AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1997
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2 REGISTRATION STATEMENT
ON FORM S-3 REGISTRATION STATEMENT
AND
FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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UNIVERSAL SELF CARE, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 5999 95-4228470
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation) Classification Code No.)
Number)
11585 FARMINGTON ROAD
LIVONIA, MICHIGAN 48150
(313) 261-2988
(Address and telephone number of registrant's principal executive offices)
BRIAN BOOKMEIER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
11585 FARMINGTON ROAD
LIVONIA, MICHIGAN 48150
(313) 261-2988
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
PETER W. ROTHBERG, ESQ.
GREENBERG TRAURIG HOFFMAN LIPOFF ROSEN & QUENTEL
153 East 53rd Street
New York, New York 10022
(212) 801-9200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
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CALCULATION OF REGISTRATION FEE
(See following page)
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE
OF SECURITIES TO BE REGISTERED REGISTERED(3) WARRANT/SHARE OFFERING PRICE(1)
Common Stock issuable upon exercise of Class
A Warrants................................ 1,707,875 $3.30 $5,635,988
Common Stock issuable upon exercise of Class
C Warrants................................ 114,400 $4.62 $528,528
Shares of Common Stock to be sold by certain
selling stockholders (the "Original
Selling Stockholder Shares").............. 2,705,144 $2.75 $7,439,146(2)
Shares of Common Stock issuable upon
exercise of certain outstanding warrants
(the "Loan Consideration Warrants")....... 150,000 $1.00 $150,000
Shares of Common Stock issuable upon
exercise of certain outstanding warrants
(the "Waiver Warrants")................... 115,000 $1.35 $155,250
Shares of Common Stock issuable upon
exercise of certain outstanding warrants
(the "Additional Waiver Warrants")........ 35,000 $2.00 $70,000
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Acquisition Options")............... 175,000 $1.25 $218,750
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Compensation Options").............. 416,667 $1.35 $562,500
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Employment Options")................ 175,000 $1.25 $218,750
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Additional Employment Options")..... 100,000 $1.75 $175,000
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Buchholz Options").................. 175,000 $1.70 $297,500
Shares of Common Stock issuable upon
exercise of outstanding options held by
Tod Robinson (the "Robinson Options")..... 30,000 $1.50 $45,000
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Funding Options")................... 375,000 $2.50 $937,500
Shares of Common Stock issuable upon
exercise of certain outstanding warrants
(the "Funding Warrants").................. 225,000 $2.25 $506,250
Total Registration Fee......................
AMOUNT OF
TITLE OF EACH CLASS REGISTRATION
OF SECURITIES TO BE REGISTERED FEE
Common Stock issuable upon exercise of Class
A Warrants................................ $1,708
Common Stock issuable upon exercise of Class
C Warrants................................ $161
Shares of Common Stock to be sold by certain
selling stockholders (the "Original
Selling Stockholder Shares").............. $2,254
Shares of Common Stock issuable upon
exercise of certain outstanding warrants
(the "Loan Consideration Warrants")....... $46
Shares of Common Stock issuable upon
exercise of certain outstanding warrants
(the "Waiver Warrants")................... $47
Shares of Common Stock issuable upon
exercise of certain outstanding warrants
(the "Additional Waiver Warrants")........ $21
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Acquisition Options")............... $67
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Compensation Options").............. $170
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Employment Options")................ $67
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Additional Employment Options")..... $54
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Buchholz Options").................. $103
Shares of Common Stock issuable upon
exercise of outstanding options held by
Tod Robinson (the "Robinson Options")..... $14
Shares of Common Stock issuable upon
exercise of certain outstanding options
(the "Funding Options")................... $285
Shares of Common Stock issuable upon
exercise of certain outstanding warrants
(the "Funding Warrants").................. $153
Total Registration Fee...................... $5,150
* This Registration Statement incorporates Post-Effective Amendment No. 1 to
Universal Self Care, Inc., Registration Statement, Registration No.
33-95222, which Registration Statement was declared effective by the
Securities and Exchange Commission on March 20, 1996. The 1,707,875 shares
of Common Stock issuable upon exercise of the Class A Warrants (the "Public
Warrants"), the 114,400 shares of Common Stock issuable upon exercise of the
Class C Warrants (the "Underwriters' Warrants"), and 870,271 shares of
Common Stock to be sold by certain selling stockholders (the "Original
Securities") were previously registered pursuant to Registration Nos.
33-50426 and 33-95222, and of the $5,150 filing fee identified above ($2,594
of which relates to the Original Securities), more than $2,594 was
previously paid in connection with Registration Nos. 33-50426 and 33-95222
with respect to the Original Securities. A filing fee of $2,556 is herewith
included upon filing this Registration Statement with respect to the
previously unregistered 1,834,873 shares of Common Stock included in the
Selling Stockholder Shares (the "New Selling Stockholder Shares"), 150,000
shares of Common Stock underlying the Loan Consideration Warrants (the "Loan
Consideration Shares"), the 115,000 shares of Common Stock underlying the
Waiver Warrants (the "Waiver Shares"), the 35,000 shares of Common Stock
underlying the Additional Waiver Warrants (the "Additional Waiver Shares"),
the 175,000 shares of Common Stock underlying the Acquisition Options (the
"Acquisition Shares"), the 416,667 shares of Common Stock underlying the
Compensation Options (the "Compensation Shares"), the 175,000 shares of
Common Stock underlying the Employment Options (the "Employment Shares"),
the 100,000 shares of Common Stock underlying the Additional Employment
Options (the "Additional Employment Shares"), the 375,000 shares of Common
Stock underlying the Funding Options (the "Funding Shares"), the 225,000
shares of Common Stock underlying the Funding Warrants (the "Funding Warrant
Shares"), the 175,000 shares of Common Stock underlying the Buchholz Options
(the "Buchholz Shares")_and the 30,000 shares of Common Stock underlying the
Robinson Options (the "Robinson Shares") (the New Selling Stockholder
Shares, the Loan Consideration Shares, the Waiver Shares, the Additional
Waiver Shares, the Acquisition Shares, the Compensation Shares, the
Employment Shares, the Additional Employment Shares, the Robinson Shares,
the Buchholz Shares, the Funding Shares and the Funding Warrant Shares are
collectively referred to as the "New Shares").
(1) Estimated solely for the purpose of calculating the registration fee.
Estimates the exercise prices of the Public Warrants, the Underwriters'
Warrants, the Loan Consideration Warrants, the Waiver Warrants, the
Additional Waiver Warrants, the Acquisition Options, the Compensation
Options, the Employment Options, the Additional Employment Options, the
Robinson Options, the Buchholz Options, the Funding Options and the Funding
Warrants (collectively, the "New Convertible Securities").
(2) Pursuant to Rule 457, such number of shares and the estimated offering price
per share, is based upon the average of the high and low prices for a share
of Common Stock on July 7, 1997, which was less than $2.75 per share as
reported on The Nasdaq SmallCap Market.
(3) Pursuant to Rule 416, there are also being registered hereby such additional
indeterminate number of shares of such Common Stock as may become issuable
by reason of stock splits, stock dividends, and similar adjustments as set
forth in the provisions of the Public Warrants, the Underwriters' Warrants
and the New Convertible Securities).
UNIVERSAL SELF CARE, INC.
1,707,875 SHARES OF COMMON STOCK, 2,705,144 SHARES OF COMMON STOCK
INCLUDED IN 1,707,875 CLASS A COMMON STOCK FOR CERTAIN SELLING STOCKHOLDERS (THE
PURCHASE WARRANTS ("CLASS A WARRANTS") "ORIGINAL SELLING STOCKHOLDERS' SHARES")
------------------------ ------------------------
1,971,667 SHARES OF COMMON STOCK
114,400 SHARES OF COMMON STOCK, INCLUDED IN 1,746,667 ADDITIONAL
INCLUDED IN 114,400 CLASS C COMMON STOCK WARRANTS AND OPTIONS
PURCHASE WARRANTS ("CLASS C WARRANTS") (THE "NEW CONVERTIBLE SECURITIES")
------------------------ ------------------------
This Prospectus relates to an offering (the "Offering") of 6,499,086 shares
of Common Stock, $.0001 par value (the "Common Stock"), of Universal Self Care,
Inc., a Delaware corporation ("Universal" or the "Company"), consisting of: (i)
1,707,875 shares of Common Stock underlying 1,707,875 outstanding Class A
Warrants (the "Public Warrants"), (ii) 114,400 shares of Common Stock underlying
114,400 outstanding Class C Warrants (the Class C Warrants are sometimes
identified as the "Underwriters' Warrants"), (iii) 2,705,144 shares of Common
Stock held by certain stockholders of the Company (the "Original Selling
Stockholders' Shares") and 1,971,667 shares of Common Stock (the "New Shares")
underlying 1,971,667 New Convertible Securities (the Original Selling
Stockholders' Shares and the New Shares are hereinafter sometimes collectively
referred to as the "Shares"). See "PLAN OF DISTRIBUTION AND SELLING
STOCKHOLDERS." Each Class A Warrant entitles the holder to purchase one share of
Common Stock for $3.30 per share until December 10, 1997. Each Class C Warrant
entitles the holder to purchase one share of Common Stock for $4.62 per share
until December 10, 1997. The New Convertible Securities consist of the
following: (i) 150,000 Loan Consideration Warrants issued to Messrs. Robert M.
Rubin and Damon Testaverde, former members of senior management, to purchase
150,000 Loan Consideration Shares of Common Stock, exercisable at $1.00 per
share through July 28, 2003; (ii) 115,000 Waiver Warrants issued to Mr. Fred
Kassner, Ms. Susan Kaufman and Mr. Peter Fishbein to purchase 115,000 Waiver
Shares of Common Stock, exercisable at $2.00 per share through August 30, 2001;
(iii) 35,000 Additional Waiver Warrants issued to Ms. Susan Kaufman and Mr.
Peter Fishbein to purchase 35,000 Additional Waiver Shares of Common Stock; (iv)
175,000 Acquisition Warrants issued to Edward Buchholz to purchase 175,000
Acquisition Shares of Common Stock in connection with the Company's 1993
acquisition of Diabetes Self Care (formerly the Thriftee Group), exercisable at
$1.25 per share through February 8, 1998; (v) 416,667 Compensation Options
issued to members of senior management, Messrs. Brian Bookmeier, Alan Korby,
Matthew Gietzen and Edward Buchholz, to purchase 416,667 Compensation Shares of
Common Stock, in connection with their waiver of 12 months of compensation from
the Company, exercisable at $1.35 per share through May 31, 2001; (vi) 350,000
Employment Options issued to Edward Buchholz under his Company employment
agreement to purchase 175,000 Employment Shares of Common Stock, exercisable at
$1.25 per share through February 8, 1998, and 175,000 Employment Shares of
Common Stock, exercisable at $1.70 per share through December 15, 2001; (vii)
100,000 Additional Employment Options issued to Richard Hough under his Company
employment agreement to purchase 100,000 Additional Employment Shares of Common
Stock, exercisable at $1.75 per share through June 30, 1999; (viii) 30,000
Robinson Options issued to Tod Robinson under his Company employment agreement
to purchase 30,000 Robinson Shares at $1.50 per share and (ix) 375,000 Funding
Options issued to Health Care Partners Funding L.P., the Company's principal
lender, to purchase 375,000 Funding Shares of Common Stock, exercisable at $2.50
per share through September 30, 2001 and (x) 225,000 Funding Warrants issued to
Health Care Partners Funding L.P. to purchase 225,000 Funding Warrant Shares of
Common Stock, exercisable at $2.25 per share through April 30, 2002.
The outstanding Class A Warrants were initially issued as components of
Units sold in connection with a December 1992 public offering of the Company's
securities (the "Public Offering"), and the Underwriters' Warrants are issuable
upon exercise of the Underwriters' Unit Purchase Option sold to the several
underwriters of the Public Offering. The Company will receive the proceeds from
exercise of the Public Warrants and the Underwriters' Warrants as well as from
exercise of the New Convertible Securities referred to in this Prospectus.
