-----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, G+qPq3WCdoVohsyNvPuyHtvpU9+FpkPD741hVWpMFPGpQaRN8spv2Shtp0/BgYT+ AZDeKviglEhbqBeO86vkVQ== 0000950123-99-009305.txt : 19991018 0000950123-99-009305.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950123-99-009305 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19991014 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORTEC INTERNATIONAL INC CENTRAL INDEX KEY: 0000889992 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 113068704 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-80979 FILM NUMBER: 99728213 BUSINESS ADDRESS: STREET 1: 3960 BROADWAY STREET 2: BLDG 28 CITY: NEW YORK STATE: NY ZIP: 10032 BUSINESS PHONE: 7183264698 S-3/A 1 AMENDMENT NO. 3 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1999 REGISTRATION NO. 333-80979 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 3 TO REGISTRATION STATEMENT FILED ON FORM S-3 UNDER THE SECURITIES ACT OF 1933 ---------------- ORTEC INTERNATIONAL, INC. (NAME OF ISSUER IN ITS CHARTER) DELAWARE 8099 11-3068704 (STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER JURISDICTION OF INDUSTRIAL CODE IDENTIFICATION NUMBER) INCORPORATION) NUMBER)
3960 BROADWAY, NEW YORK, NEW YORK 10032 (212) 740-6999 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) DR. STEVEN KATZ PRESIDENT AND CHIEF EXECUTIVE OFFICER ORTEC INTERNATIONAL, INC. 3960 BROADWAY, NEW YORK, NEW YORK 10032 (212) 740-6999 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) ----------------- COPIES TO: GABRIEL KASZOVITZ, ESQ. SAUL M. KASZOVITZ, ESQ. FEDER, KASZOVITZ, ISAACSON, WEBER, SKALA & BASS LLP 750 LEXINGTON AVENUE, NEW YORK, NEW YORK 10022-1200 (212) 888-8200 FAX: (212) 888-7776 ---------------- Approximate date of proposed sale to the public: Not applicable. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / 2 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, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ii 3 CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF SECURITIES BEING REGISTERED PRICE PER OFFERING REGISTRATION REGISTERED (2) SECURITY (1) PRICE(1) FEE (1) Common Stock, par value 1,031,246 Shares $ 7.41875 (3) $ 7,650,564 $ 2,127 $.001 per share (2)
(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457. (2) Pursuant to Rule 416, this Registration Statement also covers any additional shares of Common Stock which may become issuable by virtue of the anti-dilution provisions of any warrants or options to which the shares of Common Stock being registered hereby are included. (3) Represents the average of the high and low sales prices of the Common Stock for June 14, 1999, as reported by the Nasdaq SmallCap Market. 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 AN AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE. iii 4 ORTEC INTERNATIONAL, INC. 1,031,246 SHARES OF COMMON STOCK This prospectus covers 1,031,246 shares of common stock, par value $.001 per share, for sale by our shareholders, including 348,557 shares issuable by us upon the exercise of certain options and warrants. The holders of those shares intend to sell them from time to time for their own respective accounts in the open market at the prices then available or in individually negotiated transactions at such prices as may be agreed upon. Our common stock is traded on the NASDAQ SmallCap Market System under the symbol "ORTC." On October 13, 1999, the last reported sale price of the common stock was $8 1/4. --------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS ___________, 1999 5 In this prospectus, references to the "Company," "Ortec,", "we,""us" and "our" refer to Ortec International, Inc. TABLE OF CONTENTS
Page ---- Prospectus Summary..................................................................... 3 Risk Factors........................................................................... 6 Disclosure Regarding Forward-Looking Statement......................................... 11 Use of Proceeds........................................................................ 11 Selling Shareholders................................................................... 12 Description of Securities.............................................................. 14 Plan of Distribution................................................................... 16 Incorporation of Certain Information by Reference...................................... 16 Legal Matters.......................................................................... 17 Experts................................................................................ 17 Disclosure of Commission Position on Indemnification for Securities Act Liabilities...................................................... 17 Where You Can Find More Information.................................................... 18
6 PROSPECTUS SUMMARY All of the information in this summary is qualified in its entirety by the more detailed information appearing elsewhere in this prospectus, including information under "Risk Factors." ORTEC INTERNATIONAL, INC. We are a development stage biomaterial and cell culture biotechnology company that has developed a patented technology which we call Composite Cultured Skin. Our Composite Cultured Skin acts as a biologically active dressing that stimulates the repair, replacement and regeneration of human skin. When our Composite Cultured Skin is applied to the wound site, it produces a mix of growth factors that stimulate wound closure. Our product is intended to be utilized for the treatment of numerous skin wounds, including partial thickness burns, venous stasis ulcers, autograft donor sites, diabetic ulcers and damage from four diseases with small patient populations. With the approval of the United States Food and Drug Administration we are currently conducting, have completed, or will shortly conduct clinical trials of the use of our Composite Cultured Skin in the treatment of all of those skin wounds except partial thickness burns. Venous stasis