AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1996
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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ACCUMED INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 36-4054899
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(State of other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
900 N. Franklin Street, Suite 401
Chicago, Illinois 60610
(312) 642-9200
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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PETER P. GOMBRICH
Chief Executive Officer
AccuMed International, Inc.
900 N. Franklin Street, Suite 401
Chicago, Illinois 60610
(312) 642-9200
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPY TO:
GILLES S. ATTIA, ESQ.
Graham & James
400 Capitol Mall, Suite 2400
Sacramento, California 95814
(916) 558-6700
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If 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 on continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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 MAXIMUM PROPOSED MAXIMUM
AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE REGISTRATION FEE
Common Stock, Par Value $0.01............... 255,000 shares $6.44 $1,641,563 $566
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933, as amended, based on $6.44 per share, the average of the high and low
sales prices reported for the Common Stock on July 1, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
255,000 SHARES
ACCUMED INTERNATIONAL, INC.
COMMON STOCK
This Prospectus relates to 255,000 (the "Shares") of Common Stock, par value
$0.01 per share (the "Common Stock"), of AccuMed International, Inc. (the
"Company" or "AccuMed"). The Company will not receive any of the proceeds from
any sales of the Shares. The Registration Statement of which this Prospectus
forms a part has been filed pursuant to contractual registration rights of the
Shares. (Holders Shares are referred to as the "Selling Stockholders.") See
"Selling Stockholders."
The Shares of Common Stock may be offered and sold from time to time by the
Selling Stockholders through ordinary brokerage transactions in the
over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of the sale or at negotiated prices (this
"Offering"). See "Risk Factors," "Selling Stockholders" and "Plan of
Distribution."
The closing price for the Common Stock on July 1, 1996, as reported on the
National Association of Securities Dealers Automated Quotation System
("Nasdaq"), was $6.75 per share.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS."
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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.
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No underwriting commissions or discounts will be paid by the Company in
connection with this Offering. Estimated expenses payable by the Company in
connection with this Offering are approximately $70,000.
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THIS DATE OF THIS PROSPECTUS IS ___________, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
regional offices: New York Regional Office, 7 World Trade Center, Room 1400, New
York, New York 10048 and Chicago Regional Office, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Common Stock is quoted on the
Nasdaq SmallCap Market and reports and other information regarding the Company
may be inspected at the National Association of Securities Dealers, Inc. at 1735
K Street, N.W., Washington, D.C. 20006.
Additional information regarding the Company and the securities offered
hereby is contained in the Registration Statement on Form S-3 (Registration No.
333- ) of which this Prospectus forms a part, and the exhibits thereto filed
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). For further information pertaining to the Company and the
securities offered hereby, reference is made to the Registration Statement and
the exhibits thereto, which may be inspected without charge at, and copies may
be obtained at prescribed fees from, the office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549.
The Company furnishes stockholders with annual reports containing audited
financial statements and other periodic reports as the Company may deem to be
appropriate or as required by law or the rules of the National Association of
Securities Dealers, Inc.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have heretofore been filed by the Company with
the Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are incorporated by reference herein and shall be deemed to be
a part hereof:
(1) The Company's Annual Report on Form 10-KSB for the year ended September
30, 1995.
(2) The Company's Current Report on Form 8-K filed with the Commission on
January 16, 1996.
(3) The Company's Current Report on Form 8-K filed with the Commission on
January 17, 1996.
(4) The Company's Current Report on Form 8-K filed with the Commission on
January 19, 1996.
(5) The Company's Amendment No. 1 to the Current Report on Form 8-K/A filed
with the Commission on January 24, 1996.
(6) The Company's Transition Report on Form 10-KSB for the transition period
ended December 31, 1995.
(7) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996.
(8) The description of Common Stock contained in the Company's Registration
Statement on Form 8-A filed with the Commission on September 18, 1992 by
which the Common Stock of the Company was registered under Section 12 of
the Exchange Act, and the description of the Common Stock incorporated
therein by reference to the Registration Statement on Form S-1 (Regis.
No. 33-48302) filed with the Commission on June 3, 1992 and amended on
June 25, 1992, July 23, 1992 and September 10, 1992, under the caption
"Description of Securities" therein.
(9) The description of the Common Stock contained in the Company's Amendment
No. 1 to Registration Statement on Form 8-A/A filed with the Commission
on January 2, 1996.
2
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this Offering shall 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 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 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 this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference in this Prospectus (not including
exhibits and other information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Requests for
such documents should be directed to AccuMed International, Inc., located at 900
N. Franklin Street, Suite 401, Chicago, Illinois 60610, Attn: Chief Financial
Officer, telephone (312) 642-9200.
The following are tradenames and trademarks of the Company: the "Alamar"
logo and name, READar-TM-, PIPETar-TM-, alamarBlue-TM-, AccuMed, Inc., AccuMed
International, Inc., the "AccuMed" logo and name, AcCell-TM-, TracCell-TM-,
Sensititre-Registered Trademark-, SensiTouch-Registered Trademark-,
SensiLink-TM-, Aris-TM-, JustOne-TM-, MicroBact-TM-, Sensi-Cal-TM-, Amco AEPA-
1-Registered Trademark- and Diascan-TM-.
3
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE, INCLUDING INFORMATION UNDER
"RISK FACTORS," AND IN THE INFORMATION AND DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. THE STATEMENTS THAT ARE NOT HISTORICAL FACTS OR STATEMENTS OF CURRENT
STATUS CONTAINED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS (AS DEFINED
IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO, THE RISKS SET FORTH IN "RISK
FACTORS." ACTUAL RESULTS MAY DIFFER MATERIALLY.
THE COMPANY
AccuMed International, Inc. ("AccuMed" or the "Company") designs,
manufactures and markets diagnostic and screening products for the clinical
diagnostic laboratory, pharmaceutical and veterinary markets. The Company's
products use innovative proprietary technology designed to improve quality and
productivity and reduce costs in the cytopathology and microbiology laboratory.
The Company's cytopathology products provide automated support and enhancement
of the human screener in the analysis of cytopathology specimens. The Company's
initial products for the cytopathology laboratory market are the AcCell 2000 and
the AcCell 2001 automated slide handling and microscopy workstations for the
analysis of cervical Pap smears (collectively, the "AcCell 2000/2001"). The
Company is developing a set of related products, including the TracCell 2000
specimen mapping workstation, designed to work in concert with the AcCell
2000/2001 to offer the cytopathology laboratory a family of high performance
tools that provide comprehensive support during initial critical phases of the
Pap smear analysis process. The Company has recently granted exclusive
distribution rights in the Western Hemisphere for the AcCell 2000/2001 and the
TracCell 2000 to Olympus America Inc. ("Olympus"). Marketing of the TracCell
2000 is subject to additional testing and, for the U.S. market, FDA clearance
under a 510(k) Notification. The Company also offers the microbiology laboratory
a variety of FDA-cleared products for the identification and minimum inhibitory
concentration ("MIC/ID") testing of bacteria suspected of causing infections and
their susceptibility to antibiotics under the tradenames Sensititre and Alamar.
AccuMed is developing a low cost Kirby-Bauer reading instrument for the
microbiology market and is researching a potential new MIC/ID testing system
combining certain of the Company's proprietary technologies.
The Pap smear is currently the most widely-used screening test for the early
detection of cancer in the United States. It is estimated that laboratories in
the U.S. alone will process over 55 million Pap smears in 1996, with over 120
million processed worldwide. Although cervical cancer is one of the most common
cancers afflicting women throughout the world, survival rates can reach 90% if
detected early. Although the conventional manual Pap smear test is highly
effective, the test and process has limitations, including human
cytotechnologist error due to high volumes, habituation and fatigue, and
burdensome administrative requirements. False negative Pap smear diagnoses rates
range from between 5% to 30%, and both false negative and false positive
diagnoses lead to significant liability issues to the laboratory and possible
health issues to the patient, while at the same time adding significant cost to
the process. The AcCell system directly addresses these issues by eliminating a
large portion of the manual work ancillary to slide analysis, guaranteeing 100%
slide review and automatically recording and reporting what has been done on the
AcCell data management system.
The Company's cytopathology products are designed to improve the quality of
cell analysis, increase accuracy and productivity in the laboratory, and reduce
the time and costs associated with analysis, but without requiring significant
changes from standard laboratory practice. Rather than developing costly and
risky fully automated primary screening systems that eliminate the need for a
trained cytotechnologist, the Company is focused on providing a comprehensive
family of proprietary, technologically-advanced, application-driven products
offering seamless support of medical professionals in the analysis and diagnosis
of Pap smears and other cell samples. Initially applied to Pap test analysis,
the AcCell system is expected to have a broad range of cytopathology, pathology
and histology applications.
4
The Company's microbiology division focuses on developing, manufacturing and
marketing in vitro diagnostic tests for the clinical laboratory, veterinary and
pharmaceutical markets. The Company markets, and is developing, a variety of
proprietary MIC/ID testing products, both manual and automated, focused on
testing for bacterial infections. AccuMed's microbiology product lines include a
series of disposable test kits and a wide range of automated instruments used to
identify infectious organisms, such as bacteria, and determine the
susceptibility of such organisms to antimicrobial agents, such as antibiotics.
