AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 2002
FILE NO. 333-74172
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LIFEPOINT, INC.
(Exact Name of Registrant as Specified in Its Charter)
<Table>
DELAWARE 33-0539168
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
1205 SOUTH DUPONT STREET, ONTARIO, CALIFORNIA 91761
(Address of Principal Executive Offices (Zip Code)
</Table>
MS. LINDA H. MASTERSON
LIFEPOINT, INC.
1205 SOUTH DUPONT STREET
ONTARIO, CA 91761
(909) 418-3023
(Name, Address and Telephone Number of Agent for Service)
COPY TO:
ROBERT W. BEREND, ESQ.
WACHTEL & MASYR, LLP
110 EAST 59TH STREET
NEW YORK, N.Y. 10022
(212) 909-9602
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(4) PER UNIT(1)(3) OFFERING PRICE REGISTRATION FEE(2)
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Common Stock $.001 par value, shares to be
offered by selling stockholders............... 6,841,491 $4.30 $29,418,411 $2,706
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</Table>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Rounded to the nearest dollar.
(3) The closing sales price of the Common Stock as reported on the American
Stock Exchange on February 15, 2002 was taken as the offering price of the
shares and is used solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) under the Securities Act of 1933.
(4) An indeterminate number of shares of the Common Stock are being registered
pursuant to Rule 416 under the Securities Act to cover any adjustment in the
number of shares issuable upon the conversion of the Series C convertible
preferred stock or the exercise of the warrants as a result of any dilution
resulting from stock splits, stock dividends or similar transactions.
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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6,841,491 SHARES
LIFEPOINT, INC.
COMMON STOCK
We, LifePoint, Inc., are not offering for sale any securities pursuant to
this prospectus. Instead, all but four of the selling stockholders named in the
list beginning on page 34 of this prospectus will be selling shares of our
common stock as follows:
- 2,719,801 shares which are issuable upon the conversion of 233,059 shares
of our Series C convertible preferred stock which were sold to them as
part of units in a private placement closed by us in June and September
2001,
- 2,719,766 shares which are issuable upon the exercise of warrants which
were purchased as part of the units,
- 815,940 shares which are issued or which we estimate will be issuable
upon the quarterly redemption of premium (in lieu of dividends) with
respect to the shares of our Series C convertible preferred stock, and
11,352 shares which were issued in lieu of premium being redeemed with
respect to certain of these shares, and
- 99,505 shares which is our current estimate as to the shares which are
issuable pursuant to a provision that calls for compensatory payments
with respect to the securities sold in the private placement.
In addition, six selling stockholders named in the list will be selling
475,127 shares of our common stock which are issuable upon the exercise of
warrants issued in partial payment of a placement agent's fee and four finders'
fees in connection with the above-mentioned private placement.
The selling stockholders, or their pledgees, donees, transferees or other
successors-in-interest, may offer the shares of our common stock for resale on
the American Stock Exchange, in the third market, in isolated transactions, or
in a combination of such methods of sale. Their shares may be sold at fixed
prices that may be changed, at market prices prevailing at the time of sale, at
prices related to prevailing market prices, or at negotiated prices with
institutional or other investors.
Our common stock is currently listed on the American Stock Exchange under
the symbol: LFP. On February 15, 2002, the closing sales price as so reported
was $4.30 per share.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated , 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
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Summary..................................................... 3
Risk Factors................................................ 7
Use of Proceeds............................................. 19
Material Changes............................................ 20
Plan of Distribution........................................ 27
Selling Stockholders........................................ 32
Interests of Named Experts and Counsel...................... 45
Incorporation of Certain Information by Reference........... 45
</Table>
2
SUMMARY
Because the following is a summary, it does not contain all of the
information that may be important to you as a prospective purchaser of shares of
our common stock from a selling stockholder. You should read this entire
prospectus carefully, including the risk factors, and the periodic reports filed
by us pursuant to the Securities Exchange Act of 1934 before you decide to
purchase a share of our common stock. You may find a list of our current
periodic reports under the caption "Incorporation of Certain Information by
Reference" in this prospectus.
KEY QUESTIONS AND ANSWERS.
1. WHO ARE WE?
We, LifePoint, Inc., are a Delaware corporation, with our corporate office
and manufacturing plant at 1205 South Dupont Street, Ontario, California 91761.
Our research and development facility is located at 10400 Trademark Street,
Rancho Cucamonga, California 91730. Our telephone number is (909) 418-3000. You
should make inquiries relating to this prospectus to Michele A. Clark, our Chief
Accounting Officer, by writing to her at our Ontario, California address or by
calling her at (909) 418-3000.
2. WHAT BUSINESS ARE WE IN?
We have developed, are manufacturing and have now started marketing a
saliva-based, on-site diagnostic test system that initially tests simultaneously
for drugs of abuse and alcohol. We have identified 11 markets for our initial
products. However, our initial focus is:
- law enforcement/criminal justice for testing of drivers and suspects and
for use in drug courts and in probation and parole hearings,
- the industrial workplace for pre-employment and employee testing and
- for emergency medical diagnostic applications.
We are currently completing preparation for launch of our product. This
includes the sales training of our personnel and that of our exclusive
distributor to the law enforcement market in the United States. In addition, we
are currently conducting testing of our first product at potential customer
locations prior to the market launch of this product. Our first product uses
technology licensed to us from the United States Navy and our own patented
technologies. Our initial product, the LifePoint(R) IMPACT(TM) Test System, uses
a person's saliva to test on-site, for the presence of alcohol and drugs of
abuse, such as cocaine, heroin and marijuana. Our proprietary system consists of
a small instrument with integrated software to automatically process the sample
collection, test the sample and generate hardcopy test results. It requires a
fully contained disposable saliva test module that consists of a mouthpiece for
collecting the sample, connected to a test cassette that serves as an automatic
sample collection device, sample processing and reaction/read chamber for up to
ten different test analyses. Our initial target markets will be first law
enforcement and subsequently the medical emergency room and the industrial
workplace.
We anticipate that the only obstacle to our not launching our product when
currently contemplated (in late February 2002) would be a currently
unanticipated problem relating to the performance of our product as revealed in
our product tests at potential customer sites.
3
In later years, we plan that, as our research and development efforts
continue, we will make our non-invasive on-site diagnostic device available for
other uses. Potential uses include long-term therapeutic drug monitoring, rapid
diagnostic testing, disease-state testing and wellness/health screening.
3. WHAT IS OUR RECORD OF REVENUES AND EARNINGS?
We had our first revenues ($22,910) in December 2001. We had no revenues
prior to that date because we had not offered for sale any product or services.
Through December 31, 2001, we incurred net losses of $34,303,558. We do not
expect the marketing launch of the IMPACT Test System earlier than in late
February 2002. Accordingly, we anticipate that our operational losses will
continue through this quarter ending March 31, 2002 and probably for at least
five additional quarters after the quarter in which we launch the product, if
not longer.
4. DO WE NEED ANY GOVERNMENTAL APPROVALS TO BEGIN MARKETING?
For us to market our testing device to hospitals and other medical
facilities in the United States, we must first obtain clearance from the United
States Food and Drug Administration (the "FDA"). We currently expect to submit
our product to the FDA for clearance no later than during the quarter ending
June 30, 2002. Based on the current average experiences of other companies as
tracked by an industry group, we expect to get such clearance approximately 100
days later. However, we could be delayed in our submission. In addition, the FDA
may not clear the product when submitted. In addition, even if this agency
clears our product, we may receive this clearance later than we anticipate.
Based on the FDA's regulations proposed in November 2000, we may also
require FDA approval to sell to the industrial market in the United States. We
and others are currently attempting to dissuade the FDA from finalizing this
policy. However, we are simultaneously collecting clinical data in the event
that we have to make an application to the FDA for clearance at the same time as
we make our application for medical use as described in the preceding paragraph.
We do not require any governmental approvals to market the IMPACT Test
System to law enforcement agencies in the United States and to market our
product outside the United States. We currently anticipate that we will have our
market launch to the law enforcement market in late February 2002.
5. WHAT SECURITIES ARE WE OFFERING PURSUANT TO THIS PROSPECTUS?
We are not offering any securities pursuant to this prospectus. Persons or
entities who or which acquired units in our sixth private placement pursuant to
Regulation D under the Securities Act of 1933 will make substantially all of the
sales of shares of our common stock pursuant to this prospectus. These units
consisted of shares of our Series C preferred stock (which shares are
convertible into shares of our common stock) and warrants. We held three
closings with respect to this offering -- on June 20, June 29 and September 28,
2001. We do not intend to offer or sell any additional units.
An entity exercising three warrants and each of four entities and a person
exercising a warrant will sell other shares of our common stock pursuant to this
prospectus. All of these warrants were granted as partial compensation for
serving as a placement agent or a finder in the private placement described in
the preceding paragraph. In addition, the holders of our Series C preferred
stock and the related warrants may also sell shares of our common
4
stock when and if they receive these shares as compensatory payments with
respect to their shares of our Series C preferred stock and warrants. All of
these persons or entities (including three transferees of six entities) will be
referred to in this prospectus as the "selling stockholders". They are named in
the list beginning on page 34 of this prospectus. The selling stockholders also
will include pledgees, donees, transferees or other successors-in-interest of
the foregoing named persons or entities.
The selling stockholders will offer, as of the date of this prospectus:
- 2,719,801 shares when and if 233,059 shares of our Series C preferred
stock are converted.
- 815,940 shares which is our current estimate (of which 126,400 shares
have been issued) as to the shares to be issued by us upon our quarterly
redemptions of premium with respect to the 233,059 shares of our Series C
preferred stock during the period which began September 30, 2001 and ends
June 30, 2004.
- 11,352 shares which were issued by us to the purchasers of the units on
September 28, 2001 in lieu of our redeeming premium because of the long
delay between their subscriptions and the closing.
- 99,505 shares of our common stock which is our current estimate as to the
shares which may be issued by us pursuant to the provision that calls for
compensatory payments with respect to our Series C preferred stock and
investor warrants.
- 2,719,766 shares when and if the warrants we issued to the investors are
exercised.
- 444,792 shares when and if the warrants we issued to the placement agent
are exercised.
- 30,335 shares when and if the warrants we issued to finders or their
transferees are exercised.
The selling stockholders may, as an alternative to their offering pursuant
to this prospectus the aggregate of 6,841,491 shares of our common stock, seek
to sell such shares, when permissible, pursuant to the exemption of Rule 144
under the Securities Act of 1933.
In addition to the above securities, the selling stockholders also own, as
of the date of this prospectus, an aggregate of 160,857 shares of our Series C
preferred stock and warrants to purchase an aggregate of 1,877,236 shares of our
common stock. These other securities were also purchased in the aforementioned
private placement and are held in escrow. They also own an aggregate of 103,308
shares of our common stock which we issued in redemption of premium and 834
shares of our common stock which we issued in lieu of redemption of premium
which are held in escrow. None of the shares of our common stock relating to
these escrowed securities are being offered by the selling stockholders pursuant
to this prospectus. As the notes to the table beginning on page 38 of this
prospectus indicate, certain of the selling stockholders beneficially own other
shares of our common stock which are also not being offered pursuant to this
prospectus.
6. WHAT IS THE OFFERING PRICE PURSUANT TO THIS PROSPECTUS?
The selling stockholders have advised us that they will sell, from time to
time, the shares of our common stock at the prices quoted for our common stock
on the American Stock Exchange, in the third market, in isolated transactions,
or in a combination of such methods of sale. They may sell their shares at fixed
prices that may be changed, at market
5
prices prevailing at the time of sale, at prices related to prevailing market
prices, or at negotiated prices with institutional or other investors. Our
common stock is currently listed on the American Stock Exchange under the
symbol: LFP. On February 15, 2002, the closing sales price as so reported was
$4.30 per share. The selling stockholders have also advised us that they may
sell their shares, when permissible, pursuant to the exemption of Rule 144 under
the Securities Act of 1933. There will be no underwriter's discounts or
commissions, except for the charges to selling stockholder if he, she or it
sells through his, her or its broker-dealer.
7. WILL WE RECEIVE ANY PROCEEDS AS A RESULT OF SALES OF SHARES PURSUANT TO THIS
PROSPECTUS?
We will not receive any proceeds from the sales of shares of our common
stock by the selling stockholders pursuant to this prospectus. We may, however,
receive $9,584,679 if all of the outstanding warrants we issued to the selling
stockholders and not held in escrow as of January 31, 2002 are exercised. These
warrants enable the holders to purchase an aggregate of 3,194,893 shares of our
common stock. We cannot be certain as to when and if all of these warrants will
be exercised. Nor can we be certain as to the amount of proceeds we will
actually receive from exercises. Estimates are especially difficult because of
provisions in the warrants we issued to investors which provide for reduction in
the exercise price if we hereafter sell, with certain exceptions, our securities
for a sales price less than the exercise price. In such event, the exercise
price of these warrants is reduced to such lower sales price. In addition,
holders may exercise on a "cashless basis" in most of the warrants. In a
cashless exercise the holder is entitled to receive shares of our common stock
having a market value equal to the net exercise value of the portion of the
warrant being exercised. The holder makes no cash payment to exercise the
warrant. The warrants specify the manner of calculating the number of shares of
our common stock issuable in a "cashless" exercise.
