports, proxy statements and other information filed by the
Company can be inspected and copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New
York Regional office, 7 World Trade Center, Suite 1300, New York, New York
10048. The Commission also maintains a Web site (http://www.sec.gov) at which
reports, proxy and information statements and other information regarding the
Company may be accessed. In addition, such reports, proxy statements and other
information can also be inspected at the offices of the Nasdaq Stock Market,
1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated by reference in this Prospectus: (i) the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996; (ii)
the Proxy Statement of the Company filed for the Annual Meeting of Shareholders
held on May 14, 1997; (iii) the Company's Quarterly Reports on Form 10-QSB for
the quarters ended March 31, June 30, and September 30, 1997; and (iv) the
description of the Company's Common Stock contained in Amendment No. 1 to the
Company's Form 8-A Registration Statement dated July 29, 1993, File No. 0-22146.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15
of the 1934 Act after the date of this Prospectus and prior to the termination
of the offering of securities contemplated hereby shall also be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded hereby to the extent that a
statement contained 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.
The Company will provide without charge to each person to whom a copy
of this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents which are incorporated by
reference into this Prospectus, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to Joseph A. Marino, Applied
Biometrics, Inc., 501 E. Highway 13, Burnsville, Minnesota 55337, telephone
number (612) 890-1123.
THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE CERTAIN
FORWARD-LOOKING STATEMENTS BASED ON CURRENT EXPECTATIONS WHICH INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY DIFFER
MATERIALLY FROM THOSE PROJECTED IN SUCH FORWARD-LOOKING STATEMENTS DUE TO A
NUMBER OF RISK FACTORS, INCLUDING THOSE SET FORTH BELOW. THE COMPANY HAS
ATTEMPTED, WHEREVER POSSIBLE, TO IDENTIFY THESE FORWARD-LOOKING STATEMENTS BY
USING WORDS SUCH AS "BELIEVE," "ANTICIPATE," "ESTIMATE," "EXPECT," AND SIMILAR
EXPRESSIONS. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY THE
RESULTS OF ANY REVISIONS TO ANY SUCH FORWARD-LOOKING STATEMENTS THAT MAY BE MADE
TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS PROSPECTUS OR TO
REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE COMPANY
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR INFORMATION PROSPECTIVE
INVESTORS SHOULD CONSIDER.
Applied Biometrics, Inc. (the "Company") develops and manufactures
cardiac output monitoring devices for use in operating rooms and intensive care
units. Medical practitioners recognize the importance of measuring cardiac
output (the volume of blood pumped to the body by the heart) as a means of
patient monitoring in the critical care environment because it is a fundamental
indicator of the physical stability of a patient. The Company's products are
designed to meet the needs of the critical care environment for devices that
provide useful, reliable, high quality cardiac output information that can be
continuously monitored at relatively low cost with minimum difficulty of access
and interpretation.
Since January 1994, the Company has focused its efforts primarily in
developing its cardiac output monitoring system which uses the Extravascular
Doppler ("EVD") probe and the Company's ABCOM 2000 Cardiac Output Monitor
("ABCOM 2000 Monitor") described below. The EVD probe is a device that is placed
into the body during open-chest operations to monitor cardiac output during
surgery and the post-operative recovery period. The EVD probe is a single-use
disposable product that is attached by the surgeon directly to the ascending
aorta (or sometimes to the pulmonary artery). A transducer mounted on the distal
end of the EVD probe transmits an ultrasound signal through the blood vessel.
The cardiac output is computed by measuring the diameter of the blood vessel and
the velocity with which the blood passes through the artery being measured. This
provides accurate blood flow measurement during open-chest surgery and the
post-operative period of intensive care. A patented release mechanism on the EVD
probe allows it to be removed nonsurgically. In November 1995, the Company began
marketing the EVD system to a small segment of its target market for testing and
evaluation. The Company believes the EVD system is now in its final stages of
development and is intended to be introduced commercially in 1998.
