As filed with the Securities and Exchange Commission on May 21, 2004.
Registration No. 333-115393
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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IRIS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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Delaware 95-2579751
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(State of other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
9172 ETON AVENUE
CHATSWORTH, CALIFORNIA 91311
(818) 709-1244
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
-------------------
Name and address of agent for service: Copies of communications sent to:
------------------------------------- ---------------------------------
MARTIN G. PARAVATO JOSEPH E. NIDA, ESQ.
CHIEF FINANCIAL OFFICER SHEPPARD MULLIN RICHTER & HAMPTON LLP
IRIS INTERNATIONAL, INC. 800 ANACAPA STREET
9172 ETON AVENUE SANTA BARBARA, CA 93101
CHATSWORTH, CALIFORNIA 91311
Approximate date of commencement of proposed sale to the public: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please 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
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Proposed maximum
Title of each class of Amount to be offering price per Proposed maximum Amount of
securities to be registered) registered share aggregate offering price registration fee
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Common Stock, par value 2,571,975 shares(2) $7.08 $18,209,583(1) $2,307.15
$0.01 per share
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based on a per share price of $7.08, the average of the high and low
reported sales prices of the Registrant's common stock on the Nasdaq
National Market on May 4, 2004.
(2) Includes 441,975 shares of common stock issuable upon exercise of
warrants sold in the private placement transaction on April 22, 2004.
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 this Registration
Statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended (the "Securities Act") or until this
Registration Statement shall become effective on such date as the Securities and
Exchange Commission (the "SEC"), acting pursuant to said Section 8(a), may
determine.
[INSERT IRIS LOGO]
IRIS International, Inc.
2,571,975 Shares
Common Stock
($0.01 Par Value)
--------------
This prospectus relates to the disposition of 2,571,975 shares of our
common stock which may be disposed of, from time to time, by the selling
stockholders listed in the section of this prospectus entitled "Selling
Stockholders," or other transferees, pledges, donees or successors-in-interest.
The shares offered by this prospectus, include 441,975 shares of common stock
issuable upon exercise of warrants. The shares were initially sold and the
warrants were initially issued to the selling stockholders in a private
placement transaction on April 22, 2004. While we will not receive any of the
proceeds from the sale of the 2,571,975 shares being offered by the selling
stockholders hereunder, we will receive up to $2,492,100 if and when the
warrants are exercised.
Our common stock is quoted on the Nasdaq National Market under the symbol
"IRIS." On May 10, 2004, the last reported sale price for our common stock on
the Nasdaq National Market was $7.52 per share.
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INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE
CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
--------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------
The date of this prospectus is May 21, 2004
TABLE OF CONTENTS
Page
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Prospectus Summary.......................2
Risk Factors.............................4
Use of Proceeds.........................12
Selling Stockholders....................12
Plan of Distribution....................15
Legal Matters...........................17
Experts.................................17
Where You Can Find More Information.....17
Information Incorporated by Reference...18
INFORMATION CONTAINED IN THIS PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL TO
SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE ACCURATE
AS OF THE DATE OF THIS PROSPECTUS.
--------------
Unless the context otherwise requires, the terms "we," "our," "us," "our
company," and "IRIS" refer to IRIS International, Inc. and its subsidiaries.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this prospectus and in the documents incorporated by
reference in this prospectus that are not statements of historical fact are
forward-looking statements. These statements relate to our future plans,
objectives, expectations and intentions. You may generally identify these
statements by the use of words such as "expect," "anticipate," "intend," "plan"
and similar expressions.
You should not place undue reliance on our forward-looking statements. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of numerous risks and uncertainties that
are beyond our control, including those we discuss in "Risk Factors" and
elsewhere in this prospectus and in the documents incorporated by reference in
this prospectus. The information in this prospectus speaks only as of the date
of this prospectus and the information incorporated herein by reference speaks
only as of its date. You should not rely on these statements without also
considering the risks and uncertainties associated with these statements and our
business.
1
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL OF THE
INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK.
THEREFORE, YOU SHOULD READ CAREFULLY AND CONSIDER THIS ENTIRE PROSPECTUS,
INCLUDING THE "RISK FACTORS" SECTION AND THE INFORMATION WE INCORPORATE BY
REFERENCE, BEFORE INVESTING IN OUR COMMON STOCK.
IRIS INTERNATIONAL, INC. (FORMERLY, INTERNATIONAL REMOTE IMAGING SYSTEMS,
INC.)
IRIS operates through its Iris Diagnostics division and its StatSpin,
Inc., Advanced Digital Imaging Research, LLC (ADIR) and IRIS Global Networks,
Inc. subsidiaries. IRIS's operating units design, develop, manufacture, and
market patented and proprietary image-based in vitro diagnostic systems for
automating microscopic urinalysis, and innovative centrifuges for blood,
cytology, and urinalysis. The divisions and subsidiaries of IRIS are summarized
below.
Iris Diagnostics is a leader in automated urinalysis technology with its
workstations installed in major medical institutions throughout the world. Iris
Diagnostics manufactures the only clinical analyzers using real-time video flow
imaging, displaying microscopic images on a video screen. The systems are
operated by touch screen interfaces pioneered by IRIS for use in urinalysis and
microscopic analysis of body fluids. IRIS's imaging systems use patented and
proprietary Automated Intelligent Microscopy (AIM) technology for automating
microscopic procedures, enabling clinical laboratory technologists to rapidly
and efficiently analyze and process specimens automatically, significantly
reducing the costly and time-consuming manual steps required for microscopic
analysis.
The StatSpin(R) subsidiary, acquired in 1996 by IRIS, excels as a maker of
innovative centrifuges and blood analysis products. Forty thousand of its
benchtop centrifuge systems have been sold to date. Major medical institutions
worldwide, along with thousands of smaller hospitals, commercial laboratories,
clinics, doctors' offices, veterinary labs and research institutions use
StatSpin's products. StatSpin manufactures the world's fastest blood separator
(30 seconds). Its bench top centrifuges are dedicated to applications for manual
specimen preparation in coagulation, cytology, hematology and urinalysis.
StatSpin has been providing centrifuges to the veterinary market through a
company which provides sample and analysis systems and recently passed the
13,000th centrifuge shipped to this market.