ulcers are open lesions on the legs which result from the poor circulation of blood returning from the legs to the heart. An autograft donor site is an area of a patient's body from which the patient's skin was taken to cover a wound at another part of such patient's body. The four diseases with small patient populations are epidermolysis bullosa, erythema multiforme, Stevens-Johnson syndrome and toxic epidermal necrolysis. We have recently developed the technology for the cryopreservation of our product without diminishing its effectiveness. Cryopreservation means the freezing of our product to give it a shelf life of approximately six months, as opposed to a few days when our product is not cryopreserved. We have recently received FDA approval to conduct a clinical trial for the use of our product in its cryopreserved form in the treatment of donor site wounds. Our immediate focus is to use our Composite Cultured Skin to treat acute and chronic skin wounds and associated diseases. However, we believe that there is an opportunity to apply our core technologies to repair selected structural tissues such as tendon, ligament, cartilage, bone and blood vessels. In order to achieve our objectives, we have identified five strategic initiatives: - developing a commercial manufacturing operation; - seeking a corporate sales and distribution partner; - implementing a plan to operate in a managed care/reimbursement environment; - continuing our human clinical trials; and - continuing our research and development. See "Disclosure Regarding Forward Looking Information." 3 7 As a development stage company we have not yet sold any products. Our activities have been limited to human clinical tests of our Composite Cultured Skin and research and development. From the creation of Ortec in March 1991 through June 30, 1999, we have spent an aggregate of $7,985,726 for human clinical trials and research and development, which figure does not include employee salaries. From inception in March 1991 through June 30, 1999 we have sustained a net loss of $25,801,325. Ortec was organized in 1991 under the laws of the State of Delaware for the purpose of acquiring our skin replacement product and to develop, test and market it. Our executive offices are located at 3960 Broadway, New York, New York, and our telephone number is (212) 740-6999. 4 8 THE OFFERING Securities offered 1,031,246 shares of common stock Sellers The shares are being offered by our shareholders and not by us. Offering prices Prices then available on the Nasdaq SmallCap Market or in individually negotiated transactions. Common stock to be outstanding after the offering(1) 6,911,310 shares Use of proceeds Other than the proceeds from the exercise of the 348,557 options and warrants, we will not receive any proceeds from the sale of the shares. Risk factors An investment in the shares involves a high degree of risk. See "Risk Factors." Nasdaq SmallCap System trading symbol "ORTC"
- ----------- (1) Includes 348,557 shares offered by this prospectus issuable by us upon exercise of outstanding options and warrants. Does not include (i) 161,011 shares reserved by us for issuance upon exercise of warrants granted by us expiring January 19, 2000 exercisable at $1.00 per share; (ii) 1,188,600 shares reserved by us for issuance upon the exercise of our publicly traded Class B Warrants at $15 per share and expiring November 30, 1999; (iii) 1,543,250 shares reserved by us for issuance upon the exercise of stock options included in our 1996 Stock Option Plan, of which options to purchase 933,000 shares at prices ranging from $6.00 to $213/8 have already been granted by us ; and (iv) 384,549 shares reserved by us for issuance upon the exercise of other outstanding warrants granted by us, at prices ranging from $8.00 to $14.25 and expiring at various times from March 1, 2000 to December 1, 2002. 5 9 RISK FACTORS The purchase of the shares involves a high degree of risk, including, but not necessarily limited to, the risks described below. Before purchasing the shares, you should consider carefully the general investment risks enumerated elsewhere in this prospectus and the following risk factors, as well as the other information contained in this prospectus. 1. WE DO NOT HAVE SUFFICIENT FUNDS TO BRING OUR PRODUCT TO MARKET, WHICH MAY IMPACT OUR CONTINUED VIABILITY. We anticipate that our cash on hand is sufficient to meet our cash requirements through approximately April 2000, assuming that we will not incur unexpected costs. Before the end of that period we will be required to raise additional funds to complete our human clinical trials and produce and market our Composite Cultured Skin. We may seek additional funds through sale of our securities to the public and through private placements, debt financing or short term loans. Our failure to obtain additional financing will have a material adverse effect on us and on our operations. We have no current understandings or commitments from any persons that they will provide any additional financing. Additional financing may result in dilution for then current shareholders. 2. WE ARE A DEVELOPMENT STAGE COMPANY AND BECAUSE WE HAVE NEVER REALIZED OPERATING REVENUES OR EXPECT TO REALIZE SUFFICIENT OPERATING REVENUES FOR A WHILE, UNLESS WE SECURE ADDITIONAL FINANCING WE WILL NOT BE ABLE TO CONTINUE TO OPERATE OUR BUSINESS. Ortec was organized in March 1991. We have no products approved for commercial sale and we have not realized any operating revenues. We do not expect our Composite Cultured Skin to be available for commercial sale until the first quarter of 2000 at the earliest and then only for four diseases with very small patient populations. We will need to secure additional financing to complete our other human clinical trials and to produce and market our Composite Cultured Skin for use by larger patient populations for other wounds. We may not be able to secure such financing nor may we be able to reach that larger marketing stage with funds that we may be able to raise. We are also likely to continue to encounter difficulties which are common to development stage companies, including unanticipated costs relating to development, delays in the testing of products, regulatory approval and compliance and competition. 