The Company's initial target market for the EVD system is the pediatric
surgery market. Due to the small size of pediatric surgical patients, there is
no competing product which can measure cardiac output in infants and small
children. In addition, the number of pediatric surgeons is relatively small. The
Company expects that the lack of competition and the small number of potential
customers will allow it to quickly penetrate an important market where the
utility and efficacy of the EVD system can be demonstrated.
The Company in the past developed and began to market its Transtracheal
Doppler ("TTD") device, a single-use disposable endotracheal tube with an
integrated transducer, which, when inserted into the trachea, transmits an
ultrasound signal directed to the ascending aorta to determine cardiac output.
The TTD device provided a minimally invasive means of measuring cardiac output.
Due to technical difficulties, the Company discontinued active marketing of the
TTD device in 1991. The Company intends to begin a research and development
project designed to bring the TTD device back to market after completing the
development and initial marketing of the EVD system, but no assurance can be
given that this project will result in the re-introduction of the TTD device or
that the TTD device will be successful if it is re-introduced.
Cardiac output, as determined by both the Company's EVD system and TTD
device, is displayed on the Company's ABCOM 2000 monitor. The ABCOM 2000 monitor
utilizes proprietary software developed by the Company to indicate cardiac
output and show, in wave form, velocity and blood flow direction. It also
indexes cardiac output by dividing cardiac output by body surface area, has a
menu instruction or prompt sequence to lead the physician through proper
operation and displays instructions concerning entry of data for the monitor.
During the post-operative period, the monitor provides attending physicians and
other medical personnel continuous, real-time monitoring of cardiac output. The
monitor also provides trending and other significant information, including
vessel diameter, average blood velocity and stroke volume.
The Company is a Minnesota corporation organized in 1984. The executive
offices of the Company are located at 501 E. Highway 13, Burnsville, Minnesota
55337, and its telephone number is (612) 890-1123.
RECENT PURCHASE DEVELOPMENT
On November 2, 1997, the Company acquired certain assets and
intellectual property rights relating to Transcatheter Closure Device products
("TCDs") pursuant to a Purchase Agreement with Bernhard Schneidt and Dr. Rainer
Schrader (the "Purchase Agreement"). The Company issued a total of 80,000 shares
of its Common Stock to Messrs. Schneidt and Schrader in connection with the
purchase. The Company also issued a total of 5,000 shares of its Common Stock to
Eric Cockheyt, a distributor of the Company's products in Europe, for services
performed in connection with the transaction.
Transcatheter Closure Devices are a new generation of small,
implantable devices which are delivered through a catheter and designed to
permanently repair certain cardiac defects in children and adults. The
implantation of TCDs often eliminates the need for open heart surgery which has
traditionally been required. The purchase provides the Company with the ability
to pursue a new cardiac product line which complements its existing technology,
products and cardiovascular customer base.
The Company is in the initial stages of developing TCDs. The Company
hopes to develop a product family that will be capable of providing an
effective, nonsurgical method of correcting a variety of heart defects which may
include patent ductus arteriosis ("PDA"), arterial septal defect ("ASD"),
ventricular septal defect ("VSD") and patent foramen ovale ("PFO"). One product
variant has already been sold in Germany by Mr. Schneidt for PDA closures. That
product has been implanted successfully in over 100 human cases without
incident. The Company expects to complete product development of its PDA device
in the near future and intends to begin marketing and distributing the product
in Europe and in the United States after approval to market the product is
obtained from the Food and Drug Administration. The Company anticipates
beginning to develop and test product variants for ASD, VSD and/or PFO sometime
in 1998. At least two of the Company's competitors, Nitinol Medical
Technologies, Inc. and Microvena, Inc., have developed related products which
are currently in clinical trials for ASD closures.