Advanced Digital Imaging Research (ADIR) is a research and development
organization specializing in digital imaging software and algorithm development.
Located in the Houston, Texas area, ADIR conducts R&D projects sponsored by the
National Institutes of Health, NASA, and corporate clients. ADIR has a number of
ongoing NIH-sponsored research projects being conducted in collaboration with
medical researchers around the United States. New technology developed under
these projects will be made available to IRIS and other client companies for
commercialization. ADIR is expanding the scope of its research activities beyond
cytogenetics, to include projects of interest to IRIS and other corporate
clients. ADIR also plans to commercialize non-company related technology by
means of patents and licensing agreements.
In June 2003, we established a European subsidiary called IRIS Global
Networks, Inc., in Novara, Italy, just outside of Milan. This office will serve
as the base for Sales and Service support for the expanding distribution network
being established for our recently launched iQ200 Automated Urine Microscopy
Analyzer. With distribution agreements covering multiple countries in Europe,
Africa and the Middle East, the establishment of this subsidiary gives us the
needed infrastructure to support those distributors.
2
We are a Delaware corporation. Our executive offices are located at 9172
Eton Avenue, Chatsworth, California, 91311, and our telephone number is (818)
709-1244. Our website address is www.proiris.com. The information on our website
is not a part of this prospectus.
3
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS AND IN THE
DOCUMENTS THAT WE INCORPORATE BY REFERENCE INTO THIS PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS AND UNCERTAINTIES BEFORE PURCHASING OUR
COMMON STOCK. IF ANY OF THESE RISKS OR UNCERTAINTIES WERE TO OCCUR, OUR
BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS COULD SUFFER SERIOUS HARM.
IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU COULD
LOSE ALL OR PART OF YOUR INVESTMENT. SEE ALSO, "SPECIAL NOTE ON FORWARD-LOOKING
STATEMENTS."
RISKS RELATED TO OUR BUSINESS
OUR SUCCESS DEPENDS LARGELY ON THE ACCEPTANCE OF OUR NEW IQ200
OPERATING PLATFORM.
Our current strategy assumes that our iQ200 operating platform will be
adopted by a large number of end-users. We have invested, and continue to
invest, a substantial amount of our resources in promotion and marketing of the
iQ200 operating platform in order to increase its market penetration, expand its
sales into new geographic areas and enhance and expand its system features. A
failure of our iQ200 operating platform to achieve and maintain a significant
market presence, or the failure to successfully implement our promotion and
marketing strategy, will have a material adverse effect on our financial
condition and results of operations.
WE FACE INTENSE COMPETITION AND OUR FAILURE TO COMPETE EFFECTIVELY,
PARTICULARLY AGAINST LARGER, MORE ESTABLISHED COMPANIES WILL CAUSE OUR
BUSINESS TO SUFFER.
The healthcare industry is highly competitive. We compete in this industry
based primarily on product performance, service and price. Many of our
competitors have substantially greater financial, technical and human resources
than we do, and may also have substantially greater experience in developing
products, obtaining regulatory approvals and manufacturing and marketing and
distribution. As a result, they may be better able to compete for market share,
even in areas in which our products may be superior. Further, our competitive
position could be harmed by the establishment of patent protection by our
competitors or other companies. The existing competitors or other companies may
succeed in developing technologies and products that are more effective or
affordable than those being developed by us or that would render our technology
and products less competitive or obsolete. If we are unable to effectively
compete in our market, our financial condition and results of operations will
materially suffer.
WE HAVE HAD A HISTORY OF DECLINING PROFITABILITY AND RECORDED AN
OPERATING LOSS IN 2003. WE MAY INCUR LOSSES IN THE FUTURE.
We have incurred significant losses since our inception and, as of
December 31, 2003, we had accumulated a deficit of approximately $25.0 million.
We may not achieve profitability in the future and further losses may arise. Our
ability to achieve profitable operations in the future will depend on our
ability to sell our products at sufficient volumes and with sufficient margins
to be profitable. If we are unable to do so, we will not be profitable and our
financial condition and results of operations will suffer.
OUR QUARTERLY SALES AND OPERATING RESULTS MAY FLUCTUATE IN FUTURE
PERIODS, AND IF WE FAIL TO MEET EXPECTATIONS THE PRICE OF OUR COMMON STOCK
MAY DECLINE.
Our quarterly sales and operating results have fluctuated significantly in
the past and are likely to do so in the future due to a number of factors, many
of which are not within our control. If our quarterly sales or operating results
4
fall below the expectations of investors or securities analysts, the price of
our common stock could decline substantially. Factors that might cause quarterly
fluctuations in our sales and operating results include the following:
o variation in demand for our products, including seasonality;
o our ability to develop, introduce, market and gain market acceptance of
new products and product enhancements in a timely manner;
o our ability to manage inventories, accounts receivable and cash flows;
o our ability to control costs;
o the size, timing, rescheduling or cancellation of orders from consumers
and distributors; and
o our ability to forecast future sales and operating results and
subsequently attain them.
The amount of expenses we incur depends, in part, on our expectations
regarding future sales. In particular, we expect to continue incurring
substantial expenses relating to the marketing and promotion of our products.
Since many of our costs are fixed in the short term, if we have a shortfall in
sales, we may be unable to reduce expenses quickly enough to avoid losses. If
this occurs, we will not be profitable. Accordingly, you should not rely on
quarter-to-quarter comparisons of our operating results as an indication of our
future performance.
OUR SUCCESS DEPENDS LARGELY ON SALES OF LABORATORY INSTRUMENTS AND
RELATED SALES OF CONSUMABLES AND SERVICE CONTRACTS.
Historically, we derived most of our revenues from the sale of consumables
and service revenue and to a lesser extent from the sale of urinalysis
workstations. Modest declines in unit sales of urinalysis workstations or gross
margins for this product line could diminish our revenues and profits. In
addition, because our installed base of workstations utilize a large annual
volume of consumables and produce service revenue, any decline in our installed
base will diminish revenues and profits even further.
WE RELY ON INDEPENDENT AND SOME SINGLE-SOURCE SUPPLIERS FOR KEY
COMPONENTS OF OUR INSTRUMENTS. ANY DELAY OR DISRUPTION IN THE SUPPLY OF
COMPONENTS MAY PREVENT US FROM SELLING OUR PRODUCTS AND NEGATIVELY IMPACT OUR
OPERATIONS.