3. WE MAY NOT BE ABLE TO OBTAIN FDA APPROVAL FOR COMMERCIAL SALE OF OUR PRODUCT SO THAT WE MAY NEVER RECEIVE ANY REVENUES. Pursuant to the Federal Food Drug and Cosmetic Act and regulations promulgated thereunder, the FDA regulates the manufacture, distribution and promotion of medical devices in the United States. Our Composite Cultured Skin is regulated as a medical device. We must receive premarket approval by the FDA for any commercial sale of our product. Before receiving such approval we must provide proof in human clinical trials of the nontoxicity, safety and efficacy of our Composite Cultured Skin. Premarket approval is a lengthy and expensive process. We may not be able to obtain FDA approval for any commercial sale of our product. We will not generate any revenues until we obtain FDA approval 6 10 to sell our product in commercial quantities for human application. Even if such FDA approval is obtained, we may not be able to make sales of our product on a profitable basis. 4. EVEN IF WE OBTAIN FDA APPROVAL FOR COMMERCIAL SALE OF OUR PRODUCT, THE MANUFACTURE AND SALE OF OUR PRODUCT WILL CONTINUE TO BE REGULATED BY THE FDA. IF WE DO NOT COMPLY WITH THE FDA'S MANUFACTURING AND RECORD KEEPING REGULATIONS, WE MAY NOT BE ABLE TO START OR CONTINUE SELLING OUR PRODUCT. There will be periodic FDA inspections of the facilities used to manufacture our Composite Cultured Skin and of our records. Such manufacturing facilities must meet the FDA's good manufacturing processes standards. We will also always have to comply with the FDA's recordkeeping, reporting, product testing, design, safety and labeling requirements. Such regulatory compliance will increase our operating costs. More important, non-compliance will prevent us from making commercial sales of our product. 5. THE SUCCESSFUL MARKETING OF OUR PRODUCT WILL DEPEND ON ITS ACCEPTANCE BY THE MEDICAL COMMUNITY. SECURING SUCH ACCEPTANCE WILL REQUIRE SUBSTANTIAL EFFORT AND EXPENSE AND IF SUCH ACCEPTANCE BY THE MEDICAL COMMUNITY IS NOT SECURED WE WILL NOT BE ABLE TO SUCCESSFULLY MARKET OUR PRODUCT. Our Composite Cultured Skin must be accepted by the medical community as an effective skin regeneration product in order for us to make any significant commercial sales. Securing such acceptance will require substantial effort. We do not have any experience marketing to the medical community and will either have to employ persons experienced in securing such acceptance or rely on other companies which have such marketing expertise. We may not be able to secure the services of such experienced persons or any company having such expertise. 6. SINCE WE HAVE DEVELOPED ONLY ONE PRODUCT, OUR FAILURE TO SELL THAT PRODUCT ON A PROFITABLE BASIS MIGHT LIMIT OUR ABILITY TO CONTINUE OUR OPERATIONS. To date, we have developed only one product, our Composite Cultured Skin . In the event we fail to develop additional products and our product does not obtain FDA approval for commercial distribution, or even if FDA approval is obtained, our product is not viewed favorably by the medical community or it becomes obsolete, we will be unable to become profitable and we may be required to discontinue our operations. 7. MANY OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER RESOURCES THAN WE DO. SOME ARE ALREADY MAKING COMMERCIAL SALES OF THEIR SKIN REPLACEMENT PRODUCTS. 7 11 Many companies and academic institutions have developed, or are capable of developing products based on other technologies that are or may be competitive with our Composite Cultured Skin. Our competitors include Organogenesis, Inc., Genzyme Tissue Repair, Inc., Advanced Tissue Sciences, Inc., Life Cell Corporation and Integra Life Sciences. Many of those and other potential competitors are well established, are much larger than we are and have substantially greater financial and other resources than we have and have skin replacement products that are being commercially sold or are available for commercial sale. In addition, the biomedical field is undergoing rapid and significant technological change. Such companies and academic institutions may succeed in developing other products that are more effective than our Composite Cultured Skin. Our success will depend on our ability to establish and maintain a competitive position in this marketplace, which we may not be able to do. 8. WE MAY NOT BE ABLE TO DEVELOP AND SELL OUR PRODUCT IF SOME OF OUR SUPPLIERS DISCONTINUE OR ARE DELAYED IN SUPPLYING US WITH THE MATERIALS NECESSARY TO MANUFACTURE OUR PRODUCT. We currently purchase bovine collagen sponges, a key component of our Composite Cultured Skin, from one supplier who produces the sponges to our specifications. We have no written agreement with that supplier obligating the supplier to supply sponges to us. If we are required to secure another source for bovine collagen sponges, we would encounter additional delay and expense in continuing our human clinical trials and, consequently, in marketing our Composite Cultured Skin. We will continue to rely on a limited number of outside suppliers to supply other materials that we use in producing and testing our Composite Cultured Skin. Replacing all or some of our suppliers could delay our clinical trials and create additional expense for us. 9. WHILE WE RELY ON OUR PATENTS TO PROTECT OUR PROPRIETARY INTEREST IN OUR TECHNOLOGY, WE COULD LOSE THAT PROTECTION IF OUR PATENTS ARE SUCCESSFULLY CHALLENGED IN FUTURE COURT PROCEEDINGS OR IF OUR TECHNOLOGY IS RENDERED OBSOLETE BY NEW TECHNOLOGIES DEVELOPED BY OTHERS. Our U.S. patent expires in 2011. We have also been granted a European patent for most of Europe, as well as patents in Australia , New Zealand, Ireland, Israel, Japan, Thailand