6
RISK FACTORS
Before you invest in our common stock by purchasing shares from a selling
stockholder named in this prospectus, you should be aware that there are various
risks, including those that are described below. A list of the named selling
stockholders may be found in this prospectus in the table beginning on page 34.
You should consider carefully these risk factors, together with all of the other
information included in this prospectus and in the periodic reports we have
filed under the Securities Exchange Act of 1934, before you decide to purchase
any shares of our common stock. For information as to how you may receive copies
of our periodic reports, we direct your attention to the section captioned
"Incorporation of Certain Information by Reference" in this prospectus.
Some of the information in this prospectus may contain forward-looking
statements. These statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward looking" information. When considering these forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. These forward-looking statements could involve
known and unknown risks, uncertainties and other factors that might materially
alter the actual results suggested by the statements. In other words, our
performance might be quite different from what the forward-looking statements
imply.
THE FOLLOWING RISK FACTORS RELATE TO OUR OPERATIONS:
WE EXPECT OUR OPERATIONAL LOSSES TO CONTINUE FOR PROBABLY ANOTHER SIX QUARTERS.
From the date we incorporated on October 8, 1992 through December 31, 2001,
we have incurred net losses of $34,303,558. These losses were due to the fact we
had no product or service to offer for sale or rental. As a result, we incurred
only expenses without generating any revenues. We are about to launch our first
product, which is called the IMPACT Test System. This device uses a person's
saliva to test on-site for the presence in his or her body of alcohol and drugs
of abuse, such as cocaine, heroin and marijuana.
We intend no earlier than late February 2002 to have our market launch of
our product to law enforcement agencies that are one of our three initial
worldwide target markets. There will be no governmental approval required as a
prerequisite for us to market to these potential users of our product. However,
as we subsequently indicate under this caption "Risk Factors" there are certain
legal challenges we must overcome to make our product fully acceptable in this
market.
For us to market our product in the United States to hospitals and other
medical facilities (especially to medical emergency rooms which are our third
initial worldwide target market), we must first obtain clearance from the Food
and Drug Administration for our product. We currently expect to file our
"510(k)" application for clearance with the FDA no later than during the quarter
ending June 30, 2002. We currently expect to obtain FDA clearance not earlier
than 100 days after submission.
Our second initial target market will be industrial companies with safety
sensitive positions. In November 2000, the FDA published draft guidance for
workplace testing for drugs of abuse. In this document the FDA announced its
intention to be consistent in its regulation of drugs of abuse screening tests
used in the home, work place, insurance and sports settings. The FDA would,
however, continue to defer oversight for law enforcement applications. Should
the FDA adopt such regulations, despite our efforts and those of
7
others to dissuade the FDA from doing so, such regulations would delay the start
of our marketing to the industrial market in the United States until we comply.
However, in anticipation of such adoption, we are preparing the clinical data
which we believe, from our discussions with the FDA, this agency would require
to approve our entry into the industrial market in the United States. We would
seek this clearance from the FDA simultaneously with our seeking its approval of
use of our product for medical purposes. Accordingly, we do not believe that any
potential delay in marketing to the industrial market will be significant except
if, as we shall note in the succeeding paragraph, we do not obtain the
medical-user clearance, in the usual and customary time, for some currently
unanticipated reason. In addition, we intend to market our product to law
enforcement agencies and medical users in Europe prior to obtaining FDA approval
for use in the United States. This program as planned could offset any loss in
early revenues due to the delay, if it occurs, in marketing to the industrial
market in the United States.
We may not meet the schedule described in the preceding paragraphs, both as
to our market launch and making our submission to the FDA. In addition, the FDA
or a foreign government may not grant clearance for the sale of our product for
routine screening and diagnostic operations. Furthermore, the clearance process
may take longer than we project. Even if we do meet our schedule, we do not
expect to produce product revenues on a regular basis until the middle of this
quarter ending March 31, 2002 at the earliest when the product is formally
launched. We, therefore, anticipate that our losses will continue for the
balance of this fiscal year ending March 31, 2002. We also anticipate that we
shall turn profitable not sooner than five quarters after the quarter in which
the product is launched. We can estimate, but we cannot assure you, as to when
our expected revenues will exceed expenses.
OUR TRANSITION TO AN OPERATIONAL COMPANY MAY STRAIN OUR MANAGERIAL, OPERATIONAL
AND FINANCIAL RESOURCES.
We expect to encounter the risks and difficulties frequently encountered by
companies that have recently made a transition from research and development
activities to commercial production and marketing. We have set forth below
certain of these risks and difficulties under this caption "Risk Factors." As an
example, our transition from a development stage company to a commercial company
may strain our managerial, operational and financial resources. If our product
achieves market acceptance, then we will need to increase the number of our
employees, significantly increase our manufacturing capability and enhance our
operating systems and practices. We cannot assure you that we will be able to
effectively do so or otherwise manage our future growth.
WE MAY HAVE A NEED FOR ADDITIONAL FINANCING TO CONTINUE OR EXPAND OUR BUSINESS.
As we previously reported in our recent periodic reports beginning with our
Annual Report on Form 10-K for the fiscal year ended March 31, 2001, we required
additional financing to bridge the gap between the time the IMPACT Test System
would first be brought to market and the time the resultant sales would result
in profitability. As reported under the caption "Material Changes" in this
prospectus, in June and September, 2001, we realized $12,694,807 in proceeds
(net of $1,092,278 in expenses related to this private placement). Because part
of the proceeds from the offering ($5,629,995 as of January 31, 2002) are held
in escrow against the achievement by us of two designated milestones by March
31, 2002, we could have to refund some or all of these proceeds held in escrow.
8
We remain confident that we shall achieve both milestones by March 31, 2002
and, accordingly, obtain all of the escrowed funds. However, if such funds were
not to be released to us, and if we did not find an alternative, we could have
to suspend our operations. We could attempt to persuade the investors
nevertheless to release some or all of escrowed funds. However, we cannot be
certain that any or all will. We will, of course, seek contingent equity or debt
financing against such an unanticipated event occurring. However, even after our
product is launched, we cannot be certain that any such financing will be
available to us. To assist us in bridging the gap between now and our obtaining
the escrowed funds, our major stockholder (which is also one of the investors
with securities and proceeds in escrow) has loaned us $1,500,000.
We believe that, with
- the net proceeds from the private placement described in the second
preceding paragraph (assuming the release of all funds from escrow),
- the marketing fee to be paid as described in the succeeding paragraph,
and
- the proceeds from standard commercial banking lines of credit which we
are currently negotiating,
we shall have sufficient funds to complete our field trials and pilot studies,
initiate our product launch and reach profitability. We expect to achieve
profitability five quarters post product introduction. There can be no assurance
that our estimate as to costs and timing will be correct. In addition, we may
not be able to consummate standard commercial banking lines of credit on an
acceptable and timely basis. Furthermore, if there are any delays in our
marketing launch of our product in late February 2002 or in our obtaining FDA
approval, or if there is a reduced rate of growth in our revenues from those we
anticipate, we may require additional funding. In addition, if orders for our
product come in faster than we anticipated, we could require additional
financing to expand our manufacturing, sales and other capabilities. Our
inability to meet any such increased demand could result in the cancellation of
orders and thus delay the attainment of profitability.
We have entered into a strategic partnering agreement with CMI, Inc. to
distribute our products exclusively to the law enforcement market in the United
States and Canada. As part of this agreement, CMI is obligated to make minimum
payments of approximately $5,000,000 to us over a two and one-half year period.
Additionally, we continue to pursue additional strategic partnering for our
other markets. However, we can not give you any assurance when and if any such
arrangement will be made or as to the revenues it would generate.
We have also investigated the possibility of an underwritten public
offering. We had received expressions of interest from several well-known,
top-tier firms, but only on a post-revenue basis. However, because currently the
market is not generally receptive to public offerings, we can give you no
assurance that stock market conditions in 2002 will be receptive to a public
offering by us, should we require additional financing.
In addition, competitive conditions in our industry may make us less
attractive to potential investors. For additional information on our potential
competition, we recommend that you read the third succeeding section under this
caption "Risk Factors."
If all of our common stock purchase warrants which were outstanding, and
which were not held in escrow, and all of our stock options which were
outstanding, on January 31, 2002 were subsequently exercised for cash, we would
realize $29,337,011 and
9
$6,743,364, respectively, in gross proceeds. However, we cannot be certain as to
when and if these warrants and options will be exercised by the respective
holders. We cannot project at what time there will be a sufficient spread
between the exercise price and the market price of our common stock so as to
induce the holder to exercise. In addition, most of the outstanding stock
options are not currently exercisable as to all of the shares of our common
stock subject thereto and certain of the warrants are not currently exercisable
at all. Certain of the warrants are exercisable on a "cashless" basis.
Accordingly, we cannot rely on these exercises as a source of financing.
We recognize that, without the additional financing if required, we cannot
bridge the gap between the commencement of marketing and when, if ever, we begin
to operate on a profitable basis. Unless we obtain such additional financing (if
required) and achieve profitability, your investment in our company may become a
complete loss. We can give you no assurance as to achieving additional financing
or profitability.
ADDITIONAL FINANCINGS WILL FURTHER DILUTE OUR EXISTING STOCKHOLDERS.
Since October 1997 when we obtained our independence from our former
parent, we have consummated six private placements to finance our operations. As
a result, we have issued, or will issue (when and if shares of our preferred
stock are converted and warrants are exercised), an aggregate of 35,492,206
shares of our common stock related to these private placements. Such issuances
do not give effect to any shares we may issue in the future in redemption of
premium with respect to our outstanding shares of our Series C preferred stock
or as compensatory payments. The 35,492,206 shares may represent a 486.4%
increase from the 7,297,206 shares of our common stock outstanding before the
first private placement. Any further issuances due to additional equity
financings will further dilute our existing stockholders.
UNEXPECTED PROBLEMS AS TO HOW OUR PRODUCT FUNCTIONS CAN DELAY OUR RECEIPT OF
REVENUES AND ULTIMATELY OUR ATTAINING PROFITABILITY.
We have experienced delays in launching our product because of
unanticipated performance problems that have arisen first in our own testing in
our research and development facility and later at beta sites. We had made a
commitment to ourselves and to our stockholders and prospective customers not to
release our product for sale until we are confident that our product meets or
exceeds our customer's expectations. In many markets, we shall get only one
chance with a customer. If a customer's initial experience with a product is not
good, it is very difficult to go back a second time. Accordingly, when a product
performance problem surfaced, we had no choice except to delay the release.
By delaying the time of our product launch, these product problems have
delayed our receipt of revenues. They may have also increased our need for
additional financing. And with the delay in our receiving revenues, our
opportunity to achieve profitability was delayed even longer. Based on the data
we have collected to date, we strongly believe that our current testing at
customer locations will not reveal any material product problem that would delay
our intended product launch in late February 2002. However, there is always such
a possibility as has been our past experience and that of other companies
introducing new products.
Some examples of our past problems and the delays which they caused us are
as follows:
- In February of 2001 we ascertained that our mold materials were not
working together. As a result of the cooperation of our mold design
contractor and our
10
dedicated engineering group, we redesigned these combinations. However, to
do so caused a six-week slip in our timeline. We reported this problem and
the expected delay to our stockholders by letter in March 2001.
- In April of 2001 we ascertained, during field tests, a problem with how
the mouthpiece collected saliva. We had to halt these field evaluations
until we could ascertain the cause. We quickly found that our supplier had
made, without our knowledge, a change in the materials used in the
production of the mouthpiece tips. We developed three alternative
approaches. One of these required some re-design of the mouthpiece molds.
This work took several weeks to implement and then we first had to
validate the results. As we anticipated to our stockholders by letter in
May of 2001, this caused a delay of six weeks before we could then start
field evaluations again. However, thanks to the significant efforts of our
development team, the cooperation of our outside vendors and the help of
our clinical investigators, we quickly diagnosed the problem and
implemented a solution.
- In September of 2001, we had collected enough final test data to indicate
that we had to make additional engineering modifications to the final
product design. These modifications forced us to delay our intended
product launch from the end of September to the end of the year. We
reported this to our stockholders by letter in October of 2001. If the
resolution was to be limited to only a simple engineering redesign, then
we would have been delayed for only a few weeks to a month at most.
Unfortunately, the engineering redesign did not completely resolve the
problem. We had to add several changes to our plastic molds. Keep in mind
that even a minor mold change can take several months to design,
implement, test and validate. We are now testing products made from these
modified molds. We strongly believe that we have now overcome our last
pre-launch product problem and that we will launch our product in late
February 2002. We reported this to our stockholders by letter in January
2002.
Your attention is also directed to the possible delays at the FDA described
in the fourth preceding section under this caption "Risk Factors".