Certain of our components are obtained from outside vendors, the loss or
breakdown of our relationships with these outside vendors could subject us to
substantial delays in the delivery of our products to our customers. Furthermore
certain key components of our instruments are manufactured by single-source
suppliers. For example, ARKRAY is the single-source supplier for our new line of
urine chemistry analyzers and related consumable products and spare parts.
ARKRAY's AX-4280 Automated Urine Chemistry Analyzer combines with our iQ200
Automated Urine Microscopy Analyzer to constitute our iQ200 system. If we are no
longer able to sell ARKRAY's chemistry analyzer, we will have to replace it with
a chemistry analyzer from another source, which could interrupt domestic
deliveries of the iQ200 system and have an adverse effect on our results of
operations. Roche Diagnostics is the single-source supplier for our proprietary
CHEMSTRIP/ IRIStrip urine test strips and related urine test strip readers, both
used in the Model 500 and 939UDx urinalysis workstations. Because these
suppliers are the only vendors with which we have a relationship for a
particular component, we may be unable to sell products if one of these
suppliers becomes unwilling or unable to deliver components meeting our
specifications. Our inability to sell products to meet delivery schedules could
have a material adverse effect on our reputation in the industry as well as our
financial condition and results of operations.
5
ONE OF OUR SINGLE-SOURCE SUPPLIERS HAS TERMINATED ITS AGREEMENT WITH US.
Roche Diagnostics has exercised its right to terminate the agreements
relating to the supply of test strips and related urine test strip readers.
Roche will continue to supply test strips and replacement readers to our
installed base of workstations for six years after termination of these
contracts, or until 2009. The failure to successfully and timely complete the
phase out of their strips and readers with the introduction of our new iQ200
analyzers would have a material adverse effect on our instrument sales and the
revenue growth for system supplies and service.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE. IF ADDITIONAL CAPITAL IS
NOT AVAILABLE, WE MAY HAVE TO CURTAIL OR CEASE OPERATIONS.
We have limited capital and will require substantial capital resources to
execute our business strategy.
Any equity financings may be dilutive to our existing stockholders and may
involve the issuance of securities that have rights, preferences or privileges
senior to those of our current stockholders. A debt financing, if available, may
involve restrictive covenants on our business that could limit our operational
and financial flexibility, and the amount of debt incurred could make us more
vulnerable to economic downturns or operational difficulties and limit our
ability to compete. Furthermore, financing may not be available when needed and,
if available, may not be on terms acceptable to us.
WE OPERATE IN A CONSOLIDATING INDUSTRY WHICH CREATES BARRIERS TO OUR
MARKET PENETRATION.
The healthcare industry in recent years has been characterized by
consolidation. Large hospital chains and groups of affiliated hospitals prefer
to negotiate comprehensive supply contracts for all of their supply needs at
once. Large suppliers can often equip an entire laboratory and offer these
hospital chains and groups one-stop shopping for laboratory instruments,
supplies and service. Larger suppliers also typically offer annual rebates to
their customers based on the customer's total volume of business with the
supplier. The convenience and rebates offered by these large suppliers are
administrative and financial incentives that we do not offer our customers. Our
plans for further market penetration in the urinalysis market will depend in
part on our ability to overcome these and any new barriers resulting from
continued consolidation in the healthcare industry. The failure to overcome such
barriers could have a material adverse effect on our financial condition or
results of operations.
BUSINESS INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS.
Products for Iris Diagnostics and StatSpin are manufactured in a single
facility for each division and are vulnerable to interruption in the event of
war, terrorism, fire, earthquake, power loss, floods, telecommunications failure
and other events beyond our control. If our facilities were significantly
damaged or destroyed by any cause, we would experience delays in locating a new
facility and equipment and qualifying the new facility with the Food and Drug
Administration ("FDA"). As a result, our results would suffer. In addition, we
may not carry adequate business interruption insurance to compensate us for
losses that may occur and any losses or damages incurred by us could be
substantial.
IF WE ARE UNABLE TO MANAGE OUR GROWTH, OUR RESULTS COULD SUFFER.
We have been experiencing significant growth in the scope of our
operations. This growth has placed significant demands on our management as well
as operational resources. In order to achieve our business objectives, we
anticipate that we will need to continue to grow. If this growth occurs, it will
6
continue to place additional significant demands on our management and our
operational resources, and will require that we continue to develop and improve
our operational, financial and other internal controls both in the U.S. and
internationally. In particular, our growth rate has increased and if it
continues to do so, we will face many challenges in implementing appropriate
control systems, expanding our sales and marketing infrastructure capabilities,
providing adequate training and supervision to maintain high quality standards,
and preserving our cultural values. Currently, the main challenge associated
with our growth has been cash flow management. Our inability to scale our
business appropriately or otherwise adopt to growth would cause our business,
financial condition and results of operations to suffer.
OUR SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT, RETAIN AND MOTIVATE
MANAGEMENT AND OTHER SKILLED EMPLOYEES.
Our success depends in significant part upon the continued services of key
management and skilled personnel. Competition for qualified personnel is intense
and there are a limited number of people with knowledge of, and experience in,
our industry. We do not have employment agreements with most of our key
employees or maintain life insurance policies on them. The loss of key
personnel, especially without advance notice, or our inability to hire or retain
qualified personnel, could have a material adverse effect on our instrument
sales and our ability to maintain our technological edge. We cannot guarantee
that we will continue to retain our key management and skilled personnel, or
that we will be able to attract, assimilate and retain other highly qualified
personnel in the future.
ANY FAILURE TO SUCCESSFULLY INTRODUCE OUR FUTURE PRODUCTS AND SYSTEMS
INTO THE MARKET COULD ADVERSELY AFFECT OUR BUSINESS.
The commercial success of our future products and systems depends upon
their acceptance by the medical community. Our future product plans include
capital-intensive laboratory instruments. There is often market resistance to
products that require significant capital expenditures or which eliminate jobs
through automation. We have no assurance that the market will accept our future
products and systems, or that sales of our future products and systems will grow
at the rates expected by our management.
OUR SALES IN INTERNATIONAL MARKETS ARE SUBJECT TO A VARIETY OF LAWS AND
POLITICAL AND ECONOMIC RISKS THAT MAY ADVERSELY IMPACT OUR SALES AND RESULTS
OF OPERATIONS IN CERTAIN REGIONS.