(Cover Page Continued on Next Page)
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. THE COMPANY HAS
EXPERIENCED SEVERE CASH FLOW SHORTAGES FROM TIME TO TIME. THERE IS NO
ASSURANCE THAT THE COMPANY WILL NOT EXPERIENCE SEVERE CASH FLOW
SHORTAGES IN THE FUTURE. THERE IS ALSO NO ASSURANCE THAT THE COMPANY
WILL RECEIVE ANY PROCEEDS FROM THE OFFERING. SEE "RISK FACTORS"
(COMMENCING ON PAGE 13, PARTICULARLY "--SUBSTANTIAL
INDEBTEDNESS AND CASH FLOW SHORTAGES..."; "--NEED FOR
ADDITIONAL FINANCING"; AND "--NO PROCEEDS TO THE
COMPANY FROM THE OFFERING."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997
The persons identified herein as the Original Selling Stockholders acquired
their 2,705,144 Original Selling Stockholders' Shares being offered hereby in
various transactions, including: (i) 450,000 shares of Common Stock underlying
warrants exercisable at $1.00 per share (the "Kassner Warrants") sold in partial
consideration for two secured loan transactions (the "Kassner Financings"), one
of which was consummated in April 1995 (a $1,000,000 loan, which has since been
fully retired, and warrants to purchase 150,000 shares) and the other of which
was consummated in July 1995 (a $2,000,000 loan, which has since been repaid,
and warrants to purchase 300,000 shares); (ii) 222,223 shares of Common Stock
(of which only 13,889 shares are included in the Original Selling Stockholders'
Shares), purchased for $1.00 per share, upon the exercise of warrants issued in
partial consideration for an aggregate of $400,000 of loans made to the Company
in January 1995 (the "Bridge Financing") and evidenced by 10% promissory notes
due July 1995 (the "Bridge Notes"); (iii) an aggregate 106,382 remaining shares
(out of an original 200,000 shares) of Common Stock acquired by Messrs. Kenneth
Payne, Jr. and Clayton Wisely in connection with the Company's 1993 acquisition
of Diabetes Self Care; (iv) 300,000 shares acquired by Mr. Robert Moody in an
April 1995 private placement; (v) 500,000 shares acquired in connection with a
May 1997 private placement; and (vi) 1,334,873 shares acquired in connection
with a June 1997 private placement.
The persons identified herein as the holders of the New Convertible
Securities and the Original Selling Stockholders' Shares are sometimes
collectively referred to as the "Selling Stockholders."
The Company's publicly traded Common Stock and Class A Warrants are
currently listed separately on the automated quotation system of the Nasdaq
SmallCap Market ("Nasdaq") under the symbols "USCI" and "USCIW," respectively.
The Common Stock and Class A Warrants are also separately listed on the Boston
Stock Exchange under the symbols "USV" and "USVW," respectively. On July 7,
1997, the last trade prices for the Common Stock and Class A Warrants reported
on Nasdaq were $2.6875 per share and $.75 per Class A Warrant, respectively.
The various exercise prices of each of the Public Warrants, Underwriters'
Warrants, and New Convertible Securities are all subject to adjustment pursuant
to the anti-dilution provisions thereof. The Company will only receive proceeds
from the exercise of the foregoing securities, but will not receive any proceeds
from the resale thereof.
The exercise of the Public Warrants may be prohibited in certain states. See
"RISK FACTORS--Costs Resulting From Necessity of Continuing Post-Effective
Amendments to the Company's Registration Statement and State Blue Sky
Registration; Exercise of Public Warrants Dependent on Current Registration
Statement; Costs Resulting from Obligations to Selling Stockholders." Although
the Public Warrants were initially sold in jurisdictions in which the Public
Warrants and underlying shares of Common Stock were qualified for sale,
purchasers who reside in or may move to jurisdictions in which the Public
Warrants or underlying shares are not registered for sale or otherwise qualified
may have purchased such Public Warrants in the aftermarket during the period
when the Public Warrants are exercisable. In this event, the Company would be
unable to issue shares to such persons desiring to exercise their Public
Warrants unless and until the shares could be qualified for sale in the
jurisdictions in which such purchasers reside, or unless an exemption to such
qualification exists. The exercise prices and other terms of the Public Warrants
were originally determined by negotiation between the Company and the
underwriters of the Units sold in the Public Offering, and such terms were not
necessarily related to the Company's asset value, net worth, or any other
established criterion of value. See "RISK FACTORS" and "PLAN OF DISTRIBUTION AND
SELLING STOCKHOLDERS."
The Company will not receive any of the proceeds from sales of the Shares by
the Selling Stockholders. The Shares may be offered from time to time by the
Selling Stockholders through ordinary brokerage transactions in the
over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices. The Selling
Stockholders may be deemed to be "Underwriters" as defined in the Securities Act
of 1933, as amended (the "Securities Act"). No underwriting arrangements have
been entered into by the Selling Stockholders. If any broker-dealers are used by
the Selling Stockholders, any commissions paid to broker-dealers and, if
broker-dealers purchase any Shares as principals, any profits received by such
broker-dealers on the resales of the shares may be deemed to be underwriting
discounts or commissions under the Securities Act. In addition, any profits
realized by the Selling Stockholders may be deemed to be underwriting
commissions. All costs, expenses and fees in connection with the registration of
the Shares offered by Selling Stockholders will be borne by the Company.
Brokerage commissions, if any, attributable to the sale of the Shares will be
borne by the Selling Stockholders. The Company has agreed to indemnify the
Selling Stockholders against certain liabilities, including liabilities under
the Securities Act.
The distribution of the Shares by the Selling Stockholders may be effected
in one or more transactions that may take place on the over-the-counter market,
including ordinary broker's transaction, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Stockholders in connection with the sales of the Shares. See "PLAN OF
DISTRIBUTION AND SELLING STOCKHOLDERS."
2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copies at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington D.C. 20549, and at the Commission's Regional Offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained upon written request from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. For further information, reference is hereby made to the
Registration Statement. Each statement made in this Prospectus concerning a
document filed as part of the Registration Statement is qualified in its
entirety by reference to such document for a complete statement of its
provisions. Copies of the Registration Statement may be inspected, without
charge, at the offices of the Commission, or obtained at prescribed rates from
the Public Reference Section of the Commission, at the address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 001-111568)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1996;
2. The Company's Annual Report, as amended, on Form 10-KSB/A for the
fiscal year ended June 30, 1996;
3. The Company's definitive proxy material filed on January 22, 1997 on
Schedule 14A in connection with the Company's 1997 Annual Meeting of
Stockholders;
4. The Company's Form 10-QSB for each of the quarters ended September
30, 1996, December 31, 1996 and March 31, 1997.
5. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed December 8, 1992; and
6. The Company's Current Reports on Form 8-K filed on September 10,
1996 and July 7, 1997.
7. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since June 30, 1996.
All other documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Shares will be deemed
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated herein by reference, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified shall not be deemed to constitute a part of this Prospectus except as
so modified, and any statement so superseded shall not be deemed to constitute a
part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of the Warrants and the Shares, to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents which are incorporated herein by reference).
Requests for such copies should be directed to Mr. Robert Ortlieb,
Communications Director, 11585 Farmington Road, Livonia, Michigan 48150;
telephone number (313) 261-2988.
3
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED BY, AND MUST BE READ IN CONJUNCTION WITH,
THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN
THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL SHARE AND PER SHARE INFORMATION
IN THIS PROSPECTUS ASSUMES NO ISSUANCE OF THE 3,568,942 SHARES ISSUABLE UPON
EXERCISE OF THE PUBLIC WARRANTS, THE UNDERWRITERS' WARRANTS AND THE NEW
CONVERTIBLE SECURITIES. UNLESS OTHERWISE INDICATED, THE TERM "YEAR" OR "FISCAL
YEAR" REFERS TO THE COMPANY'S FISCAL YEAR ENDING JUNE 30.
THE COMPANY
Universal, a Delaware corporation incorporated in 1989, is a managed care
company that supplies and distributes both prescription and non-prescription
medications and durable medical equipment and supplies, principally to persons
suffering from diabetes, as well as to persons suffering from asthma. Universal
is the parent corporation for the following wholly-owned subsidiaries:
Clinishare Diabetes Centers, Inc., a California corporation ("Clinishare");
Physicians Support Services, Inc., a California corporation ("PSS");
USC-Michigan, Inc., a Michigan corporation and its wholly-owned subsidiary, PCS,
Inc.--West (the "PCS Companies"), a Michigan corporation; The Thriftee Group,
Inc. (formerly Fieldcor, Inc.), a Virginia corporation; and Medical Accounting
Specialists, Inc., a Virginia corporation. Depending upon the context, the term
"Company" refers to either Universal alone, or Universal and one or more of its
operating subsidiaries. These subsidiaries and Universal do business as
"Diabetes Self Care" or "Universal RX."
The Company is completing the consolidation of all subsidiary operations in
the two primary administrative offices in Livonia, Michigan and Roanoke,
Virginia. The Livonia office contains executive offices, new customer
development and sales and marketing departments. The Roanoke facility contains
administrative offices, accounting, order maintenance, billing and reimbursement
processing operations. Warehousing and shipping operate from Roanoke, Virginia,
Livonia, Michigan and Van Nuys, California.
The existing market for the Company's products reaches all 50 states. It is
estimated by the American Diabetes Association that more than 16 million people
in the United States (6% of the domestic population, based upon 1990 United
States census figures) suffer from diabetes, with over 725,000 new cases being
diagnosed each year.
The Company's products are currently sold to customers through the efforts
of the Company's in-house marketing staff. Sales of such products are made (i)
by the efforts of sales representatives employed by the Company; (ii) by mail
order for delivery by common carrier and (iii) through managed care contracts
with business corporations and medical insurance groups. The Company's sales
have traditionally been made to persons referred by physicians, diabetes nurse
educators and other health care professionals and to persons reached by the
Company's print advertising. Managed care contracts are the fastest growing
segment of the business, and Management's business plan is directed toward
making the managed care business the dominant part of the Company's business in
the future.
A profile of required products is maintained for each Company customer, and
customers receive the necessary diabetes and asthma supplies on a scheduled
monthly basis. Customers are contacted periodically to determine ongoing
requirements and to otherwise adjust product shipments.
The Company solicits contracts to provide "managed care services" to
corporations that provide self-insured medical coverage to their employees. A
contract with a managed care customer generally gives the Company the exclusive
right to supply all diabetes and asthma-related products to the large numbers of
persons whose medical care is provided and/or paid for by the contracting
parties, at agreed upon prices, during the contract period. Universal Rx's
managed care services include management of diabetes and asthma product
purchasing and consulting services related to the types and amounts of related
products which should be purchased by the customer. The Company's program was
designed in anticipation of
4
changes in health care delivery systems proposed by state and Federal
governments which are expected to favor managed care contracts.
The Company's sales representatives are responsible for contacting customer
referral sources and for promoting the Company's scheduled, monthly product
shipment program and other services. Based upon medical prescriptions received
by the Company, a profile of required products is maintained and customers who
are part of the scheduled, monthly shipment program receive the necessary
diabetes and asthma supplies on a regular monthly basis. Customers are contacted
on a periodic basis to determine ongoing requirements and otherwise to adjust
product shipments. The primary products sold include insulin, syringes, glucose
test strips, glucose monitors, lancets and insulin pumps.
Payment for scheduled, monthly home delivery of products is made by the
customer's assignment to the Company of the customer's full Medicare, Medicaid
(Medi-Cal for California residents eligible for Medicaid benefits) or other
third-party insurance cost reimbursement amount. The sales price of the
Company's products is adjusted for any contractual allowances required by
Medicare and Medi-Cal. Other than contractual allowances, any difference between
the product purchase price and the reimbursement amount received by the Company
is billed directly to the customer or that customer's secondary insurance
carrier for further collection. Managed care contract customers also receive
home delivery of products and individual attention; however, claims are filed
directly with the managed care company, with one invoice covering many
customers. Payment is usually received in under 30 days with a minimum of
administrative effort. The Company's management believes that continued and
increased participation in managed care contracts can represent a significant
opportunity for the Company to improve its operating results.
The Company distributes a significant portion of its products by common
carrier and the United States Postal Service. Each customer determines an
initial list of monthly necessities based upon his or her individual profile as
provided by their physician. Based on this profile, the customer receives a
monthly shipment of necessary supplies.