The use of MIC/ID testing by hospitals and laboratories assists physicians and
other health care professionals in determining the most effective course of
treatment earlier and more efficiently, potentially shortening patient hospital
stays, resulting in more accurate diagnoses and reducing overall healthcare
costs. For the three months ended March 31, 1996 the Company generated revenues
of $1,179,000 from sales of microbiology products.
The Company and its predecessor companies have consistently pursued a
strategy of developing or acquiring early detection products that reduce, or
potentially reduce, overall healthcare costs while enhancing or maintaining
current levels of effectiveness. The Company believes that the current pressures
in the healthcare industry for reduced costs and increased efficiencies are
better addressed by products that work within and enhance established practices.
Products that seek to revolutionize established practices often face regulatory
and market acceptance hurdles that are difficult if not impossible to overcome.
The Company is also focused on integrated product designs that the Company
believes are demanded by a market that seeks individualized products and the
ability to expand product capability as the customer's business changes.
AccuMed's objective is to establish the AcCell system as the premier microscopy
workstation for the primary screening of Pap smears, exploit other applications
for the AcCell technology such as histology and pathology laboratory work and
enhance its position in the MIC/ID testing market through development of new
products based on proprietary technology. The key elements of the Company's
strategy include (i) continuing to establish the AcCell system through OEM
agreements with major microscope manufacturers, such as the agreement with
Olympus already in place, (ii) focusing on international market opportunities,
(iii) enhancing the Accell system through research and development of new
products, (iv) establishing a recurring revenue base by charging TracCell 2000
users "by the test", (v) integrating the Company's proprietary microbiology
technologies into new MIC/ID products, (vi) continuing to seek out acquisition
candidates with compatible technologies and (vii) setting up new channels of
sales and distribution.
AccuMed is headquartered at 900 N. Franklin Street, Suite 401, Chicago,
Illinois 60610, with additional facilities in Westlake, Ohio and East Grinstead,
Sussex, England. Previously, the Company was incorporated under the laws of the
State of California as "Alamar Biosciences, Inc." On December 29, 1995, AccuMed,
Inc., an Illinois corporation, merged (the "Merger") with and into Alamar
Biosciences, Inc. and the surviving entity was renamed AccuMed International,
Inc. and reincorporated under Delaware law. The Company has one wholly-owned
subsidiary, AccuMed International, Ltd. ("AccuMed U.K." or "Sensititre")
5
THE OFFERING
Common Stock offered............... 255,000 shares offered by the Selling Stockholders.
The Company will not receive any proceeds from the
sales of Shares by the Selling Stockholders.
Common Stock to be outstanding
after this offering............... 18,631,453 shares(1).
Nasdaq Common Stock symbol......... "ACMI"
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(1) Represents shares outstanding at July 1, 1996 plus shares to be sold by the
Company in this Offering. Excludes: (i) an aggregate of 5,969,333 shares
reserved for issuance upon exercise of outstanding warrants at exercise
prices ranging from $0.25 to $5.00 per share, with a weighted average
exercise price of $3.21 per share; (ii) an aggregate of 1,657,982 shares
reserved for issuance upon the exercise of stock options outstanding at July
1, 1996 at exercise prices between $0.63 and $8.38 per share, with a
weighted average exercise price of $2.13 per share; and (iii) an aggregate
of 196,631 shares reserved for issuance upon exercise of options available
for future grant under the Company's Amended and Restated 1990 Stock Option
Plan, Amended and Restated 1992 Stock Option Plan and 1995 Stock Option
Plan.
RISK FACTORS
The statements that are not historical facts or statements of current status
contained in this Prospectus are forward-looking statements (as defined in the
Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties, including, but not limited to, the risks set forth in "Risk
Factors." Actual results may differ materially. The decision of whether to make
an investment in the Common Stock involves an analysis of certain risks,
including but not limited to, the risk factors set forth in this Prospectus.
Each potential investor is urged to carefully consider the risks inherent in the
Company's significant and continuing operating losses, the regulatory
environment in which the Company operates, and the volatility of the Company's
stock price. See "Risk Factors."
6
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING, BUT
NOT NECESSARILY LIMITED TO, THE RISK FACTORS DESCRIBED BELOW. EACH PROSPECTIVE
INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS INHERENT IN AND
AFFECTING THE BUSINESS OF THE COMPANY AND THIS OFFERING BEFORE MAKING AN
INVESTMENT DECISION. THE STATEMENTS THAT ARE NOT HISTORICAL FACTS OR STATEMENTS
OF CURRENT STATUS CONTAINED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, THE FACTORS
SET FORTH BELOW. ACTUAL RESULTS MAY DIFFER MATERIALLY.
LIMITED RELEVANT OPERATING HISTORY; SIGNIFICANT OPERATING LOSSES;
ACCUMULATED DEFICIT; SUBSTANTIAL COSTS OF INTEGRATION AND CONSOLIDATION. The
Company's predecessor was formed in 1988 and was engaged primarily in research
and development of microbiology products until early 1994. The Company's
predecessor never realized any significant revenues from product sales. AccuMed,
Inc., which was merged into the Company in December 1995, was incorporated in
February 1994 and in February 1995 acquired the Sensititre microbiology
business. Until such acquisition, AccuMed, Inc. had no revenues and operations
consisted of a limited amount of research and development. Accordingly, although
the Sensititre business had a significant operating history and revenues from
sales, AccuMed, Inc., as a separate entity, had very limited operating history
prior to the Merger. Upon consummation of the Merger on December 29, 1995, the
operations of the Company and AccuMed, Inc. were combined and the resulting
company began to develop, manufacture and sell the Alamar and the Sensititre
microbiology products and the AccuMed cytopathology products. Thus, the combined
Company has a limited relevant operating history upon which an evaluation of
it's prospects can be made. Such prospects must be considered in light of the
risks, expenses and difficulties frequently encountered in establishing a new
business in a continually evolving industry with an increasing number of market
entrants and intense competition and the risks, expenses and difficulties
encountered in the shift from development to commercialization of new products
based on innovative technology.
The Company has incurred significant operating losses in each fiscal quarter
since its inception. For the years ended September 30, 1994 and 1995, and the
three months ended December 31, 1995 and March 31, 1996, the Company's operating
losses were approximately $3,146,000, $3,707,000, $5,662,000 and $2,649,000,
respectively. The costs of integrating and consolidating the recently merged
companies as a single enterprise have been substantial and account for
approximately $4,000,000 and $3,500,000 of the losses for the three months ended
December 31, 1995 and March 31, 1996, respectively. As of March 31, 1996, the
Company had an accumulated deficit of approximately $25,410,000. Such losses are
expected to continue for the foreseeable future until such time, if any, as the
Company is able to attain sales levels sufficient to support its operations.
There can be no assurances that the Company will be able to implement
successfully its operating strategy, generate increased revenues or ever achieve
profitable operations.
SIGNIFICANT CAPITAL REQUIREMENTS; POSSIBLE NEED FOR ADDITIONAL CAPITAL;
SUBSTANTIAL ACCOUNTS PAYABLE. The Company intends to expend substantial funds
for research and product development, expansion of sales and marketing
activities, expansion of manufacturing capacity and other working capital and
general corporate purposes. Although the Company believes that internally
current resources and generated funds will be sufficient to fund the Company's
projected operations through the next 12 months, no assurances to that effect
can be given. The Company's future liquidity and capital requirements will
depend upon numerous factors, including the costs and timing of expansion of
manufacturing capacity, the costs, timing and success of the Company's product
development efforts, the costs and timing of expansion of sales and marketing
activities, the extent to which the Company's existing and new products gain
market acceptance, competing technological and market developments, the progress
of commercialization efforts of the Company's distributors, the costs involved
in preparing, filing, prosecuting, maintaining, enforcing and defending patent
claims and other intellectual property rights, developments related to
regulatory and third party reimbursement matters and CLIA, and other factors. In
the event that additional financing is needed, the Company may seek to
7
raise additional funds through public or private financing, collaborative
relationships or other arrangements. The Company currently has no commitments
with respect to sources of additional financing, and there can be no assurances
that any such financing sources, if needed, would be available to the Company or
that adequate funds for the Company's operations, whether from the Company's
revenues, financial markets, collaborative or other arrangements with corporate
partners or from other sources, will be available when needed or on terms
attractive to the Company. The failure of the Company to obtain adequate
additional financing may require the Company to delay, curtail or scale back
some or all of its research and development programs, sales and marketing
efforts, manufacturing operations, clinical studies and regulatory activities
and, potentially, to cease its operations. Moreover, the inability of the
Company to grant licenses to third parties to commercialize products or
technologies that the Company would otherwise develop itself, and the terms of
such licenses may be less favorable than if the Company were negotiating from a
stronger position. Any additional equity financing may involve substantial
dilution to the Company's then-existing stockholders.
Of the approximately $2,146,000 of accounts payable as of May 31, 1996,
approximately $1,690,000 represent amounts payable for over 30 days. Amounts
owed to various vendors and suppliers may be subject to late charges of up to
approximately 1.5% per month. If the Company is unable to increase cash
resources, significant demand for payment of payables in excess of cash
resources could cause the Company to liquidate assets, issue additional equity
securities, curtail existing programs or make other arrangements that could have
a material adverse effect on the business, financial condition and results of
operations of the Company.
