-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H+K+Ogf35hSH/m3hgfMhpvwBx0ArmzWBJZrk8Rx7dFg/BQkOOZveoM0HHyCYc1ZU TuPsVVqyW5Zh/R2TkYU9vQ== 0000950137-02-004999.txt : 20020927 0000950137-02-004999.hdr.sgml : 20020927 20020927150126 ACCESSION NUMBER: 0000950137-02-004999 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20020927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOLECULAR DIAGNOSTICS INC CENTRAL INDEX KEY: 0000075439 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 364296006 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100150 FILM NUMBER: 02774620 BUSINESS ADDRESS: STREET 1: 900 NORTH FRANKLIN STREET STREET 2: SUITE 210 CITY: CHICAGO STATE: IL ZIP: 60610 BUSINESS PHONE: 4078490290 MAIL ADDRESS: STREET 1: 900 NORTH FRANKLIN STREET 1 STREET 2: SUITE 210 CITY: CHICAGO STATE: IL ZIP: 60610 FORMER COMPANY: FORMER CONFORMED NAME: BELL NATIONAL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC COAST HOLDINGS INC DATE OF NAME CHANGE: 19830303 FORMER COMPANY: FORMER CONFORMED NAME: AMPERSAND MEDICAL CORP DATE OF NAME CHANGE: 19990527 S-2 1 c71905sv2.txt FORM S-2 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 2002 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 MOLECULAR DIAGNOSTICS, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-4296006 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.)
414 NORTH ORLEANS STREET, SUITE 510 CHICAGO, ILLINOIS 60610 (312) 222-9550 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) PETER P. GOMBRICH CHIEF EXECUTIVE OFFICER MOLECULAR DIAGNOSTICS, INC. 414 NORTH ORLEANS STREET, SUITE 510 CHICAGO, ILLINOIS 60610 (312) 222-9550 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) Copy to: ROBERT J. MINKUS, ESQ. SCHIFF HARDIN & WAITE 6600 SEARS TOWER CHICAGO, ILLINOIS 60606-6473 (312) 258-5500 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time to time after the effective date of this Registration Statement. 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, check the following box. [X] If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this form, 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, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) 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, check the following box. [ ] CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.001 per share............................ 5,945,000 $0.40 $2,378,000 $219 - ----------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------
(1) The registrant is also registering an undetermined number of shares of common stock as may be issued pursuant to antidilution adjustments. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act based on the average of the bid and ask prices for our common stock as reported on the Over-the-Counter Bulletin Board on September 25, 2002. 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. PURSUANT TO RULE 429 OF THE SECURITIES ACT, THE PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT ALSO COVERS 41,297,458 SHARES OF COMMON STOCK FROM A PREVIOUS REGISTRATION STATEMENT (FILE NO. 333-83578) AS TO WHICH A REGISTRATION FEE OF $1,502 WAS PAID. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. Subject to Completion Dated September 27, 2002 PRELIMINARY PROSPECTUS 46,766,537 Shares MOLECULAR DIAGNOSTICS, INC. COMMON STOCK The selling stockholders listed in this prospectus are offering from time to time: - 5,493,766 shares of our common stock; - 6,104,803 shares of our common stock that are issuable upon the conversion of our Series B convertible preferred stock; - 6,962,824 shares of our common stock that are issuable upon the conversion of our Series C convertible preferred stock; - 1,895,753 shares of our common stock that are issuable upon the conversion of our Series D convertible preferred stock; - 289,286 shares of our common stock that are issuable upon conversion of stock appreciation rights; - 8,865,700 shares of our common stock that are issuable upon conversion of convertible promissory notes; and - 17,154,405 shares of our common stock that are issuable upon exercise of common stock purchase warrants. We will not receive any of the proceeds from the sale of the common stock. We will, however, receive the exercise price of the common stock purchase warrants if and when they are exercised. We issued the common stock, Series B convertible preferred stock, Series C convertible preferred stock, Series D convertible preferred stock, stock appreciation rights, convertible promissory notes and common stock purchase warrants to the selling stockholders in transactions exempt from registration under the Securities Act. The selling stockholders may offer and sell the common stock from time to time in transactions in the over-the-counter market or in negotiated transactions. The selling stockholders directly, or through agents or dealers designated from time to time, may sell the common stock at fixed prices, which may change, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Our common stock is traded on the Over-the-Counter Bulletin Board under the symbol MCDG. On September 25, 2002, the last reported sale price of our common stock on the Over-the-Counter Bulletin Board was $0.39 per share. INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 1. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The date of this prospectus is September [ ], 2002. TABLE OF CONTENTS
PAGE ---- About this Prospectus....................................... i Risk Factors................................................ 1 Forward-Looking Statements.................................. 3 Molecular Diagnostics, Inc.................................. 5 Recent Developments......................................... 11 Use of Proceeds............................................. 11 Selling Stockholders........................................ 12 Plan of Distribution........................................ 27 Description of Capital Stock................................ 29 Legal Matters............................................... 43 Experts..................................................... 43 Where You Can Find More Information About Us................ 43 Documents Delivered with this Prospectus.................... 44 Commission Position on Indemnification for Securities Act Liability................................................. 44
In this prospectus, "we," "us," "our," and "Molecular Diagnostics" refer to Molecular Diagnostics, Inc, its subsidiaries and predecessors. --------------------- You should rely only on information contained in or incorporated by reference in this prospectus. Neither we nor the selling stockholders have authorized anyone to provide you with different information. The selling stockholders are not offering these securities in any state where the offer is not permitted. You should not assume that the information provided by this prospectus is accurate as of any date other than the date on the front of this prospectus. ABOUT THIS PROSPECTUS This prospectus is part of two registration statements that we filed with the Securities and Exchange Commission to register 46,766,537 shares of our common stock which the selling stockholders named in this prospectus may sell from time to time. Accordingly you should refer to these registration statements and their exhibits for further information about us and our common stock. Statements contained in this prospectus concerning documents we filed with the SEC are not intended to be comprehensive, and in each instance we refer you to the copy of the actual document filed as an exhibit to the registration statements or otherwise filed with the SEC. You should read this prospectus together with the additional information described under the heading "Where You Can Find More Information About Us." i RISK FACTORS You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones we are facing. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. THERE IS A LIMITED MARKET FOR PENNY STOCKS SUCH AS OUR COMMON STOCK. Our common stock is considered a "penny stock" because, among other things, its price is below $5 per share, it trades on the Over-the-Counter Bulletin Board and we have net tangible assets of less than $2,000,000. As a result, there may be less coverage by security analysts, the trading price may be lower, and it may be more difficult for our stockholders to dispose of, or to obtain accurate quotations as to the market value of, their common stock. Being a penny stock could limit the liquidity of our common stock. THE HISTORICALLY VOLATILE MARKET PRICE OF OUR COMMON STOCK MAY AFFECT THE VALUE OF OUR STOCKHOLDERS' INVESTMENT AND OUR ABILITY TO RAISE ADDITIONAL CAPITAL. The market price of our common stock, like that of many other medical products and biotechnology companies, has in the past been highly volatile. This volatility is likely to continue for the foreseeable future. Factors affecting the volatility of our common stock include: - general economic and other external market factors; - announcements of mergers, acquisitions, licenses and strategic agreements; - announcements of private or public sales of securities; - announcements of new products or technology by us or our competitors; - ability to finance our operations; - fluctuations in operating results; and - announcements of the Food and Drug Administration ("FDA") relating to products. OUR COMMON STOCK IS UNLIKELY TO PRODUCE DIVIDEND INCOME FOR THE FORESEEABLE FUTURE. We have never paid a cash dividend on our common stock and we do not anticipate paying cash dividends for the foreseeable future. We intend to reinvest any funds that might otherwise be available for the payment of dividends in the further development of our business. OUR COMMON STOCK IS SUBJECT TO DILUTION, AND AN INVESTOR'S OWNERSHIP INTEREST AND RELATED VALUE MAY DECLINE. We are authorized to issue up to 10,000,000 shares of preferred stock. We have approximately 118,093 shares of Series A convertible preferred stock outstanding which convert into 51,580 shares of our common stock and 1,324,856 shares of Series B convertible preferred stock outstanding which convert into 6,104,803 shares of our common stock. We also have 1,285,499 shares of Series C convertible preferred stock outstanding which convert into 6,962,824 shares of our common stock, 175,000 shares of Series D convertible preferred stock outstanding which convert into 1,895,753 shares of our common stock, and 434,387.52 shares of Series E convertible preferred stock outstanding, which will be convertible into 12,701,670 shares of our common stock on December 1, 2002. Our Certificate of Incorporation gives our Board of Directors authority to issue the remaining undesignated shares of preferred stock with such voting rights, designations, rights, preferences and limitations as they may determine. 1 We have outstanding warrants to purchase 17,154,405 shares of our common stock, outstanding options to purchase approximately 3,429,330 shares of our common stock, 450,000 stock appreciation rights which are convertible into 289,286 shares of common stock, and $3,659,439 in principal amount of convertible promissory notes outstanding which are convertible into 8,865,700 shares of common stock. Exercise or conversion by the holders of these securities would result in substantial dilution to our shareholders. WE HAVE A LIMITED OPERATING HISTORY AND THERE ARE DOUBTS AS TO OUR BEING A GOING CONCERN. We have a limited operating history. Our revenues, since our inception in March 1998, have been derived nearly entirely from sales by Samba Technologies, SARL, our wholly-owned subsidiary. We have not introduced or sold any of our InPath System products to date. We will continue to devote substantial resources to product development. We anticipate that we will continue to incur significant losses unless and until some or all of our products have been successfully introduced, if ever, into the market place. We have incurred substantial losses and have limited financial resources. Consequently, our independent accountants have noted that these conditions raise substantial doubt as to our ability to continue as a going concern. Our financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result from the outcome of this uncertainty. The going concern explanatory paragraph may make additional financing more difficult or costly. WE MAY NOT BE ABLE TO MEET OUR SHORT-TERM CAPITAL REQUIREMENTS. We believe that our existing capital resources are not sufficient to meet the short-term requirements of our company. These short-term requirements include a significant amount of liabilities and promissory notes that are in arrears. In addition, we have unpaid tax liabilities. Therefore, we need to raise additional capital to meet these obligations and support our operations. We do not have any current commitments for additional funds, and our management cannot be certain that we will be able to raise such funds. It is unlikely that we will be able to meet our short-term funding requirements through the issuance of notes or other debt instruments. We anticipate that these short-term funding needs including the payment on defaulted promissory notes will require the sale or issuance of additional shares of common stock or instruments convertible into common stock. Such sales, or issuances, if any, may have a dilutive effect on the value of our common stock. We cannot be certain what level of dilution, if any, may occur or if we will be able to complete any such sales of common stock in the future. Our operating business plan for 2002 anticipated that we would need to raise new equity during the early part of the year, which we did in a bridge financing completed in June 2002. The failure to raise sufficient additional funds would adversely affect our ability to meet our short-term capital requirements, continue our clinical tests, meet our product timelines and/or to continue as a going concern. We have retained Fortis Advisors, LLC as our financial advisors to seek other sources of new debt or equity financing, including strategic alliances, which may involve equity investments. WE MAY NOT BE ABLE TO MEET OUR LONG-TERM CAPITAL REQUIREMENTS. We do not know if we will be able to sustain our long term operations through future revenues. Whether we will need to raise additional funds to support our long-term operations is influenced by many factors, including the costs, timing and success of efforts to develop products and market acceptance of our products. OUR PRODUCTS ARE SUBJECT TO GOVERNMENT REGULATION AND MAY NOT RECEIVE NECESSARY GOVERNMENT APPROVALS. The sale and use of our products in the United States is regulated by the FDA. We must meet significant FDA requirements before we receive clearance to market our products. Included in these FDA requirements 2 is the conduct of lengthy and expensive clinical trials to prove the safety and efficacy of the products. Until we complete such clinical trials our products may be used only for research purposes or to provide supplemental diagnostic information in the United States. We have received FDA approval for one of our products, the e(2) Collector. We have started clinical trials for one other product and expect to begin additional trials in 2003. We cannot be certain that our product development plans will allow these additional trials to commence or be completed according to plan or that the results of these trials, or any future trials, when submitted to the FDA along with other information, will result in FDA clearance to market our products in the United States. Sales of medical devices and diagnostic tests outside the United States are subject to foreign regulatory requirements that vary from country to country. The time required to obtain regulatory clearance in a foreign country may be longer or shorter than that required for FDA marketing clearance. Export sales of certain devices that have not received FDA marketing clearance may be subject to regulations and permits, which may restrict our ability to export the products to foreign markets. If we are unable to obtain FDA clearance for our products, we may need to seek foreign manufacturing agreements to be able to produce and deliver our products to foreign markets. We cannot be certain that we will be able to secure such foreign manufacturing agreements. WE MAY NOT BE ABLE TO COMPETE WITH COMPANIES THAT ARE LARGER AND HAVE MORE RESOURCES. We compete in the medical device and diagnostics marketplace with companies that are much larger and have greater financial resources than we do. We cannot be certain that our products will be able to be successfully marketed in this competitive environment. WE MAY NOT BE ABLE TO MARKET OUR PRODUCTS. We do not intend to maintain a direct sales force to market our products. Therefore, in order to successfully market our products, we must be able to negotiate profitable sales and marketing agreements with organizations that have direct sales forces calling on domestic and foreign markets that may use the products. If we are not able to successfully negotiate such agreements, we may be forced to market our products through our own sales force. We cannot be certain that we will be successful in developing and training such a sales force, should one be required, or that we will have the financial resources to carry out such development and training. WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY. We hold a variety of patents and trademarks and have applied for a significant number of additional patents and trademarks with the United States Patent and Trademark Office and several foreign patent authorities. We intend to file additional patent and trademark applications as dictated by our research and development projects and business interests. We cannot be certain that any of the currently pending patent or trademark applications, or any of those which may be filed in the future, will be granted. We protect much of our core technology as trade secrets because our management believes that patent protection would not be possible or would be less effective than maintaining secrecy. We cannot be certain that we will be able to maintain secrecy or that a third party will not be able to develop technology independently. The cost of litigation to uphold the validity of a patent or patent application, prevent infringement or protect trade secrets could be substantial, even if we are successful. Furthermore, we cannot be certain that others will not develop similar technology independently or design around the patent aspects of our products. FORWARD-LOOKING STATEMENTS This prospectus contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, which are, in turn, based on information currently available to 3 our management. When we use words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "should," "likely" or similar expressions, we are making forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions. Our future results and stockholder values may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under "Risk Factors" beginning on page 1. In addition to the Risk Factors and other important factors discussed elsewhere in this prospectus, and in our Annual Report on Form 10-K, as amended, which accompanies this document, you should understand that other risks and uncertainties and our public announcements and SEC filings could affect our future results and could cause results to differ materially from those suggested by the forward-looking statements. Except for special circumstances in which a duty to update arises when prior disclosure becomes materially misleading in light of subsequent events, we do not intend to update any of these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. 4 MOLECULAR DIAGNOSTICS, INC. GENERAL We were incorporated in Delaware in December 1998 as the successor to Bell National Corporation ("Bell National"), which was incorporated in California in 1958. In December 1998, Bell National, which was then a shell corporation without any business activity, acquired InPath, LLC, ("InPath") a development stage company engaged in the design and development of products used in screening for cervical and other types of cancer. For accounting purposes, the acquisition was treated as if InPath had acquired Bell National. However, Bell National continued as the legal entity and the registrant for SEC filing purposes. Bell National merged into Ampersand Medical Corporation, its wholly-owned subsidiary, in May 1999 in order to change the state of incorporation of the company to Delaware. In January 1999, we purchased all of the assets of Samba Technologies, SARL, ("Samba") based in France, from Unilog Regions, S.A. In September 2001, we acquired AccuMed International, Inc., ("AccuMed") by means of a merger of AccuMed into our wholly-owned subsidiary. Shortly after the AccuMed merger, Ampersand Medical Corporation changed its corporate name to Molecular Diagnostics, Inc. The name change was effected by the merger of our wholly-owned subsidiary, Molecular Diagnostics, Inc., with and into Ampersand Medical Corporation. In October 2001, we became a minority shareholder in Cell Solutions, LLC, a Virginia limited liability company. We are focused on the design, development and marketing of the InPath System. The component products of the InPath System are intended to detect, at the earliest possible stage, cancer and cancer-related diseases and may be used in a laboratory, clinic, or doctor's office. We also design and manufacture the AcCell computer aided-automated microscopy instrument and the AcCell Savant, an instrument that includes an AcCell and software, which collects quantitative cellular information used in support of a diagnostic process. These instruments are sold to laboratories and medical diagnostic companies for use in the customers' proprietary applications. The instruments, in certain instances, are also placed in customer facilities on a fee-for-use basis. Samba designs, develops and markets web-enabled software based systems for image analysis, image capture, and image transmission and management for clinical and industrial applications. Samba is also developing the software used in the InPath System. Nearly all of our reported revenue to date has been from the sale of Samba products and services. The science of medical diagnostics has advanced significantly during the past decade. Much of this advance has come as a result of new knowledge of the human genome and related proteins, which form the foundation of cell biology and the human body. Our goal is to utilize this research as a base to develop screening and diagnostic testing products for cancer and cancer-related diseases. We believe that the success of these products will improve patient care through more accurate test performance, wider availability and more cost-effective service delivery. We are developing an initial series of products to address these criteria including sample collection devices, chemical and biological tests, and analytic instruments and related software. Our strategy is to develop products through internal development processes, strategic partnerships, licenses and acquisitions of companies. This strategy has required and will continue to require additional capital. As a result, we will incur substantial operating losses until we are able to successfully market some, or all, of our products. PRODUCTS The InPath System We are currently developing and testing a family of products for use in cancer screening and diagnosis. We call this family of products the InPath System. The core of the InPath System is a combination of protein antibodies -- the Cocktail-CVX -- that allows the InPath System to detect and highlight abnormal cervical cells in a rapid and objective fashion. We intend to use different antibody combinations to detect and diagnose different types of cancer and other cancer-related diseases. The initial application of the InPath System is designed to enhance the current cervical cancer screening process performed in laboratories, commonly referred to as the PAP test. Our ultimate goal is to perform this 5 screening test in a matter of minutes at the point of service, whether in a laboratory, doctor's office, clinic or mobile medical vehicle. The InPath System includes the following components: - A unique sample collection device consisting of a small disposable balloon, shaped to fit the cervix. The device is intended to replace the spatula and brush currently used to collect patient cytology samples. - A biochemical assay, fully-automated, is applied to a sample to identify abnormal cells. - In the laboratory version of the InPath System slide based test, this biochemical assay is applied to sample cells released from a collection device and deposited on a glass slide. - In the point of service version of the InPath System, this biochemical assay is applied directly to the cellular sample and analyzed either in solution or while still on the collection device. - An instrument which performs an automated analysis of a sample by means of an optical scan that detects the presence of multiple wavelengths of fluorescent light. This light is produced by fluorescent reporter tags, which are attached to certain components used in the biochemical assay. - In the laboratory version of the InPath System, the AcCell computer aided automated microscopy instrument uses a camera to read the various wavelengths of light from the collector. - In the point of service version of the InPath System, the proprietary instrument uses custom designed optical devices and lasers to capture the various wavelengths of light. - Custom designed software that controls the automated instruments and processes the analysis of the captured light detected. IN-CELL HPV TEST In June 2000, we obtained a world-wide exclusive license from Invirion and Bruce Patterson, M.D., its principal, for a proprietary medical technology to detect the presence of E6 and E7 genes of the human papillomavirus ("HPV"), a sexually transmitted disease. These viral oncogenes signify that the virus has assimilated into the patient's cellular DNA, and presence of E6/E7 genes is much more closely associated with a woman's risk of developing cervical cancer than currently marketed HPV tests. We intend to use this technology as part of the InPath System to allow physicians to manage patient care. The combination of the two tests will give the healthcare provider a better picture of the level of any disease present and whether a patient may be at an increased risk to develop certain diseases in the future. Based on these results, the health care provider may prescribe a more thorough course of treatment. We began to offer this product for sale as an Analyte Specific Reagent ("ASR") for use by laboratories qualified to perform high complexity tests in "home-brew" applications at the end of 2001, received initial orders in the first quarter of 2002, and made initial shipments during second quarter of 2002. SAMBA SOFTWARE PRODUCTS AND SERVICES Samba designs, develops and markets web-enabled software based systems for image analysis, image capture, and image transmission and management in clinical and industrial applications. Samba also designs the imaging and analysis software used in the laboratory version of the InPath System. Samba is currently working on control and analysis software for other instruments in the InPath System. Nearly all of our reported revenue to date is derived from the sale of Samba's products and services to other researchers, other instrument manufacturers, and pharmaceutical companies. Samba software suites, a group of programs that may be used alone or in combination for a particular application, allow the user to capture and share digital images and related data. Examples of applications are radiology, pathology, and real-time coordination between a pathologist and a physician during surgical procedures. Samba software can create a single data folder, where patient information, physician case notes and diagnostic images from various sources are maintained or annotated. The software can be employed in local or wide area networks, or through an Internet browser using security-encrypted files. All of Samba's software, developed using Visual Basic, C/C++ and Java, can be used on a wide variety of image capture 6 instruments or devices and can employ static, historical, or dynamic (live) images. Samba also provides software customization, installation, interface, network, and Internet consulting services to the users of its products. AUTOMATED MICROSCOPY INSTRUMENTS AcCell In November 2001, Ventana Medical Systems, Inc. ("Ventana") agreed to purchase and distribute, on a non-exclusive basis, AcCell with their image analysis software, a computer aided automated microscopy instrument, designed to help medical specialists examine and diagnose specimens of human cells. AcCell may be delivered with a variety of features including: - Robotic slide-feeding systems to load and unload slides from the microscope; - Bar code readers to ensure proper identification of samples being analyzed; - Electro-mechanical scanning stages to facilitate accurate slide screening; - Automated cellular focusing on slides; and - Data management software to facilitate primary or secondary review of samples and report results into record-keeping systems. The current AcCell instrument is a key tool of our research process, clinical trials, and the InPath System laboratory based test. During the fourth quarter of 2001, we initiated development of the next generation of the AcCell instrument, AcCell 2500, utilizing strategic design and manufacturing partners. During that same quarter, we also signed contracts with customers to deliver both the current version and the AcCell 2500 version of the instrument. Delivery of AcCell 2500 prototype units commenced in the second quarter of 2002. Delivery of production units is presently scheduled to begin in the first quarter of 2003. We are continuing to sell and market the instrument to other potential customers, OEM laboratories and into the diagnostics marketplace. AcCell Savant The AcCell Savant includes an AcCell base instrument as well as an electronic imaging system and image analysis software. This instrument is designed for use as a quantitative microscopy platform. We currently have instruments in use in a customer's laboratory or clinical facility for research purposes under a fee-per-use contract, which we extended