The Company maintains a pharmacy in Virginia that is licensed by the
Virginia State Board of Pharmacy, and one in California licensed by the State of
California Department of Consumer Affairs-- State Board of Pharmacy. These
pharmacies are utilized for the preparation and/or distribution of diabetes and
asthma supplies that are available by prescription and some non-prescription
supplies. Neither pharmacy is available for walk-in sales to customers.
REVENUES, ASSETS AND PROFITS
The Company's revenues are derived from the sale and distribution of
supplies, equipment, publications and drugs related to the treatment and care of
diabetes and asthma. During the year ended June 30, 1996, approximately 95% of
the Company's total sales revenues were derived from third-party payors such as
Medicare, Medicaid (including Medi-Cal), insurance companies and other
third-party payor health care reimbursement programs (including self-insured
corporations and HMOs). Approximately 5 % of its revenues were from private
party payments. Approximately 12% of Company reimbursement sales were made to
HMOs and self-insured corporations through the efforts of the managed care
program (Universal Rx).
Glucose strips, blood glucose monitors, syringes and insulin are the four
(4) most important products distributed by the Company. Glucose strip sales
accounted for over 65 % of Company's consolidated net sales during the year
ended June 30, 1996.
SUPPLIERS
The Company's largest four suppliers during the fiscal year ended June 30,
1996 were Lifescan, Inc., from which the Company purchased approximately
$11,000,000 of inventory (53 % of total purchases), Boehringer Mannheim, from
which the company purchased approximately $3,775,000 of inventory (18% of
5
total purchases), McKesson Wholesale, Inc., from which the Company purchased
approximately $3,505,000 of inventory (17% of total purchases) and Medisense,
Inc., from which the Company purchased approximately $838,000 of inventory (4%
of total purchases).
The Company's largest four suppliers during the fiscal year ended June 30,
1995 were Lifescan, Inc., from which the Company purchased approximately
$3,900,000 of inventory (26% of total purchases), McKesson Wholesale, Inc., from
which the Company purchased approximately $3,384,000 of inventory (22% of total
purchases), Overland Pharmacy, Inc., from which the Company purchased
approximately $2,335,000 of inventory (15% of total purchases) and Boehringer
Mannheim, from which the Company purchased approximately $1,585,000 of inventory
(10% of total purchases).
The Company's credit terms with its principal suppliers are standard
wholesale terms in the pharmaceutical industry, which is a maximum of 25 days
post-shipment cash payment or 30, 60 and 90 day terms with manufacturers,
depending upon the products purchased.
SALES AND MARKETING
The Company generates sales through the efforts of 32 "outside" sales
representative employees who cover 34 states. In addition, the Company has a
staff of 29 "inside" sales representative employees who generate mail order
sales from a list of customers who have previously ordered products and new
customers generated from advertisements in trade journals. Sales are also
generated through print advertising and word of mouth from referral sources and
customers. The Company employs a staff of 67 trainers whose sole purpose is to
provide individual in-home or in-hospital customer training on products.
The Company's outside sales representatives are responsible for developing
new referral sources while maintaining the current client base in their assigned
territory. All outside sales representatives market directly to the following
health care professionals: hospitals, clinics, private physicians, diabetes
educators, nurses, dieticians, home care companies, private charitable
organizations, county medical services and plan benefit designers, who on a
regular basis see people with diabetes and can refer patients to the Company.
The Company markets its managed care program to health organizations and
large self-insured companies principally through the efforts of its 95% owned
subsidiary, Health Care Management Solutions, Inc., whose sales representatives
work to generate long-term contracts to provide diabetes products to members of
HMOs and employee participants in self-insured company health plans. Health Care
Partners Funding L.P. owns the 5% balance of the equity of Health Care
Management Solutions, Inc. This area is currently and is expected to continue as
the fastest growing part of the Company's business.
Sales representatives involve themselves in community activities related to
diabetes and/or asthma education and at-home diabetes care. The Company,
throughout the year, is involved in national trade shows which provide exposure
to referral sources. All sales representatives complete a formal educational
training program that encompasses an overview of diabetes and asthma, the
industry and its operations. The sales representatives become familiar with the
features and operating procedures of the products that they sell. They are
educated with respect to the Company's policies and procedures of training
customers and the Company's operations.
Upon the referral of a potential customer, the Company verifies the
insurance coverage and arranges for a personal visit with the customer by a
Company representative. Normally, the customer has just been diagnosed as having
diabetes or asthma and the representative provides emotional support as well as
demonstrated experience that the disease can be controlled, with the intent of
instilling confidence that the customer can lead a normal lifestyle. The
representative will review the physician's order in detail with the individual
for the types of products to be used and the frequency of blood glucose testing
to be performed. Based on this profile, the representative will make
recommendations regarding procedures to be followed. The representative provides
detailed instruction on the proper use of prescribed medical devices. The
customer will be encouraged to participate in the Company's monthly maintenance
program so that he or
6
she can receive necessary supplies and/or medication on a periodic basis,
subject to adjustment as ongoing needs change.
The Company also provides mail order services to customers already
experienced in handling the treatment of diabetes and asthma. Customers respond
to print advertising in industry publications and contact Company
representatives to make product purchases. The Company's representatives are
knowledgeable about the products and provide a friendly, supportive
communication with the customer. Following the initial order, the representative
will periodically contact the customer to determine further requirements. The
Company maintains a follow-up program to monitor its customers' needs and
generate on-going revenues.
The Company does not depend upon any one or a limited number of customers
for the sale of its products. During the years ended June 30, 1994, 1995 and
1996 no single customer accounted for more than 10% of the Company's
consolidated net sales.
COMPETITION
There are numerous other companies on a local, regional and national level
throughout the United States that sell products and services to individuals with
diabetes or asthma. Although all of these companies deliver similar products to
individuals with diabetes or asthma, there are three different primary services
that differentiate the Company's products from those of other companies. These
include home delivery and training with follow-up monthly maintenance
deliveries, mail-order sales and managed care long-term contracts. The primary
service, home delivery and training, involves an individual visit with the
customer by a Company representative. The physician's order is reviewed, and
specific training on the use of the recommended products and advice on
recordkeeping, diet and a variety of related subjects is provided. The customer
is then entered into a monthly maintenance program for supplies and is monitored
on an ongoing basis. The Company also provides mail-order services for customers
requiring individual purchases. Along with home delivery and training services
and mail order services, the Company provides complete insurance reimbursement
processing services so that the customer is not required to submit insurance
claims and wait for reimbursements.
National retail chain stores and pharmacies such as Price Club, K-Mart,
Wal-Mart, Revco and RiteAid, regional chains, and local retailers sell many of
the same diabetes and asthma supplies and equipment as those sold by the
Company. Many of the national companies are more well-established, larger and
better financed than the Company. These companies utilize their reputations and
substantial marketing resources to attract consumers with diabetes or asthma.
However, retailers and pharmacies frequently have a limited selection of
products, and provide little or no training or follow-up in the use of products
by individuals suffering from diabetes. These retailers may not offer
third-party billing services, forcing the customer to pay for products
themselves and wait for subsequent reimbursement, even though the customer may
have insurance that covers all or a portion of the cost of the supplied
products.
The total number of retail competitors is large, and the market for diabetes
and asthma-related products is fragmented because of its size and the low
barriers to entry, but Company management believes that the number of companies
in the current market that offer either home delivery and training services or
mail-order services, along with third-party insurance reimbursement processing
services, has been decreasing slightly primarily due to mergers and acquisitions
and reductions in reimbursement levels for insurance reimbursement (including
Medicare and Medicaid). This latter aspect of the Company's business is
characterized by higher barriers to entry due to the specialization of
operations related to the processing of third-party claims and high entry level
costs. No new major competitors in this aspect of the business have been
identified over the past 12 months. Major current competitors in this aspect of
the Company's business would include Liberty Medical and Diabetes Support
Services, both located in Florida, Ideal Diabetic in southern California, and
Diabetes Control Center located in Texas. Most companies that specialize in
diabetes and/or asthma-related products are local operations that are not
7
adequately capitalized, nor do they possess the specialized staff or technology
to effectively manage high volumes of third-party insurance reimbursement
claims.
Management believes that the Company's selling strategy, high customer
service emphasis, sophisticated third-party billing knowledge, managed care
program and ability to sell its products through both mail-order and full
service home delivery provides the Company with a competitive advantage in the
diabetes products marketplace.
PATENTS AND TRADEMARKS
The Company possesses no patents. The Company possesses federal trademark
protection for its SugarFree logo. The Company conducts its pharmacy and mail
order operations under the name "Diabetes Self Care", for which it has not filed
for trademark protection.
The Company is not a party to any agreements pursuant to which it either
licenses the use of its name or any part of its operational methods to any third
party, or obtains a license to use the name or operational methods of any other
person.
EMPLOYEES
As of May 31, 1997, the Company employed approximately 266 full-time
employees. Of that number, 8 employees are in senior management, 52 are in sales
and marketing and sales support and 206 are in operations and corporate
administration.
None of the Company's operations are covered by collective bargaining
agreements. The Company believes its relations with employees are good.
GOVERNMENT REGULATION
The health care industry, including the sale of medical products and
services, is subject to extensive public interest and governmental regulation on
both federal and state levels.
THIRD-PARTY REIMBURSEMENT GENERALLY. Medicare and Medicaid are government
funded health insurance programs. While Medicare provides federally funded
health insurance coverage for persons age 65 or older and for certain disabled
persons, the Medicaid program is administered and funded by state governments
and provides fully paid health coverage to participants in the Aid to Families
with Dependent Children program (most commonly known as "Welfare"). Medicare and
Medicaid provide reimbursement for certain of the services, supplies and items
provided by the Company, with such coverage of the services and supplies which
the Company provides being subject to extensive regulation. The levels of
reimbursement paid or payments made by such programs are often lower than the
levels of reimbursement paid by other third-party payers, such as traditional
indemnity insurance companies.
The following table sets forth certain information with respect to the
percentage of the Company's revenues attributable to various reimbursement
sources:
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1996
---------------------- ----------------------
Private payers, including insurance companies.................... 20% of Total Sales 19% of Total Sales
Medicare, Medicaid and other governmental programs............... 75% of Total Sales 69% of Total Sales
Managed care contracts........................................... 5% of Total Sales 12% of Total Sales
100% of Total Sales 100% of Total Sales
The Company accepts assignment of Medicare and Medicaid claims, as well as
claims with respect to other third-party payers, on behalf of its patients
whenever the reimbursement coverage is adequate to ensure payment of the
patient's obligations. The Company processes its customers' claims, accepts
8
payment at prevailing and allowable rates, and assumes the risks of delay or
nonpayment for improperly billed services which are determined by the
third-party payor as being medically unnecessary. The Company employs the
administrative personnel necessary to transmit claims for product cost
reimbursement directly to private health insurance carriers, and seeks payment
for any unreimbursed costs directly from patient-customers. No assurance can be
given that a significant number of future requests for reimbursement will not be
denied, although the Company believes that its policies, procedures, and prices
currently minimize this risk.
Like other health care companies, the Company's revenue and profitability
are adversely affected by the continuing efforts of third-party payers
(including Medicare, Medicaid and managed care companies) to contain or reduce
the costs of health care by lowering reimbursement rates, increasing case
management review of bills for services and negotiating reduced contract
pricing. As expenditures in the home health care market continue to grow,
initiatives aimed at reducing the costs of product and service delivery in that
market are increasing.
MEDI-CAL PROGRAM. The Company is approved by the State of California Health
and Welfare Agency, Department of Health Services (Medi-Cal) as a supplier of
pharmaceutical drugs, equipment and supplies to Medi-Cal qualified patients. The
Company is able to take assignments from Medi-Cal patients of claims for cost
reimbursement, and it submits such claims to Medi-Cal following sales of
products and services to covered persons. The Medi-Cal program predetermines the
dollar amounts with respect to which product and service reimbursements will be
made, and the Company accepts such reimbursement payments in full satisfaction
of patient accounts.
The California Department of Health Services is currently following a
pricing guideline which uses Average Wholesale Prices (AWP) plus 25% and a
dispensing fee. The prices attainable using these guidelines provide
satisfactory profit margins from sale of products to Medi-Cal recipients. The
State of California has approved medical supplies, such as diabetes and asthma
supplies, as part of the reimbursable formulary for its budget year which began
on July 1, 1996. The California Department of Health Services has announced its
intention to move Medi-Cal recipients toward a managed-care system in the future
and has initiated this program in several counties. Management believes that it
can establish programs which can be marketed to the managed-care providers when
this transition is implemented, although there is no assurance that such will
occur and that the Company will not be materially adversely affected by such a
change in reimbursement policy.