PROTECTION OF INTELLECTUAL PROPERTY. The Company holds a United States
patent, and has received a notice of intent to grant a related European patent,
with respect to a portion of the Alamar microbiology technology. The Company has
obtained licenses on several United States and foreign patents and other
intellectual property rights regarding aspects of the technology embodied in the
Sensititre product line and in March 1996 entered into a letter of intent to
acquire certain image analysis patents from Accuron Corporation. The Company
owns, or has been assigned, six United States patent applications covering blood
cultures, and certain technologies embodied in the AcCell and TracCell systems.
During 1996, the Company has applied for eight additional United States patents
relating to the optical imaging technology. None of such applications have been
granted as of the date of this Prospectus and there can be no assurances that
any such patent applications will result in issued patents. The Company may, in
the future, file additional patent applications; however, there can be no
assurances that the Company will be successful in obtaining approval of any
future patent applications it files with respect to its technologies.
There can be no assurances that the aforementioned patents, patent
applications and licenses will adequately protect the Company from potential
infringers. Such patents, patent applications and licenses may cover only
portions of the Company's technologies. Other portions may be in the public
domain or protectable only under trade secret laws. In addition, since patent
applications in the United States are maintained in secrecy until patents issue,
and since publications of discoveries in the scientific or patent literature
tend to lag behind actual discoveries by several months, the Company cannot be
certain that the Company or the original patent application filer, was the first
creator of inventions covered by pending patent applications or that such
companies were the first to file patent applications for such inventions.
From late 1994 until early 1996, the Company was party to patent and trade
secret litigation both asserting and defending its rights relating to part of
the Alamar microbiology technology covered in its existing United States patent.
Despite the successful resolution of such litigation, there can be no assurances
that the Company will not become a party to future litigation involving other
parties in connection with its intellectual property rights.
8
The Company also relies for protection of its intellectual property on trade
secret law and nondisclosure and confidentiality agreements with its employees,
consultants, distributors, researchers and advisors. There can be no assurances
that such agreements will provide meaningful protection for the Company's trade
secrets or proprietary know-how in the event of any unauthorized use or
disclosure of such trade secrets or know-how. In addition, others may obtain
access to, or independently develop, technologies or know-how similar to that of
the Company.
The Company's success will also depend on its ability to avoid infringement
of patent or other proprietary rights of others. The Company is not aware that
it is infringing any such rights of a third-party, nor is it aware of
proprietary rights of others for which it will be required to obtain a license
in order to develop its products. However, there can be no assurances that the
Company is not infringing proprietary rights of others, or that the Company will
be able to obtain any technology licenses it may require in the future.
DELAYED OR UNSUCCESSFUL PRODUCT DEVELOPMENT. The Company will be required
to undertake time-consuming and costly development activities and seek
regulatory approval for these new products. There can be no assurances that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these new products, that
regulatory clearance or approval of these or any new products will be granted by
the FDA on a timely basis, if at all, or that the new products will adequately
meet the requirements of the applicable market or achieve market acceptance.
Although the Company believes that the TracCell 2000 will require a pre-market
clearance under Section 510(k) ("510(k)") of the Federal Food, Drug and Cosmetic
Act of 1938, as amended, for marketing in the United States, a requirement that
the Company file a pre-market approval ("PMA") application for the product would
significantly delay the Company's ability to market such test and significantly
increase the costs of development. The Company believes that the TracCell 3000
may require a PMA. The Company's growth and profitability will depend, in part,
upon its ability to complete development of and successfully introduce new
products including the TracCell 2000 and the TracCell 3000. The Company's
proposed TracCell 3000 mapping system is in an early stage of development and
there can be no assurances that it will be successfully developed. The
completion of the development of the Company's cytopathology products remain
subject to all the risks associated with the commercialization of new products
based on innovative technologies, including unanticipated technical or other
problems and the possible insufficiency of the funds allocated for the
completion of such development, which could result in a change in the design,
delay in the development, or abandonment of such applications and products.
Consequently, there can be no assurances that the Company's proposed
cytopathology products will be successfully developed or manufactured, or that
if developed and manufactured, that such products will meet price or performance
objectives, be developed on a timely basis or prove to be as effective as
competing products. The inability to successfully complete development of a
product or application or a determination by the Company, for financial,
technical or other reasons, not to complete development of any product or
application, particularly in instances in which the Company has made significant
capital expenditures, could have a material adverse affect on the Company.
Pursuant to a Research and Development Agreement between the Company and
RADCO Ventures, Inc., the Company and RADCO are attempting to develop a new
automated microbiology product line combining Sensititre and Alamar
technologies. The Company is also developing a new microbiology system for the
susceptibility market segment to automatically analyze the zone size using the
disk diffusion ("Kirby Bauer") method. If such development projects do not
result in one or more commercially viable products obtaining FDA pre-market
approval, the Company may reassess its business strategy with respect to the
Microbiology Division. Such reassessment could lead to changes in the Company's
overall business plan, including the relative allocation of resources between
the Microbiology Division and Cytopathology Division and the relative emphasis
on current, as well as future, products in each division.
LIMITED SALES, MARKETING AND DISTRIBUTION EXPERIENCE; DEPENDENCE ON THIRD
PARTY DISTRIBUTORS. In order for the Company to increase revenues and achieve
profitability, the Company's products, particularly
9
its cytopathology products, must achieve a significant degree of market
acceptance. The Company has only limited experience marketing and selling its
cytopathology products. The Company intends to distribute these products
primarily through a limited number of distributors. [The Company has only
recently entered into an OEM distribution arrangement with a national
distributor, Olympus. The Company may be required to enter into additional
distribution arrangements in order to achieve broad distribution of its
products. There can be no assurance that the Company will be able to maintain
the recently established distribution relationship with Olympus or that the
Company will be able to enter into and maintain arrangements with additional
distributors on a timely basis, if at all. The Company will be dependent upon
these distributors to assist it in promoting market acceptance of its products
and creating demand for the Company's products. The risks associated with
dependence upon distributors will be exacerbated by the Company's intention to
rely on a limited number of distributors, with the result that sales to these
distributors will account for a significant portion of the Company's revenues.
There can be assurance that these distributors will devote the resources
necessary to provide effective sales and marketing support to the Company. In
addition, the Company's distributors may give higher priority to the products of
other medical suppliers, thus reducing their efforts to sell the Company's
products. If the Company is unable to establish appropriate arrangements with
distributors or if the Company's distributors become unwilling or unable to
promote, market and sell its products, the Company's business, financial
condition and results of operations would be materially adversely affected.
GOVERNMENT REGULATION. The Company's products and manufacturing processes
are subject to extensive regulation by state and federal agencies, including the
United States Food and Drug Administration (the "FDA") and comparable agencies
in certain states and other countries. United States regulatory requirements
promulgated under the Federal Food, Drug, and Cosmetic Act (the "FD&C Act")
provide that many of the Company's products may not be shipped in interstate
commerce without prior authorization from the FDA. Such authorization is based
on a review of the products' safety and effectiveness for their intended uses.
The Company's products which require FDA authorization prior to marketing may be
authorized by the FDA for marketing either pursuant to a premarket notification
under Section 510(k) of the FD&C Act (a "510(k) Notification") or a premarket
approval ("PMA"). The process of obtaining FDA and other required regulatory
clearances or approvals can be time-consuming, expensive and uncertain,
frequently requiring several years from the commencement of clinical trials to
the receipt of regulatory approval.
A 510(k) Notification, among other things, requires an applicant to show
that its products are "substantially equivalent" in terms of safety and
effectiveness to existing products which are currently permitted to be marketed.
An applicant is permitted to begin marketing a product as to which it has
submitted a 510(k) Notification at such time as the FDA issues a written finding
of "substantial equivalence." Requests for additional information may delay the
market introduction of certain of an applicant's products and, in practice,
initial approval of products can take substantially longer than the statutorily
prescribed period of 90 days.
A PMA consists of information sufficient to establish independently that a
device is safe and effective for its intended use. A PMA application must be
supported by extensive data, including preclinical and clinical trial data, to
demonstrate the safety and efficacy of the device for the intended uses
specified in the PMA application. By statute, the FDA is required to respond to
a PMA within 180 days from the date of its submission, however, the approval
process usually takes substantially longer. Commercial distribution in foreign
countries is also subject to regulatory requirements and no assurances can be
given that the Company can obtain the required regulatory approvals on a timely
basis, or at all.
Regulatory approvals, if granted, may include significant limitations on the
intended uses for which a product may be marketed. FDA enforcement policy
strictly prohibits the promotion by the Company, and any of its distributors, of
approved medical devices for off-label uses. In addition, product approvals may
be withdrawn for failure to comply with regulatory standards or the occurrence
of unforeseen problems following initial marketing.
10
The TracCell 2000 mapping system, currently under development and not yet
marketed, will require FDA approval prior to marketing in the United States At
the present time, it is the opinion of management that a full PMA will not be
required for this mapping device and that the 510(k) Notification process will
be applicable. There can be no assurances that the Company will be able to
utilize a 510(k) Notification rather than a full PMA process or that the Company
will receive FDA marketing approval for such product or, if received, that such
approval will not be withdrawn. Marketing of the TracCell 2000 mapping system,
if developed, outside of the United States will not require FDA clearance or
approval, but other regulatory bodies may submit the technology to additional
testing.