WE WILL FACE COMPETITION FROM NEW AND EXISTING DIAGNOSTIC TEST SYSTEMS.
We will compete with many companies of varying size that already exist or
may be founded in the future. Substantially all of their current tests available
either use urine or blood samples as a specimen to test for drugs of abuse or
use breath, saliva, or blood samples to test for alcohol.
With respect to our testing for the presence of drugs of abuse in saliva,
we will face competition from Avitar, Inc., OraSure Technologies, Inc., AnSys,
Inc. and Cozart Bioscience, Ltd. Each of these companies is marketing, or will
soon be marketing, an on-site drug screening, qualitative (yes/no) test for
saliva. Each is a lateral flow membrane system. Such system, which is similar to
home pregnancy tests, allows a specimen to flow across a treated test strip
(membrane) and produces a visible test result on a portion of the test strip.
This type of test gives results in under 30 minutes. We believe that the
limitations of the technologies used by these four companies will negatively
impact their ability to sell into our target markets. We believe that none of
their products, as currently available, will be evidentiary in the law
enforcement and industrial markets because each such product is not quantitative
and some are non-instrumented. Non-instrumented test results are subjective to
user interpretation. In addition, the results cannot be stored for later use in
court. Accordingly, these tests lack the hard, objective data required for
11
defense in court. In medical emergency markets, we believe that their products
will not provide the needed quantitative results. Additionally, we believe that
the type of on-site technology used by these four companies is less sensitive
than the instrumented flow immunosensor technology we have developed and not
sensitive enough to detect certain drugs at levels that are found in saliva.
(Flow immunosensor technology is a process by which a specimen flows through a
mico-column device containing the test reagent, a reaction occurs and, as a
result of the immunoassay reaction, the molecules to be tested in the sample
solution cause a signal which is read by a sensor.) Lastly, none of these
products can simultaneously test for drugs of abuse and alcohol. We,
accordingly, believe that our product is superior to the products these four
companies are currently marketing, or will soon be marketing. However, we could
be incorrect in our assessment of their products. In addition, even if we are
correct in our assessment, one or more of these companies could attempt to
modify its product to meet our criticisms. In either of these events, one or
more of these products could significantly impact our ability to sell our
product.
In addition, we recognize that other products performing on-site testing
for drugs in blood or saliva may be developed and introduced into the market in
the future.
With respect to urine testing for the presence of drugs of abuse, we shall
face as competitors BioSite Diagnostics Inc., Syva Company (a division of Dade
International Inc.), Roche Diagnostics (a division of Hoffman La Roche, Inc.)
and at least five other major pharmaceutical companies. All of these competitors
currently use urine as the specimen for on-site drug testing. Almost all of
these prospective competitors have substantially greater financial resources
than we do to develop and market their products.
With respect to testing for the presence of alcohol, we will compete with
CMI, Inc., Intoximeters, Inc., Draeger Safety, Inc., and other small
manufacturers.
Our marketing analysis has indicated a greater market potential for a
saliva sample portable testing instrument for drugs of abuse by law enforcement
agencies, occupational health clinics, hospitals and other medical facilities
than for a urine sample instrument. That is because our initial product is
intended to test whether the person is currently under the influence of drugs of
abuse or alcohol. In addition, saliva collection is observable by the person
administering the test, unlike urine testing. Accordingly, the use of saliva has
been shown to eliminate the recent problems due to alteration and substitution
of urine specimen testing for drugs. Depending on the substance being used,
differences in the individual being tested and dose and time differences,
"currently" in our product indicates drug use from minutes after the drug was
taken to 18 to 24 hours after drug use. Urine testing, on the other hand,
provides drug use from about six to eight hours after the drug was taken to
between two to five days post drug use. Our product is ideal for driver testing
for "under-the-influence" testing and drug overdose testing in medical emergency
rooms. Our product is also ideal for current employee testing for random,
post-accident and for cause testing where the employer is interested in whether
or not the employee is currently under the influence of drugs or alcohol while
on the job. However, for pre-employment testing, employers have historically
wanted the longer window of detection provided by urine testing, or even hair
testing. Accordingly, the current results of the IMPACT System may not be as
attractive to employers for use in pre-employment testing. Our current product
may, thus, have limited appeal for such use.
We believe that our IMPACT Test System will be unique because, to our
knowledge, no company is currently offering a simultaneous test for drugs and
alcohol using saliva as a specimen. Orasure Technologies, Inc. currently does
have a lab-based saliva drug test and
12
a separate onsite, non-evidential, saliva-based alcohol screen test. We are not
aware of Avitar, AnSys or Cozart also offering a product that tests for alcohol
using saliva as the test medium. In addition, we are not aware of any products
that can deliver an immediate "blood comparable" quantitative drug test that
indicates current impairment in a person from the National Institute of Drug
Abuse list of drugs of abuse (the so called "NIDA-5"). However, as indicated
earlier, by the time we have the product launch of our product (currently
anticipated to be no earlier than late February 2002), we already have some
competition to our product also using saliva as a specimen for testing. This
competition is in addition to that of the companies already using urine as the
specimen for testing. Furthermore, because of the time frame it has taken for us
to bring our product to market, our competition may have developed name
recognition among customers that will handicap our future marketing efforts.
OUR FAILURE TO COMPLY WITH THE SUBSTANTIAL GOVERNMENTAL REGULATION TO WHICH WE
ARE SUBJECT MAY ADVERSELY AFFECT OUR BUSINESS.
We have already directed your attention to the fact that we cannot market
our saliva based testing device to hospitals and other medical facilities unless
we have FDA approval. We have also pointed out the proposed FDA regulations
relating to marketing to the industrial market in the United States. Your
attention is directed to the section entitled "We expect our operational losses
to continue for probably another six quarters" under this caption "Risk
Factors."
In addition, the United States Department of Health and Human Services on
February 28, 1992 promulgated regulations implementing the Clinical Laboratory
Improvement Amendments of 1988. These regulations were to become effective
September 1, 1992. The proposed regulations would require that all employment
drug testing, including on-site testing, be processed by a federally approved
laboratory. On August 28, 1992, the Department announced that the application of
the statute to workplace testing would not go into effect on September 1, 1992
because of comments made on the final regulations. If the regulations are not
adopted, on-site drug testing in the workplace will continue to be exempt from
the statute. If the regulations are adopted, although we can obtain access to a
forensic laboratory, we believe that the consequences of adoption of the
regulations could add to a potential customer's costs. Accordingly, this could
have a material adverse impact upon our business with respect to employment
testing in the private sector. However, we designed our product in such a way
that we believe that our product will be exempt from the proposed regulations,
even if the regulations are adopted in the current form. We cannot give you any
assurance that the Department of Health and Human Services or the FDA will
agree.
We do not believe that federal, state and local provisions which have been
enacted or adopted regulating the discharge of material into the environment, or
otherwise relating to the protection of the environment, will have any material
effect upon our capital expenditures, potential earnings and our competitive
position.
WE MAY NOT BE ABLE TO EXPAND OUR MANUFACTURING OPERATIONS ADEQUATELY OR AS
QUICKLY AS REQUIRED TO MEET EXPECTED ORDERS.
We first began our manufacturing process in January 2001. We have completed
the pilot or initial stage of manufacturing with respect to both the instrument
and the saliva test modules. We have initiated the process scale-up and the
automation phase of saliva test module manufacturing. We anticipate that it
could take up to 12 months to complete
13
the full automation of the saliva test modules. However, we have not as yet made
any significant deliveries of our product. Accordingly, we have not as yet
demonstrated the ability to manufacture our product at the capacity necessary to
support our expected commercial sales. In addition, we may not be able to
manufacture cost effectively on a large scale.
We expect to conduct all manufacturing of the disposable cassettes at our
own facility. In addition, we intend to continue to assemble the instrument for
at least another four to six months or more. If our facility or the equipment in
our facility is significantly damaged or destroyed, we may not be able to
quickly restore manufacturing capacity. We have engaged an OEM supplier to final
assemble the instrument in conjunction with our own in-house assembly. Our
current timetable for transfer of some of the final assembly is four to six
months. We could, accordingly, turn over instrument assembly to a number of
qualified OEM instrument assembly suppliers in the event of such problems at our
facility. We can use another manufacturer for the final assembly of our
instrument because the subassemblies and other components are furnished by other
suppliers. Accordingly, any capable electronics manufacturer would have the
capability to produce this type of equipment. We have identified several
potential electronic manufacturers as potential alternatives to our initial OEM
supplier should we so require. However, the cassette is a proprietary device
developed by us and, accordingly we are not currently aware of any alternative
manufacturer for the cassette.
We have devoted a significant portion of our capital budget for the fiscal
year ending March 31, 2002 to reduce our cost of goods for the disposable
cassette and automating our manufacturing facility in an effort to continue to
lower our initial manufacturing costs. We are optimistic as to the results of
these efforts. Nevertheless, we cannot assure you that these efforts will result
in the manufacturing cost savings we anticipate and when these savings, if
obtained, will be reflected in our financial statements.
OUR DEPENDENCE ON THIRD-PARTY SUPPLIERS FOR CRITICAL SUPPLIES MAY IMPACT OUR
OPERATIONAL RESULTS.
We are initially only performing the final assembly of the instrument and
critical sub-assemblies are being manufactured by OEM suppliers. Our dependence
on third parties for the manufacture and supply of instrument and cassette
product components could have a material adverse effect on our profit margins
and our ability to deliver our products on a timely and competitive basis if
these third parties were to terminate production of the components, fail to
comply with FDA regulation or be subject to unforeseen adverse results. To
offset any adverse impact as a result of a default by any such supplier, we have
purchased a one-year supply of all critical materials. In addition, we have
identified one or more second sources for each current supplier. Accordingly, we
do not anticipate that our manufacturing process will be negatively impacted by
the loss of any one supplier. In addition, we rely on standing purchase orders
and master purchase agreements with our vendors. Accordingly, we do not
anticipate losing any time because of protracted contractual negotiations. One
risk, however, is that until the second source begins manufacturing at an
acceptable rate, there could be a short delay in our meeting our delivery
schedule to customers.
14
OUR DEPENDENCE ON CMI, OUR STRATEGIC PARTNER TO MARKET TO THE LAW ENFORCEMENT
MARKET, MAY ADVERSELY AFFECT OUR INITIAL MARKETING EFFORTS IF CMI DOES NOT SELL
IN THE QUANTITIES ANTICIPATED.
As already indicated, our initial target market in the United States will
be the law enforcement market. On June 4, 2001, we entered into an exclusive
three-year, renewable, distributorship agreement with CMI, Inc. to distribute
the IMPACT Test System to such market in the United States and Canada. We
selected CMI because it is the marketing and manufacturing leader for
evidentiary and screening breath alcohol testing instruments in this country.
Nevertheless, CMI may not be able to sell the quantities of IMPACT Test Systems
of which we believe that CMI is capable. In such event, we would be required to
seek another distributor or increase our own internal selling staff. We can give
you no assurance as to how quickly or successfully these alternative methods of
product distribution will be implemented. CMI's obligation to pay minimum fees
on an annual basis if during the first two years it fails to meet certain
designated minimum sales levels will offset this failure by CMI to market. The
risk to us is, of course, that, if MPD Inc., CMI's parent corporation, became
bankrupt or had similar financial problems, this would prevent CMI from paying
these minimum fees. Another risk is that CMI can terminate the agreement as
indicated in the second following paragraph. Otherwise we believe that CMI will
pay us approximately $5,000,000 during the first two and one-half years of the
agreement.
The three-year term does not begin until general marketing of our IMPACT
Test System begins. Our agreement with CMI is automatically renewable unless CMI
or we give notice to the other 180 days prior to the end of the initial term.
CMI has the option to terminate the distribution agreement with us:
- if we fail to supply at least 50% of CMI's orders for our product
continuously over any three-consecutive-month period immediately preceding
CMI's notice of default to us;
- if any information which we furnish to CMI is found to be materially
false or fraudulent;
- if we materially breach the agreement and fail to cure such breach within
ten days after CMI's notice to us; or
- if we file a petition in bankruptcy or a petition is filed against us and
not dismissed in 60 days, we make an assignment for the benefit of our
creditors, or we are insolvent and a receiver is appointed for us.
LEGAL PRECEDENT HAS NOT YET BEEN ESTABLISHED FOR UPHOLDING THE RESULTS OF
LIFEPOINT'S DIAGNOSTIC TEST SYSTEM.
The legal precedents for performing drug and alcohol testing in both law
enforcement and the industrial workplace have been well established. Blood and
urine testing are the currently accepted standard samples for drugs. Blood,
breath and saliva are the currently accepted standard samples for alcohol.
However, several saliva-based drug tests are beginning to be used. Our product
meets the Daubert and Frye standards of admissibility of scientific evidence in
court, which have been adopted in all 50 states. These standards require
acceptance of the product or technology by members of the scientific community
and proven performance equal to currently used methods. We anticipate that the
peer-reviewed papers we have presented over this past year and the papers that
we will publish from our field evaluations currently being completed will meet
this requirement prior to the
15
first legal challenge to our product. However, we cannot assure you that our
technology will be accepted. Until our product is challenged in court, legal
precedence will not have occurred.
