Registration Statement for Securities Offered Pursuant to a Transaction — Form S-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-3 Registration Statement for Securities Offered 36 143K
Pursuant to a Transaction
2: EX-4.1 Instrument Defining the Rights of Security Holders 6 32K
3: EX-5.1 Opinion re: Legality 2 9K
4: EX-23.1 Consent of Experts or Counsel 1 5K
S-3 — Registration Statement for Securities Offered Pursuant to a Transaction
Document Table of Contents
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 2001.
Registration No. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CYBERCARE, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0158479
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
CyberCare, Inc.
2500 Quantum Lakes Drive, Suite 1000
Boynton Beach, Florida 33426
(561) 742-5000
(Name, address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Michael F. Morrell
Chairman of the Board, Chief Executive Officer and Director
CYBERCARE, INC.
2500 Quantum Lakes Drive, Suite 1000
Boynton Beach, Florida 33426
(561) 742-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Joel D. Mayersohn, Esq.
Atlas Pearlman, P.A.
350 East Las Olas Boulevard, Suite 1700
Fort Lauderdale, Florida 33301
(954) 763-1200
Approximate date of commencement of proposed sale to public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
/ /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.
/ /
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.
PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 2001
CYBERCARE, INC.
8,691,498 shares of common stock
This prospectus relates to 8,691,498 shares of our common stock which may
be offered by certain selling security holders, of which 1,892,202 shares are
issuable as interest payments under convertible subordinated debentures,
1,176,470 shares were issued upon the exercise of warrants, 200,000 shares are
issuable upon the exercise of warrants, 5,000,000 shares are issuable pursuant
to a private equity line agreement, and 422,826 shares have been issued
pursuant to various contractual arrangements and are currently outstanding.
Our Common Stock, par value $0.0025 per share is traded on the Nasdaq
National Market under the trading symbol "CYBR". On November 20, 2001, the last
reported sale price for our common stock was $1.00.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE
"RISK FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
STRATEGIC INVESTMENT MANAGEMENT, S.A. IS CONSIDERED AN UNDERWRITER WITH
RESPECT TO ALL OF ITS SHARES OF COMMON STOCK PURCHASED PURSUANT TO THE PRIVATE
EQUITY LINE AGREEMENT AND OFFERED FOR SALE UNDER THIS PROSPECTUS.
The date of this Prospectus is November 21, 2001
[Enlarge/Download Table]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each maximum maximum
class of securities Amount to be offering price aggregate Amount of
to be registered registered per unit offering price registration fee
------------------- ------------ -------------- -------------- ----------------
Common Stock, $0.0025 par value (1) 1,892,202 $1.09 $2,062,500 $ 515.63
Common Stock, $0.0025 par value (2) 5,000,000 1.09 5,450,000 1,362.50
Common Stock, $0.0025 par value (3) 422,826 1.09 460,880 115.22
Common Stock, $0.0025 par value (4) 1,176,470 1.09 1,282,352 320.59
Common Stock, $0.0025 par value (5) 200,000 1.09 218,000 54.50
--------- ---------- ---------
Total Registration Fee 8,691,498 $9,473,732 $2,368.44
========= ========== =========
(1) Shares issuable as interest payments pursuant to the terms of
convertible Subordinated Debentures. Estimated solely for purposes
of calculating the registration fee pursuant to Rule 457(c) under
the Securities Act based on the average of the closing bid and asked
price of the Common Stock as reported on the Nasdaq National Market
on November 16, 2001.
(2) Shares issuable pursuant to a Private Equity Line Agreement.
Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act based on the
average of the bid and asked price of the Common Stock as reported
on the Nasdaq National Market on November 16, 2001.
(3) Shares issued pursuant to various contractual arrangements.
Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act based on the
average of the closing bid and asked price of the Common Stock as
reported on the Nasdaq National Market on November 16, 2001.
(4) Shares issued pursuant to the exercise of Common Stock Purchase
Warrants. Estimated solely for purposes of calculating the
registration fee pursuant to Rule 457(c) under the Securities Act
based on the average of the closing bid and asked price of the
Common Stock as reported on the Nasdaq National Market on November
16, 2001.
(5) Shares issuable upon exercise of Common Stock Purchase Warrants.
Estimated solely for purposes of calculating the registration
fee pursuant to Rule 457(c) under the Securities Act based on the
average of the closing bid and asked price of the Common Stock as
reported on the Nasdaq National Market on November 16, 2001.
There is being registered hereunder an indeterminate number of
shares of our common stock as may be sold from time to time by certain
selling stockholders as described herein.
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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 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
TABLE OF CONTENTS
[Download Table]
Page
Summary Information, Risk Factors and Ratio of Earnings to
Fixed Changes
Business....................................................... 3
Risk Factors................................................... 4
Cautionary Statement about Forward-Looking Information............... 14
Use of Proceeds...................................................... 15
Description of Securities to be Registered........................... 15
Selling Security Holders............................................. 16
Plan of Distribution................................................. 26
Where You Can Find More Information.................................. 27
Interests of Named Experts and Counsel
Legal Matters.................................................. 28
Experts........................................................ 28
Incorporation of Certain Information by Reference....................II-2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) IS EFFECTIVE. THIS
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.
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BUSINESS
We develop and provide a patented, comprehensive network-based
telehealth solution that enables voice and video communication and the
exchange of medical data, particularly patient vital signs, between a
chronically ill patient and a care provider. Our proprietary system consists
of our family of Electronic HouseCall-Registered Trademark- System (EHC-TM-,
or EHC) products, software applications and the CyberCare 24 Network-TM-. Our
CyberCare System-TM-, which has been cleared for marketing by the U.S. Food
and Drug Administration ("FDA"), features a routed network architecture that
enables us to connect a community of users and providers. We believe the need
to control health care costs while providing effective care to the aging
population has created significant demand for remote patient monitoring
solutions. Our telehealth solution is designed to improve the quality of care
by expediting the detection and treatment of medical problems while
decreasing overall health care costs by reducing emergency room visits and
hospitalizations that result from delayed diagnoses and interventions.
Improved patient-caregiver communication and enhanced access to
information are necessary to successfully improve the medical care provided to
the elderly and chronically ill. The elderly require a disproportionate share of
health care services as many chronic illnesses increase in incidence and
severity with age. Consequently, the aging of the world's population is placing
a substantial burden on health care delivery resources. Chronic illnesses are
responsible for seven out of every 10 deaths in the United States, claiming the
lives of approximately 1.7 million people annually. Chronic illness care is
well-suited to benefit from the adoption of telehealth technologies due to the
fact that routine checks on the health condition of chronically ill patients can
reduce hospitalizations, thereby lowering the costs associated with chronic
illness. In addition, health care costs and quality of care relative to the
aging population and the prevalence of chronic illnesses are negatively impacted
by the decreasing ratio of health care professionals per capita. The global
health care system is struggling to effectively manage the health of patients in
this challenging environment. As a result, health care providers are seeking
alternative methods to control costs while delivering effective care to a
growing population.
Our CyberCare System addresses the challenges of access to the homebound
patient and can be utilized for clinical monitoring of patients with chronic
illnesses in a more effective and cost-efficient manner than current health care
models. We address fundamental issues such as patient access, early detection of
illness and deterioration of medical condition, clinical staffing shortages, and
acute care facility capacity constraints. Furthermore, the use of our CyberCare
System provides opportunities for family members to interact through voice and
video, thereby enabling communication with elderly or sick family members in
remote locations.
Our CyberCare System consists of three integrated technology components:
hardware, a proprietary network and software. The hardware component consists of
the EHC products that are installed in patient settings and at care provider
locations. These units are equipped with peripheral devices to measure patient
vital signs and transmit that medical data over our network. Our network couples
video-conferencing and data capture, allowing care providers to remotely monitor
the health status of the patient. Our proprietary software applications
represent an important value-added component to the network, providing
innovative tools for structuring care plans, tracking patient progress and
ensuring patient compliance with diet, exercise and medication requirements.
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A routed network architecture is functionally superior to point-to-point
system alternatives. Point-to-point systems rely on a patient establishing a
connection with a particular provider. A routed network architecture enables
connectivity of a community of users and providers. This connectivity creates a
scalable business model by increasing the utilization of personnel to provide
patients with greater access to care. In addition, the routed network creates a
community of care providers who are involved in patient care. This can include
the patient's dietician, pharmacist, case manager, primary care physician,
specialty care physician, physical therapist, counselor and even family members.
Furthermore, the CyberCare System allows interactive support group sessions
between multiple patients and a caregiver.
We have obtained FDA clearance for a portfolio of peripheral devices for
use with our CyberCare System which measure multiple vital signs in the
convenience of a patient's home and transmits that information to care providers
for review. The peripheral devices include a thermometer, blood pressure cuff,
pulse oximeter, glucometer, electronic stethoscope and weight scale. The medical
information gathered by these peripheral devices is available for real-time
review by remote care providers and is stored in a secured central database for
review and analysis. This database of medical information allows care providers
to measure results against patients' historical medical information, thereby
creating a record of patient data.
RISK FACTORS
Before you invest in our securities, you should be aware that there are
various risks. Additional risks and uncertainties not presently known to us or
that we currently believe to be immaterial may also adversely affect our
business and operations. You should carefully consider these risk factors,
together with all of the other information included in or incorporated by
reference into this prospectus before you decide to purchase our securities. If
any of the following risks develop into actual events, our business, financial
condition or results of operations could be materially adversely affected.