Our ability to capitalize on growth in new international markets and to
maintain the current level of operations in our existing international markets
is subject to risks associated with international sales operations. These
include:
o changes in currency exchange rates which impact the price to
international consumers;
o the burdens of complying with a variety of foreign laws and
regulations;
o unexpected changes in regulatory requirements; and
o the difficulties associated with promoting products in unfamiliar
cultures.
We are also subject to general political, economic and regulatory risks in
connection with our international sales operations, including:
o political instability;
o changes in diplomatic and trade relationships;
o general economic fluctuations in specific countries or markets; and
o changes in regulatory schemes.
7
Any of the abovementioned factors could adversely affect our sales and
results of operations in international markets.
WE DEPEND ON INDEPENDENT DISTRIBUTORS TO SELL OUR PRODUCTS IN
INTERNATIONAL MARKETS.
We sell our products in international markets through independent
distributors. These distributors may not command the necessary resources to
effectively market and sell our products. If a distributor fails to meet annual
sales goals, it may be difficult and costly to locate an acceptable substitute
distributor. If a change in our distributors becomes necessary, we may
experience increased costs, as well as substantial disruption and a resulting
loss of sales.
IF WE FAIL TO MEET CHANGING DEMANDS OF TECHNOLOGY, WE MAY NOT CONTINUE
TO BE ABLE TO COMPETE SUCCESSFULLY WITH OUR COMPETITORS.
The market for our products and systems is characterized by rapid
technological advances, changes in customer requirements, and frequent new
product introductions and enhancements. Our future success depends upon our
ability to introduce new products that keep pace with technological
developments, enhance current product lines and respond to evolving customer
requirements. Our failure to meet these demands could result in a loss of our
market share and competitiveness and could harm our revenues and results of
operations.
CHANGES IN GOVERNMENT REGULATION OF THE HEALTHCARE INDUSTRY COULD
ADVERSELY AFFECT OUR BUSINESS.
Federal and state legislative proposals are periodically introduced or
proposed that would affect major changes in the healthcare system, nationally,
at the state level or both. Future legislation, regulation or payment policies
of Medicare, Medicaid, private health insurance plans, health maintenance
organizations and other third-party payors could adversely affect the demand for
our current or future products and our ability to sell our products on a
profitable basis. Moreover, healthcare legislation is an area of extensive and
dynamic change, and we cannot predict future legislative changes in the
healthcare field or their impact on our industry or our business. Any impairment
of our ability to market our products could have a material adverse effect on
our financial condition and results of operations.
SINCE WE OPERATE IN THE MEDICAL TECHNOLOGY INDUSTRY, OUR PRODUCTS ARE
SUBJECT TO GOVERNMENT REGULATION THAT COULD IMPAIR OUR OPERATIONS.
Most of our products are subject to stringent government regulation in the
United States and other countries. These regulatory processes can be lengthy,
expensive and uncertain. Additionally, securing necessary clearances or
approvals may require the submission of extensive official data and other
supporting information. Our failure to comply with applicable requirements could
result in fines, recall or seizure of products, total or partial suspension of
production, withdrawal of existing product approvals or clearances, refusal to
approve or clear new applications or notices, or criminal prosecution. If any of
these events were to occur, they could harm our business. Changes in existing
federal, state or foreign laws or regulations, or in the interpretation or
enforcement of these laws, could have a material adverse effect on our business.
WE ARE SUBJECT TO CURRENCY FLUCTUATIONS.
We are exposed to certain foreign currency risks in the importation of
goods from Japan. The new line of urine chemistry analyzers, some assemblies for
our iQ200 platform and related consumables strips and spare parts are sourced
from ARKRAY, a supplier located in Kyoto, Japan. Our purchases from this
supplier are denominated in Japanese Yen. These components represent a
significant portion of our material costs. Fluctuations in the U.S. Dollar/
8
Japanese Yen exchange rate would result in increased costs for our key
components. Any such increases would reduce our gross margins and would be
likely to result in a material adverse effect on our revenues and financial
condition. Similarly, we are also exposed to currency fluctuations with respect
to the exportation of our products. Although our international sales are
denominated in U.S. Dollars, we have agreements with our distributors to share
fluctuations outside of a certain range in such exchange rates. Accordingly, any
fluctuation in the exchange rate between the U.S. Dollar and the currency of the
country with which we are exporting products would also reduce our gross margins
and would be likely to result in a material adverse effect on our financial
condition and results of operations.
OUR COPYRIGHTS AND TRADEMARKS MAY NOT BE ENFORCEABLE.
We claim copyrights in our software and the ways in which it assembles and
displays images. We also claim trademark rights in the United States and other
foreign countries. However, we can make no assurance that we will be able to
obtain enforceable copyright and trademark protection, or that this protection
will provide us a significant commercial advantage.
OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF
OTHERS.
Given the complete factual and legal issues associated with intellectual
property rights, there can be no assurance that our current and future products
do not or will not infringe the intellectual property rights of others. A
determination that such infringement exists or even a claim that it exists could
involve us in costly litigation and have an adverse effect on our business and
financial condition.
WE MAY BE SUBJECT TO LITIGATION REGARDING OUR PATENT AND OTHER
INTELLECTUAL PROPERTY RIGHTS.
Offensive or defensive litigation regarding patent and other intellectual
property rights could be time-consuming and expensive. Additionally, litigation
could demand significant attention from our technical and management personnel.
Any change in our ability to protect and maintain our proprietary rights could
materially and adversely affect our financial condition and results of
operations.
ANY FAILURE OR INABILITY TO PROTECT OUR TECHNOLOGY AND CONFIDENTIAL
INFORMATION COULD ADVERSELY AFFECT OUR BUSINESS.
PATENTS. Our commercial success depends in part on our ability to protect
and maintain our Automated Intelligent Microscopy (or AIM) and other proprietary
technology. We have received patents with respect to portions of the
technologies of AIM. However, ownership of technology patents may not insulate
us from potentially damaging competition. Patent litigation relating to clinical
laboratory instrumentation patents (like the ones we own) often involves complex
legal and factual questions. Therefore, we can make no assurance that claims
under patents currently held by us, or our pending or future patent
applications, will be sufficiently broad to adequately protect what we believe
to be our proprietary rights. Additionally, one or more of our patents could be
circumvented by a competitor.