MEDICARE PROGRAM. The Company is a participating Medicare part B provider.
As a Medicare provider, the Company can provide equipment and supplies to
Medicare beneficiaries, and obtain reimbursement directly from the Medicare
intermediaries. Medicare itself sets guidelines for the types and quantities of
equipment and supplies, the costs of which are reimbursable under the Medicare
program. In the event that full reimbursement is not obtained through Medicare,
patient-customers are personally responsible for full payment either through
secondary private insurance coverage or otherwise.
STATE LICENSING AND REGULATION. Certain operations of the Company may be
subject to state and local regulation. Management believes that all of the
Company's present operations are substantially in compliance with such state and
local laws and regulations. To the extent the Company engages in new activities
or expands current activities into new states, the cost of compliance with
applicable state and local regulations and licensing requirements cannot be
determined with any certainty at this time.
INSURANCE COVERAGE
The Company currently has in force workers compensation, property, business
auto, general liability and product liability insurance policies for all its
operations. The automobile policy has a combined single coverage of $1,000,000.
The general and products liability coverage limits are $1,000,000 for each
occurrence and $2,000,000 in aggregate.
9
The Company also has a comprehensive general umbrella liability insurance
policy covering all its operations. This policy has coverage limits of
$5,000,000 for each occurrence, and $5,000,000 in aggregate for products
liability, general liability and malpractice claims.
The Company believes that its insurance coverage is customary in amount and
consists of such other terms and conditions as are generally consistent with
industry practice.
The Company was incorporated in Delaware on May 12, 1989, maintains its
principal executive office at 11585 Farmington Road, Livonia, MI 48150, and its
telephone number is (313) 261-2988.
THE FOLLOWING SUMMARY FINANCIAL INFORMATION FOR THE YEARS 1995 AND 1996 HAS
BEEN DERIVED FROM THE AUDITED FINANCIAL STATEMENTS OF THE COMPANY, AND THE
SUMMARY FINANCIAL INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1997
HAS BEEN DERIVED FROM THE UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY.
10
SUMMARY FINANCIAL INFORMATION
NINE MONTHS ENDED
YEAR ENDED JUNE 30 MARCH 31
---------------------------- ----------------------------
1996 1995 1997 1996
------------- ------------- ------------- -------------
(UNAUDITED)
Revenues............................................ $ 36,257,415 $ 22,726,241 $ 25,902,592 $ 27,119,887
Cost of goods sold.................................. 22,504,611 14,813,946 14,773,270 16,763,111
Gross profit...................................... 13,752,804 7,912,295 11,129,322 10,356,776
Selling, general, and administrative expense........ 15,022,290 8,720,395 10,726,684 10,527,977
Operating income (loss) before other expenses....... (1,168,979) (1,762,100) 402,638 (171,201)
Other expenses
Interest expense, net............................. 615,552 470,139 610,260 606,853
Net income (loss)................................... $ (2,532,238) $ (2,032,239) $ (207,622) $ (869,013)
THE OFFERING
Securities Offered:................. 1,707,875 shares of Common Stock issuable upon
exercise of 1,707,875 outstanding Class A Warrants.
Each Class A Warrant entitles the holder, for $3.30,
to purchase one share of Common Stock until December
10, 1997.
114,400 shares of Common Stock issuable upon exercise
of 114,400 Class C Warrants. Each Class C Warrant
entitles the holder, for $4.62, to purchase one share
of Common Stock until December 10, 1997.
2,705,144 shares of Common Stock to be sold by the
Selling Stockholders.
1,971,667 shares of Common Stock issuable upon
exercise of 1,971,667 New Convertible Securities held
by a diverse group of holders of New Convertible
Securities, which securities are exercisable at
varying prices ranging from $1.00 per share to $2.50
per share.
See "PLAN OF DISTRIBUTION AND SELLING STOCKHOLDERS."
Common Stock Outstanding before the
Offering(1)....................... 9,724,579 shares
Common Stock Outstanding after the
Offering if only New Convertible
Securities are exercised.......... 11,696,246 shares
Common Stock Outstanding after the
Offering if all Public Warrants,
Underwriter's Warrants and New
Convertible Securities are
exercised(2)...................... 13,518,521 shares
Preferred Stock Outstanding......... 444,667 shares of Series A Redeemable Preferred
Stock.
1,000,000 shares of Series B Convertible Preferred
Stock.
11
Risk Factors:....................... The shares offered hereby involve a high degree of
risk. See "RISK FACTORS."
Use of Proceeds:.................... See "Use of Proceeds." Net proceeds from the exercise
of the Warrants and the New Convertible Securities,
if any are exercised, will be used for working
capital and general corporate purposes. In excess of
$1,400,000 of the proceeds from exercise of any of
such options and warrants, to the extent that a
sufficient number of options and warrants to produce
such proceeds are exercised, may be used to settle or
partially settle claims against Universal for accrued
sales taxes and alleged discriminatory pricing in
violation of California Medical regulations. On July
7th, 1997, the last sales price on Nasdaq for a share
of Common Stock was $2.6875.
Due to the fact that the exercise price of the Public
Warrants is $3.30 per share, and the exercise price
of the Underwriters' Warrants is $4.62 per share, it
is unlikely that any of such warrants will be
exercised and the proceeds of exercise received by
the Company without a significant increase in the
market price of the Company's Common Stock or a
lowering of the exercise prices of such warrants. It
is possible that the 1,971,667 New Convertible
Securities, exercisable at prices ranging from $1.00
to $2.50 per share, may be exercised insofar as the
current market price of the Common Stock exceeds such
exercise prices. Without such exercises, the Company
will not receive any of the proceeds of this Offer-
ing. It is not possible to predict how many of the
options and warrants referred to above will be
exercised and the magnitude of the proceeds, if any,
realizable therefrom. The Company will not receive
any of the proceeds from the resale of any securities
described herein.
Nasdaq Symbol:...................... Common Stock
USCI
Boston Stock Exchange Symbol:....... Common Stock
USV
- ------------------------
(1) Does not include (i) a maximum of 1,707,875 shares of Common Stock issuable
upon exercise of the Public Warrants; (ii) a maximum of 114,400 shares of
Common Stock issuable upon exercise of Underwriters' Warrants; (iii) a
maximum of 1,971,667 shares of Common Stock issuable upon exercise of the
New Convertible Securities; or (iv) a maximum of 650,000 shares of Common
Stock issuable upon exercise of outstanding options granted under the
Company's employee and management stock option plans.
(2) Assumes (i) issuance of 1,707,875 shares of Common Stock upon exercise of
the Public Warrants; (ii) issuance of 114,400 shares of Common Stock
issuable upon exercise of Underwriters' Warrants; and (iii) issuance of
1,971,667 shares of Common Stock upon exercise of the New Convertible
Securities. Does not include issuance of any of the 1,050,000 shares of
Common Stock issuable upon exercise of options granted under the Company's
employee and management stock option plans.
12
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE. EACH PROSPECTIVE
INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AS WELL AS THE
OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS PRIOR TO PURCHASING THE
SECURITIES OFFERED HEREBY.
1. HISTORICAL NET LOSSES; ACCUMULATED DEFICIT. Universal was founded in May
1989, and commenced operations in June 1989. Universal has incurred net losses
in each year since inception, including net losses of $742,064, $2,032,239 and
$2,532,238 in each of fiscal years ended June 30, 1994, 1995 and 1996, and
$207,622 in the nine months ended March 31, 1997, respectively. In addition,
before its acquisition of the PCS Companies, and thereafter, Universal and the
combined Company have each experienced cash flow shortages. Although its net
worth was $2,597,658 at March 31, 1997, since inception the Company has incurred
accumulated losses of $8,531,927 and its entire stockholders' equity has been
derived from sales of stock and other securities. Prior to consummation of its
1992 Public Offering, Universal suffered from severe cash flow shortages which
resulted in delays in payments to trade creditors and litigation. As a result of
its accumulated deficit and losses from operations, such cash flow shortages
have reoccurred, although to a lesser degree than prior to the 1992 Public
Offering. See "Substantial Indebtedness and Cash Flow Shortages; Potential
Change in Control of Operating Subsidiaries" below. Universal has negotiated
repayment schedules and settlements with its creditors. There can be no
assurance that, as a result of its receipt of the net proceeds from this
Offering, if any, the Company will be able to obtain or sustain profitable
operations, or that it will not incur significant additional cash flow shortages
in the future.
Management believes that Universal's historical losses are primarily due to
inadequate sales volumes in relation to staffing, fixed overhead expenses and
interest costs, as well as delays in reimbursements from Medicare, Medicaid
(including Medi-Cal) and other third-party payors, and that application of the
net proceeds of this Offering and anticipated improvements in the levels of
Medicare reimbursements will enable the Company to achieve profitable
operations. Nevertheless, recent reductions in Medicare allowable
reimbursements, and potential future changes in the structure of Medicare and
Medicaid health care programs, may have a materially adverse effect upon the
Company's business and its prospects for future profitable operations by
lowering the Company's profit margins from its sale of products. Like other
health care companies, the price the Company charges for its products is by and
large dictated by the allowable reimbursement rates paid by Medicare and
Medicaid (Medi-Cal). As the Company received approximately 69% of its revenues
from Medicare and Medicaid (Medi-Cal) reimbursement sources in the fiscal year
ended June 30, 1996, any reduction in such reimbursement rates would reduce the
Company's sales revenues by a corresponding amount without the Company's receipt
of a corresponding reduction in its costs for the products that it sells. The
result would be a general reduction in the Company's overall profit margin on
its product sales. See "Dependence on Reimbursement by Third-Party Payors"
below.
There can be no assurance that the Company will be able to achieve
profitability following this Offering.
2. SIGNIFICANT OPERATING LOSSES AS A RESULT OF THE ACQUISITION OF THE PCS
COMPANIES. Universal consummated PCS Companies Merger in April 1995. Since
consummation of the PCS Companies Merger, the PCS Companies have incurred
operating losses of approximately $288,308 through June 30, 1996. Such operating
loses have resulted in the Company's continuing need for cash. As a result of
these losses and the Company's obligations under the PCS Merger Agreement to
repay certain substantial amounts of indebtedness of the PCS Companies shortly
after consummation of the Merger and to meet scheduled redemptions of its Series
A Preferred Stock, the Company was required to obtain the liquidity necessary to
meet its obligations with $3,000,000 gross proceeds of the two Kassner
Financings in April and July 1995 (two-year secured loans), $250,000 gross
proceeds from an additional one-year unsecured loan from Mr. Kassner in June
1995, the sale of 800,000 shares of Common Stock for aggregate gross proceeds of
$800,000, the exercise of an option to acquire 125,000 shares of Common Stock
for $125,000 gross
13
proceeds, the sale of 148,000 shares of Common Stock in a private placement to
employees consummated in June and July 1995 for $148,000 gross proceeds, and the
refinancing of approximately $4,500,000 of indebtedness, secured by accounts
receivable, with Health Care Partners Funding, L.P. in August 1996. There can be
no assurances that the proceeds to the Company from this Offering will be
sufficient to satisfy the Company's liquidity and cash needs and that further
offerings of securities and debt financings will not be needed to support
operations in the near future.
3. POTENTIAL LIABILITY FROM CALIFORNIA AND MEDICARE AUDITS.The Company is
subject to two audits by departments of the State of California with respect to
allegations of two-tier pricing policies in violation of Medi-Cal regulations
and allegations of non-payment of sales tax amounts which should have been
collected on certain items sold by Universal. The Company's management intends
to vigorously defend its positions in both matters, but based upon the above
contingencies it has provided a reserve of $1,450,000 in the event that a
defense of its positions does not prevail. The Company has not established a
funded escrow account to supply the funds which may be necessary to settle these
audit matters. If the Company requires additional financing to fund any
settlements of these matters, there is no assurance that such financing will be
available, if needed, on terms satisfactory to the Company.