through 2003. As a part of the contract extension, we agreed to provide additional instruments to handle the customer's laboratory or clinical facility for research purposes and increased test volumes. The customer has also agreed to be a beta test site for a new and updated version of the proprietary image analysis software used in the application. Variations of this platform may also be used with image analysis software developed by Samba. MARKETS According to several industry reports, there are approximately 60,000,000 PAP tests performed annually in the United States. The U.S. market for cervical screening today amounts to approximately $1,000,000,000, based on current average costs to perform the existing test. Our initial strategy is to market the laboratory version of the InPath System to major laboratory organizations in the United States. Once the InPath System has been successfully established in the laboratory market, our strategy is to form alliances with these laboratories and other medical products distribution companies and utilize their sales forces to broaden sales of the InPath System to hospitals, clinics, managed care organizations and office-based physician groups. The cost of the PAP test outside of the United States, where approximately 100,000,000 tests are performed annually, varies widely from country to country. Outside the United States, most healthcare services are provided by governmental organizations. Healthcare in many of these countries is managed by governmental agencies, often at the local level, making the precise number of tests performed difficult to 7 validate. In developing countries where healthcare, especially cancer screening, may be minimal, non-profit organizations often supplement government health programs. We estimate the total of the non-U.S. market today at between $500,000,000 and $600,000,000. We intend to distribute the InPath System into both markets pursuant to our statutory regulatory approvals. We also anticipate that because our products are more cost-effective and designed to increase access to cervical screening, the potential combined market could be expanded to a level in excess of $3,000,000,000. The AcCell is a key proprietary component of the laboratory version of the InPath System. In addition, we are marketing the AcCell instrument platform, including the version nearing its market introduction, to medical diagnostic companies as a means to automate specific diagnostic testing processes. We will attempt to expand our existing customer base and to supply the AcCell platform to additional customers who are interested in automating their proprietary diagnostic testing processes. We market the AcCell as the most versatile and cost-effective automated microscopy platform currently available. We are expanding our existing customer base for the AcCell Savant and will continue to market this product to customers interested in image analysis and quantitative microscopy. Samba currently sells its products and services through direct sales and representatives in Europe and through a distribution arrangement in Central and South America. Prior to 1999, Samba had a distribution arrangement in North America. Since our acquisition of Samba, we have marketed Samba products in the United States. Samba is adding to its distribution agreements to cover specific countries or market segments in Europe, Asia, the Middle East and North Africa. During 2000, we added a full time marketing person to introduce the Samba products to a broad range of potential customers and distribution partners in the United States. This potential market includes large laboratories, integrated healthcare delivery networks, web-based medical information providers, and laboratory and hospital information system vendors. We have licensed Samba software to a large medical diagnostics company in the United States and have several pilot-study installations currently in place or planned for 2002 and 2003 in the United States. GOVERNMENT REGULATION, CLINICAL STUDIES AND REGULATORY STRATEGY The development, manufacture, sale, and distribution of some of our products is regulated by the FDA and comparable authorities in certain states and foreign countries. In the United States, the Food, Drug and Cosmetic Act (the "FD&C Act") and related regulations apply to some of our products. These products cannot be shipped in interstate commerce without prior authorization from the FDA. Medical devices may be authorized by the FDA for marketing in the United States either pursuant to a pre-market notification under Section 510(k) of the FD&C Act, commonly referred to as a 510(k) notification, or a pre-market approval application (a "PMA"). The process of obtaining FDA marketing clearance and approval from other applicable regulatory authorities is costly and there can be no guarantee that the process will be successful. The 510(k) notifications and PMA applications typically require preliminary internal studies, field studies, and/or clinical trials, in addition to submission of other design documentation. We manage the regulatory process through the use of consultants, Clinical Research Organizations, ("CROs") and members of our Medical Advisory Board. A 510(k) notification, among other things, requires an applicant to show that its products are "substantially equivalent" in terms of safety and effectiveness to an existing FDA-cleared predicate product. An applicant may only market a product submitted through a 510(k) notification after the FDA has issued a written notification determining the product has been found to be substantially equivalent. To obtain PMA approval for a device, an applicant must demonstrate, independent of other similar devices, that the device in question is safe and effective for its intended uses. A PMA must be supported by extensive data, including pre-clinical and clinical trial data, as well as extensive literature and design documentation to prove the safety and effectiveness of the device. The PMA process is substantially longer than a 510(k) notification process. During the review period, the FDA may conduct extensive reviews of our clinical trial center documentation and our manufacturing facilities and processes or those of our strategic 8 partners. In addition, the FDA may request additional information and clarifications and convene a physician advisory panel to assist in its determination. The FD&C Act generally bars advertising, promoting, or other marketing of medical devices that the FDA has not approved or cleared. Moreover, FDA enforcement policy strictly prohibits the promotion of known or approved medical devices for non-approved or "off-label" uses. In addition, the FDA may withdraw product clearances or approvals for failure to comply with regulatory standards. Our current and prospective foreign operations are also subject to government regulation, which varies from country to country. Many countries, directly or indirectly through reimbursement limitations, control the price of most healthcare products. Developing countries put restrictions on the importation of finished products, which may delay such importation. European Directives establish the requirements for medical devices in the European Union. The specific directives are the Medical Device Directive (MDD 93/42/EEC) and the In-Vitro Diagnostics Device Directive (IVDD/98/79/EEC). The International Organization for Standardization ("ISO") establishes standards for compliance with these directives, particularly for quality system requirements. The FDA has adopted regulations governing the design and manufacture of medical devices that are, for the most part, harmonized with the ISO's quality system standards for medical devices. The FDA's adoption of the ISO's approach to regulation and other changes to the manner in which the FDA regulates medical devices will increase the cost of compliance with those regulations. We will be subject to certain registration, record-keeping and medical device reporting requirements of the FDA. Our manufacturing facilities, or those of our strategic partners, will be obligated to follow the FDA's Quality System Regulation and be subject to periodic FDA inspections. Any failure to comply with the FDA's Quality System Regulation or any other FDA or other government regulations would have a material adverse effect on our future operations. The InPath System will need to be cleared for marketing by the FDA, as described above, prior to its sale and use in the U.S. clinical market. We cannot be sure whether or when the FDA will clear the InPath System. Internationally, the InPath System may be subject to various government regulations, which may delay the introduction of new products and services and adversely affect our business. The InPath System may be subject to regulation in the United States under the Clinical Laboratory Improvement Act ("CLIA"). CLIA establishes quality standards for laboratories conducting testing to ensure the accuracy, reliability and timeliness of patient test results, regardless of where the test is performed. The requirements for laboratories vary based on the complexity of the tests performed. Thus, the more complicated the test, the more stringent the requirement. Tests are categorized as high complexity, moderate complexity (including the category of provider performed microscopy) and waived tests. CLIA specifies quality standards for laboratory proficiency testing, patient test management, quality control, personnel qualifications and quality assurance, as applicable. The FDA is responsible for categorization of commercially marketed laboratory tests. The Centers for Disease Control ("CDC") is responsible for categorization of laboratory procedures such as provider-performed microscopy. For commercially-marketed tests, the FDA now determines the appropriate complexity category as it reviews pre-market submissions for clinical laboratory devices. Manufacturers are asked to include an extra copy of the package insert identified as "FOR CLIA CLASSIFICATION" in the submission for product commercialization (i.e., 510(k) or PMA). Manufacturers are notified of the assigned complexity through routine FDA correspondence (that is, as an enclosure with a clearance or approval letter or as a separate letter in response to other submissions). Categorization is effective as of the date of the written notification to the manufacturer. We are developing the InPath System to be user-friendly, require minimal operator training, and have safety and operating checks built into the functionality of the instruments. We believe that our efforts will result in the FDA and/or the CDC assigning the lowest possible classification of the InPath System. If, however, these products are classified into a higher category, it may have a significant impact on our ability to market the product in the United States. 9 We continue to conduct clinical studies and trials on our InPath System during its development. These studies and trials vary in terms of number of patient samples, individual product components, specific processes and conditions, purpose, and other factors which may affect the results. We are using the data from our completed and ongoing clinical trials and studies to offer our InPath System for sale as an ASR in countries such as the United States, Mexico, Peru, Chile, India, China and other developing nations. We are not permitted to market non-ASR products in certain countries, including the United States, with clinical or diagnostic claims until we have received clearance from the appropriate regulatory agency. ASR tests make no medical claims but may be used by laboratories, who are qualified to perform high complexity tests, and physicians as components of "home-brew" procedures. We received our first U.S. ASR orders in early 2002. We are pursuing regulatory approval of the InPath System products through a series of submissions and in some cases, using data from a single clinical study. This tiered approach is designed to accelerate revenue opportunities for the InPath System in the short term and to drive adoption of our innovative products over the long term, while minimizing the expense and time involved in undertaking the appropriate study. The first stage of the overall strategy involved the submission of our e(2) Collector for approval as a substantially equivalent device to the brush and spatula method of gathering samples used in the current PAP tests. We filed the 510(k) notification in late September 2001 and received FDA approval in the second quarter of 2002. The second stage of our overall strategy involves a continuing study of the InPath System and Cocktail-CVX. This submission will cover the InPath System as a means to eliminate true negative samples from further testing. We presently anticipate completion of this portion of the study and submission of the data to the FDA during the fourth quarter of 2002. We will also submit the data to foreign regulatory authorities that have jurisdiction over these products. Subsequently, we will be collecting and submitting data for the InPath System point of service test. We anticipate that we will begin launching our clinical trials of the InPath In-Cell HPV test during the first quarter of 2003 and expect completion of the trial and submission of the data to the FDA during the second quarter of 2003, depending on our ability to raise necessary capital. If the submissions for the various InPath System products are cleared by the FDA for sale in the U.S. market or approved for sale by foreign regulatory agencies, we intend to sell the cleared products in the respective clinical markets. INPATH SYSTEM PROJECTED PRODUCT INTRODUCTION TIMELINES
PRODUCT PROCESS TIMELINE - ------- ------- -------- e2 Collector Clinical trials Completed Regulatory submission & review Filed September 28, 2001 Regulatory clearance Approved May 31, 2002 US sales 3rd Quarter 2002 International sales 1st Quarter 2003 Cocktail-CVX Clinical trials Current through 4th Quarter 2002 Regulatory submission & review 4th Quarter 2002 Regulatory clearance projected 4th Quarter 2003 US sales (ASR) 1st Quarter 2003 US sales 1st Quarter 2004 International sales (CE Mark) 1st Quarter 2003 In-Cell HPV test Regulatory submission & review 2nd Quarter 2003 Regulatory clearance anticipated 2nd Quarter 2004 US sales (ASR) 2nd Quarter 2003 International sales (CE Mark) 2nd Quarter 2003 International sales 4th Quarter 2001
We currently distribute AcCell, AcCell Savant and Samba software products into commercial markets that do not require regulatory clearance. In order to distribute these products for use in certain clinical 10 applications, however, we will be required to conduct clinical trials and to make submissions to applicable regulatory agencies for clearance. We do not have any current plans to make any submissions to the FDA or other foreign regulatory agencies covering these products. In the future, some of our customers may include these products in submissions to the FDA or other foreign regulatory agencies covering their use in a customer's proprietary diagnostic or clinical process. RECENT DEVELOPMENTS In June 2002, we completed a bridge financing in which we issued 105 units, each consisting of a $25,000 convertible promissory note at 7% due July 30, 2002 and a common stock purchase warrant entitling the holder to the right to purchase 25,000 shares of our common stock for $0.65 per share. Each unit sold for $25,000 and we received $2,625,000. In August 2002, the bridge notes were amended to extend the maturity date to December 31, 2002 and to eliminate the $0.50 per share floor conversion price. The bridge warrants were also amended to reduce the exercise price to $0.25 per share. Bathgate McColley Capital Group, LLC served as our placement agent. In July 2002, we entered into a contract for investment banking services with Fortis Advisors, LLC. We issued 60,182 shares of common stock to Fortis Advisors as an inducement to reach this agreement. On August 30, 2002, we issued a promissory note to Round Valley Capital, LLC in exchange for $650,000 cash. The note bears interest at the annual rate of 36%, and is due on June 1, 2003. The promissory note is senior to all other borrowings and trade payables. The transaction included fees of $131,118 that were netted out of the note proceeds. Additionally, as an inducement to enter into the agreement, we issued to Round Valley Capital 711,364 shares of common stock and a warrant to purchase 681,818 shares of common stock for $0.20 per share. The warrant was exercisable when the loan was funded, and expires September 2003. In lieu of additional cash fees requested by Round Valley Capital, the exercise price of the warrant is discounted from the current market price of our stock. We also issued 5,750,000 shares of common stock to Round Valley Capital to be held as collateral for the transaction. USE OF PROCEEDS All of the shares of common stock offered pursuant to this prospectus are being offered by the stockholders listed under Selling Stockholders. We will not receive any of the proceeds from the sales of the shares of common stock. We will receive the exercise price of the common stock purchase warrants if and when they are exercised, up to an aggregate of approximately $17,777,268 if all common stock purchase warrants are exercised. We intend to use any proceeds from the exercise of the common stock purchase warrants for working capital and general corporate purposes. 11 SELLING STOCKHOLDERS The following table sets forth with respect to the selling stockholders (i) the number and percentage of shares of common stock beneficially owned as of August 31, 2002, (ii) the maximum number of shares of common stock which may be sold pursuant to this prospectus and (iii) the number and percentage of shares of common stock which will be beneficially owned after sales pursuant to this prospectus, assuming the sale of all shares of common stock set forth in (ii) above:
NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ Peter P. Gombrich, Chairman of the Board, Chief Executive Officer, and director(1).............. 870,666 3.4% 674,000 196,666 * 414 N. Orleans #510 Chicago, IL 60610 John Abeles, M.D., director(3).................... 388,199 1.5% 0 219,000 * 414 N. Orleans #510 Chicago, IL 60610 Alexander M. Milley, director(2).................. 3,916,167 13.3% 0 219,000 * 414 N. Orleans #510 Chicago, IL 60610 Cadmus Corporation(4)............................. 822,167 3.1% 539,286 282,881 1.1% 3600 Rio Vista Avenue Orlando, FL 32805 Azumith Corporation(60)........................... 2,875,000 10.1% 2,875,000 0 * 3600 Rio Vista Avenue Orlando, FL 32805 Denis O'Donnell, director(7)...................... 1,003,901 3.8% 784,901 219,000 * c/o Molecular Diagnostics 414 North Orleans, Suite 510 Chicago, IL 60610 Robert C. Shaw, director(6)....................... 719,417 2.8% 500,417 219,000 * 414 N. Orleans #510 Chicago, IL 60610 William J. Ritger(8).............................. 4,274,063 16.4% 270,823 4,003,240 15.4% 623 Ocean Avenue Sea Girt, NJ 08750 Leonard R. Prange(5).............................. 1,091,017 4.2% 108,329 982,688 3.8% 641 W. Willow #142 Chicago, IL 60614 Eric Gombrich(9).................................. 448,406 1.7% 25,000 423,406 1.6% c/o 414 N. Orleans, #510 Chicago, IL 60610 Robert M. Adrian(11).............................. 75,758 * 75,758 0 * 6211 Highland Drive Chevy Chase, MD 20815 Airlie Group LP(10)............................... 453,176 1.8% 453,176 0 * 201 Main Street, #3300 Fort Worth, TX 76102 Ameripath, Inc.(64)............................... 112,481 * 112,481 0 * 8100 Chancellor Dr, Suite 200 Orlando, FL 32809-7645 Bathgate McColley Capital Group, LLC(13).......... 825,250 3.1% 825,250 0 * 5350 South Roslyn St., #380 Englewood, CO 80111 Margaret M. Bathgate(65).......................... 822 * 822 0 * 6376 E. Tufts Ave. Englewood, CO 80111 Bentell AS(12).................................... 50,000 * 50,000 0 * Askervelen 61 N-1373 Asker NORWAY
12
NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ Frank Blatz(12)................................... 25,000 * 25,000 0 * 970 Nepawin Lane Scotch Plains, NJ 07076 Kevin G. Boyle(47)................................ 7,781 * 7,781 0 * 127 Hawksbill Way Jupiter, FL 33458 Kevin G. Boyle Securities, Inc.(27)............... 50,000 * 50,000 0 * 365 Stewart Ave., Apt B10 Garden City, NY 11530 Brady Retirement Fund, L.P.(48)................... 228,939 * 228,939 0 * 44 Montgomery St., #2110 San Francisco, CA 94104 John H. Burlingame(12)............................ 15,000 * 15,000 0 * P.O. Box 948 South Orleans, MA 02662 Christopher Patrick Casaburo(53).................. 106,699 * 106,699 0 * 405 Mayfair Lane Louisville, KY 40207 David Cathcart(12)................................ 15,000 * 15,000 0 * 207 Fox Horn Lane Charlottesville, VA 22902 Cat Invest I, AS(15).............................. 238,239 * 238,239 0 * v/Adv. Oystein Eskeland Postboks 1484 Vika 0116 Oslo NORWAY Cell Solutions, L.L.C.(41)........................ 172,120 * 172,120 0 * 95 Big Tree Street Livonia, NY 14487 Michael Chiero(31)................................ 10,000 * 10,000 0 * 715 Walnut Dr. Darien, IL 60561 Commonwealth Associates(16)....................... 1,023,302 3.8% 1,023,302 0 * 830 Third Ave., 4th Floor New York, NY 10022 Neil Costa(14).................................... 89,371 * 89,371 0 * 714 Broadway New York, NY 10003 J Thomas Cox(43).................................. 50,000 * 50,000 0 * 1063 Sandpiper Lane Santa Barbara, CA 93110 Thomas F. Curnin(12).............................. 35,000 * 35,000 0 * 40 Ocean Avenue Larchmont, NY 10538 Bruce H. Davis, M.D.(53).......................... 106,699 * 106,699 0 * Box 6357 Scarborough, ME 04070-6357 Bruce De Schryver(12)............................. 20,000 * 20,000 0 * 10 Woodbury Way Fairport, NY 14450 Richard D. Doermer(17)............................ 15,000 * 15,000 0 * 415 N. LaSalle, #500 Chicago, IL 60610 Richard Domanik(69)............................... 51,483 * 51,483 0 * 30908 Leslie Court Libertyville, IL 60048 Fred and Susan Duboc(65).......................... 53,630 * 53,630 0 * 5500 South Pemberton Littleton, CO 80121 Susan M. Duncan(53)............................... 106,699 * 106,699 0 * 2651 S. Wadsworth Circle Lakewood, CO 80227
13
NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ Susan M. Duncan Irrev Gift Trust(53).............. 106,699 * 106,699 0 * 2651 S. Wadsworth Circle Lakewood, CO 80227 James E. Duncan(53)............................... 106,699 * 106,699 0 * 2651 S. Wadsworth Circle Lakewood, CO 80227 Gary C. Evans(18)................................. 404,541 1.6% 404,541 0 * 13215 Glad Acres Farmers Branch, TX 75234 David A. Fishman(43).............................. 50,000 * 50,000 0 * 333 Superior Street, #420 Chicago, IL 60611 Bruce J. Fogel(15)................................ 115,370 * 115,370 0 * 359 Eagle Drive Jupiter, FL 33477 Fortis Advisors, LLC(70).......................... 60,182 * 60,182 0 * 6909 E. Main Street Suite 101 Scottsdale, AZ 85251 Four Corners Investment, Corp.(49)................ 623,766 2.4% 623,766 0 * c/o Mr. Laurence Gibson, President 330 S. Decatur Blvd., Suite 1000 Las Vegas, NV 89107 FISERV C/FBO Greg Fulton SDIRA(53)................ 106,699 * 106,699 0 * c/o Mr. Greg Fulton 5520 S. Newport St. Greenwood Village, CO 80111 Charles B. Ganz(27)............................... 50,000 * 50,000 0 * c/o Mellon Private Asset Management 1801 N. Military Trail Boca Raton, FL 33431 Geary Partners, L.P.(24).......................... 1,151,961 4.3% 1,151,961 0 * c/o Mr. William J. Brady 44 Montgomery St., Suite 2110 San Francisco, CA 94104 Drew S. Giles & Laurette K. Giles(27)............. 7,500 * 7,500 0 * S. Pine Hill Trail West Tequerta, FL 33469 George Gorodeski(66 )............................. 15,000 * 15,000 0 * 25154 Bridgeton Beachwood, OH 44122 George I. Gorodeski & Shafrira S. Gorodeski(19)... 76,000 * 76,000 0 * 25154 Bridgeton Beachwood, OH 44122 Robert Habig(43).................................. 25,000 * 25,000 0 * c/o 414 N. Orleans #510 Chicago, IL 60610 John P. Harkrader(12)............................. 15,000 * 15,000 0 * P.O. Box 465 Farmingdale, NJ 07727 Ben W. Hasten and Susan L. Hasten, JTWROS(53)..... 106,699 * 106,699 0 * 366 Elm Street Denver, CO 80220 Arthur F. Hebard(12).............................. 30,000 * 30,000 0 * 6408 N W 45th Place Gainesville, FL 32653 Hess Investments(12).............................. 33,333 * 33,333 0 * 4311 Down Point Ln Windermere, FL 34786
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ Holleb and Coff(21)............................... 250,000 * 250,000 0 * 55 East Monroe Suite 4100 Chicago, IL 60603 Richard T. Huebner(65)............................ 411 * 411 0 * Bathgate Capital Partners, LLC 5350 S Roslyn St., Suite 400 Greenwood Village, CO 80111 Fred R. Huettig(12)............................... 20,000 * 20,000 0 * 28 Corey Lane Mendham, NJ 07945 Shirley Hughes(59)................................ 11,499 * 10,000 1,499 * 506 2nd Street Griswold, IA 51535 John P. Ike(12)................................... 35,000 * 35,000 0 * Box 31 Pottersville, NJ 07979 John C. Iverson(50)............................... 657,799 2.5% 640,196 0 * 476 Mariner Dr. Jupiter, FL 33477 John C. Iverson Family Limited Partnership(68).... 17,603 * 17,603 0 * 476 Mariner Dr. Jupiter, FL 33477 Susan Keesee(43).................................. 25,000 * 25,000 0 * c/o 414 N. Orleans #510 Chicago, IL 60610 David Kenkel & Stefanie Kenkel(14)................ 54,164 * 54,164 0 * JTTEN 1845 4 Wheel Drive Whitefish, MT 59937 Brian S Kinsman(58)............................... 29,641 * 29,641 0 * 4987 Bradshaw Ct San Diego, CA 92130 Theodore L. Koenig(31)............................ 30,000 * 30,000 0 * One Northbrook Place 5 Revere Drive, Suite 206 Northbrook, IL 60062 Thad T. Konopnicki & Audrey E. Vaughn(11)......... 45,000 * 45,000 0 * 3512 N. Dinwiddle Arlington, VA 22207 Jonathan B. Kruljac & Teri E. Kruljac JTWROS(23)...................................... 806,202 3.0% 476,202 0 * 8873 E. Bayou Gulch Rd. Parker, CO 80134 John A. Lamb -- IRA Rollover(25).................. 45,461 * 45,461 0 * CIBC World Markets Corp., Cust 206 Shady Hills Court Simi Valley, CA 93065 William A. Lamb -- IRA(26)........................ 90,922 * 90,922 0 * 7010 North 13th Place Phoenix, AZ 85020 Lucas Capital Management(12)...................... 20,000 * 20,000 0 * 328 Newman Springs Rd Red Bank, NJ 07701 George B. Lucas, Jr. as Trustee of George B. Lucas Trust dated 8/31/88(14)......................... 54,164 * 54,164 0 * 249 Hilldale Rd. Villanova, PA 19085 George B. Lucas, Jr. as Trustee of Muriel B. Crowell Rev. Trust dated 4/26/91(14)............ 108,329 * 108,329 0 * 1004 Vicars Woods Apt. S-315 Ponte Vedra Beach, FL 32082
15
NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ George B. Lucas, Jr. as Trustee of Robert L. Crowell Rev. Trust dated 4/26/91(14)............ 135,410 * 135,410 0 * 1004 Vicars Woods Apt. S-315 Ponte Vedra Beach, FL 32082 Wayne Maggio & Maria Maggio JTWROS(11)............ 75,758 * 75,758 0 * JT TEN 22 A Grove Street Winchester, MA 01890 James J. Maguire(12).............................. 20,000 * 20,000 0 * P.O. Box 180 Pottersville, NJ 07979 Robert L. Malatesta(12)........................... 15,000 * 15,000 0 * 52 Mitchel Place Little Silver, NJ 07739 Frank Mancuso(43)................................. 5,000 * 5,000 0 * 111 W. Maple Street, Apt 2410 Chicago, Il 60610 Thomas J. McCabe(12).............................. 16,667 * 16,667 0 * P.O. Box 3480 Warrenton, VA 20188 Thomas J. McCabe(47).............................. 91,235 * 91,235 0 * 1 Whitehall St., Apt 1825 New York, NY 10004-2131 Eugene McColley(65)............................... 32,260 * 32,260 0 * 5350 South Reslyn Street, Suite 380 Englewood, CO 80111 Robert McCullough, Jr.(57)........................ 271,125 1.0% 271,125 0 * P.O. Box 151 Kentfield, CA 94914 Silas McKinley, Jr.(58)........................... 200,000 * 200,000 0 * P.O. Box 50264 Clayton, MO 63105 Monarch Consulting(27)............................ 330,000 1.3% 330,000 0 * 8873 E. Bayou Gulch Road Parker, CO 80134 Monsun AS(29)..................................... 1,610,709 5.9% 1,610,709 0 * Torvejen 12 C 1383 Aske NORWAY W. Douglas Moreland(28)........................... 630,057 2.4% 630,057 0 * 1655 E. Layton Drive Englewood, CO 80110 David R. Morgan(14)............................... 92,080 * 92,080 0 * P.O. Box 470 Meadow Vista, CA 95722 Steven J. Morris(15).............................. 115,370 * 115,370 0 * 66 Navesink Ave. Rumson, NJ 07760 Osprey Partners(30)............................... 53,331 * 53,331 0 * c/o Michael A. Mulshine 868 Riverview Drive Brielle, NJ 08730 Gerald Mustapick(31).............................. 50,000 * 50,000 0 * 14041 U.S. Highway One, Suite A Juno Beach, FL 33408 Scott J. Mustapick(31)............................ 5,000 * 5,000 0 * Robin R. Mustapick, JTWROS 14041 U.S. Highway One, Suite A Juno Beach, FL 33408
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ Nasha, A California Limited Partnership(53)....... 106,699 * 106,699 0 * c/o Mr. Peter M. Radin, Jr. 601 California St., Suite 1300 San Francisco, CA 94108 Christopher Neary(12)............................. 33,333 * 33,333 0 * 11768 Willard Avenue Tustin, CA 92782 NeoMed Innovations III LP(32)..................... 6,426,702 20.0% 6,426,702 0 * c/o Mr. Eric Amble 8 Queensway House Queen Street St Helier Hersey JE2 4WD Channel Islands Newell Investment Company Profit Plan(55)......... 320,098 1.2% 320,098 0 * c/o Minton Newell 100 Baywood Ave. Hillsborough, CA 94010 Northlea Partners, Ltd.(33)....................... 169,199 * 169,199 0 * c/o Dr. John Abeles 2365 NW 41st St Boca Raton, FL 33431 OFF Sands Point, LTD(62).......................... 192,059 * 192,059 0 * c/o Mr. John P. Nichols 280 Park Avenue 39th Floor New York, NY 10017 Barry Ollman(14).................................. 27,082 * 27,082 0 * 9555 Poundstone Place Greenwood Village, CO 80111 Paul E. Orrson(52)................................ 853,594 3.2% 853,594 0 * 7920 Sherwood Ave. Towson, MD 21204 The Paisley Fund, L.P.(14)........................ 649,973 2.5% 649,973 0 * 388 Market Street Suite 1700 San Francisco, CA 94111 Hedge Fund -- Paisley Pacific, LP(51)............. 2,133,987 7.7% 2,133,987 0 * c/o Mr. John Wallace RS Investment 388 Market Street, Suite 1700 San Francisco, CA 94111 Invirion(34)...................................... 300,000 1.2% 300,000 0 * c/o Bruce K. Patterson 2300 Childrens Plaza, No 51 Chicago, IL 60614 Fred H. Pearson(67)............................... 35,000 * 35,000 0 * 140 S Dearborn St., Suite 900 Chicago, IL 60603 Fred H. Pearson(35)............................... 186,616 * 186,616 0 * TR UA 07-01-97 Fred H. Pearson S Trust 140 S Dearborn St., Suite 900 Chicago, IL 60603 Robert John Peterson Trust(58).................... 24,383 * 24,383 0 * 32 Aquinas Dr San Rafael, CA 94903 B. Michael Pisani(36)............................. 407,484 1.6% 407,484 0 * 44 Lake Road Short Hills, NJ 07078