and South Africa. We are prosecuting patent claims in Canada, the Russian Federation, Brazil and China. One of our competitors recently filed an opposition with the European Patent Office challenging the validity of our patent in Europe. Our patent counsel is now preparing our response. The opposition in Europe may not be resolved for at least another year. While the result in Europe will not affect the validity of our patent in the United States, our patents might be successfully challenged in court proceedings. In addition, our United States and foreign patents may not provide us with any commercial benefits if our product is not effective or if new technologies makes our product obsolete. Several of our competitors, including Organogenesis, Inc., Advanced Tissue Sciences, Inc., Genzyme Tissue Repair Inc., Integra Life Sciences and LifeCell Corporation, have been granted patents relating to their particular skin technologies. 10. WE ARE EXPOSED TO THE RISK OF PRODUCT LIABILITY CLAIMS IN THE EVENT THAT OUR COMPOSITE CULTURED SKIN CAUSES INJURY OR OTHERWISE RESULTS IN ADVERSE EFFECTS. 8 12 Although we have obtained product liability insurance coverage in the amount of $2,000,000, such insurance coverage may not be adequate to protect us against future product liability claims. Product liability insurance may not be available to us in the future on terms acceptable to us, if at all. 11. WE ARE DEPENDENT ON OUR EXECUTIVE OFFICERS AND CERTAIN OTHER KEY PERSONNEL FOR MANAGING OUR AFFAIRS AND CONTINUING OUR CLINICAL TRIALS AND RESEARCH AND DEVELOPMENT ACTIVITIES. THE LOSS OF THEIR SERVICES COULD DELAY OUR CLINICAL TRIALS AND THE TIME WHEN WE CAN SELL OUR PRODUCT. The management of our day-to-day operations is handled by our executive officers. The development of our product is managed by a wide array of scientific personnel. The loss of the services of any of these individuals could cause delays in our ongoing operations, including delays in the conduct of our clinical trials and the times when we can start sales of our product for treating different medical conditions. 12. OUR OUTSTANDING OPTIONS AND WARRANTS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK. 2,751,513 shares, including 348,557 shares covered by this prospectus, that are issuable upon exercise of outstanding warrants and options at prices ranging from $1.00 per share for 156,807 shares to $21 3/8 per share, will be eligible for immediate sale into the public securities markets after such warrants and options are exercised. In addition, 264,204 shares that are issuable upon exercise of other outstanding warrants and options exercisable at prices ranging from $1.00 (for 4,204 shares) to $14.25 are eligible for sale in the public securities markets one or two years after such warrants and options are exercised. We cannot make any prediction as to the effect, if any, that sales of those shares, or the availability of those shares for sale, will have on the market prices of our common stock prevailing from time to time. 13. THE MARKET PRICE OF OUR COMMON STOCK MAY BE HIGHLY VOLATILE, AS HAS BEEN THE CASE WITH THE SECURITIES OF OTHER DEVELOPMENT STAGE BIOTECHNOLOGY COMPANIES. The market price of our common stock has ranged from $4 3/4 to $23 during the past three and a half years. We believe that the market price of our common stock was adversely affected by set backs encountered by other publicly held skin technology companies in securing FDA approval for, or marketing their products. We believe that the market price of our common stock has also been adversely affected in the recent past because of reduced interest by investors in small cap biotechnology companies such as ours. We believe that in the future factors such as our or our competitors' announcements concerning technological innovations, new commercial products or procedures, proposed government regulations and developments or disputes relating to patents or proprietary rights may have a significant impact on the market price of our common stock. 9 13 14. SINCE WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON STOCK AND DO NOT INTEND TO DO SO IN THE FORESEEABLE FUTURE, A PURCHASER IN THIS OFFERING WILL ONLY REALIZE AN ECONOMIC GAIN ON HIS INVESTMENT FROM AN APPRECIATION, IF ANY, IN THE MARKET PRICE OF OUR COMMON STOCK. We have never paid, and have no intentions in the foreseeable future to pay, any dividends on our common stock. Therefore, an investor in this offering, in all likelihood, will only realize a profit on his investment if the market price of our common stock increases in value. 15 . THE CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK AND CERTAIN CHANGE OF CONTROL AGREEMENTS WILL DISCOURAGE PURCHASES OF OUR COMMON STOCK BY PERSONS WHO MIGHT OTHERWISE SEEK TO GAIN CONTROL OF ORTEC. Our executive officers, directors, founders and affiliated persons beneficially own 2,068,576 shares of our outstanding common stock representing approximately 32% of the total of our outstanding shares before the exercise of any outstanding warrants and options. Accordingly, such persons will be able to exercise substantial control in the election of Ortec's directors, increases in our authorized capital or the dissolution or merger of Ortec, or sale of our assets, and otherwise influence the control of our affairs. Such substantial control by these persons could serve to impede or prevent a change of control of our Company. In addition, we have entered into certain agreements with Dr. Steven Katz and Messrs. Ron Lipstein and Alain Klapholz which provide that, in the event of a change of control of Ortec, we will be required to (1) pay to such three persons between 2 and 2.99 times the compensation paid to such three persons in the twelve months prior to the date of change of control; (2) extend the expiration dates of options and warrants held by them so that they expire not less than three years after such change in control occurs; (3) at their option lend them, interest free and for a period of three years, the funds needed by them to pay the exercise prices of warrants and options they exercise; and (4) pay any special federal excise taxes payable by such three persons on the amounts we have agreed to pay them and the value of such benefits we have agreed to give them. Messrs. Katz, Lipstein and Klapholz are all executive officers, directors and founders of Ortec. As a result, potential purchasers may not seek to acquire control of our Company through the purchase of common stock which may tend to reduce the market price of our common stock. In addition, we are subject to provisions of the General Corporation Law of the State of Delaware respecting business combinations which could, under certain circumstances, also hinder or delay a change in control. 