In addition, the PCS Companies are currently the subject of an investigation
by Medicare for (i) Medicare's alleged overpayment for services provided by the
PCS Companies and (ii) Medicare's payment to the PCS Companies for claims which
were allegedly not properly subject to Medicare reimbursement. Medicare has
withheld approximately $300,000 of payments due for claims reimbursement to
cover the estimated liability which may result from this investigation. Medicare
withheld an additional $79,000 of payments during July 1996 to cover the final
liability identified during its investigation. As of the date of this
Prospectus, the Company is waiting for the Medicare administrator to set a "fair
trial hearing date," as required under applicable regulations, for a hearing to
consider this matter. Management of the Company intends to vigorously defend
these assessments.
The Company has undergone an audit by medicare covering the charges
submitted for reinbursement in the Western region (Region D) during the period
January 1, 1994 through December 31, 1995. Medicare determined that an
overpayment to the Company may have occurred as a result of the use of a
superseded diagnosis code on claims submitted. The claims in question were
originally submitted to medicare in order to gain a denial of charges so that an
alternative carrier could be validly billed, insofar as a denial is required by
certain intermediaries prior to billing for certian charges. Medicare may have
inappropriately made reimbursements on these charges. In November 1996 Medicare
issued a demand for refund of $795,702 plus interest of $17,738. In December
1996 Medicare commenced offsets against reimbursements otherwise payable to the
Company's subsidiary that had originally submitted the claims in question in
order to collect the alleged overpayments. The subsidiary in question is no
longer actively billing the Medicare program, and the offsets are of nominal
amounts.
4. DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS. During the year ended
June 30, 1996, 100% of Universal's total sales revenues were derived from
customers with Medicare, Medicaid (including Medi-Cal) and other third-party
payor health care reimbursement programs (including self-insured corporations
and HMOs).
The levels of revenues and profitability of the Company, like those of other
health care companies, are affected by the continuing efforts of third-party
payors to contain or reduce the costs of health care by lowering reimbursement
rates, increasing case management review of services and negotiating reduced
contract pricing. The price the Company charges for its products is by and large
dictated by the allowable reimbursement rates paid by Medicare and Medicaid
(Medi-Cal). As the Company received approximately 69% of its revenues from
Medicare and Medicaid (Medi-Cal) reimbursement sources in the fiscal year ended
June 30, 1996, any reduction in such reimbursement rates will reduce the
Company's sales revenues by a corresponding amount without the Company's receipt
of a corresponding reduction in its costs for the products that it sells. The
result would be a general reduction in the Company's overall profit margin on
its
14
product sales. There have been, and management expects that there will continue
to be, proposals to limit Medicare and Medicaid (Medi-Cal) reimbursement for
health care services by turning to managed care systems and other means. The
Company cannot predict whether any of these proposals will be adopted, but if
adopted and implemented such proposals could have a materially adverse effect
upon the Company's business and financial condition by reducing the Company's
profit margins on the products that it sells, as the Company cannot simply
increase the margins on its products because revenues from 69% of the Company's
sales of diabetes products cannot exceed the allowable reimbursement rates set
by Medicare and Medicaid (Medi-Cal), and the remaining 31% of revenues is
derived from reimbursements or payments under non-governmental reimbursement
programs (e.g., Blue Cross) and managed care contracts (e.g., HMOs). Moreover,
significant changes in insurance coverage, managed care contracts, or Medicare
or Medicaid (Medi-Cal) coverage, for the products sold by the Company could also
have a materially adverse effect upon the Company's business and financial
condition.
The Company is legally prohibited from collecting, and does not collect,
directly from patients any portion of the purchase price of products sold to
Medi-Cal or other Medicaid program participants. The Company only collects the
allowable reimbursement rate set by the applicable program on such sales.
Reductions in Medi-Cal or other Medicaid program reimbursement rates will reduce
the Company's sales revenues from the same volume of purchases made by its
existing customer base. There can be no assurance that Medicare, Medicaid and/or
Medi-Cal reimbursement rates will not be further reduced under the terms of any
final federal legislation signed into law which results from the present health
care bills currently being discussed.
The processing of third-party payor reimbursements is a labor-intensive and
expensive effort, and frequent delays in obtaining payments have created cash
flow problems. Delays in obtaining third-party payor payments will likely
continue in the future. Furthermore, to the extent it seeks full payment, the
Company must collect directly from the patient a portion of the purchase price
of products sold to Medicare and privately insured patients, and is subject to a
credit risk on such amounts. The majority of the Company's billings do not
involve individual customer credit risk since the Company's customers usually
either have a secondary insurance plan or the reimbursement is considered
payment in full (Medicaid). In some instances, the commercial insurance carriers
may reimburse the customer directly, in which case the Company must collect
directly from the customer.
Generally, and as of March 31, 1997, approximately 9% of the Company's
receivables represent amounts that the Company collects directly from
individuals. With respect to all other receivables, the direct customer has
either a secondary insurance plan (e.g., "Medi-gap insurance") which provides
full payment to the Company for amounts not covered by the primary insurer, or
the reimbursement amount obtainable by the Company directly from the customer
represents payment in full ("Medicaid"). Part of the receivables to be collected
directly from customers represents amounts previously "reimbursed" to the
customers by insurers, which amounts are intended to be paid to the Company by
the customers. The Company experiences a higher default rate on these direct-pay
customer receivables (estimated at approximately 5%), and provides a higher
proportional level of reserves for uncollectible amounts with respect thereto
than it does on receivables that are collectible from insurers, managed care
companies and other intermediaries.
Final determination of reimbursements are subject to audit by Medicare and
Medicaid (Medi-Cal). Such audits may result in retroactive adjustments for past
charges for products and services, which adjustments could affect the future
operations and earnings of the Company. The Company has experienced and
currently is experiencing, audits by Medicare and Medi-Cal with respect to past
reimbursement charges. There can be no assurance that such audits may not occur,
or reoccur, as applicable, in the future and that such retroactive adjustments
may not be made. Any such adjustments could have a materially adverse effect on
the Company's financial prospects. See "Potential Liability from California and
Medicare Audits."
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5. CHANGES IN GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON
OPERATIONS. Health care is an area of extensive regulations and dynamic
regulatory change, and the Company is subject to extensive government
regulation. Changes in laws or regulations or new interpretations of existing
laws or regulations can have a dramatic effect on methods of doing business,
costs of doing business and amounts of reimbursement by government and private
third-party payors.
The Company is subject to state laws governing professional licensure for
pharmacy operations, including controlled substance regulation. Federal laws
governing the Company's activities include regulations concerning controlled
substances and regulations under Medicare and Medicaid (Medi-Cal) concerning
coverage and reimbursement. Federal and state laws concerning coverage and
reimbursement requirements change frequently, and there can be no assurance that
federal or state governments will not impose additional restrictions upon all or
a portion of the Company's activities which might adversely effect its business.
For example, the Medicare, Medicaid and Medi-Cal programs could be further
modified to emphasize managed care (an intention already announced by Medi-Cal
and the Medicaid programs in certain other states), by reimbursing program
participants only for payments to health maintenance organizations ("HMOs")
rather than for separate services and purchases. Such modification could have a
materially adverse effect on the financial prospects and business of the
Company, including the potential for further reductions in permitted
reimbursement rates to health care product providers such as the Company.
6. NEED FOR ADDITIONAL FINANCING.
If the Company's cash flows are not sufficient to satisfy its cash
requirements or to finance its operations, the Company will require additional
financing. The Company will also require such additional financing to expand its
operations in the future. Such financing will involve the issuance of additional
debt or equity securities or borrowings from banks or other sources. The
Company's ability to obtain additional financing may be limited for a number of
reasons, including its current levels of existing indebtedness, restrictive
covenants under its credit agreements, and the fact that a substantial portion
of the Company's assets are either subject to existing liens and encumbrances or
represent accounts receivable from governmental agencies which are not
customarily considered acceptable collateral in conventional secured financings.
In addition, any additional financing may result in further dilution to Company
stockholders resulting from the issuance of Common Stock or securities
exercisable for or convertible into Common Stock.
In the past, the Company has supported its ongoing operations to a great
extent through the issuance of equity securities for cash consideration at
prices below the then current market prices of the Company's Common Stock. For
example, in January 1995, the Company completed a Bridge Financing for the
purpose of raising additional working capital pursuant to which the Company
raised an aggregate of $400,000. The Company issued to such bridge investors
promissory notes in the aggregate principal amount of $400,000 and issued
warrants to purchase an aggregate of 222,223 shares of its Common Stock at an
exercise price of $1.00 per warrant. In May 1995, the Company completed a
private placement for the purpose of raising additional working capital funds
pursuant to which the Company raised an aggregate of $800,000 from two
accredited investors, in consideration for the issuance of 800,000 shares of
Company Common Stock at $1.00 per share. In June and July 1995, the Company
completed a private placement pursuant to which the Company raised an aggregate
of $148,000 from employees of the Company in consideration for the issuance of
148,000 shares of Company Common Stock at $1.00 per share. In April 1995 and
July 1995, the Company entered into the Kassner Financings pursuant to which Mr.
Kassner loaned to the Company an aggregate of $3,000,000 at an interest rate of
2% above a commercial lender's fluctuating prime rate. In consideration for the
Kassner Financings, the Company issued warrants to acquire an aggregate of
485,000 shares of Common Stock, each exercisable at $1.00 per share.
Furthermore, in December 1995 the Company canceled certain indebtedness owed
to Messrs. Rubin and Testaverde, and the loans represented thereby became
evidenced by new demand notes aggregating
16
$200,000 principal. At the time that such demand notes were executed, the
canceled note and advances were in default. In consideration for agreeing to
such exchange of indebtedness and for waiving all past defaults under such
indebtedness, Messrs. Rubin and Testaverde were issued 5-year warrants (the
"Loan Consideration Warrants") to purchase an aggregate of 300,000 shares of the
Company's Common Stock at $1.00 per share. Upon issuance of his warrant, Mr.
Rubin immediately partially exercised such warrant and purchased 150,000 shares
of the Company's common stock in consideration for canceling in full the
$150,000 December 1995 demand note made by the Company to Mr. Rubin (as
described above). Mr. Testaverde's 8% $50,000 demand note made by the Company
was repaid in November 1996, and he still holds his Loan Consideration Warrants
to purchase 50,000 shares of Company Common Stock at $1.00 per share. See
"Substantial Indebtedness and Cash Flow Shortages; Potential Change in Control
of Operating Subsidiaries" below.
In May and June 1997, the Company sold an aggregate of 1,759,415 shares of
Common Stock for cash and cancellation of indebtedness at $2.00 per share to
investors, and paid cash and issued an additional 75,458 shares as selling
commissions in connection with such private placements.
Completion of all these equity offerings was dilutive to existing Company
stockholders, because the purchase prices for the Common Stock acquired, or the
exercise prices of the warrants acquired, in such offerings were significantly
below then market prices for the Company's Common Stock (which generally ranged
between approximately $2.00 and $3.00 per share during the applicable period).
In addition, future sales of Common Stock or of securities convertible into or
exercisable for Common Stock, at below market prices for the Common Stock, may
be necessary to obtain needed financing in the future. Such issuances would
result in further dilution to existing stockholders.
Although the Company was able to refinance approximately $4,500,000 of
indebtedness with Health Care Partners Funding, L.P. in August 1996, there can
be no assurance that the Company will be successful in obtaining additional
financing or that such financing, if obtained, will be on terms favorable to the
Company. The failure of the Company to obtain required financing on acceptable
terms could have a material adverse effect on its operations. In this regard,
investors should be aware that as of April 30, 1997, more than $1,186,266
otherwise available for working capital may have to be used to effect
settlements of amounts which may be owed by Universal to departments of the
State of California.
7. NO PROCEEDS TO THE COMPANY FROM THE OFFERING. Unless Public Warrants,
Underwriters' Warrants and/or the New Convertible Securities are exercised, the
Company will not receive any proceeds of this Offering to be applied to its
working capital. On July 7, 1997, the last sales price reported on Nasdaq for a
share of the Company's Common Stock was $2.6875 per share. Due to the fact that
the exercise price of the Class A Warrants is $3.30 per share, and the exercise
price of the Underwriters' Warrants is $4.62 per share, it is unlikely that any
of such warrants will be exercised without a significant increase in the market
price of the Company's Common Stock or a reduction in the exercise prices of
such securities. Even though the exercise prices of the New Convertible
Securities range between $1.00 per share and $2.50 per share, which is below the
current market price of the Common Stock, it is not possible to predict how many
of the New Convertible Securities will be exercised and the magnitude of the
proceeds, if any, realizable therefrom. In the absence of its receipt of
Offering proceeds, the Company may need to obtain an alternative source of
financing to supply its working capital needs for the future. There is no
guarantee that it will be able to obtain such alternative financing. See "Need
For Additional Financing" above.