TRADE SECRETS. We have trade secrets, unpatented technology and
proprietary knowledge related to the sale, promotion, operation, development and
manufacturing of our products. We generally enter into confidentiality
agreements with our employees and consultants. However, we cannot guarantee that
our trade secrets, unpatented technology or proprietary knowledge will not
become known or be independently developed by competitors. If any of this
proprietary information becomes known to third parties, we may have no practical
recourse against these parties.
9
WE MAY NOT BE ABLE TO REALIZE THE DEFERRED TAX ASSET RELATING TO OUR
TAX NET OPERATING LOSS CARRY FORWARD.
As of December 31, 2003, IRIS has deferred tax assets in excess of $8.0
million resulting from the differences between the financial statement and the
tax bases of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. There is no assurance
that we will be able to generate taxable income in the years that the
differences reverse.
DEFECTIVE PRODUCTS MAY HAVE AN ADVERSE EFFECT ON OUR REPUTATION AND
SUBJECT US TO LIABILITY.
Our products are used to gather information for medical decisions and
diagnosis. Accordingly, a defect in the design or manufacture of our products,
or a failure of our products to perform for the use that we specify, could have
a material adverse effect on our reputation in the industry and subject us to
claims of liability arising from inaccurate or allegedly inaccurate test
results. Misuse of our products by a technician that results in inaccurate or
allegedly inaccurate test results could similarly subject us to claims of
liability. We currently maintain product liability insurance coverage for up to
$1.0 million per incident and up to an aggregate of $2.0 million per year. We
also currently maintain a product liability umbrella policy for coverage of
claims aggregating to $10.0 million. Although management believes this liability
coverage is sufficient protection against future claims, there can be no
assurance of the sufficiency of these policies. Any substantial underinsured
loss would have a material adverse effect on our financial condition and results
of operations. Furthermore, any impairment of our reputation could have a
material adverse effect on our revenues and prospects for future business. We
have not received any indication that our insurance carrier will not renew our
product liability insurance at or near current premiums, however, we cannot
guarantee that this will continue to be the case. In addition, any failure to
comply with FDA regulations governing manufacturing practices could hamper our
ability to defend against product liability lawsuits.
OUR BUSINESS COULD SUFFER IF WE ARE UNSUCCESSFUL IN INTEGRATING
BUSINESS COMBINATIONS, ADDITIONAL PRODUCT LINES OR STRATEGIC ALLIANCES.
While we have no commitments or agreements to acquire other companies or
product lines or enter into strategic alliances, we may pursue acquisitions of
companies, additional product lines or enter into strategic alliances. Our
ability to grow through acquisitions or strategic alliances depends upon our
ability to identify, negotiate, complete and integrate suitable acquisitions or
strategic alliance with our current operations. There can be no assurance that
we will be able to identify and enter into acquisitions or strategic alliances
on acceptable terms. Even if we do so, we may experience any one or more of the
following: difficulties in integrating any acquired companies, personnel and
product lines into our existing business, delays in realizing the benefits of
any acquired companies, product lines or strategic alliances, diversion of our
management's time and attention from other business concerns, a higher cost of
integration than we expected, assumption of undisclosed liabilities, adverse
market reaction, difficulties in retaining key employees who are necessary to
manage these acquisitions or alliances and additional risks we may assume in
connection with such transactions.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
OUR CERTIFICATE OF INCORPORATION AND BYLAWS COULD DELAY OR PREVENT AN
ACQUISITION OR SALE OF OUR COMPANY.
Our Certificate of Incorporation empowers the Board of Directors to
establish and issue a class of preferred stock, and to determine the rights,
preferences and privileges of the preferred stock. Our Certificate of
Incorporation also prohibits stockholder action by written consent. These
provisions give the Board of Directors the ability to deter, discourage or make
more difficult a change in control of our Company, even if such a change in
10
control would be in the interest of a significant number of our stockholders or
if such a change in control would provide our stockholders with a substantial
premium for their shares over the then-prevailing market price for the common
stock.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW COULD DELAY OR PREVENT AN
ACQUISITION OF OUR COMPANY.
We are subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which regulates corporate acquisitions. These
provisions could discourage potential acquisition proposals and could delay or
prevent a change in control transaction. They could also have the effect of
discouraging others from making tender offers for our common stock or preventing
changes in our management.
11
USE OF PROCEEDS
All proceeds from the sale of the shares of common stock offered by this
prospectus will be for the account of the selling stockholders. We will not
receive any of the proceeds from the sale of the shares of our common stock. If
and when all of the warrants are exercised, we will, however, receive up to
$2,492,100, which will be applied to working capital, reduction of indebtedness
or other general corporate purposes.
SELLING STOCKHOLDERS
On April 22, 2004, we issued 2,130,000 shares of common stock and warrants
to purchase up to an additional 390,000 shares of common stock with an exercise
price of $7.80 per share in a private placement transaction. Net proceeds from
the private placement after estimated costs and expenses were approximately
$11.6 million. The private placement was managed by Oppenheimer & Co. Inc. As
partial consideration for its services, Oppenheimer & Co. Inc. received warrants
to purchase up to 122,475 shares of common stock with an exercise price of $7.80
per share. The warrants issued in the private placement are exercisable
immediately through and including the date occurring five years from the date of
their issuance. The warrants issued to Oppenheimer & Co. Inc. are exercisable
beginning on October 22, 2004 through and including the date occurring five
years from the date of their issuance.
The following table shows the names of the selling stockholders, and lists
the number of shares of our common stock registered for sale by each of them
under this prospectus. It also shows the total number of shares of common stock
owned by them before and after the offering, and the percentage of our total
outstanding shares represented by these amounts. We do not know when or in what
amounts a selling stockholder may choose to sell any of the shares offered by
this prospectus. Because the selling stockholders may offer all or some of their
shares of common stock pursuant to this offering, we cannot estimate the number
of shares of common stock that the selling stockholders will hold after
completion of this offering. The table assumes that each selling stockholder
will sell all of the common stock being offered by this prospectus for their
account. None of the selling stockholders has had a material relationship with
us within the past three years other than as a result of the selling
stockholder's ownership of our securities, except for Oppenheimer & Co. Inc.,
who acted as our Placement Agent for the shares of common stock that are the
subject of this prospectus.