17
NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ Jeffery L Pratt(58)............................... 26,786 * 26,786 0 * 530 Poplar Grove Vandalia, OH 45377 P.L. Thomas Group(37)............................. 39,834 * 39,834 0 * 300 W. Washington St. Chicago, IL 60606 Presidio Partners, L.P.(63)....................... 1,993,491 7.2% 1,993,491 0 * c/o Mr. William J. Brady 44 Montgomery St., Suite 2110 San Francisco, CA 94104 Robert L. Priddy(38).............................. 103,428 * 16,380 87,048 * 3435 Kingsborough Atlanta, GA 30326 Prospektiva SA(39)................................ 388,608 1.5% 388,608 0 * via Funicolare 2 6900 Lugano SWITZERLAND Jeff Purcell(11).................................. 57,315 * 57,315 0 * 5 Oakbrook Ct. Oak Brook, IL 60521 RS Diversified Growth Fund(14).................... 3,954,000 13.3% 3,954,000 0 * 388 Market Street Suite 1700 San Francisco, CA 94111 Peter M. Radin, Jr.(56)........................... 213,399 * 213,399 0 * 601 California St. Suite 1300 San Francisco, CA 94108 George Resta(22).................................. 87,497 * 87,497 0 * 854 St. Edmonds Pl. Annapolis, MD 21401 Ralph Richart(43)................................. 50,000 * 50,000 0 * 350 Shore Drive Oakdale, NY 11769 Cal and Amanda Mae Rickel, JTWROS(53)............. 106,699 * 106,699 0 * P.O. Box 1076 Cortez, CO 81321-1076 Bernard B. Rinella(11)............................ 250,000 * 250,000 0 * One N. LaSalle, #3400 Chicago, IL 60610 Round Valley Capital, LLC(71)..................... 1,393,182 5.3% 1,393,182 0 * 1819 E. Southern Ave. Suite D10 Mesa, AZ 85207 John Rutzel(12)................................... 15,000 * 15,000 0 * 14 Hathaway Drive Princeton Junction, NJ 08550-1632 Sands Point Partners, LP(61)...................... 234,739 * 234,739 0 * c/o Mr. Stuart Z. Feldman 280 Park Avenue, 39th Floor New York, NY 10017 Louis Scher(12)................................... 15,000 * 15,000 0 * 9 Parkside Avenue Asheville, NC 28804 Lee E. Schlessman(56)............................. 213,399 * 213,399 0 * 1301 Pennsylvania Street, Suite 800 Denver, CO 80203 Virginia Schmidt(12).............................. 30,000 * 30,000 0 * 55 Linden Avenue Verona, NJ 07044
18
NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ Schwartz, Cooper, Greenberger & Krauss(31)........ 750,000 2.8% 750,000 0 * 180 N LaSalle Street, Suite 2700 Chicago, IL 60601 Andrew Schwartz(53)............................... 106,699 * 106,699 0 * 350 E. 79th Street Apartment 26-C New York, NY 10021 Margret Selig(12)................................. 20,000 * 20,000 0 * Amsandberg 34 60599 Frankfurt GERMANY Arthur A. Sharples(12)............................ 100,000 * 100,000 0 * P.O. Box 570 New Vernon, NJ 07976 Janis Smythe(12).................................. 15,000 * 15,000 0 * P.O. Box 206 Hillsdale, NY 12529 Michael Song(11).................................. 50,000 * 50,000 0 * 333 E. Ontario, #608B Chicago, IL 60611 Dennis J. Stack(15)............................... 28,842 * 28,842 0 * 256 Cardinal Lane Jupiter, FL 33458 Georgie W. Stanley(14)............................ 89,371 * 89,371 0 * P.O. Box 180 Pottersville, NJ 07979 Michael C. Stanley(42)............................ 318,113 1.2% 50,000 0 * 13 Robin Road Warren, NJ 07059 Michael C. Stanley Trustee for the Georgie Stanley II Trust(14).................................... 89,371 * 89,371 0 * P.O. Box 180 Pottersville, NJ 07979 Michael C. Stanley Trustee for the Benjamin A. Stanley Trust(14)............................... 89,371 * 89,371 0 * P.O. Box 180 Pottersville, NJ 07979 Michael C. Stanley Trustee for the Michael Bredt Stanley Trust(14)............................... 89,371 * 89,371 0 * P.O. Box 180 Pottersville, NJ 07979 Michael Studer(15)................................ 57,630 * 57,630 0 * 1110 Cottonwoodlane, #210 Irving, TX 75038 Jeremy Taylor(12)................................. 35,000 * 35,000 0 * P.O. Box 147 Metamora, IN 47030 James R. Tobin(12)................................ 15,000 * 15,000 0 * 50 Bridge Avenue Bay Head, NJ 08742 Transamerica Business Credit Corp.(44)............ 26,839 * 26,839 0 * 790 E. Colorado Blvd Pasadena, CA 91101 Trinity Capital, AS(15)........................... 132,737 * 132,737 0 * P.O. Box 1767 Vika 0122 Oslo NORWAY Tucker Anthony Incorporated(40)................... 150,000 * 150,000 0 * 200 Liberty Street, 3rd Floor New York, NY 10281
19
NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ ---------- ------------ ------------ Tuller Enterprises Inc. Money Purchase Pension Plan(55)........................................ 320,098 1.2% 320,098 0 * c/o Mr. Robert M. Tuller 2651 Pierce St San Francisco, CA 94123 Frank Gerardi Trustee, Univest Management E P S P(45)........................................... 540,502 2.1% 284,854 255,648 * 149 W. Village Way Jupiter, FL 33458 James A. Urner(12)................................ 15,000 * 15,000 0 * 42 Mount St Bay Head, NJ 08742 Ventana(46)....................................... 3,645,753 12.4% 3,645,753 0 * 3865 N Business Center Drive Tucson, AZ 85705 Violina AS(15).................................... 238,239 * 238,239 0 * Postboks 1484 Vika 0116 Oslo Norway Fred Vogel and Jill Vogel(55)..................... 320,098 1.2% 320,098 0 * Sunflower Ranch Co. P.O. Box 666 Patterson, CA 95363-0666 Hunter Vogel(53).................................. 106,699 * 106,699 0 * 2959 Laguna San Francisco, CA 94123 Anita Von Dreusche(12)............................ 30,000 * 30,000 0 * 110 Norman Drive Ramsey, NJ 07446 Karen A. Von Dreusche & Richard J. Berr(12)....... 30,000 * 30,000 0 * JTTEN 52 Sunrise Court Medford, NJ 08055 Trond E. Wennberg(15)............................. 66,425 * 66,425 0 * Jonsok Veien 7 1182 Oslo NORWAY David Craig Wright(20)............................ 263,667 1.0% 263,667 0 * 14740 Maine Cove Terrace Gaithersburg, MD 20878 Xillix Technologies Corp.(54)..................... 13,406 * 13,406 0 * 300-13775 Commerce Parkway Richmond, BC V6V 2V4 Canada Richard Yetman(12)................................ 20,000 * 20,000 0 * 6 Ocean Blvd Island Heights, NJ 08732 Peter J. Zeganelli & Carol A. Zeganelli(31)....... 10,000 * 10,000 0 * 11 Rafenberg Rd Sleepy Hollow, NY 10591 Robert Zelinka(47)................................ 308 * 308 0 * 15919 Laurel Creek Drive Delray Beach, FL 33446 Rona Zelinka(47).................................. 308 * 308 0 * 15919 Laurel Creek Drive Delray Beach, FL 33446 Bud Zuckerman(14)................................. 54,164 * 54,164 0 * 6587 Lakeview Drive Boulder, CO 80303 ---------- ---------- --------- Totals............................................ 58,357,695 46,766,537 7,109,076 ========== ========== =========
20 - --------------- + With respect to shares and percent of shares beneficially owned after the offering, we assumed that the selling stockholders will sell all of the shares of common stock offered by the prospectus. We cannot assure you that the selling stockholders will sell all or any of their shares. * Represents less than 1% of the outstanding shares of common stock. (1) Includes: (i) 674,000 shares issued as a result of the merger of InPath and Bell National in December 1998; and (ii) 196,666 shares underlying options exercisable by Mr. Gombrich within sixty days. Excludes: (i) 2,894,787 shares underlying 105,265 shares of Series E convertible preferred stock owned by Mr. Gombrich; and (ii) 922,277 shares underlying 33,537.36 shares of Series E convertible preferred stock owned by Suzanne Musikantow Gombrich, all of which become convertible December 1, 2002. (2) Includes: (i) 282,881 shares owned by Cadmus Corporation ("Cadmus"), of which Mr. Milley is a director and executive officer, and 250,000 shares issuable to Cadmus under a currently exercisable warrant; (ii) 219,000 shares subject to options exercisable by Mr. Milley within sixty days; (iii) 289,286 shares underlying stock appreciation rights currently exercisable by Cadmus, and (iv) 2,875,000 shares issuable to Azimuth Corporation ("Azimuth") under a currently exercisable warrant. Excludes: (i) 678,134 shares underlying 24,659.44 shares of Series E convertible preferred stock owned by Mr. Milley; (ii) 553,666 shares underlying 20,133.32 shares of Series E convertible preferred stock owned by Milley Management, Inc. of which Mr. Milley is the sole director and executive officer; (iii) 1,327,464 shares underlying 48,271.44 shares of Series E convertible preferred stock owned by Cadmus (iv); 556,875 shares underlying 20,250 shares of Series E convertible preferred stock owned by Azimuth of which Mr. Milley is a director and executive officer; and (v) 163,520 shares underlying 5,946.20 shares of Series E convertible preferred stock owned by Winchester National, Inc. of which Mr. Milley is a director, all of which become convertible December 1, 2002. (3) Includes (i) 219,000 shares underlying stock options exercisable by Dr. Abeles within sixty days; (ii) 65,359 shares underlying a convertible promissory note issued in 2002 issuable to Northlea Partners, Ltd. ("Northlea Partners"); (iii) 87,500 shares underlying currently exercisable warrants issuable to Northlea Partners; and (iv) 16,340 shares underlying warrants issuable upon conversion of the promissory note issuable to Northlea Partners. Excludes 210,778 shares underlying 7,664.64 shares of Series E convertible preferred stock held by Northlea Partners, which become convertible December 31, 2002. Dr. Abeles disclaims beneficial ownership of all shares owned by Northlea Partners except shares attributable to his 1% interest in Northlea Partners as a general partner. (4) Includes: (i) 282,881 shares of common stock; (ii) 250,000 shares underlying a warrant exercisable within sixty days and (iii) 289,286 shares underlying currently exercisable stock appreciation rights. Excludes 1,327,465 shares underlying 48,271.44 shares of Series E convertible preferred stock, which become convertible December 1, 2002. (5) Includes: (i) 300,000 shares received as the result of the merger of InPath and Bell National in December 1998; (ii) 321,688 shares received as the result of the conversion during 2000 of the principal and accrued interest related to a 6% convertible promissory note purchased in a private offering in May 1999; (iii) 361,000 shares received upon exercise of employee stock options; and (iv) 108,329 shares underlying 20,000 shares of Series C convertible preferred stock purchased in a private offering in November 2001. (6) Includes: (i) 463,333 shares received in a Claims Settlement Agreement in December 1998; (ii) 37,084 shares acquired in a private transaction in 1989; and (iii) 219,000 shares underlying stock options, which are exercisable within sixty days. (7) Includes: (i) 784,901 shares underlying warrants issued for services performed in 2000 and 2001; and (ii) 219,000 shares underlying options exercisable within sixty days. (8) Includes: (i) 198,240 shares purchased in a private offering during 2000 and 2001; (ii) 70,000 shares owned by The Research Works, which is controlled by Mr. Ritger; (iii) 3,735,000 shares owned by Seaside Partners, L.P. ("Seaside Partners"), in which Mr. Ritger holds a majority voting interest through Seaside Advisors, L.L.C., the general partner of Seaside Partners; and (iv) 270,823 shares 21 underlying Series C Convertible Preferred Stock. Excludes 1,980,000 shares underlying 72,000 shares of Series E convertible preferred stock, which become convertible December 1, 2002. (9) Includes: 25,000 share stock award, 15,073 shares purchased through the Employee Stock Purchase Plan, and 408,333 shares subject to options exercisable within 60 days. (10) Represents shares received as a result of the merger of InPath and Bell National in December 1998. (11) Represents shares purchased in a private offering during 1999. (12) Represents shares purchased in a private offering during 2000. (13) Represents 825,250 shares underlying warrants issued to Bathgate and Bathgate designees as compensation for services during 2001. (14) Represents shares underlying Series C convertible preferred stock. (15) Represents shares underlying Series B convertible preferred stock purchased in a private offering during 2001. (16) Represents warrants issued by AccuMed in connection with various financings. (17) Represents 15,000 shares underlying warrants exercisable within sixty days received as compensation for services performed during 1999. (18) Includes: (i) 75,758 shares purchased in a private offering during 1999; (ii) 33,333 shares purchased in a private offering during 2000; (iii) 114,904 shares underlying 25,000 shares of Series B convertible preferred stock purchased in a private offering during 2001; and (iv) 180,546 shares underlying Series C convertible preferred stock. (19) Represents 76,000 shares received as the result of the exercise of a warrant received for services performed during 1999. (20) Represents shares received as a result of the conversion of the principal and accrued interest related to 6% convertible promissory notes purchased in a private offering during 1999. (21) Represents 250,000 shares underlying a warrant received as compensation for services during 1999 and exercisable within sixty days. (22) Includes: (i) 33,333 shares purchased in a private offering in 2000; and (ii) 54,164 shares underlying Series C convertible preferred stock. (23) Includes: (i) 47,775 shares received upon conversion of a promissory note in 2000; (ii) 330,000 shares underlying warrants issued to Monarch Consulting, which is controlled by Mr. Kruljac, for services performed in 2001 and 2002; (iii) 108,329 shares underlying Series C convertible preferred stock; (iv) 196,078 shares underlying convertible promissory notes issued in 2002; (v) 75,000 shares underlying currently exercisable warrants; and (vi) 49,020 shares underlying warrants issuable upon conversion of the promissory notes. (24) Includes: (i) 761,441 shares underlying Series B convertible preferred stock; (ii) 239,216 shares underlying a convertible promissory note issued in 2002; (ii) 91,500 shares underlying currently exercisable warrants; and (iii) 59,804 shares underlying warrants issuable upon conversion of the promissory note. (25) Includes: (i) 16,666 shares purchased in a private offering during 2000; and (ii) 28,795 shares underlying 6,250 shares of Series B convertible preferred stock purchased in a private offering during 2001. (26) Includes: (i) 33,333 shares purchased in a private offering during 2000; and (ii) 57,589 shares underlying 12,500 shares of Series B convertible preferred stock purchased in a private offering during 2001. (27) Represents shares underlying warrants issued for services performed during 2001. (28) Includes: (i) 216,658 shares underlying Series C convertible preferred stock; (ii) 130,719 shares underlying a convertible promissory note; (iii) 250,000 shares underlying currently exercisable warrants; and (iv) 32,680 shares underlying warrants issuable upon conversion of the promissory note. 22 (29) Includes: 525,504 shares underlying a convertible promissory note and accrued interest issued during 2000; (ii) 585,205 shares underlying 125,000 shares of Series B convertible preferred stock purchased in a private offering during 2001; and (iii) 500,000 shares underlying currently exercisable warrants. (30) Represents shares underlying a warrant issued for services performed in 2000 and 2001. (31) Represents shares underlying warrants currently exercisable. (32) Includes: (i) 1,902,650 shares underlying Series B convertible preferred stock purchased in a private offering during 2001; (ii) 1,464,052 shares underlying a convertible promissory note issued in 2001; (iii) 1,307,190 shares underlying a convertible promissory note issued in 2002; (iv) 1,060,000 shares underlying currently exercisable warrants; and (v) 692,810 shares underlying warrants issuable upon conversion of the promissory notes. (33) Includes: (i) 65,359 shares underlying a convertible promissory note issued in 2002; (ii) 87,500 shares underlying currently exercisable warrants; and (iii) 16,340 shares underlying warrants issuable upon conversion of the promissory note. (34) Represents shares underlying warrants issued or issuable as license fees under a License and Technology Agreement entered into during 2000. (35) Represents 186,616 shares received as the result of the merger of InPath and Bell National in December 1998. (36) Includes: (i) 50,000 shares purchased in a private offering in 1999; and (ii) 357,484 shares underlying Series C convertible preferred stock. (37) Represents warrants issued in the AccuMed merger in exchange for warrants issued by AccuMed as compensation for services. (38) Includes: (i) 78,311 shares converted from AccuMed common stock; (ii) 8,737 shares underlying options exercisable in 60 days; and (iii) 16,380 shares underlying warrants. (39) Includes: (i) 48,333 shares received as compensation for services during 2000; (ii) 48,333 shares underlying a warrant issued for services performed during 2000; and (iii) 291,942 shares underlying warrants issued for services performed during 2001. (40) Represents shares underlying warrants issued as compensation for services performed in 2001. (41) Represents shares underlying warrants issued as compensation for achievement of specified goals. (42) Includes: (i) 50,000 shares purchased in a private offering during 2000; (ii) 89,371 shares underlying Series C convertible preferred stock owned by The Georgie Stanley II Trust, 89,371 shares underlying Series C convertible preferred stock owned by The Benjamin A. Stanley Trust, and 89,371 shares underlying Series C convertible preferred stock owned by The Michael Bredt Stanley Trust for each of which Mr. Stanley serves as Trustee. (43) Represents shares issued as stock grants. (44) Represents warrants issued in the AccuMed merger in exchange for warrants issued by AccuMed as additional consideration for a long term credit facility. (45) Includes: (i) 175,148 shares received as the result of the conversion of the principal and accrued interest related to a 6% convertible promissory note purchased in a private offering during 1999; (ii) 227,169 shares underlying a warrant issued for services performed during 2000 and 2001; (iii) 57,685 shares underlying shares of Series B convertible preferred stock purchased in a private offering during 2001; and (iv) 80,500 shares received as compensation for services performed during 2001. (46) Includes: (i) 1,895,753 shares underlying Series D convertible preferred stock; and (ii) 1,750,000 shares underlying currently exercisable warrants. (47) Represents shares received upon conversion of Series B convertible preferred stock. (48) Includes: (i) 149,981 shares underlying Series B convertible preferred stock; (ii) 48,366 shares underlying a convertible promissory note issued in 2002; (ii) 18,500 shares underlying currently exercisable warrants; and (iii) 12,092 shares underlying warrants issuable upon conversion of the promissory note. 23 (49) Includes: (i) 90,270 shares underlying Series C convertible preferred stock; (ii) 326,797 shares underlying convertible promissory notes issued in 2002; (iii) 125,000 shares underlying currently exercisable warrants; and (iv) 81,699 shares underlying warrants issuable upon conversion of the promissory notes. (50) Includes: (i) 392,156 shares underlying convertible promissory notes issued in 2002; (ii) 150,000 shares underlying currently exercisable warrants; (iii) 98,040 shares underlying warrants issuable upon conversion of the promissory notes and (iv) 17,603 shares owned by John C. Iverson Family Limited Partnership. (51) Includes: (i) 1,307,190 shares underlying a convertible promissory note issued in 2002; (ii) 500,000 shares underlying currently exercisable warrants; and (iii) 326,797 shares underlying warrants issuable upon conversion of the promissory note. (52) Includes: (i) 522,876 shares underlying convertible promissory notes issued in 2002; (ii) 200,000 shares underlying currently exercisable warrants; and (iii) 130,718 shares underlying warrants issuable upon conversion of the promissory notes. (53) Includes: (i) 65,359 shares underlying a convertible promissory note issued in 2002; (ii) 25,000 shares underlying currently exercisable warrants; and (iii) 16,340 shares underlying warrants issuable upon conversion of the promissory note. (54) Represents 13,406 shares underlying a convertible promissory note acquired in the AccuMed merger. (55) Includes: (i) 196,078 shares underlying a convertible promissory note issued in 2002; (ii) 75,000 shares underlying currently exercisable warrants; and (iii) 49,020 shares underlying warrants issuable upon conversion of the promissory note. (56) Includes: (i) 130,719 shares underlying a convertible promissory note issued in 2002; (ii) 50,000 shares underlying currently exercisable warrants; and (iii) 32,680 shares underlying warrants issuable upon conversion of the promissory note. (57) Includes: (i) 57,726 shares underlying Series B convertible preferred stock; (ii) 130,719 shares underlying a convertible promissory note issued in 2002; (ii) 50,000 shares underlying currently exercisable warrants; and (iii) 32,680 shares underlying warrants issuable upon conversion of the promissory note. (58) Represents shares issued as the result of the merger of InPath and Bell National in December 1998. (59) Includes: (i) 10,000 shares issued as stock grants; and (ii) 1,499 shares obtained through the Employee Stock Purchase Plan. (60) Represents 2,875,000 shares underlying currently exercisable warrants. Excludes 556,875 shares underlying 20,250 shares of Series E convertible preferred stock. (61) Includes: (i) 143,791 shares underlying a convertible promissory note issued in 2002; (ii) 55,000 shares underlying currently exercisable warrants; and (iii) 35,948 shares underlying warrants issuable upon conversion of the promissory note. (62) Includes: (i) 117,647 shares underlying a convertible promissory note issued in 2002; (ii) 45,000 shares underlying currently exercisable warrants; and (iii) 29,412 shares underlying warrants issuable upon conversion of the promissory note. (63) Includes: (i) 1,395,975 shares underlying Series B convertible preferred stock; (ii) 366,013 shares underlying a convertible promissory note issued in 2002; (ii) 140,000 shares underlying currently exercisable warrants; and (iii) 91,503 shares underlying warrants issuable upon conversion of the promissory note. (64) Represents shares issued as compensation for services to be performed in the future. (65) Represents shares received upon conversion of Series C convertible preferred stock. (66) Represents 15,000 shares purchased in a private offering during 2000. (67) Represents 35,000 shares purchased in a private offering during 1999. 24 (68) Represents 17,603 shares issued in exchange for accrued dividends on 250,000 shares of Series B convertible preferred stock that had been converted into common stock. (69) Represents 51,483 shares underlying currently exercisable warrants issued for services performed in 2001. (70) Represents 60,182 shares issued for services performed in 2002. (71) Includes (i) 681,818 shares underlying currently exercisable warrants for services performed in 2002 and (ii) 711,364 shares issued for services performed in 2002. For purposes of this table, a person is deemed to have beneficial ownership of any shares of common stock which such person may acquire within 60 days after the date of this prospectus. For purposes of computing the percentage of outstanding shares of common stock held by each person named above, any security which such person has the right to acquire from us within 60 days after the date of this prospectus is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. On May 24, 2000, we granted Dr. Denis O'Donnell a warrant to purchase 784,901 shares of common stock exercisable at $0.01 per share, as compensation as a finder in a private placement of common stock that occurred in 2000 and 2001. The warrant expires three years from the date of its grant. Dr. O'Donnell, a director, is a member and manager of Seaside Advisers, L.L.C., a firm which provides investment management services to Seaside Partners. On December 4, 2000, we issued a promissory note to Azimuth in exchange for $200,000 in cash. The note bore interest at the rate of 12% per year and was due December 31, 2000. As additional consideration for the note, we issued Azimuth a five-year warrant to purchase 50,000 shares of common stock at a price of $0.937 per share, the approximate market price of common stock at the time. The note was repaid on February 20, 2001. In that the note was not repaid when due, we were obligated by the terms of the note to pay a 3% increase in the rate of interest from January 1, 2001 until the date of payment. We were also obligated to issue Azimuth two warrants, each to purchase 12,500 shares of our common stock, at an exercise price of $0.01 per share, representing a two month late payment penalty. We determined the value of these warrants to be $1,184 and charged the amount to interest expense during 2001. The proceeds of the note were used for general working capital and to pay license fees. On December 11, 2000, we issued a promissory note to Azimuth in exchange for $100,000 in cash. The note bore interest at the rate of 12% per year and was due 180 days from date of issue. As additional consideration for the note, we issued Azimuth a five-year warrant to purchase 1,000,000 shares of common stock at a price of $1.25 per share, an approximate 15% premium over the market price of common stock on the date the warrant was issued. The proceeds of this note were used to repay a convertible promissory note to AccuMed due on March 29, 2001. The prepayment was made in conjunction with ongoing negotiations to acquire AccuMed. We repaid the note and accrued interest on February 20, 2001. On February 1, 2001 and February 7, 2001, we received $495,000 in cash from Azimuth in exchange for two promissory notes that bore interest at 15% per year. Of the cash received, $470,000 was used to partially fund a loan to AccuMed made on February 7, 2001, in connection with a definitive agreement to acquire AccuMed. As additional compensation for these loans, we issued Azimuth a five-year warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.25 per share, an approximate 83% discount from the $1.50 market price of our common stock on the date the warrant was issued. We determined the value of the warrant to be $12,000, using the difference between the fair market interest rate and the stated interest rate, and recorded the value as additional paid in capital and also charged the entire value to interest expense during February 2001. On February 20, 2001, we used $809,000 of the proceeds from a private placement of Series B convertible preferred stock to repay these notes, two additional notes issued to Azimuth in December 2000, and all of their related accrued interest. 