The desire to use saliva for drug testing in the workplace market is very
strong. As an example, SAMHSA, the federal agency that regulates drug testing on
federal safety-sensitive workers, has indicated that it is in the process of
adding saliva to the menu of applicable technologies for drug testing of federal
safety sensitive personnel. There are few state laws limiting the use of saliva
for workplace testing. Currently, saliva or other bodily substances testing of
employees for drugs is permitted in all states but one.
State laws are being revised on an ongoing basis to allow law enforcement
officers to use saliva as a specimen for testing for drivers under the influence
of drugs or alcohol. Currently, saliva and other bodily substance testing for
DUI testing with consent is permitted in all states, but will be subject to a
variety of factors. Saliva or other bodily substances for DUI testing for drugs
or alcohol under implied consent is permitted in 24 states. Additional efforts
will be needed to change the laws in states which have not adopted saliva as a
test specimen. We believe this change will occur because law enforcement
officials are anxious to have a non-invasive test method for drug testing and
are willing to support legislation. We are currently working on draft
legislation for this joint effort. Nevertheless, we cannot assure you as to when
and if this legislation will be adopted in the other states.
Lastly, the National Highway and Traffic Safety Administration must approve
alcohol test products for Department of Transportation use, either as a
screening method or an evidentiary method. We believe that our product meets the
requirements of an evidentiary product. Nevertheless, because we have not yet
submitted our product for approval, we cannot guarantee acceptance by the
governmental agency.
OUR EFFORTS TO LEGALLY PROTECT OUR PRODUCT MAY NOT BE SUCCESSFUL.
We will be dependent on our patents and trade secret law to legally protect
the uniqueness of our testing product. However, if we institute legal action
against those companies that we believe may have improperly used our technology,
we may find ourselves in long and costly litigation. This result would increase
our costs of operations and thus adversely affect our results of operations.
In addition, should it be successfully claimed that we have infringed on
the technology of another company, we may not be able to obtain permission to
use those rights on commercially reasonable terms. In any event, payment of a
royalty or licensing fee to any such company would also add to our costs of
operations and thereby adversely affect our results of operations.
WE MAY BE SUED FOR PRODUCT LIABILITY RESULTING FROM THE USE OF OUR DIAGNOSTIC
PRODUCT.
We may be held liable if our IMPACT Test System causes injury of any type.
We have obtained product liability insurance to cover this potential liability.
However, assuming a judgment is obtained against us, our insurance may not cover
the potential liabilities. Our policy limits may be exceeded. We currently
believe that the amount of our coverage is adequate for the potential risks in
these areas. If we are required at a later date to increase the coverage, we may
obtain the desired coverage, but only at a higher cost.
16
WE MAY NOT BE ABLE TO OPERATE SUCCESSFULLY OUR BUSINESS IF WE LOSE KEY PERSONNEL
OR FAIL TO ATTRACT SKILLED PERSONNEL.
We believe that our success in the future will depend on the continued
services of our senior management team and other personnel, as well as our
ability to attract and retain skilled personnel. The loss of any of our senior
management team or other key employees, or our failure to attract and retain the
necessary scientific, manufacturing, sales and marketing personnel could have a
material adverse effect on our business, results of operations and financial
condition.
WE MAY NOT BE ABLE TO ESTABLISH SALES AND MARKETING CAPABILITIES NECESSARY TO
EXPLOIT WHAT WE BELIEVE IS A GREAT POTENTIAL FOR OUR PRODUCT.
We are currently in the process of building up our marketing and sales
capabilities. In addition, we have engaged a strategic partner to sell our
product in the law enforcement market, one of our three initial target markets.
However, we may not be able to add the additional marketing and sales personnel
we require. In addition, we may not be able to engage a second strategic partner
to market our product in certain segments of the industrial marketplace as we
currently contemplate. We also may not obtain the distribution capabilities we
require in foreign markets. Finally, even if we have the personnel and the
strategic partners and distributors, we cannot be certain as to how quickly, if
at all, the different marketplaces will accept our product.
THE FOLLOWING RISK FACTORS RELATE TO OUR COMMON STOCK:
FUTURE SALES MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
Of the 32,161,178 shares of our common stock outstanding on January 31,
2002, the holders could sell all but (1) an aggregate of 137,752 shares issued
as a result of the securities which we sold in June and September 2001 and (2)
an aggregate of 104,142 shares held in escrow. Holders subsequently became
eligible to sell the aggregate of 137,782 shares pursuant to this prospectus. Of
the shares eligible for sale, as of January 31, 2002, holders selling pursuant
to the exemption of Rule 144 under the Securities Act of 1933 would be limited
in the number of shares each sold in each three-month period by paragraph (e) of
such Rule.
As of January 31, 2002, there were 3,270,165 shares reserved for issuance
upon the exercises of stock options granted or to be granted pursuant to either
our 1997 stock option plan or our 2000 stock option plan. Stock options were
exercisable on such date, or will become exercisable within 60 days thereafter,
to purchase an aggregate of 643,652 shares. All of the shares issuable upon the
exercises of stock options pursuant to these two plans have been registered
under the Securities Act of 1933 for issuance by us to the respective optionees.
Accordingly, unless the optionee is an "affiliate" of our company as such term
is defined in Rule 405 under the Securities Act of 1933, he or she may, after
exercise of a stock option, resell the shares received upon exercise without
delivering a "reoffer" prospectus. Consistent with the practice of other public
companies, we filed on August 9, 2001 a reoffer prospectus so that directors,
executive officers and significant employees of our company holding stock
options, or who exercised stock options, may resell their shares of our common
stock immediately as other employees may do.
In addition, as of January 31, 2002, we had reserved an aggregate of
6,232,819 shares for the exercises of certain outstanding common stock purchase
warrants. The subject warrants do not include the common stock purchase warrants
held by the selling stockholders or those held by our two principal operating
officers. The subject warrants
17
expire on various dates ranging from December 7, 2002 to September 6, 2006. They
have exercise prices ranging from $.50 to $4.77 per share. They were all
exercisable as of January 31, 2002. The shares of our common stock issuable upon
exercises of these warrants to purchase an aggregate of 1,688,744 shares have
not been registered under the Securities Act of 1933. Accordingly, these shares
will be "restricted securities" as such term is defined in Rule 144 (a)(3) under
the Securities Act of 1933 after issuance. The holder (including an affiliate of
our company) may, one year after the exercise of any such warrant, resell his,
her or its shares received upon any such exercise pursuant to the exemption from
registration of Rule 144 under the Securities Act of 1933. We have registered in
another registration statement (File No. 333-65536) under the Securities Act of
1933 for resale by the holders the remaining 4,544,075 shares issuable upon the
exercises of the subject warrants.
We are unable to predict the effect that sales into the market of shares of
our common stock made under Rule 144 or otherwise and the delayed sales into the
market of shares subject to the outstanding stock options and the warrants may
have on the then prevailing market price of our common stock. It is likely that
market sales of large amounts of these shares of our common stock or of the
6,841,491 shares offered, as of the date of this prospectus, for resale by this
prospectus (or the potential for those sales even if they do not actually occur)
may have the effect of depressing the market price of our common stock.
WE DO NOT ANTICIPATE PAYING DIVIDENDS COMMON STOCK IN THE FORESEEABLE FUTURE.
We intend to retain future earnings, if any, to fund our operations and
expansion of our business. In addition, our expected continuing operational
losses and our Series C preferred stock will limit legally our ability to pay
dividends on our common stock. Accordingly, we do not anticipate paying cash
dividends on shares of our common stock in the foreseeable future.
OUR BOARD'S RIGHT TO AUTHORIZE ADDITIONAL SHARES OF PREFERRED STOCK COULD
ADVERSELY IMPACT THE RIGHTS OF HOLDERS OF OUR COMMON STOCK.
Our board of directors currently has the right, with respect to the
2,570,000 shares of our preferred stock not designated as our Series C preferred
stock, to authorize the issuance of one or more additional series of our
preferred stock with such voting, dividend and other rights as our directors
determine. Such action can be taken by our board without the approval of the
holders of our common stock. The sole limitation is that the rights of the
holders of any new series of preferred stock must be junior to those of the
holders of the Series C preferred stock with respect to dividends, upon
redemption and upon liquidation. Accordingly, the holders of any new series of
preferred stock could be granted voting rights that reduce the voting power of
the holders of our common stock. For example, the preferred holders could be
granted the right to vote on a merger as a separate class even if the merger
would not have an adverse effect on their rights. This right, if granted, would
give them a veto with respect to any merger proposal. Or they could be granted
20 votes per share while voting as a single class with the holders of the common
stock, thereby diluting the voting power of the holders of our common stock. In
addition, the holders of any new series of preferred stock could be given the
option to be redeemed in cash in the event of a merger. This would make an
acquisition of our company less attractive to a potential acquirer. Thus, our
board could authorize the issuance of shares of the new series of preferred
stock in order to defeat a proposal for the acquisition of our company which a
majority of our then holders of our common stock otherwise favor.
18
Our certificate of incorporation also provides for a classified
board -- one third of the directors to be elected each year. Accordingly, at
least two successive annual elections will ordinarily be required to replace a
majority of the directors in order to effect a change in management. Thus, the
classification of the directors may frustrate a takeover attempt which a
majority of our then holders of our common stock believe to be in the best
interest of our company.
These are the only two provision in our certificate of incorporation or
bylaws which could be used by us as an anti-takeover device. In addition, the
obligation to comply with the procedures of Section 203 of the Delaware
corporate statute, which governs our company, may discourage certain potential
acquirors which are unwilling to comply with its provisions. At a minimum we
believe such statutory requirements may require the potential acquirer to
negotiate the terms with our directors. We believe that will be beneficial to
our stockholders.
USE OF PROCEEDS
We will not receive any proceeds upon the subsequent sales by the selling
stockholders of the 6,841,491 shares of our common stock offered by this
prospectus. If the common stock purchase warrants outstanding as of January 31,
2002 to purchase an aggregate of 3,194,893 shares of our common stock held by
the selling stockholders and offered for resale pursuant to this prospectus are
exercised in their entirety, we will receive $9,584,679 upon such exercises.
Because of the uncertainty as to when and if any of these warrants will be
exercised and as to which "cashless" exercises will be made, we intend to use
any proceeds from these exercises for working capital purposes.
19
MATERIAL CHANGES
SERIES C PREFERRED STOCK
A copy of our certificate of designation containing the terms and
conditions governing our Series C convertible preferred stock was filed as an
exhibit to our Annual Report on Form 10-K for the fiscal year ended March 31,
2001. In addition to your reading the description which follows in this section
of this prospectus of this security's material terms and conditions, you may
wish to read this exhibit. To obtain a copy, your attention is directed to the
section entitled "Incorporation of Certain Information by Reference" in this
prospectus.
(1) GENERAL
On June 20, 2001, we sold, at $35,000 per unit, to 11 accredited investors
an aggregate of 228.007 units. Each unit consisted of 1,000 shares of a
newly-designated series of our preferred stock, which we designated as the
Series C convertible preferred stock, and a common stock purchase warrant
expiring June 19, 2006 to purchase then 10,000 shares of our common stock at
$3.50 per share. We shall refer to these common stock purchase warrants as the
"investor warrants" so as to distinguish them from other common stock purchase
warrants we have issued, including those issued to the placement agent and
finders in the offering.
430,000 shares of the 3,000,000 authorized shares of our preferred stock
were designated as the Series C preferred stock in order to cover not only the
original sale by us, but also subsequent sales after the original issuance on
June 20, 2001. On June 29, 2001, we sold an additional 85.713 units at the same
purchase price per unit to the three holders of our then designated Series B 20%
cumulative convertible preferred stock. These holders surrendered these shares
and the related common stock purchase warrants as their payment for such units.
These three holders were among the 11 purchasers on June 20, 2001. The exchange
was contemplated at the date of the initial closing.
On September 28, 2001, we sold an additional 80.196 units at the same
purchase price per Unit to 16 accredited investors. We, accordingly, had sold an
aggregate of 393,916 units. We realized $12,694,807 in proceeds (net of
$1,092,278 in expenses) from this offering.
As of August 16, 2001, we and the purchasers agreed that a holder could
convert a share of our Series C preferred stock at an initial conversion price
of $3.00 (not $3.50) into 11.67 shares (not 10 shares) of our common stock. In
addition, we and the holders agreed to reduce the exercise price of our investor
warrants from $3.50 to $3.00 per share. A holder would also receive 11,670
shares, not 10,000 shares, upon exercise of an investor warrant included in a
unit. Furthermore, we and the holders agreed to delete the provision requiring
quarterly resets of the exercise price of our investment warrants based on the
market prices for our common stock during the first year. The changes to our
Series C preferred stock were to become effective only if the related
certificate of designation governing the terms and conditions were so amended.
