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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1998
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PLC SYSTEMS INC.
(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA 04-3153858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WILLIAM C. DOW, PRESIDENT
PLC SYSTEMS INC.
10 FORGE PARK
FRANKLIN, MASSACHUSETTS 02038
(508) 541-8800
(Address, including zip code, and telephone, including area code, of
registrant's principal executive offices)
COPY TO:
NEIL H. ARONSON, ESQUIRE
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
One Financial Center
Boston, MA 02111
(617) 542-6000
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
Title of each offering aggregate Amount of
class of securities Amount to be price per offering registration
to be registered registered share price fee
Common Stock, no par 821,190 (1) $12.28125(2) $10,120,498(2) $2,985.55
value per share
(1) Includes an indeterminate number of shares of Common Stock that may
become issuable to prevent dilution resulting from stock splits, stock
dividends and conversion price or exercise price adjustments, which are
included pursuant to Rule 416 under the Securities Act of 1933, as
amended.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee. Pursuant to Rule 457(c) of the Securities Act, as
amended, the proposed maximum offering price for 816,326 of the shares
registered for sale hereby have been calculated based upon the average
of the high and low sale prices of the Company's Common Stock as
reported by the American Stock Exchange on May 22, 1998. The remaining
4,864 shares registered for sale hereby have been offered at a fixed
offering price per share of $19.53. The proposed maximum aggregate
offering price represents the sum total of these two calculations.
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Approximate date of commencement of proposed sale to public: as soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act"), other than securities
offered only in connection with dividend or interest reinvestment plans, check
the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earliest
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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PROSPECTUS
PLC SYSTEMS INC.
821,190 SHARES OF COMMON STOCK,
NO PAR VALUE PER SHARE
The 821,190 shares of Common Stock of PLC Systems Inc., a British
Columbia corporation (the "Company"), offered hereby are being sold by the
selling stockholders identified herein (the "Selling Stockholders"). Such offers
and sales may be made on one or more exchanges, in the over-the-counter market,
or otherwise, at prices and on terms then prevailing, or prices related to the
then-current market price, or in negotiated transactions, or by underwriters
pursuant to underwriting agreements in customary form, or in a combination of
any such methods of sale, or in other transactions of similar type and manner.
See "Plan of Distribution". The Selling Stockholders may also sell such shares
in accordance with Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The Selling Stockholders are identified and certain
information with respect to them is provided under the caption "Selling
Stockholders" herein, to which reference is made. The expenses of the
registration of the securities offered hereby, including fees of counsel for the
Company, will be paid by the Company. The following expenses will be borne by
the Selling Stockholders: underwriting discounts and selling commissions, if
any, and the fees of legal counsel in excess of $5,000, if any, for the Selling
Stockholders. The filing by the Company of this Prospectus in accordance with
the requirements of Form S-3 is not an admission that any person whose shares
are included herein is an "affiliate" of the Company.
The Selling Stockholders and any broker executing sell orders on behalf
of any Selling Stockholder may be deemed to be "underwriters" within the meaning
of the Securities Act, in which event commissions received by any such broker
may be deemed to be underwriting commissions under the Securities Act. The
Company will not receive any of the proceeds from the sale of the securities
offered hereby. The Common Stock is listed on the American Stock Exchange
("AMEX") under the symbol PLC. On May 22, 1998, the closing sale price of the
Common Stock, as reported by AMEX, was $11.9375 per share.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 4 OF THIS PROSPECTUS.
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.
No person is authorized in connection with any offering made hereby to
give any information or to make any representations other than as 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. This Prospectus is
not an offer to sell, or a solicitation of an offer to buy, by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sales made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
THE DATE OF THIS PROSPECTUS IS _______, 1998.
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). These reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024 of the Commission's office at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at its regional
offices located at 7 World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such reports, proxy statements and other information can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the Commission's Web site is http://www.sec.gov.
Additional updating information with respect to the securities covered herein
may be provided in the future to purchasers by means of appendices to this
Prospectus.
The Company's Common Stock is listed for trading on AMEX. Reports and
other information concerning the Company can be inspected at the offices of AMEX
located at 86 Trinity Place, New York, New York 10006-1881.
The Company has filed with the Commission in Washington, D.C. a
registration statement (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the Securities Act, as
amended, with respect to the securities offered or to be offered hereby. This
Prospectus does not contain all of the information included in the Registration
Statement, certain items of which are omitted in accordance with the rules and
regulations of the Commission. For further information about the Company and the
securities offered hereby, reference is made to the Registration Statement and
the exhibits thereto. Although statements contained herein concerning the
provisions of any documents are true and correct in all material respects, any
such statements are not necessarily complete, and, in each instance, such
statements are qualified in their entirety by reference to such document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any document incorporated herein by reference, excluding exhibits. Requests
should be made to PLC Systems Inc., 10 Forge Park, Franklin, Massachusetts
02038, or by telephone at (508) 541-8800 and directed to Patricia L. Murphy,
Chief Financial Officer.
THE COMPANY
PLC Systems Inc. (the "Company") has developed a patented high-powered
carbon dioxide ("CO(2)") laser system known as The Heart Laser(TM) (the "Heart
Laser") for broad application in the treatment of coronary artery disease with a
surgical laser procedure developed by the Company and its clinical investigators
known as transmyocardial revascularization ("TMR"). The Company believes that
TMR using the Heart Laser may provide an alternative or adjunct therapy to
conventional revascularization treatments, such as coronary bypass surgery and
balloon angioplasty, which are currently used to bypass or reduce the blockage
in coronary arteries afflicted with coronary artery disease. Well over 3,000
patients have been treated with TMR using the Heart Laser in the United States
and overseas. The Heart Laser has been shipped to 33 sites in the United States
and as of March 31, 1998, the Company had sold or placed 70 Heart Lasers
overseas. A number of studies and scientific conferences have been held
favorably reporting on the use of TMR using the Heart Laser as an adjunct or
alternative to bypass and angioplasty procedures on patients that were not
eligible for these procedures. In July 1997, the circulatory systems devices
panel convened to review the Company's PMA application for the TMR using the
Heart Laser System. In a nine to two vote, the panel recommended that the PMA
application not be recommended for approval pending further patient data.
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In April 1998, the circulatory systems devices panel of the FDA again convened
to review the Company's PMA application for TMR using the Heart Laser System.
The panel unanimously recommended TMR using the Heart Laser System for marketing
for patients who suffer from severe, stable angina and are not amenable to
conventional coronary revascularization techniques (e.g., bypass surgery and
angioplasty). As part of its recommendation, the panel described certain
labeling conditions and post-market surveillance obligations for the FDA's
consideration. The panel's decision is not binding. The Company awaits the FDA's
final action on the application.