25 On July 26, 2001, we issued a promissory note to Cadmus in exchange for $100,000 in cash. On August 6, 2001, we issued a promissory note to Azimuth in exchange for $100,000 in cash. Mr. Milley, director and a significant stockholder, is also considered a control person of both Cadmus and Azimuth. The notes, which were due on September 22, 2001 and subsequently extended until November 15, 2001, bore interest at the rate of 15% per annum. As additional consideration for the notes, we issued five-year warrants to Cadmus and Azimuth entitling the holders to each purchase 250,000 shares of common stock at an exercise price of $1 per share. The closing market prices of common stock on the respective issue dates of the warrants, which entitle each holder to purchase 250,000 shares of common stock, were $0.73 per share. We determined the fair value of these warrants to be $1,400 using the fair value interest rate method. This value was charged to interest expense during the third quarter. The notes were repaid in November 2001. On August 17, 2001, we agreed to issue a five-year warrant to Azimuth entitling the holder to purchase 500,000 shares of common stock at an exercise price of $1 per share. In conjunction with the issuance of this warrant, Azimuth agreed to relinquish the conversion rights granted to it under the terms of the September 2000 convertible promissory note. The closing market price of common stock on the issue date of the warrant was $.73 per share. We determined the fair value of the warrant to be approximately $25,000 based on the value of the unamortized debt discount at the date the warrant was issued and the conversion right under the note was waived. This value was charged to interest expense during the third quarter of 2001. On August 6, 2001, we issued a promissory note to Northlea Partners in exchange for $25,000 in cash. Dr. Abeles, a director, is the general partner of Northlea Partners. The terms of the note are the same as the notes issued to Cadmus and Azimuth. As additional consideration for this note, we issued a five-year warrant to Northlea Partners entitling the holder to purchase 62,500 shares of common stock at an exercise price of $1 per share. The closing market price of the common stock on the issue date of this warrant was $0.73 per share. We determined the fair value of the warrant to be $1,400 using the fair value interest rate method. This value was charged to interest expense during the third quarter. The note is in default. On September 20, 2001, we issued a promissory note to Northlea Partners in exchange for $15,000 in cash. The note was due on December 20, 2001 and bears interest at the rate of 9% per annum. The note is currently in arrears. Also on September 20, 2001, we issued a promissory note to Mr. Shaw, a director, in exchange for $25,000 in cash. The note was due December 20, 2001 and bore interest at the rate of 9% per annum. The note remains outstanding as of the date of this report and is in arrears. In October 2001, Mr. Prange, our former President and COO/CFO, purchased 20,000 shares of Series C convertible preferred stock at a purchase price of $3.00 per share. The purchase was made in conjunction with a private placement of Series C convertible preferred stock and was made under the same terms and conditions as other investors in the offering. The Series C convertible preferred stock has a dividend of 10% and is convertible into common stock at a conversion price of $0.60 per share. In December 2001, Mr. Gombrich, our CEO and Chairman of the Board, tendered 2,631,625 shares of common stock, pursuant to an exchange offer open to all holders of common stock, in exchange for 105,265 shares of Series E convertible preferred stock. Mr. Milley, a director, tendered 616,486 shares of common stock in exchange for 24,659 shares of Series E convertible preferred stock. In May 2002, we received cash of $25,000 from Northlea Partners and issued a convertible promissory note and 25,000 warrants. The convertible promissory bears interest at 7% per annum and matures on December 31, 2002. The convertible promissory note is convertible at any time at the option of the holder or automatically when we receive an equity infusion of at least $7,000,000 at a conversion price equal to a 25% discount to the market price of the common stock at the date of conversion, but not greater than $1 per share. Each of the warrants is exercisable for one share of common stock at an exercise price of $0.25 per share for a period of five years. Upon conversion of the convertible promissory note, Northlea Partners will be entitled to receive an additional number of warrants equal to 25% of the number of common shares issued in conversion of the convertible promissory note. Each of these warrants will be exercisable into one share of our common stock at a price equal to 150% of the conversion price of the convertible promissory note. 26 PLAN OF DISTRIBUTION We are registering the common stock on behalf of the selling stockholders. The common stock may be offered and sold by the selling stockholders, or by purchasers, transferees, donees, pledgees or other successors in interest, directly or through brokers, dealers, agents or underwriters who may receive compensation in the form of discounts, commissions or similar selling expenses paid by the selling stockholders or by a purchaser of the common stock on whose behalf such broker-dealer may act as agent. Sales and transfers of the common stock may be effected from time to time in one or more transactions, in private or public transactions, in the over-the-counter market, in negotiated transactions or otherwise, at a fixed price or prices that may be changed, at market prices prevailing at the time of sale, at negotiated prices, without consideration or by any other legally available means. The selling stockholders may sell any or all of the common stock from time to time in one or more of the following methods: - ordinary brokers transactions, which may include long or short sales; - transactions involving cross or block trades or otherwise on the Over-the-Counter Bulletin Board; - purchases by brokers, dealers or underwriters as principal and resales by such purchasers for their own accounts under this prospectus; - "at the market" offerings to or through market makers or into an existing market for the common stock; - in other ways not involving market makers or established trading markets, including direct sales to purchasers or sales effected through agents; - through transactions in options, swaps or other derivatives (whether exchange listed or otherwise); or - any combination of the above. In addition, the selling stockholders or successors in interest may enter into hedging transactions with broker-dealers who may engage in short sales of common stock in the course of hedging the positions they assume with the selling stockholders. The selling stockholders or successors in interest may also enter into option or other transactions with broker-dealers that require delivery by such broker-dealers of the common stock, which common stock may be resold thereafter under this prospectus. Brokers, dealers, underwriters or agents participating in the distribution of the common stock may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of common stock for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). The selling stockholders and any broker-dealers acting in connection with the sale of the common stock by this prospectus may be deemed to be underwriters within the meaning of Section 2(11) of the Securities Act, and any commissions received by them and any profit realized by them on the resale of common stock as principals may be underwriting compensation under the Securities Act. Neither we nor the selling stockholders can presently estimate the amount of such compensation. We do not know of any existing arrangements between the selling stockholders and any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the common stock. The selling stockholders and any other persons participating in a distribution of securities will be subject to applicable provisions of the Securities Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M, which may restrict certain activities of, and limit the timing of purchases and sales of securities by, the selling stockholders and other persons participating in a distribution of securities. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions subject to specified exceptions or exemptions. 27 Any securities covered by this prospectus that qualify for sale under Rule 144 under the Securities Act may be sold under that rule rather than under this prospectus. We cannot assure you that the selling stockholders will sell any or all of the shares of common stock offered by this prospectus. In order to comply with the securities laws of certain states, if applicable, the selling stockholders will sell the common stock in jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states, the selling stockholders may not sell the common stock unless the shares of common stock have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and obtained. We will not receive any proceeds from the sale of the common stock covered by this prospectus. We have agreed to pay all of the expenses incident to the registration of the common stock, other than discounts and selling concessions or commissions, if any, and fees and expenses of counsel for the selling stockholders, if any. 28 DESCRIPTION OF CAPITAL STOCK GENERAL We have set forth in this section a description of certain rights and preferences of our convertible preferred stock as well as our other outstanding securities and contractual obligations because we believe they are materially relevant to an investor's understanding of an investment in our shares of common stock. Our authorized capital stock consists of 110,000,000 shares, consisting of 100,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. On August 31, 2002 we had: - 27,136,031 shares of common stock issued and outstanding; - 590,197 shares of Series A convertible preferred stock of which 118,093 were issued and outstanding; - 1,500,000 shares of Series B convertible preferred stock of which 1,324,856 were issued and outstanding; - 1,666,666 shares of Series C convertible preferred stock of which 1,285,499 were issued and outstanding; - 300,000 shares of Series D convertible preferred stock of which 175,000 were issued and outstanding; - 800,000 shares of Series E convertible preferred stock of which 434,388 were issued and outstanding; - warrants that entitle the holders to purchase 17,154,405 shares of common stock at prices ranging from $0.01 to $23.75; - 450,000 stock appreciation rights which are convertible into 289,286 shares of common stock; - $3,659,439 aggregate principal amount convertible promissory notes that entitle the holders to purchase 8,865,700 shares of common stock; and - options that entitle the holders to purchase 3,429,330 shares of common stock at prices ranging from $0.39 to $36.08. COMMON STOCK Each share of our common stock has the same relative rights and is identical in all respects with each other share of common stock. Subject to any prior rights of the holders of any preferred stock then outstanding, holders of our common stock are entitled to receive such dividends as are declared by our Board of Directors out of funds legally available therefore. Full voting rights are vested in the holders of common stock, each share being entitled to one vote, subject to the rights of the holders of any preferred stock then outstanding. Our Board of Directors may issue authorized shares of common stock without stockholder approval. Subject to any prior rights of the holders of any preferred stock then outstanding, in the event of our liquidation, dissolution or winding up, holders of shares of our common stock are entitled to receive, pro rata, any assets distributable to stockholders with respect to shares held by them. Holders of shares of common stock do not have any preemptive rights to subscribe for any additional securities which may be issued by us or any cumulative voting rights. The outstanding shares of our common stock are fully paid and non-assessable. PREFERRED STOCK Our preferred stock may be issued in one or more series at such time or times and for such consideration as our Board of Directors may determine. Our Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of preferred stock with such voting rights and other powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions, as shall be stated in the resolution authorizing the particular series of preferred stock. Our Board 29 of Directors is authorized to designate the series and the number of shares comprising such series, the dividend rate, the redemption rights, if any, any purchase, retirement or sinking fund provisions, any conversion rights and any special voting rights with respect to the shares of such series. The ability of our Board of Directors to issue preferred stock without stockholder approval could make an acquisition by an unwanted suitor of a controlling interest in us more difficult, time-consuming or costly, or otherwise discourage an attempt to acquire control of us. Shares of preferred stock redeemed or acquired by us may return to the status of authorized but unissued shares, without designation as to series, and may be reissued by our Board of Directors. SERIES A CONVERTIBLE PREFERRED STOCK We are authorized to issue 590,197 shares of Series A convertible preferred stock, of which 118,093 shares were issued and outstanding as of August 31, 2002. Each share of Series A convertible preferred stock has a stated value of $4.50 and a conversion price of $10.3034, subject to antidilution adjustment. The Series A convertible preferred stock ranks senior to our common stock and on parity with our other issued and outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series A convertible preferred stock. DIVIDENDS Shares of the Series A convertible preferred stock pay no dividends. VOTING RIGHTS The holders of the Series A convertible preferred stock have no right to vote on any matter except as required by Delaware law. If the Series A convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series A convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series A convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series A convertible preferred stock then outstanding, we may not repeal, amend or change the Series A convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series A convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series A convertible preferred stock is $4.50 per share. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series A convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series A convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series A convertible preferred stock. If the assets available for distribution to the holders of Series A convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series A convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series A convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series A convertible preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We have authorized, reserved and will keep available a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series A convertible preferred stock and dividends payable thereon. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. 30 REDEMPTION Shares of the Series A convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series A convertible preferred stock. CONVERSION Shares of Series A convertible preferred stock are convertible, at any time, at the option of the holder into shares of common stock. Each share of the Series A convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $4.50 stated value by the then effective conversion price (currently $10.3034), which is referred to as the conversion rate. The conversion rate is currently 0.4368. If during the three year period beginning March 1, 2001, the market price of our common stock equals or exceeds $13.50 per share for any 20 consecutive trading days commencing 45 business days before the date in question, we may elect to convert all the then outstanding shares of Series A convertible preferred stock into common stock at the then effective conversion rate. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series A convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock , (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series A convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. SERIES B CONVERTIBLE PREFERRED STOCK We are authorized to issue 1,500,000 shares of Series B convertible preferred stock, of which 1,324,856 shares were outstanding as of August 31, 2002. Each share of Series B convertible preferred stock has a stated value of $4 and a conversion price of $1, subject to antidilution adjustment. The Series B convertible preferred stock ranks senior to our common stock and on parity with our other issued and outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series B convertible preferred stock. DIVIDENDS Shares of the Series B convertible preferred stock accrue dividends on a quarterly basis at an annual rate of 10% per share payable on the last day of March, June, September and December, commencing March 31, 2001, out of any assets or funds legally available for payment of dividends. Dividends are cumulative and accrue, whether or not declared by our Board of Directors, but can only be declared or paid and set apart for payment if full cumulative dividends for all prior quarterly dividend periods then outstanding shall have been or shall be concurrently paid or declared and set apart for payment. 31 We may not pay any dividends or any distribution on any class or series of capital stock ranking junior to the Series B convertible preferred stock except dividends payable in shares of our stock of any class junior to the preferred stock, and we may not repurchase or redeem any junior stock, if any dividends on the Series B convertible preferred stock are then in arrears. VOTING RIGHTS The holders of the Series B convertible preferred stock have no right to vote on any matter except as required by Delaware law. If the Series B convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series B convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series B convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series B convertible preferred stock then outstanding, we may not repeal, amend or change the Series B convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series B convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series B convertible preferred stock is $4 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series B convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series B convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series B convertible preferred stock. If the assets available for distribution to the holders of Series B convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series B convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series B convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series B convertible preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We have authorized, reserved and will keep available a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series B convertible preferred stock and dividends payable thereon. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. REDEMPTION Shares of the Series B convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series B convertible preferred stock. CONVERSION Shares of Series B convertible preferred stock are convertible, at any time, at the option of the holder, into shares of common stock. Each share of the Series B convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $4 stated value per share plus all accrued but unpaid dividends by the then effective conversion price (currently $1), which is referred to as the conversion rate. 32 If the market price of our common stock equals or exceeds $4 per share for any 40 consecutive trading days, we may elect to convert all outstanding shares of Series B convertible preferred stock into common stock at the then effective conversion rate. If for any reason we do not pay any portion of the accrued dividends on the Series B convertible preferred stock being converted, we may pay that portion of unpaid dividends in shares of common stock. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series B convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock, (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series B convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. SERIES C CONVERTIBLE PREFERRED STOCK We are authorized to issue 1,666,666 shares of Series C convertible preferred stock, of which 1,285,499 were issued and outstanding as of August 31, 2002. Each share of Series C convertible preferred stock has a stated value of $3 and a conversion price of $0.60, subject to antidilution adjustment. The Series C convertible preferred stock ranks senior to our common stock and on parity with our other issued and outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series C convertible preferred stock. DIVIDENDS Shares of the Series C convertible preferred stock accrue dividends on a semi-annual basis at an annual rate of 10% per share payable on the last day of March and September, commencing March 31, 2002, out of any assets or funds legally available for payment of dividends. Dividends are cumulative and accrue, whether or not declared by our Board of Directors, but can only be declared or paid and set apart for payment if full cumulative dividends for all prior dividend periods then outstanding shall have been or shall be concurrently paid or declared and set apart for payment. Dividends are payable in cash provided that we may pay the dividends for the first two years in cash or in shares of our common stock. We may not pay any dividends or any distribution on any class or series of capital stock ranking junior to the Series C convertible preferred stock except dividends payable in shares of our stock of any class junior to the preferred stock, and we may not repurchase or redeem any junior stock, if any dividends on the Series C convertible preferred stock are then in arrears. VOTING RIGHTS The holders of the Series C convertible preferred stock have no right to vote on any matter except as required by Delaware law. If the Series C convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series C convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series C convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series C convertible preferred stock then outstanding, we may not repeal, amend or change the Series C 33 convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series C convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series C convertible preferred stock is $3 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series C convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series C convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series C convertible preferred stock. If the assets available for distribution to the holders of Series C convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series C convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series C convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series C convertible preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We have authorized, reserved and will keep available a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series C convertible preferred stock and dividends payable thereon. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. REDEMPTION Shares of the Series C convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series C convertible preferred stock. CONVERSION Shares of Series C convertible preferred stock are convertible, at any time at the option of the holder, into shares of common stock. Each share of the Series C convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $3 stated value per share plus all accrued but unpaid dividends by the then effective conversion price, which is referred to as the conversion rate. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series C convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock, (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. 34 FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series C convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. SERIES D CONVERTIBLE PREFERRED STOCK We are authorized to issue 300,000 shares of Series D convertible preferred stock, of which 175,000 were issued and outstanding as of August 31, 2002. Each share of Series D convertible preferred stock has a stated value of $10 and a conversion price of $1, subject to antidilution adjustment. The Series D convertible preferred stock ranks senior to our common stock and on parity with our other outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series D convertible preferred stock. DIVIDENDS Shares of the Series D convertible preferred stock accrue dividends on a semi-annual basis at an annual rate of 10% per share payable on the last day of April and October, commencing April 30, 2002, out of any assets or funds legally available for payment of dividends. Dividends are cumulative and accrue, whether or not declared by our Board of Directors, but can only be declared or paid and set apart for payment if full cumulative dividends for all prior dividend periods then outstanding shall have been or shall be concurrently paid or declared and set apart for payment. Dividends are payable in cash provided that we may pay the dividends for the first two years in cash or in shares of our common stock. We may not pay any dividends or any distribution on any class or series of capital stock ranking junior to the Series D convertible preferred stock except dividends payable in shares of our stock of any class junior to the preferred stock, and we may not repurchase or redeem any junior stock, if any dividends on the Series D convertible preferred stock are then in arrears. VOTING RIGHTS The holders of the Series D convertible preferred stock have no right to vote on any matter except as required by Delaware law. If the Series D convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series D convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series D convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series D convertible preferred stock then outstanding, we may not repeal, amend or change the Series D convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series D convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series D convertible preferred stock is $10 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series D convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series D convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series D convertible preferred stock. If the assets available for distribution to the holders of Series D convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series D convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series D convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series D convertible 35 preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We have authorized, reserved and will keep available a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series D convertible preferred stock and dividends payable thereon. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. REDEMPTION Shares of the Series D convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series D convertible preferred stock. CONVERSION Shares of Series D convertible preferred stock are convertible, at any time, at the option of the holder, into shares of common stock. Each share of the Series D convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $10 stated value per share plus all accrued but unpaid dividends by the then effective conversion price, which is referred to as the conversion rate. If the market price of our common stock equals or exceeds $5 per share for any 20 consecutive trading days, we may elect to convert all outstanding shares of Series D convertible preferred stock into common stock at the then effective conversion rate. If for any reason we do not pay any portion of the accrued dividends on the Series D convertible preferred stock being converted, we may pay that portion of unpaid dividends in shares of common stock. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series D convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock, (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series D convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. SERIES E CONVERTIBLE PREFERRED STOCK We are authorized to issue 800,000 shares of Series E convertible preferred stock, of which 434,387.52 were issued and outstanding as of August 31, 2002. Each share of Series E convertible preferred stock has a stated value of $22 and a conversion price of $0.80, subject to antidilution adjustment. The Series E convertible preferred stock ranks senior to our common stock and on parity with our other outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series E convertible preferred stock. 36 DIVIDENDS Shares of the Series E convertible preferred stock accrue dividends on a semi-annual basis at an annual rate of 10% per share payable on the last day of May and November, commencing May 31, 2002, out of any assets or funds legally available for payment of dividends. Dividends are cumulative and accrue, whether or not declared by our Board of Directors, but can only be declared or paid and set apart for payment if full cumulative dividends for all prior dividend periods then outstanding shall have been or shall be concurrently paid or declared and set apart for payment. Dividends are payable in cash provided that we may pay the dividends for the first two years in cash or in shares of our common stock. The dividend rate increases to 20% per share if after December 1, 2002 we have not reserved sufficient shares of common stock to allow for the conversion of all shares of Series E convertible preferred stock. We may not pay any dividends or any distribution on any class or series of capital stock ranking junior to the Series E convertible preferred stock except dividends payable in shares of our stock of any class junior to the preferred stock, and we may not repurchase or redeem any junior stock, if any dividends on the Series E convertible preferred stock are then in arrears. VOTING RIGHTS The holders of the Series E convertible preferred stock shall be entitled to vote on any matter on which the holders of common stock are entitled to vote. If the Series E convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series E convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series E convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series E convertible preferred stock then outstanding, we may not repeal, amend or change the Series E convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series E convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series E convertible preferred stock is $22 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series E convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series E convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series E convertible preferred stock. If the assets available for distribution to the holders of Series E convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series E convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series E convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series E convertible preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We have authorized, reserved and will keep available a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series E convertible preferred stock and dividends payable thereon. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. 37 REDEMPTION Shares of the Series E convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series E convertible preferred stock. CONVERSION Shares of Series E convertible preferred stock are convertible, at any time after December 1, 2002, at the option of the holder, into shares of common stock. Each share of the Series E convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $22 stated value per share plus all accrued but unpaid dividends by the then effective conversion price, which is referred to as the conversion rate. If the market price of our common stock equals or exceeds $22 per share for any 20 consecutive trading days, we may elect to convert all outstanding shares of Series E convertible preferred stock into common stock at the then effective conversion rate. If for any reason we do not pay any portion of the accrued dividends on the Series E convertible preferred stock being converted, we may pay that portion of unpaid dividends in shares of common stock. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series E convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock, (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series E convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. COMMON STOCK PURCHASE WARRANTS As of August 31, 2002, we have outstanding common stock purchase warrants that entitle the holders to the right to purchase 17,154,405 shares of our common stock. These common stock purchase warrants have exercise prices ranging from $0.01 to $23.75. Common stock purchase warrants not exercised by their respective expiration dates will expire. ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of the common stock purchase warrants are subject to adjustment from time to time if we (A) subdivide shares of our common stock, (B) declare a dividend upon our common stock payable solely in shares of our common stock, (C) reclassify or change our common stock into different securities, or (D) make a distribution on our capital stock other than regular cash dividends. 38 RESERVATION OF SHARES We have authorized, reserved and will keep available a sufficient number of shares of our common stock as will be issuable upon exercise of all outstanding common stock purchase warrants. Upon issuance, these shares of common stock will be duly and validly issued, fully paid and non-assessable, free of all preemptive rights and taxes. VOTING The holders of the common stock purchase warrants have no right to vote on matters submitted to shareholders and have no right to receive dividends. LISTING There is no public trading market for the common stock purchase warrants. FRACTIONAL SHARES We will not issue fractional shares of common stock upon exercise of the common stock purchase warrants but rather will pay the holder an amount in cash equal to the fair market value of any fractional interest. REGISTRATION RIGHTS We are obligated to register the resale of the common stock into which the common stock purchase warrants are exercisable provided more than one year has elapsed from the issuance of the relevant common stock purchase warrant. If we fail to make a filing with the SEC to register the underlying common stock within 30 days of the holder's request, the holder is entitled to receive from us in cash the difference between the exercise price and the average closing price of our common stock during the 30 calendar days immediately following the holder's request to register the common stock purchase warrants. In addition to the common stock purchase warrants described above, we have issued warrants for services rendered and in connection with financings. These warrants have the same characteristics as the common stock purchase warrants described above with respect to reservation of shares, voting, listing and fractional shares. The particular additional terms of these warrants are as follows: AZIMUTH/CADMUS/NORTHLEA/VENTANA/CELL SOLUTIONS COMMON STOCK PURCHASE WARRANTS On February 7, 2001, we issued a warrant to Azimuth entitling Azimuth to purchase 1,000,000 shares of our common stock at an exercise price of $0.25 per share, subject to the antidilution adjustments described below. The Azimuth warrant expires February 7, 2006. On August 6, 2001, we issued warrants to Azimuth, Cadmus and Northlea Partners entitling the holders to purchase 250,000, 250,000 and 62,500 shares, respectively, of our common stock at an exercise price of $1.00 per share subject to the antidilution adjustments described below. These warrants expire August 6, 2006. On November 2, 2001 we issued a warrant to Ventana to purchase 1,750,000 shares of our common stock at an exercise price of $1.15 per share, subject to the antidilution adjustments described below. The Ventana warrant expires November 2, 2004. On October 11, 2001 we issued a warrant to Cell Solutions, LLC to purchase 172,120 shares of our common stock at an exercise price of $0.82 per share, subject to the antidilution adjustments described below. The Cell Solutions warrant expires October 11, 2006. 39 ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of these warrants are subject to adjustment from time to time upon the occurrence of any of the following events: - If we (A) pay a dividend or make a distribution of common stock or (B) subdivide or combine outstanding shares of our common stock; - If we issue or sell any shares of our common stock at a price per share less than the exercise price; - If we dividend or otherwise issue or sell any securities convertible into our common stock; - If we (A) merge or consolidate with another entity, (B) sell, lease or otherwise transfer all or substantially all of our property or assets or (C) effect a capital reorganization or recapitalization of our common stock. BATHGATE WARRANTS On February 28, 2001, we issued warrants pursuant to a warrant agreement with Bathgate entitling the holders of those warrants to purchase an aggregate of 227,500 shares of our common stock at an exercise price of $1.20 per share subject to the antidilution adjustments described below. The Bathgate warrants expire February 28, 2006. ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of the Bathgate warrants are subject to adjustment from time to time upon the occurrence of any of the following events: - If we (A) pay a dividend or make a distribution to holders of our common stock, (B) subdivide or combine our outstanding shares of our common stock, or (C) issue by classification of our common stock other securities; - If we issue rights, options, warrants or convertible securities to all or substantially all holders of our common stock, without charge, entitling them to purchase common stock below the then current market value per share of common stock on the date of issuance; - If we distribute to holders of common stock all or substantially all evidences of indebtedness of assets or rights, options, warrants or convertible securities containing the right to purchase our common stock; - If we (A) consolidate or merge with another entity, or (B) sell or convey all or substantially all of our property or assets of the business. We may not merge or consolidate with another entity unless we make these adjustments. No adjustment to the Bathgate warrants will be made due to any dividends or distributions out of earnings or grants or exercises of currently authorized or outstanding options or issuance of shares under our benefit plans. HOLLEB WARRANT On July 15, 1999, we issued a warrant to Holleb & Coff entitling Holleb to purchase 250,000 shares of our common stock at an exercise price of $0.33 per share. The Holleb warrant expires July 14, 2009. TUCKER ANTHONY WARRANT On July 10, 2001, we issued a warrant to Tucker Anthony Incorporated entitling Tucker Anthony to purchase 150,000 shares of our common stock at an exercise price of $1.20 subject to the antidilution adjustments described below. The Tucker Anthony warrant expires July 10, 2006. 40 ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of the Tucker Anthony warrant are subject to adjustment from time to time if we (A) declare a dividend on our outstanding common stock payable in shares of our capital stock; (B) subdivide or combine outstanding shares of our common stock into a greater or smaller number of shares; or (C) issue any shares of our capital stock by way of reclassification, including a merger or consolidation. SCHWARTZ, COOPER, GREENBERGER & KRAUSS On February 13, 2002, we issued a warrant to Schwartz, Cooper, Greenberger & Krauss entitling Schwartz Cooper to purchase 750,000 shares of our common stock at an exercise price of $0.01 per share, anytime after February 13, 2003 subject to the antidilution adjustments described below. The Schwartz Cooper warrant expires February 12, 2012. ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of the Schwartz Cooper warrant is subject to adjustment from time to time if we (A) declare a dividend on our outstanding common stock payable in shares of our capital stock; (B) subdivide or combine outstanding shares of our common stock into a greater or smaller number of shares; (C) effect a stock split; (D) reclassify or recapitalize shares of our common stock; (E) consolidate or merge with another entity; or (F) sell or lease all or substantially all of our properties and assets. REGISTRATION RIGHTS We are obligated to register the resale of the common stock into which the Schwartz Cooper warrant is exercisable at any time after February 13, 2002 upon the demand of the holder or if we undertake to register any common stock for our own account or any other person. BRIDGE FINANCING From March 2002 through June 2002, we raised $2,625,000 in bridge financing in which we issued 105 units, each consisting of a $25,000 convertible promissory note at 7% due December 31, 2002 and a common stock purchase warrant entitling the holder to the right to purchase 25,000 shares of our common stock for $0.25 per share. Each unit sold for $25,000. We also issued 22.4 units to NeoMed Innovations III LP based on an outstanding convertible promissory note dated May 15, 2000. BRIDGE WARRANT Each bridge warrant is exercisable into one share of our common stock at $0.25 per share for a period of five years. ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of the bridge warrants are subject to adjustment from time to time upon the occurrence of any of the following events: - If we (A) pay a dividend or make a distribution to our shareholders, (B) subdivide our common stock, (C) combine our common stock into a smaller number of shares, or (D) issue by classification of our common stock other securities; - If we issue any securities at a price per share less than the exercise price of the bridge warrants; - If we distribute evidences of our indebtedness or assets to all or substantially all of the holders of common stock; 41 - If we consolidate or merge with another entity or sell or convey all or substantially all of our business or assets or property. BRIDGE PROMISSORY NOTE The bridge promissory notes, as amended, due December 31, 2002 bear interest at 7% per year and are convertible at any time at the option of the holder and automatically when we raise at least $7,000,000 in equity financing (including the conversion of the bridge promissory notes). The bridge promissory notes convert into one share of our common stock at a 25% discount to the price at which our common stock is trading at the time of conversion but not more than $1. In addition, for each four shares of common stock the bridge promissory notes are converted into, the holder receives one common stock purchase warrant which is exercisable for one share of our common stock at 150% of the conversion price of the bridge promissory notes. CONVERTIBLE PROMISSORY NOTE We have issued a convertible promissory note to Monsun AS due July 31, 2002. The note is in default, but there are no default remedies in the note agreement. The promissory note is for the principal amount of $500,000. We also issued a warrant for 100,000 shares of our common stock with an exercise price of $0.60 per share and a warrant for 200,000 shares of our common stock with an exercise price of $.30 per share to Monsun in consideration of Monsun initially extending the due date of their note, and a second warrant for 200,000 shares with an exercise price of $0.70 per share in consideration of Monsun extending the note to July 31. If we prepay the promissory note, the holder, at its option, may elect to convert the promissory note, plus accrued interest, into shares of our common stock at the conversion rate of $1 per share. In addition, the number of shares of common stock the promissory note is convertible into is subject to adjustment from time to time if we (A) subdivide, combine or reclassify our common stock, or (B) exchange our common stock for securities or property of another company. RICHARD DOMANIK WARRANT On May 30, 2002, we issued a warrant to Richard Domanik entitling him to purchase 51,483 shares of our common stock at an exercise price of $0.01 per share, any time after May 31, 2002. The Richard Domanik warrant expires May 31, 2007. REGISTRATION RIGHTS We are obligated to register the resale of the common stock into which the Richard Domanik warrant is exercisable upon the demand of the holder or if we undertake to register any common stock for our own account or any other person. ROUND VALLEY CAPITAL, LLC WARRANT On September 4, 2002, we issued a warrant to Round Valley Capital, LLC entitling Round Valley Capital to purchase 681,818 shares of our common stock at an exercise price of $0.20 per share, any time after September 4, 2002. The Round Valley Capital warrant expires September 3, 2003. In lieu of additional cash fees requested by Round Valley Capital, the exercise price of the warrant is discounted from the current market price of our stock. REGISTRATION RIGHTS We are obligated to register the resale of the common stock into which the Round Valley Capital warrant is exercisable 30 days from the exercise date. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar of our common stock is LaSalle Bank National Association, Chicago, Illinois. 42 LEGAL MATTERS The validity of the shares offered by this prospectus has been passed upon for us by Schiff Hardin & Waite, Chicago, Illinois. EXPERTS The consolidated financial statements of Molecular Diagnostics, Inc. appearing in our Form 10-K, as amended, for the year ended December 31, 2001, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon (which contains an explanatory paragraph describing conditions that raise substantial doubt about Molecular Diagnostics' ability to continue as a going concern as described in Note 1 to the consolidated financial statements) included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION ABOUT US We file annual, quarterly and special reports and other information with the SEC. You may read and copy any document we file with the SEC in Washington, D.C. or at its regional offices located at: Public Reference Room Midwest Regional Office 450 Fifth Street, N.W. Citicorp Center Room 1024 500 West Madison Street Washington, D.C. 20549 Suite 1400 Chicago, Illinois 60661
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains reports, proxy statements and other information about issuers, like us, who file electronically. The address of that site is: http://www.sec.gov. Our common stock is listed on the Over-the-Counter Bulletin Board and reports and proxy statements and other information about us can be inspected at the offices of The Nasdaq-Amex Stock Market, Inc., 1735 K Street, N.W., Washington, DC 20006-1500. We filed two registration statements on Form S-2 under the Securities Act with the SEC that registers the shares of our common stock offered by this prospectus. This prospectus constitutes a part of those registration statements but does not contain all the information presented in the registration statements and their exhibits. For more information we refer you to the registration statements, including the exhibits. The SEC allows us to "incorporate by reference" information we file with the SEC, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is an important part of this prospectus. This prospectus incorporates by reference: - Annual Report on Form 10-K, as amended, for the year ended December 31, 2001; - Quarterly Report on Form 10-Q for the quarter ended March 31, 2002; - Quarterly Report on Form 10-Q for the quarter ended June 30, 2002; - Current Report on Form 8-K dated January 22, 2002; and - Current Report on Form 8-K dated June 10, 2002. 43 To receive at no cost a copy of the documents incorporated by reference in this prospectus, you may write or telephone us at the following: Molecular Diagnostics, Inc. 414 North Orleans Street Suite 510 Chicago, Illinois 60610 (312) 222-9550 Attention: Peter P. Gombrich We will not provide exhibits to documents unless they are specifically incorporated by reference. If you request any incorporated documents from us, we will mail them to you by first class mail, or another equally prompt means, within one business day after we receive your request. DOCUMENTS DELIVERED WITH THIS PROSPECTUS We are delivering a copy of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2001 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 with this prospectus. COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to our charter, bylaws or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim of indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by one of our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 44 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 46,766,537 Shares MOLECULAR DIAGNOSTICS, INC. COMMON STOCK PROSPECTUS September , 2002 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by Molecular Diagnostics, Inc. in connection with the sale of the common stock being registered. All amounts are estimates except the registration fees.
AMOUNT TO BE PAID ------------ SEC Registration Fee................................... $ 219 Printing............................................... 10,000 Legal Fees and Expenses................................ 10,000 Accounting Fees and Expenses........................... 5,000 Blue Sky Fees and Expenses............................. 0 Transfer Agent and Registrar Fees...................... 0 Miscellaneous.......................................... 281 ------- Total........................................ $25,500 =======
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 145 of the Delaware General Corporation Law authorizes indemnification of directors, officers, employees and agents of Molecular Diagnostics; allows the advancement of costs of defending against litigation; and permits companies incorporated in Delaware to purchase insurance on behalf of directors, officers, employees and agents against liabilities whether or not in the circumstances such companies would have the power to indemnify against such liabilities under the provisions of the statute. Molecular Diagnostics' Certificate of Incorporation, copies of which are incorporated hereto as Exhibits 3.1, 3.3, 3.5-3.7, 3.9-3.13 and its By-Laws, which are incorporated hereto as Exhibits 3.2, 3.4 and 3.8 provide for indemnification of its officers and directors to the fullest extent permitted by Section 145 of the Delaware General Corporation Law. Molecular Diagnostics' Certificate of Incorporation eliminates, to the fullest extent permitted by Delaware law, liability of a director to Molecular Diagnostics or its stockholders for monetary damages for a breach of such director's fiduciary duty of care except for liability where a director (a) breaches his or her duty of loyalty to Molecular Diagnostics or its stockholders, (b) fails to act in good faith or engages in intentional misconduct or knowing violation of law, (c) authorizes payment of an illegal dividend or a stock repurchase or (d) obtains an improper personal benefit. While liability for monetary damages has been eliminated, equitable remedies such as injunctive relief or rescission remain available. In addition, a director is not relieved of his responsibilities under any other law, including the federal securities laws. Molecular Diagnostics has obtained an insurance policy in the amount of $3,000,000 which (i) provides for the payment by the insurer of all amounts which Molecular Diagnostics may legally pay to officers and directors as indemnification, excluding certain fines and penalties which are legally uninsurable, and (ii) insures Molecular Diagnostics' officers and directors against certain claims which are not indemnified by Molecular Diagnostics. Insofar as indemnification by Molecular Diagnostics for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Molecular Diagnostics pursuant to the foregoing provisions, Molecular Diagnostics has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. II-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Bell National Corporation Plan of Reorganization (Annex I). (Incorporated herein by reference to Item 1 of the Bell National Corporation Annual Report on Form 10-K for the period from August 20, 1985 to December 31, 1985 and for the years ended December 31, 1986 and 1987.)* 2.2 Exchange Agreement dated December 4, 1998 among the Company, InPath, and the InPath Members. (Incorporated herein by reference to Appendix A to the Bell National Corporation Definitive Proxy Statement on Schedule 14A, filed on April 30, 1999.)* 2.3 Agreement and Plan of Merger of Bell National Corporation and the Company. (Incorporated herein by reference to Appendix C to the Bell National Corporation Definitive Proxy Statement on Schedule 14A, filed on April 30, 1999.)* 2.4 Agreement and Plan of Merger by and among AccuMed International, Inc., AccuMed Acquisition Corp. and Ampersand Medical Corporation, dated as of February 7, 2001. (Incorporated herein by reference to Appendix I to Registration Statement No. 333-61666.) 2.5 Amendment No. 1, dated May 14, 2001 to the Agreement and Plan of Merger by and among AccuMed International, Inc., AccuMed Acquisition Corp. and Ampersand Medical Corporation, dated February 7, 2001. (Incorporated herein by reference to Appendix I to Registration Statement No. 333-61666.) 3.1 Restated Articles of Incorporation. (Incorporated herein by reference to Exhibit 3.1 of the Bell National Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 1988.)* 3.2 Bylaws of Bell National Corporation. (Incorporated herein by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.)* 3.3 Certificate of Incorporation of the Company as amended. (Incorporated herein by reference to Appendix D to the Bell National Corporation Definitive Proxy Statement on Schedule 14A, filed on April 30, 1999.)* 3.4 By-laws of the Company. (Incorporated herein by reference to Appendix E to the Bell National Corporation Definitive Proxy Statement on Schedule 14A, filed on April 30, 1999.)* 3.5 Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of Ampersand Medical Corporation. (Incorporated herein by reference to Exhibit 3.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.) 3.6 Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock of Ampersand Medical Corporation. (Incorporated herein by reference to Exhibit 3.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.) 3.7 Certificate of Incorporation of Molecular Diagnostics, Inc., as amended. (Incorporated herein by reference to the Company's Current Report on Form 8-K dated September 26, 2001.) 3.8 Section 6 of Article VII of the By-laws of the Company as amended. (Incorporated herein by reference to Exhibit 3.3 to the Company's S-4 Registration Statement, File No. 333-61666, filed August 24, 2001.) 3.9 Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock of Molecular Diagnostics, Inc. (Incorporated herein by reference to Exhibit 3.4 to the Company's S-2 Registration Statement, File No. 333083578 filed February 28, 2002) 3.10 Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock. (Incorporated herein by reference to Exhibit 3.5 to the Company's S-2 Registration Statement, File No. 333083578 filed February 28, 2002) 3.11 Certificate of Amendment of Amended Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock. (Incorporated herein by reference to Exhibit 3.6 to the Company's S-2 Registration Statement, File No. 333083578 filed February 28, 2002) 3.12 Certificate of Designation, Preferences and Rights of Series D Convertible Preferred Stock. (Incorporated herein by reference to Exhibit 3.7 to the Company's S-2 Registration Statement, File No. 333083578 filed February 28, 2002)
II-2
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.13 Certificate of Designation, Preferences and Rights of Series E Convertible Preferred Stock. (Incorporated herein by reference to Exhibit 3.8 to the Company's S-2 Registration Statement, File No. 333083578 filed February 28, 2002) 4.1 Form of Common Stock Purchase Warrant, as executed by Bell National Corporation on December 4, 1998 with respect to each of Mr. Gombrich, Theodore L. Koenig, William J. Ritger, Fred H. Pearson, Walter Herbst, AccuMed International, Inc., Northlea Partners Ltd., and Monroe Investments, Inc. (collectively, the "InPath Members"). (Incorporated herein by reference to Exhibit 3 of the Schedule 13D filed jointly by the InPath Members on December 14, 1998.)* 4.2 Stockholders Agreement dated December 4, 1998 among the Company, Winchester National, Inc., the InPath Members, and Mr. Milley, Mr. Shaw, Cadmus, and MMI (collectively, the "Claimants"). (Incorporated herein by reference to Exhibit 2 to the Schedule 13D filed jointly by the InPath Members on December 14, 1998.)* 4.3 Form of Common Stock Purchase Warrant issued to Holleb & Coff on July 4, 1999 representing the right to purchase 250,000 shares of Common Stock of the Company in connection with legal services rendered. (Incorporated herein by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 4.4 Form of Common Stock Purchase Warrant issued to The Research Works on October 11, 1999 representing the right to purchase 70,000 shares of Common Stock of the Company in connection with the preparation of an investment research report. (Incorporated herein by reference to Exhibit 4.4 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 4.5 Form of Common Stock Purchase Warrant issued to Azimuth Corporation on December 10, 1999 representing the right to purchase 50,000 shares of Common Stock of the Company as additional consideration for a 12% Convertible Promissory Note issued on the same date. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 4.6 Form of Common Stock Purchase Warrant issued to Richard Doermer on January 3, 2000 representing the right to purchase 96,250 shares of Common Stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.7 Form of Common Stock Purchase Warrant issued to Richard Doermer on January 3, 2000 representing the right to purchase 75,759 shares of Common Stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.8 Form of Common Stock Purchase Warrant issued to Richard Doermer on January 3, 2000 representing the right to purchase 121,313 shares of Common Stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.9 Form of Common Stock Purchase Warrant issued to Richard Doermer on January 3, 2000 representing the right to purchase 94,697 shares of Common Stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.10 Form of Common Stock Purchase Warrant issued to William J. Ritger on May 24, 2000 representing the right to purchase 531,614 shares of Common Stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.11 Form of Common Stock Purchase Warrant issued to Denis M. O'Donnell on May 24, 2000 representing the right to purchase 784,901 shares of Common Stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.11 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.12 Form of Common Stock Purchase Warrant issued to Prospektiva, SA on May 23, 2000 representing the right to purchase 48,333 shares of Common Stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)*
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.13 Form of Common Stock Purchase Warrant issued to Dr. Bruce Patterson, on September 12, 2000 representing the right to purchase 150,000 shares of Common Stock of the Company as additional consideration for the achievement of product development milestones under a License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus. (Incorporated by reference to Exhibit 4.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.14 Form of Common Stock Purchase Warrant issued to Dr. Bruce Patterson, on September 12, 2000 representing the right to purchase 100,000 shares of Common Stock of the Company as consideration for an Addendum to a License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus. (Incorporated by reference to Exhibit 4.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.15 Form of Common Stock Purchase Warrant issued to Osprey Partners, on November 22, 2000 representing the right to purchase 100,000 shares of Common Stock of the Company in connection with financial advisory services to be rendered over twelve months. (Incorporated by reference to Exhibit 4.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.16 Form of Common Stock Purchase Warrant issued to Univest Management, Inc. on November 22, 2000 representing the right to purchase 100,000 shares of Common Stock of the Company in connection with financial advisory services to be rendered over twelve months. (Incorporated by reference to Exhibit 4.16 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.17 Form of Common Stock Purchase Warrant issued to Azimuth Corporation on December 1, 2000 representing the right to purchase 50,000 shares of Common Stock of the Company as additional consideration for a 12% Promissory Note issued on December 4, 2000. (Incorporated by reference to Exhibit 4.17 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.18 Form of Common Stock Purchase Warrant issued to Azimuth Corporation on December 8, 2000 representing the right to purchase 1,000,000 shares of Common Stock of the Company as additional consideration for a 15% Promissory Note issued on December 11, 2000 in connection with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 4.18 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.19 Form of Common Stock Purchase Warrant issued to Azimuth Corporation on February 7, 2001 representing the right to purchase 1,000,000 shares of Common Stock of the Company as additional consideration for two 15% Promissory notes issued on February 1, 2001 and February 7, 2001 in connection with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 4.19 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.20 Common Stock Purchase Warrant issued to Azimuth Corporation on August 6, 2001 representing the right to purchase 250,000 shares of common stock of the Company as additional consideration for a 15% promissory note. (Incorporated by reference to Exhibit 4.24 to the Company's S-4 Registration Statement File No. 333-61666 filed August 24, 2001.) 4.21 Common Stock Purchase Warrant issued to Cadmus Corporation on August 6, 2001 representing the right to purchase 250,000 shares of common stock of the Company as additional consideration for a 15% promissory note. (Incorporated by reference to Exhibit 4.23 to the Company's S-4 Registration Statement File No. 333-61666 filed August 24, 2001.) 4.22 Common Stock Purchase Warrant issued to Northlea Partners, Ltd. on August 6, 2001 representing the right to purchase 62,500 shares of common stock of the Company as additional consideration for a 15% promissory note. (Incorporated by reference to Exhibit 4.27 to the Company's S-4 Registration Statement File No. 333-61666 filed August 24, 2001.)