This action would have required our obtaining the consent or approval of the
holders of a majority of the outstanding shares of our common stock. It also
would have given rise to a great expense to us. However, the investors agreed,
as of November 21, 2001, to waive the requirement of an amendment to the
certificate of designation. Instead, we have agreed by contract with the
investors to give them the right to convert their shares of our Series C
preferred stock on the amended basis described above. Such agreement is
permitted by Delaware law which governs our
20
company. The investors also agreed that we could make compensatory payments in
shares of our common stock, rather than in cash, if we defaulted in the
performance of our registration commitments to the investors.
There were outstanding, as of January 31, 2002, an aggregate of 393,916
shares of our Series C preferred stock (convertible into an aggregate of
4,597,002 shares of our common stock) and investor warrants to purchase an
aggregate of 4,597,002 shares of our common stock.
(2) ESCROW ARRANGEMENT
Pursuant to an escrow agreement, unless waived as indicated below, 50% of
the proceeds, the shares of our Series C preferred stock and the investor
warrants were to be held in escrow. They would be released upon achievement by
our company of the following two milestones:
(a) (i) confirmation that we had sold at least an additional 57 units
for an aggregate of at least 370.720 units (which was completed in
September 2001) and
(ii) receipt of validation from an independent third party that the
IMPACT Test System produces data and functions as expected to be
outlined in a 510(k) application to be submitted to the FDA, and
(b) confirmation that we have received bona fide orders for the sale
of the IMPACT Test System in an amount not less than $250,000.
Any holder of the Series C preferred stock may, at any time, waive
compliance with either milestone. Such a waiver releases from escrow the
corresponding proceeds to us and the securities to the investor. Purchasers of
38.625 of the 80.196 units at the closing held on September 28, 2001 waived
having their securities and their purchase price amounts held in escrow.
Purchasers of 33.571 units subsequently waived escrow. Upon non-achievement of a
milestone, a holder can request that its purchase price then held in escrow be
refunded to the holder. In such event the related escrowed securities would be
cancelled.
On September 28, 2001, we sold more than the number of units required by
the first milestone. The independent evaluator was to be selected by 70% of the
investors holding 42,857 shares or more of the Series C preferred stock. In
December 2001, these investors selected Owen & Associates, Inc. as the
independent third party to make the evaluation of the IMPACT Test System. We
provided to this third party the complete FDA package on the internal data for
all of the assays (accuracy, precision, specificity, cross-reactivity,
interference and stability) that is usual and customary for FDA approval and all
of the field data collected to the date of delivery. The independent consultant
subsequently requested that we provide additional field data for three of the
drug assays to enable the consultant to make the required determination. The
investors with escrowed securities and financing proceeds agreed to extend the
deadline for achievement of the first milestone from January 15, 2002 (as
previously changed from December 31, 2001) to March 31, 2002 to give us time to
provide the additional data requested by the consultant. The new deadline is
concurrent with the deadline for our achieving the second milestone. In
addition, certain of the investors offered a $1,000,000 credit facility to us.
Unless the condition is waived by these holders, we must achieve this first
milestone before we can claim achievement of the second milestone even if we
have product orders in excess of $250,000.
21
We estimate that we need to receive bona fide orders for approximately 30
systems to achieve the $250,000 in orders milestone. There is no limitation on
the source of these orders. We may obtain the orders from our exclusive
distributor to the law enforcement market or from our other distributors. They
may be domestic or international orders.
As of January 31, 2002, the following were held in escrow:
- $5,629,995 of the purchase price amounts paid for the units,
- 160,857 shares of the Series C preferred stock (which are convertible
into an aggregate of 1,877,201 shares of our common stock),
- investor warrants to purchase an aggregate of 1,877,236 shares of our
common stock,
- 103,308 shares of our common stock issued upon the redemption of premium
with respect to the foregoing shares of the Series C preferred stock, and
- 834 shares of our common stock issued in lieu of the redemption of
premium.
To enable us to meet our cash needs as a result of funds still being held
in escrow, on February 1, 2002, General Conference Corporation of Seventh-day
Adventists, our largest stockholder and one of the investors with escrowed
purchase proceeds and securities, loaned us $1,500,000. The loan is due April 9,
2002. We are required to pay interest at the annual rate of 5% (10% in the event
of default). We are required to prepay the loan with any proceeds released to us
from escrow. We also issued a warrant to our lender to purchase 500,000 shares
of our common stock at $3.25 per share.
(3) SENIORITY OF OUR SERIES C PREFERRED STOCK
Our Series C preferred stock is senior to any other series of our preferred
stock which we hereafter designate and our common stock. Except as may be
consented to by the holders of at least a majority of the then outstanding
shares of our Series C preferred stock,
(1) we may not pay any dividends or make other distributions on our
common stock or any other series of the preferred stock (other than
dividends on our common stock in shares),
(2) we may not redeem any shares of our common stock or any other
series of the preferred stock; and
(3) we may not distribute to the holders of our common stock or any
other series of the preferred stock any assets upon liquidation,
dissolution or winding up of our company until the holders of our Series C
preferred stock have received $35.00 per share (which is the stated value
of a share of our Series C preferred stock) and any accumulated but unpaid
premium (we shall explain how premium is defined in the second succeeding
subsection).
We may make redemptions of premium and other redemptions only if legally
permissible under the Delaware General Corporation Law. Because we currently
have sufficient "surplus" as that term is defined under the Delaware General
Corporation Law, we should be able to make these redemptions on a current basis.
As of December 31, 2001, we determined our surplus to be approximately
$2,100,000. We redeemed, as of September 30, 2001 and December 31, 2001, with
respect to premium accrued as of each such date because we deemed the surplus to
be sufficient under Delaware law. However, continuance of operational losses in
the future, as we currently anticipate, would increase
22
our accumulated deficit. Unless the increase was offset by additional equity
financings (as to which we can give you no assurance), our surplus would be
reduced, possibly to a level at some point in the future that would be too low
to permit a redemption of premium under Delaware law. There are actions other
than equity financings which we can take to create additional "surplus" for a
dividend. We are not confined to "surplus" as shown in our latest balance sheet.
We are also not confined to GAAP accounting rules when making a determination
whether a surplus exists. We may, for example, reevaluate the value of a patent
to increase the available surplus for dividends. However, in determining whether
or not a surplus exists, we are required to use fair values for both assets and
liabilities.
If we are prohibited from redeeming any premium as a result of having
insufficient surplus, we are not liable to the holders of the Series C preferred
stock. In such an event, the holders may pay to us an amount sufficient to
fulfill our obligation to make the premium payment and we will redeem the
premium in shares of our common stock. Absent such payment by the holder, the
obligation to redeem would accrue until we were legally able to make the
redemption.
(4) DIVIDENDS
There will be no dividends payable on the Series C preferred stock.
(5) PREMIUM
On the last date of each of our fiscal quarters, commencing September 30,
2001, we are required to redeem all accrued and unpaid premium as of such date.
This obligation continues until no share of our Series C preferred stock is
outstanding. Premium is defined by the related certificate of designation for
this security to be an amount equal to the product of:
(a) 10% (5% after June 20, 2004),
(b) the quotient of the number of days since the last redemption of
premium and 365 and
(c) the stated value (i.e., $35.00 per share).
We are to effect the redemption of premium by the issuance of a number of
shares of our common stock to each holder of our Series C Preferred Stock equal
to the quotient obtained by dividing the aggregate amount of premium then due on
the shares of our Series C preferred stock held by such holder on such date by
the market price on such date.
We are to calculate the market price of our common stock as an average over
a 20-trading-day period. We will determine "market price" as follows:
(a) if our common stock is then listed on a national securities
exchange or quoted on The Nasdaq Stock Market, we will use the average of
the closing sale prices of our common stock as reported on the exchange or
quoted for Nasdaq on each trading day during such 20-trading-day period as
reported by Bloomberg Financial Services (or a comparable service) or
(b) if our common stock is not then listed on an exchange or quoted on
Nasdaq, we will use the average of the closing bid and asked prices for our
common stock on the OTC Bulletin Board of the National Association of
Securities Dealers, Inc. or in the pink sheets as reported by Bloomberg
Financial Services (or a comparable service) or, if no such price is
available, as determined by an investment banking firm
23
we select which is reasonably acceptable to the holders of a majority of
the outstanding shares of our Series C preferred stock.
We made our first redemption as of September 30, 2001. We issued an
aggregate of 108,203 shares of our common stock. Because our common stock is
currently listed on the American Stock Exchange, we calculated market price on
the basis of (a), as defined above. An aggregate of 53,690 shares of those
shares were still held in escrow, as of January 31, 2002, because the related
160,857 shares of our Series C preferred stock were held in escrow.
We made our second redemption as of December 31, 2001. We issued an
aggregate of 121,505 shares of our common stock. An aggregate of 49,618 shares
of those shares were still in escrow, as of January 31, 2002, because the
related 160,857 shares of our Series C preferred stock were held in escrow.
(6) CONVERSION
A holder may convert initially a share of our Series C preferred stock at a
fixed conversion price of $3.00 per share into 11.67 shares of our common stock.
On June 20, 2004, the conversion price will become the lesser of $3.00 or the
market price on such anniversary date for any shares still outstanding. The
market price of our common stock will be calculated for this purpose on the same
basis as described in the preceding subsection for premium. If all 393,916
shares of our Series C preferred stock which were outstanding on January 31,
2002 were converted at $3.00 per share, we would issue 4,597,002 shares of our
common stock. Of this amount, an aggregate of 1,877,201 shares of our common
stock is attributable to the 160,857 shares of our Series C preferred stock held
in escrow.
We are required to adjust the number of shares of our common stock issuable
upon conversion and the conversion price in the event of a stock dividend, a
stock split, a reorganization, a recapitalization or a combination or
subdivision of our common stock or a similar event. If we sell shares of our
common stock (or a security convertible or exercisable into shares of our common
stock) for a purchase price less than the then conversion price, the conversion
price will be reduced to such purchase price.
Upon conversion, whether optional or mandatory as described above or in the
succeeding three paragraphs, a holder is entitled to all accumulated but unpaid
premium to the date of conversion.
We can compel conversion of our Series C preferred stock if conversion is
required by an investment banker in an underwritten offering. To qualify for
this forced conversion right the offering must provide us with net proceeds of
at least $20,000,000. In addition, the offering price to the public, net of
underwriting discounts and commissions, can not be less than $10.00 per share of
our common stock.
In the event that the market price of our common stock for any ten
consecutive trading days is at or above $7.50, $8.50, $9.50, $10.50 and $11.50,
respectively, we can compel the holders to convert not more than 20% of the then
outstanding shares of our Series C preferred stock. Once we compel conversion at
a trigger price, we can only compel conversion at the next higher trigger price.
For us to utilize the mandatory conversion right described in this paragraph or
the preceding paragraph, our common stock must still be listed on the American
Stock Exchange (or the New York Stock Exchange) or quoted on Nasdaq. In
addition, we must otherwise be in compliance with our
24
obligations and authorized shares of our common stock must be available for
conversion of the shares of our Series C preferred stock.
If our common stock is suspended from trading or not listed on the American
Stock Exchange which it currently is (or the New York Stock Exchange), or quoted
on Nasdaq for an aggregate of ten full trading days during any nine-month
period, each holder of the Series C preferred stock may, at his, her or its
option, convert his, her or its shares. If the market price of our common stock
is less than the then conversion price, the conversion price shall be reduced to
the lower market price.
(7) REDEMPTION
In certain default situations, as, for example:
(a) our failure to make timely deliveries (after a grace period) of
certificates for shares of our common stock following conversions of shares
of our Series C preferred stock;
(b) our default (after a grace period) in fulfilling our obligations
under a registration rights agreement with the purchasers of our Series C
preferred stock; or
(c) our material breach of our agreements with such purchasers (after
a grace period to cure), or if we:
(1) sell all of our assets, or
(2) merge where we are not the survivor, or
(3) have 50% of its voting power owned by one person, entity or
group other than our current affiliates or other than by reason of a
transfer of outstanding shares,
any holder of our Series C preferred stock may demand that we redeem, for cash,
his, her or its shares at a specified redemption price, plus accrued and unpaid
premium. The specified redemption price will be the greater of:
(a) $42 plus 120% of accrued and unpaid premium for each share of our
Series C preferred stock or
(b) 11.67 times (subject to adjustment for, among other things,
accrued and unpaid premium) the higher of:
(i) the highest closing price for the shares of our common stock
for the days between the receipt of the investor's notice to redeem his,
her or its shares of our Series C preferred stock and the day before we
redeem the shares from the investor and
(ii) the fair market value of the shares on the date on which we
receive a notice of the investor's intention to redeem his, her or its
shares, as determined by us and the holders of the majority of the
shares of the Series C preferred stock. If we and they cannot agree, an
investment banking firm mutually acceptable to the holders of the
majority of the shares of our Series C preferred stock will make the
determination.
We may, at our option, redeem the shares of our Series C preferred stock at
its stated value (i.e., $35.00 per share) plus accrued but unpaid premium, if
the closing sales price of our common stock is less than $3.50 per share for 11
or more consecutive trading dates.