The Company was incorporated pursuant to the Company Act of British
Columbia, Canada on March 3, 1987. The Company's principal offices are located
at 10 Forge Park, Franklin, Massachusetts 02038, and its telephone number is
(508) 541-8800.
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RISK FACTORS
An investment in the Common Stock being offered by this Prospectus
involves a high degree of risk. The following factors, in addition to those
discussed elsewhere in the Prospectus or incorporated herein by reference,
should be carefully considered in evaluating the Company and its business
prospects before purchasing shares offered by this Prospectus. This Prospectus
contains and incorporates by reference forward-looking statements within the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, which can be identified by the use of forward-looking terminology such as
"may," "will," "would," "could," "intend," "plan," "expect," "anticipate,"
"estimate," or "continue" or the negative thereof or other variations thereon or
comparable terminology. Reference is made in particular to the discussion set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, the Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, the Preliminary Proxy Statement filed
pursuant to Section 14(a) of the Exchange Act filed with the Commission as of
April 22, 1998, and all documents subsequently filed with the Commission by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior
to the filing of a Post-Effective Amendment which indicates that all securities
covered by this Prospectus have been sold or which deregisters all such
securities then remaining unsold are incorporated in this Prospectus by
reference. Such statements are based on current expectations that involve a
number of uncertainties including those set forth in the risk factors below.
Actual results could differ materially from those projected in the
forward-looking statements.
GOVERNMENT REGULATIONS. On April 24, 1998, the Company obtained a
recommendation for Pre-Market Approval ("PMA") from an advisory panel (the "FDA
Advisory Panel") of the U.S. Food and Drug Administration (the "FDA") for the
Company's sole product, the Heart Laser. The FDA Advisory Panel unanimously
recommended PMA for TMR using the Heart Laser System for marketing for patients
who suffer from severe, stable angina and are not amenable to conventional
coronary revascularization techniques. As part of its recommendation, the FDA
Advisory Panel described certain labeling conditions and post-market
surveillance obligations for the FDA's consideration. The panel's decision is
not binding. The Company awaits the FDA's final action on the application. No
assurance can be given as to when, if at all, the FDA will approve TMR using the
Heart Laser System or that approval will include any desirable claims.
In October 1997, the Company was notified that the French Ministry of
Health was instituting a commercial moratorium on lasers used for TMR, as in
their opinion, the procedure was considered to be experimental and should only
be performed within the context of a clinical study. An evaluation of the safety
of TMR is currently under review by a panel of French experts and the results of
this review will determine the status of TMR. The Company has provided a dossier
of its clinical results to the panel and is actively working with the Ministry
to have this moratorium lifted. No assurance can be given as to whether the
Company will be successful in its efforts to have this situation modified.
The Company's products and its manufacturing activities are subject to
extensive and rigorous federal and state regulation in the United States and to
various regulatory requirements in other countries, including Japan, Australia
and certain countries in Southeast Asia. Regulatory approvals, if granted, may
include significant limitations on the indicated uses for which a product may be
marketed. In addition, the process of obtaining and maintaining required
approvals can be lengthy, expensive and uncertain.
Current FDA enforcement policy strictly prohibits the marketing of
approved medical devices for unapproved uses. In addition, product approvals
could be withdrawn for failure to comply with regulatory standards or the
occurrence of unforeseen problems following initial marketing. The Company is
required for its existing products, and will be required for its Heart Laser, to
adhere to applicable regulations setting forth current Good Manufacturing
Practices ("GMP") requirements, which include testing, control and documentation
requirements. Failure to comply with applicable GMP or other regulatory
requirements can result in, among other sanctions, fines, delays or suspensions
of approvals, injunctions against further distribution, seizures or recalls of
products, adverse publicity, operating restrictions and criminal prosecutions.
Furthermore, changes in existing regulations or adoption of new regulations
could prevent the Company from obtaining, or affect the timing of, future
regulatory approvals and could adversely affect the continued marketing of the
Company's existing products. No assurance can be given that the Company will be
able to obtain necessary regulatory approvals on a timely basis or at all, and
delays in receipt of a failure to receive such approvals, the loss of previously
received approvals, or
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failure to comply with regulatory requirements would have a material adverse
effect on the Company's business, financial condition and results of operations.
UNCERTAINTY OF CLINICAL AND MARKETING ACCEPTANCE; TECHNOLOGY
UNCERTAINTY. Use of TMR with the Heart Laser without arresting and cooling the
heart and in lieu of a heart-lung machine is new and only now becoming widely
known. Market acceptance of the Heart Laser will depend in large part on the
Company's ability to demonstrate to the medical community in general, and to
cardiac surgeons and cardiologists in particular, the efficacy, relative safety
and cost effectiveness of treating cardiovascular disease using the Heart Laser
and to train cardiac surgeons to perform TMR. To date, the Company has trained
only a limited number of physicians and will need to expand its marketing and
training capabilities. Moreover, even if TMR using the Heart Laser becomes
generally accepted by the medical community, physicians trained in competitive
TMR products may elect not to consider, or to recommend a competitor's products
instead of, the Company's Heart Laser. In recommending the approval of the PMA
for TMR using the Heart Laser, the FDA Advisory Panel limited the ability of the
Company to market TMR using the Heart Laser to patients who suffer from severe,
stable angina and are not amenable to conventional coronary revascularization
techniques. No assurance can be given that TMR will be accepted as an
alternative to other existing or new therapies, or the cardiologists and cardiac
surgeons will accept TMR as an appropriate course of treatment for their
patents. Lack of clinical and market acceptance would have a material adverse
effect on the Company's business, financial condition and results of operations.
Patients have been treated with TMR since only January 1990. No
assurance can be given that patients may not suffer adverse, long-term
consequences from the TMR procedure.
DEPENDENCE ON THE HEART LASER PRODUCT. The Company focuses its
resources on the continued development and refinement of its Heart Laser and
single use surgical products. If the Company is unable to obtain requisite
regulatory approvals or to achieve commercial acceptance of the Heart Laser, the
Company's business, financial condition and results of operations would be
materially and adversely affected.
RAPID TECHNOLOGICAL CHANGE AND INTENSE COMPETITION. The medical care
products industry is characterized by extensive research efforts and rapid
technological progress. New technologies and developments are expected to
continue at a rapid pace in both industry and academia. Competition in the
market for surgical lasers and for the treatment of cardiovascular disease is
intense and is expected to increase. The Company is aware of several other
companies who have entered the TMR market or have announced their intention to
enter the TMR market. Most of these companies are using holmium lasers, two are
using excimer lasers and a company recently announced its intention to develop a
CO(2) laser for TMR. Most of these companies are in the early stages of clinical
tests. Management believes that the Heart Laser, if approved for general sale by
the FDA, will compete primarily with conventional coronary bypass, balloon
angioplasty and new coronary procedures (including minimally invasive surgical
techniques, atherectomy, laser angioplasty and metallic stents). Several of the
companies who have entered the TMR market are developing percutaneous methods of
performing TMR. These percutaneous methods of performing TMR are in the early
stages of development and may not be commercially available for several years.