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.23 Common Stock Purchase Warrant issued to Azimuth Corporation on July 26, 2001 representing the right to purchase 500,000 shares of common stock of the Company as consideration of Azimuth's waiver of the conversion feature of its $500,000 convertible promissory note issued September 22, 2000. (Incorporated by reference to Exhibit 4.25 to the Company's S-4 Registration Statement File No. 333-61666 filed August 24, 2001.) 4.24 Common Stock Purchase Warrant issued to Azimuth Corporation on August 17, 2001 representing the right to purchase 25,000 shares of common stock of the Company. (Incorporated by reference to Exhibit 4.26 to the Company's S-4 Registration Statement File No. 333-61666, filed August 24, 2001.) 4.25 Common Stock Purchase Warrant issued to Tucker Anthony Incorporated on July 10, 2001 representing the right to purchase 150,000 shares of common stock of the Company. (Incorporated by reference to Exhibit 4.28 to the Company's S-2 Registration Statement, File No. 333-83578 filed February 28, 2002). 4.26 Common Stock Purchase Warrant issued to Ventana Medical Systems, Inc. on November 2, 2001 representing the right to purchase 1,750,000 shares of common stock of the Company. (Incorporated by reference to Exhibit 4.29 to the Company's S-2 Registration Statement, File No. 333-83578 filed February 28, 2002). 4.27 Form of Confidential $5,000,000 Common Stock Private Offering Memorandum dated January 2000. (Incorporated by reference to Exhibit 4.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.28 Form of Confidential $5,000,000 Series B Convertible Preferred Stock Private Offering memorandum dated November 2000 and amended January 30, 2001. (Incorporated by reference to Exhibit 4.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.29 Amendment No. 1 to Stockholders Agreement dated July 25, 2000 among the Company, the InPath Members, Mr. Milley, Mr. Shaw, MMI, Cadmus Corporation, and Winchester National, Inc. (Incorporated by reference to Exhibit 4.22 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.30 Common Stock Purchase Warrant issued to Schwartz, Cooper, Greenberger & Krauss, Chartered on February 13, 2002 representing the right to purchase 750,000 shares of common stock. (Incorporated by reference to Exhibit 4.30 to the Company's S-2 Registration Statement, File No. 333-83578 filed June 27, 2002). 4.31 Common Stock Purchase Warrant issued to Monsun AS on April 1, 2002 representing the right to purchase 200,000 shares of common stock. (Incorporated by reference to Exhibit 4.31 to the Company's S-2 Registration Statement, File No. 333-83578 filed June 27, 2002). 4.32 Form of Common Stock Purchase Warrant issued to Cell Solutions, LLC on October 11, 2001 representing the right to purchase 172,120 shares of common stock. (Incorporated by reference to Exhibit 4.32 to the Company's S-2 Registration Statement, File No. 333-83578 filed June 27, 2002). 4.33 Form of Common Stock Purchase Warrant issued in connection with certain bridge financing in June 2002. (Incorporated by reference to Exhibit 4.33 to the Company's S-2 Registration Statement, File No. 333-83578 filed June 27, 2002). 4.34 Common Stock Purchase Warrant issued to Richard Domanik on May 30, 2002 representing the right to purchase 51,483 shares of common stock. 4.35 Common Stock Purchase Warrant issued to Round Valley Capital, LLC on September 4, 2002 representing the right to purchase 681,818 shares of common stock. 5.1 Opinion of Schiff Hardin & Waite. 10.1 Stock Appreciation Rights Agreement dated as of November 20, 1989 between the Company and Raymond O'S. Kelly. (Incorporated herein by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.)* 10.2 Stock Appreciation Rights Agreement dated as of November 20, 1989 between the Company and Nicholas E. Toussaint. (Incorporated herein by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.)*
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.3 Stock Appreciation Rights Agreement dated as of November 20, 1989 between the Company and Nicholas E. Toussaint. (Incorporated herein by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.)* 10.4 SAR Agreement Extension dated November 15, 1995 between the Company and Raymond O'S. Kelly. (Incorporated herein by reference to Exhibit 10.20 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.)* 10.5 SAR Agreement Extension dated November 15, 1995 between the Company and Nicholas E. Toussaint. (Incorporated herein by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.)* 10.6 Employment Agreement dated May 1, 1998 between Mr. Gombrich and InPath, LLC, as amended on December 4, 1998. (Incorporated herein by reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.)* 10.7 Claims Agreement dated December 4, 1998 among the Company, the Claimants, and Liberty Associates Limited Partnership. (Incorporated herein by reference to Exhibit 4 to the Schedule 13D filed jointly by the InPath Members on December 14, 1998.)* 10.8 Ampersand Medical Corporation Equity Incentive Plan established as of June 1, 1999. (Incorporated herein by reference to Appendix F to the Bell National Corporation Definitive Proxy Statement on Schedule 14A, as filed on April 30, 1999.)* 10.9 Ampersand Medical Corporation Employee Stock Purchase Plan. (Incorporated herein by reference to Appendix G to the Bell National Corporation Definitive Proxy statement on Schedule 14A, as filed on April 30, 1999.)* 10.10 Form of Promissory Note issued in connection with the Bridge Financing in June 2002. (Incorporated by reference to Exhibit 10.10 to the Company's S-2 Registration Statement, File No. 333-83578 filed June 27, 2002). 10.11 Lease Agreement between the Company and O.P., L.L.C. dated September 1, 1999 pertaining to the premises located at suite 305, 414 N. Orleans, Chicago, IL 60610. (Incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.12 Amendment to Lease Agreement between the Company and O.P., L.L.C. dated November 1, 1999 pertaining to the premises at suite 300, 414 N. Orleans, Chicago, IL 60610. (Incorporated herein by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.13 Form of Note purchase agreements dated between March 1, 1999 and June 29, 1999 between the Company and several purchasers. (Incorporated herein by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.14 Form of 6% Convertible Subordinated Note Due 2000, dated between March 1, 1999 and June 29, 1999 issued by the Company to several purchasers. (Incorporated herein by reference to Exhibit 10.15 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.15 Schedule of purchasers of 6% Convertible Notes Due 2000, including dates and amount purchased. (Incorporated herein by reference to Exhibit 10.16 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.16 Form of Senior Convertible Promissory Note issued to Azimuth Corporation on December 10, 1999. (Incorporated herein by reference to Exhibit 10.17 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.17 Form of Restricted Stock Award of 50,000 shares of Common Stock issued to David A. Fishman, M.D., on August 10, 1999 as additional compensation under a 36 month Consulting Agreement dated June 1, 1999. (Incorporated herein by reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) 10.18 Form of Restricted Stock award of 50,000 shares of Common Stock issued to Arthur L. Herbst, M.D., on August 10, 1999 as additional compensation under a 36 month Consulting Agreement dated July 1, 1999. (Incorporated herein by reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)*
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.19 Form of $2,000,000 note received from Seaside Partners, L.P. on April 28, 2000. (Incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.20 Form of $300,000 note received from AccuMed International, Inc. on September 22, 2000 in conjunction with the proposed acquisition of AccuMed by the Company. (Incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.21 Form of $500,000 Convertible Promissory Note issued to Azimuth Corporation on September 22, 2000 in connection with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.22 Form of $500,000 Convertible Promissory Note issued to Monsun, AS on November 1, 2000. (Incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.23 Form of $200,000 Promissory Note issued to Azimuth Corporation on December 4, 2000. (Incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.24 Form of $100,000 Promissory Note issued to Azimuth Corporation on December 11, 2000 in conjunction with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.25 Amendment to Patent and Technology License Agreement dated June 9, 2000 by and between Ampersand Medical Corporation, AccuMed International, Inc. and InPath, L.L.C. (Incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.26 License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus dated June 23, 2000, by and between Invirion, Dr. Bruce Patterson, and Ampersand Medical Corporation. (Incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.27 First Addendum to License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus dated September 12, 2000, by and between Invirion, Dr. Bruce Patterson and Ampersand Medical Corporation. (Incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.28 Second Addendum to License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus dated January 12, 2001, by and between Invirion, Dr. Bruce Patterson and Ampersand Medical Corporation. (Incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.29 Form of $25,000 Promissory Note issued to Azimuth Corporation on February 1, 2001 in conjunction with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.30 Form of $470,000 Promissory Note issued to Azimuth Corporation on February 7, 2001 in conjunction with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.31 Lease Agreement between the Company and O.P., L.L.C date May 18, 2000, pertaining to premises located at 414 N. Orleans, Suite 510, Chicago, Illinois 60610. (Incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)*
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.32 First Amendment to Lease Agreement between the Company and O.P., L.L.C. dated February 13, 2001, pertaining to additional premises at 414 N. Orleans, Suite 503, Chicago, Illinois 60610 and extending the term of the original lease until February 28, 2006. (Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.33 Form of Restricted Stock Award of 25,000 shares of Common Stock issued to Eric A Gombrich on May 1, 2000 as additional compensation under a 36 month Employment Agreement dated April 1, 2000. (Incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.34 Form of Restricted Stock Award of 50,000 shares of Common Stock issued to Ralph M. Richart, M.D., on July 24, 2000 as additional compensation under a 36 month Consulting Agreement dated June 1, 2000. (Incorporated by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.35 Form of Restricted Stock Award of 50,000 shares of Common Stock issued to J. Thomas Cox, M.D., on October 20, 2000 as additional compensation under a 36 month Consulting Agreement dated October 15, 2000. (Incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.) 10.36 Form of Voting Agreement between the Company and each of the officers and directors of AccuMed International, Inc. (Exhibit A to the Agreement and Plan of Merger included in Appendix I to the proxy statement-prospectus.) 10.37 $100,000 Promissory Note issued to Cadmus Corporation on July 26, 2001. (Incorporated by reference to Exhibit 10.39 to the Company's S-4 Registration Statement, File No. 333-61666, filed August 24, 2001.) 10.38 $100,000 Promissory Note issued to Azimuth Corporation on August 6, 2001. (Incorporated by reference to Exhibit 10.40 to the Company's S-4 Registration Statement, File No. 333-61666, filed August 24, 2001.) 10.39 $25,000 Promissory Note issued to Northlea Partners, Ltd. on August 6, 2001. (Incorporated by reference to Exhibit 10.41 to the Company's S-4 Registration Statement, File No. 333-61666, filed August 24, 2001.) 10.40 $118,500 Promissory Note issued to Schwartz, Cooper, Greenberger & Krauss on February 13, 2002. (Incorporated by reference to Exhibit 10.40 to the Company's S-2 Registration Statement, File No. 333-83578 filed June 27, 2002). 10.41 $650,000 Promissory Note issued to Round Valley Capital on August 30, 2002. 23.1 Consent of Ernst & Young. 23.2 Consent of Schiff Hardin & Waite (Included in Exhibit 5.1.) 24.1 Power of Attorney by directors and officers of the Company. 24.2 Certified copy of a resolution by the Board of Directors of the Company authorizing execution of the Registration Statement on behalf of the Company by an attorney-in-fact.
- --------------- * SEC File No. 0-935 (b) Financial Statement Schedules The information required to be set forth herein is incorporated by reference to Molecular Diagnostics' Annual Report on Form 10-K, as amended, for the year ended December 31, 2001. II-8 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 of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. 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 20 percent 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; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. D. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the Certificate of Incorporation, as amended (the "Certificate of Incorporation"), and the bylaws, as amended (the "Bylaws"), of the registrant, the Delaware General Corporation Law or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-9 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-2 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Chicago, State of Illinois, on September 27, 2002. MOLECULAR DIAGNOSTICS, INC. By: /s/ PETER P. GOMBRICH ---------------------------------- Peter P. Gombrich, Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ PETER P. GOMBRICH Director and Chairman of the Board September 26, 2002 - --------------------------------------------------- of Directors, Chief Executive Peter P. Gombrich Officer and acting Secretary (principal executive officer) /s/ STEPHEN G. WASKO President and Chief Operating September 27, 2002 - --------------------------------------------------- Officer Stephen G. Wasko /s/ MICHAEL A. BRODEUR Interim Chief Financial Officer September 26, 2002 - --------------------------------------------------- (principal financial officer and Michael A. Brodeur principal accounting officer) * Director September 19, 2002 - --------------------------------------------------- Alexander M. Milley * Director September 19, 2002 - --------------------------------------------------- Robert C. Shaw * Director September 19, 2002 - --------------------------------------------------- John H. Abeles * Director September 19, 2002 - --------------------------------------------------- Denis M. O'Donnell /s/ PETER P. GOMBRICH Individually and as September 26, 2002 - --------------------------------------------------- Attorney-in-fact Peter P. Gombrich
II-10 EX-4.34 3 c71905exv4w34.txt COMMON STOCK PURCHASE WARRANT EXHIBIT 4.34 THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE144 UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF MOLECULAR DIAGNOSTICS, INC. Warrant No. RDOM1 WARRANT TO PURCHASE SHARES OF COMMON STOCK WARRANT TO PURCHASE 51,493 SHARES EXERCISE PRICE $0.01 PER SHARE THIS CERTIFIES THAT Richard A. Domanik, Ph.D. 30908 Leslie Court Libertyville, IL 60048, is entitled to purchase from Molecular Diagnostics, Inc., a Delaware corporation (hereinafter called the "Company") with its principal office located at 414 North Orleans Street, Suite 510, Chicago, Illinois 60610, at any time after the Exercise Date (as defined below), but before 3:00 P.M., Central Time, on the Expiration Date (as defined below), at the Exercise Price (as defined below), the number of shares (the "Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock") set forth above. SECTION 1. DEFINITIONS. The following terms used in this agreement shall have the following meanings (unless otherwise expressly provided herein): The "Act." The Securities Act of 1933, as amended. The "Commission." The Securities and Exchange Commission. The "Company." Molecular Diagnostics, Inc. "Common Stock." The Company's Common Stock, par value $0.001 per share. "Current Market Price." The Current Market Price shall be determined as follows: (a) if the security at issue is listed on a national securities exchange or admitted to unlisted trading privileges on such an exchange or quoted on either the National Market System or the Small Cap Market of the automated quotation service operated by The Nasdaq Stock Market, Inc. ("Nasdaq"), the current value shall be the last reported sale price of that security on such exchange or system on the day for which the Current Market Price is to be determined or, if no such sale is made on such day, the average of the highest closing bid and lowest asked price for such day on such exchange or system; or (b) if the security at issue is not so listed or quoted or admitted to unlisted trading privileges, the Current Market Value shall be the average of the last reported highest bid and lowest asked prices quoted on the Nasdaq Electronic Bulletin Board, or, if not so quoted, then by the National Quotation Bureau, Inc. on the last business day prior to the day for which the Current Market Price is to be determined; or (c) if the security at issue is not so listed or quoted or admitted to unlisted trading privileges and bid and asked prices are not reported, the current market value shall be determined in such reasonable manner as may be prescribed from time to time by the Board of Directors of the Company. "Exercise Date." May 31, 2002. "Exercise Price." $0.01 per Share. "Expiration Date." May 31, 2007. "Holder" or "Warrantholder." The person to whom this Warrant is issued and any valid transferee thereof pursuant to Section 3.1 below. "NASD." The National Association of Securities Dealers, Inc. "Nasdaq." The automated quotation system operated by the Nasdaq Stock Market, Inc. "Termination of Business." Any sale, lease or exchange of all, or substantially all, of the Company's assets or business or any dissolution, liquidation or winding up of the Company. "Warrants." The warrants issued in accordance with the terms of this Agreement and any Warrants issued in substitution for or replacement of such warrants, including those evidenced by a certificate or certificates originally issued or issued upon division, exchange, substitution or transfer pursuant to this Agreement. "Warrant Securities." The Common Stock purchasable upon exercise of a Warrant including the Common Stock underlying unexercised portions of a Warrant. SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANT. 2.1. Exercise of Warrant. Subject to the terms of this Agreement, the Holder shall have the right, at any time beginning on the Exercise Date but prior to 3:00 p.m., Central Time, on the Expiration Date, to purchase from the Company up to the number of fully paid and nonassessable Shares to which the Holder may at the time be entitled to purchase pursuant to this Agreement, upon surrender to the Company, at its principal office, of the Warrant to be exercised, together with the purchase form on the reverse thereof, duly filled in and signed, and upon payment to the Company of the Exercise Price for the number of Shares in respect of which such Warrants are then exercised, but in no event for less than 100 Shares (unless fewer than an aggregate of 100 shares are then purchasable under all outstanding Warrants held by a Holder). 2.2. Payment of Exercise Price. Payment of the aggregate Exercise Price shall be made in cash or by check, or any combination thereof. 2.3. Issuance of Shares. Upon such surrender of the Warrants and payment of such Exercise Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Shares so purchased upon the exercise of the Warrant, together with cash, as provided in Section 10 hereof, in respect of any fractional Shares otherwise issuable upon such surrender. 2.4. Status as Holder of Shares. Upon receipt of the Warrant by the company as described in Sections 2.1. above, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company may then be closed or that certificates representing such Shares may not have been prepared or actually delivered to the Holder. SECTION 3. TRANSFERABILITY AND FORM OF WARRANT 3.1. Limitation on Transfer. Any assignment or transfer of a Warrant shall be made by the presentation and surrender of the Warrant to the Company at its principal office or the office of its transfer agent, if any, accompanied by a duly executed Assignment Form. Upon the presentation and surrender of these items to the Company, the Company, at its sole expense, shall execute and deliver to the new Holder or Holders a new Warrant or Warrants, in the name of the new Holder or Holders as named in the Assignment Form, and the Warrant presented or surrendered shall at that time be canceled. 3.2. Exchange of Certificate. Any Warrant may be exchanged for another certificate or certificates entitling the Warrantholder to purchase a like aggregate number of Shares as the certificate or certificates -2- surrendered then entitled such Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant shall make such request in writing delivered to the Company, and shall surrender, properly endorsed, with signatures guaranteed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute and deliver to the person entitled thereto a new Warrant as so requested. 3.3. Mutilated, Lost, Stolen, or Destroyed Certificate. In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and a bond of indemnity, if requested, also satisfactory in form and amount, at the applicant's cost. Applicants for such substitute Warrant shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 4. RESERVATION OF WARRANT SECURITIES. There has been reserved, and the Company shall at all times keep reserved so long as the Warrants remain outstanding, out of its authorized and unissued Common Stock, such number of shares of Common Stock as shall be subject to purchase under the Warrants. Every transfer agent for the Common Stock and other securities of the Company issuable upon the exercise of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares and other securities as shall be requisite for such purpose. The Company will keep a copy of this Agreement on file with every transfer agent for the Common Stock and other securities of the Company issuable upon the exercise of the Warrants. The Company will supply every such transfer agent with duly executed stock and other certificates, as appropriate, for such purpose and will provide or otherwise make available any cash which may be payable as provided in Section 9 hereof. SECTION 5. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS. 5.1. Restrictions on Transfer. The Warrantholder agrees that prior to making any disposition of the Warrants or the Shares, the Warrantholder shall give written notice to the Company describing briefly the manner in which any such proposed disposition is to be made; and no such disposition shall be made if the Company has notified the Warrantholder that in the opinion of counsel reasonably satisfactory to the Warrantholder a registration statement or other notification or post-effective amendment thereto (hereinafter collectively a "Registration Statement") under the Act is required with respect to such disposition and no such Registration Statement has been filed by the Company with, and declared effective, if necessary, by, the Commission. 5.2. Registration. Not later than 30 days from the Exercise Date, the Company shall file a registration statement on Form S-2, or other appropriate form, to register the Warrant Securities. In connection with the Registration Statement, the Company will use its diligent efforts to effect such registration, qualification or compliance as soon as practicable (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations), as may be so requested and as would permit or facilitate the sale and distribution of all of such Warrant Securities. As long as the Warrant Securities are registered as required by this Section 5.2, the Holder has the right to sell the Warrant Securities immediately upon exercising the Warrant. The Company shall comply with the requirements of this Section 5.2 at its own expense. That expense shall include, but not be limited to, legal, accounting, consulting, printing, federal and state filing fees, NASD fees, out-of-pocket expenses incurred by counsel, accountants and consultants retained by the Company, and miscellaneous expenses directly related to the registration statement or offering statement and the offering. However, this expense shall not include the portion of any underwriting commissions, transfer taxes and the underwriter's accountable and nonaccountable expense allowances attributable to the offer and sale of the Warrant, Warrant Securities and the Warrant Securities underlying the unexercised portion of this Warrant, all of which expenses shall be borne by the Holder or Holders of this Warrant and the holders of the Warrant Securities registered or qualified. 5.3. Inclusion of Information. In the event that the Company registers or qualifies the Warrant Securities pursuant to Section 5.2 above, the Company shall include in the registration statement or qualification, and -3- the prospectus included therein, all information and materials necessary or advisable to comply with the applicable statutes and regulations so as to permit the public sale of the Warrant Securities or the Warrant Securities underlying the unexercised portion of this Warrant. As used in Section 5.2, reference to the Company's securities shall include, but not be limited to, any class or type of the Company's securities or the securities of any of the Company's subsidiaries or affiliates. 5.4. Condition of Company's Obligations. As to each registration statement or offering statement, the Company's obligations contained in this Section 5 shall be conditioned upon a timely receipt by the Company in writing of the following: (a) Information as to the terms of the contemplated public offering furnished by and on behalf of each Holder or holder intending to make a public distribution of the Warrant Securities or Warrant Securities underlying the unexercised portion of the Warrant; and (b) Such other information as the Company may reasonably require from such Holders or holders, or any underwriter for any of them, for inclusion in the registration statement or offering statement. 5.5. Reciprocal Indemnification. In each instance in which pursuant to this Section 5 the Company shall take any action to register or qualify the Securities or the Warrant Securities underlying the unexercised portion of this Warrant, prior to the effective date of any registration statement or offering statement, the Company and each Holder or holder of Warrants or Warrant Securities being registered or qualified shall enter into reciprocal indemnification agreements, in the form customarily used by reputable investment bankers with respect to public offerings of securities, containing substantially the same terms as described in Section 8 . These indemnification agreements also shall contain an agreement by the Holder or shareholder at issue to indemnify and hold harmless the Company, its officers and directors from and against any and all losses, claims, damages and liabilities, including, but not limited to, all expenses reasonably incurred in investigating, preparing, defending or settling any claim, directly resulting from any untrue statements of material facts, or omissions to state a material fact necessary to make a statement not misleading, contained in a registration statement or offering statement to which this Section 5 applies, if, and only if, the untrue statement or omission directly resulted from information provided in writing to the Company by the indemnifying Holder or shareholder expressly for use in the registration statement or offering statement at issue. 5.6. Survival. The Company's obligations described in this Section 5 shall continue in full force and effect regardless of the exercise, surrender, cancellation or expiration of this Warrant. SECTION 6. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of the Warrants or the securities comprising the Shares; provided, however, the Company shall not be required to pay any tax which may be payable in respect of any transfer of the Warrants or the securities comprising the Shares. SECTION 7. INDEMNIFICATION AND CONTRIBUTION 7.1. Indemnification by Company. In the event of the filing of any Registration Statement with respect to the Warrant Shares pursuant to Section 8 hereof, the Company agrees to indemnify and hold harmless the Warrantholder or any holder of Warrant Shares and each person, if any, who controls the Warrantholder or any holder of Warrant Shares within the meaning of the Act, against any and all loss, claim, damage or liability, joint or several (which shall, for all purposes of this Agreement include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which such Warrantholder or any holder of Warrant Shares may become subject, under the Act or otherwise, insofar as such loss, claim, damage, or liability (or action with respect thereto) arises out of or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Effective Prospectus, or the Final Prospectus or any amendment or supplement thereto; or (b) the omission or alleged omission to state in the Registration Statement, any Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements therein not misleading; except that the Company shall not be liable in any such case to the extent, but only to the extent, that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged -4- omission made in reliance upon and in conformity with written information furnished to the Company by such Warrantholder or the holder of such Warrant Shares specifically for use in the preparation of the Registration Statement, any Preliminary Prospectus, the Effective Prospectus and the Final Prospectus or any amendment or supplement thereto. This indemnity will be in addition to any liability which the Company may otherwise have. 7.2. Indemnification by Warrantholders. The Warrantholders and the holders of Warrant Shares agree that they, severally, but not jointly, shall indemnify and hold harmless the Company, each other person referred to in subparts (1), (2) and (3) of Section 11(a) of the Act in respect of the Registration Statement and each person, if any, who controls the Company within the meaning of the Act, against any and all loss, claim, damage or liability, joint or several (which shall, for all purposes of this Agreement include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which the Company may become subject under the Act or otherwise, insofar as such loss, claim, damage, liability (or action in respect thereto) arises out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or any amendment or supplement thereto; or (b) the omission or alleged omission to state in the Registration Statement, any Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements therein not misleading; except that such indemnification shall be available in each such case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon information and in conformity with written information furnished to the Company by the Warrantholder or the holder of Warrant Shares specifically for use in the preparation thereof. This indemnity will be in addition to any liability which such Warrantholder or holder of Warrant Shares may otherwise have. 7.3. Right to Provide Defense. Promptly after receipt by an indemnified party under Section 7.1 or 7.2 above of written notice of the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such section, notify the indemnifying party in writing of the claim or the commencement of that action; the failure to notify the indemnifying party shall not relieve it of any liability which it may have to an indemnified party, except to the extent that the indemnifying party did not otherwise have knowledge of the commencement of the action and the indemnifying party's ability to defend against the action was prejudiced by such failure. Such failure shall not relieve the indemnifying party from any other liability which it may have to the indemnified party. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under such section for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation. 7.4. Contribution. If the indemnification provided for in Sections 7.1 and 7.2 of this Agreement is unavailable or insufficient to hold harmless an indemnified party, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, or liabilities referred to in Sections 7.1 or 7.2 above (a) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Warrantholders on the other; or (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such proportion as is appropriate to reflect the relative benefits referred to in clause (a) above but also the relative fault of the Company on the one hand and the Warrantholders on the other in connection with the statements or omissions which resulted in such losses, claims, damages, or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Warrantholders shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and un-itemized expenses received by the Underwriters, in each case as set forth in the table on the cover page of the Final Prospectus. Relative fault shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or the Underwriter and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such untrue statement or omission. For purposes of this Section, the term "damages" shall include any counsel fees or other expenses reasonably incurred by the Company or the Underwriters in connection with investigating or defending any action or claim which is the subject of the contribution provisions of this Section 7.4. No person adjudged guilty of fraudulent -5- misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each party entitled to contribution agrees that upon the service of a summons or other initial legal process upon it in any action instituted against it in respect of which contribution may be sought, it shall promptly give written notice of such service to the party or parties from whom contribution may be sought, but the omission so to notify such party or parties of any such service shall not relieve the party from whom contribution may be sought from any obligation it may have hereunder or otherwise (except as specifically provided in Section 10.4 hereof). SECTION 8. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933 This Warrant, the Warrant Securities, and all other securities issued or issuable upon exercise of this Warrant, may not be offered, sold or transferred, in whole or in part, except in compliance with the Act, and except in compliance with all applicable state securities laws. The Company may cause substantially the following legends, or their equivalents, to be set forth on each certificate representing the Warrant Securities, or any other security issued or issuable upon exercise of this Warrant, not theretofore distributed to the public or sold to underwriters, as defined by the Act, for distribution to the public pursuant to Section 8 above: (a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM AND OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT ANY PROPOSED RESALE OR TRANSFER IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS." (b) Any legend required by applicable state securities laws. Any certificate issued at any time in exchange or substitution for any certificate bearing such legends (except a new certificate issued upon completion of a public distribution pursuant to a registration statement under the Securities Act of 1933, as amended (the "Act"), or the securities represented thereby) shall also bear the above legends unless, in the opinion of the Company's counsel, the securities represented thereby need no longer be subject to such restrictions. SECTION 9. FRACTIONAL SHARES No fractional shares or scrip representing fractional shares shall be issued upon the exercise of all or any part of this Warrant. With respect to any fraction of a share of any security called for upon any exercise of this Warrant, the Company shall pay to the Holder an amount in money equal to that fraction multiplied by the Current Market Price of that share. SECTION 10. NO RIGHTS AS STOCKHOLDER; NOTICES TO WARRANTHOLDER. Nothing contained in this Agreement or in the Warrants shall be construed as conferring upon the Warrantholder or its transferees any rights as a stockholder of the Company, including the right to vote, receive dividends, consent or receive notices as a stockholder in respect to any meeting of stockholders for the election of directors of the Company or any other matter. The Company covenants, however, that for so long as this Warrant is at least partially unexercised, it will furnish any Holder of this Warrant with copies of all reports and communications furnished to the shareholders of the Company. SECTION 11. CHARGES DUE UPON EXERCISE. The Company shall pay any and all issue or transfer taxes, including, but not limited to, all federal or state taxes, that may be payable with respect to the transfer of this Warrant or the issue or delivery of Warrant Securities upon the exercise of this Warrant. -6- SECTION 12. WARRANT SECURITIES TO BE FULLY PAID The Company covenants that all Warrant Securities that may be issued and delivered to a Holder of this Warrant upon the exercise of this Warrant and payment of the Exercise Price will be, upon such delivery, validly and duly issued, fully paid and nonassessable. SECTION 13. NOTICES Any notice pursuant to this Agreement by the Company or by a Warrantholder or a holder of Shares shall be in writing and shall be deemed to have been duly given if delivered or mailed by certified mail, return receipt requested: (i) If to a Warrantholder or a holder of Shares, addressed to the address set forth above. (ii) If to the Company addressed to it at 414 North Orleans Street, Suite 510, Chicago, Illinois 60610, Attention: President. Each party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. SECTION 14. APPLICABLE LAW This Warrant shall be governed by and construed in accordance with the laws of the State of Illinois, and courts located in Illinois shall have exclusive jurisdiction over all disputes arising hereunder. SECTION 15. ARBITRATION. The Company and the Holder, and by receipt of this Warrant or any Warrant Securities, all subsequent Holders or holders of Warrant Securities, agree to submit all controversies, claims, disputes and matters of difference with respect to this Warrant, including, without limitation, the application of this Section 15 to arbitration in Chicago, Illinois, according to the rules and practices of the American Arbitration Association from time to time in force; provided, however, that if such rules and practices conflict with the applicable procedures of Illinois courts of general jurisdiction or any other provisions of Illinois law then in force, those Illinois rules and provisions shall govern. This agreement to arbitrate shall be specifically enforceable. Arbitration may proceed in the absence of any party if notice of the proceeding has been given to that party. The parties agree to abide by all awards rendered in any such proceeding. These awards shall be final and binding on all parties to the extent and in the manner provided by the rules of civil procedure enacted in Illinois. All awards may be filed, as a basis of judgment and of the issuance of execution for its collection, with the clerk of one or more courts, state or federal, having jurisdiction over either the party against whom that award is rendered or its property. No party shall be considered in default hereunder during the pendency of arbitration proceedings relating to that default. SECTION 16. ACCEPTANCE OF TERMS; SUCCESSORS. By its acceptance of this Warrant Certificate, the Holder accepts and agrees to comply with all of the terms and provisions hereof. All the covenants and provisions of this Warrant Certificate by or for the benefit of the Company or the Holder shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 17. MISCELLANEOUS PROVISIONS (a) Subject to the terms and conditions contained herein, this Warrant shall be binding on the Company and its successors and shall inure to the benefit of the original Holder, its successors and assigns and all holders of Warrant Securities and the exercise of this Warrant in full shall not terminate the provisions of this Warrant as it relates to holders of Warrant Securities. (b) If the Company fails to perform any of its obligations hereunder, it shall be liable to the Holder for all damages, costs and expenses resulting from the failure, including, but not limited to, all reasonable attorney's fees and disbursements. -7- (c) This Warrant cannot be changed or terminated or any performance or condition waived in whole or in part except by an agreement in writing signed by the party against whom enforcement of the change, termination or waiver is sought; provided, however, that any provisions hereof may be amended, waived, discharged or terminated upon the written consent of the Company and the Company. (d) If any provision of this Warrant shall be held to be invalid, illegal or unenforceable, such provision shall be severed, enforced to the extent possible, or modified in such a way as to make it enforceable, and the invalidity, illegality or unenforceability shall not affect the remainder of this Warrant. (e) The Company agrees to execute such further agreements, conveyances, certificates and other documents as may be reasonably requested by the Holder to effectuate the intent and provisions of this Warrant. (f) Paragraph headings used in this Warrant are for convenience only and shall not be taken or construed to define or limit any of the terms or provisions of this Warrant. Unless otherwise provided, or unless the context shall otherwise require, the use of the singular shall include the plural and the use of any gender shall include all genders. Dated September 20, 2002 MOLECULAR DIAGNOSTICS, INC. By: /s/ PETER P. GOMBRICH ------------------------------------ Peter P. Gombrich Chief Executive Officer -8- PURCHASE FORM ------------- Dated _________________, The undersigned hereby irrevocably elects to exercise the Warrant represented by this Warrant Certificate to the extent of purchasing __________ Shares of Molecular Diagnostics, Inc. and tenders payment of the exercise price thereof. INSTRUCTIONS FOR REGISTRATION OF STOCK Name ______________________________________________________ (Please type or print in block letters) Address ___________________________________________________ ................................................................................ ASSIGNMENT FORM --------------- FOR VALUE RECEIVED, _____________________, hereby sells, assigns and transfers unto Name ______________________________________________________ (Please type or print in block letters) Address ___________________________________________________ the right to purchase Shares of Molecular Diagnostics, Inc. represented by this Warrant Certificate to the extent of _____________ Shares as to which such right is exercisable and does hereby irrevocably constitute and appoint ______________ attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Signature ____________________________ Dated ____________ NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS IT APPEARS UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. ................................................................................. -9- EX-4.35 4 c71905exv4w35.txt COMMON STOCK PURCHASE WARRANT EXHIBIT 4.35 THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE144 UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF MOLECULAR DIAGNOSTICS, INC. Warrant No. RVC1 WARRANT TO PURCHASE SHARES OF COMMON STOCK WARRANT TO PURCHASE 681,818 SHARES EXERCISE PRICE $0.20 PER SHARE VOID AFTER 3:00 P.M., CENTRAL TIME, ON SEPTEMBER 5, 2003 THIS CERTIFIES THAT Round Valley Capital LLC, 1819 E. Southern Avenue, Suite D10, Mesa, Arizona 85204, is entitled to purchase from Molecular Diagnostics, Inc., a Delaware corporation (hereinafter called the "Company") with its principal office located at 414 North Orleans Street, Suite 510, Chicago, Illinois 60610, at any time after the Exercise Date (as defined below), but before 3:00 P.M., Central Time, on the Expiration Date (as defined below), at the Exercise Price (as defined below), the number of shares (the "Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock") set forth above. SECTION 1. DEFINITIONS. The following terms used in this agreement shall have the following meanings (unless otherwise expressly provided herein): The "Act." The Securities Act of 1933, as amended. The "Commission." The Securities and Exchange Commission. The "Company." Molecular Diagnostics, Inc. "Common Stock." The Company's Common Stock, par value $0.001 per share. "Current Market Price." The Current Market Price shall be determined as follows: (a) if the security at issue is listed on a national securities exchange or admitted to unlisted trading privileges on such an exchange or quoted on either the National Market System or the Small Cap Market of the automated quotation service operated by The Nasdaq Stock Market, Inc. ("Nasdaq"), the current value shall be the last reported sale price of that security on such exchange or system on the day for which the Current Market Price is to be determined or, if no such sale is made on such day, the average of the highest closing bid and lowest asked price for such day on such exchange or system; or (b) if the security at issue is not so listed or quoted or admitted to unlisted trading privileges, the Current Market Value shall be the average of the last reported highest bid and lowest asked prices quoted on the Nasdaq Electronic Bulletin Board, or, if not so quoted, then by the National Quotation Bureau, Inc. on the last business day prior to the day for which the Current Market Price is to be determined; or (c) if the security at issue is not so listed or quoted or admitted to unlisted trading privileges and bid and asked prices are not reported, the current market value shall be determined in such reasonable manner as may be prescribed from time to time by the Board of Directors of the Company. "Exercise Date." September 4, 2002. "Exercise Price." $0.20 per Share. "Expiration Date." September 3, 2003. "Holder" or "Warrantholder." The person to whom this Warrant is issued and any valid transferee thereof pursuant to Section 3.1 below. "NASD." The National Association of Securities Dealers, Inc. "Nasdaq." The automated quotation system operated by the Nasdaq Stock Market, Inc. "Termination of Business." Any sale, lease or exchange of all, or substantially all, of the Company's assets or business or any dissolution, liquidation or winding up of the Company. "Warrants." The warrants issued in accordance with the terms of this Agreement and any Warrants issued in substitution for or replacement of such warrants, including those evidenced by a certificate or certificates originally issued or issued upon division, exchange, substitution or transfer pursuant to this Agreement. "Warrant Securities." The Common Stock purchasable upon exercise of a Warrant including the Common Stock underlying unexercised portions of a Warrant. SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANT. 2.1. Exercise of Warrant. Subject to the terms of this Agreement, the Holder shall have the right, at any time beginning on the Exercise Date but prior to 3:00 p.m., Central Time, on the Expiration Date, to purchase from the Company up to the number of fully paid and nonassessable Shares to which the Holder may at the time be entitled to purchase pursuant to this Agreement, upon surrender to the Company, at its principal office, of the Warrant to be exercised, together with the purchase form on the reverse thereof, duly filled in and signed, and upon payment to the Company of the Exercise Price for the number of Shares in respect of which such Warrants are then exercised, but in no event for less than 100 Shares (unless fewer than an aggregate of 100 shares are then purchasable under all outstanding Warrants held by a Holder). 2.2. Payment of Exercise Price. Payment of the aggregate Exercise Price shall be made in cash or by check, or any combination thereof. 2.3. Issuance of Shares. Upon such surrender of the Warrants and payment of such Exercise Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Shares so purchased upon the exercise of the Warrant, together with cash, as provided in Section 10 hereof, in respect of any fractional Shares otherwise issuable upon such surrender. 2.4. Status as Holder of Shares. Upon receipt of the Warrant by the company as described in Sections 2.1. above, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company may then be closed or that certificates representing such Shares may not have been prepared or actually delivered to the Holder. SECTION 3. TRANSFERABILITY AND FORM OF WARRANT 3.1. Limitation on Transfer. Any assignment or transfer of a Warrant shall be made by the presentation and surrender of the Warrant to the Company at its principal office or the office of its transfer agent, if any, accompanied by a duly executed Assignment Form. Upon the presentation and surrender of these items to the Company, the Company, at its sole expense, shall execute and deliver to the new Holder or Holders a new Warrant or Warrants, in the name of the new Holder or Holders as named in the Assignment Form, and the Warrant presented or surrendered shall at that time be canceled. -2- 3.2. Exchange of Certificate. Any Warrant may be exchanged for another certificate or certificates entitling the Warrantholder to purchase a like aggregate number of Shares as the certificate or certificates surrendered then entitled such Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant shall make such request in writing delivered to the Company, and shall surrender, properly endorsed, with signatures guaranteed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute and deliver to the person entitled thereto a new Warrant as so requested. 3.3. Mutilated, Lost, Stolen, or Destroyed Certificate. In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and a bond of indemnity, if requested, also satisfactory in form and amount, at the applicant's cost. Applicants for such substitute Warrant shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 4. RESERVATION OF WARRANT SECURITIES. There has been reserved, and the Company shall at all times keep reserved so long as the Warrants remain outstanding, out of its authorized and unissued Common Stock, such number of shares of Common Stock as shall be subject to purchase under the Warrants. Every transfer agent for the Common Stock and other securities of the Company issuable upon the exercise of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares and other securities as shall be requisite for such purpose. The Company will keep a copy of this Agreement on file with every transfer agent for the Common Stock and other securities of the Company issuable upon the exercise of the Warrants. The Company will supply every such transfer agent with duly executed stock and other certificates, as appropriate, for such purpose and will provide or otherwise make available any cash which may be payable as provided in Section 9 hereof. SECTION 5. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS. 5.1. Restrictions on Transfer. The Warrantholder agrees that prior to making any disposition of the Warrants or the Shares, the Warrantholder shall give written notice to the Company describing briefly the manner in which any such proposed disposition is to be made; and no such disposition shall be made if the Company has notified the Warrantholder that in the opinion of counsel reasonably satisfactory to the Warrantholder a registration statement or other notification or post-effective amendment thereto (hereinafter collectively a "Registration Statement") under the Act is required with respect to such disposition and no such Registration Statement has been filed by the Company with, and declared effective, if necessary, by, the Commission. 5.2. Registration. Not later than 30 days from the Exercise Date, the Company shall file a registration statement on Form S-2, or other appropriate form, to register the Warrant Securities. In connection with the Registration Statement, the Company will use its diligent efforts to effect such registration, qualification or compliance as soon as practicable (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations), as may be so requested and as would permit or facilitate the sale and distribution of all of such Warrant Securities. As long as the Warrant Securities are registered as required by this Section 5.2, the Holder has the right to sell 1/3 of the Warrant Securities within 30 days of exercising the Warrant, up to 2/3 of the Warrant Securities within 60 days of exercising the Warrants and all the Warrant Securities after 90 days of exercising the Warrant. The Company shall comply with the requirements of this Section 5.2 at its own expense. That expense shall include, but not be limited to, legal, accounting, consulting, printing, federal and state filing fees, NASD fees, out-of-pocket expenses incurred by counsel, accountants and consultants retained by the Company, and miscellaneous expenses directly related to the registration statement or offering statement and the offering. However, this expense shall not include the portion of any underwriting commissions, transfer taxes and the underwriter's accountable and nonaccountable expense allowances attributable to the offer and sale of the Warrant, Warrant Securities and the -3- Warrant Securities underlying the unexercised portion of this Warrant, all of which expenses shall be borne by the Holder or Holders of this Warrant and the holders of the Warrant Securities registered or qualified. 5.3. Inclusion of Information. In the event that the Company registers or qualifies the Warrant Securities pursuant to Section 5.2 above, the Company shall include in the registration statement or qualification, and the prospectus included therein, all information and materials necessary or advisable to comply with the applicable statutes and regulations so as to permit the public sale of the Warrant Securities or the Warrant Securities underlying the unexercised portion of this Warrant. As used in Section 5.2, reference to the Company's securities shall include, but not be limited to, any class or type of the Company's securities or the securities of any of the Company's subsidiaries or affiliates. 5.4. Condition of Company's Obligations. As to each registration statement or offering statement, the Company's obligations contained in this Section 5 shall be conditioned upon a timely receipt by the Company in writing of the following: (a) Information as to the terms of the contemplated public offering furnished by and on behalf of each Holder or holder intending to make a public distribution of the Warrant Securities or Warrant Securities underlying the unexercised portion of the Warrant; and (b) Such other information as the Company may reasonably require from such Holders or holders, or any underwriter for any of them, for inclusion in the registration statement or offering statement. 5.5. Reciprocal Indemnification. In each instance in which pursuant to this Section 5 the Company shall take any action to register or qualify the Securities or the Warrant Securities underlying the unexercised portion of this Warrant, prior to the effective date of any registration statement or offering statement, the Company and each Holder or holder of Warrants or Warrant Securities being registered or qualified shall enter into reciprocal indemnification agreements, in the form customarily used by reputable investment bankers with respect to public offerings of securities, containing substantially the same terms as described in Section 8 . These indemnification agreements also shall contain an agreement by the Holder or shareholder at issue to indemnify and hold harmless the Company, its officers and directors from and against any and all losses, claims, damages and liabilities, including, but not limited to, all expenses reasonably incurred in investigating, preparing, defending or settling any claim, directly resulting from any untrue statements of material facts, or omissions to state a material fact necessary to make a statement not misleading, contained in a registration statement or offering statement to which this Section 5 applies, if, and only if, the untrue statement or omission directly resulted from information provided in writing to the Company by the indemnifying Holder or shareholder expressly for use in the registration statement or offering statement at issue. 5.6. Survival. The Company's obligations described in this Section 5 shall continue in full force and effect regardless of the exercise, surrender, cancellation or expiration of this Warrant. SECTION 6. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of the Warrants or the securities comprising the Shares; provided, however, the Company shall not be required to pay any tax which may be payable in respect of any transfer of the Warrants or the securities comprising the Shares. SECTION 7. INDEMNIFICATION AND CONTRIBUTION 7.1. Indemnification by Company. In the event of the filing of any Registration Statement with respect to the Warrant Shares pursuant to Section 8 hereof, the Company agrees to indemnify and hold harmless the Warrantholder or any holder of Warrant Shares and each person, if any, who controls the Warrantholder or any holder of Warrant Shares within the meaning of the Act, against any and all loss, claim, damage or liability, joint or several (which shall, for all purposes of this Agreement include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which such Warrantholder or any holder of Warrant Shares may become subject, under the Act or otherwise, insofar as such loss, claim, damage, or liability (or action with respect thereto) arises out of or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Effective Prospectus, or the Final Prospectus or any amendment or supplement thereto; or (b) the omission or alleged omission to state in the Registration Statement, any Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or any -4- amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements therein not misleading; except that the Company shall not be liable in any such case to the extent, but only to the extent, that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by such Warrantholder or the holder of such Warrant Shares specifically for use in the preparation of the Registration Statement, any Preliminary Prospectus, the Effective Prospectus and the Final Prospectus or any amendment or supplement thereto. This indemnity will be in addition to any liability which the Company may otherwise have. 7.2. Indemnification by Warrantholders. The Warrantholders and the holders of Warrant Shares agree that they, severally, but not jointly, shall indemnify and hold harmless the Company, each other person referred to in subparts (1), (2) and (3) of Section 11(a) of the Act in respect of the Registration Statement and each person, if any, who controls the Company within the meaning of the Act, against any and all loss, claim, damage or liability, joint or several (which shall, for all purposes of this Agreement include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which the Company may become subject under the Act or otherwise, insofar as such loss, claim, damage, liability (or action in respect thereto) arises out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or any amendment or supplement thereto; or (b) the omission or alleged omission to state in the Registration Statement, any Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements therein not misleading; except that such indemnification shall be available in each such case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon information and in conformity with written information furnished to the Company by the Warrantholder or the holder of Warrant Shares specifically for use in the preparation thereof. This indemnity will be in addition to any liability which such Warrantholder or holder of Warrant Shares may otherwise have. 7.3. Right to Provide Defense. Promptly after receipt by an indemnified party under Section 7.1 or 7.2 above of written notice of the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such section, notify the indemnifying party in writing of the claim or the commencement of that action; the failure to notify the indemnifying party shall not relieve it of any liability which it may have to an indemnified party, except to the extent that the indemnifying party did not otherwise have knowledge of the commencement of the action and the indemnifying party's ability to defend against the action was prejudiced by such failure. Such failure shall not relieve the indemnifying party from any other liability which it may have to the indemnified party. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under such section for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation. 