The AcCell 3000, currently in the initial stages of development, may not be
sold in the United States unless, and until, the Company has obtained FDA
approval of a PMA submission. Management estimates that the entire process of
receiving pre-market approval of the complete system could take more than two
years after submission of initial clinical data. There can be no assurances that
the Company will receive FDA marketing approval for such product or, if
received, that such approval will not be withdrawn. Marketing of the AcCell 3000
outside of the United States will not require FDA clearance or approval, but
other regulatory bodies may submit the technology to additional testing.
The Company has secured the services of an independent devices and
diagnostics consulting company to guide the process of design, implementation
and monitoring of field trials and submission of documentation for these
cytopathology products to the FDA.
Marketing of the Company's minimum inhibitory concentration/identification
("MIC/ID") microbiology products in the United States requires the submission to
the FDA of a 510(k) Notification. With respect to the Company's Alamar product
line, 510(k) Notifications must be filed and cleared with respect to each
antibiotic used. To date, the Company has submitted 510(k) Notifications, and
obtained findings of "substantial equivalence," for 32 antibiotics commonly used
to fight "gram negative" bacteria and 21 antibiotics commonly used to fight
"gram positive" bacteria. The Company has also received marketing clearance for
four separate 510(k) Notifications with respect to the READar system. The
Company may submit applications to add individual antibiotics to those
previously cleared, as the market warrants. However, there can be no assurances
that clearances will continue to be obtained.
The Company is developing a new microbiology system for the susceptibility
market segment to automatically analyze the zone size using the Kirby Bauer
method. The Company licensed the software algorithm technology from a Spanish
firm and will integrate the software into the hardware developed by the Company.
The complete system will require submission of a 510(k) Notification. There can
be no assurances that the Company can develop the hardware nor that the licensed
software is adequate to submit a 510(k) Notification or that the Company will
receive the FDA marketing clearance. Marketing of the new disk diffusion
product, if developed, outside the United States will not require any FDA
submissions, clearances or approvals, but other regulatory bodies may submit the
technology to additional testing.
Pursuant to a Research and Development Agreement with RADCO Ventures, Inc.,
a research and development company ("RADCO"), RADCO and the Company are
attempting to develop a new automated microbiology product line using Sensititre
and Alamar technologies. Such a product will require the submission of a 510(k)
Notification. Management estimates that the entire process of receiving approval
of the complete system could take up to 12 months after the submission of
initial clinical data. There can be no assurances that the Company will receive
FDA marketing approval for such a product or, if received, that such approval
will not be withdrawn. Marketing of the new automated microbiology product line
outside the United States will not require any FDA submissions, clearances or
approvals, but other regulatory bodies may submit the technology to additional
testing.
The Company also intends to seek ISO 9001 registration, an international
manufacturing quality standard, and to seek the "CE" mark for its AcCell and
TracCell products. The CE mark is recognized by countries that are members of
the European Union and the European Free Trade Association and,
11
effective in 1998, will be required to be affixed to all medical devices sold in
the European Union. The AcCell 2000/2001 successfully completed all safety
evaluations required to obtain UL, CSA and international certifications on June
18, 1996. Compliance testing against FCC emissions standards and the EMC
Directive was initiated on June 19, 1996 and is expected to be completed before
August 1, 1996. The AcCell 2000/2001 is expected to be certified as complying
with CE Mark requirements upon completion of this process. No assurances can be
given that the Company will obtain the CE mark its AcCell or TracCell products
or satisfy ISO 9001 standards, or that any product which the Company may develop
or commercialize will obtain the CE mark, or will be able to obtain any other
required regulatory clearance or approval on a timely basis, or at all.
There can be no assurances that the Company will be able to obtain necessary
regulatory approvals or clearances in the United States, or internationally, on
a timely basis, or at all. Delays in receipt of, or failure to receive, such
approvals or clearances, the loss of previously received approvals or
clearances, or failure to comply with existing or future regulatory requirements
would have a material adverse effect on the Company's business, financial
condition and results of operations.
In addition, the Company is subject to certain FDA registration,
record-keeping and reporting requirements, is obligated to follow FDA "Good
Manufacturing Practices" ("GMP") regulations and is subject to periodic FDA
inspection. The manufacturing facility used to manufacture the Company's
microbiology kits currently meets applicable GMP guidelines and FDA regulations.
The Company's cytopathology manufacturing facility has been designed to meet GMP
standards, although such compliance is not required and the facility has not
been audited for compliance. There can be no assurances, however, that the
facilities used to manufacture the Company's products will continue to meet GMP
guidelines. Future changes in regulations or enforcement policies could impose
more stringent requirements on the Company, compliance with which could
adversely affect the Company's business.
UNCERTAINTY OF MARKET ACCEPTANCE AND INITIAL HIGHER COST OF CYTOPATHOLOGY
PRODUCTS. The Company has generated limited revenues from the sale of its
cytopathology products to date. The Company's success, growth and profitability
will depend on market acceptance of the AcCell 2000/2001 and the TracCell 2000,
if approved for marketing by the FDA, for use in connection with cervical cancer
screening by clinical laboratories and health care providers. Market acceptance
will depend on the Company's ability to demonstrate to these parties that there
are limitations associated with conventional patient data management of Pap
smear samples, slide handling and mapping, and documentation of slide review and
that the Company's products can substantially mitigate these shortcomings by
increasing efficiency, diagnostic accuracy and documenting the scope of sample
review. The initial cost of equipping a clinical laboratory with the Company's
products for use in connection with cervical cancer screening will increase a
laboratory's equipment expenditures. There can be no assurances that the Company
can demonstrate to such parties that the higher cost of equipping existing
laboratories with the AcCell 2000/2001 and TracCell 2000, if approved for
marketing by the FDA, will be offset by a reduction in costs associated with
increased efficiency and decreased malpractice liability risks resulting from
more accurate diagnostics and better document slide review procedures. The
Company believes that many clinical laboratories offer Pap tests at lower gross
margins than other tests in order to receive orders for other, higher margin,
laboratory tests. As a result, clinical laboratories may be reluctant or
unwilling to accept the additional costs related to installing and utilizing the
AcCell 2000/2001 and the TracCell 2000.
LIMITED NUMBER OF CUSTOMERS. Due in part to a recent trend toward
consolidation of clinical laboratories, the Company expects that the number of
potential domestic customers for its cytopathology products will decrease. Due
to the relative size of the largest United States laboratories, it is likely
that a significant portion of the sales of AcCell 2000/2001 and TracCell 2000,
if approved for marketing by the FDA, sales will be concentrated among a
relatively small number of customers. The Company will need to foster an
awareness of and acceptance by these potential customers of the AcCell 2000/2001
and the TracCell 2000, for patient data management, slide handling, mapping and
12
slide review documentation and the benefits of such systems over conventional
methods. The Company's dependence on sales to large laboratories may strengthen
the purchasing leverage of these potential customers. There can be no assurances
that the Company will be successful in selling its products, or that any such
sales will result in sufficient revenue to allow the Company to become
profitable.
TECHNOLOGICAL CHANGE AND COMPETITION. The Company's AcCell 2000/2001
currently faces, and the TracCell 2000 mapping system, if successfully developed
and approved by the FDA, will face competition from companies that may be
developing competing systems. The Company believes that many of the Company's
existing and potential competitor companies possess substantially greater
financial, marketing, sales, distribution and technical resources than the
Company, and more experience in research and development, clinical trials,
regulatory matters, manufacturing and marketing. The Company is aware of two
companies which currently market imaging systems to re-examine or rescreen
conventional Pap smears previously diagnosed as negative as was another company
that is developing devices for the production and analysis of Pap smear slides.
If either company marketing rescreening products receives FDA approval for one
as a primary screening system to replace conventional Pap smears or if automated
analysis systems are developed and receive FDA approval, the Company's business
financial condition and results of operations could be materially and adversely
affected.
The market for the Company's microbiology products is highly competitive,
and the Company competes with numerous well-established foreign and domestic
companies, most of which possess substantially greater financial, technical,
marketing, personnel and other resources than the Company and have established
reputations for success in the development, sale and service of manual and/ or
automated in vitro diagnostic testing products. A significant portion of the
MIC/ID testing market in the United States is controlled by two companies,
Microscan and bioMerieux Vitek. These companies market a broad range of
medically related products and have resources far greater than those of the
Company. Difco Laboratories, Inc. ("Difco") has been issued a United States
patent covering technology similar to the Alamar technology covered in one of
the Company's patents. The Company's patent is intended to provide protection
for the relevant Alamar technology when used in conjunction with a "poising"
agent used to stabilize the bacterial susceptibility process. The Company is not
aware of Difco's plans, if any, to exploit the patent. There can be no
assurances that Difco, which has substantially greater resources and experience
in research, development, manufacturing and marketing than the Company, will not
use its patented technology to develop products that will compete directly with
the Alamar microbiology products. In addition, the Company is aware of several
potential competitors with similar competitive advantages in markets that the
Company intends to enter in the future. There can be no assurances that other
technologies or products, which are functionally similar to those of the
Company, are not currently available or under development, or that other
companies with expertise and resources that would encourage them to attempt to
develop and market competitive products will not develop new products directly
competitive with the Company's products.
The cytopathology and medical diagnostic industries are characterized by
rapid product development and technological advances. The Company's products
could be rendered obsolete or uneconomical by the introduction and market
acceptance of competing products, technological advances of the Company's
current or potential competitors, or by other approaches. There can be no
assurances that the Company will be able to compete successfully against current
or future competitors or that competition, including the development and
commercialization of new products and technology, will not have a material
adverse effect on the Company's business, financial condition or results or
operations.