25
If we exercise this option, we must issue to a holder an investor warrant to
purchase .875 of a share of our common stock for each share of the Series C
preferred stock redeemed.
We may also, at our option, redeem the shares of our Series C preferred
stock at its stated value (i.e., $35.00 per share), plus accrued but unpaid
premium, on and after June 20, 2004. Our common stock must be listed on the
American Stock Exchange or the New York Stock Exchange or quoted on Nasdaq for
us to redeem as provided in this paragraph or the preceding paragraph. In
addition, we must otherwise be in compliance with our obligations and authorized
shares of our common stock must be available for conversion of shares of our
Series C preferred stock.
(8) REACQUIRED SHARES
Shares of our Series C preferred stock which have been converted, redeemed
or reacquired by us in any manner will, upon compliance by us with the
provisions of the Delaware General Corporation Law, have the status of
authorized and unissued shares of the preferred stock not constituting part of
any series of our preferred stock. In other words, they will be in the same
status as if never issued.
(9) FRACTIONAL SHARES
No fractional shares will be issued upon either conversion of a share of
our Series C preferred stock or upon redemption of premium in shares of our
common stock. Instead we will disregard the fractional share and we shall round
up or down to the nearest whole share the number of shares of our common stock
which we issue.
(10) VOTING RIGHTS
We have described in the subsection entitled "Seniority of our Series C
Preferred Stock" under this caption "Material Changes" in this prospectus
certain actions that we may not take without the consent of a majority of the
holders of our Series C preferred stock. In addition, the vote or consent of a
majority of the holders is required if we are to:
- alter or change the rights, preferences or privileges of our Series C
preferred stock or issue any additional shares of such series except on
the same terms and conditions.
- alter or change the rights, preferences or privileges of any previously
issued shares of our capital stock as to affect adversely our Series C
preferred stock.
- create any new class or series of our capital stock having a preference
over, or ranking pari passu with, our Series C preferred stock as to the
distribution of assets upon liquidation, dissolution or winding up of our
company.
- increase the par value of our common stock.
The holders of shares of our Series C preferred stock have no other voting
rights except as they are otherwise granted by the Delaware General Corporation
Law. This statute provides a voting right to the holders of the Series C
preferred stock if the action being voted upon by the holders of our common
stock would adversely affect the rights of the preferred stockholders.
Whenever the holders of shares of the Series C preferred stock have been
granted by this law the right to vote separately as a class, the vote of the
holders of at least a majority of the then outstanding shares will be required
for approval. However, we have agreed
26
contractually with the holders that, if their consent is required with respect
to a change affecting their security, unanimous consent is required.
(11) LIQUIDATION
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of our company, each holder of shares of our Series C preferred
stock will be entitled to receive out of the assets available for distribution
to stockholders an amount equal to $35.00 per share (i.e., its stated value).
Each holder will also receive, as a preferential payment, a sum equal to all
accrued but unpaid premium, if any. After payment in cash to the holders of the
shares of the Series C preferred stock of the full preferential amounts fixed by
the certificate of designation as described in this paragraph, such holders will
have no right or claim to any of our remaining assets.
INVESTOR WARRANTS
A copy of the form of investor warrant was filed as an exhibit to the
registration statement of which this prospectus constitutes part I. In addition
to your reading the following description of its material terms and conditions,
you may wish to read this exhibit. To obtain a copy, your attention is directed
to the section entitled "Incorporation of Certain Information by Reference" in
this prospectus.
The investor warrants are initially exercisable at $3.00 per share. The
exercise price and the number of shares of our common stock are subject to
adjustment in the event of a stock dividend, a stock split, a reorganization, a
recapitalization or a combination or subdivision of our common stock or a
similar event. If we, on or prior to June 19, 2004, sell shares of our common
stock (or a security convertible or exercisable into shares of our common stock)
for a purchase price less than the then conversion price, then we must reduce
the exercise price of our investor warrant to such lower sale exercise price.
An investor warrant may be exercised on a "cashless" basis. In a cashless
exercise the holder is entitled to receive shares of our common stock having a
market value equal to the net exercise value of the portion of the warrant being
exercised. The holder makes no cash payment to exercise the warrant. The
investor warrants specify the manner of calculating the number of shares of our
common stock issuable in a "cashless" exercise.
As a result of an agreement dated as of August 16, 2001, we and the holders
of the investor warrants agreed to delete a provision in our investor warrants
that would have reset the exercise price to a lower price based on the market
price of our common stock at the end of each quarter during the first year the
warrants were outstanding. In addition, the agreement reduced the exercise price
of the investor warrants from $3.50 to $3.00 per share.
PLAN OF DISTRIBUTION
ELIGIBLE SHARES
All shares of our common stock to be reoffered pursuant to this prospectus
by the selling stockholders are shares:
- issuable upon the conversions of shares of our Series C preferred stock
sold to selling stockholders in a private placement which we closed on
June 20, June 29 and September 28, 2001.
27
- issued or issuable upon the quarterly redemptions of premium with respect
to the outstanding shares of our Series C preferred stock.
- issued to the selling stockholders who or which purchased their
securities on September 28, 2001 in lieu of redemption of premium.
- issuable pursuant to the provisions that call for compensatory payments
with respect to our Series C preferred stock and our investor warrants.
- issuable upon the exercises of common stock purchase warrants expiring
June 19, 2006 (These investor warrants were initially issued in the
private placement as part of units with the shares of our Series C
preferred stock).
- issuable upon the exercises of common stock purchase warrants expiring
June 19, 2006 and September 27, 2006 issued to one of the selling
stockholders as partial payment of a placement agent fee in the private
placement.
- issuable upon the exercises of common stock purchase warrants expiring
June 19, 2006 and September 27, 2006 issued as partial payments of
finder's fees in connection with the private placement.
The term "selling stockholders" as used by us in this prospectus includes
pledgees, donees, transferees or other successors in interest selling shares of
our common stock received after the date of this prospectus from one or more of
the selling stockholders named in the list commencing on page 34 as a pledge,
gift, partnership distribution or other non-sale related transfer.
We have registered an aggregate of 689,540 shares of our common stock based
on our current estimate as to the shares to be issued upon the redemption of
premium with respect to the 233,059 shares of the Series C preferred stock not
held in escrow as of January 31, 2002. This estimate is for the period
commencing September 30, 2001 and ending June 30, 2004. An aggregate of 126,400
shares of our common stock were issued as of September 30, 2001 and December 31,
2001 in redemption of premium and were not held in escrow as of January 31,
2002. Our estimate as to the shares to be issued in the future in redemption of
premium assumes that no shares of the Series C preferred stock not held in
escrow will be converted or redeemed during that period. Should we require
additional shares for redemption of premium, we intend to file a new
registration statement under the Securities Act of 1933 registering the
additional shares then required. A similar procedure will be followed should our
estimate as to the number of shares (99,505) of our common stock to be issued as
compensatory payments with respect to our Series C preferred stock and our
investor warrants be insufficient.
As of the date of this prospectus, we were not registering an aggregate of
3,858,379 shares of our common stock as a result of the related securities being
held in escrow. We did not give effect in the foregoing total to any shares we
estimate to be issued upon the redemption of premium for quarters ending March
31, 2002 through June 30, 2004. Whenever the related securities are released
from escrow to selling stockholders, we intend to file a new registration
statement under the Securities Act of 1933 registering the additional shares of
our common stock as to which the related securities are released from escrow.
For further information as to the escrow arrangement, we direct your attention
to the section entitled "New Series C Preferred Stock (2) Escrow Arrangement"
under the caption "Material Changes" in this prospectus.
28
WARRANT SHARES
Certain of the selling stockholders are offering pursuant to this
prospectus shares of our common stock issuable when and if the investor
warrants, the placement agent's warrants and the finder's warrants are
exercised.
For certain information as to the investor warrants, we direct your
attention to the section entitled "Investor Warrants" under the caption
"Material Changes" in this prospectus.
We granted the three placement agent's warrants to purchase an aggregate of
444,792 shares of our common stock to Wells Fargo Van Kasper LLC in partial
payment for its services as the placement agent in our sixth private placement
in June and September 2001. We also paid such firm cash fees of $676,973.
We issued one of the finder's warrants to purchase 11,670 shares of our
common stock to Ladenburg Thalmann & Co. Inc. in partial payment of a finder's
fee with respect to our sixth private placement in June 2001. We also paid such
firm a cash finder's fee of $35,000.
We issued a second finder's warrant to purchase 9,329 shares of our common
stock to EHC Consulting in partial payment of a finder's fee with respect to our
sixth private placement in June 2001. We also paid such firm a cash finder's fee
of $41,970.
We issued the third finder's warrant to purchase 2,042 shares of our common
stock to APS Financial Corporation in partial payment of a finder's fee with
respect to our sixth private placement in September 2001. We also paid such firm
a cash finder's fee of $6,125. APS Financial Corporation is not listed as a
selling stockholder because it transferred 50% of its finder's warrant to each
of Lee E. Burton and American Physicians Service Group, Inc. The transferees are
affiliated with the finder and are each listed as a selling stockholder in the
table beginning on page 34 of this prospectus.
We issued the fourth finder's warrant to purchase 7,294 shares of our
common stock to Brada Mountain Capital Corp. in partial payment of a finder's
fee with respect to our sixth private placement in September 2001. It was also
entitled to a cash finder's fee of $21,125. However, at its request, we netted
this amount against the purchase price for .625 of a unit.
All of the placement agent's warrants and the finder's warrants are
exercisable initially at $3.00 per share. Each expires on either June 19, 2006
or September 27, 2006. Each also provides for an adjustment to the number of
shares of our common stock issuable upon exercise and the exercise price in the
event of a stock dividend, a stock split and similar events as described for the
investor warrants.
DISTRIBUTION METHOD
All of the selling stockholders have advised us that they may sell, from
time to time, pursuant to this prospectus, their shares of our common stock (an
aggregate of 6,841,941 shares as of the date of this prospectus) on the American
Stock Exchange, in the third market, in isolated transactions, or in a
combination of such methods of sale. They have also advised us that their sales
may be made at fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to prevailing market prices, or at
negotiated prices with institutional or other investors. In addition, the
selling stockholders may sell, when permissible, pursuant to the exemption of
Rule 144 under the Securities Act of 1933. As of the date of this prospectus,
none of the shares of our
29
common stock being offered pursuant to this prospectus had met the one-year
holding requirement to become eligible for sale pursuant to Rule 144 under the
Securities Act of 1933. On February 15, 2002, the closing sales price as
reported on the American Stock Exchange was $4.30 per share.
The selling stockholders will act independently of each other. They may
sell the shares of our common stock pursuant to this prospectus by one or more
of the following methods, without limitation:
(a) a block trade on which the broker-dealer so engaged will attempt
to sell the shares of our common stock as agent, but may position and
resell a portion of the block as principal to facilitate the transaction;
(b) purchases by the broker-dealer as principal and resales by such
broker-dealer for its account pursuant to this prospectus;
(c) ordinary brokerage transactions and transactions in which the
broker solicits, or acts as an intermediary for, purchasers;
(d) face-to-face transactions between the selling stockholder and
purchasers without a broker-dealer; or
(e) in one or more underwritten offerings on a firm commitment or best
efforts basis.
In effecting sales, a broker-dealer engaged by a selling stockholder may
arrange for other brokers or dealers to participate. Such brokers or dealers may
receive commissions or discounts from the selling stockholder in amounts which
will be negotiated immediately prior to sale. This compensation to a particular
broker-dealer might be in excess of customary commissions for routine market
transactions. Brokers or dealers and any participating brokers or dealers acting
as described in this paragraph may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933 in connection with these
sales. Any profits realized by the selling stockholder and the compensation of
such brokers or dealers may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933.
Upon our being notified by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares of
our common stock through a block trade, a special offering, an exchange
distribution or a secondary distribution or a purchase by a broker or dealer, we
shall file a supplement to this prospectus, if required, pursuant to Rule 424(c)
under the Securities Act of 1933. In such supplement we shall disclose (a) the
name of each broker-dealer, (b) the number of shares involved, (c) the price at
which such shares were sold, (d) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, (e) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out in this prospectus, as supplemented, and (f) other facts material to the
transaction.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in, or transfer or assign, some or all
of the shares of our common stock owned by them. The pledgees, secured parties
or persons to whom such securities have been hypothecated shall, upon
foreclosure in the event of a default, and the transferees and assignees shall,
be deemed to be selling stockholders for the purpose of this prospectus. The
number of shares of our common stock beneficially owned by a selling stockholder
who or which so transfers, pledges or assigns will decrease as and when the
selling stockholder takes such actions. The plan of distribution for the selling
stockholder's
30
shares of our common stock sold hereunder will otherwise remain unchanged by
reason of a transfer, pledge or assignment. In addition, a selling stockholder
may, from time to time, sell short our common stock. In such instances, this
prospectus may be delivered in connection with such short sales and the shares
of our common stock offered hereby may be used to cover such short sales.
A selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of our common
stock in the course of hedging the positions they assume with such selling
stockholder. This may occur in connection with distributions of shares of our
common stock by such broker-dealers. A selling stockholder may also enter into
option or other transactions with a broker-dealer that involve the delivery of
shares of our common stock to the broker-dealer. The broker-dealer may then
resell or otherwise transfer the shares of our common stock. A selling
stockholder may also loan or pledge shares of our common stock to a
broker-dealer. The broker-dealer may then sell the shares of our common stock so
loaned or, upon a default, may sell or otherwise transfer the pledged shares of
our common stock.
In order to comply with the securities laws of some states, the shares of
our common stock will have to be sold for a selling stockholder in those
jurisdictions only through registered or licensed brokers or dealers.
We have advised the selling stockholders of the requirement under the
Securities Act of 1933 that each of them, or any broker-dealer acting for him,
she or it, must deliver a copy of this prospectus in connection with any resale
by such selling stockholder of shares of our common stock under this prospectus.
We have furnished copies of this prospectus to the American Stock Exchange so
that, only with respect to a sale made on the American Stock Exchange, the
selling stockholder or its broker-dealer will not have to deliver a copy of this
prospectus to the purchaser.
We have also undertaken, if, in the future in our opinion, this prospectus
no longer complies with Section 10(a)(3) of the Securities Act of 1933, to
advise the selling stockholders of this opinion, to request that the selling
stockholders cease use of this prospectus and to confirm our then intention to
amend this registration statement in order to effect such compliance.
The holders of a majority of the shares have the right to select an
underwriter (reasonably acceptable to us) to sell for whichever selling
stockholders so desire. In such event the terms of distribution as described in
this subsection will be modified for those who so elect and this prospectus will
be amended or supplemented. As of the date of this prospectus, we have received
no such request.
MISCELLANEOUS
We have also advised each of the selling stockholders that, if it is
determined by a court at a later date that he, she or it is an "underwriter"
within the meaning of Section 2(11) of the Securities Act of 1933, the selling
stockholder may be found liable for monetary damages to purchasers under
Sections 11, 12(2) and 15 of the Securities Act of 1933 if there are any defects
in this registration statement (i.e., material misstatements or omissions). We
have also advised them that they may be found liable under Section 10(b) of the
Securities Exchange Act of 1933 and Rule 10b-5 thereunder for such material
misstatements or omissions, if any.
We and the selling stockholders are obligated to take such steps as may be
necessary to ensure that the offer and sale by the selling stockholders of an
aggregate, as of the date
31
of this prospectus, of 6,841,491 shares of our common stock offered by this
prospectus will comply with the requirements of the federal securities laws,
including Regulation M.
In general, Rule 102 under Regulation M prohibits any selling stockholder
or a broker-dealer acting for such selling stockholder from, directly or
indirectly, bidding for, or purchasing, any shares of our common stock, or
attempting to induce any person to bid for, or to purchase, shares of our common
stock during a restricted period (as such term is defined in Rule 100) which
ends when he, she or it has completed his, her or its participation in a
distribution of shares in an offering made pursuant to this prospectus. Rule 102
sets forth certain exceptions for the selling stockholder, including exercising
a stock option or warrant. For purposes of the Rule, exercise of an investor
warrant, a placement agent's warrant or a finder's warrant would be excepted.
We are bearing all costs relating to the registration of the shares of our
common stock offered by this prospectus. Any commissions, discounts or other
fees payable to broker-dealer in connection with any sale of shares of our
common stock will be borne by the selling stockholder selling such shares.
SELLING STOCKHOLDERS
The next following table for each selling stockholder indicates as of the
date of this prospectus:
- the name of the selling stockholder,
- the number of shares of our common stock beneficially owned as of January
31, 2002,
- the number of shares of our common stock to be offered pursuant to this
prospectus, and
- the number of shares of our common stock to be beneficially owned if all
of the shares to be offered pursuant to this prospectus are sold.
The table also indicates the percentage of beneficial ownership before and after
the proposed sales. During the past three years, none of the selling
stockholders had any position, office or other material relationship with us,
except as a stockholder and except that Paul Sandler, a director of our company,
is affiliated with a family partnership that is a selling stockholder (PMLDSS,
Ltd.).
Each of the selling stockholders named in the next following table has
advised us that he, she or it may, from time to time, offer all of the shares of
our common stock shown next to his, her or its name in the column "Offered" and
the shares to be received subsequent to the date of this prospectus upon the
redemption of premium or as compensatory payments in the manner and at the
prices described under "Plan of Distribution-Distribution Method" elsewhere in
this prospectus.
The selling stockholders are offering, by this prospectus, as of the date
of this prospectus, as indicated in the next following table, an aggregate of
6,052,446 shares of our common stock, as follows:
(1) an aggregate of 2,719,801 shares issuable upon the conversions of
233,059 shares of our Series C preferred stock not held in escrow,
32
(2) an aggregate of 3,194,893 shares issuable upon the exercises of
our investor warrants not held in escrow (2,719,866 shares), our placement
agent's warrants (444,792 shares) and our finder's warrants (30,335
shares),
(3) an aggregate of 126,400 shares issued upon the redemption of
premium with respect to the 233,059 shares of our Series C preferred stock
not held in escrow, and
(4) 11,352 shares issued in lieu of the redemption of premium with
respect to the 75,696 shares of our Series C preferred stock purchased on
September 28, 2001 and not held in escrow.
The table does not reflect the aggregate of 689,540 additional shares of
our common stock which we currently estimate, as of January 31, 2002, to be
issued commencing as of March 31, 2002 and on or before June 30, 2004 upon the
redemption of premium with respect to the 233,059 shares of our Series C
preferred stock not held in escrow. This estimate assumes no shares of our
Series C preferred stock are converted, redeemed or cancelled prior thereto. The
table also does not include an aggregate of 99,505 shares of our common stock
which is our current estimate as to the shares which may be issued as
compensatory payments to the selling stockholders with respect to their shares
of our Series C preferred stock and investor warrants not held in escrow.
Accordingly, the selling stockholders may be offering pursuant to this
prospectus an aggregate of 789,045 shares of our common stock not shown next to
their names in the table, together with the aggregate of 6,052,446 shares shown
in the table, or an aggregate of 6,841,491 shares pursuant to this prospectus.
The table does not reflect any of the shares of our common stock related to
securities owned by the selling stockholders and held in escrow. For information
as to the escrow arrangement, we direct your attention to the section "New
Series C Preferred Stock-(2) Escrow Arrangement" under the caption "Material
Changes" elsewhere in this prospectus. For information as to who owns the
securities held in escrow, as of January 31, 2002, your attention is directed to
the table in the section entitled "Table as to Escrowed Shares" under this
caption "Selling Stockholders."
The percentages of beneficial ownership reported in the next following
table are based upon 32,161,178 shares of our common stock which were
outstanding on January 31, 2002. Effect is given, where applicable, pursuant to
Rule 13d-3(1)(i) under the Securities Exchange Act of 1934, to shares issuable
upon the conversion of shares of our Series C preferred stock and exercises of
the investor warrants, the placement agent's warrants and the finder's warrants,
to the extent currently convertible or exercisable within 60 days of January 31,
2002 and without regard to the securities held in escrow even though the escrow
is scheduled to end within such 60 days.
33
Each of the following symbols as used in the following table shall have the
meaning assigned to it as below:
<Table>
<Caption>
Symbol Meaning
- ------ -------
CS Shares of our common stock issuable upon
conversion of our Series C preferred stock.
IW Shares of our common stock issuable upon exercise
of our investor warrants
PS Shares of our common stock issued upon redemption
of premium
LP Shares of our common stock issued in lieu of
redemption of premium
OW Shares of our common stock issuable upon exercise
of placement agent's and finder's warrants
OS Shares of our common stock beneficially owned by
the selling stockholders acquired other than in
connection with our private placement in June and
September 2001
TS The total of all of the foregoing shares of our
common stock
</Table>
Where a particular symbol is not shown for the selling stockholder, he, she or
it does not own shares falling in that category.
TABLE OF SELLING STOCKHOLDERS
<Table>
<Caption>
BENEFICIAL
NUMBER OF SHARES OWNERSHIP(1)
--------------------------------------------- --------------
NAME OF BEFORE AFTER BEFORE AFTER
SELLING STOCKHOLDER SALE OFFERED SALE SALE SALE
- ------------------- --------- ---------------- --------- ------ -----
General Conference........... CS 166,718 166,718 0
Corporation of Seventh-day IW 166,712 166,712 0
Adventists(1) PS 9,310 9,310 0
OS 6,262,129 0 6,262,129
--------- ------- ---------
TS 6,604,869 342,740 6,262,129 20.2% 19.1%
Omicron Partners LP(2)....... CS 414,285 414,285 0
IW 414,285 414,285 0
PS 23,131 23,131 0
--------- -------
TS 851,701 851,701 0 2.6% 0
Zanett Lombardier Master..... CS 333,435 333,435 0
Fund II, L.P(3) TW 323,426 323,426 0
PS 18,618 18,618 0
--------- -------
TS 675,479 675,479 0 2.1% 0
Rano Mukhamadieva(4)......... IW 10,003 10,003 0 nil 0
New England Partners......... CS 333,424 333,424 0
Capital, L.P(5) IW 333,424 333,424 0
PS 9,005 9,005 0
LP 1,441 1,441 0
--------- -------
TS 677,294 677,294 0 2.0% 0
</Table>
34
<Table>
<Caption>
BENEFICIAL
NUMBER OF SHARES OWNERSHIP(1)
--------------------------------------------- --------------
NAME OF BEFORE AFTER BEFORE AFTER
SELLING STOCKHOLDER SALE OFFERED SALE SALE SALE
- ------------------- --------- ---------------- --------- ------ -----
Estate of Herman
Sandler(6)................. CS 105,030 105,030 0
IW 105,030 105,030 0
PS 2,837 2,837 0
LP 1,544 1,544 0
OS 450,000 0 450,000
--------- ------- ---------
TS 664,441 214,441 450,000 2.0% 1.4%
Dandelion International,..... CS 210,621 210,621 0
Ltd.(7) IW 210,615 210,615 0
PS 12,413 12,413 0
OS 87,500 0 87,500
--------- ------- ---------
TS 521,149 433,649 87,500 1.6% nil
Bomoseen Investments......... CS 210,621 210,621 0
Ltd.(8) IW 210,615 210,615 0
PS 12,413 12,413 0
--------- ------- ---------
TS 433,649 433,649 0 1.3% 0
Wallington Investment........ CS 204,786 204,786 0
Holdings Ltd.(9) IW 204,780 204,780 0
PS 12,413 12,413 0
--------- ------- ---------
TS 421,979 421,979 0 1.3% 0
McCarthy Family Partners..... CS 40,845 40,845 0
2002, G.P.(10) IW 40,845 40,845 0
--------- ------- ---------
TS 81,690 81,690 0 nil 0
PMLDSS Ltd.(11).............. CS 105,030 105,030 0
IW 105,030 105,030 0
PS 2,837 2,837 0
LP 1,575 1,575 0
OS 225,318 0 225,318
--------- ------- ---------
TS 439,790 214,472 225,318 1.4% nil
Brendon Devlin............... CS 116,700 116,700 0
IW 116,700 116,700 0
PS 3,152 3,152 0
LP 2,860 2,860 0
--------- ------- ---------
TS 239,412 239,412 0 nil 0
Elliott International
L.P.(12)................... CS 91,691 91,691 0
IW 68,769 68,769 0
PS 5,122 5,122 0
--------- ------- ---------
TS 165,582 165,582 0 nil 0
Elliot Associates,
L.P.(13)................... CS 75,026 75,026 0
IW 56,265 56,265 0
PS 4,189 4,189 0
--------- ------- ---------
TS 135,480 135,480 0 nil 0
RAM Capital Resources,
LLC(14).................... IW 41,678 41,678 0 nil 0
</Table>
35
<Table>
<Caption>
BENEFICIAL
NUMBER OF SHARES OWNERSHIP(1)
--------------------------------------------- --------------
NAME OF BEFORE AFTER BEFORE AFTER
SELLING STOCKHOLDER SALE OFFERED SALE SALE SALE
- ------------------- --------- ---------------- --------- ------ -----
Timberline Opportunity....... CS 11,670 11,670 0
Partners, LP(15) IW 11,670 11,670 0
PS 651 651 0
OS 165,000 0 165,000
--------- ------- ---------
TS 188,991 23,991 165,000 nil nil
AWINN Ltd.(16)............... CS 11,670 11,670 0
IW 11,670 11,670 0
PS 315 315 0
LP 299 299 0
OS 146,978 0 146,978
--------- ------- ---------
TS 170,932 23,954 146,978 nil nil
The Michael S. McCord........ CS 11,670 11,670 0
GST Trust(17) IW 11,670 11,670 0
PS 315 315 0
LP 307 307 0
OS 126,003 0 126,003
--------- ------- ---------
TS 149,965 23,962 126,003 nil nil
OTATO Limited................ CS 66,519 66,519 0
Partnership(18) IW 66,519 66,519 0
PS 3,714 3,714 0
--------- ------- ---------
TS 136,752 136,752 0 nil 0
H&B Wilson Interests......... CS 23,340 23,340 0
Ltd.(19) IW 23,340 23,340 0
PS 630 630 0
LP 620 620 0
OS 60,602 0 60,602
--------- ------- ---------
TS 108,532 47,930 60,602 nil nil
Lee E. Burton(20)............ CS 11,670 11,670 0
IW 11,670 11,670 0
PS 315 315 0
LP 7 7 0
OW 1,021 1,021 0
OS 48,485 0 48,485
--------- ------- ---------
TS 73,168 24,683 48,485 nil nil
Raul M. Rodelas.............. CS 35,010 35,010 0
IW 35,010 35,010 0
PS 945 945 0
LP 524 524 0
--------- ------- ---------
TS 71,489 71,489 0 nil 0
Michel A. Amsalem............ CS 35,010 35,010 0
IW 35,010 35,010 0
PS 945 945 0
LP 384 384 0
--------- ------- ---------
TS 71,349 71,349 0 nil 0
</Table>
36
<Table>
<Caption>
BENEFICIAL
NUMBER OF SHARES OWNERSHIP(1)
--------------------------------------------- --------------
NAME OF BEFORE AFTER BEFORE AFTER
SELLING STOCKHOLDER SALE OFFERED SALE SALE SALE
- ------------------- --------- ---------------- --------- ------ -----
Aljay L. Smith............... CS 29,175 29,175 0
IW 29,175 29,175 0
PS 788 788 0
LP 724 724 0
--------- ------- ---------
TS 59,862 59,862 0 nil 0
Gary Blum.................... CS 29,175 29,175 0
IW 29,175 29,175 0 nil 0
PS 788 788 0
LP 409 409 0
--------- ------- ---------
TS 59,547 59,547 0
Harry S. Y. Nam(21).......... CS 11,670 11,670 0
IW 11,670 11,670 0
PS 315 315 0
LP 7 7 0
OS 20,000 0 20,000
--------- ------- ---------
TS 43,662 23,662 20,000 nil 0
Dos Cunados(22).............. CS 5,835 5,835 0
IW 5,835 5,835 0
PS 157 157 0
LP 150 150 0
OS 20,908 0 20,908
--------- ------- ---------
TS 32,885 11,977 20,908 nil 0
Stifel Nicolaus,............. CS 11,670 11,670 0
Custodian for A. Ray IW 11,670 11,670 0
Cercle IRA PS 315 315 0
LP 309 309 0
--------- ------- ---------
TS 23,964 23,964 0 nil 0
Brada Mountain Capital....... CS 7,294 7,294 0
Corp.(23) IW 7,294 7,294 0
PS 197 197 0
LP 192 192 0
OW 7,294 7,294 0
--------- ------- ---------
TS 22,271 22,271 0 nil 0
Scorpion Acquisition......... CS 10,211 10,211 0
LLC(24) IW 10,211 10,211 0
PS 570 570 0
--------- ------- ---------
TS 20,992 20,992 0 nil 0
Wells Fargo Van Kasper
LLC(25).................... OW 444,792 444,792 0 1.4% 0
Ladenburg Thalmann & Co.