8. SIGNIFICANT COMPETITION. The market for the Company's products is large
and fragmented. The Company has numerous competitors, including local
pharmacies, mail order catalogue businesses and many large nationwide retail
chains that are better financed than the Company. In addition, the barriers to
entry into the Company's business are relatively low.
9. SUBSTANTIAL INDEBTEDNESS AND CASH FLOW SHORTAGES; POTENTIAL CHANGE IN
CONTROL OF OPERATING SUBSIDIARIES. On March 31, 1997, the Company's total
balance sheet indebtedness was $17,128,040, of which (i) an aggregate of
$1,512,116 was owed to Fred Kassner, a private investor, under secured term
loans due
17
July 14, 1997 (which loans have since been retired), (ii) $567,061 was owed to a
principal stockholder, H. T. Ardinger, under a promissory note (which note has
since been retired) (iii) $5,543,139 was owed to Health Care Partners Funding,
L.P. under a revolving credit agreement and (iv) $1,923,329 was owed to the
holders of the Series A Preferred Stock pursuant to mandatory redemption
payments.
In August 1996, the Company and its operating subsidiaries (the "Providers")
entered into the Loan and Security Agreement, dated as of August 15, 1996 (the
"Health Partners Agreement"), with Health Care Partners Funding, L.P. The Health
Partners Agreement contains certain financial and operating covenants, including
requirements that the Company satisfy financial ratios, as well as prohibitions
on the payment of dividends on the Company's outstanding Common Stock, but which
permits the limited payment of dividends and redemption payments on the
Company's outstanding Preferred Stock.
The Company has suffered from repeated cash flow shortages in the past, and
may continue to suffer from such shortages in the future. If the Company incurs
unanticipated costs, has unanticipated write-offs of investments or other assets
or experiences further operating or other losses, the Company would need to
incur additional indebtedness or obtain other forms of financing to support its
ongoing operations, which would lead to a further increase in the Company's
leverage. This leverage (i) could adversely affect the ability of the Company to
obtain additional financing in the future for working capital, capital
expenditures or other purposes, should it need to do so, (ii) will require a
substantial portion of the Company's cash flow from operations to be dedicated
to debt service, (iii) may place the Company at a competitive disadvantage, if
it is more highly leveraged than its competitors, and (iv) may make the Company
more vulnerable to a downturn in its business. The Company is currently in
compliance with all financial and operating covenants under its indebtedness
agreements.
10. POTENTIAL LIABILITY TO THE COMPANY FROM FAILURE TO MEET PREFERRED STOCK
PAYMENTS. Based upon the Company's history of cash flow shortages, operating
losses and working capital shortages, it is not certain that the Company will
have the ability to pay the dollar amounts that it is obligated to pay under the
terms of the Series A and Series B Preferred Stock delivered to certain former
shareholders of the PCS Companies as part of the merger consideration in the PCS
Merger Agreement. As operating losses are expected to continue in the future,
and after taking into account the amounts that the Company may have to pay to
the State of California with respect to two current audits, in the event that no
additional financing is obtained by the Company there can be no assurance that
the Company will be able to pay such amounts under the Preferred Stock when due,
or at all. In the event that the Company is unable (whether contractually or
otherwise) to make the required payments under the terms of the Preferred Stock,
Preferred Stockholders may be able to compel the Company to pay such amounts at
a time when to do so could have adverse consequences for the Company's ongoing
business, and which payment could put the Company at risk of future insolvency.
In addition, were a court to determine that the Company had breached its charter
provisions by failing to make required payments on its Series A and Series B
Preferred Stock, the court could grant other relief which cannot now be
determined. See "No Dividends."
To date, the Company has made all required redemption payments on the Series
A Preferred Stock.
11. DEPENDENCE ON KEY PERSONNEL. The business of the Company is dependent
upon the active participation and technical expertise of its executive officers
and key personnel: Tod Robinson, Edward Buchholz, Alan Korby, Brian Bookmeier
and Matthew Gietzen. The loss of the services of one or more of such persons
would have a material adverse effect on the Company. The Company has employment
agreements with each of such named persons.
The Company has key man life insurance policies covering all of its key
personnel. In addition, the Company's ability to maintain a competitive position
depends, in part, on its ability to attract additional qualified personnel.
There is no assurance that the Company will be able to attract or retain such
persons in the future.
18
12. CONTROL BY MANAGEMENT. Messrs. Alan Korby, Brian Bookmeier, Matthew B.
Gietzen , Edward Buchholz and James Linesch beneficially own approximately 7.5%,
7.5%, 7.5%, 4.4%, and 1.4% of the outstanding voting securities of the Company
(the combination of outstanding Common Stock and Preferred Stock), respectively.
On that basis, all directors and executive officers of the Company, in the
aggregate, have the ability to vote approximately 28.3% of the Company's
outstanding voting securities. Insofar as the holders of voting securities do
not have cumulative voting rights under the Company's Certificate of
Incorporation, Messrs. Korby, Bookmeier, Buchholz, Gietzen and Linesch, the
current directors and nominees for, acting together, are currently in a position
to materially influence the outcome of issues to be voted on by the Company's
stockholders.
13. NO DIVIDENDS. Universal has not paid any cash dividends on its Common
Stock and the Company intends to follow a policy of retaining earnings, if any,
to finance the development and expansion of its business. The Company does not
expect to declare or pay any dividends on its Common Stock in the foreseeable
future. Furthermore, under the terms of the Health Partners Agreement which
provides for indebtedness secured by the trade receivables, the Company is
prohibited from declaring and paying any dividends on its Common Stock without
Health Care Partners Funding, L.P.'s consent. The Company is currently obligated
to make dividend and redemption payments on its outstanding Preferred Stock,
which payments are permitted under the Health Partners Agreement. See "Potential
Liability to the Company from Failure to Meet Preferred Stock Payments" above.
14. ADEQUACY OF INSURANCE. Universal currently has in place $3,000,000 of
product liability insurance coverage, plus a $10,000,000 umbrella liability
insurance policy also covering product liability claims, to protect it against
product liability claims brought by customers in connection with such customers'
purchases of products sold by Universal. Although the Company believes the
foregoing insurance coverage is customary and generally consistent with industry
practice, to the extent that such coverage is inadequate and the Company incurs
losses which are uninsured such losses could have a materially adverse effect
upon the Company and its capital resources.
15. COMPLETE DISCRETION IN APPLICATION OF PROCEEDS. Upon exercise of any of
the Public Warrants, the Underwriters' Warrants and/or the New Convertible
Securities, all of the net proceeds to the Company therefrom have been
designated for general corporate and working capital purposes and may be
expended at the discretion of the Company's management, although the Company may
be required to apply a portion of such amount to pay tax liabilities in
connection with its operations in California as the result of state audits. As a
result of the foregoing, any return on investment to investors will be
substantially dependent upon the discretion and judgment of the Company's
management with respect to the application and allocation of the net proceeds,
if any, to the Company of the Offering. See "No Proceeds to the Company from the
Offering" above and "USE of PROCEEDS."
16. ILLIQUIDITY OF COMPANY SECURITIES FROM POSSIBLE DELISTING AND RISK OF
LOW-PRICED SECURITIES. The Company's Common Stock is currently listed on Nasdaq
and on the Boston Stock Exchange. For continued Nasdaq listing, a company must
maintain at least $2,000,000 in total assets, at least $1,000,000 in net worth,
and a minimum bid price of $1.00 per share. For continued listing on the Boston
Stock Exchange, a company must maintain at least $1,000,000 in assets, the
market value of the public float must be at least $500,000, and stockholders'
equity must be at least $500,000. At this time, the Company meets continued
listing criteria on Nasdaq and on the Boston Stock Exchange. However, there can
be no assurance that the Company will be able to satisfy certain specified
financial tests and market related criteria required for continued quotation on
Nasdaq and the Boston Stock Exchange following the Offering. If the Company is
unable to satisfy the Nasdaq and the Boston Stock Exchange maintenance criteria
in the future, its Common Stock may be delisted from trading on Nasdaq and the
Boston Stock Exchange. If it did not qualify for such listing, trading, if any,
would thereafter be conducted in the over-the-counter market in the so-called
"pink sheets" or the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. ("NASD"), and consequently an investor could find it
more difficult to dispose or to obtain accurate quotations as to the price, of
the Company's securities.
19
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Commission regulations generally
define a penny stock to be an equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Such exceptions include any
equity security listed on Nasdaq and any equity security issued by an issuer
that has (i) net tangible assets of at least $2,000,000, if such issuer has been
in continuous operation for three years, (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average annual revenue of at least $6,000,000, if such issuer
has been in continuous operation for less than three years. Unless an exception
is available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith. At this time, the Company's equity
securities are not traded subject to the penny stock regulations.
In addition, if the Company's securities are not quoted on Nasdaq, or the
Company does not meet the other exceptions to the penny stock regulations cited
above, trading in its securities would be covered by Rule 15g-9 promulgated
under the Exchange Act for non-Nasdaq and non-exchange listed securities. Under
such rule, broker/dealers who recommend such securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Securities also are exempt from this
rule if the market price is at least $5.00 per share.
If the Company's securities become subject to the regulations applicable to
penny stocks, the market liquidity for the Company's securities could be
severely affected. In such an event, the regulations on penny stocks could limit
the ability of broker/dealers to sell the Company's securities and thus the
ability of purchasers of the Company's securities to sell their securities in
the secondary market.
17. ADVERSE IMPACT OF SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE.
No assurance can be given as to the effect, if any, that future sales of Common
Stock, or the availability of shares of Common Stock for future sales, will have
on the market price of the Common Stock from time to time. Sales of substantial
amounts of Common Stock (including shares issued upon the exercise of warrants
or stock options), or the possibility that such sales could occur, could
adversely affect the market price of the Common Stock and could also impair the
Company's ability to raise capital through an offering of its equity securities
in the future. Assuming exercise of all the Public Warrants, the Underwriters'
Warrants and the New Convertible Securities (other than the Class B Preferred
Stock), upon completion of the Offering the Company will have 13,293,521 shares
of Common Stock outstanding, of which the approximately 5,589,631 currently
publicly traded shares of Common Stock, the 3,793,942 shares to be acquired upon
exercise of the Public Warrants, the Underwriters' Warrants and the New
Convertible Securities, and the 2,705,144 Original Selling Stockholders' Shares
will be transferable without restriction under the Securities Act. The remaining
1,361,804 shares of Common Stock to be outstanding on completion of this
Offering are "restricted securities" (as that term is defined in Rule 144
promulgated under the Securities Act) which may be publicly sold only if
registered under the Securities Act or if sold in accordance with an applicable
exemption from registration, such as Rule 144. In general, under Rule 144 as
currently in effect, subject to the satisfaction of certain other conditions, a
person, including an affiliate of the Company, who has beneficially owned
restricted securities for at least one year, is entitled to sell (together with
any person with whom such individual is required to aggregate sales), within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class, or, if the Common
Stock is quoted on Nasdaq or a national securities exchange, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the immediately preceding
three months, and who has beneficially owned restricted securities for at least
two years, is entitled to sell such restricted shares under Rule 144 without
regard to any of the limitations described above. An aggregate of approximately
5,181,284 of the 9,724,579 currently outstanding shares of Common Stock owned by
current stockholders are "restricted securities" which are currently eligible
for sale pursuant to Rule 144.