However, if these methods are developed, they could provide a less invasive
method for use by cardiac surgeons and cardiologists.
Many of the companies manufacturing these devices have substantially
greater capital, as well as greater research and development, regulatory,
manufacturing and marketing resources and experience than the Company and
represent significant competition for the Company. Such companies may succeed in
developing products that are more effective or less costly in treating coronary
disease than the Heart Laser, and may be more successful than the Company in
manufacturing and marketing their products. No assurance can be given that the
Company's competitors or others will not succeed in developing technologies,
products or procedures that are more effective or less invasive than any being
developed by the Company or that would render the Company's technology and
products obsolete or noncompetitive. The advent of either new devices,
procedures or new pharmaceutical agents could hinder the Company's ability to
compete effectively and have a material adverse effect on its business,
financial condition and results of operations.
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HISTORY OF OPERATING LOSSES; NO ASSURANCE OF FUTURE PROFITABILITY.
Prior to acquiring PLC Medical System, Inc. (formerly known as Laser
Engineering, Inc.) in 1992, the Company had essentially no business, and had
incurred operating losses since its inception in 1987 until the year ended
December 31, 1995. For the year ended December 31, 1995, the Company had net
earnings of $2,004,000. For the years ended December 31, 1996 and December 31,
1997, the Company incurred net losses of $1,540,000 and $14,404,000,
respectively. For the quarter ended March 31, 1998, the Company incurred a net
loss of $3,936,000. No assurance can be given that the Company will operate
profitably on a quarterly or annual basis in the future.
On April 24, 1998, the Company obtained a recommendation for Pre-Market
Approval ("PMA") from an advisory panel (the "FDA Advisory Panel") of the U.S.
Food and Drug Administration (the "FDA") for the Company's sole product, TMR
using the Heart Laser. The FDA Advisory Panel unanimously recommended PMA for
TMR using the Heart Laser System for marketing for patients who suffer from
severe, stable angina and are not amenable to conventional coronary
revascularization techniques. As part of its recommendation, the FDA Advisory
Panel set forth certain labeling conditions and post-market surveillance
obligations for the FDA's consideration.
Future profitability will likely be determined by the timing and nature
of FDA approval, if any, of TMR using the Heart Laser System. In addition,
future profitability will also likely be determined by the number of shipments
and the related mix of sales and placements. Furthermore, the Company must also
convince health care professionals and the general public of the medical and
economic benefits of TMR. Also, The Company must convince such third party
payors to provide coverage for TMR and reimburse hospitals for procedures
utilizing TMR. No assurance can be given that the Company will be successful in
marketing the Heart Laser and TMR or that the Company will be able to operate
profitably on a consistent basis.
RELIANCE UPON PATENTS AND PROPRIETARY RIGHTS; EXISTING PATENT
LITIGATION. Since April 1992, the Company has received 14 U.S. patents, of which
11 involve the Heart Laser System and its related technologies. The Company also
has issued 10 U.S. patent applications pending relating to the Heart Laser
handpiece, other technology associated with minimally surgical techniques and
technologies associated with percutaneous TMR. In April 1996, the Company
received patents from the European Patent Office and the Japanese Patent Office
providing patent protection on its heart synchronization technology. Additional
Japanese issued patents cover a TMR headpiece, a self-aligning coupler for a
laser endoscope, laser beam manipulation and a laser beam status indicator. In
December 1996, a patent was issued in Canada covering a self aligning coupler
for a laser endoscope. In April 1997, a patent covering heart synchronization
technology was issued in Canada. The Company has over 30 patents pending related
to the Heart Laser and its components in various international patent offices.
The Company expects to continue to file domestic and foreign patent applications
on various features of the Heart Laser. However, no assurance can be given that
any additional patents will be issued. Furthermore, no assurance can be given
that the existing patents will be held valid if subsequently challenged, that
any additional patents will be issued or that the scope of any patent protection
will exclude competition. Similarly, no assurance can be given that the other
parties will not be issued patents which will prevent, limit or interfere with
one or more of the Company's products, or will require licensing and the payment
of significant fees or royalties by the Company to such third parties in order
to enable the Company to conduct its business. Any of these occurrences could
have a material adverse effect on the Company's business, financial condition
and results of operations. No assurance can be given that any patents will
provide competitive advantages for the Company's products.
In September 1996, CardioGenesis Corporation, ("CardioGenesis") filed a
civil lawsuit in the United States District Court for the Northern District of
California seeking to have the Company's synchronization patent declared
invalid, or, alternatively, asking the court to determine whether CardioGenesis
infringes on this patent. In October 1996, the Company filed an answer and
counterclaim alleging that CardioGenesis infringes on this patent. The
counterclaim seeks both injunctive relief and monetary damages against
CardioGenesis. In October 1997, CardioGenesis filed an amended complaint seeking
to have the Company's synchronization patent declared unenforceable.
CardioGenesis is not seeking monetary damages from the Company but will seek
reimbursement of its legal expenses if successful in the lawsuit. Trial has been
scheduled to begin in January 1999.
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In January 1997, CardioGenesis Corporation, filed a challenge to the
Company's European synchronization patent in the European Patent Office and in
March 1997 the Company filed its response. In addition, in April 1997, the
Company filed an infringement lawsuit against CardioGenesis in the Munich
District Court alleging infringement of its synchronization patent. An oral
hearing has been scheduled in the Munich District Court on October 1, 1998.
Legislation is pending in Congress that may limit the ability of
medical device manufacturers in the future to obtain patents on surgical and
medical procedures that are not performed by, or as part of, devices or
compositions which are themselves patentable. While the Company cannot predict
whether the legislation will be enacted, or what limitations will result from
the law if enacted, any limitation or reduction in the patentability of medical
or surgical methods and procedures could have a material adverse effect on the
Company's ability to protect its proprietary methods and procedures.
The validity and breadth of claims covered in medical technology
patents involve complex legal and factual issues and therefore are highly
uncertain. There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry. Litigation, which
could result in substantial cost to and diversion of effort by the Company, may
be necessary to enforce patents issued to the Company, to protect trade secrets
or know-how owned by the Company, to defend the Company against claimed
infringement of the rights of others and to determine the scope and validity of
the proprietary rights of others. Adverse determinations in litigation could
subject the Company to significant liabilities to third parties, could require
the Company to seek licenses from third parties and could prevent the Company
from manufacturing, selling or using its products, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company also relies upon unpatented proprietary technology and
trade secrets that it seeks to protect, in part, through confidentiality
agreements with employees and other parties. No assurance can be given that
these agreements will not be breached, that the Company will have adequate
remedies for any breach, that others will not independently develop or otherwise
acquire substantially equivalent proprietary technology and trade secrets or
disclose such technology or that the Company can meaningfully protect its rights
in such unpatented technology. Any disclosure of such information could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, others may hold or receive patents which
contain claims that may cover products developed by the Company.