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF LOSSES AND A SUBSTANTIAL ACCUMULATED DEFICIT AND
THERE IS NO ASSURANCE THAT WE WILL BE PROFITABLE
To date, we have been unable to generate revenue sufficient to be
profitable on a consistent basis. Consequently, we have sustained substantial
losses. Net loss for the nine months ended September 30, 2001 was $21,228,000.
Net losses for the years ended December 31, 2000 and 1999 were $28,698,000 and
$10,808,000, respectively. Our accumulated deficits as of September 30, 2001,
December 31, 2000 and December 31, 1999 were $88,378,000, $67,150,000, and
$38,452,000, respectively. There can be no assurance that we will ever achieve
the level of revenues needed to be profitable in the future or, if profitability
is achieved, that it will be sustained.
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WE MAY NEED TO OBTAIN ADDITIONAL FINANCING AND WE CANNOT BE CERTAIN THAT
ADDITIONAL FINANCING WILL BE AVAILABLE WHEN NEEDED OR ON TERMS FAVORABLE
TO US OR OUR STOCKHOLDERS
Our future capital requirements will depend on many factors, including but
not limited to:
* the market acceptance of the CyberCare System;
* the levels of promotion and marketing required to attain a
competitive position in the marketplace;
* the extent to which we invest in new technology and
improvements of existing technology; and
* the response of competitors to our introduction of the
CyberCare System and other new products and services.
To the extent that funds generated by certain Securities described
in this Registration Statement, together with existing resources, are
insufficient to fund our activities over the long-term, we may need to raise
additional funds through equity or debt financing or from other sources. The
sale of additional equity or convertible debt may result in additional dilution
to our stockholders. To the extent that we rely upon debt financing, we will
incur the obligation to repay the funds borrowed with interest and may become
subject to covenants and restrictions that restrict operating flexibility. No
assurance can be given that additional equity or debt financing will be
available or that, if available, it can be obtained on terms favorable to us or
our stockholders. Failure to obtain necessary financing could have a material
adverse effect on our business, financial condition or results of operations.
WE MAY NOT BE ABLE TO PROTECT PATENTS AND PROPRIETARY TECHNOLOGY, WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
Our ability to compete effectively in the telehealth industry will depend
on our success in developing and marketing our products and services and/or
acquiring other suitable businesses and protecting our proprietary technology
both in the United States and abroad. We currently have a license for certain
patents and have several patents pending. We intend to file additional patent
applications that we deem to be economically beneficial. If we are not
successful in obtaining and defending patents or demonstrating that our
technology is proprietary under trade secret laws, we will have limited
protection against those who might copy our technology. We cannot assure you
that our patent applications will be approved, and we may incur substantial
costs in defending any patent or license infringement suits or in asserting any
patent or license rights, including those granted by third parties. The
expenditure involved in asserting, obtaining or defending these intellectual
property rights may be more than we can afford.
Although we have and will continue to enter into confidentiality, covenant
not to compete and invention agreements with our employees, consultants,
partners and acquisition targets, there can be no assurance that such agreements
will be honored or that we will be able to adequately protect our rights to our
non-patented trade secrets and know-how.
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THIRD PARTIES MAY CLAIM THAT WE HAVE BREACHED THEIR INTELLECTUAL PROPERTY
RIGHTS, WHICH COULD RESULT IN SIGNIFICANT ADDITIONAL COSTS OR PREVENT US
FROM PROVIDING ALL OF OUR SERVICES
Third parties may bring claims of copyright or trademark infringement,
patent infringement or misappropriation of creative ideas or formats against us
with respect to content that we distribute or our technology or marketing
techniques and terminology. Claims of this kind, even if without merit, could be
time-consuming to defend, result in costly litigation, divert management
attention, require us to enter into costly royalty or licensing arrangements or
prevent us from distributing certain content or utilizing important
technologies, ideas or formats.
Defending and prosecuting intellectual property suits, interference
proceedings and related legal and administrative proceedings are costly,
time-consuming and divert the attention of technical and management personnel.
Litigation may be necessary to enforce our patents or defend our patent rights,
to protect our trade secrets or know-how or to determine the enforceability,
scope and validity of the proprietary rights of others. If the outcome of any
such litigation or interference proceedings is adverse to us, it could subject
us to significant liabilities to third parties or require us to license disputed
rights from third parties or cease using such technology, which would have a
material adverse effect on our business, financial condition, results of
operations and future growth prospects. Patent and intellectual property
disputes in the medical device area have often been settled through licensing or
similar arrangements, which can include ongoing royalties. Further, we cannot
assure you that we will obtain necessary licenses on satisfactory terms, if at
all.
CHANGES IN PAYMENT FOR MEDICAL SERVICES COULD HARM OUR BUSINESS
We believe that trends in cost containment in the health care industry
will continue to result in a reduction in per-patient revenues which may
impact our health services segments. The federal government has implemented,
through the Medicare program, a payment methodology for physician services.
This methodology is a fee schedule that, except for certain geographical and
other adjustments, pays similarly situated physicians the same amount for the
same services. The schedule is adjusted each year and is subject to increases
or decreases at the discretion of Congress. We cannot assure you that any
reduced operating margins could be recouped by us through cost reductions,
increased volume, introduction of additional procedures or otherwise. Rates
paid by non-governmental insurers, including those that provide Medicare
supplemental insurance, are based on established physician, ambulatory
surgery center and hospital charges, and are generally higher than Medicare
payment rates. A change in the makeup of the patient mix of our practices and
those that we manage that results in a decrease in patients covered by
private insurance or a shift in private pay payment structures could
adversely affect our business, financial condition or results of operations.
CERTAIN PAYMENTS TO OUR PT&R SUBSIDIARY HAVE BEEN SUSPENDED BY MEDICARE
Our Physical Therapy and Rehabilitation ("PT&R") subsidiary received a
letter from the Health Care Financing Administration (now known as the Centers
for Medicare and Medicaid Services ("CMS")), through its intermediary, notifying
it of the suspension of Medicare payments to PT&R pending resolution of certain
complaints from patients regarding services rendered during the year 2000. The
complaining patients constituted less than 1% of PT&R's Medicare patients.
During the suspension, the Medicare program continued to process PT&R's claims.
In August 2001 the
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suspension was lifted, although a portion of the reimbursement amounts for
processed claims remains in escrow pending further review. We are working
cooperatively with CMS to resolve any outstanding issues and to effectuate
release of the amount held in escrow.
WE ARE THE SUBJECT OF SECURITIES CLASS ACTION LITIGATION
We are currently the subject of a consolidated class action lawsuit
against us and certain of our executive officers alleging violations of federal
securities laws. The action seeks unspecified damages and costs. Securities
litigation could result in substantial costs to us and could divert management's
attention and resources away from our operations and development. Although we
have insurance coverage for this consolidated action which we believe will be
adequate to cover defense costs, there can be no assurance that an exception or
exclusion to coverage may apply or such coverage will in fact cover all defense
costs. While we believe that we have meritorious defenses to these suits, there
can be no assurance that we will prevail in this litigation. Since this
consolidated action is in the early stages, we cannot predict the outcome of
this litigation or determine the full potential impact it may have on our
liquidity or financial condition. We and our executives believe the claims made
by the complaint lack merit.
WE INTEND TO ACQUIRE VARIOUS COMPANIES AND/OR ENTER INTO STRATEGIC JOINT
VENTURES WHICH WILL SUBJECT US TO ALL OF THE RISKS ASSOCIATED WITH SUCH
ACTIVITIES
We intend to grow through acquiring and/or entering into strategic joint
ventures with compatible businesses to develop our telehealth business. There
can be no assurance that suitable acquisitions will be available or that
acquisitions can be negotiated on acceptable terms, or that the operations of
such transactions or joint ventures can be integrated effectively into our
operations. Competition for suitable acquisition candidates is expected to be
intense and many of our competitors will have greater resources than we have.
Our failure to implement our expansion strategy could have a material adverse
effect on our financial performance and, moreover, the attendant risks of
expansion could also have a material adverse effect on our business.
Our growth strategy will result in significant additional demands on our
infrastructure, and will place a significant strain on our managerial,
administrative, operational, financial and technical resources. Additional
capital may be needed and there can be no assurance that we will be able to
obtain sufficient resources to support our current and future plans for
acquisition and growth. The inability to continue to upgrade our operational and
financial control systems, the emergence of unexpected expansion difficulties or
failure to manage our proposed expansion properly could have a material adverse
effect on our business, financial condition and results of operations.
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WE HAVE LIMITED EXPERIENCE CONDUCTING OPERATIONS INTERNATIONALLY, WHICH MAY
MAKE OVERSEAS EXPANSION MORE DIFFICULT AND COSTLY
We have begun the process of initiating business network operations in
several foreign countries. As such, we are subject to differing laws,
regulations and business cultures which may adversely impact our business. We
may also be exposed to economic and political instability and international
unrest. Although we have and will continue to enter into agreements with our
partners and customers that attempt to minimize these risks, there can be no
assurance that such agreements will be honored or we will be able to adequately
protect our interests.
We plan to expand our international operations in the future. There are
many barriers and risks to competing successfully in the international
marketplace, including:
* Costs of customizing products for foreign countries;
* Foreign currency risks;
* Dependence on local vendors;
* Compliance with multiple, conflicting and changing laws, and
regulations and policies;
* Longer sales cycles;
* Import and export restrictions and tariffs.