The Purchase Agreement required the Company to, among other things,
file a registration statement with the Securities and Exchange Commission
covering the shares and further requires the Company to file such post-effective
amendments to the registration statement as may be necessary to cause such
registration statement to remain effective for a period of twenty-four months,
commencing on the effective date of the registration statement. Concurrent with
the execution of the Purchase Agreement, the Company entered into a Consulting
Agreement with Bernhard Schneidt under which Mr. Schneidt will provide the
Company with the research and development, engineering, manufacturing, and
marketing services in connection with the Company's development and
commercialization of the TCD technology.
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK IS SPECULATIVE IN NATURE AND INVOLVES
A HIGH DEGREE OF RISK. ACCORDINGLY, IN ANALYZING AN INVESTMENT IN THESE
SECURITIES, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, ALONG WITH OTHER INFORMATION REFERRED TO HEREIN. NO INVESTOR SHOULD
PARTICIPATE IN THIS OFFERING UNLESS SUCH INVESTOR CAN AFFORD THE LOSS OF HIS OR
HER ENTIRE INVESTMENT.
DELAYS IN DEVELOPMENT AND SALE OF PRODUCTS
The Company's ability to succeed is dependent upon the successful
completion of the development of its products, including the EVD system for use
in pediatric cases and successful commercialization of the TCDs, beginning with
its PDA device. The Company has encountered problems in the engineering and
manufacture of the EVD system which have resulted in delaying the roll out of
the product. Failure of the Company to successfully complete the development of
the EVD system or, if successfully developed, to successfully market the EVD
system as now developed or as altered and improved hereafter and failure of the
market to accept the Company's TCDs in commercial quantities could inhibit the
Company's ability to continue operations. Failure of the Company to successfully
solve the technical difficulties relating to the TTD device and to achieve
marketing success with that product would inhibit the Company's ability to
achieve its future growth potential.
HISTORY OF LOSSES; ACCUMULATED DEFICIT
The Company was incorporated in 1984 and has experienced losses in each
year of its operations since inception. Its accumulated deficit at September 30,
1997 was $14.1 million. The Company anticipates continuing operating losses in
the foreseeable future. The Company is in the process of beginning to establish
commercial introduction of the EVD system to the pediatric cardiovascular market
and is preparing to begin selling its PDA device. There can be no assurance that
the commercial introduction of the EVD system or the PDA device will be
successful or that the Company will be able to redevelop and commercially market
its TTD device or successfully develop any products relating to other TCDs. Nor
can there be assurance that the Company will ever be able to generate sufficient
revenues or net cash flow from operations or to attain and maintain profitable
operations.
UNCERTAINTY OF PRODUCT ACCEPTANCE; OBSOLESCENCE OF TECHNOLOGY
The Company originally introduced the TTD device in 1989 and, due to
technical difficulties, discontinued the active marketing of that product in
1991. The EVD system is based upon the same technology as the TTD device. The
EVD system is expected to be introduced in 1998. Although the Company's
experience indicates that there is demand for such products, no assurance can be
given that the EVD system, the TTD device or any products relating to TCDs which
the Company intends to develop will be accepted by the market. A failure of the
EVD system or its PDA device to gain market acceptance would have a significant
adverse effect on the Company's future revenues and earnings and could inhibit
the Company's ability to continue operations. A failure of the TTD device or the
products the Company hopes to develop relating to TCDs to gain market acceptance
would inhibit the Company's ability to achieve its future growth potential. Even
if the Company's products are successfully developed and accepted, they may be
made obsolete by significant technological change or innovation in the
marketplace. There can be no assurance that the development of any of the
Company's technologies or products will be successfully completed or accepted by
the market.
LACK OF ASSEMBLY AND MANUFACTURING EXPERIENCE
The Company expects to begin the manufacture and assembly of the EVD
system in commercial quantities and its first generation of TCDs in 1998. There
can be no assurance that the Company will be able to
successfully attract and retain the personnel and make commercial arrangements
with third party manufacturers necessary to produce its products on a commercial
basis. An inability of the Company to provide its products to potential
purchasers on a timely basis could have a significant adverse effect on the
Company's future earnings and revenues.