POTENTIAL LIMITATIONS ON THIRD PARTY REIMBURSEMENT. Health care
providers, such as hospitals and physicians, that purchase medical devices such
as the Heart Laser for use on their patients generally rely upon third party
payors, such as Medicare, Medicaid and private insurance plans, to reimburse all
or part of the costs and fees associated with the health care services provided
to their patients. Medicare and Medicaid (in some states) determine whether to
provide coverage for a particular procedure and reimburse hospitals for
inpatient medical procedures at a fixed rate according to diagnosis related
groups ("DRGs"). The Health Care Financing Administration ("HCFA"), the agency
responsible for administering the Medicare system, has prohibited Medicare
coverage for procedures that are not deemed safe and effective for the condition
being treated, or which are still
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investigational. Even though TMR using the Heart Laser has received a
recommendation for approval of its PMA application from an FDA Advisory Panel,
Medicare and other third party payors may deny reimbursement if they conclude
that the device is not cost-effective, or is experimental or used for an
unimproved indication. In November 1995, the Heart Laser was listed as a
Category B device by the FDA and HCFA. This classification means that treatments
performed with the Heart Laser are eligible for Medicare and Medicaid
reimbursement during the clinical trials, while the device is still
investigational. The rule allowing coverage for Category B devices left the
coverage determination for procedures involving those devices to the discretion
of local Medicare contractors, in the absence of a national coverage
instruction.
In February 1997, HCFA published a national noncoverage instruction for
TMR based upon its belief that scientific evidence substantiating the safety and
effectiveness of TMR is not currently available. HCFA often denies reimbursement
for procedures performed using devices which have not yet received FDA approval.
The noncoverage instruction applies to procedures performed on or after May 19,
1997 on Medicare beneficiaries. No assurance can be given that the FDA Advisory
Panel's recommendation of approval of TMR using the Heart Laser will lead to a
reversal in HCFA's policy and that such reimbursement will be granted or, if
granted that the reimbursement will be at the same rate or will not be canceled
in the future. Even though TMR using the Heart Laser has received a
recommendation of approval from the FDA Advisory Panel, Medicare and other third
party payors may deny coverage if they conclude that TMR is not reasonable,
necessary and/or cost-effective. No assurance can be given that, even if
coverage is granted, private insurance reimbursement levels will not adversely
affect the Company's ability to sell its products.
Capital costs for medical equipment by hospitals are currently
reimbursed separately from DRG payments. Moreover, even if reimbursement is
available, no assurance can be given that the payors' reimbursement levels will
be adequate to enable the Company to sell its product on a profitable basis.
Since 1984, Medicare has reimbursed hospitals' operational costs on the basis of
a prospective payment methodology; however, until recently, hospitals' capital
costs have been excluded from these prospective rates and reimbursed on a
capital cost pass-through basis. HCFA has issued final Medicare regulations
establishing the prospective payment methodology for inpatient hospital
capital-related costs. These new regulations include a ten-year transition
period which blends the old and the new capital payments. It is anticipated that
the new capital costs reimbursement methodology may reduce Medicare
reimbursement for hospital capital costs. Any reductions in Medicare
reimbursement implemented pursuant to this new methodology could have an adverse
impact on the market for the Heart Laser and the Company's other surgical
lasers. The market for the Company's products could also be adversely affected
by future legislation to reform the nation's health care system or by changes in
industry practices regarding reimbursement policy and procedures.
PENDING LITIGATION. Following the July 1997 FDA Advisory Panel meeting
wherein the panel recommended that the PMA application for TMR using the Heart
Laser not be recommended for approval, the Company and certain of its officers
have been named as defendants in 21 purported class action lawsuits filed
between August 1997 and November 1997 in the United States District Court for
the District of Massachusetts. The suits allege violations of the federal
securities laws. The plaintiffs are seeking damages in connection with such
alleged violations. Nineteen of these complaints have been consolidated by the
court into a single action for pretrial purposes and the remaining two suits
have been consolidated into one suit for pretrial purposes. These matters are in
the earliest stages of litigation and the Company has filed motions to dismiss
all of these claims. There can be no assurance that the motions to dismiss these
claims will be successful. Management is unable to make a meaningful estimate of
the amount or range of loss that could result from an unfavorable outcome of
these pending litigation matters. It is possible that the Company's result of
operations or cash flows in a particular quarter or annual period or its
financial position could be materially affected by an ultimate unfavorable
outcome of this pending litigation. The Company believes that is has valid
defenses to these class action litigation matters and intends to vigorously
defend itself in these matters.
DEPENDENCE UPON KEY PERSONNEL. The highly technical nature of the
Company's business, its ability to continue its technological developments and
to market its products and thereby develop a competitive edge in the marketplace
depends, in large part, on its ability to attract and maintain qualified
technical and key management personnel. Competition for such personnel is
intense, and no assurance can be given that the Company will be able
- 8 -
11
to attract and retain such personnel. The Company is dependent in particular
upon the services of Dr. Robert I. Rudko, its Chairman and Chief Scientist and
William C. Dow, its President and Chief Executive Officer. The loss of either
Dr. Rudko or Mr. Dow would have a material adverse effect on the Company.
RISKS RELATED TO GROWTH AND EXPANSION. As a result of both internal
growth and the FDA Advisory Panel's recommendation of approval of the PMA of TMR
using the Heart Laser, the Company could experience rapid growth and expansion.
This growth and expansion could place a significant strain on the Company's
manufacturing and technical support personnel and other resources. The Company's
growth would result in an increase in the level of responsibility for both
existing and new management personnel. If the Company's management is unable to
manage growth effectively, the Company's business, financial condition and
results of operations would be materially and adversely affected.
PRODUCT LIABILITY AND POSSIBLE INSUFFICIENCY OF INSURANCE. The
manufacture and sale of the Company's products entail the risk of product
liability claims. A recent United States Supreme Court decision held that,
despite a company's compliance with FDA regulations, it still may not be
shielded from common-law negligent design claims or manufacturing and labeling
claims based on state rules. No assurance can be given that the coverage limits
of the Company's product liability insurance policies, which are presently at an
annual aggregate maximum of $4 million, will be adequate. Such insurance is
expensive and in the future may not be available on acceptable terms, if at all.