The following table is based on information provided to us by the selling
stockholders named in the table, and does not necessarily indicate beneficial
ownership for any other purpose. The selling stockholders may, however, have
sold, transferred or otherwise disposed of all or a portion of their shares of
common stock since the date on which they provided such information. The number
of shares of common stock beneficially owned by the selling stockholders is
determined in accordance with the rules of the SEC. The number of shares
beneficially owned includes any shares as to which a person has sole or shared
voting power or investment power. Shares which a person has the right to acquire
within 60 days of the date of this prospectus are included in the shares owned
by that person and are treated as outstanding for purposes of calculating the
ownership percentage of that person, but not for any other person. The term
"selling stockholders" includes the stockholders listed below and their
transferees, assignees, pledgees, donees or other successors. The percent of
beneficial ownership for each selling stockholder is based on 14,815,342 shares
of stock outstanding as of May 5, 2004.
12
Percent of
Outstanding
Number of Shares of Number of Number of Percent of
Shares of Common Shares of Shares of Shares of
Common Stock Stock Common Stock Common Stock Common Stock
Beneficiallly Beneficially to be Offered Beneficially Beneficially
Owned Prior to Owned Prior Pursuant to this Owned After Owned After
Name of Selling Stockholder Offering(1) to Offering Prospectus(2) the Offering(3) the Offering(3)
---------------------------------------------------------------------------------------------------------------------------
The Pinnacle Fund, LP 1,493,000(4) 9.99% 1,150,000(5) 370,000 *
Sherleigh Associates, Inc. Defined
Benefit Pension Plan 689,600 4.65% 477,250 212,350 1.43%
Dolphin Offshore Partners 571,500 3.86% 471,500 100,000 *
Westpark Capital, LP 260,500 1.76% 80,500 180,000 1.21%
SDS Capital Group SPC, Ltd. 92,000 * 92,000 0 *
Incline Capital, LP 73,000 * 23,000 50,000 *
WS Opportunity Fund International,
Ltd.(6) 69,200 * 57,500 11,700 *
WS Opportunity Fund (QP), LP(6) 64,720 * 53,820 10,900 *
WS Opportunity Fund, LP(6) 52,930 * 43,930 9,000 *
Oppenheimer & Co. Inc.(7) 0 * 122,475 0 *
------------
* Represents less than One Percent of the outstanding shares.
(1) Includes shares issuable upon the exercise of outstanding warrants as
follows:
The Pinnacle Fund, LP 150,000
Sherleigh Associates, Inc. Defined Benefit Pension Plan 62,250
Dolphin Offshore Partners 61,500
SDS Capital Group SPC, Ltd. 12,000
Westpark Capital, LP 10,500
WS Opportunity Fund International, Ltd. 7,500
WS Opportunity Fund (QP), LP 7,020
WS Opportunity Fund, LP 5,730
Incline Capital, LP 3,000
(2) Includes the shares of common stock which are the subject of this
Prospectus.
(3) Assumes that all shares being offered by each selling stockholder under
this prospectus are sold, that the selling stockholder acquires no
additional shares of common stock before the completion of this offering,
and that the selling stockholder disposes of no shares of common stock
other than those offered under this prospectus.
(4) Includes 123,000 shares issuable upon the exercise of an outstanding
warrant granted to The Pinnacle Fund, LP in the private placement
transaction on April 22, 2004. We have only included a portion of the
150,000 shares covered by the warrant because, pursuant to the terms of the
warrant, the maximum number of shares that may be acquired by The Pinnacle
Fund, LP upon any exercise of the warrant is limited to the extent
necessary to insure that, following such exercise, the total number of
shares of common stock then beneficially owned by The Pinnacle Fund, LP and
its affiliates and any other persons whose beneficial ownership of common
stock would be aggregated with The Pinnacle Fund, LP for purposes of
Section 13(d) of the Exchange Act, does not exceed 9.999% of the total
number of issued and outstanding shares of common stock (including for such
13
purpose the shares of common stock issuable upon such exercise). Based on
14,815,342 shares of common stock outstanding as of May 5, 2004, the
maximum number of shares issuable to The Pinnacle Fund, LP under the
warrant are 123,000 shares.
(5) Includes 150,000 shares possibly issuable upon the exercise of an
outstanding warrant granted to The Pinnacle Fund, LP in the private
placement transaction on April 22, 2004. Although, as of May 5, 2004, the
maximum number of shares issuable to The Pinnacle Fund, LP under the
warrant are 123,000 shares, it is possible that an increase in the number
of the Company's outstanding shares of common stock or the sale of the
Company's common stock by The Pinnacle Fund, LP may allow The Pinnacle
Fund, LP to exercise the warrant for the full amount of 150,000 shares.
(see footnote 4 to this table)
(6) Patrick P. Walker, Reid S. Walker and G. Stacy Smith each manage the WS
Opportunity Fund International, Ltd., WS Opportunity Fund (QP), LP and WS
Opportunity Fund, LP. In addition, at least two of such individuals manage
Walker Smith Capital, L.P., Walker Smith Capital (QP), L.P. and Walker
Smith International Fund, Ltd. Because these individuals may be deemed to
have voting or dispositive control over the shares held by all of these
entities, they may be deemed the beneficial owners of any shares held by
such entities. Walker Smith Capital, L.P., Walker Smith Capital (QP), L.P.
and Walker Smith International Fund, Ltd. each hold the following number of
shares of common stock of the Company, none of which are including in this
offering:
Walker Smith Capital, L.P. 5,300
Walker Smith Capital (QP), L.P. 28,300
Walker Smith International Fund, Ltd. 34,800
The aggregate number of shares of common stock held by WS Opportunity Fund
International, Ltd., WS Opportunity Fund (QP), LP, WS Opportunity Fund, LP,
Walker Smith Capital, L.P., Walker Smith Capital (QP), L.P., and Walker
Smith International Fund, Ltd. is 100,000 shares, which does not equal an
amount greater than 1% of the outstanding shares of the Company's common
stock after the offering.
(7) Includes 122,475 shares of common stock issuable upon the exercise of
warrants by Oppenheimer & Co. Inc. on or after October 22, 2004.