20
18. DILUTIVE EFFECT OF ISSUANCE OF COMMON STOCK UPON CONVERSION OF PREFERRED
STOCK AND EXERCISE OF WARRANTS AND OPTIONS; DILUTIVE EFFECT OF POSSIBLE ISSUANCE
OF ADDITIONAL OPTIONS. The Company has reserved 500,000 shares of Common Stock
for issuance to employees, including officers, and to directors pursuant to the
Company's 1992 Stock Option Plan, and has reserved 550,000 shares of Common
Stock for issuance to Management and others under its Management Non-Qualified
Stock Option Plan. Of such amounts, options exercisable to acquire an aggregate
of 410,000 shares have been granted. In addition, the Company has reserved for
issuance (i) an additional 175,000 shares of Common Stock underlying an option
granted to Edward Buchholz in connection with the acquisition of Diabetes Self
Care (the "Acquisition Option"), (ii) an additional 100,000 shares of Common
Stock underlying a five-year warrant issued to Robert M. Rubin (the "Rubin
Warrant") and (iii) an additional 50,000 shares of Common Stock underlying a
five-year warrant issued to Damon Testaverde (the "Testaverde Warrant")
(collectively, the "Loan Consideration Warrants"), (iv) 416,667 shares
underlying the Compensation Warrants granted to Messrs. Bookmeier,
Korby, Gietzen and Buchholz, (v) 115,000 shares of Common Stock underlying the
Waiver Warrants, (vi) 35,000 shares of Common Stock underlying the Additional
Waiver Warrants, (vii) 350,000 shares of Common Stock underlying options granted
to Mr. Buchholz under his employment agreement (the "Employment Options"),
(viii) 100,000 shares of Common Stock underlying options granted to Richard
Hough under his employment agreement (the "Additional Employment Options"), (ix)
375,000 shares of Common Stock underlying options granted to Health Care
Partners Funding, L.P. in connection with its refinancing of Company
indebtedness (the "Funding Options"), (x) 225,000 shares of Common Stock
underlying warrants granted to Health Care Partners Funding, L.P. in
consideration of certain amendments for the Company's financing agreements (the
"Funding Warrants") and (xi) 30,000 shares of Common Stock underlying options
granted to Tod Robinson (the "Robinson Options"). Therefore, under the 1,707,875
publicly traded warrants issued by the Company (the "Public Warrants"), the
114,400 warrants issued to underwriters of the Company's 1992 public offering
(the "Underwriter's Warrants"), the 175,000 Acquisition Options, the 150,000
Loan Consideration Warrants, the 115,000 Waiver Warrants, the 35,000 Additional
Waiver Warrants, the 410,000 options granted under the Company's option plans,
the 416,667 Compensation Options, the 350,000 Employment Options, the 100,000
Additional Employment Options, the 375,000 Funding Options, the 225,000 Funding
Warrants and the 30,000 Robinson Options there are a total of 4,028,942
additional shares of Common Stock which, upon full exercise of such options and
warrants, will enter the market. Furthermore, 1,000,000 shares of the Series B
Preferred Stock delivered to certain of the former PCS Companies' stockholders
are convertible into 500,000 shares of Common Stock. Immediately after the
Offering, assuming full exercise of the Public Warrants, the Underwriters'
Warrants and the New Convertible Securities, conversion of the Series B
Preferred Stock and exercise of other currently outstanding stock options and
warrants available for issuance under the Company's stock option plans or
otherwise, an aggregate of 4,528,942 additional shares of Common Stock will be
outstanding. In addition, the former principal stockholders of the PCS Companies
have registration rights with respect to the shares of Common Stock acquired as
a result of the Merger. The conversion of the outstanding Series B Preferred
Stock issued to the former PCS Companies' stockholders, or the exercise of other
outstanding options, and the sale of shares of Common Stock underlying such
securities (or even the potential of such exercise or sale) may have a
depressive effect on the market price of the Company's securities.
The existence, exercise and conversion of all securities referred to above,
as well as the granting of additional employee plan options, and other rights to
acquire Company securities, may prove to be a hindrance to future financings by
the Company. The terms upon which the Company may be able to obtain additional
equity capital may be adversely affected since the holders of the outstanding
Series B Preferred Stock and options can be expected to exercise them, at a time
when the Company would, in all likelihood, be able to obtain any needed capital
on terms more favorable to the Company. Finally, the exercise of any such
options or warrants may further dilute the net tangible book value of the Common
Stock. The Company has agreed that, under certain circumstances, it will
register the sale under federal and state securities laws of certain of the
shares of Common Stock underlying such securities, including the shares
21
subject to this Offering. Exercise of these registration rights has involved,
and could in the future involve, substantial expense to the Company and may
adversely affect the terms upon which the Company may obtain additional
financing.
19. POSSIBLE ANTI-TAKEOVER EFFECT OF ISSUANCE OF PREFERRED STOCK. The
Company's Articles of Incorporation authorize the issuance of 10,000,000 shares
of "blank check" Preferred Stock, with designations, rights and preferences
determined from time to time by its Board of Directors. Accordingly, the
Company's Board of Directors is empowered, without further stockholder approval,
to issue Preferred Stock with dividend, liquidation, conversion, voting or other
rights that could adversely affect the voting power or other rights of the
holders of the Common Stock. In the event of issuance, the Preferred Stock could
be used, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Except for an aggregate of
1,444,667 shares of Preferred Stock outstanding and issued to certain former
stockholders of the PCS Companies, the Company has no current plans to issue any
additional shares of Preferred Stock. However, there can be no assurance that
Preferred Stock will not be issued at some time in the future.
20. COSTS RESULTING FROM NECESSITY OF CONTINUING POST-EFFECTIVE AMENDMENTS
TO THE COMPANY'S REGISTRATION STATEMENT AND STATE BLUE SKY REGISTRATION;
EXERCISE OF PUBLIC WARRANTS DEPENDENT ON CURRENT REGISTRATION STATEMENT; COSTS
RESULTING FROM OBLIGATIONS TO SELLING STOCKHOLDERS. Although the Public Warrants
were not knowingly sold by the Company to purchasers in jurisdictions in which
the Public Warrants were not registered or otherwise qualified for sale,
purchasers may buy Public Warrants in the after-market or may move to
jurisdictions in which the Public Warrants and the Common Stock underlying the
Public Warrants are not so registered or qualified. In this event, the Company
would be unable to issue Common Stock to those persons desiring to exercise
their Public Warrants unless and until the Public Warrants and the underlying
Common Stock are qualified for sale in jurisdictions in which such purchasers
reside, or an exemption from such qualification exists in such jurisdictions. In
addition, any additional equity financing may result in further dilution to
Company stockholders resulting from the issuance of Common Stock or securities
exercisable for or convertible into Common Stock. There can be no assurance that
the Company will be able to effect any required qualification.
The Public Warrants will not be exercisable unless the Company maintains a
current Registration Statement on file with the Commission through
post-effective amendments to the Registration Statement containing this
Prospectus. Although the Company has agreed to file appropriate post-effective
amendments to the Registration Statement containing this Prospectus, and to
maintain a current Registration Statement on file with the Commission relating
to the Public Warrants, there can be no assurance that such will be accomplished
or that the Public Warrants will continue to be so registered.
The Company has undertaken to maintain a current registration statement with
regard to the Shares after the date of this Prospectus until all such shares
have been sold or are otherwise capable of being sold pursuant to an exemption
from the registration requirements of the Securities Act. The obligation to
maintain a current registration statement may impose a financial burden on the
Company and create a contractual liability of the Company to the Selling
Stockholders.
21. LIMITATION ON NET OPERATING LOSS CARRYFORWARDS. The Company had net
operating loss carryforwards for tax purposes totaling $5,150,000 at June 30,
1996, which expire between the years 2004 and 2011. However, the Company is
limited in the amount of annual usage of those carryforwards during such period
due to certain restrictions imposed by the Internal Revenue Code. As a result,
to the extent the Company has taxable income during such period, the Company may
be subject to higher income taxes than it would otherwise incur given the
limited amount of such carryforwards which may be available for use in any one
year during such period.
22
USE OF PROCEEDS
On the assumption that all of the Public Warrants, Underwriters' Warrants
and New Convertible Securities are exercised, the net proceeds which the Company
will receive from such exercise, after deduction of expenses of this Offering,
will be approximately $9,600,000. The Company intends to utilize the net
proceeds of the Offering for working capital and general corporate purposes. To
the extent that less than all of the Public Warrants, Underwriters' Warrants and
New Convertible Securities are exercised and the Company receives less than the
approximate $9,600,000 of net proceeds of the Offering, such net proceeds will
still be added to working capital and used for general corporate purposes,
including expansion of its marketing programs, additional inventory, financing
receivables growth and delays in third-party reimbursement payments. Unless any
of such warrants and options are exercised, the Company will not receive any
proceeds of this Offering. The Company will not receive any proceeds from the
resale by the holders of any of the Public Warrants, Underwriters' Warrants or
New Convertible Securities.
On July 7, 1997, the last sales price reported on Nasdaq for a share of the
Company's Common Stock was $2.6875 per share. Due to the fact that the exercise
price of the Class A Warrants is $3.30 per share, and the exercise price of the
Underwriters' Warrants is $4.62 per share, it is unlikely that any of such
warrants will be exercised without a significant increase in the market price of
the Company's Common Stock or a reduction in the exercise prices of such
warrants. Although it is possible that certain of the New Convertible Securities
will be exercised, insofar as the New Convertible Securities are exercisable at
prices ranging from $1.00 to $2.50 per share, it is not possible to predict how
many of the warrants and options will be exercised and the magnitude of the
proceeds, if any, realizable therefrom. See "RISK FACTORS-- No Proceeds to the
Company from the Offering."
(The remainder of this page has been intentionally left blank.)
23
PLAN OF DISTRIBUTION AND SELLING STOCKHOLDERS
Common Stock issuable upon exercise of the Public Warrants is distributed
when and as such Public Warrants are exercised by Warrant holders. No Public
Warrants have been exercised as of the date indicated on the cover of this
Prospectus. The Company may solicit the exercise of the Public Warrants at any
time. The Company may also reduce the exercise price of the Public Warrants in
order to encourage their exercise.
In December 1992, Westfield Financial Corporation, Lew Lieberbaum & Co.,
Inc. and Tamaron Investments, Inc. (the "Underwriters") acted as the
underwriters of the Company's 1992 Public Offering in which the Company sold
571,900 Units of securities to the public (with each Unit consisting of three
shares of Common Stock, two Class A Warrants and one Class B Warrant), and
selling securityholders sold 155,900 shares of Common Stock. The exercise price
and the other terms of the Public Warrants were determined by negotiation
between the Company and the Underwriters.
The following table sets forth certain information with respect to the
Selling Stockholders for whom the Company is registering the Shares for resale
to the public. The Company will not receive any of the proceeds from the sale of
the Shares by the Selling Stockholders. Beneficial ownership of the Shares by
such Selling Stockholders after this Offering will depend on the number of
shares sold by each Selling Stockholder. Assuming all of the Shares being
offered hereby are sold, the Selling Stockholders will not beneficially own any
Common Stock in the Company, except as identified below.