As a result of these competitive barriers to entry and risks, we
cannot assure you that we will be able to successfully market, sell and deliver
our products and services in international markets.
We may engage in hedging transactions in the future to manage or reduce
our foreign exchange risk. However, our attempts to manage our foreign currency
exchange risk may not be successful and, as a result, our net earnings could be
negatively affected by any unfavorable fluctuations in foreign currency exchange
rates.
Our foreign operations could also be subject to unexpected changes in
regulatory requirements, tariffs, and other market barriers and political and
economic instability in the countries where we operate. Due to our foreign
operations, we could be subject to such factors in the future and the impact of
any such events that may occur in the future could subject us to additional
costs or loss of sales, which could negatively affect our operating results.
THE NATURE OF OUR BUSINESS EXPOSES US TO PROFESSIONAL AND PRODUCT
LIABILITY CLAIMS, WHICH COULD MATERIALLY ADVERSELY IMPACT OUR OPERATIONS
Our business and technology exposes us to potential professional and
product liability risks which are inherent to such business and products,
including the risks associated with providing telehealth and disease management
products and services through a virtual private network which is reliant upon
telecommunications pipelines and connects provided by third parties which may,
from time to time, experience interruption of service. There can be no assurance
that we will not be subjected to future claims and potential liability. While we
plan to maintain insurance to protect against professional and product
liability, including errors and omissions in our technology and software design,
unauthorized access to our network and loss or interruption of service or system
functions, there can be no assurance that we will not be materially adversely
impacted.
WE MAY LOSE REVENUE OR INCUR ADDITIONAL COSTS BECAUSE OF SYSTEM FAILURE
8
Any system failure that causes interruptions in our operations may
have an adverse effect on our business, financial condition or results of
operations. Our services are dependent on our own and other companies' abilities
to successfully integrate technologies and equipment. In connecting with other
companies' equipment we take the risk of not being able to provide service due
to telecommunications failure. In addition, there is the risk that our equipment
may malfunction or that we could make an error, which may negatively affect our
customers service. Our hardware and other equipment may also suffer damage from
natural disasters and other catastrophic events, such as loss of power and
telecommunications failures. We have taken a number of steps to prevent our
service from being affected by natural disasters, including development of
redundant systems. Nevertheless, there can be no assurance that any such steps
and redundancies will prevent our system from becoming disabled in the event of
a hurricane, power outage or otherwise. The failure of our system resulting from
the effects of a natural or man-made disaster could have an adverse effect on
our relationship with our customers and our business, financial condition and
results of operation.
THE LOSS OF CERTAIN MEMBERS OF OUR MANAGEMENT TEAM COULD MATERIALLY ADVERSELY
AFFECT US.
We are dependent, to a significant extent,on the continued efforts and
abilities of members of our management team. If we were to lose the services of
any of these individuals or other key employees without obtaining a qualified
replacement, our business could be materially adversely affected.
We believe that our success will also depend upon our ability to hire,
train and retain other highly-skilled personnel. We compete in a new market and
there is a limited number of people with skills necessary to provide the
services our clients demand. Competition for quality personnel is intense. We
cannot be sure that we will be successful in hiring, assimilating or retaining
the necessary personnel, and our failure to do so could adversely affect our
business, financial condition and results of operation.
WE COMPETE WITH A NUMBER OF ESTABLISHED COMPANIES, SOME OF WHICH HAVE
SIGNIFICANTLY GREATER FINANCIAL, TECHNOLOGICAL AND MARKETING RESOURCES THAN WE
DO, AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY WITH THESE COMPANIES.
The network-based telehealth solutions business is relatively new and
evolving. We compete with companies in the telehealth and monitoring business
and from other industries. The health care industry in general and the market
for medical ancillary services specifically are highly competitive. We compete
with ancillary services companies that are larger and have greater financial
resources than we do. We face competition from companies that provide
network-based telehealth solutions, most of which are in the early stages of
development.
We believe that we compete effectively by providing superior technology
and network-based telehealth solutions and more personalized care to the
patients and customers we serve. We believe the primary competitors for EHC
products are small, privately-held companies, none of which have established a
major market position as of this time. Some larger companies, such as Panasonic
and Agilent, have also recently announced initiatives in this market. Key
differentiating factors between us and our competitors in this segment lie
primarily in our network-based telehealth solutions architecture
9
which utilizes our patented technology and our developed software
applications.
RISKS RELATED TO OUR INDUSTRY
WE CANNOT GUARANTEE YOU THAT OUR PRODUCTS WILL BE FULLY DEVELOPED OR
ACCEPTED BY THE HEALTH CARE INDUSTRY
We cannot assure you that payors, physicians, medical providers or the
medical community in general will accept and utilize our products and services.
The extent that and the rate at which our products achieve market acceptance and
penetration will depend on many variables, including the establishment and
demonstration in the medical insurance and payor communities of the clinical
safety, efficacy and cost-effectiveness of our products and services, the
advantage of these products over existing technology, third-party reimbursement
practices and our manufacturing, quality control, marketing and sales efforts.
There can be no assurance that our potential customers will accept our
technology or services.
Similar risks will confront any other products and services we develop in
the future. Failure of our products and services to gain market acceptance would
have a material adverse effect on our business, financial condition, and results
of operations.
WE ARE SUBJECT TO A SIGNIFICANT NUMBER OF HEALTH CARE INDUSTRY REGULATIONS
AND RELATED REGULATIONS, THE FAILURE OF TO COMPLY WITH, COULD MATERIALLY
ADVERSELY AFFECT OUR OPERATIONS
We are subject to substantial potential liability resulting from a variety
of possible causes, including violation of numerous health care laws,
malpractice and product liability. Many of the health care laws to which we are
subject are broad in scope and difficult to interpret. If any actions or
lawsuits are brought against us in the future, such actions or lawsuits could
have a materially adverse effect on us. Violations of the state and federal
anti-kick-back laws and regulations could result in substantial civil and/or
criminal penalties and/or administrative sanctions for the individuals or
entities, including exclusion from participation in the Medicare and Medicaid
programs, as well as the suspension or revocation of professional licensure.
Such sanctions, if applied to us or any of our employees, could result in
significant loss of reimbursement and could have a material adverse effect on
us.
We attempt to minimize our potential liability through implementation of
and adherence to compliance policies and procedures, effective supervision and
personnel recruitment procedures. We also carry a variety of insurance policies
including policies insuring against certain negligent acts. There can be no
assurance, however, that such insurance policies will adequately cover our
losses resulting from such potential liability, or that we will continue to
qualify for, or be able to afford or obtain such insurance in the future.
The Health Insurance Portability and Accountability Act of 1996 ("HIPAA"),
among other things, mandates administrative simplification of electronic data
interchanges of health information, including standardizing transactions,
establishing uniform health care provider, payer and employer identifiers and
seeking protections for confidentiality and security of patient data. Final
regulations governing health care transaction security were published in the
August 17, 2000 FEDERAL REGISTER, and will become effective for most entities in
or after October 2002. Final regulations governing privacy and
10
confidentiality of individually identifiable health information were
published in the December 20, 2000 FEDERAL REGISTER, and will become
effective for most entities in or after February 2003. Many of the provisions
of HIPAA do not directly apply to us since we are not included in the types
of entities to which HIPAA applies. However, because we may be considered a
business associate of a covered entity, and because the implementation of our
CyberCare System for our customers necessitates that we have interaction with
patient users of the system, we will nonetheless have to comply with certain
aspects of the HIPAA regulations. We are proceeding to assess where our
current systems diverge from HIPAA's privacy and security requirements and to
implement protocols and procedures that will bring such systems and areas
into compliance before the deadlines identified in the final regulations. We
are unable at this time to assess the cost of implementation of the
administrative simplification requirements of HIPAA that are applicable to
our business.
RISK FACTORS ASSOCIATED WITH CONTRACTS AND SUB-CONTRACTS WITH THE U.S.
GOVERNMENT
It is our goal to introduce the CyberCare System for use by agencies or
authorities of the federal and state governments (such as the U.S. Veterans
Administration, Medicare, Medicaid, TRICARE, or other federally or state funded
health care programs) and we are currently engaged in the administration of
pilot programs for our CyberCare System with certain of these agencies and
authorities. Accordingly, a portion of our revenue may be derived from contracts
or subcontracts funded by the U.S. government or other state or local
governments. Therefore, our financial performance may be adversely affected by
changing government (federal, state or local) procurement practices and policies
as well as declines in government spending and funding. The factors that could
have a material adverse effect on our ability to win new contracts with the
federal, state or local governments, or retain existing contracts, include the
following: budgetary constraints; changes in government funding levels,
programs, policies or requirements; technological developments; the adoption of
new laws or regulations; and general economic conditions.
NEW LEGISLATIVE DEVELOPMENTS COULD RESULT IN FINANCIAL HARDSHIP
Proposed legislation regarding health care reform has been introduced
in Congress and before many state legislatures. Any such reforms at the
federal or state level could significantly alter patient-provider
relationships. State and federal agency rule-making addressing these issues
is also expected. No predictions can be made as to whether future health care
reform legislation, similar legislation or rule-making will be enacted or, if
enacted, its effect on us. Any federal or state legislation prohibiting
investment interests in, or contracting with, us by physicians or health care
providers for which there is no statutory exception or safe harbor would have
a material adverse effect on our business, financial condition and results of
operations.