14
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling stockholders. The
selling stockholders and their successors, including their transferees,
assignees, pledges, donees or other successors, may dispose of the shares
covered by this prospectus from time to time for their own accounts. They will
act independently of us in making decisions regarding the timing, manner and
size of each sale. They may sell their shares on the Nasdaq National Market or
other exchanges, in the over-the-counter market or in privately negotiated
transactions. They may sell their shares directly or through underwriters,
broker-dealers or agents, who may receive compensation in the form of discounts,
concessions, or commissions from the selling stockholders or from the purchasers
of the shares. The compensation received by a particular underwriter, broker,
dealer or agent might exceed customary commissions.
The shares of common stock may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at prices related
to the prevailing market prices, at varying prices determined at the time of
sale, or at negotiated prices.
The selling stockholders may dispose of their shares through any of the
following methods or any combination of these methods:
o purchases by a broker or dealer as a principal and resale by that
broker or dealer for its own account under this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers, which may include long or short sales made after
the effectiveness of the registration statement of which this
prospectus is a part;
o cross trades or block trades in which the broker or dealer engaged to
make the sale will attempt to sell the securities as an agent, but
may position and resell a portion of the block as a principal to
facilitate the transaction;
o through the writing of options;
o in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales made through
agents;
o any combination of the above transactions; or
o any other lawful method.
In addition, any securities covered by this prospectus which qualify for
sale in compliance with Rule 144 promulgated under the Securities Act of 1933,
as amended, may be sold under Rule 144 rather than under this prospectus.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
these transactions, broker-dealers may engage in short sales of common stock in
the course of hedging the positions they assume with the selling stockholders.
The selling stockholders also may sell shares short and redeliver the
shares to close out such short positions. The selling stockholders may enter
into options or other transactions with broker-dealers that require the delivery
to the broker-dealer of the shares. The broker-dealer may then resell or
otherwise transfer the shares covered by this prospectus (which may be amended
15
or supplemented to reflect the transaction). The selling stockholders also may
loan or pledge the shares to a broker-dealer or another financial institution.
If a selling stockholder defaults on the loan or the obligation secured by the
pledge, the broker-dealer or institution may sell the shares so loaned or
pledged under this prospectus (which may be amended or supplemented to reflect
the transaction).
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholders.
Broker-dealers or agents may also receive compensation from the purchasers
shares for whom they act as agents or to whom they sell as principals, or both.
Compensation received by a particular broker-dealer might be in excess of
customary commissions and will be in amounts to be negotiated in connection with
the sale.
Broker-dealers or agents and any other participating broker-dealers or the
selling stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
The selling stockholders have advised us that they have not entered into
any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares and that there is no
underwriter or coordinating broker acting in connection with the proposed sale
of shares by the selling stockholders.
We have agreed to maintain the effectiveness of the registration statement
of which this prospectus is a part until the earliest to occur of the following:
o the date on which all shares held by the selling stockholders can be
sold immediately without registration and free of volume or manner
of sale restrictions pursuant to Rule 144; or
o the date on which all shares offered by this prospectus have been
sold or otherwise transferred by the selling stockholders pursuant
to and in accordance with the registration statement, or in other
transactions that would result in the removal of transfer
restrictions and restrictive legends from the shares.
We may suspend the selling stockholders' rights to resell shares under this
prospectus for limited periods if required to do so by regulatory action or
because material information or events affecting us are not adequately disclosed
in the then available prospectus.
We have agreed to pay the expenses of registering the shares under the
Securities Act, including registration and filing fees, printing expenses,
administrative expenses and certain legal and accounting fees. The selling
stockholders will bear all discounts, commissions or other amounts payable to
underwriters, dealers or agents as well as fees and disbursements for legal
counsel retained by any selling stockholder. We have also agreed to indemnify
the selling stockholders against certain liabilities, including certain
liabilities under the Securities Act.
The selling stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of shares
against liabilities, including liabilities arising under the Securities Act.
Because the selling stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling stockholders
will be subject to the prospectus delivery requirements of the Securities Act.
16
If we are required to supplement this prospectus or post-effectively amend the
registration statement to disclose a specific plan of distribution of the
selling stockholders, the supplement or amendment will describe the particulars
of the plan of distribution, including the shares of common stock, purchase
price and names of any agent, broker, dealer, or underwriter or arrangements
relating to any such entity or applicable commissions.
Under applicable rules and regulations under the Securities Exchange Act
of 1934, as amended, no person engaged in the distribution of the shares may
simultaneously engage in market making activities with respect to our common
stock for a restricted period before the commencement of the distribution. In
addition, the selling stockholders will be subject to applicable provisions of
the Securities Exchange Act of 1934, as amended, and the associated rules and
regulations under the Securities Exchange Act of 1934, as amended, including
Regulation M, the provisions of which may limit the timing of purchases and
sales of the shares by the selling stockholders.
We will make copies of this prospectus (as it may be supplemented or
amended from time to time) available to the selling stockholders and have
informed the selling stockholders of the need to deliver copies of this
prospectus to purchasers at or before the time of any sale of the shares.
Our common stock is traded on the Nasdaq National Market under the symbol
"IRIS." The transfer agent for our shares of common stock is Continental Stock
Transfer & Trust Company, 17 Battery Place, New York, New York, 10004-1123,
Attention: William F. Seegraber.
LEGAL MATTERS
The validity of the issuance of the shares of common stock in this
offering will be passed upon for us by Sheppard, Mullin, Richter & Hampton LLP,
800 Anacapa Street, Santa Barbara, California 93101.
EXPERTS
The consolidated financial statements as of December 31, 2003 and 2002 and
for the three years in the period ended December 31, 2003 incorporated by
reference in this Prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their report incorporated herein by reference, and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
Because we are subject to the informational requirements of the SEC, we
file reports, proxy statements and other information with the SEC. You may read
and copy these reports, proxy statements and other information at the public
reference room maintained by the SEC at the following address:
Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
You may obtain information on the operation of the public reference room
by calling the SEC at (800) SEC-0330. In addition, we are required to file
electronic versions of those materials with the SEC through the SEC's EDGAR
system. The SEC maintains a web site at http://www.sec.gov, which contains
reports, proxy statements and other information regarding registrants that file
electronically with the SEC.