PERCENTAGE OF
SHARES OF
COMMON STOCK OUTSTANDING COMMON STOCK
SHARES OF REGISTERED FOR OWNED
COMMON STOCK OFFERING WITH ------------------------
NAME AND ADDRESS BENEFICIALLY THIS BEFORE AFTER
OF BENEFICIAL OWNER OWNED PROSPECTUS OFFERING OFFERING
- --------------------------------------------------------------- -------------- -------------- ----------- -----------
Robert L. Moody, Jr............................................ 607,560 607,560 6.1% -0-
2302 Post Office Street
Suite 601
Galveston, TX 77550(1)
Fred Kassner................................................... 1,951,950 1,951,950 18.6% -0-
59 Spring Street
Ramsey, New Jersey (2)
Kenneth F. Payne............................................... 24,691 24,691 * -0-
5115 Bernard Drive
Suite 201
Roanoke, VA 24018
Clayton R. Wisely.............................................. 81,691 81,691 * -0-
230 North Lewis Street
Staunton, VA 24401
Susan Kaufman and Peter Fishbein............................... 50,000 50,000 * -0-
430 East 86th Street
New York, New York 10028
Stanley Gulkin................................................. 13,889 13,889 * -0-
9 Natalie Drive
West Caldwell, NJ 07006
Edward Buchholz................................................ 601,358 601,358 5.8% *
3601 Thirlane Road, NW
Roanoke, VA 24019(3)
Brian Bookmeier................................................ 579,148 125,000 5.8% 4.6%
11585 Farmington Road
Livonia, MI 48150(4)
24
PERCENTAGE OF
SHARES OF
COMMON STOCK OUTSTANDING COMMON STOCK
SHARES OF REGISTERED FOR OWNED
COMMON STOCK OFFERING WITH ------------------------
NAME AND ADDRESS BENEFICIALLY THIS BEFORE AFTER
OF BENEFICIAL OWNER OWNED PROSPECTUS OFFERING OFFERING
- --------------------------------------------------------------- -------------- -------------- ----------- -----------
Alan Korby..................................................... 574,148 125,000 5.7% 4.5%
11585 Farmington Road
Livonia, MI 48150(5)
Matthew Gietzen................................................ 577,147 125,000 5.8% 4.6%
11585 Farmington Road
Livonia, MI 48150(6)
Robert M. Rubin................................................ 613,798 100,000 6.2% 5.3%
6060 KingsGate Circle
Delray Beach, FL 33484(7)
Damon Testaverde............................................... 437,372 125,458 4.4% 3.2%
580 Oakdale Street
Staten Island, NY 13012(8)
Health Care Partners Funding, L.P.............................. 600,000 600,000 5.8% -0-
2 Wisconsin Circle
Suite 320 Chevy Chase, MD 20815(9)
Richard Hough.................................................. 100,000 100,000 1.0% -0-
3601 Thirlane Road, NW
Roanoke, VA 24019 (10)
Tod Robinson................................................... 30,000 30,000 * -0-
12744 Via Nieve
San Diego, CA 92130 (11)
Ida Borgonovo.................................................. 155,000 155,000 1.6% -0-
55 Quarto Annuviziata
Rome, Italy 00189
Michele Farina................................................. 95,000 95,000 1.0% -0-
Via Ruggiero 22
Caserta, Italy 81100
Giovanni Giordano.............................................. 20,000 20,000 * -0-
Assunta Giordano
Joint Tenants
Viale Cappiello 90
Caserta, Italy 81100
Lorena Trabucco................................................ 10,000 10,000 * -0-
Via Laviano 64
Caserta, Italy 81100
Angelina Panvini............................................... 220,000 220,000 2.3% -0-
Via Laviano 64
Caserta, Italy 81100
- ------------------------
* Less than 1%
(1) Includes 307,560 shares of Common Stock underlying the Public Warrants which
are part of the securities being registered hereby.
(2) Includes 642,535 shares of Common Stock underlying the Public Warrants and
100,000 shares of Common Stock underlying the Waiver Warrants which are part
of the securities being registered hereby.
(3) Includes the shares underlying 350,000 Employment Options, 175,000
Acquisition Options and 41,667 Compensation Options.
25
(4) Includes 166,667 shares of Common Stock issuable upon conversion of Mr.
Bookmeier's 333,334 shares of Series B Preferred Stock, and the shares
underlying 125,000 Compensation Options.
(5) Includes 166,666 shares of Common Stock issuable upon conversion of Mr.
Korby's 333,333 shares of Series B Preferred Stock, and the shares
underlying 125,000 Compensation Options.
(6) Includes 166,666 shares of Common Stock issuable upon conversion of Mr.
Gietzen's 333,333 shares of Series B Preferred Stock, and the shares
underlying 125,000 Compensation Options.
(7) Includes the shares underlying 100,000 Loan Consideration Warrants.
(8) Includes 150,000 options granted under the 1992 Employee Stock Option Plan
exercisable at $1.50 per share, and the shares underlying 50,000 Loan
Consideration Warrants.
(9) Includes the shares underlying 375,000 Funding Options exercisable at $2.50
per share.
(10) Includes the shares underlying 100,000 Additional Employment Options.
(11) Includes the shares underlying 30,000 Robinson Options.
The Selling Stockholders have advised the Company that sales of the Shares
may be effected from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Common Stock or a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares directly to
purchasers or through broker-dealers that may act as agents or principals. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of shares of
Common Stock for whom such broker-dealers may act as agents or to whom they sell
as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions).
The Selling Stockholders and any broker-dealers that act in connection with
the sale of the Shares as principals may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act and any commissions received
by them and any profit on the resale of the shares of Common Stock as principals
might be deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares of Common Stock against certain liabilities, including liabilities
arising under the Securities Act. The Company will not receive any proceeds from
the sales of the Shares by the Selling Stockholders. Sales of the Shares by the
Selling Stockholders, or even the potential of such sales, would likely have an
adverse effect on the market price of the Common Stock.
At the time a particular offer of Shares is made by or on behalf of the
Selling Stockholders, to the extent required, a Prospectus will be distributed
which will set forth the number of Shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for Shares purchased from the
Selling Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.
Under the Exchange Act, and the regulations thereto, any person engaged in a
distribution of the securities of the Company offered by this Prospectus may not
simultaneously engage in market-making activities with respect to such
securities of the Company during the applicable "cooling-off" period (two or
nine days) prior to the commencement of such distribution. In addition, and
without limiting the foregoing, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rule 10b-6 and 10b-7, in connection
with transactions in such securities, which provisions may limit the timing of
purchases and sales of such securities by the Selling Stockholders.
26
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon for the
Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, 153 East 53rd
Street, New York, New York 10022.
EXPERTS
The financial statements of Universal Self Care, Inc. incorporated in this
Prospectus from the Company's 1996 Annual Report on Form 10-KSB and Annual
Report on Form 10-KSB/A have been audited by Feldman Radin & Co., P.C.
independent auditors, as stated in their report, which is incorporated by
reference herein, and has been so incorporated by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED HEREBY, OR AN OFFER TO SELL OR SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
------------------------
TABLE OF CONTENTS
PAGE
---------
Available Information........................... 3
Incorporation of Certain Documents by
Reference..................................... 3
Prospectus Summary.............................. 4
Risk Factors.................................... 13
Use of Proceeds................................. 23
Plan of Distribution and Selling Stockholders... 24
Legal Matters................................... 27
Experts......................................... 27
1,707,875 SHARES OF COMMON STOCK
INCLUDED IN 1,707,875 CLASS A
COMMON STOCK PURCHASE WARRANTS
------------------------
114,400 SHARES OF COMMON STOCK
INCLUDED IN 114,400 CLASS C
COMMON STOCK PURCHASE WARRANTS
------------------------
2,705,144 SHARES OF COMMON STOCK
FOR CERTAIN SELLING STOCKHOLDERS
------------------------
1,971,667 SHARES OF
COMMON STOCK
INCLUDED IN 1,971,667
NEW CONVERTIBLE SECURITIES
UNIVERSAL SELF
CARE, INC.
---------------------
PROSPECTUS
---------------------
JULY , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses (other than selling
commissions) which will be paid by Universal Self Care, Inc. (the "Registrant")
in connection with the issuance and distribution of the securities being
registered. With the exception of the Registration fee and the NASD filing fee,
all amounts shown are estimates.
Registration fee................................................... $ 2,556
NASDAQ fee......................................................... 10,000
Boston Stock Exchange Fee.......................................... 10,000
Blue sky fees and expenses (including legal and filing fees)....... 5,000*
Printing and engraving expenses.................................... 10,000*
Legal fees and expenses............................................ 25,000*
Accounting fees and expenses....................................... 5,000*
Transfer Agent fees and expenses................................... 3,000*
Miscellaneous expenses............................................. 1,444
---------
Total.............................................................. $ 72,000*
---------
---------
- ------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Seventh of the Certificate of Incorporation of the Registrant
eliminates the personal liability of directors to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, however, that such elimination of the personal liability of a director
of the Registrant does not apply to (i) any breach of the director's duty of
loyalty to the Registrant or its stockholders, including, but not limited to,
any appropriation, in violation of his duties, of any business opportunity of
the Registrant, (ii) acts or omissions which involve intentional misconduct or a
knowing violation of law, (iii) actions prohibited under Section 174 of the
Delaware General Corporation Law (i.e., liabilities imposed upon directors who
vote for or assent to the unlawful payment of dividends, unlawful repurchases or
redemption of stock, unlawful distribution of assets of the Registrant to the
stockholders without the prior payment or discharge of the Registrant's debts or
obligations, or unlawful making or guaranteeing of loans to directors), or (iv)
any transaction from which the director derived an improper personal benefit. In
addition, Article Ninth of the Registrant's Certificate of Incorporation, as
amended, provides that the Registrant shall indemnify its corporate personnel,
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law, as amended from time to time.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and,
II-1
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he 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 reasonable cause to
believe that his conduct was unlawful.
Section 145 further provides that a corporation may indemnify a person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. To the extent that a director, officer,
employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith. Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of any undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
The indemnification and advancement of expenses provided by, or granted
pursuant to, Section 145 of the Delaware General Corporation Law shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
The Selling Stockholder Agreements that Selling Stockholders are being asked
to sign contain, among other things, provisions whereby the Selling Stockholders
agree to indemnify the Registrant, each officer and director of the Registrant
who has signed the Registration Statement and each person who controls the
Registrant within the meaning of Section 15 of the Securities Act, against any
losses, liabilities, claims or damages arising out of alleged untrue statements
or alleged omissions of material facts with respect to information furnished to
the Registrant by Selling Stockholders for use in the Registration Statement or
Prospectus. See "UNDERTAKINGS."
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. EXHIBITS.
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
3.1(a) Certificate of Incorporation of the Company. (1)
3.1(b) Certificate of Renewal of Charter of the Company. (1)
3.1(c) Certificate of Amendment of Charter of the Company. (3)
3.2 By-Laws of the Company. (3)
3.3 Certificate of Designations, Preferences and Relative, Participating, Optional or other special rights
of Series A Redeemable Preferred Stock. (4)
3.4 Certificate of Designations, Preferences and Relative, Participating, Optional or other special rights
of Series B Convertible Preferred Stock. (4)
4.1(a) Specimen Certificate of the Company's Common Stock. (2)
4.1(b) Specimen of Redeemable Common Stock Purchase Warrant. (5)
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel.
23.1 Consent of Feldman Radin & Co., P.C.
23.2 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel (included in Exhibit 5.1).
- ------------------------
(1) Incorporated by reference, filed as an exhibit to the Registrant's
Registration Statement on Form S-1 filed on August 3, 1992, SEC File No.
33-50426.
(2) Incorporated by reference, filed as an exhibit to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1 filed on October 13, 1992.
(3) Incorporated by reference, filed as an exhibit to Amendment No. 2 to the
Registrant's Registration Statement on Form S-1 filed on November 10, 1992.
(4) Incorporated by reference, filed as an Exhibit to the Company's Current
Report on Form 8-K, filed on April 19, 1995.
(5) Incorporated by reference, filed as an exhibit to Amendment No. 4 to the
Registrant's Registration Statement on Form S-1 filed on December 4, 1992.
B. FINANCIAL STATEMENT SCHEDULES
None Required.
ITEM 17. UNDERTAKINGS.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(2) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in
II-3
the aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(3) To include any additional or changed material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement;
(b) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange 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.
3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
4. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has fully caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Livonia, Michigan, on the 2nd day of July, 1997.
UNIVERSAL SELF CARE, INC.
BY: /S/ BRIAN BOOKMEIER
-----------------------------------------
Brian Bookmeier, President and
Chief Executive Officer
POWER OF ATTORNEY
UNIVERSAL SELF CARE, INC. and each of the persons whose signature appears
below hereby constitutes and appoints BRIAN BOOKMEIER AND ALAN KORBY, and each
of them singly, such person's true and lawful attorneys-in-fact, with full power
to them and each of them to sign for such person and in such person's name, in
the capacities indicated below, any and all amendments to this Registration
Statement, hereby ratifying and confirming such person's signature as it may be
signed by said attorney-in-fact to any and all amendments to said Registration
Statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------------------------------------- ------------------------------------------------------ ----------------
/s/ BRIAN BOOKMEIER President, Chief Executive July 2, 1997
Brian Bookmeier Officer, Acting Chief Financial
and Chief Accounting Officer and
Director
/s/ ALAN KORBY Vice President and Director July 2, 1997
Alan Korby
/s/ MATTHEW GIETZEN Vice President and Director July 2, 1997
Matthew Gietzen
/s/ EDWARD BUCHHOLZ Vice President and Director July 2, 1997
Edward Buchholz
/s/ STEVEN LEICHTER, M.D. Director July 2, 1997
Steven Leichter, M.D.
/s/ JAMES LINESCH Director July 2, 1997
James Linesch
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