EXTENSIVE GOVERNMENT REGULATION
The Company's products are medical devices regulated by the United
States Food and Drug Administration (the "FDA"). Such regulations extend to
manufacturing practices, the conduct of clinical investigations, premarket
approval, record keeping and reporting requirements and labeling, among other
matters. The Company has obtained clearance for commercial marketing of the TTD
device, EVD system and ABCOM 2000 monitor from the FDA. However, further
development of the TTD device may require further FDA clearance prior to
commercial marketing, including clinical trials. In addition, other medical
devices that the Company might develop may also be subject to FDA regulation.
Although the Company has clearance to market its current products, there can be
no assurance that the Company will be able to obtain FDA clearance for
commercial marketing any of the products it may develop relating to TCDs or be
able to obtain FDA clearance for commercial marketing of its current products if
they require further development which requires additional clearance. Even if
FDA clearance is required and received, government regulation may have an
adverse impact on the timing and cost of new product introductions, may
interfere with the marketing of existing products and may require the recall of
products from customer locations.
DEPENDENCE ON HEALTH CARE REIMBURSEMENT
The Company's ability to commercialize its products successfully may
depend in part on the extent to which reimbursement for the cost of such
products and related treatments will be available from governmental health
administration authorities, private health insurers and other organizations.
Government and other third party payors are increasingly challenging the prices
of medical products and services. Uncertainty exists as to the reimbursement
status of new health care products, and there can be no assurance that adequate
third-party coverage will be available to enable the Company to maintain price
levels sufficient to realize an appropriate return on its investment in product
development. The federal government has imposed payment rates for Diagnosis
Related Groups ("DRGs") and prospective reimbursement programs that provide
economic incentives for healthcare institutions to reduce operating costs.
Although the Company believes that its products will ultimately reduce the cost
of patient care, these reimbursement programs may adversely affect sales of the
Company's products. If adequate coverage and reimbursement levels are not
provided by government and other third party payors for use of the Company's
products, the market acceptance of these products could be adversely affected.
The Company has not obtained, and does not expect to obtain in the near future,
a specific Current Procedural Terminology ("CPT") code relating to Medicare
reimbursement for its products. It believes, however, that reimbursement for its
products may be available under existing CPT codes for the measurement of
cardiac output by other means. In addition, future changes in the system of
health care reimbursement may also adversely affect the Company's future
revenues and earnings.
DEPENDENCE ON KEY PERSONNEL
The Company's ability to develop and market its products and to achieve
and maintain a competitive position depends, in large part, on its ability to
attract and retain qualified personnel. Competition for such personnel is
intense and there can be no assurance that the Company will be able to attract
and retain such personnel. In particular, the Company is presently dependent
upon the services of Joseph A. Marino, the Chairman of its Board of Directors,
Chief Executive Officer and President. The loss of the services of Mr. Marino
could have an adverse effect on the Company and there would likely be a
difficult transition period in finding a replacement for him. The Company does
not have and may not be able to obtain at reasonable rates
key person life insurance covering Mr. Marino. Additionally, important personnel
that the Company has retained to work on the development of products relating to
TCDs may be subject to restrictions in prior employment agreements. Although the
Company believes that these employees could be replaced if necessary, the
presence of such restrictions, if enforceable, could inhibit the Company's
ability to develop and market its products in a timely manner.
COMPETITION
The markets for the Company's products are highly competitive. Present
competitors in the cardiac output measurement field tend to be large,
established companies with research and development, marketing, production,
sales, financial and other resources greater than those of the Company. The
competitors of the Company in the cardiac closure field are believed to be
medium sized companies, the most prominent of which are Nitinol Medical
Technologies, Inc., located in Boston, Massachusetts, and Microvena, Inc.,
located in Minneapolis, Minnesota. The Company believes that both Nitinol and
Microvena are in clinical trials with TCDs that are designed for applications
other than the PDA closure devices that the Company intends to initially develop
and market. The competitors of the Company in the cardiac closure field may have
greater resources and be able to penetrate the TCD market sooner than the
Company. There can be no assurance that the Company's present products will be
able to compete successfully with existing or future competitive products or
that the Company will be able to develop or acquire additional products or
otherwise effectively respond to new products or technological advances
developed by competitors.