RISK OF LITIGATION; PRODUCT LIABILITY INSURANCE; POTENTIAL UNAVAILABILITY OF
INSURANCE. The commercial screening of Pap smears has been characterized by
significant malpractice litigation. The Company faces a risk of exposure to
product liability, errors and omissions or other claims in the event that the
use of its AcCell 2000/2001 or other future potential products including the
TracCell 2000, if approved
13
for marketing by the FDA, is alleged to have resulted in a false negative
diagnosis. While the AcCell 2000/2001 is a slide handling and patient data
management instrument and the TracCell 2000 is being designed to facilitate
slide mapping and human review that do not purport to diagnose any slide, there
can be no assurances that the Company will avoid significant liability. The
Company currently maintains a product liability insurance policy providing
maximum coverage of $10,000,000 and per occurrence coverage of $10,000,000. The
medical device industry in general has experienced increasing difficulty in
obtaining and maintaining reasonable product liability coverage, and substantial
increases in insurance premium costs in many cases have rendered coverage
economically impractical. There can be no assurances that the Company's existing
product liability insurance will be adequate or continue to be available, or
that additional product liability insurance will be available to the Company
when needed or at a reasonable cost. An inability to maintain insurance at
acceptable costs or otherwise protect against potential product liability could
prevent or inhibit the continued commercialization of the Company's products. In
addition, a product liability claim in excess of relevant insurance coverage or
product recall could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company also faces the
possibility that defects in designs or manufacture of its products could result
in product recall.
POTENTIAL FLUCTUATIONS IN FUTURE QUARTERLY RESULTS. The Company expects
that its operating results will fluctuate significantly from quarter to quarter
in the future and will depend on the timing and level of market acceptance of
the Company's products, the level of expenditures associated with product
development activities, the results of factors, many of which are outside the
Company's control. These factors include the timing of these activities,
including the TracCell 2000 and TracCell 3000, the effectiveness of the OEM
distributor in the sale of the AcCell 2000/2001 and, possibly, future
cytopathology products, the likelihood and timing and costs in obtaining
necessary regulatory approval of the timing and level of expenditures associated
with expansion of sales and marketing activities and overall operations, the
Company's ability to cost effectively expand manufacturing capacity and maintain
consistently acceptable yields, the timing of establishment of strategic
distribution arrangements and the success of the activities conducted under such
arrangements, changes in demand for its products, order cancellations,
competition, changes in government regulation and other factors, the timing of
significant orders from and shipments to customers, and general economic
conditions. These factors are difficult to forecast, and these and or other
factors could have a material adverse effect on the Company's business,
financial condition and results of operations. Fluctuations in quarterly demand
for products may adversely affect the continuity of the Company's manufacturing
operations, increase uncertainty in operational planning, disrupt cash flow from
operations and contribute to the volatility of the Company's stock price. The
Company's expenses are based in part on the Company's expectations as to future
revenue levels and to a large extent are fixed in the short term. If revenues do
not meet expectations, the Company's business, financial condition and results
of operations could be materially adversely affected. The Company believes that
period to period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
As a result of the foregoing factors, it is likely that in some future quarter
the Company's revenue or operating results will be below the expectations of
public market analysts and investors. In such event the price of the Company's
Common Stock could be materially adversely affected. Company's products
requiring such approval.
ENVIRONMENTAL REGULATION. The Company is subject to a variety of local,
state and federal and foreign government regulations relating to the storage,
discharge, handling, emission, generation, manufacture and disposal of toxic,
infectious or other hazardous substances used to manufacture the Company's
products. The failure to comply with current or future regulations could result
in the imposition of substantial fines against the Company, suspension of
production, alteration of its manufacturing processes or cessation of
operations. There can be no assurances that the Company will not be required to
incur significant costs to comply with any such laws and regulations in the
future, or that such laws or regulations will not have a material adverse effect
on the Company's business, financial condition and results of operations. Any
failure by the Company to control the use, disposal, removal or storage of, or
to adequately restrict the discharge of, or assist in the cleanup of,
14
hazardous chemicals or hazardous, infectious or toxic substances could subject
the Company to significant liabilities, including joint and several liability
under certain statutes. The imposition of such liabilities would have a material
adverse effect on the Company's business, financial condition and results of
operations.
UNCERTAINTY OF PROFITABLE MANUFACTURING. At the end of 1995, the Company
acquired Sensititre's manufacturing facility near London, England. Sensititre
has been manufacturing Sensititre products for many years in the U.K. and since
July 1995, has been manufacturing Alamar products at such facility. Prior to
July 1995, however, the Company manufactured Alamar products at a facility in
Sacramento, California. The Company was unable to reduce manufacturing costs at
the Sacramento facility to a level that would have allowed for profitable
operations. While it is expected that consolidation of the Alamar product line
manufacturing effort in the U.K. facility may result in certain economies of
scale, there can be no assurances that the Company's Alamar product line will
ever be manufactured in a cost-effective manner.
The Company's Cytopathology Division has only recently begun assembling of
the AcCell 2000 and AcCell 2001 at its Chicago location. In June 1996, the
Company entered into its first OEM Agreement, for the exclusive distribution of
certain cytopathology products in the Western Hemisphere. There can be no
assurances that the Company will be able to sell sufficient numbers of systems
or develop volume manufacturing processes, that will lead to a
profitable/cost-effective manufacture of the AcCell products.
The Company's semi-automated and fully-automated instruments for reading
results of microbiology diagnostic test kits, READar, PIPETar and ARIS, are
manufactured for the Company by the developers of such products or by other
outside vendors. There can be no assurances that any of these developers or
vendors will be able to manufacture the Alamar product line's current and
proposed automated reading or related products in a cost-effective manner.
DEPENDENCE ON SUPPLIERS. Certain key components and raw materials used in
the manufacturing of the Company's products are currently provided by
single-source vendors. Although the Company believes that alternative sources
for such materials and raw materials are available, any supply interruption in a
single-sourced component or raw material would have a material adverse effect on
the Company's ability to manufacture products until a new source of supply were
qualified. There can be no assurance that the Company would be successful in
qualifying additional sources on a timely basis or at all, which would have a
material adverse effect on the Company's business. In addition, an uncorrected
impurity or supplier's variation in a raw material, either unknown to the
Company or incompatible with the Company's manufacturing process, could have a
material adverse effect on the Company's ability to manufacture products.
IMPACT OF MEDICARE, MEDICAID AND OTHER THIRD-PARTY REIMBURSEMENT. In the
United States, many Pap smears and MIC/ID testing are currently paid for by the
patient, and the level of reimbursement by third-party payers that do provide
reimbursement varies considerably. Third-party payers (Medicare/ Medicaid,
private health insurance, health administration authorities in foreign countries
and other organizations) may affect the demand, pricing or relative
attractiveness of the Company's products and services by regulating the
frequency and maximum amount of reimbursement for Pap screenings and MIC/ID
testing provided by such payers or by not providing any reimbursement at all.
Restrictions on reimbursement for Pap screenings and MIC/ID testing may limit
the price which the Company can charge for its products or reduce the demand for
them. In addition, if Medicare and Medicaid do not provide for reimbursement for
Pap screenings and MIC/ID testing, or if the level of such reimbursement is
significantly below the amount laboratories and hospitals charge patients to
perform Pap screenings and MIC/ID testing, respectively, the size of the
potential market available to the Company may be reduced. There can be no
assurances that the level of reimbursement to laboratories for Pap screenings
and MIC/ID testing will achieve or be maintained at levels necessary to permit
the Company to generate substantial revenues or be profitable.
15
In the international market, reimbursement by private third-party medical
insurance providers, including governmental insurers and providers, varies from
country to country. In certain countries, the Company's ability to achieve
significant market penetration may depend upon the availability of third-party
or governmental reimbursement.
UNCERTAINTY AND POSSIBLE NEGATIVE EFFECTS OF HEALTH CARE REFORM. The health
care industry is undergoing fundamental changes that are the result of
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to control the escalation of
health care expenditures within the economy. Reforms that have been, and may be,
considered include controls on health care spending through limitations on the
increase in private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups and fundamental
changes to the health care delivery system. Health care reform could, for
example, result in a reduction in the recommended frequency of Pap tests or
limitations on reimbursement based on the frequency of Pap tests and MIC/ID
testing, which would likely reduce the demand for the Company's cytopathology
products in connection with Pap smear screening and microbiology products, as
the case may be. The Company anticipates that Congress and state legislatures
will continue to review and assess cost containment measures, alternative health
care delivery systems and methods of payment, and public debate of these issues
will likely continue. Due to uncertainties regarding the outcome of health care
reform initiatives and their enactment and implementation, the Company cannot
predict what reforms will be proposed or adopted or the effect such proposal or
adoption may have on the Company. There can be no assurances that future health
care legislation or other changes in the administration or interpretation of
government health care or third-party reimbursement programs will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
INTERNATIONAL SALES AND OPERATIONS RISKS. The Company sells microbiology
products and intends to sell its cytopathology and any future products to
customers both in the United States and internationally. International sales and
operations may be limited or disrupted by the imposition of government controls,
export license requirements, political instability, trade restrictions, changes
in tariffs or difficulties in staffing and managing international operations.