RISKS RELATED TO OUR STOCK
SUBSTANTIALLY ALL OF OUR SHARES ARE ELIGIBLE FOR RESALE, WHICH MAY HAVE A
DEPRESSIVE EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK
As of October 31, 2001, we had 66,464,892 shares of our Common Stock
outstanding, of which substantially all can be sold under an effective
registration statement or under Rule 144. Under Rule 144, a person who has held
restricted securities for a period of one year may sell a limited
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number of shares to the public in ordinary brokerage transactions. Sales
under Rule 144 may have a depressive effect on the market price of our Common
Stock due to the potential increased number of publicly held securities. The
timing and amount of sales of Common Stock that are currently eligible to be
resold pursuant to Rule 144 could have a depressive effect on the future
market price of our Common Stock.
THE ISSUANCE OF SHARES OF COMMON STOCK UNDER THE PRIVATE EQUITY LINE
AGREEMENT WILL BE DILUTIVE TO OUR EXISTING STOCKHOLDERS
Pursuant to the terms of the Private Equity Line Agreement, we may issue
up to $15,000,000 of shares of our Common Stock to Strategic Investment
Management, S.A. at a price equal to approximately 85% of the market price of
the Common Stock, pursuant to the terms of the Private Equity Line Agreement.
THE EXERCISE OF OPTIONS AND WARRANTS WILL BE DILUTIVE TO OUR EXISTING
STOCKHOLDERS
As of October 31, 2001, we had outstanding warrants and options to
purchase a total of 29,664,215 shares of our Common Stock at prices ranging from
between $0.50 and $31.50 per share, 22,025,647 shares of which are fully vested.
Included in the total warrants and options outstanding are stock options to
purchase up to 2,555,000 of the Companys' Common Stock. These options will only
vest in three equal installments and vesting will not begin until the Company
deploys and installs at least 4,000 Electronic telehealth Workstation units
("units") or when the Company recognizes revenue from the deployment of the
units of not less than $7.5 million one year from date of the grant, whichever
is later. We are also authorized to issue up to an additional 5,897,681 options
without shareholder approval under our company stock option and stock purchase
plans.
THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF OUR
SUBORDINATED DEBENTURES COULD NEGATIVELY EFFECT THE MARKET PRICE FOR OUR
COMMON STOCK
We have outstanding subordinated debentures which are convertible into
Common Stock at the holder's option at a conversion price equal to 90% of the
average closing price for the 20 days trading prior to the date of the
conversion notice, but no less than $3.25 per share.
Because the conversion price is not fixed the ultimate number of shares of
Common Stock issuable if the holders elect to convert the $10 million principal
amount of the Subordinated Debentures is unknown at this time. Based upon an
average market price of $3.25 per share (which is the minimum conversion price
and above the 20 day trading price), we would be obligated to issue 3,076,923
shares on conversion if all $10 million of the Subordinated Debentures were
converted.
WE MAY ISSUE ADDITIONAL SHARES AND DILUTE YOUR OWNERSHIP PERCENTAGE
Some events over which you have no control could result in the issuance
of additional shares of our Common Stock or Preferred Stock, which would
dilute your ownership percentage in CyberCare. We may issue additional shares
of Common Stock or Preferred Stock:
* to raise additional capital or finance acquisitions;
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* upon the exercise or conversion of outstanding options and
warrants
* upon the sale of shares of Common Stock pursuant to the
Private Equity Line Agreement;
* as interest payments for and/or upon conversion of certain
Subordinated Debentures that have been issued; and/or
* in lieu of cash payment of dividends or for services rendered.
YOUR PERCENTAGE OF OWNERSHIP AND VOTING POWER AND THE PRICE OF OUR COMMON STOCK
MAY DECREASE BECAUSE WE HAVE ISSUED, AND IN THE FUTURE MAY ISSUE, A SUBSTANTIAL
NUMBER OF SHARES OF COMMON STOCK OR SECURITIES CONVERTIBLE INTO OR EXERCISABLE
FOR OUR COMMON STOCK
We have the authority to issue up to 200 million shares of our Common
Stock and 20 million shares of our Preferred Stock without stockholder approval.
We may also issue options and warrants to purchase shares of our Common Stock.
Future issuances could be at values substantially below the price paid for our
Common Stock by current stockholders. We may conduct additional future offerings
of our Common Stock, Preferred Stock, or other securities with rights to convert
the securities into shares of our Common Stock which may result in a decrease in
the value or market price of our Common Stock. Further, the issuance of
Preferred Stock could have the effect of delaying, deferring or preventing a
change of ownership without further vote or action by the stockholders and may
adversely affect the voting and other rights of the holders of Common Stock.
OUR ANTI-TAKEOVER DEFENSE PROVISIONS MAY DETER POTENTIAL ACQUIRERS AND MAY
DEPRESS OUR STOCK PRICE
Our articles of incorporation, as amended, and bylaws as amended, contain
provisions that could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire or
control us. If a change of control or change in management is delayed or
prevented, the value of our Common Stock could decline.
In addition, our articles of incorporation authorize the issuance of up to
20,000,000 shares of Preferred Stock with such rights and preferences as may be
determined from time to time by our board of directors, of which no shares are
currently issued and outstanding. Our board of directors may, without
shareholder approval, issue Preferred Stock with dividends, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of our Common Stock.
Our board of directors is a "classified board," with approximately
one-third of our directors elected each year. Two annual meetings would be
necessary to change a majority of the directors as a result of having a
classified board. The existence of a classified board may, in certain
circumstances, deter or delay mergers, tender offers, other possible takeover
attempts or changes in management of the board of directors that may be favored
by some or a majority of our stockholders.
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WE ANTICIPATE VOLATILITY IN OUR STOCK PRICE
The market price for securities in our industry historically has been
highly volatile. From January 1, 2000 through November 16, 2001, the price of
our Common Stock has fluctuated between $39.75 and $0.70 per share. The price of
our Common Stock may be subject to fluctuations in response to:
- quarter to quarter variations in operating results;
- vendor additions or cancellations;
- creation or elimination of funding opportunities;
- favorable or unfavorable coverage by securities analysts;
- the availability of products, technology and services; and
- other events or factors, many of which are beyond our control.
These broad market and industry factors may cause the price of our
Common Stock to decline, regardless of our actual operating performance.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING INFORMATION
This prospectus and other materials we have filed or may file with the
Securities and Exchange Commission, as well as information included in oral
statements or other written statements made, or to be made, by us, contain,
or may contain disclosures which are "forward-looking statements".
This Registration Statement on Form S-3 contains forward-looking
statements. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "could," "may," "will," "believes,"
"anticipates," "plans," "expects," "projects," "estimates," "intends,"
"continues," "seeks," "predicts," "expectations," variations of such words
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions ("Future Factors") that
are difficult to predict. As a result, because these statements are based on
expectations as to future performance and events and are not statements of
fact, actual events or results may differ materially from those expressed or
forecast in such forward-looking statements. Factors that might cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements include, without limitation, those discussed in
our filings with the Securities and Exchange Commission, including but not
limited to our most recent proxy statement and "Risk Factors" in our most
recent Form 10-KSB as well as Future Factors that may have the effect of
reducing our available operating income and cash balances.
Future Factors include risks associated with the uncertainty of future
financial results; government approval processes; changes in the regulation
of the healthcare and technology industries at either the federal or state
levels; changes in reimbursement for services by government or private
payors; competitive pressures in the healthcare and technology industries and
the Company's response thereto; delays or inefficiencies in the introduction,
acceptance or effectiveness of new products; the impact of competitive
products or pricing; the Company's relationships with customers and partners;
cash expenditures related to possible future acquisitions and expansions;
on-going capital expenditures; the Company's ability to obtain capital in
favorable terms and conditions; increasing price, products and services; U.S.
and non-U.S. competitors, including new entrants; rapid
14
technological developments and changes and the Company's ability to continue
to introduce competitive new products and services on a timely,
cost-effective basis; the mix of products and services; the availability of
manufacturing capacity, components and materials; the ability to recruit and
retain talent; the achievement of lower costs and expenses; credit concerns
in the emerging service provider market; customer demand for the Company's
products and services; U.S. and non-U.S. government and public policy changes
that may affect the level of new investments and purchases made by customers;
changes in U.S. and non-U.S. governmental regulations; protection and
validity of patent and other intellectual property rights; reliance on large
customers and significant suppliers; the ability to supply customer
financing; technological implementation; and cost/financial risks in the use
of large, multiyear contracts; the Company's credit ratings; the outcome of
pending and future litigation; continued availability of financing, financial
instruments and financial resources in the amounts, at the times and on the
terms required to support the Company's future business; general industry and
market conditions and growth rates; and general U.S. and non-U.S. economic
conditions, including interest rate and currency exchange rate fluctuations.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. You are cautioned not to unduly rely on such
forward-looking statements when evaluating the information presented herein.
These statements should be considered only after carefully reading this
entire Form S-3 and the documents incorporated herein by reference.
USE OF PROCEEDS
We will receive up to $200,000 in gross proceeds from the exercise of
warrant shares included in this Registration Statement, and up to $15,000,000
from the sale of common stock pursuant to the Private Equity Line Agreement
with Strategic Investment Management, S.A., A British Virgin Islands
Corporation ("SIM"). We presently intend to use these proceeds for general
working capital.