POTENTIAL PRODUCT LIABILITY
The risk of claims for product liability exists for all manufacturers
of medical devices, including the Company. If a product liability claim were to
be successfully asserted against the Company, it could have a material adverse
effect on the Company's financial condition. The Company has product liability
insurance coverage of $3.0 million per year, which the Company believes will be
adequate to cover the risks associated with its product sales. There is no
assurance, however, that such coverage will be sufficient to cover all claims
brought against the Company or that the Company will be able to maintain such
insurance at affordable rates or obtain additional insurance covering new
products.
POSSIBLE VOLATILITY OF STOCK PRICE
The stock markets have experienced price and volume fluctuations,
resulting in changes in the market prices of the stock of many companies which
may not have been directly related to the operating performance of those
companies. Such broad market fluctuations may adversely affect the market price
of the Common Stock following this offering. The Company believes that factors
such as indications of the market's acceptance of the Company's products and
failure to meet market expectations could cause the market price of the Common
Stock to fluctuate substantially.
RELIANCE ON PATENTS AND PROPRIETARY RIGHTS
The Company's success depends, to a large extent, on its ability to
maintain a competitive proprietary position in its product areas. The Company
relies heavily on its proprietary technologies and has obtained domestic and
foreign patents on certain aspects of its present products. The Company has also
sought to protect its products through the registration of trademarks and trade
names. However, a number of events, including the development of competing
products, could occur that could eliminate or adversely affect the protection
that the patents and other proprietary rights, which may be either presently
existing or acquired in the future, afford the Company. There therefore can be
no assurance that the steps taken by the Company will be adequate to prevent
that the misappropriation of its intellectual properties or that its current
products do not, or that its future
products will not, infringe on the rights of third parties. In the event that
the Company is found to have infringed on the proprietary rights of a third
party, the Company may be unable to market it products without a license from
such third party. There is no assurance that the Company would be able to obtain
such a license on satisfactory terms, or at all. The Company also relies, to a
great extent, upon certain unpatentable know-how, trade secrets and other
factors to provide it with a competitive advantage in the marketplace. There can
be no assurance that the Company will be able to maintain the secrecy of such
proprietary information, trade secrets or unpatentable proprietary know-how. In
the event the Company is unable to maintain the secrecy of such proprietary
information, or is unable to ultimately, or timely, to secure meaningful patent
protection for its technology and products, the Company could be vulnerable to
competitors who might attempt to copy its products. Litigation, which could
result in substantial cost to and diversion of effort by the Company, may be
necessary to enforce the patents, trade secrets and other proprietary rights
owned by the Company, to defend the Company against claimed infringement of the
rights of others or to determine the scope and validity of the proprietary
rights of others. The cost of such actions could have a material adverse affect
on the Company's financial condition, even if the prosecution or defense of such
actions are ultimately successful.
NEED FOR ADDITIONAL CAPITAL
Although the Company believes that its current funds together with cash
expected to be generated from operations will enable the Company to meet its
liquidity and capital needs for the next 12 to 18 months, additional financing
may be required to pursue its business plans and carry on future operations.
There can be no assurance that such additional financing, if needed, will be
available to the Company or, if available, that it would be on terms acceptable
or favorable to the Company. Additional financing could involve the sale of
equity securities, which could result in significant dilution to the Company's
existing shareholders.
ABSENCE OF DIVIDENDS
The Company has not paid any dividends on its capital stock since its
incorporation and does not intend to pay dividends in the foreseeable future.
CONTROL BY EXISTING MANAGEMENT.