Foreign regulatory agencies often establish product standards different from
those in the United States and any inability to obtain foreign regulatory
approvals on a timely basis could have a material adverse effect on the
Company's international business operations. Additionally, the Company's
business, financial condition and results of operations may be adversely
affected by increases in duty rates and difficulties in obtaining required
licenses and permits. There can be no assurances that the Company will be able
to successfully commercialize its products, or any future products, in any
foreign market.
NEED TO MANAGE EXPANDING OPERATIONS. If the Company is successful in
achieving market acceptance for its AcCell 2000/2001 systems and the TracCell
2000 (if regulatory approvals are obtained), the Company will be required to
expand its operations, particularly in the areas of sales and marketing and
manufacturing. As the Company expands its operations in these areas, such
expansion will likely result in new and increased responsibilities for
management personnel and place significant strain upon the Company's management,
operating and financial systems and resources. To accommodate any such growth
and compete effectively, the Company will be required to implement and improve
information systems, procedures and controls, and to expand, train, motivate and
manage its work force. The Company's future success will depend to a significant
extent on the ability of its current and future management personnel to operate
effectively, both independently and as a group. There can be no assurance that
the Company's personnel, systems, procedures and controls will be adequate to
support the Company's future operations. Any failure to implement and improve
the Company's operational, financial and management systems or to expand, train,
motivate or manage employees as required by future growth, if any, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON KEY EMPLOYEES. The Company believes that its success will
depend to a significant extent, upon the efforts and abilities of a small group
of executive, scientific and marketing personnel,
16
in particular, Peter P. Gombrich, the Company's Chief Executive Officer,
President and Chairman of the Board. The loss of the services of one or more of
these key personnel could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company's future success will depend upon its ability to continue to attract and
retain qualified scientific and management personnel who are in great demand.
There can be no assurances that the Company will be successful in attracting and
retaining such personnel.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the shares of the
Company's Common Stock, like that of the common stock of many other medical
products and high technology companies, has in the past been, and is likely in
the future to continue to be highly volatile. Factors such as fluctuations in
the Company's operating results, announcements of technological innovations or
new commercial products by the Company or competitors, government regulation,
changes in the current structure of the health care financing and payment
systems, developments in or disputes regarding patent or other proprietary
rights, economic and other external factors and general market conditions may
have a significant effect on the market price of the Common Stock. Moreover, the
stock market has from time to time experienced extreme price and volume
fluctuations which have particularly affected the market prices for medical
products and high technology companies and which have often been unrelated to
the operating performance of such companies. These broad market fluctuations, as
well as general economic, political and market conditions, may adversely affect
the market price of the Company's Common Stock. In the past, following periods
of volatility in the market price of a company's common stock, securities class
action litigations have occurred against the issuing company. There can be no
assurance that such litigation will not occur in the future with respect to the
Company. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
on the Company's business, operating results and financial condition. Any
adverse determination in such litigation could also subject the Company to
significant liabilities.
LACK OF DIVIDENDS. The Company has never paid cash or other dividends on
its Common Stock and does not intend to pay cash or other dividends in the
foreseeable future. See "Dividend Policy."
AUTHORIZATION AND POTENTIAL ISSUANCE OF PREFERRED STOCK. The Company's
Certificate of Incorporation authorizes the issuance of preferred stock with
such designation, rights and preferences as may be determined from time to time
by the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock.
Although the Company does not currently intend to issue any shares of its
preferred stock, in the event of issuance, such shares could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. There can be no assurances that the Company
will not, under certain circumstances, issue shares of its preferred stock.
OUTSTANDING WARRANTS AND OPTIONS. Investors purchasing Shares will incur
dilution to the extent outstanding stock options and warrants are exercised. As
of the date of this Prospectus, there are outstanding immediately exercisable
(i) warrants to purchase 5,969,333 shares of Common Stock at exercise prices
ranging from $0.25 to $5.00 per share with a weighted average exercise price of
$3.21, and (ii) options to purchase 1,652,971 shares of Common Stock at exercise
prices ranging from $0.63 to $8.38 per share.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. As of the date of
this Prospectus, there are 18,631,453 shares of Common Stock outstanding.
Approximately 13,000,000 shares of Common Stock or shares issuable upon exercise
of currently exercisable warrants and options sold or registered for resale
pursuant to registration statements, or for which there exist exemptions from
the registration requirements under the Securities Act, are freely tradeable
without restriction or requirement of further registration, unless such shares
are held by "affiliates" of the Company (as that term is defined in the
Securities Act and the regulations promulgated thereunder) and subject, in
certain
17
instances, to the prospectus delivery requirements under the Securities Act. The
balance of the shares were sold by the Company in reliance on exemptions from
the registration requirements of the Securities Act. In addition, the Company
has granted certain demand, and/or piggyback registration rights, relating to a
substantial portion of the restricted shares and a substantial number of shares
of Common Stock underlying warrants issued by the Company. Any future exercise
of such registration rights, and sale of such securities, will result in
dilution in the interest of the Company's then existing stockholders.
No prediction can be made as to the effect, if any, that future sales of
additional shares of Common Stock or the availability of such shares for sale,
whether pursuant to exercised registration rights or under Rule 144 or other
applicable exemptions under the Securities Act, will have on the market price of
the Common Stock prevailing from time to time. Nevertheless, the possibility
that substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the ability of the Company to raise capital through the sale of its equity
securities.
18
DIVIDEND POLICY
The Company has not paid any cash or other dividends on its Common Stock to
date. The Company currently intends to retain future earnings, if any, for its
business and does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market and
quoted on Nasdaq under the symbol "ACMI." The table below sets forth the range
of high and low closing prices for the Common Stock as reported on Nasdaq in
each completed quarter during the Company's two most recently completed fiscal
years, the transition period ended December 31, 1995; each completed quarter
during the current fiscal year and a portion of the current quarter.
HIGH LOW
--------- ---------
COMMON STOCK
1994 Fiscal Year
First Quarter................................................................................. $ 4.13 $ 2.13
Second Quarter................................................................................ 3.00 1.75
Third Quarter................................................................................. 2.75 1.00
Fourth Quarter................................................................................ 2.63 1.25
1995 Fiscal Year
First Quarter................................................................................. 1.75 0.31
Second Quarter................................................................................ 1.75 0.50
Third Quarter................................................................................. 1.50 0.81
Fourth Quarter................................................................................ 1.50 0.75
Transition Period (1)
Oct. 1, 1995 through December 31, 1995........................................................ 1.69 1.00
1996 Fiscal Year (1)
First Quarter................................................................................. 6.25 1.06
Second Quarter................................................................................ 9.38 4.88
Third Quarter (through July 1, 1996).......................................................... 6.75 6.13
- ------------------------
(1) On December 31, 1995, the Company changed its fiscal year from October 1
through September 30 to January 1 through December 31. Therefore, the
"Transition Period" includes October 1, 1995 through December 31, 1995.
On July 1, 1996 the closing price of the Common Stock as reported by Nasdaq
was $6.25 per share. At July 1, 1996, the Company had approximately 260
stockholders of record and estimates that it had approximately 560 beneficial
owners.
19
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect of the Merger of Alamar and AccuMed and the purchase of certain
assets and the assumption of certain liabilities from Sensititre US and
Sensititre UK by AccuMed on a purchase basis.
The unaudited pro forma condensed combined statements of operations for the
year ended September 30, 1995 and the three months ended December 31, 1995
assume that the Merger with AccuMed and the purchase of Sensititre US and
Sensititre UK occurred on October 1, 1994.
The pro forma adjustments are based on preliminary assumptions of the
allocation of the purchase price and are subject to substantial revision once
evaluation of the fair value of the assets and liabilities of AccuMed are
completed. Actual purchase accounting adjustments may differ from the pro forma
adjustments presented herein.
THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS THAT ACTUALLY WOULD HAVE OCCURRED IF THE
MERGERS HAD BEEN COMPLETED ON THE ASSUMED DATES NOR ARE THE STATEMENTS
INDICATIVE OF FUTURE COMBINED FINANCIAL POSITION OR EARNING.
The pro forma condensed financial statements should be read in conjunction
with the financial statements of Alamar for the fiscal year ended September 30,
1995 and the financial statements for the transition period ended December 31,
1995.