There can be no assurances that any of the outstanding warrants will be
exercised or that any Common Stock in excess of the minimum $1 million in
Common Stock will be sold to SIM pursuant to the terms of the Private Equity
Line Agreement. Pending utilization of the proceeds as described above, the
net proceeds will be deposited in interest bearing accounts or invested in
money market instruments, government obligations, certificates of deposits or
similar short-term investment grade interest bearing investments.
SECURITIES TO BE REGISTERED
GENERAL
Our authorized capital stock consists of 200,000,000 shares of Common
Stock and 20,000,000 shares of Preferred Stock. As of October 31, 2001, there
were 66,464,892 shares of Common Stock issued and outstanding. This number of
shares of Common Stock does not include shares that could be issued upon
conversion or exercise of stock options, debentures and other derivative
securities.
15
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share
owned of record on all matters voted upon by shareholders, and a majority
vote is required for all actions to be taken by shareholders. In the event of
our liquidation, dissolution or winding-up, the holders of shares of Common
Stock are entitled to share equally and ratably in our assets, if any,
remaining after the payment of all our debts and liabilities. Shares of
Common Stock have no preemptive rights, no cumulative voting rights and no
redemption, sinking fund or conversion provision. Holders of shares of Common
Stock are entitled to receive dividends if, as and when declared by our Board
of Directors out of funds legally available, therefore, subject to any
dividend restrictions imposed by our creditors. No dividend or other
distribution (including redemptions or repurchases of shares of capital
stock) may be made if, after giving effect to such distribution, we would not
be able to pay our debts as they become due in the normal course of business,
or our total assets would be less than the minimum of our total liabilities.
If we realize net profits in the future, our policy will likely be to retain
such earnings for the operation and expansion of our business.
TRANSFER AGENT AND REGISTRAR
Corporate Stock Transfer, Inc., of Denver, Colorado is the transfer
agent and registrar of our Common Stock.
SELLING SECURITY HOLDERS
OVERVIEW
This prospectus relates to periodic offers and sales of up to 8,691,498
shares of Common Stock by the selling security holders listed and described
below and their pledgees, donees and other successors in interest. The number
of shares we are registering is based on the sum of:
- our good faith estimate of the maximum number of shares we may issue
to C.C. Fortune Venture, LLC, Manford Investments, LLC, and View Far
Management Limited under the Subordinated Debentures, as interest;
- our good faith estimate of the maximum number of shares we may issue
to SIM under the Private Equity Line Agreement;
- the maximum number of shares of Common Stock issuable under common
stock purchase warrants;
- Common Shares issued in lieu of cash for professional and consulting
services, purchase of domain names, and other contractual
arrangements.
Accordingly, the number of shares we are registering for issuance may
be higher than the number we actually issue under those agreements. On the
other hand, if our estimate is too low, we may need to file a new
registration statement with the SEC, which will need to become effective
before
16
we can issue the shares in question or request additional draw downs on the
Private Equity Line Agreement.
PRIVATE PLACEMENT
Pursuant to fully executed subscription agreements, we sold a
combination of $10,000,000 of Subordinated Debentures and Common Stock
Purchase Warrants to three accredited investors in May 2001. The securities
were sold in a private transaction exempt from registration under the
Securities Act of 1933, as amended, in reliance on Section 4(2) of the
Securities Act and Rule 506 of Regulation D thereunder (the "Private
Placement"). The purchasers were C.C. Fortune Venture, LLC, Manford
Investments, LLC, and View Far Management Limited.
CONVERTIBLE SUBORDINATED DEBENTURES
GENERAL TERMS. The Convertible Subordinated Debentures ("Subordinated
Debentures") in the aggregate principal amount of $10,000,000 were issued in
May 2001 and have a three year term. Interest payments are to be made
quarterly, on August 1, November 1, February 1, and March 1 during the term.
The Subordinated Debentures initially bear interest at the rate of 13.75%,
payable 50% in shares of our Common Stock and 50% in cash. At any time
beginning 1 year after the issuance date, the holder may elect to receive all
interest payments in cash only, upon which election the interest payable on
the Subordinated Debentures shall be reduced to 12.75%. Such election is
permanent. At such times as interest is payable in part in shares of our
Common Stock, the number of shares of Common Stock we may issue as interest
payments is determined by dividing the amount of the applicable interest
payment by the average closing sale price for our Common Stock for the
quarterly trading period prior to the date the interest shall be due and
payable. The value of such interest shares shall be capped at $15 per share.
INTEREST PAYMENTS IN COMMON STOCK. Assuming that:
- none of the Subordinated Debentures holders elects to have
interest paid in cash only;
- that we make all interest payments on time; and
- that there are no events of default,
the maximum amount of interest payments during the term of the Subordinated
Debentures will be $4,125,000, one half of which ($2,062,500) would be
payable in shares of our Common Stock. It is impossible at this time to
determine the exact number of shares of our Common Stock that would have to
be issued to make such interest payments because the price per share of
Common Stock utilized in the calculation is determined each quarter during
the term based upon the average closing sale price for our Common Stock
during each respective quarter.
Based upon the closing sale price for our Common Stock on the NASDAQ
National Market on November 16, 2001 ($1.09), the total number of shares
issuable as interest payments through the term of the Subordinated Debentures
would be 1,892,202 shares of Common Stock. In the event:
- the average actual share price computed during the quarters
throughout the term is higher or lower than the share price based on
November 16, 2001;
17
- one or more Subordinated Debenture holders elects to receive interest
payments in cash only;
- we prepay the principal and interest under the Subordinated
Debentures;
- there is an event of default resulting in the increase in the
interest rate to 18%; or
- one or more of the Subordinated Debentures holders converts the
principal and interest due under the Subordinated Debentures to shares
of Common Stock during the term,
then the number of shares of Common Stock to be issued as interest payments
under the Subordinated Debentures may be higher or lower than the number that
has been estimated above. All of the 1,892,202 shares of Common Stock
estimated to be issuable as interest payments under the Subordinated
Debentures are included in this prospectus.
ISSUANCE OF COMMON STOCK UPON CONVERSION. In addition to interest
payments, shares of Common Stock may be issued to the Subordinated Debentures
holders in the event they elect to convert the principal and/or interest due
under the Subordinated Debentures to shares of Common Stock. The Subordinated
Debentures holders have the right to convert commencing 6 months after the
issuance date and continuing for the remainder of the term. The per share
conversion price of Common Stock shall be 90% of the average closing sale
price for a share of Common Stock for the 20 trading days immediately prior
to the date of the conversion notice. The conversion price shall in no event
be less than $3.25. Based upon the minimum conversion price of $3.25 per
share, and assuming that all interest payments are timely made and that all
holders of the Debentures elect to convert as soon as possible, the total
number of shares issuable upon the conversion would be 3,076,923 shares of
Common Stock. In the event:
- one or more of the Debentures holders does not elect to convert;
- we prepay the principal and interest under the Debentures prior
to conversion;
- interest payments are not timely made;
- one or more events of default occur; or
- the actual conversion price of a share of Common Stock is higher
than the minimum conversion price,
then the number of shares of Common Stock to be issued on conversion of the
Subordinated Debentures may be higher or lower than the number that has been
estimated above. None of the 3,076,923 shares of Common Stock estimated to be
issuable upon conversion of the Subordinated Debentures are included in this
prospectus.
COMMON STOCK PURCHASE WARRANTS.
GENERAL TERMS. The three accredited investors in the Private Placement
received, in addition to the Subordinated Debentures, Common Stock Purchase
Warrants entitling them to purchase in the aggregate:
- 1,500,000 shares of Common Stock at $3.00 per share;
- 500,000 shares of Common Stock at $4.00 per share; and
- 500,000 shares of Common Stock at $5.00 per share.
18
The Common Stock Purchase Warrants are exercisable immediately and
expire 24 months after the effective date of the registration statement
covering the underlying shares. The number of shares the holders of the
Common Stock Purchase Warrants are entitled to received upon their execution
of the Common Stock Purchase Warrants is subject to adjustment in the event
of a stock split, stock dividend, recapitalization or reclassification of our
Common Stock. In the event of a capital reorganization or reclassification of
the Common Stock or any consolidation or merger of the Company with or into
another corporation, or transfer of all or substantially all of our assets,
or the payment of a liquidating distribution, then lawful provision shall be
made so that the holders of the Common Stock Purchase Warrants shall have the
right thereafter to receive upon the exercise of the Common Stock Purchase
Warrants the kind and amount of shares of stock or other securities or
property the holders would have been entitled to receive if, immediately
prior to such action the holder had held the number of shares of Common Stock
which were then purchasable upon the exercise of the Common Stock Purchase
Warrants. The Common Stock Purchase Warrants may only be exercised in
increments of 100 shares of Common Stock.
ISSUANCE OF COMMON STOCK UPON EXERCISE. Assuming that no "adjustment
event" (as described above) occurs, the holders of the Common Stock Purchase
Warrants are entitled to receive a total of 2,500,000 shares of Common Stock
upon the exercise of the Common Stock Purchase Warrants. All 2,500,000 shares
of Common Stock underlying the Common Stock Purchase Warrants are not
included in this prospectus.