The Company's directors and officers own approximately 15.8% of the
Company's outstanding capital stock on a fully diluted basis and may in the
future be able to control the Company's business and affairs, including electing
directors, appointing officers and determining officers' compensation.
LIMITATIONS ON LIABILITY.
The Company's Articles of Incorporation provide, as permitted by
Minnesota law, that a director or officer of the Company shall not be personally
liable to the Company or its shareholders for monetary damages for breach of his
or her fiduciary duty of care as a director or officer, with certain exceptions.
In addition, the Company's bylaws provide for mandatory indemnification of
directors and officers to the fullest extent permitted by Minnesota law.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Shareholders.
SELLING SHAREHOLDERS
The following table sets forth the names of the Selling Shareholders
and the number of shares of Common Stock of the Company beneficially owned by
each shareholder prior to and as of the offering:
Number of Shares Beneficially Maximum Number Number
Owned Prior to the of Shares of Shares Owned
Name(1) Offering To Be Sold After Offering(2)
------- ----------------------------- -------------- -----------------
Bernhard Schneidt(3) 40,000 40,000 0
Dr. Rainer Schrader 40,000 40,000 0
Eric Cockheyt(4) 5,000 5,000 0
------ ------
Total 85,000* 85,000
====== ======
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* Less than one percent of the Company's outstanding shares of
Common Stock.
(1) The Selling Shareholders all acquired the number of Shares set
forth opposite their names above in connection with the
Company's acquisition of certain assets and intellectual
property rights relating to TCDs. See "Recent Purchase
Developments."
(2) Assumes the sale of all Shares offered hereby. The Selling
Shareholders may sell all or any part of their respective
Shares.
(3) Mr. Schneidt is a consultant to the Company.
(4) Mr. Cockheyt is the Company's master distributor in Europe for
its products.
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Shareholders, or
pledgees, donees, transferees or other successors in interest thereof, may sell
the Shares, from time to time in one or more transactions on the Nasdaq SmallCap
Market at market prices prevailing at the time of the sale or at prices
otherwise negotiated. The methods by which the Shares may be sold may include,
but not be limited to, the following: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account in accordance with any method of sale described herein; (c) an
exchange distribution in accordance with the rules of such exchange; (d)
ordinary brokerage transactions in which the broker solicits purchasers; (e)
privately negotiated transactions; (f) short sales; and (g) a combination of any
such methods of sale. The Selling Shareholders may also sell such Shares in
accordance with Rule 144 under the Securities Act of 1993, as amended (the
"Securities Act"), if available.
The Company has been advised that, as of the date hereof, the Selling
Shareholders have made no arrangement with any broker for the sale of the
Shares. Underwriters, brokers or dealers may participate in such transactions as
agents and may, in such capacity, receive brokerage commissions from the Selling
Shareholders or purchasers of such securities. Such underwriters, brokers or
dealers may also purchase such Shares for their own account in the manner
described above. The Selling Shareholders and such underwriters, brokers or
dealers may be considered "underwriters" as that term is defined by the
Securities Act, although the Selling Shareholders disclaim such status. Any
commissions, discounts or profits received by such underwriters, brokers or
dealers
in connection with the foregoing transactions may be deemed to be underwriting
discounts and commissions under the Securities Act.
The Company has agreed to use its best efforts to maintain the
effectiveness of the registration of the Shares being offered hereunder for
twenty-four months from the date of this Prospectus when all of the Shares being
offered hereunder have been sold or may be sold without volume or other
restrictions pursuant to Rule 144 under the Securities Act, as determined by the
counsel to the Company pursuant to a written opinion letter.
All proceeds from any sales of the Shares will be the property of the
Selling Shareholder who will bear the expense of underwriting discounts and
selling commissions. The Company will bear all other expenses incurred in
connection with the offering hereunder.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Lindquist & Vennum P.L.L.P., Minneapolis,
Minnesota. Patrick Delaney, a partner in Lindquist & Vennum P.L.L.P., is a
Director and a holder of Common Stock and options to purchase Common Stock of
the Company.