20
ACCUMED INTERNATIONAL, INC
(FORMERLY ALAMAR BIOSCIENCES, INC. AND SUBSIDIARIES)
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
HISTORICAL
--------------
ALAMAR YEAR
ENDED
SEPTEMBER 30,
1995
-------------- HISTORICAL
----------------------------------------------------
ACCUMED (1) SENSITITRE US (2) SENSITITRE UK (2)
-------------- ----------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Net Revenues.................................... $ 514,776 $ 2,609,233 $ 409,360 $ 639,561
Cost of revenues................................ (1,431,187) (1,510,143) (247,860) (457,056)
-------------- -------------- ----------------- -----------------
(916,411) 1,099,090 161,500 182,505
-------------- -------------- ----------------- -----------------
Operating Expenses
General and Administration.................... 2,094,890 1,040,083 208,420 74,589
Research and Development...................... 386,882 453,277 0 88,872
Sales and Marketing........................... 309,208 1,187,177 0 0
-------------- -------------- ----------------- -----------------
Total operating expenses........................ 2,790,980 2,680,537 208,420 163,461
-------------- -------------- ----------------- -----------------
Income (Loss) from operations................... (3,707,391) (1,581,447) (46,920) 19,044
Interest income................................. 7,949 12,930 0 0
Interest (expense) ............................. (46,657) (40,201) 0 0
Other income ................................... 32,566 1,308 0 0
Other (expense)................................. (45,777) 0 0 0
-------------- -------------- ----------------- -----------------
Earnings (Loss) before income taxes............. (3,759,310) (1,607,410) (46,920) 19,044
Provision for income taxes...................... 800 0 0 0
-------------- -------------- ----------------- -----------------
Net income (loss) .............................. $ (3,760,110) $ (1,607,410) $ (46,920) $ 19,044
-------------- -------------- ----------------- -----------------
-------------- -------------- ----------------- -----------------
Net loss per common and common equivalent share
............................................... $ (0.59) $ (0.92)
-------------- --------------
-------------- --------------
Weighted average shares outstanding............. 6,375,627 1,748,940
-------------- --------------
-------------- --------------
21
PRO FORMA PRO FORMA
-------------------------------- --------------------------------
ACCUMED ACCUMED AS ALAMAR/ ACCUMED ALAMAR AS
SENSITIVE ADJUSTED, FOR ADJUSTMENTS ADJUSTED, FOR
ADJUSTMENTS THE YEAR ENDED --------------- THE YEAR ENDED
--------------- SEPTEMBER 30, SEPTEMBER 30,
1995 (3) (UNAUDITED) 1995 (4)
(UNAUDITED) --------------- ---------------
(UNAUDITED) (UNAUDITED)
Net Revenues.................................. $ (193,000)(A) $ 3,485,154 $ 0 $ 3,979,930
Cost of revenues.............................. 109,000(B) (2,108,059) 0 (3,537,246)
--------------- --------------- --------------- ---------------
(84,000) 1,359,095 0 442,684
--------------- --------------- --------------- ---------------
Operating Expenses
General and Administration.................. 100,000(C) 1,423,092 284,570(E) 3,602,552
Research and Development.................... 0 542,149 0 929,031
Sales and Marketing......................... 0 1,187,177 0 1,496,385
--------------- --------------- --------------- ---------------
Total operating expenses...................... 100,000 3,152,418 284,570 8,227,968
--------------- --------------- --------------- ---------------
Income (Loss) from operations................. (184,000) (1,793,323) (284,570) (5,785,284)
Interest income .............................. 0 12,930 0 20,679
Interest (expense)............................ (35,475)(D) (75,676) 0 (122,333)
Other income.................................. 0 1,308 0 33,874
Other (expense) .............................. 0 0 0 (45,777)
--------------- --------------- --------------- ---------------
Earnings (Loss) before income taxes .......... (219,475) (1,854,761) (284,570) (5,898,841)
Provision for income taxes.................... 0 0 0 800
--------------- --------------- --------------- ---------------
Net income (loss)............................. $ (219,475) $ (1,854,781) $ (284,570) $ (5,899,441)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Net loss per common and common equivalent
share........................................ $ (1.06) $ (0.60)
--------------- ---------------
--------------- ---------------
Weighted average shares outstanding........... 1,748,940 9,831,582
--------------- ---------------
--------------- ---------------
- ------------------------
(1) includes the twelve months and nine months ended September 30, 1995 for
AccuMed and Sensititre US/UK, respectively.
(2) includes the three months ended December 31, 1994, before the acquisitions
by AccuMed.
(3) AccuMed Consolidated includes AccuMed, Sensititre US, and Sensititre UK,
Ltd. after purchase accounting adjustments
(4) Alamar Consolidated includes Alamar Biosciences Inc., and AccuMed
Consolidated after purchase accounting adjustments. Weighted average shares
outstanding are 9,831,682 which represents 6,375,637 shares for Alamar
before the merger plus the weighted average (3,456,055) of the 4,178,104
shares (6,178,104 shares per the merger agreement less 2,000,000 shares
issued but subject to forfeiture) to be issued in connection with the
AccuMed merger. The weighted average shares outstanding for AccuMed gives
effect to the shares issued by AccuMed during the year ended September 30,
1995 using the exchange ratio of 1.98 to 1. The total shares outstanding at
September 30, 1995 are 15,107,443 (10,929,339 shares of Alamar and 4,178,104
shares issued to AccuMed) which does not include the 2,000,000 shares issued
but subject to forfeiture.
22
ALAMAR BIOSCIENCES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
ALAMAR BIOSCIENCES, INC., AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1995
(UNAUDITED)
(A) To eliminate intercompany sales from Sensititre UK to Sensititre US.
(B) To eliminate intercompany profit from the cost of product sold from
Sensititre UK to Sensititre US.
(C) To reduce amortization expense ($20,000) for the amortization of the
purchase price of AccuMed, Inc. in excess of the fair market value of
acquired assets, less assumed liabilities, and transaction costs incurred
with the Merger of AccuMed, Inc. amortized over a 10 year life, and to
adjust amortization expense for Sensititre US and Sensititre UK.
Adjustment to reflect a reasonable estimation ($120,000) of corporate
overhead costs for the three months ended December 31, 1994 carve out period
for Sensititre U.S. The estimate is based on a percentage of total sales of
Radiometer America, Inc., (of which Sensititre U.S. was a division) to the
Sensititre US product line.
(D) To adjust interest expense for $35,475, assuming that the $430,000 loan to
finance the Sensititre acquisition occurred on October 1, 1994.
(E) To adjust amortization expense for the amortization of the purchase price of
AccuMed, Inc. in excess of the fair market value of acquired assets, less
assumed liabilities, and transaction costs incurred with the Merger of
AccuMed, Inc. amortized over a 10 year life, and to adjust amortization
expense for Sensititre US and Sensititre UK.
23
ACCUMED INTERNATIONAL, INC.
(FORMERLY ALAMAR BIOSCIENCES, INC. AND SUBSIDIARIES)
PRO-FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
HISTORICAL PRO-FORMA PRO-FORMA PRO-FORMA
---------------- -------------- ---------------- -----------------
ACCUMED ACCUMED INC. ADJUSTMENTS PRO-FORMA
INTERNATIONAL, (ACQUIREE) ---------------- CONSOLIDATED
INC. -------------- -----------------
---------------- (UNAUDITED) (UNAUDITED) (UNAUDITED)
(AUDITED)
Net Revenues............................. $ 100,130 $ 1,009,376 $ (73,005)(A) $ 1,036,501
Cost of Revenues......................... (338,730) (830,497) 71,892(B) (1,097,335)
---------------- -------------- ---------------- -----------------
(238,600) 178,879 (1,113) (60,834)
Operating Epenses
General and Administration............. 1,418,797 758,066 0 2,176,863
Research and Development............... 3,997,600 338,178 0 4,335,778
Sales & Marketing...................... 7,197 289,360 0 296,557
---------------- -------------- ---------------- -----------------
Total Operating Expenses................. 5,423,594 1,385,604 0 6,809,198
---------------- -------------- ---------------- -----------------
Income (Loss) from operations............ (5,662,194) (1,206,725) (1,113) (6,870,032)
---------------- -------------- ---------------- -----------------
Interest Income.......................... 4,748 0 0 4,748
Interest (expense)....................... (10,862) (1,948) 0 (12,810)
Other.................................... (72,929) 0 0 (72,929)
---------------- -------------- ---------------- -----------------
Loss before income taxes................. (5,741,237) (1,208,673) (1,113) (6,951,023)
Provision for income taxes .............. 800 0 0 800
---------------- -------------- ---------------- -----------------
Net loss................................. $ (5,742,037) $ (1,208,673) $ (1,113) $ (6,951,823)
---------------- -------------- ---------------- -----------------
---------------- -------------- ---------------- -----------------
Net loss per common share ............... $ (0.49) $ (0.10) $ (0.00) $ (0.59)
Weighted average shares outstanding...... 11,742,980 11,742,980 11,742,980 11,742,980
24
ACCUMED INTERNATIONAL, INC. (FORMERLY ALAMAR BIOSCIENCES, INC.)
AND SUBSIDIARIES PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
ACCUMED INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
DECEMBER 31, 1995
(UNAUDITED)
(A) To eliminate intercompany sales from AccuMed International Limited (UK) to
AccuMed Inc. (US)
(B) To eliminate intercompany profit from the cost of product sold from AccuMed
International Limited (UK) to AccuMed Inc. (US)
25
SELLING STOCKHOLDERS
The following table sets forth information as of July 1, 1996 (the
"Reference Date") with respect to the beneficial ownership of shares of Common
Stock by each of the Selling Stockholders. At the Reference Date there were
18,631,453 shares of Common Stock outstanding.
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING (1) SHARES TO OFFERING(1)
---------------------- BE SOLD ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT IN OFFERING NUMBER PERCENT
- -------------------------------------------------------------- --------- ----------- ----------- --------- -----------
M. Kingdon Offshore N.V....................................... 78,000 * 78,000 0 *
Nordbanken.................................................... 40,000 * 40,000 0 *
Kingdon Partners, L.P......................................... 26,000 * 26,000 0 *
Kingdon Associates, L.P....................................... 26,000 * 26,000 0 *
Christiana Fonds SA........................................... 25,000 * 25,000 0 *
Saga Securities SA............................................ 10,000 * 10,000 0 *
Republic New York Securities f/o/b ........................... 75,000 * 10,000 65,000 *
Samisa Investment Corp.