10 14 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements included in this prospectus regarding the future clinical trials for our one product, approvals by the United States Food and Drug Administration and other plans and objectives for the future and assumptions and predictions about future supply, manufacturing, costs and marketing are all forward-looking statements. When we use words like "intend," "anticipate," "believe," "estimate," "plan" or "expect," we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date of this prospectus, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. We have disclosed certain important factors that could cause our actual results to differ materially from our current expectations under "Risk Factors" elsewhere in this prospectus. You should understand that forward-looking statements made in connection with this offering are necessarily qualified by these factors. We are not undertaking to publicly update or revise any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise. USE OF PROCEEDS Other than the proceeds received by us from the exercise of 348,557 options and warrants, we will not receive any proceeds from the sale of shares covered by this prospectus. Any proceeds received by us from the exercise of any or all of the 348,557 options and warrants may be used for our general working capital purposes, including research and development and human clinical trials. We have not specifically allocated the proceeds among these uses, and actual expenditures will depend on a number of factors. The use of any proceeds from the exercise of such 348,557 options and warrants, and the timing of such use, will depend on the availability to us of cash from other sources. Proceeds not immediately required for the purposes described above will be invested by us principally in United States government obligations, short term certificates of deposit, money market funds or other short term, interest bearing investments. 11 15 SELLING SHAREHOLDERS The following table sets forth certain information regarding beneficial ownership of our common stock as of September 21, 1999 by each selling shareholder. Except as indicated in the footnotes to this table, we believe that the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.
AMOUNT AND NATURE OF SHARES BENEFICIALLY NAME OF BENEFICIAL REGISTERED OWNED BENEFICIAL OWNER OWNERSHIP* FOR SALE AFTER SALE* - ---------------- ---------- ---------- ------------ Pequot Capital Management, Inc. 834,179(1) 281,153(1) 553,026(1) Joseph Stechler 955,166(2) 117,430(2) 827,736(2) Cygni S.A. 34,285(3) 34,285(3) -- Abraham Berliner 6,857(3) 6,857(3) -- Joseph H. Berliner Defined Benefit Pension Plan 6,857(3) 6,857(3) -- TLG Realty, LLC 20,572(3) 20,572(3) -- Veron International Limited 54,857(3) 54,857(3) -- Dennis Choy 7,200(3) 7,200(3) Biotechnology Development Fund LP 27,428(3) 27,428(3) -- Clarion Capital Corporation 13,713(3) 13,713(3) -- Victor S. Lee 27,360(3) 27,360(3) -- Joseph Owadeyah 13,715(3) 13,715(3) -- Paradigm Group LLC 72,321(4) 72,321(4) -- PGP Investors 1, LLC 68,571(3) 68,571(3) -- Interfiducia Trust Reg TTEE The Vas Family Trust 27,600(3) 27,600(3) -- Roisen Mark Sater & Amanda J. Sater 16,200(3) 16,200(3) -- James O. & Janice M. York 12,000(3) 12,000(3) -- Michael Shina 27,600(3) 27,600(3) --
12 16 Charles Chambers 13,200(3) 13,200(3) -- William Lurie 6,000(3) 6,000(3) -- Robert C. Hastings, Jr. 7,200(3) 7,200(3) -- Frank R. Kuhn 7,200(3) 7,200(3) -- Teena Lerner 30,769(5) 30,769(5) -- Oscar Gruss & Son, Incorporated 31,109(5) 31,109(5) -- Michael Feintuch 3,456(5) 3,456(5) -- Reid Howard Drescher 600(5) 600(5) -- Alan Nisselson as trustee in bankruptcy for Rodman & Renshaw 30,000(5) 30,000(5) -- Julia Heckman 2,250(5) 2,250(5) -- John J. Borer, III 4,500(5) 4,500(5) -- Karl Schmidt 5,708 5,708 -- Andrew Swartz 496 496 -- Anthony Viscogliosi 15,000(5) 15,000(5) -- Dian Griesel 25,000(5) 25,000(5) -- Henry Orlinsky 38,183(6) 10,000(6) 28,183(6) Menachem Genack 15,022(6) 3,039(6) 11,583(6)
- ------- * The number of shares of common stock beneficially owned by each person or entity is determined under rules promulgated by the United States Securities and Exchange Commission. Under such rules, beneficial ownership includes any shares as to which the person or entity has sole or shared voting power or investment power. Included among the shares owned by such person are any shares which such person or entity has the right to acquire within 60 days after August 20, 1999. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of such shares. Except for information in our records and reports filed by them with us, we have no knowledge of whether any of the selling shareholders own any other shares of our common stock or options or warrants to purchase shares of our common stock. We believe that none of the selling shareholders will own 1% or more of our outstanding shares if they sell all of their shares 13 17 registered for sale, except Pequot Capital Management, Inc., who will own 8.3%, and Joseph Stechler who will own 12.2%. (1) Shares held by three investment funds. We believe that Pequot Capital Management, Inc. has sole or shared investment and/or voting power for these shares. Includes 81,153 shares issuable upon exercise of outstanding warrants. (2) Includes the shares owned by Stechler & Company and 30,000 shares owned by a charitable foundation of which Mr. Stechler and another member of his family are the trustees and the following: (a) before sale of the registered shares, 210,500 shares to be issued by us to Mr. Stechler or Stechler & Company upon their exercise of outstanding options or warrants; (b) among the shares registered for sale 30,500 shares to be issued by us to Mr. Stechler upon his exercise of outstanding warrants; (c) after sale of the registered shares, 180,000 shares to be issued by us to Mr. Stechler or Stechler & Company upon their exercise of outstanding options and warrants. (3) One of every six shares included in this total is a share issuable upon exercise of an outstanding warrant held by such person. (4) Includes 15,178 shares issuable upon the exercise of outstanding warrants. (5) All of these shares are issuable upon exercise of outstanding warrants or options. (6) The shares shown as owned by Mr. Henry Orlinsky include shares owned by his wife. Mr. Orlinsky disclaims any beneficial interest in such shares. Also includes the following: (a) before the sale of the registered shares, 28,043 shares and 12,639 shares issuable upon the exercise of outstanding warrants owned by Mr. Orlinsky and Mr. Genack, respectively; (b) except for 400 shares owned by Mr. Genack the shares registered for sale consists of shares to be issued by us upon the exercise of outstanding options and warrants owned by Messrs. Orlinsky and Genack; (c) after the sale of the registered shares, 18,043 shares to be issued to Mr. Orlinsky (and his wife) and 10,000 shares to be issued to Mr. Genack by us upon their exercise of outstanding options and warrants. DESCRIPTION OF SECURITIES COMMON STOCK We are currently authorized to issue 25,000,000 shares of common stock, par value $.001 per share, of which 6,562,753 shares were issued and outstanding as of September 21, 1999. The holders of our common stock are entitled to one vote per share for the election of directors and with respect to all other matters to be voted on by shareholders. Shares of common stock do not have cumulative voting rights. Therefore, the holders of more than 50% of the shares voting for the election of directors can elect all of the directors if they choose to do so and, in that event, the holders of the remaining shares will not be able to elect any directors. The holders of common stock are entitled to receive dividends when, as and if declared by our Board of Directors out of legally 14 18 available funds. In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the common stock. Holders of shares of common stock, as such, have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to the common stock. OPTIONS AND WARRANTS The following options and warrants to purchase shares of our common stock which we have granted are presently outstanding. CLASS B WARRANTS. These warrants are publicly traded, are exercisable at a price of $15.00 per share and expire on November 30, 1999. There are 1,188,600 Class B Warrants outstanding. LOCK UP WARRANTS. These warrants are exercisable at a price of $1.00 per share and expire January 19, 2000. There are 161,011 Lock Up Warrants outstanding. STOCK OPTION PLAN. We have reserved 1,543,250 shares for issuance upon the exercise of stock options included in our 1996 Stock Option Plan. Options to purchase 940,500 shares at prices ranging from $6.00 to $213/8 have been granted by us and are currently outstanding. OTHER WARRANTS. We have reserved 733,106 shares for issuance upon the exercise of other warrants granted by us. Such warrants are exercisable at prices ranging from $6.00 to $14.25 per share and expire at various times from March 1, 2000 to March 26, 2004. GENERAL CORPORATION LAW PROVISIONS A Delaware statute prevents an "interested stockholder" (defined generally as a person owning 15% or more of a corporation's voting stock) from engaging in a "business combination" with the Delaware corporation for three years following the date the person became an interested stockholder unless, generally speaking, the transaction is approved by Ortec's Board of Directors and the vote of two thirds of the outstanding shares not owned by such interested stockholder. This statute could have the effect of discouraging, delaying or preventing hostile takeovers, including those that might result in the payment for our shares of a premium over market price or changes in control or management of Ortec. TRANSFER AND WARRANT AGENT The transfer agent for our common stock and the warrant agent for our publicly traded Class B Warrants, is Jersey Transfer and Trust Co., whose address is 201 Bloomfield Avenue, P.O. Box 36, Verona, New Jersey 07044. 15 19 PLAN OF DISTRIBUTION All of the shares of common stock offered pursuant to this prospectus are being offered by the holders thereof and, therefore, we will not receive any proceeds resulting from the sale of any of such shares, except for any proceeds from the exercise, if any, of the options and warrants for 348,557 shares. The shares of common stock covered by this prospectus may be sold from time to time to purchasers directly by the holders thereof. Alternatively, such holders may from time to time offer the shares of common stock through underwriters, dealers or agents, who may receive compensation in the form of underwriting discounts, concessions or commissions from such holders and any underwriters, dealers or agents who participate in the distribution of such shares may be deemed to be "underwriters" under the Securities Act, and any discounts, commissions or concessions received by any such persons might be deemed to be underwriting discounts and commissions under the Securities Act. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents filed by us with the Securities and Exchange Commission (the "Commission") are incorporated by reference in this prospectus. Our Commission file number to be used to locate these documents is 0-27368. (a) Our Annual Report on Form 10-K for the year ended December 31, 1998. (b) Our Quarterly Reports on Forms 10-Q for the quarters ended March 31, 1999 and June 30, 1999. (c) The description of our common stock set forth in our registration statement on form 8-A filed December 5, 1995, including any amendment or report filed for the purpose of updating such description. All documents subsequently filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), prior to the termination of this offering, shall be deemed to be incorporated by reference in this prospectus and to be a part of this prospectus from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is incorporated or deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. 16 20 LEGAL MATTERS The legality of the common stock included in this prospectus has been passed upon for the Company by Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, New York, New York. Gabriel Kaszovitz, a member of such firm, is a shareholder of the Company and is the owner of an option expiring April 1, 2001 for the purchase of 10,000 shares of Common Stock at $6.00 per share. EXPERTS The financial statements of the Company, incorporated by reference in this prospectus, from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, have been incorporated herein in reliance on the report of Grant Thornton LLP, Independent Certified Public Accountants, given on the authority of that firm as experts in accounting and auditing. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Our certificate of incorporation provides that the personal liability of our directors shall be limited to the fullest extent permitted by the provisions of Section 102(b)(7) of the General Corporation Law of the State of Delaware (the "DGCL"). Section 102(b)(7) of the DGCL generally provides that no director shall be liable personally to us or our shareholders for monetary damages for breach of fiduciary duty as a director, provided that our certificate of incorporation does not eliminate the liability of a director for (i) any breach of the director's duty of loyalty to us or our shareholders; (ii) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) acts or omissions in respect of certain unlawful dividend payments or stock redemptions or repurchases; or (iv) any transaction from which such director derives improper personal benefit. The effect of this provision is to eliminate our rights and the rights of our shareholders through stockholders' derivative suits on our behalf, to recover monetary damages against a director for breach of her or his fiduciary duty of care as a director including breaches resulting from negligent or grossly negligent behavior except in the situations described in clauses (i) through (iv) above. The limitations summarized above, however, do not affect our or our shareholders ability to seek nonmonetary remedies, such as an injunction or rescission, against a director for breach of her or his fiduciary duty. In addition, our certificate of incorporation provides that the Company shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify all persons whom it may indemnify pursuant to Section 145 of the DGCL. Section 145 of the DGCL permits a company to indemnify an officer or director who was or is a party or is threatened to be made a party to any proceeding because of his or her position, if the officer or director acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. We maintain a directors' and officers' liability insurance policy covering certain liabilities that may be incurred by our directors and officers in connection with the performance of their duties. The entire premium for such insurance is paid by us. 17 21 Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors and officers, and to persons controlling the Company pursuant to the foregoing provisions, we have been informed that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. WHERE YOU CAN FIND MORE INFORMATION Since January 20, 1996, we have been subject to the reporting requirements of the Exchange Act. In accordance with the Exchange Act, we have and will continue to file reports, proxy statements and other information with the Commission. Reports and other information filed by us may be inspected and copied at the public reference facilities of the Commission in Washington, D.C. Copies of such materials can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Our common stock is listed on the NASDAQ SmallCap Market and reports and information concerning the Company can also be inspected through such exchange. We intend to furnish our shareholders with annual reports containing audited financial statements and such other periodic reports as we deem appropriate or as may be required by law. We will provide without charge to each person who receives this prospectus, upon written or oral request of such person, a copy of any of the information that is incorporated by reference unless the exhibits are themselves specifically incorporated by reference. Such requests should be directed by mail to Mr. Ron Lipstein, Secretary, Ortec International, Inc., 3960 Broadway, New York, NY 10032, or by telephone at (212) 740-6999. We have filed with the Commission a registration statement on Form S-3 and all schedules and exhibits thereto under the Securities Act with respect to the common stock offered by this prospectus. This prospectus does not contain all of the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and this offering, reference is made to such registration statement, including the exhibits filed therewith, which may be inspected without charge at the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the registration statement may be obtained from the Commission at its principal office upon payment of prescribed fees. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete and, where the contract or other document has been filed as an exhibit to the registration statement, each such statement is qualified in all respects by reference to the applicable document filed with the Commission. 18 22 PART II - INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION It is expected that the following expenses will be incurred in connection with the issuance and distribution of the Common Stock being registered. All such expenses are being paid by the Company. SEC Registration fee.................................................... $ 2,127 *Printing and Edgarization............................................. 4,500 *Accountants' fees and expenses......................................... 3,000 *Attorneys' fees and expenses........................................... 15,000 *Miscellaneous.......................................................... 373 ------- *Total............................................................... $25,000 =======
- ----- *Estimated ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company's certificate of incorporation provides that the personal liability of the directors of the Company shall be limited to the fullest extent permitted by the provisions of Section 102(b)(7) of the General Corporation Law of the State of Delaware (the "DGCL"). Section 102(b)(7) of the DGCL generally provides that no director shall be liable personally to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that the Certificate of Incorporation does not eliminate the liability of a director for (i) any breach of the director's duty of loyalty to the Company or its stockholders; (ii) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) acts or omissions in respect of certain unlawful dividend payments or stock redemptions or repurchases; or (iv) any transaction from which such director derives improper personal benefit. The effect of this provision is to eliminate the rights of the Company and its stockholders (through stockholders' derivative suits on behalf of the Company) to recover monetary damages against a director for breach of her or his fiduciary duty of care as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) through (iv) above. The limitations summarized above, however, do not affect the ability of the Company or its stockholders to seek nonmonetary remedies, such as an injunction or rescission, against a director for breach of her or his fiduciary duty. In addition, the certificate of incorporation provides that the Company shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify all persons whom it may indemnify pursuant to Section 145 of the DGCL. Section 145 of the DGCL permits a company to indemnify an officer or director who was or is a party or is threatened to be made a party to any proceeding because of his or her position, if the officer or director acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers, or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and II-1 23 Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. ITEM 16. EXHIBITS
Exhibit Number Description - -------------- ----------- 4.1 Form of certificate evidencing shares of common stock(1) 5.1 Opinion of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, counsel for the Registrant* 23.1 Consent of Grant Thornton LLP* 23.2 Consent of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP (included in Exhibit 5.1)*
- ----- * Filed as an exhibit to this registration statement before this amendment No. 2. (1) Filed as an exhibit to the Company's registration statement on Form SB-2 (File No. 33-96090), or amendment 1 thereto, and incorporated herein by reference. ITEM 17. UNDERTAKINGS The Registrant hereby undertakes: 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement. 2. That for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering. 4. That for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the shares of common stock offered herein, and the offering of such shares of common stock at that time shall be deemed to be the initial bona fide offering thereof. II-2 24 5. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the Registrant's certificate of incorporation, indemnification agreement, insurance 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 Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 25 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly authorized this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on October 13, 1999. ORTEC INTERNATIONAL, INC. By: /s/ Steven Katz ---------------------------- Steven Katz, PhD President 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 dates indicated:
Signature Title Date --------- ----- ---- /s/ Steven Katz President, Chief Executive Officer October 13, 1999 - --------------- and Chairman (Principal Executive Steven Katz, PhD Officer) /s/ Mark Eisenberg Senior Vice President, Research and October 13, 1999 - --------------- Development, and Director Dr. Mark Eisenberg /s/ Ron Lipstein Chief Financial Officer, Secretary, October 13, 1999 - --------------- Treasurer and Director (Principal Ron Lipstein Financial and Accounting Officer) /s/ Alain M. Klapholz Vice President, Operations, and October 13, 1999 - --------------- Director Alain M. Klapholz Director - --------------- Joseph Stechler /s/ Steven Lilien Director October 13, 1999 - --------------- Steven Lilien, PhD
26 EXHIBIT INDEX
Exhibit Number Description - -------------- ----------- 4.1 Form of certificate evidencing shares of common stock(1) 5.1 Opinion of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, counsel for the Registrant* 23.1 Consent of Grant Thornton LLP* 23.2 Consent of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP (included in Exhibit 5.1)*
- ----- * Filed as an exhibit to this registration statement before this amendment 2. (1) Filed as an exhibit to the Company's registration statement on Form SB-2 (File No. 33-96090), or amendment 1 thereto, and incorporated herein by reference. -----END PRIVACY-ENHANCED MESSAGE-----