A successful claim or series of claims brought against the Company in excess of
its insurance coverage, and the effect any product liability litigation may have
upon the reputation and marketability of the Company's technology and products,
together with diversion of the attention of the Company's key personnel, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
POSSIBLE NEED FOR ADDITIONAL FUNDING. Management believes that the
Company's current capital resources and revenues from existing products will be
sufficient to meet its cash requirements for the next 12 months. However, delays
in obtaining regulatory approvals of the Heart Laser or unanticipated decreases
in operating revenues or increases in expenses, may adversely impact the
Company's expected funding requirements, in which event the Company may require
additional funding. In such an event, the Company would need to obtain financing
through the issuance and sale of debt or equity securities, bank financing,
joint ventures or other means, and no assurance can be given that additional
capital will be available to the Company or that capital, if any, will be
available upon satisfactory terms.
VOLATILE SECURITIES MARKET FACTORS AND POSSIBLE WIDE FLUCTUATIONS IN
STOCK PRICE. The markets for equity security in general, and for those of
medical device manufacturers in particular, have been volatile and the price of
the Company's Common Stock in the future could be subject to wide fluctuations
in response to quarterly variations in operating results, news and product
announcements, trading volume, general market trends and other factors. No
assurance can be given that the Company's Common Stock will trade in the future
at market prices in excess of its current market price.
SHARES ELIGIBLE FOR FUTURE SALE. Of the 18,985,081 shares of the
Company's Common Stock issued and outstanding on May 14, 1998, approximately
16,800,000 shares have been registered pursuant to the Act or were sold more
than two years ago and are not held by any affiliates of the Company and may be
resold without limitation under the provisions of Rule 144 or any other
provisions of the Act. Sales of such securities could have a possible depressive
effect upon the prices of the Company's securities in the public markets. The
remaining approximate 2,185,081 shares are restricted and subject to the
provisions of Rule 144 or a certain escrow agreement.
In July 1997, the Company entered into a $20 million financing
commitment. Under the terms of the financing, the Company received $10,075,000
in July 1997 and $10,075,000 in August 1997 from the issuance of five-year
convertible debentures to accredited investors through Smith Barney Inc. as
placement agent. The convertible debentures accrued interest at 5% per annum
payable in cash or common stock at the Company's option, at the time of
conversion. The debentures were convertible into common shares under a
predetermined formula. The first tranche of the debentures were convertible into
common shares at the lesser of (a) $25.98, or (b) the
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12
market price of the Company's Common Stock at the time of conversion, with no
more than 1,007,500 shares of Common Stock issuable in full payment of all
accrued interest and principal. In September 1997, the entire first tranche of
convertible debentures of $10,075,000 and related accrued interest converted
into 890,394 shares of common stock. The second tranche of the debentures were
convertible into common shares at the lesser of (a) $14.60, or (b) the market
price of the Company's Common Stock at the time of conversion, with no more than
1,507,500 shares of Common Stock issuable in full payment of all accrued
interest and principal. In September 1997, $5,825,000 of the second tranche of
convertible debentures and related accrued interest converted into 512,572
shares of common stock. In January and February 1998, the remaining $4,250,000
of the second tranche of convertible debentures and related accrued interest
converted into 576,606 shares of common stock.
In connection with the issuance of the first tranche of convertible
debentures, the Company issued 69,875 redeemable warrants to purchase shares of
its Common Stock at $27.81 per share. In connection with the issuance of the
second tranche of convertible debentures, the Company issued 80,125 redeemable
warrants to purchase shares of its Common Stock at $15.78 per share. If the
average closing sale price of its Common Stock for any consecutive 30 trading
day period commencing January 17, 1999 exceeds the exercise price by more than
50%, the Company has the right, exercisable at any time upon 30 days notice to
the holder to redeem the warrant at a price of $.10 per warrant share. The
warrants issued in connection with the first tranche expire on July 17, 2002.
The warrants issued in connection with the second tranche expire on August 14,
2002.
In April 1998, the Company entered into a $10 million financing
commitment. Under the terms of the financing, the Company received the first
tranche of $5,000,000 in April 1998 from the issuance of five-year convertible
debentures to accredited investors through Salomon Smith Barney Inc. as
placement agent. The debentures are convertible into common shares under a
predetermined formula. The first tranche of the debentures are convertible into
common shares at the lesser of (a) $19.53, or (b) commencing July 22, 1998, the
average of the five lowest consecutive closing bid prices during a look-back
period consisting of thirty consecutive days prior to the time of conversion,
with no more than 816,326 shares of Common Stock issuable in full payment of the
principal (the average of the five consecutive lowest bid prices will not
include trading days on which the holder of convertible debentures establishes a
short position in the Common Stock of the Company), subject to adjustments under
certain circumstances. The Company may, at its option, draw down the second
tranche of up to $5,000,000 at anytime prior to December 31, 1998, subject to
the satisfaction of certain conditions precedent by the Company. The second
tranche of the debentures will be convertible into shares of Common Stock at the
lesser of (a) 125% of the previous five day average closing bid price at the
time of funding, or (b) an identical floating conversion price as that
applicable to the first tranche.
In connection with the issuance of the first tranche of convertible
debentures, the Company issued 4,864 redeemable warrants to purchase shares of
its Common Stock at $19.53 per share. If the average closing sale price of its
Common Stock for any consecutive 30 trading day period commencing on April 23,
1999 exceeds the exercise price by more than 50%, the Company has the right,
exercisable at any time upon 30 days notice to the holder to redeem the warrant
at a price of $.10 per warrant share. The warrants issued in connection with the
first tranche expire on April 23, 2003. In the event that the Company issues the
second tranche of convertible debentures, the Company will issue redeemable
warrants to purchase shares of its Common Stock equal in value to 1% of the
total funding received in the second tranche. The warrants, if any, issued in
connection with the second tranche will expire five years after the date of
issuance.
SHARES RESERVED FOR EXERCISE AND GRANTING OF OPTIONS. The Company has
adopted stock option plans for employees, officers, and consultants (the "1992,
1993 and 1995 Plans") pursuant to which the Company may grant options to
purchase up to an aggregate of 2,505,000 shares of Common Stock. The Company has
also adopted the 1993 Formula Stock Option Plan for nonemployee directors (the
"Formula Plan") under which options to purchase 250,000 shares of Common Stock
may be granted and the 1997 Executive Stock Option Plan (the "Executive Plan")
under which the Company may issue non-qualified options to purchase up to
650,000 shares to its Chief Executive Officer. The Company has options to
purchase 2,325,636 shares of Common Stock outstanding under the plans. The
Company may also issue up to an additional 284,031 options under these plans.
These options may be exercised, and the underlying shares issued, at a time when
the Company would otherwise be able to obtain additional equity capital on terms
more favorable to the Company. Moreover, the Company may issue additional equity
to third party financing sources in amounts that are uncertain at this time.
- 10 -
13
RESTRICTIONS ON ELECTIONS OF DIRECTORS. The Company is incorporated
under the laws of British Columbia. Under British Columbia corporate law, a
majority of the Company's directors must be residents of Canada and at least one
director must be a resident of British Columbia. As a result, security holders
may be limited with respect to the persons that can be nominated and elected as
directors of the Company. In addition, the Company's Articles, as amended,
provide for a classified Board of Directors. These provisions may have the
effect of delaying or preventing changes in control or management of the Company
and could adversely affect the prevailing market price of the Common Stock.