PRIVATE EQUITY LINE AGREEMENT
In September 2001, we entered into a Private Equity Agreement with SIM
in order to establish a possible source of funding for the development of our
business. The Private Equity Agreement establishes what is sometimes also
referred to as an equity drawdown facility, through which SIM has committed
to provide us up to $15,000,000 over a 24 month period, upon our request, in
return for Common Stock we issue to SIM.
THE PUT PROCEDURE AND THE STOCK PURCHASES
We may request a draw down once every 7 days by serving SIM with a put
notice, stating the amount of the draw down that we wish to exercise.
AMOUNT OF THE DRAW DOWN. No draw down can be less than 10,000 shares of
Common Stock, or more than 17.5% of the "average daily trading volume"
multiplied by a factor 5, which is considered for each day of the 5 day
period consisting of the 2 trading days prior to the trading day the put
notice is deemed to be delivered, the 2 trading days after the trading day
the put notice is deemed to be delivered, and the trading day the put notice
is deemed to be delivered (provided, however, that if during that 5 trading
day period we:
- make a dividend or distribution of our Common Stock;
- subdivide or combine the Common Stock;
- issue additional shares of our Common Stock at a price per share
less than the closing bid price of the Common Stock on the primary
market on which our Common Stock is listed (currently the NASDAQ
National Market) immediately prior to such issuance;
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- make a distribution of our assets or evidence of indebtedness to the
holders of our Common Stock as a dividend in liquidation or by way
of return of capital or other than as a dividend payable out of
earnings or surplus or any distribution to such holders made in
respect of the sale of all or substantially all of our assets; or
- take any other action affecting the number of our outstanding shares
of Common Stock, which, in SIM's opinion, would have a materially
adverse effect upon the rights of SIM at the time of the put;
then, a new 5 trading day period shall begin on the trading day immediately
after the public announcement of such event and end on the fifth trading day
thereafter). The "average daily trading volume" means the average of the
daily trading volumes for the Common Stock on the primary market on which the
Common Stock is then listed (currently the NASDAQ National Market) for 8 of
the 10 trading days immediately preceding such date, after removing the
trading day with the highest trading volume and the trading day with the
lowest trading volume.
NUMBER OF SHARES. The number of put shares of Common Stock that SIM
must purchase pursuant to a put notice is determined by dividing the
investment amount stated in the put notice by the "purchase price" of the
Common Stock on the trading day on which the put notice is delivered. The
"purchase price" means 85% of the lesser of:
- the closing bid price (as reported by Bloomberg L.P.) of the
Common Stock on the principal market on which it is then
listed on the day the put notice is deemed served; and
- the lowest trade price of the Common Stock (as reported by
Bloomberg L.P.) during such trading day.
MINIMUM DOLLAR AMOUNT OF ALL PUTS. We must issue put notices and sell
shares of our Common Stock to SIM, pursuant to the Private Equity Line
Agreement, totaling at least $1,000,000.
MAXIMUM PUT. We can put $15,000,000 of our Common Stock to SIM, but no
more than19.9% of our outstanding shares of Common Stock.
SAMPLE CALCULATION OF STOCK PURCHASES.
The following is an example of the calculation of the drawdown amount
and the number of shares of Common Stock we would issue to SIM in connection
with that drawdown based on the assumptions noted in the discussion below.
For purposes of this example, suppose that we serve a put notice on SIM
in the amount of $50,000 on November 30, 2001. Suppose further that the
average daily trading volume for 8 of the 10 trading days immediately
preceding November 30, 2001 is 350,000 shares. Suppose further that the
closing bid price for the Common Stock on the NASDAQ National Market on
November 30th was $1.38 per share, and that the lowest trade price of the
Common stock on the NASDAQ National Market on November 30th was $1.31 per
share (as reported by Bloomberg L.P.).
Based on the foregoing, the amount of the draw down is $50,000, and the
number of shares of Common Stock to be put to SIM is $50,000 (the draw down
amount) divided by $1.1135 (85% of the lesser of the closing bid price and
the lowest trade price for the Common Stock on the NASDAQ
20
National Market on November 30th), which equals 44,904 shares of Common Stock
(after rounding). That amount is both greater than the minimum put amount of
10,000 shares of Common Stock, and less than the maximum put amount of
306,250 shares of Common Stock (17.5% of 350,000 the average daily trading
volume times 5)). Assuming the 44,904 shares of Common Stock is both less
than 19.9% of the then outstanding Common Stock, and would not increase SIM's
position in Common Stock above 19.9% of the then outstanding Common Stock,
and that all other conditions set forth in the Private Equity Line Agreement
have been satisfied, we would be obligated to deposit a certificate
representing 44,904 shares of Common Stock with the escrow agent, and SIM
would be obligated to wire $50,000 to the escrow agent, in each case within 5
trading days of November 30th. Distribution of the draw down amount to us and
the 44,904 shares of Common Stock to SIM would then occur pursuant to the
terms of the escrow agreement.
NECESSARY CONDITIONS BEFORE SIM IS OBLIGATED TO PURCHASE SHARES OF
COMMON STOCK
The following principle conditions must be satisfied before SIM is
obligated to purchase any shares of Common Stock that we may "put" from time
to time:
- a registration statement for the resale of the Common Stock to
be purchased by SIM must have been filed and declared
effective by the SEC and must remain effective and available
as of the condition satisfaction date and (1) neither SIM nor
we shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the registration
statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of the registration statement, either
temporarily or permanently, or intends or has threatened to do
so, and (2) no other suspension of the use or withdrawal of
the effectiveness of the registration statement or related
prospectus shall exist;
- we shall have performed, satisfied and complied in all material
respect with all covenants, agreements and conditions required by
the Private Equity Line Agreement and our representations and
warranties in the Private Equity Line Agreement shall be true and
correct;
- no statute, rule, regulation, executive order, decree, ruling
or injunction shall be in effect that prohibits the
transactions contemplated by the Private Equity Line Agreement
or that otherwise has a material adverse effect, and no
actions, suits or proceedings shall be in progress, pending or
threatened by any person, that seek to enjoin or prohibit the
transactions contemplated by the Private Equity Line Agreement
or otherwise could reasonably be expected to have a material
adverse effect;
- trading in our Common Shares must not have been suspended by
the SEC, the principal market on which the Common Stock is
then listed or the NASD and the Common Stock shall have been
approved for listing or quotation on and shall be then trading
on the NASDAQ National Market, the American Stock Exchange,
the New York Stock Exchange or the OTC Bulletin Board, and the
issuance of the shares of Common Stock in question shall not
violate the shareholder approval requirements of the principal
exchange on which the Common Stock is then listed;
- we shall have delivered to SIM, within 5 days of the effective date
of the registration statement covering the Common Stock, an opinion
of our counsel;
- no dispute between us and SIM shall exist regarding the
adequacy of the disclosure contained in the registration
statement covering the Common Stock to be issued;
21
- SIM shall not be obligated to purchase and pay for any shares of
Common Stock pursuant to a put notice if the number of shares then
to be purchased, together with all shares of Common Stock then owned
by SIM, would result in SIM owning greater than 9.9% of all of the
Common Stock that would be outstanding after said purchase;
- the minimum average of the daily trading volumes for the Common
Stock on the principal market on which it is then listed for 8 of
the 10 trading days immediately preceding such date (after removing
the trading day with the highest trading volume and the trading day
with the lowest trading volume) equals or exceeds 1,000 shares per
trading day; and
- at least 7 days shall have elapsed since the immediately prior
put date.
CLOSINGS OF COMMON STOCK PURCHASES.
On the 5th trading day following the date a put notice is deemed to
have been served, (1) we must deliver into escrow, pursuant to the terms of
an escrow agreement between SIM and us, one or more certificates evidencing
that number of shares of Common Stock to be purchased by SIM pursuant to a
duly served put notice, (2) SIM shall deliver into escrow the investment
amount specified in the duly served put notice, by wire transfer or
immediately available funds, and (3) both parties shall provide each other
with all other documents required by the Private Equity Line Agreement.
Payment of the investment amount to us and the delivery of the certificates
to SIM shall occur in accordance with the terms of the escrow agreement. We
are responsible for all expenses of the escrow agent.
ADDITIONAL OBLIGATIONS.
Pursuant to the terms of the Private Equity Line Agreement, we are
obligated to:
- cause the registration statement covering the shares of Common Stock
to be sold under the Private Equity Line Agreement to remain in full
force and effect and to comply in all respects with the terms
thereof;
- reserve that number of shares of Common Stock necessary to
meet our obligations under the Private Equity Line Agreement;
- maintain the listing of our Common Stock;
- cause our Common Stock to continue to be registered under
Section 12 of the Securities Act;
- preserve our corporate existence;
- provide SIM with copies of all documents that we file with the SEC;
- notify SIM upon the occurrence of certain events relating to the
registration statement covering the shares of Common Stock to be
sold pursuant to the Private Equity Line Agreement;
- within 10 days after the commencement of each calendar quarter
during the term of the Private Equity Line Agreement, notify SIM as
to our reasonable expectations as to the dollar amount we intend to
raise during such calendar quarter, if any, through the issuance of
put notices to SIM;
- refrain from effecting any merger or consolidation with or into, or
a transfer of all or substantially all of our assets, to another
entity unless the resulting successor or acquiring entity (if not
us) assumes by written instrument the obligation to deliver to SIM
such shares of stock and/or securities as SIM is entitled to receive
pursuant to the Private Equity Line Agreement; and
22
- refrain from entering into any other agreements, arrangements or
understandings granting us the right to put shares of our securities
to one or more investors in private placements.