7.4. Contribution. If the indemnification provided for in Sections 7.1 and 7.2 of this Agreement is unavailable or insufficient to hold harmless an indemnified party, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, or liabilities referred to in Sections 7.1 or 7.2 above (a) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Warrantholders on the other; or (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such proportion as is appropriate to reflect the relative benefits referred to in clause (a) above but also the relative fault of the Company on the one hand and the Warrantholders on the other in connection with the statements or omissions which resulted in such losses, claims, damages, or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Warrantholders shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and un-itemized expenses received by the Underwriters, in each case as set forth in the table on the cover page of the Final Prospectus. Relative fault shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or the Underwriter and the parties' relative -5- intent, knowledge, access to information, and opportunity to correct or prevent such untrue statement or omission. For purposes of this Section, the term "damages" shall include any counsel fees or other expenses reasonably incurred by the Company or the Underwriters in connection with investigating or defending any action or claim which is the subject of the contribution provisions of this Section 7.4. No person adjudged guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each party entitled to contribution agrees that upon the service of a summons or other initial legal process upon it in any action instituted against it in respect of which contribution may be sought, it shall promptly give written notice of such service to the party or parties from whom contribution may be sought, but the omission so to notify such party or parties of any such service shall not relieve the party from whom contribution may be sought from any obligation it may have hereunder or otherwise (except as specifically provided in Section 10.4 hereof). SECTION 8. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933 This Warrant, the Warrant Securities, and all other securities issued or issuable upon exercise of this Warrant, may not be offered, sold or transferred, in whole or in part, except in compliance with the Act, and except in compliance with all applicable state securities laws. The Company may cause substantially the following legends, or their equivalents, to be set forth on each certificate representing the Warrant Securities, or any other security issued or issuable upon exercise of this Warrant, not theretofore distributed to the public or sold to underwriters, as defined by the Act, for distribution to the public pursuant to Section 8 above: (a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM AND OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT ANY PROPOSED RESALE OR TRANSFER IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS." (b) Any legend required by applicable state securities laws. Any certificate issued at any time in exchange or substitution for any certificate bearing such legends (except a new certificate issued upon completion of a public distribution pursuant to a registration statement under the Securities Act of 1933, as amended (the "Act"), or the securities represented thereby) shall also bear the above legends unless, in the opinion of the Company's counsel, the securities represented thereby need no longer be subject to such restrictions. SECTION 9. FRACTIONAL SHARES No fractional shares or scrip representing fractional shares shall be issued upon the exercise of all or any part of this Warrant. With respect to any fraction of a share of any security called for upon any exercise of this Warrant, the Company shall pay to the Holder an amount in money equal to that fraction multiplied by the Current Market Price of that share. SECTION 10. NO RIGHTS AS STOCKHOLDER; NOTICES TO WARRANTHOLDER. Nothing contained in this Agreement or in the Warrants shall be construed as conferring upon the Warrantholder or its transferees any rights as a stockholder of the Company, including the right to vote, receive dividends, consent or receive notices as a stockholder in respect to any meeting of stockholders for the election of directors of the Company or any other matter. The Company covenants, however, that for so long as this Warrant is at least partially unexercised, it will furnish any Holder of this Warrant with copies of all reports and communications furnished to the shareholders of the Company. -6- SECTION 11. CHARGES DUE UPON EXERCISE. The Company shall pay any and all issue or transfer taxes, including, but not limited to, all federal or state taxes, that may be payable with respect to the transfer of this Warrant or the issue or delivery of Warrant Securities upon the exercise of this Warrant. SECTION 12. WARRANT SECURITIES TO BE FULLY PAID The Company covenants that all Warrant Securities that may be issued and delivered to a Holder of this Warrant upon the exercise of this Warrant and payment of the Exercise Price will be, upon such delivery, validly and duly issued, fully paid and nonassessable. SECTION 13. NOTICES Any notice pursuant to this Agreement by the Company or by a Warrantholder or a holder of Shares shall be in writing and shall be deemed to have been duly given if delivered or mailed by certified mail, return receipt requested: (i) If to a Warrantholder or a holder of Shares, addressed to the address set forth above. (ii) If to the Company addressed to it at 414 North Orleans Street, Suite 510, Chicago, Illinois 60610, Attention: President. Each party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. SECTION 14. APPLICABLE LAW This Warrant shall be governed by and construed in accordance with the laws of the State of Illinois, and courts located in Illinois shall have exclusive jurisdiction over all disputes arising hereunder. SECTION 15. ARBITRATION. The Company and the Holder, and by receipt of this Warrant or any Warrant Securities, all subsequent Holders or holders of Warrant Securities, agree to submit all controversies, claims, disputes and matters of difference with respect to this Warrant, including, without limitation, the application of this Section 15 to arbitration in Chicago, Illinois, according to the rules and practices of the American Arbitration Association from time to time in force; provided, however, that if such rules and practices conflict with the applicable procedures of Illinois courts of general jurisdiction or any other provisions of Illinois law then in force, those Illinois rules and provisions shall govern. This agreement to arbitrate shall be specifically enforceable. Arbitration may proceed in the absence of any party if notice of the proceeding has been given to that party. The parties agree to abide by all awards rendered in any such proceeding. These awards shall be final and binding on all parties to the extent and in the manner provided by the rules of civil procedure enacted in Illinois. All awards may be filed, as a basis of judgment and of the issuance of execution for its collection, with the clerk of one or more courts, state or federal, having jurisdiction over either the party against whom that award is rendered or its property. No party shall be considered in default hereunder during the pendency of arbitration proceedings relating to that default. SECTION 16. ACCEPTANCE OF TERMS; SUCCESSORS. By its acceptance of this Warrant Certificate, the Holder accepts and agrees to comply with all of the terms and provisions hereof. All the covenants and provisions of this Warrant Certificate by or for the benefit of the Company or the Holder shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 17. MISCELLANEOUS PROVISIONS (a) Subject to the terms and conditions contained herein, this Warrant shall be binding on the Company and its successors and shall inure to the benefit of the original Holder, its successors and assigns and all holders of Warrant Securities and the exercise of this Warrant in full shall not terminate the provisions of this Warrant as it relates to holders of Warrant Securities. -7- (b) If the Company fails to perform any of its obligations hereunder, it shall be liable to the Holder for all damages, costs and expenses resulting from the failure, including, but not limited to, all reasonable attorney's fees and disbursements. (c) This Warrant cannot be changed or terminated or any performance or condition waived in whole or in part except by an agreement in writing signed by the party against whom enforcement of the change, termination or waiver is sought; provided, however, that any provisions hereof may be amended, waived, discharged or terminated upon the written consent of the Company and the Company. (d) If any provision of this Warrant shall be held to be invalid, illegal or unenforceable, such provision shall be severed, enforced to the extent possible, or modified in such a way as to make it enforceable, and the invalidity, illegality or unenforceability shall not affect the remainder of this Warrant. (e) The Company agrees to execute such further agreements, conveyances, certificates and other documents as may be reasonably requested by the Holder to effectuate the intent and provisions of this Warrant. (f) Paragraph headings used in this Warrant are for convenience only and shall not be taken or construed to define or limit any of the terms or provisions of this Warrant. Unless otherwise provided, or unless the context shall otherwise require, the use of the singular shall include the plural and the use of any gender shall include all genders. Dated September 4, 2002 MOLECULAR DIAGNOSTICS, INC. By: /s/ PETER P. GOMBRICH --------------------------- Peter P. Gombrich Chief Executive Officer -8- PURCHASE FORM Dated _________________, The undersigned hereby irrevocably elects to exercise the Warrant represented by this Warrant Certificate to the extent of purchasing ____________ Shares of Molecular Diagnostics, Inc. and tenders payment of the exercise price thereof. INSTRUCTIONS FOR REGISTRATION OF STOCK Name __________________________________________________________________ (Please type or print in block letters) Address _______________________________________________________________ ................................................................................. ASSIGNMENT FORM FOR VALUE RECEIVED, _________________________________, hereby sells, assigns and transfers unto Name __________________________________________________________________ (Please type or print in block letters) Address _______________________________________________________________ the right to purchase Shares of Molecular Diagnostics, Inc. represented by this Warrant Certificate to the extent of __________ Shares as to which such right is exercisable and does hereby irrevocably constitute and appoint _________________ attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Signature _________________________________ Dated _____________________ NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS IT APPEARS UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. ................................................................................. -9- EX-5.1 5 c71905exv5w1.txt OPINION OF SCHIFF, HARDIN & WAITE EXHIBIT 5.1 September , 2002 Molecular Diagnostics, Inc. 414 North Orleans Street Suite 510 Chicago, Illinois 60610 Re: MOLECULAR DIAGNOSTICS, INC. Ladies and Gentlemen: We have acted as counsel to Molecular Diagnostics, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing by the Company of a registration statement on Form S-2 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to which the Company is registering 5,945,000 shares of the Company's common stock, par value $0.001 per share (the "Common Stock") for resale to the public. The Common Stock, if and when sold, will be sold by certain shareholders of the Company. This opinion is being rendered in connection with the filing of the Registration Statement. In connection with the foregoing, we have made such examination as we have deemed necessary for the purpose of this opinion. Based upon such examination it is our opinion that, when the Registration Statement has become effective under the Securities Act, and when the Common Stock included therein has been qualified as required under the laws of those jurisdictions in which they are to be issued and when the Common Stock included therein has been sold, issued and paid for in the manner described in the Registration Statement, the Common Stock will have been validly issued and will be fully paid and non-assessable. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to our name under the caption "Legal Matters" in the prospectus included in the Registration Statement. Very truly yours, /s/ ------------------------------------------ Robert J. Minkus 51 EX-10.41 6 c71905exv10w41.txt $650,000 PROMISSORY NOTE EXHIBIT 10.41 PROMISSORY NOTE $825,500.00 AUGUST 30TH, 2002 MESA, ARIZONA FOR VALUE RECEIVED MOLECULAR DIAGNOSTICS, INC., ("MD") of 414 N Orleans, Suite 510, Chicago, IL 60610 (hereafter, "Maker") hereby issues this Promissory Note (the "Note") and promises to pay to the order of Round Valley Capital, LLC ("RVC") of 1819 E. Southern Avenue, Suite D10, Mesa, Arizona, 85204 (hereafter, together with any holder hereof, called "Holder"), the principal sum of eight hundred twenty five thousand five hundred and 00/100 dollars (US$825,500.00) as described below. 1. Payment of Principal, Interest and Expenses. (a) Principal. The principal amount hereof shall be due and payable as follows: a) $19,500 shall be due and payable to Holder on or before each of the following dates: October 1st, 2002; November 1st, 2002, December 1st, 2002, January 1st, 2003, February 1st, 2003, March 1st, 2003, April 1st, 2003, May 1st, 2003; and b) $669,500 shall be due and payable to Holder on or before June 1st, 2003 (the "Maturity Date"). (b) Interest. Interest shall begin to accrue and compound on any outstanding principal remaining unpaid as of the Maturity Date at a rate of 18% per annum (the "Default Rate") (or if deemed excessive by a court of competent jurisdiction, then the maximum extent permitted by law) and shall continue to accrue thereon until such time as all principal, interest, and other amounts due under this Note have been paid in full. If any court of competent jurisdiction should find that any interest charged hereunder exceeds the maximum interest permitted by law, then the interest due hereunder shall be at the maximum rate permitted by law. All payments on this Note shall be applied first to accrued interest with the balance to the payment of principal. (c) Transactional Expenses. MD shall pay RVC an origination fee consisting of: a) $75,000 in cash; and b) 711,364 unregistered common shares MD, which shares shall become registered and freely tradable as soon as practical upon the filing of the S2 registration statement; and c) Warrant rights to purchase 681,818 common shares of MD for $0.20 per share. These Warrants shall not become exercisable until completion of the $650,000 bridge loan or MD's last draw upon said financing. Once the Warrants become exercisable, MD will register and cause to become freely tradable, and RD will have the right to sell: 1/3 of the shares within 30 days of exercising the Warrants; up to 2/3rds of the shares within 60 days of exercising the Warrants; and then all shares after 90 days. Each of the foregoing cash expenses shall be paid by the undersigned from funds advanced on September 4th, 2002. Additionally, MD shall pay all of RVC's legal and transactional expenses incurred in funding and securing this transaction, up to an amount not to exceed $7,500. (d) Collection Expenses. The Maker shall pay all expenses incurred by Holder in the collection of this Note, including, without limitation, the reasonable fees, court costs, and disbursements of counsel to Holder, if this Note is collected by or through an attorney-at-law. (e) General. All payments of principal and expenses shall be in lawful money of the United States of America, and made according to such wire transfer instructions or other delivery method as Holder may designate to Maker in writing from time to time. Absent further instructions, all payments shall be made to the order of: Round Valley Capital, LLC and shall be paid at: 1819 E. Southern Avenue, Suite D10, Mesa, Arizona 85204. (f) Prepayment. Maker may retire this Note at any time by paying all outstanding principal, interest and expenses due hereunder, provided, that this Note may not be prepaid prior to March 1st, 2002. Holder will reduce the outstanding principal amount due hereunder by $214 (discount) for each day before June 1st, 2003 that this Note is retired, with a maximum total discount available of $58,000. 2. Subordination. Anything in this Note to the contrary notwithstanding, the indebtedness evidenced by this Note shall be senior to any and all principal of, premium, if any, and interest on any Junior Debt as hereinafter defined. "Junior Debt", for the purposes of this Section 2, means: (i) all present and future debts and obligations of Maker arising from the borrowing of money by Maker, whether secured or unsecured, as borrower or guarantor, due or to become due, direct or indirect, jointly or independently, owed to any individuals, investors, trust company, insurance company, pension trust fund, bank or other financial institution organized under the laws of the United States of America or of any state or foreign country, and any renewal, extension or modification or replacement of any of the foregoing, (ii) indebtedness that by its terms is junior in right of payment to any indebtedness owing to Holder; and (iii) indebtedness to any and all trade creditors and other amounts incurred in connection with obtaining goods, materials or services incurred in the ordinary course of business, or indebtedness consisting of trade payables. 3. Security. Maker grants to Holder a priority security interest and first lien against all existing and after acquired assets of Molecular Diagnostics, Inc., including but not limited to all personal property, inventory, equipment, licenses, accounts, accounts receivable, contracts, claims, actions, rights, intellectual property rights including patents and trademarks, and all other personal or real property of any kind, including the all proceeds from the sale, disposition, or transfer thereof, and wherever located. Maker agrees to assist Holder in perfecting this security interest, including executing and assisting in any additional instruments and documentation and the filing of any UCC-1's and any other requested documents reflecting the security interests granted hereunder. Maker shall issue its stock certificate no. 0119 to Round Valley Capital, LLC for 5,750,000 unregistered common shares (the "Shares") and grants a security interested to Round Valley Capital, LLC therein. Maker shall promptly register the Shares upon its failure to cure any default hereunder within 10 business days of written notice thereof. 4. Waiver. Maker, and its successors and assigns, waive presentment for payment, demand, protest and notice of demand, dishonor, notice of dishonor, protest and nonpayment. In any action on this Note, Holder or its assignee need not produce or file the original of this Note, but need only file a photocopy of this Note certified by Holder or such assignee to be a true and correct copy of this Note in all material respects. 5. Governing Law and Jurisdiction. This Note shall be construed, interpreted and enforced in accordance with the laws of the State of Arizona without regard conflicts of laws. The Maker hereby submits itself to the jurisdiction and venue of the State and Arizona and agrees that venue shall exclusively be in the Courts with proper jurisdiction over Mesa, Arizona. 6. Surrender of Note. This Note shall be returned to Maker upon the payment in full of all amounts owed by Maker under this Note. 7. Default. Each of the following events shall constitute an "Event of Default" under this Note: (i) Maker shall fail to pay any principal or other amounts due hereunder when due, or Maker shall in any way fail to comply with the other terms, covenants or conditions contained in this Note, in each case after written demand has been made therefor by Holder AND A TEN BUSINESS DAY PERIOD THEREAFTER HAS EXPIRED WITHOUT MAKER'S COMPLIANCE with such demand; or (ii) Maker or any Guarantor of this Promissory Note shall (a) commence a voluntary case under the Bankruptcy Code of 1978, as amended, or other federal bankruptcy law (as now or hereafter in effect); (b) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts; (c) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws; (d) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign; (e) be unable to, or admit in writing its inability to, pay its debts as they become due; (f) make a general assignment for the benefit of creditors; or (g) make a conveyance fraudulent as to creditors under any state or federal law. Upon the occurrence of an Event of Default described in (i) immediately above, any and all of the obligations hereunder, at the option of Holder, and without further demand or notice of any kind, may be immediately declared, and thereupon shall immediately become in default and due and payable and Holder may exercise any and all rights and remedies available to it at law, in equity or otherwise. Upon the occurrence of an Event of Default described in clause (ii) immediately above, any and all of the obligations hereunder, without demand or notice of any kind, shall immediately become in default and due and payable and Holder may exercise any and all rights and remedies available to it at law, in equity or otherwise. 8. Miscellaneous. (a) Time. Time is of the essence of this Note. (b) Amendments and Waivers. All amendments to this Note, and any waiver or consent of Holder, must be in writing and signed by Holder and Maker. Under no circumstances shall any delay of enforcement by Holder be construed as a waiver of any of Holder's rights hereunder. (c) Invalidity and Construction. If any provision of this Promissory Note contravenes or is held invalid under the laws of Arizona or Illinois, this Promissory Note shall be construed as though it did not contain that provision, and the rights and liabilities of the parties to this Promissory Note shall be construed and enforced accordingly. (d) Execution by Facsimile. This instrument may be executed by Maker and delivered to Holder by electronic and/or facsimile transmission and each image hereof bearing the signature of Maker shall be considered an original document for all purposes. 9. Successors and Assigns. This Note shall be binding upon the successors and assigns of Maker. IN WITNESS HEREOF, Molecular Diagnostics, Inc. has caused this Note to be duly executed and delivered by its duly authorized officer all as of the day and year first above written. MOLECULAR DIAGNOSTICS, INC. By: /s/ PETER GOMBRICH ------------------------------------------- Peter Gombrich, its Chief Executive Officer EX-23.1 7 c71905exv23w1.txt CONSENT OF ERNST & YOUNG EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement Form S-2 and related prospectus of Molecular Diagnostics, Inc. for the registration of 46,766,537 shares of its common stock and to the incorporation by reference therein of our report dated April 8, 2002, with respect to the consolidated financial statements and schedules of Molecular Diagnostics, Inc. and Subsidiaries included in its Annual Report on Form 10-K, as amended, for the year ended December 31, 2001, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Chicago, Illinois September 26, 2002 50 EX-24.1 8 c71905exv24w1.txt POWER OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a director or officer, or both, of MOLECULAR DIAGNOSTICS, INC., a Delaware corporation (the "Company"), does hereby constitute and appoint Peter P. Gombrich, with full power to act alone, as the true and lawful attorney and agent of the undersigned, with full power of substitution and resubstitution to execute, file or deliver any and all instruments and to do any and all acts and things which he may deem advisable to enable the Company to comply with the Securities Act of 1933, as amended (the "Securities Act") and any requirements or regulations of the Securities and Exchange Commission in respect thereto, in connection with the registration under said Securities Act of 5,945,000 shares of common stock, par value $0.001 per share, which were issued and sold in connection with agreements in which the Company is required to register such shares, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his name as director or officer, or both, of the Company, as indicated below opposite his signature, to the registration statement, or any amendments, post-effective amendments, supplements or papers supplemental thereto, to be filed in respect of said shares of common stock, and each of the undersigned does hereby fully ratify and conform all that said attorneys and agents, or any of them, or the substitute of any of them, shall do or cause to be done by the virtue hereof. IN WITNESS WHEREOF, each of the undersigned has subscribed these presents, this 19th day of September, 2002.
SIGNATURE TITLE /s/ Peter P. Gombrich Director and Chairman of the Board of Directors, - ----------------------------------- Chief Executive Officer and acting Secretary Peter P. Gombrich /s/ Alexander M. Milley Director - ----------------------------------- Alexander M. Milley /s/ Robert C. Shaw Director - ----------------------------------- Robert C. Shaw /s/ John H. Abeles, M.D. Director - ----------------------------------- John H. Abeles, M.D. /s/ Denis M. O'Donnell, M.D. Director - ----------------------------------- Denis M. O'Donnell, M.D.
EX-24.2 9 c71905exv24w2.txt CERTIFIED COPY OF A RESOLUTION EXHIBIT 24.2 SECRETARY'S CERTIFICATE I, PETER P. GOMBRICH, hereby certify that I am acting Secretary of MOLECULAR DIAGNOSTICS, INC., a Delaware corporation (the "Corporation"), and as such the official custodian of its records and seal, that attached hereto is a true and correct copy of resolutions which were adopted by the Board of Directors of the Corporation; and that such resolutions have not been annulled, rescinded or amended in any manner and are in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand as Secretary of said Corporation and affixed its Corporate seal this 19th day of September, 2002. /s/ Peter P. Gombrich -------------------------------------- Peter P. Gombrich, Chief Executive Officer and acting Secretary UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF MOLECULAR DIAGNOSTICS, INC. WHEREAS, Molecular Diagnostics, Inc. (the "Corporation") has entered into registration rights agreements with holders of preferred stock, par value $0.001 per share, convertible promissory notes, warrants and options (the "Securities") (all of whom are hereafter referred to as the "Selling Stockholders"), pursuant to which the Corporation is required to register 5,945,000 shares of common stock, par value $0.001 (the "Shares"). NOW, THEREFORE, BE IT RESOLVED, that the Corporation cause to be registered under the Securities Act of 1933, as amended (the "Securities Act"), the Shares held by the Selling Stockholders holding an aggregate 5,945,000 shares of Common Stock, and that the Corporation and its officers and directors do or cause to be done all acts and things deemed necessary to comply with the Securities Act or any requirements of the Securities and Exchange Commission (the "SEC") in respect thereof for the purpose of registering the Shares under the Securities Act, including the preparation, execution and filing of an appropriate registration statement (the "Registration Statement") and any and all amendments and exhibits thereto; FURTHER RESOLVED, that Peter P. Gombrich is hereby designated as agent for service of process to be named in the Registration Statement and to receive notices and communications from the SEC in connection therewith; FURTHER RESOLVED, that the Chairman of the Board and the Chief Executive Officer of the Corporation are hereby authorized and empowered to execute powers of attorney in such form as deemed appropriate, constituting and appointing Peter P. Gombrich, with full power to act alone, as the true and lawful attorney and agent of the Corporation and its officers, with full power of substitution and resubstitution to execute and file with the SEC, in the name and on behalf of the Corporation and any such officer, the Registration Statement and any amendments or exhibits thereto, and any and all other documents as may be necessary or appropriate to comply with the Securities Act in connection with the registration of the Shares; FURTHER RESOLVED, that the Chairman of the Board and the Chief Executive Officer of the Corporation, with full power to act alone, be hereby authorized to determine the jurisdictions in which appropriate action shall be taken to qualify or register for sale all or such part of the Shares as any such officer may deem advisable; that any such officer be and each is hereby authorized to perform on behalf of the Corporation any and all such acts as he may deem necessary or advisable in order to comply with the applicable laws of any such jurisdictions, and in connection therewith to execute and file all requisite papers and documents, including but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; that the execution by any such officer of any such paper or document or the doing by them of any act in connection with the foregoing matters shall conclusively establish his authority therefore from the Corporation and the approval and ratification by the Corporation of the papers and documents so executed and the actions so taken; and that any resolutions required to be adopted by any such jurisdiction so taken; and that any resolutions required to be adopted by any such jurisdictions in connection with such registration or qualification of the Shares shall be considered as adopted hereby; FURTHER RESOLVED, that it is desirable and in the best interest of the Corporation that its securities be qualified or registered for sale in various states; that the Chairman of the Board or Chief Executive Officer and the Secretary or an Assistant Secretary hereby are authorized to determine the states in which appropriate action shall be taken to qualify or register for sale all or such part of the securities of the Corporation as said officers may deem advisable; that said officers are hereby authorized to perform on behalf of the Corporation any and all such acts as they may deem necessary or advisable in order to comply with the applicable laws of any such states, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; and the execution by such officers of any such paper or document or the doing by them of any act in connection with the foregoing matters shall conclusively establish their authority therefor from the Corporation and the approval and ratification by the Corporation of the papers and documents so executed and the action so taken. IN WITNESS WHEREOF, each of the undersigned has subscribed these presents, this 19th day of September, 2002.
SIGNATURE TITLE /s/ Peter P. Gombrich Director and Chairman of the Board of Directors, - -------------------------------- Chief Executive Officer and acting Secretary Peter P. Gombrich /s/ Alexander M. Milley Director - -------------------------------- Alexander M. Milley /s/ Robert C. Shaw Director - -------------------------------- Robert C. Shaw /s/ John H. Abeles, M.D. Director - -------------------------------- John H. Abeles, M.D. /s/ Denis M. O'Donnell, M.D. Director - -------------------------------- Denis M. O'Donnell, M.D.
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