POSSIBLE UNENFORCEABILITY OF JUDGMENTS AGAINST THE COMPANY AND ITS
CANADIAN DIRECTORS. The Company is incorporated under the laws of British
Columbia. Under British Columbia corporate law, there is doubt as to the
enforceability in British Columbia against the Company and the Canadian
directors of original actions or actions for enforcement of judgments issued by
courts of the United States.
NON-PAYMENT OF DIVIDENDS. The Company has never paid cash dividends on
its Common Stock. The Company currently intends to retain all future earnings,
if any, for use in its business and does not anticipate that cash dividends will
be paid in the foreseeable future.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock by the Selling Stockholders.
SELLING STOCKHOLDERS
The shares of Common Stock offered hereby by the Selling Stockholders
are issuable upon (a) the conversion of convertible debentures in the aggregate
amount of $5,000,000 (the "Convertible Debentures") issued by the Company in a
private placement in April 1998 (the "1998 Private Placement") to Southbrook
International Investments, Ltd. ("Southbrook"), Brown Simpson Strategic Growth
Fund, L.P. ("Brown Simpson L.P.") and Brown Simpson Strategic Growth Fund, Ltd.
("Brown Simpson Limited") and (b) the exercise of warrants to purchase an
aggregate of 4,864 shares of Common Stock (the "Warrants") issued by the Company
to Southbrook, Brown Simpson L.P. and Brown Simpson Limited in connection with
the 1998 Private Placement.
The number of shares registered on the registration statement of which
this Prospectus is a part and the number of shares offered hereby have been
determined by agreement between the Company, Southbrook, Brown Simpson L.P. and
Brown Simpson Limited. The number of shares of Common Stock that will ultimately
be issued to Southbrook, Brown Simpson L.P. and Brown Simpson Limited upon
conversion of the Convertible Debentures is dependent upon a conversion formula
which relies in part on the closing bid price of the Common Stock for the five
trading days during the thirty days immediately preceding the date of
conversion, and, therefore cannot be determined at this time.
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock by the Selling Stockholders
as of May 21, 1998, and as adjusted to reflect the sale of the Common Stock
offered hereby by the Selling Stockholders:
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14
Maximum Number of Shares Registered
Selling Stockholder Shares Owned Prior to Offering for Sale Hereby (4)
------------------- ------------------------------ ----------------------
Southbrook International
Investments, Ltd. 299,968(1) 656,952
Brown Simpson Strategic
Growth Fund, Ltd. 39,132(2) 123,179
Brown Simpson Strategic
Growth Fund, L.P. 13,044(3) 41,059
(1) Includes (i) 39,764 shares of Common Stock issuable upon exercise of a
warrant issued to Southbrook, at an exercise price of $15.78 per share,
(ii) 32,500 shares of Common Stock issuable upon exercise of a warrant
issued to Southbrook, at an exercise price of $27.81 per share, (iii)
3,891 shares of Common Stock issuable upon exercise of a warrant issued
to Southbrook in connection with the issue and sale of the Convertible
Debentures, at an exercise price of $19.53 per share (the "Southbrook
Warrant"), (iv) 19,000 shares of Common Stock, and (v) 204,813 shares
of Common Stock issuable upon conversion of its Convertible Debentures
at the current conversion price of $19.53 per share. Commencing July
22, 1998, the number of shares of Common Stock issuable upon conversion
of the Convertible Debentures will become dependent in part upon the
market price of the Common Stock prior to a conversion, the actual
number of shares of Common Stock that will be issued in respect of such
conversions, and consequently the number of shares of Common Stock that
will be beneficially owned by Southbrook, will fluctuate daily and
cannot be determined at this time. However, Southbrook has
contractually agreed to restrict its ability to convert Convertible
Debentures (and receive shares of Common Stock in payment of interest
thereon) and exercise the Southbrook Warrant to the extent that the
number of shares of Common Stock held by it and its affiliates after
such conversion and/or exercise exceeds 4.999% of the then issued and
outstanding shares of Common Stock following such conversion and/or
exercise.
(2) Includes (i) 730 shares of Common Stock issuable upon exercise of a
warrant issued to Brown Simpson Limited in connection with the issue
and sale of the Convertible Debentures, at an exercise price of $19.53
per share (the "Brown Simpson Limited Warrant"), and (ii) 38,402 shares
of Common Stock issuable upon conversion of its Convertible Debentures
at the current conversion price of $19.53 per share. Commencing July
22, 1998, the number of shares of Common Stock issuable upon conversion
of the Convertible Debentures will become dependent in part upon the
market price of the Common Stock prior to a conversion, the actual
number of shares of Common Stock that will be issued in respect of such
conversions, and consequently the number of shares of Common Stock that
will be beneficially owned by Brown Simpson Limited, will fluctuate
daily and cannot be determine at this time. However, Brown Simpson
Limited has contractually agreed to restrict its ability to convert
Convertible Debentures (and receive shares of Common Stock in payment
of interest thereon) and exercise the Brown Simpson Limited Warrant to
the extent that the number of shares of Common Stock held by it and its
affiliates after such conversion and/or exercise exceeds 4.999% of the
then issued and outstanding shares of Common Stock following such
conversion and/or exercise.
(3) Includes (i) 243 shares of Common Stock issuable upon exercise of a
warrant issued to Brown Simpson L.P. in connection with the issue and
sale of the Convertible Debentures, at an exercise price of $19.53 per
share (the "Brown Simpson L.P. Warrant"), and (ii) 12,801 shares of
Common Stock issuable upon conversion of its Convertible Debentures at
the current conversion price of $19.53 per share. Commencing July 22,
1998, the number of shares of Common Stock issuable upon conversion of
the Convertible Debentures will become dependent in part upon the
market price of the Common Stock prior to a conversion, the actual
number of shares of Common Stock that will be issued in respect of such
conversions, and consequently the number of shares of Common Stock that
will be beneficially owned by Brown Simpson L.P. will fluctuate daily
and cannot be determined at this time. However, Brown Simpson L.P. has
contractually agreed to restrict its ability to convert Convertible
Debentures (and receive shares of Common Stock in payment interest
thereon) and exercise the Brown Simpson L.P. Warrant to the extent that
the number of shares of Common Stock held by it and its affiliates
after such conversion and/or exercise exceeds 4.999% of the then issued
and outstanding shares of Common Stock following such conversion and/or
exercise.
(4) Represents the maximum number of shares of Common Stock issuable upon
conversion of the Convertible Debentures and exercise of the Warrants.