17
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act with respect to the securities offered with this prospectus. This
prospectus does not contain all of the information in the registration
statement, parts of which we have omitted, as allowed under the rules and
regulations of the SEC. You should refer to the registration statement for
further information with respect to us and our securities. Statements contained
in this prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, we refer you to the copy of each
contract or document filed as an exhibit to the registration statement. Copies
of the registration statement, including exhibits, may be obtained without
charge at the website maintained by the SEC at www.sex.gov, or may be inspected
without charge at the SEC's principal office in Washington, D.C., and you may
obtain copies from that office upon payment of the fees prescribed by the SEC.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the information
that has been incorporated by reference into this prospectus (except exhibits,
unless they are specifically incorporated by reference into this prospectus).
You should direct any requests for copies to: Investor Relations, IRIS
International, Inc., 9172 Eton Avenue, Chatsworth, California 91311-5874;
telephone number (818) 709-1244.
INFORMATION INCORPORATED BY REFERENCE
The Securities and Exchange Commission, or SEC, allows us to "incorporate
by reference" in this prospectus the information that we file with the SEC. This
means that we can disclose important information by referring the reader to
those SEC filings. The information incorporated by reference is considered to be
part of this prospectus, and later information we file with the SEC will update
and supersede this information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Section 13(a), 13(c), 14,
or 15(d) of the Securities Exchange Act prior to the termination of the
offering:
o our Annual Report on Form 10-K for our fiscal year ended December 31,
2003 and any amendments thereto;
o our Quarterly Report on Form 10-Q for our fiscal quarter ended March
30, 2004;
o our Current Report on Form 8-K filed with the SEC April 26, 2004;
o the description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on June 3, 1981, including
any amendment or report filed for the purpose of updating this
description.
You may obtain copies of those documents on the website maintained by the
SEC at www.sec.gov, or from us, free of cost, by contacting us at the address or
telephone number provided in "Where You Can Find More Information" immediately
above.
18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of common stock being registered. All
amounts are estimates except the Securities and Exchange Commission registration
fee.
Securities and Exchange Commission registration fee.............. 2,056.01
Nasdaq National Market additional listing fee.................... 21,300.00
Accounting fees and expenses...................................... 15,000.00
Legal fees and expenses........................................... 15,000.00
Printing and related fees......................................... 5,000.00
Miscellaneous..................................................... 5,000.00
Total............................................................. $63,356.01
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation or a derivative action), if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceedings, had no reasonable cause to believe their conduct
was unlawful.
A similar standard is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
such action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's Certificate of
Incorporation, Bylaws, disinterested director vote, stockholder vote, agreement
or otherwise.
As permitted by Section 145 of the Delaware General Corporation Law,
Article VIII of our Certificate of Incorporation, as amended, provides:
II-1
"The corporation shall to the fullest extent permitted by Section
145 of the Delaware General Corporation Law indemnify all persons
whom it may indemnify pursuant thereto."
Our Bylaws provide for indemnification of officers and directors to the
fullest extent permitted by Delaware law. In addition, the Registrant has, and
intends in the future to enter into, agreements to provide indemnification for
directors and officers in addition to that provided for in the Bylaws.
We maintain insurance on behalf of any person who is a director or officer
against any loss arising from any claim asserted against any of them and expense
incurred by any of them in any capacity, subject to certain exclusions.
ITEM 16. EXHIBITS.
Exhibit
Number Description of Exhibit
------ ----------------------
4.1(1) Form of Investor Warrant to Purchase Common Stock
4.2(1) Placement Agent Warrant to Purchase Common Stock, dated April
19, 2004
5.1 Opinion of Sheppard, Mullin, Richter & Hampton, LLP, together
with consent
10.1(1) Form of Common Stock Purchase Agreement
23.1 Consent of Sheppard, Mullin, Richter & Hampton, LLP (included in
its opinion filed as Exhibit 5.1)
23.2 Consent of BDO Seidman, LLP, Independent Auditors
24.1* Power of Attorney
* Previously filed.
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 26, 2004.
ITEM 17. UNDERTAKINGS.
(a) 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-2
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this 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 this 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) if, in the aggregate,
the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form S-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act that
are incorporated by reference in this 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) 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 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act) that is incorporated by reference in this 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) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, executive 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, 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-3
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 Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chatsworth, State of California, on May 21,
2004.
INTERNATIONAL REMOTE IMAGING
SYSTEMS, INC.
By: /s/ Cesar M. Garcia
_______________________________________
Cesar M. Garcia,
Chief Executive Officer
By: /s/ Martin G. Paravato
_______________________________________
Martin G. Paravato,
Chief Financial Officer
II-4
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Cesar M. Garcia* Chief Executive Officer May 21, 2004
------------------------------ and Director
Cesar M. Garcia (Principal Executive Officer)
/s/ Martin G. Paravato Chief Financial Officer May 21, 2004
------------------------------ and Secretary
Martin G. Paravato (Principal Financial and
Accounting Officer)
/s/ Richard H. Williams* Director May 21, 2004
------------------------------
Richard H. Williams
/s/ Steven M. Besbeck* Director May 21, 2004
------------------------------
Steven M. Besbeck
/s/ Thomas F. Kelley* Director May 21, 2004
------------------------------
Thomas F. Kelley
/s/ Richard G. Nadeau* Director May 21, 2004
------------------------------
Richard G. Nadeau
/s/ Michael D. Matte* Director May 21, 2004
------------------------------
Michael D. Matte
*By: /s/ Martin G. Paravato
-------------------
Martin G. Paravato
Attorney-in-Fact
Mary 21, 2004
II-5
INDEX
Exhibit
Number Description of Exhibit
-------- -----------------------------------------------------------------
4.1(1) Form of Investor Warrant to Purchase Common Stock
4.2(1) Placement Agent Warrant to Purchase Common Stock, dated April
19, 2004
5.1 Opinion of Sheppard, Mullin, Richter & Hampton, LLP, together
with consent
10.1(1) Form of Common Stock Purchase Agreement
23.1 Consent of Sheppard, Mullin, Richter & Hampton, LLP (included
in its opinion filed as Exhibit 5.1)
23.2 Consent of BDO Seidman, LLP, Independent Auditors
24.1* Power of Attorney
* Previously filed.
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 26, 2004.