EXPERTS
The financial statements and financial statement schedule of the
Company incorporated by reference in this Prospectus have been prepared by the
Company without audit, except for the balance sheet of the Company as of
December 31, 1996, and the Statement of Operations and Statement of Changes in
Financial Position for the year ended December 31, 1996 (the "Audited Financial
Statements"). The Audited Financial Statements have been audited by Price
Waterhouse LLP, independent certified public accountants, as indicated in their
reports accompanying such financial statements and financial statement schedule,
and are incorporated herein in reliance upon such reports given upon the
authority of said firm as experts in accounting and auditing.
INDEMNIFICATION
The Company's Articles of Incorporation eliminate or limit certain
liabilities of its directors and the Company's Bylaws provide for
indemnification of directors, officers and employees of the Company in certain
instances. Insofar as exculpation of, or indemnification for, liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such exculpation or indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC registration fee ......................................... $170
Accounting fees and expenses ................................. 500
Legal fees and expenses ...................................... 5,000
Miscellaneous ................................................ 500
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Total ................................................... $ 6,170
=======
Except for the SEC registration fee, all of the foregoing expenses have
been estimated.
ITEM 15: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Statutes requires, among other
things, the indemnification of persons made or threatened to be made a party to
a proceeding by reason of acts or omissions performed in their official capacity
as an officer, director, employee or agent of the corporation against judgments,
penalties and fines (including attorneys' fees) if such person is not otherwise
indemnified, acted in good faith, received no improper benefit, reasonably
believed that such conduct was in the best interests of the corporation, and, in
the case of criminal proceedings, had no reason to believe the conduct was
unlawful. In addition, Section 302A.521, subd. 3, of the Minnesota Statutes
requires payment by the corporation, upon written request, of reasonable
expenses in advance of final disposition in certain instances if a decision as
to required indemnification is made by a disinterested majority of the Board of
Directors present at a meeting at which a disinterested quorum is present, or by
a designated committee of the Board, by special legal counsel, by the
shareholders or by a court.
The Company's Bylaws provide for the indemnification of its directors,
officers, employees, and agents in accordance with, and to the fullest extent
permitted by, the provisions of the Minnesota Business Corporation Act, as
amended from time to time.
ITEM 16. EXHIBITS
Exhibit No. Description
- ----------- -----------
5.1 Opinion of Lindquist & Vennum P.L.L.P., counsel to
the Company
23.1 Consent of Price Waterhouse LLP, independent certified public
accountants
23.2 Consent of Lindquist & Vennum P.L.L.P. (see Exhibit 5.1 above)
24 Powers of Attorney (included on signature page hereof)
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes, in accordance with Item
512 of Regulation S-K:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 and Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the Prospectus, to deliver or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe it meets all of
the requirements for filing a Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Burnsville, State of Minnesota, on the 18th day of
December, 1997.
APPLIED BIOMETRICS, INC.
By /s/ Joseph A. Marino
--------------------------------------------
Joseph A. Marino
Chairman of the Board, Chief Executive Officer,
President and Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Joseph A. Marino and Patrick Delaney such person's true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution
for such person and in such person's name, place and stead, in any and all
capacities, to sign any or all amendments to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person, hereby ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on December 18,
1997 in the capacities indicated.
Signature Title
--------- -----
/s/ Joseph A. Marino Chairman of the Board,
- -------------------------------- Chief Executive Officer,
Joseph A. Marino President and Chief Financial Officer
(principal executive, financial and
accounting officer)
/s/ William E. Engbers Director
- --------------------------------
William E. Engbers
/s/ Patrick Delaney Director and Secretary
- --------------------------------
Patrick Delaney
/s/ George E. Kline Director
- --------------------------------
George E. Kline
/s/ Demetre Nicoloff, M.D., Ph.D Director
- --------------------------------
Demetre Nicoloff, M.D., Ph.D