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15
PLAN OF DISTRIBUTION
All or a portion of the 821,190 shares (the "Shares") of Common Stock
of the Company offered hereby may be offered and sold from time to time by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest. Such offers and sales may be made from time to time on one or more
exchanges or in the over-the-counter market, or otherwise, at prices and on
terms then prevailing or at prices related to the then-current market price, or
in negotiated transactions. The methods by which the shares may be sold may
include, but not be limited to, the following: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) an exchange
distribution in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(e) privately negotiated transactions; (f) short sales; and (g) a combination of
any such methods of sale. In effecting sales, brokers or dealers engaged by the
Selling Stockholder may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from the
Selling Stockholders (or, if any such broker-dealer acts as agent for the
purchaser of such shares, from such purchaser) in amounts to be negotiated which
are not expected to exceed those customary in the types of transactions
involved. Broker-dealers may agree with the Selling Stockholders to sell a
specified number of such Shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a Selling
Stockholders, to purchase as principal any unsold Shares at the price required
to fulfill the broker-dealer commitment to the Selling Stockholders.
Broker-dealers who acquire Shares as principal may thereafter resell such Shares
from time to time in transactions (which may involve block transactions and
sales to and through other broker-dealers, including transactions of the nature
described above) in the over-the-counter market or otherwise at prices and on
terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such Shares
commissions as described above.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in sales of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
From time to time the Selling Stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in securities
of the Company or derivatives thereof, and may sell and deliver the Shares in
connection therewith or in settlement of securities loans. If the Selling
Stockholders engage in such transactions, the Conversion Price may be affected.
From time to time the Selling Stockholders may pledge their Shares pursuant to
the margin provisions of its customer agreements with its brokers. Upon a
default by the Selling Stockholders, the broker may offer and sell the pledged
Shares from time to time.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including fees and disbursements (not to exceed an
aggregate of $5,000) of counsel to the Selling Stockholders. The Company has
agreed to indemnify the Selling Stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.
The Company has agreed to use its best efforts to maintain the
effectiveness of the registration of the shares being offered hereunder until
April 23, 2003 or such earlier date when all of the shares being offered
hereunder have been sold or may be sold without volume or other restrictions
pursuant to Rule 144 or Rule 144A under the Securities Act, as determined by
counsel to the Company pursuant to a written opinion letter.
The Selling Stockholders and any brokers participating in such sales
may be deemed to be underwriters within the meaning of the Securities Act. There
can be no assurance that the Selling Stockholders will sell any or all of the
shares of Common Stock offered hereunder.
All proceeds from any such sales will be the property of the Selling
Stockholder who will bear the expense of underwriting discounts and selling
commissions, if any, and their own legal fees.
LEGALITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby is being
passed upon for the Company by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., Boston, Massachusetts.
EXPERTS
The consolidated balance sheets of PLC Systems Inc. at December 31,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the three years ended December 31, 1997,
incorporated by reference in PLC Systems Inc.'s Annual Report (Form 10-K) for
the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statements have been
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
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INTERESTS OF NAMED EXPERTS AND COUNSEL
A member of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., owns
3,162 shares of Common Stock of the Company.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (File No. 1-11388).
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 (File No. 1-11388).
(c) The Company's Preliminary Proxy Statement filed pursuant to
Section 14(a) of the Exchange Act filed with the Commission as of
April 22, 1998(File No. 1-11388).
(d) The description of the Company's capital stock contained in the
Company's registration statement on Form 8-A under the 1934 Act
(File No. 1-11388), including amendments or reports filed for the
purpose of updating such description.
All reports and other documents subsequently filed by the Company with
the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act,
prior to the filing of a post-effective amendment which indicates that all
securities covered by this Prospectus have been sold or which deregisters all
such securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of such
reports and documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents which have been incorporated herein by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Patricia L. Murphy, Chief Financial Officer, at PLC Systems Inc., 10 Forge Park,
Franklin, Massachusetts 02038, or by telephone at (508) 541-8800.
INDEMNIFICATION
The British Columbia Company Act (the "Company Act"), Section 152,
enables a corporation, with the approval of the Court, to indemnify a director
or a former director of the Company, or a director or a former director of a
corporation of which it is or was a shareholder, and his heirs and personal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or to satisfy a judgment, actually and reasonably
incurred by him, including an amount paid to settle an action or satisfy a
judgment in a civil, criminal or administrative action, or proceeding to which
he is made a party by reason of being or having been a director, including an
action brought by the Company or corporation if:
a. he acted honestly and in good faith with a view to
the best interest of the corporation of which he is
or was a director; and
b. in the case of a criminal or administrative action or
proceeding, he had reasonable grounds for believing
that his conduct was lawful.
The Company Act also provides that a company may purchase and maintain
insurance for a director or former director of the Company, or a director or
former director of a corporation of which it is or was a shareholder, and his
heirs and personal representatives, against liability incurred by him as a
director or officer.
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17
The Articles of the Company provide that the Company shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding whether or not brought by
the Company or by a corporation or other legal entity or enterprise whether
civil, criminal or administrative, by reason of the fact that he is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise in accordance
with Section 152 of the Company Act.
The Articles of the Company also provide that the Company shall
indemnify any person other than a director with respect to any loss, damage,
costs or expenses whatsoever incurred by him while acting as an officer,
employee or agent for the Company unless such loss, damage, cost or expense
shall arise out of failure to comply with instructions, willful act, or default
or fraud by such person in any of which events the Company shall only indemnify
such persons if the directors in their absolute discretion so decide, or the
Company by ordinary resolutions shall so direct.
The indemnification provided by the Company's Articles shall continue
as to a person who has ceased to be a director, officer, employee or agent, and
shall benefit such person's heirs, executors and administrators.
The Articles of the Company authorize the directors from time to time
to cause the Company to give indemnities to any director, officer, employee,
agent or other person who has undertaken or is about to undertake any liability
on behalf of the Company or any corporation controlled by it.
The Articles of the Company further provide that, subject to the
Company Act no director, officer or employee for the time being of the Company
shall be liable for the acts, receipts, neglects or defaults of any other
director, officer, or employee or for joining in any receipt or act for
conformity, or for any loss, damages or expense happening to the Company through
insufficiency or deficiency of title to any property acquired by order of the
board for the Company, or for the insufficiency or deficiency of any security in
or upon which any monies of or belonging to the Company shall be invested or for
any loss or damages arising from the bankruptcy, insolvency or tortious act of
any person, firm or corporation with whom or which any monies, securities or
effects shall be lodged or deposited or for any loss occasioned by any error of
judgment or oversight on his part, or for any loss, damage or misfortune
whatever which may happen in the execution of the duties of his respective
office or trust or in relation thereto unless the same shall happen by or
through his own willful act of default, negligence, breach of trust or breach of
duty.