Republic New York Securities f/o/b ........................... 85,000 * 10,000 75,000 *
Emerge Capital
Republic New York Securities f/o/b ........................... 10,000 * 10,000 0 *
Beko Investment Services
Republic New York Securities f/o/b ........................... 5,000 * 5,000 0 *
Beko Investment Client A/C
Republic New York Securities f/o/b ........................... 5,000 * 5,000 0 *
Fondspartners SA
Republic New York Securities f/o/b ........................... 4,000 * 4,000 0 *
Bq. Prive Edmond Rothschild
Republic New York Securities f/o/b ........................... 18,000 * 3,000 15,000 *
J. Watling
Republic New York Securities f/o/b ........................... 18,000 * 3,000 15,000 *
Kelebe Investment Corp.
- ------------------------
* Represents less than 1%.
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock listed as beneficially owned by them. A person is deemed to be
the beneficial holder of securities that can be acquired by such person
within 60 days from the Reference Date upon the exercise of warrants or
options. Each beneficial owner's percentage ownership is determined by
including shares underlying options or warrants which are exercisable by
such person currently or within 60 days following the Reference Date, and
excluding shares underlying options and warrants held by any other person.
The Company has agreed to indemnify certain of the Selling Stockholders and
the Selling Stockholders have agreed to indemnify the Company against certain
civil liabilities, including liabilities under the Securities Act.
Except as noted in the footnotes above, none of the Selling Stockholders has
held any office or maintained any material relationship with the Company during
the past three years.
26
PLAN OF DISTRIBUTION
The Common Stock and Warrants offered hereby may be sold by the Selling
Stockholders from time to time as market conditions permit in the
over-the-counter market, or otherwise, at prices and terms then prevailing or at
prices related to the then current market price, or in negotiated transactions.
The shares offered hereby may be sold by one or more of the following methods,
without limitation: (a) a block trade in which a 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 pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Stockholders may
arrange for other brokers or dealers to participate. Such brokers or dealers may
receive commissions or discounts from Selling Stockholders in amounts to be
negotiated immediately prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In addition, any
securities covered by this Prospectus that qualify for sale pursuant to Rule 144
under the Securities Act might be sold under Rule 144 rather than pursuant to
this Prospectus.
LEGAL MATTERS
The legality of the securities offered by this Prospectus will be passed
upon for the Company by Graham & James LLP, Sacramento, California.
EXPERTS
The balance sheet of AccuMed, Inc as of December 31, 1994, and the
statements of operations, stockholder's deficit, and cash flows for the period
from February 7, 1994 (inception) through December 31, 1994, the balance sheets
of Alamar Biosciences, Inc. as of September 30, 1995 and 1994, and the
statements of operations, stockholder's equity, and cash flows for each of the
three years in the period ended September 30, 1995, and the balance sheet of
Sensititre/Alamar, the Microbiology Division of AccuMed, Inc., as of December
31, 1994 and the statements of net sales, cost of sales, and selling expenses
for the eight months ended December 31, 1994 and for each of the two years in
the period ended April 30, 1994, as incorporated by reference in the
Registration Statement of which this Prospectus forms a part a part, have been
incorporated herein in reliance on the reports, which included explanatory
paragraphs related to AccuMed, Inc.'s and Alamar Biosciences, Inc.'s ability to
continue as going concerns, of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
The balance sheets of AccuMed International Limited as of December 31, 1994,
April 30, 1994 and 1993, and the statements of operations and cash flows for the
eight months ended December 31, 1994, and for each of the two years in the
period ended April 30, 1994, as incorporated by reference in the Registration
Statement of which this Prospectus forms a part, have been incorporated herein
in reliance on the report of Coopers & Lybrand, independent accountants, given
on the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of AccuMed International, Inc. and
subsidiaries as of December 31, 1995, and for the three months ended December
31, 1995, incorporated by reference herein and elsewhere in the Registration
Statement of which this Prospectus forms a part from the Company's Transition
Report of Form 10-KSB for the transition period ended December 31, 1995, have
been included therein and incorporated by reference herein and elsewhere in the
Registration Statement of which this Prospectus forms a part in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
included therein and incorporated herein by reference, and upon the authority of
said firm as experts in accounting and auditing.
27
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any Selling
Stockholder. This Prospectus does not constitute an offer to sell or the
solicitation of any offer to buy any security other than the shares of Common
Stock offered by this Prospectus, nor does it constitute an offer to sell or a
solicitation of any offer to buy the shares of Common Stock by anyone in any
jurisdiction in which such offer or solicitation is not authorized, or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that information contained herein is
correct as of any time subsequent to the date hereof.
255,000 SHARES
ACCUMED
INTERNATIONAL,
INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the issuance and distribution of the securities being registered hereunder.
All of the amounts shown are estimates (except for the SEC registration fee).
SEC registration fee............................................. $ 566
Printing and engraving expenses.................................. 3,000
Accounting fees and expenses..................................... 2,000
Legal fees and expenses.......................................... 3,000
Blue Sky fees and expenses....................................... 500
Miscellaneous.................................................... 934
---------
TOTAL........................................................ $ 10,000
---------
---------
None of these expenses will be paid by the Selling Stockholders pursuant to
the terms of the agreements under which the shares of Common Stock to be sold
hereby were issued.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has provisions in its Certificate of Incorporation which
eliminate the liability of the Company's directors to the Company and its
stockholders for monetary damages to the fullest extent permissible under
Delaware law and provisions which authorize the Company to indemnify its
directors and agents by bylaws, agreements or otherwise, to the fullest extent
permitted by law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission. The Company's
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by Delaware law.
The Company's officers and directors are covered by a director's and
officer's liability insurance policy maintained by the Company. Under the
insurance policy, the Company is entitled to be reimbursed for indemnity
payments that it is required or permitted to make to its directors and officers.
ITEM 16. EXHIBITS
The following exhibits are filed herewith:
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
4.1 Certificate of Incorporation of the Registrant (incorporated by reference to the Registrant's
Transition Report of Form 10-KSB for the transition period ended December 31, 1995 (the
"Transition Report")).
4.2 Specimen Certificate for Common Stock (incorporated by reference to the Transition Report).
4.3 Bylaws of the Registrant (incorporated by reference to Transition Report).
4.4 Form of Securities Purchase Agreement by and between AccuMed International, Inc. and certain
non-U.S. persons.
4.5 May 31, 1996 Securities Purchase Agreement by and among AccuMed International, Inc. and Kingdon
Associates, L.P., Kingdon Partners, L.P. and M. Kingdon Offshore N.V.
5.1 Opinion of Graham & James LLP, counsel to the Registrant, regarding the legality of the securities
offered hereby.
23.1 Consent of Graham & James LLP (contained in Exhibit 5.1 filed herewith.)
II-1
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Coopers & Lybrand (UK).
23.4 Consent of KPMG Peat Marwick LLP.
24.1 Powers of Attorney (contained in the signature page to this Registration Statement, page II-5).
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
additional or changed material information with respect to the plan of
distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company 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 Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on , 1996.
ACCUMED INTERNATIONAL, INC.
By: /s/ PETER P. GOMBRICH
-------------------------------------
Peter P. Gombrich,
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Peter P. Gombrich and
Mark L. Santor, and each of them, attorneys-in-fact for the undersigned, each
with the power of substitution, for the undersigned in any and all capacities,
to sign any and all amendments to this Registration Statement (including
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming that each of said attorneys-in-fact
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 on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------- ----------------
Chairman of the Board and
/s/ PETER P. GOMBRICH Chief Executive Officer
------------------------------------------- (Principal Executive July 3, 1996
(Peter P. Gombrich) Officer)
Vice President, Finance
/s/ MARK L. SANTOR and Chief Financial
------------------------------------------- Officer (Principal July 3, 1996
(Mark L. Santor) Financial and Accounting
Officer)
/s/ JOHN H. ABELES
------------------------------------------- Director July 3, 1996
(John H. Abeles)
/s/ DONALD M. EARHART
------------------------------------------- Director July 3, 1996
(Donald M. Earhart)
------------------------------------------- Director , 1996
(Jack H. Halperin)
II-3
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------- ----------------
------------------------------------------- Director , 1996
(Paul F. Lavallee)
------------------------------------------- Director , 1996
(Joseph W. Plandowski)
/s/ LEONARD M. SCHILLER
------------------------------------------- Director July 3, 1996
(Leonard M. Schiller)
II-4
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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4.1 Certificate of Incorporation of the Registrant (incorporated by reference to the Registrant's
Transition Report of Form 10-KSB for the transition period ended December 31, 1995 (the "Transition
Report")).
4.2 Specimen Certificate for Common Stock (incorporated by reference to the Transition Report).
4.3 Bylaws of the Registrant (incorporated by reference to Transition Report).
4.4 Form of Securities Purchase Agreement by and between AccuMed International, Inc. and Subscriber.
4.5 May 31, 1996 Securities Purchase Agreement by and among AccuMed International, Inc. and Kingdon
Associates, L.P., Kingdon Partners, L.P. and M. Kingdon Offshore N.V.
5.1 Opinion of Graham & James LLP, counsel to the Registrant, regarding the legality of the securities
offered hereby.
23.1 Consent of Graham & James LLP (contained in Exhibit 5.1 filed herewith.)
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Coopers & Lybrand (UK).
23.4 Consent of KPMG Peat Marwick LLP.
24.1 Powers of Attorney (contained in the signature page to this Registration Statement, page II-5).
II-5