TERMINATION OF PRIVATE EQUITY LINE AGREEMENT
The Private Equity Line Agreement will terminate on the earlier of:
- 24 months after the earlier of (1) the effective date of the
registration statement registering for resale the shares of Common
Stock to be sold to SIM under the Private Equity Line Agreement and
(2) such earlier date as SIM and us agree in writing; and
- the date on which we have made puts of Common Stock in an aggregate
amount greater than or equal to $15,000,000, or 19.9% of then
outstanding Common Stock.
SIM has the right to terminate the Private Equity Line Agreement in the
event that:
- the registration statement covering the shares of Common Stock to be
issued under the Private Equity Line Agreement is not effective
within 120 days after the date of the Private Equity Line Agreement;
- there shall occur any stop order or suspension of trading of
the Common Stock or any of our other securities;
- we fail to amend the registration statement covering the shares of
Common Stock to be issued under the Private Equity Line Agreement as
required in order to maintain its compliance with the disclosure
requirements of the Securities Act;
- an event happens that has a material adverse effect on us;
- we experience a change in control;
- we fail to comply with the provisions of the Private Equity
Line Agreement regarding (1) maintaining the listing of our Common
Stock; (2) maintaining the registration of our Common Stock under
Section 12 of the Securities Act; (3) keeping the certificates
evidencing the shares of Common Stock to be issued under the Private
Equity Line Agreement free from legends, except our standard
restrictive legend; and (4) maintaining our corporate existence.
MISCELLANEOUS
COSTS AND EXPENSES. We have agreed to pay the reasonable fees, expenses
and disbursements of SIM's continuing due diligence with respect to the
Private Equity Line Agreement, including fees of counsel in connection with
SIM's counsels' participation in our filing of a registration statement
relating to the Common Stock put to SIM pursuant to the terms of the
agreement. In no event shall such expenses aggregate more than 1% of our net
proceeds in excess of $1,000,000 from puts of our Common Stock to SIM.
COMPLIANCE WITH SECURITIES LAWS AND PROHIBITION ON SHORT SALES. The
Private Equity Line Agreement provides that SIM's purchase and resale of
shares of Common Stock will be in compliance with all applicable state and
federal securities laws, rules and regulations and the rules and regulations
of the principal market on which our Common Stock is then listed, and that
SIM shall not engage in any short sale or hedging transaction prohibited by
Rule 10(b)(6) promulgated under the Securities Act or any other provisions,
rule or regulation of the federal securities laws.
23
COMMON STOCK TO BE ISSUED PURSUANT TO PRIVATE EQUITY LINE AGREEMENT.
Pursuant to the terms of the Private Equity Line Agreement, we may put
up to a maximum of $15,000,000 of Common Stock to SIM during the two year
term of the agreement, subject to certain restrictions. The number of shares
of Common Stock issuable upon the serving of a put notice is determined by
dividing the investment amount stated in the put notice by the "purchase
price" of the Common Stock on the trading day on which the put notice is
delivered. The "purchase price" shall mean 85% of the lesser of (1) the
closing bid price (as reported by Bloomberg L.P.) of the Common Stock on the
principal market on which it is then listed on the day the put notice is
deemed served and (2) the lowest trade price of the Common Stock (as reported
by Bloomberg L.P.) during such trading day. Assuming that we elect to put the
maximum amount allowable ($15,000,000), and based upon a per share price of
Common Stock equal to $1.00, the maximum number of shares issuable to SIM
under the Private Equity Line Agreement is 15,000,000 shares of Common Stock.
5,000,000 shares of Common Stock estimated to be issuable pursuant to the
Private Equity Line Agreement are included in this registration statement.
SALES OF COMMON STOCK BY SELLING SECURITY HOLDERS
This registration statement relates to periodic offers and sales of up
to 8,691,498 shares of common stock by the selling security holders and their
pledgees, donees and other successors in interest. The following table sets
forth:
- the name of each selling security holder,
- the number of shares owned and
- the number of shares being registered for resale by each
selling security holder
All of the shares being registered for resale under this registration
statement for the selling security holders may be offered hereby. Because the
selling security holders may sell some or all of the shares owned by them
which are included in this registration statement, and because there are
currently no agreements, arrangements or understandings with respect to the
sale of any of the shares, no estimate can be given as to the number of
shares being offered hereby that will be held by the selling security holders
upon termination of any offering made hereby. We have, therefore, for the
purposes of the following table assumed that:
- we will elect to draw down $5,000,000, pursuant to the terms of the
Private Equity Line Agreement;
- that the selling security holders will exercise the warrants
described below;
- that the selling security holders will elect to receive interest
payments under the Subordinated Debentures partly in shares of
Common Stock and partly in cash; and
- that the selling security holders will elect to sell all of the
shares owned by them which are being offered hereby.
Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities and includes any securities which the
24
person has the right to acquire within 60 days through the conversion or
exercise of any security or other right. The information as to the number of
shares of Common Stock owned by each selling security holder is based upon
the information contained in a record list of our shareholders at November
13, 2001. For purposes of this filing, the Company has made the assumption
that all of the shares included in this Registration Statement will be sold,
however there is no contractual or other arrangements requiring any of these
shares to be sold.
[Enlarge/Download Table]
Number of Shares to Shares to be owned
Name of selling security holder shares owned be offered after offering
------------------------------- ------------ ---------- ------------------
C. C. Fortune Venture, LLC (1) 1,135,322 1,135,322 0
Manford Investments, LLC (2) 966,675 966,675 0
View Far Management Limited (3) 2,616,213 378,440 2,237,773
Strategic Investment Management, S.A. (4) 5,000,000 5,000,000 0
Syzex Corporation (5) 181,818 181,818 0
Angela Sabella (6) 848,235 588,235 260,000
Jeff Spetalnick (7) 3,120 3,120 0
Park Joonegun (8) 6,763 3,120 3,643
Integrated Management Group, Inc. (9) 15,000 15,000 0
Business Management Partners (10) 200,000 200,000 0
Thomas, Kayden, Horstemeyer & Risley, LLP (11) 69,768 69,768 0
Raymond James & Associates, Inc. (12) 25,000 25,000 0
Cardio Command (13) 125,000 125,000 0
---------- --------- ---------
Totals 11,192,914 8,691,498 2,501,416
========== ========= =========
(1) Includes (1) 42,232 shares of our Common stock presently issued and
outstanding (2) 1,093,090 shares of our Common Stock issuable pursuant to
the terms of a Subordinated Debenture as payment of 50% of the total
interest payments and upon the election to convert the principal and
interest under the Subordinated Debenture into shares of our Common Stock;
Ms Angela Sabella is the control person of C.C. Fortune Venture, LLC and
is subject to a 13D filing.
(2) Includes (1) 601,717 shares of our Common stock presently issued and
outstanding; (2) 364,958 shares of our Common Stock issuable pursuant to
the terms of a Subordinated Debenture as payment of 50% of the total
interest payments.
(3) Includes (1) 1,303,238 shares of the our Common stock presently issued and
outstanding; (2) 362,975 shares of our Common Stock issuable pursuant to
the terms of a Subordinated Debenture as payment of 50% of the total
interest payments, and (3) warrants entitling to purchase up to 950,000
shares of the Company's common stock at exercise prices ranging from $1.25
to $18.44 per share. Mr. K.L. Wong is the control person of View Far
Management Limited and is subject to a 13D filing.
(4) Includes 5,000,000 shares of our Common Stock issuable, at our option,
pursuant to the terms of a Private Equity Line Agreement.
(5) Shares issued as consideration under an agreement for marketing and
sales services. Mr. Patrick Thompson is the control person for
Syzex Corporation
(6) Includes (1) 698,235 shares of our Common Stock which are presently issued
and outstanding, and (2) warrants to purchase up to 150,000 shares of our
Common Stock at an exercise price of $1.25 per share
(7) Shares issued a consideration for the purchase of a domain name.
(8) Includes (1) 3,120 shares of our Common Stock are presently issued and
outstanding which were issued as consideration for the purchase of a
domain name; and (2) warrants to purchase up to 3,643 shares of our common
stock at an exercise price of $3.50 per share.
(9) Shares issued as consideration for the purchase of a domain name.
Mr. Eric Nathanson is the control person for Integrated Management.
(10) Includes warrants to purchase up to 200,000 shares of our
Common Stock at an exercise price of $1.00 per share. Mr. Richard
Harris is the control person for Business Management Partners.
(11) Shares issued as consideration for payment of legal fees.
25
(12) Shares issued as consideration under a contractual arrangement.
(13) Shares issued in settlement of a contractual arrangement. Mr.
Maynard Ramsey III is the control person of CardioCommand, Inc.
None of the selling security holders have, or within the past three
years have had, any position, office or other material relationship with us
or any of our predecessors or affiliates, other than as described previously
in this section. Raymond James & Associates is a registered broker-dealer
that received its shares in the ordinary course of business in the
transaction described in footnote 12 above. To our knowledge Raymond James &
Associates does not have any arrangement with any person to participate in
the distribution of such securities.
We have agreed to pay the full costs and expenses in connection with
the issuance, offer, sale and delivery of the shares, including all fees and
expenses in preparing, filing and printing the registration statement and
prospectus and related exhibits, amendments and supplements thereto and
mailing of those items. We will not pay selling commissions and expenses
associated with any sale by the selling security holders.