The Articles of the Company provide that the directors of the Company
may rely upon the accuracy of any statement of fact represented by an officer of
the Company to be correct, or upon statements in a written report of the auditor
of the Company, and shall not be reasonable or held liable for any loss or
damage resulting in the paying of any dividends or otherwise acting in good
faith upon any such statement.
The Articles of the Company permit the directors to cause the Company
to purchase and maintain insurance for the benefit of any person who was or is a
director, officer, employee or agent of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability incurred by him as a director, officer, employee or agent.
COMMISSION POLICY
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company,
the Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
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18
No dealer, salesman or any other person has been authorized in connection with
this Offering 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. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction 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 an offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the circumstances of the Company or
the facts herein set forth since the date hereof.
TABLE OF CONTENTS
PAGE
----
Available Information........................................ 2
The Company.................................................. 2
Risk Factors................................................. 4
Use of Proceeds..............................................11
Selling Stockholders.........................................11
Plan of Distribution.........................................13
Legality of Common Stock.....................................13
Experts......................................................13
Interests of Named Experts and Counsel.......................14
Incorporation of Certain Information
by Reference............................................14
Indemnification..............................................14
821,190 SHARES OF COMMON STOCK,
NO PAR VALUE PER SHARE
PLC SYSTEMS INC.
PROSPECTUS
MAY 27, 1998
19
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the
securities being registered will be borne by the Registrant. Other than the SEC
registration fee and AMEX filing fee, the amounts stated are estimates.
SEC Registration Fee........................................ 2,985.55
AMEX Filing Fee............................................. 12,897.28
Legal Fees and Expenses..................................... 12,000.00
Accounting Fees and Expenses................................ 5,000.00
TOTAL................................................................ 32,882.83
The Selling Stockholders will bear the expense of their own legal
counsel in excess of $5,000 and miscellaneous fees and expenses, if any.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
See "Indemnification" contained in Part I hereof, which is incorporated
herein by reference.
The corporation shall indemnify and hold harmless persons who serve at
its express written request as directors or officers of another organization in
which the corporation owns shares or of which it is a creditor.
In addition, the Registration Rights Agreement, incorporated by
reference as Exhibit 99.4 hereto, contains provisions for indemnification by the
Selling Stockholders of the Registrant and its officers, directors, and
controlling persons against certain liabilities under the Securities Act.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------
4.1 The Certificate of Incorporation of the Registrant (previously filed as
Exhibit 3a to the Registrant's Registration Statement on Form S-1, File
No. 33-48340, and incorporated herein by reference).
4.2 Form of Common Stock Certificate (previously filed as Exhibit No. 4c to
the Registrant's Registration Statement on Form S-1, File No. 33-48340,
and incorporated herein by reference).
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with
respect to the legality of the securities being registered.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in Exhibit 5)
24 Power of Attorney (filed in Part II of this Registration Statement)
II-1
20
*99.1 Convertible Debenture Purchase Agreement dated as of April 23, 1998
between Southbrook International Investment, Ltd., Brown Simpson
Strategic Growth Fund, L.P. and Brown Simpson Strategic Growth Fund,
Ltd. and the Registrant.
*99.2 Form of Convertible Debenture.
*99.3 Form of Redeemable Warrant.
*99.4 Registration Rights Agreement dated as of April 23, 1998 between
Southbrook International Investment, Ltd., Brown Simpson Strategic
Growth Fund, L.P. and Brown Simpson Strategic Growth Fund, Ltd. and the
Registrant.
----------------
* Each of Exhibits 99.1 through 99.4 were previously filed as Exhibit 10a
through 10d, respectively, to the Registrant's Quarterly Report on Form
10-Q for the Quarter ended March 31, 1998 (File No. 1-11388), and are
incorporated herein by reference.
II-2
21
ITEM 17. UNDERTAKINGS.
A. Rule 415 Offering
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b)(sec.230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs
(A)(i) and (1)(ii) do not apply if the registration statement is on
Form S-3 or Form S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
B. Filings Incorporating Subsequent Exchange Act Documents by Reference
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
1934 Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the 1934 Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. Request for Acceleration of Effective Date or Filing of Registration
Statement on Form S-8
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director,
II-3
22
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Franklin, Commonwealth of Massachusetts, on May 27,
1998.
PLC SYSTEMS INC.
By: /s/ William C. Dow
---------------------------------------------
William C. Dow
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William C. Dow and Patricia L. Murphy, or
any of them, his attorney-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, (or any other
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act) and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as full to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them or their or his substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ William C. Dow
---------------------------- President and Chief Executive May 27, 1998
William C. Dow Officer and Director (principal
executive officer)
/s/ Patricia L. Murphy
---------------------------- Chief Financial Officer, May 27, 1998
Patricia L. Murphy Treasurer (principal financial
officer and principal
accounting officer)
/s/ Robert I. Rudko
---------------------------- Chairman of the Board of May 27, 1998
Robert I. Rudko, Ph.D Directors
/s/ Harold P. Capozzi
---------------------------- Director May 27, 1998
Harold P. Capozzi
/s/ H.B. Brent Norton
---------------------------- Director May 27, 1998
H.B. Brent Norton
/s/ Edward Pendergast
---------------------------- Director May 27, 1998
Edward Pendergast
/s/ Kenneth J. Pulkonik
---------------------------- Director May 27, 1998
Kenneth J. Pulkonik
/s/ Robert A. Smith
---------------------------- Director May 27, 1998
Robert A. Smith
24
PLC SYSTEMS INC.
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
EXHIBIT
NUMBER DESCRIPTION
4.1 The Certificate of Incorporation of the Registrant (previously filed as
Exhibit 3a to the Registrant's Registration Statement on Form S-1, File
No. 33-48340, and incorporated herein by reference).
4.2 Form of Common Stock Certificate (previously filed as Exhibit No. 4c to
the Registrant's Registration Statement on Form S-1, File No. 33-48340,
and incorporated herein by reference).
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with
respect to the legality of the securities being registered.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in Exhibit 5).
24 Power of Attorney (filed in Part II of this Registration Statement) .
*99.1 Convertible Debenture Purchase Agreement dated as of April 23, 1998
between Southbrook International Investment, Ltd., Brown Simpson
Strategic Growth Fund, L.P. and Brown Simpson Strategic Growth Fund,
Ltd. and the Registrant.
*99.2 Form of Convertible Debenture.
*99.3 Form of Redeemable Warrant.
*99.4 Registration Rights Agreement dated as of April 23, 1998 between
Southbrook International Investment, Ltd., Brown Simpson Strategic
Growth Fund, L.P. and Brown Simpson Strategic Growth Fund, Ltd. and the
Registrant.
----------------
* Each of Exhibits 99.1 through 99.4 were previously filed as Exhibit 10a
through 10d, respectively, to the Registrant's Quarterly Report on Form
10-Q for the Quarter ended March 31, 1998 (File No. 1-11388), and are
incorporated herein by reference.