PLAN OF DISTRIBUTION
GENERAL
The shares of Common Stock owned, or which may be acquired, by the
selling security holders may be offered and sold by means of this
registration statement from time to time as market conditions permit in the
principal market, or otherwise, at prices and terms then prevailing or at
prices related to the then-current market price, or in negotiated
transactions. These shares may be sold by one or more of the following
methods, without limitation:
- a block trade in which a broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this registration statement;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
- face-to-face transactions between sellers and purchasers without a
broker/dealer.
In effecting sales, brokers or dealers engaged by the selling security
holders may arrange for other brokers or dealers to participate. Such brokers
or dealers may receive commissions or discounts from selling security holders
in amounts to be negotiated.
Other than SIM, the selling shareholders and any broker/dealers who act
in connection with the sale of the shares hereunder may be deemed to be
"underwriters" within the meaning of the Securities Act and the 1934 Act, and
any commissions received by them and profit on any resale of the shares as
principal might be deemed to be underwriting discounts and commissions under
the Securities Act. SIM is an "underwriter" in connection with the resale of
its share of Common Stock. We have been informed by SIM that there are no
existing arrangements between it and any other stockholder, broker, dealer or
underwriter in relation to the distribution of this registration statement.
We have agreed to
26
indemnify the selling security holders, SIM and any securities broker/dealers
who may be deemed to be an underwriter against certain liabilities, including
liabilities under the Securities Act.
We have advised the selling security holders that they and any
securities broker/dealers or others who may be deemed to be statutory
underwriters will be subject to the registration statement delivery
requirements under the Securities Act. We have also advised each selling
security holder that in the event of a "distribution" of the shares owned by
the selling security holder, such selling security holder, any "affiliated
purchasers" and any broker/dealer or other person who participates in such
distribution, and SIM at all times, may be subject to Rule 102 under the
Securities Exchange Act of 1934 (the "1934 Act") until their participation in
that distribution is completed. Rule 102 makes it unlawful for any person who
is participating in a distribution to bid for or purchase stock of the same
class as is the subject of the distribution. A "distribution" is defined in
Rule 102 as an offering of securities "that is distinguished from ordinary
trading transactions by the magnitude of the offering and the presence of
special selling efforts and selling methods." We have also advised the
selling security holders and SIM that Rule 101 under the 1934 Act prohibits
any "stabilizing bid" or "stabilizing purchase" for the purpose of pegging,
fixing or stabilizing the price of the common stock in connection with this
registration statement.
The selling security holders do not intend to distribute or deliver the
prospectus by means other than by hand or mail.
UNDERWRITING COMPENSATION
The underwriting compensation for SIM will depend on the amount of
financing that we obtain under the Private Equity Line Agreement. SIM will
purchase shares under the Private Equity Line Agreement for a purchase price
equal to 85% of the lesser of (1) the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the principal market on which it is
then listed (currently the NASDAQ National Market) on the day the put notice
in question is deemed served, and (2) the lowest trade price of the Common
Stock (as reported by Bloomberg L.P.) during such trading day. Assuming that
we drawdown the maximum amount allowable under the Private Equity Line
Agreement, SIM's underwriting compensation would total $2,250,000.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference rooms at 450 Fifth Street,
N.W., Washington, D.C., and at its offices in New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for more information on the
operation of the public reference rooms. Copies of our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus, and later information filed with
the SEC will update and supersede this information. We incorporate by
reference the documents listed below, any of such documents filed since the
date this registration statement was filed and any future filings with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the 1934 Act until the
offering is completed:
27
- our annual report on Form 10-KSB for the fiscal year ended
December 31, 2000,
- our proxy statement filed on May 9, 2001, for our annual meeting of
shareholders,
- our quarterly reports on Forms 10-Q for the periods ended March 31,
2001, June 30, 2001, and September 30, 2001,
- our current report on Form 8-K filed on June 1, 2001, June 28, 2001,
September 17, 2001, October 15, 2001 and October 31, 2001.
You may request a copy of these filings, at no cost, by writing or
calling us at the following address and telephone number:
Corporate Secretary
CyberCare, Inc.
2500 Quantum Lakes Drive, Suite 1000
Boynton Beach, Florida 33426-8308
Telephone (561)742-5000
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will
be passed upon for us by Atlas Pearlman, P.A., Fort Lauderdale, Florida.
EXPERTS
Ernst & Young LLP, Certified Public Accountants, have audited our
consolidated financial statements included in our Annual Report on Form 10-KSB
for the two years ended December 31, 2000, as set forth in their report, which
is incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
28
8,691,498 SHARES
CYBERCARE, INC.
COMMON STOCK
NOVEMBER 21, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
[Download Table]
Registration Fees - Securities and Exchange Commission $ 2,500*
Listing of Additional Shares - The Nasdaq Stock Market 35,000*
Cost of Printing 15,000*
Legal Fees and Expenses 15,000*
Accounting Fees and Expenses 5,000*
Blue Sky Fees and Expenses --*
Miscellaneous --*
------
Total $72,500*
======
*Estimated
Item 15. Indemnification of Directors and Officers.
The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of a Florida corporation. Our
articles of incorporation and bylaws provide that we shall indemnify to the
fullest extent permitted by the Florida Business Corporation Act any person
whom we may indemnify under the act.
The provisions of Florida law that authorize indemnification do not
eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies including injunctive or other forms of non-monetary relief
will remain available. In addition, each director will continue to be subject
to liability for:
* violations of criminal laws, unless the director has
reasonable cause to believe that his or her conduct was lawful
or had no reasonable cause to believe his conduct was
unlawful,
* deriving an improper personal benefit from a
transaction,
* voting for or assenting to an unlawful
distribution, and
* willful misconduct or conscious disregard for our best
interests in a proceeding by or in our right to procure a
judgment in its favor or in a proceeding by or in the right of
a shareholder.
The statute does not affect a director's responsibilities under any
other law, including federal securities laws.
The effect of Florida law, our articles of incorporation, as amended,
and our bylaws, as amended, is to require us to indemnify our officers and
directors for any claim arising against those persons in their official
capacities if the person acted in good faith and in a manner that he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was
II-1
unlawful.
To the extent indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or control persons, we have been
informed that in the opinion of the SEC, this indemnification is against public
policy as expressed in the Securities Act and is unenforceable.
Item 16. Exhibits and Consolidated Financial Statement Schedules.
[Download Table]
Exhibit No. Description
4.1 Form of Subordinated Debenture*
5 Opinion of Atlas Pearlman, P.A.*
10.1 Form of Private Equity Line Agreement(1)
23.1 Consent of Independent Certified Public Accountants*
23.2 Consent of Atlas Pearlman, P.A. (contained in Exhibit 5)*
24 Power of Attorney. Reference is made to signature page.
------------------------
* Filed herewith
(1) Incorporated by reference to the Company's Form 8-K filed on October 31,
2001.
Item 17. Undertakings.
CyberCare will:
1. File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
i. Include any prospectus required by section 10(a)(3) of
the Securities Act;
ii. Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and 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 prospects filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
iii. Include any additional or changed material information
on the plan of distribution.
2. For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial BONA
FIDE offering.
3. File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
II-2
4. For purposes of determining any liability under the Securities Act ,
each filing of the registrant's annual report pursuant to Section 13(a) of
Section 15(d) of the 1934 Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 159d) of the 1934 Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
5. 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
1934 Act; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are 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.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, we
certify that we have reasonable grounds to believe that we meet all of the
requirements for filing on Form S-3 and have duly caused this Registration
Statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in the City of Boynton Beach and the State of Florida, on the 21st
day of November, 2001.
CYBERCARE, INC.
By: /s/ Michael F. Morrell
----------------------
Michael F. Morrell
Chairman of the Board,
Chief Executive Officer and
Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael F. Morrell as his or her
attorney-in-fact, with the power of substitution, for him or her in any and all
capacities, to sign any amendment or post-effective amendment to this
Registration Statement on Form S-3 or abbreviated registration statement
(including, without limitation, any additional registration filed pursuant to
Rule 462 under the Securities Act of 1933) with respect hereto and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his or her substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
[Download Table]
SIGNATURE TITLE DATE
Chief Executive, Director
/s/ Michael F. Morrell and Chairman of the Board November 21, 2001
--------------------------------
Michael F. Morrell
/s/ Steven M. Cohen Chief Financial Officer November 21, 2001
--------------------------------
Steven M. Cohen
Executive Vice President November 21, 2001
/s/ Dana J. Pusateri and Director
--------------------------------
Dana J. Pusateri
Senior Vice President November 21, 2001
/s/ Daniel Bivins and Director
--------------------------------
Daniel Bivins
Chief Operating Officer, November 21, 2001
/s/ Joseph Forte Senior Vice President,
-------------------------------- and Director
Joseph Forte
II-4
/s/ Theodore J. Orlando Director November 21, 2001
--------------------------------
Theodore J. Orlando
/s/ Terry Lazar Director November21, 2001
--------------------------------
Terry Lazar
/s/ Alan Adelson Director November 21, 2001
--------------------------------
Alan Adelson
/s/ Peter Murphy Director November 21, 2001
--------------------------------
Peter Murphy
/s/ Zachariah P. Zachariah Director November 21, 2001
--------------------------------
Zachariah P. Zachariah
II-5
Dates Referenced Herein and Documents Incorporated by Reference
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