Inc.(26)................... OW 11,670 11,670 0 nil 0
EHC Consulting(27)........... OW 9,329 9,329 0 nil 0
American Physicians Service
Group, Inc.(28)............ OW 1,021 1,021 0 nil 0
</Table>
37
- -------------------------
(1) No person or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934 or Regulation 13D-G promulgated thereunder)
controls this selling stockholder. The governing board of this selling
stockholder delegates investment authority over owned and trustee funds
through various committees to the General Conference Investment Office,
which is led by an Associate Treasurer of this selling stockholder.
Day-to-day responsibility with respect to each issuer in which this selling
stockholder makes an investment (including us) is delegated to one or more
portfolio managers. They may vote our shares or execute investment
decisions with respect to our securities, but only within the guidelines or
policies authorized by the governing board or one of the governing
committees. The shares of our common stock reported in the table as being
beneficially owned, as of January 31, 2002, by this selling stockholder
include (a) an aggregate of 6,022,129 shares acquired by this selling
stockholder and its affiliate in prior private placements of our company
and in open market purchases and (b) an aggregate of 240,000 shares
issuable upon the exercises of two warrants expiring February 28, 2005 also
acquired in a prior private placement of our company. This selling
stockholder is also offering 240,000 of the shares described in (a) and all
of the shares described in (b) pursuant to another registration statement
of our company. This selling stockholder was subsequently issued a common
stock purchase warrant to purchase 500,000 shares of our common stock. For
information as to this warrant, your attention is directed to the section
entitled "Series C Preferred Stock (2) Escrow Arrangement" under the
caption "Material Changes" in this prospectus.
(2)Omicron Capital, L.P., a Delaware limited partnership ("Omicron Capital"),
serves as subadvisor to this selling stockholder, a Bahamas limited
partnership, and Grove Management Limited ("Grove") is the general partner
of this selling stockholder. By reason of such relationships, Omicron
Capital may be deemed to share dispositive power over the shares of our
common stock owned by this selling stockholder and Grove may be deemed to
share voting and dispositive power over the shares of our common stock owned
by this selling stockholder. Omicron Capital and Grove disclaim beneficial
ownership of such shares of our common stock. This selling stockholder and
Grove are not "affiliates" of one another, as that term is used for purposes
of the Securities Exchange Act of 1934, or of any other person named in this
prospectus as a selling stockholder. No person or "group" (as that term is
used in Section 13(d) of the Securities Exchange Act of 1934 or Regulation
13D-G promulgated thereunder) controls this selling stockholder and Grove.
(3)Lombardier Management Limited, a Cayman Islands limited liability company
("Lombardier"), is the general partner and serves as subadvisor to this
selling stockholder, a Cayman Islands limited partnership. Zanett Lombardier
Limited is the limited partner of this selling stockholder ("ZL Limited").
By reason of such relationships, Lombardier may be deemed to share
dispositive power over the shares of our common stock owned by this selling
stockholder and ZL Limited may be deemed to share voting and dispositive
power over the shares of our common stock owned by this selling stockholder.
Lombardier and ZL Limited disclaim beneficial ownership of such shares of
common stock. Lombardier and ZL Limited are not "affiliates" of one another,
as that term is used for purposes of the Securities Exchange Act of 1934, or
of any other person named in this prospectus as a selling stockholder. No
person or "group" (as that term is used in Section 13(d) of the
38
Securities Exchange Act of 1934 or Regulation 13D-G promulgated thereunder)
controls Lombardier and ZL Limited.
(4) The shares of our common stock reported in the table as being beneficially
owned and being offered by this selling stockholder reflect an aggregate of
10,003 shares issuable upon the exercise of an investor warrant transferred
to her by Zanett Lombardier Master Fund II, L.P., another selling
stockholder.
(5)NEP Capital LLP ("NEP Capital"), as the general partner of this selling
stockholder, has the sole voting and investment powers with respect to the
shares of our common stock reported in the table for this selling
stockholder. Accordingly, NEP Capital may be deemed the beneficial owner of
these shares as a result of possessing these powers. However, NEP Capital
disclaims such beneficial ownership of these shares. There are five
independent members of NEP Capital. Accordingly, no person or "group" (as
that term is defined in Section 13(d) of the Securities Exchange Act of 1934
or Regulation 13D-G promulgated thereunder) controls NEP Capital.
(6)The late Mr. Sandler was an affiliate of a broker-dealer registered under
the Securities Exchange Act of 1934. He purchased shares of our Series C
preferred stock and investor warrants in the ordinary course of his personal
business and not that of the broker-dealer. At the time of the purchase of
these securities, he had no agreements or understandings, directly or
indirectly, with any person to distribute the shares reported in the table
other than his registration rights under an agreement dated as of June 20,
2001 which he and all of the other investors executed with us. The shares of
our common stock reported in the table as being beneficially owned, as of
January 31, 2002, by this selling stockholder include (a) 300,000 shares
acquired by the late Mr. Sandler upon the exercise of a common stock
purchase warrant and (b) 150,000 shares issuable upon the exercise of a
common stock purchase warrant expiring January 7, 2003 granted to him. The
late Mr. Sandler was a brother of Paul Sandler, a director of our company.
(7)Dany Aboukheir, as a director of this selling stockholder, has sole voting
and investment powers with respect to the shares of our common stock
reported in the table for this selling stockholder. Accordingly, she may be
deemed the beneficial owner of these shares as a result of possessing these
powers. However, she disclaims such beneficial ownership of these shares.
The shares of our common stock reported in the table as being beneficially
owned, as of January 31, 2002, by this selling stockholder include 87,500
shares issuable upon the exercise of a common stock purchase warrant
expiring March 13, 2006. This selling stockholder is offering these 87,500
shares pursuant to another registration statement of our company. This
selling stockholder was a former holder of shares of the Series B preferred
stock.
(8)Each of Robert T. Tucker and Nancy Main is a director of this selling
stockholder. As such, they have shared voting and investment powers with
respect to the shares of our common stock reported in the table for this
selling stockholder. Accordingly, they may be deemed the beneficial owners
of these shares as a result of possessing these powers. However, they
disclaim such beneficial ownership of these shares. This selling stockholder
was a former holder of shares of the Series B preferred stock.
(9)Dominique Lang, as a director of this selling stockholder, has sole voting
and investment powers with respect to the shares of our common stock
reported in the table for this selling stockholder. Accordingly, he may be
deemed the beneficial
39
owner of these shares as a result of possessing these powers. However, he
disclaims such beneficial ownership. This selling stockholder was a former
holder of shares of the Series B preferred stock.
(10)Kevin McCarthy, as the general partner of this selling stockholder, has sole
voting and investment powers with respect to the shares of our common stock
reported in the table for this selling stockholder. Accordingly, he may be
deemed a beneficial owner of these shares. This selling shareholder acquired
its securities from Dandelion International, Ltd., Bomoseen Investments Ltd.
and Wallington Investment Holdings Ltd., three other selling stockholders.
(11)Paul Sandler, a director of our company, is the President of the corporate
general partner of this selling stockholder (which is a "family
partnership"). As such, he has voting and investment powers with respect to
the shares of our common stock reported in the table for this selling
stockholder. Accordingly, he may be deemed a beneficial owner of the shares
reported in the table. The shares of our common stock reported in the table
as being beneficially owned, as of January 31, 2002, by this selling
stockholder include (a) 200,000 shares owned directly by Dr. Sandler and (b)
an aggregate of 25,318 shares issuable upon the exercise of stock options
granted to Dr. Sandler as a director as to which the stock options are
currently exercisable or exercisable within 60 days of January 31, 2002.
(12)Elliott International Capital Associates Inc. has the sole voting and
investment powers with respect to securities (including ours) owned by this
selling stock- holder. Paul E. Singer, as President of such entity, with the
power to act on its behalf, may be deemed the beneficial owner of the shares
of our common stock reported in the table for this selling stockholder as a
result of possessing such powers. However, he disclaims sole beneficial
ownership of these shares.
(13)Paul E. Singer is the general partner of this selling stockholder. As such,
he has sole voting and investment powers with respect to the shares of our
common stock reported in the table. Accordingly, he may be deemed the
beneficial owner of these shares as a result of possessing such powers.
However, he disclaims sole beneficial ownership of these shares.
(14)Michael E. Fein, as the President of this selling stockholder, has sole
voting and investment powers with respect to the shares of our common stock
reported in the table for this selling stockholder. Accordingly, he may be
deemed the beneficial owner of these shares as a result of possessing such
powers. However, he disclaims sole beneficial ownership of these shares. The
shares of our common stock reported in the table as being beneficially owned
(as of January 31, 2002) and offered by this selling stockholder reflect (a)
22,923 shares issuable upon the exercise of an investor warrant transferred
to it by Elliot International L.P., another selling stockholder, and (b)
18,755 shares issuable upon the exercise of an investor warrant transferred
to it by Elliot Associates, L.P., another selling stockholder.
(15)Timberline Asset Management LLC, as the general partner of this selling
stockholder, has sole voting and investment powers with respect to the
shares of our common stock reported in the table for this selling
stockholder. Adam Haron is the sole member of the limited liability company
which is the general partner. Accordingly, he may be deemed the beneficial
owner of these shares as a result of possessing such powers. The shares of
our common stock reported in the table as being beneficially owned, as of
January 31, 2002, by this selling stockholder include
40
(a) 82,500 shares acquired in our fourth private placement in February 2000,
(b) 40,000 shares issued upon the partial exercises of a common stock
purchase warrant expiring February 28, 2005 also acquired in such private
placement and (c) 42,500 shares issuable upon the exercise of the foregoing
warrant. This selling stockholder is also offering the shares described in
(a), (b) and (c) pursuant to another registration statement of our company.
(16)Peter M. Way is the principal limited partner and a 50% owner with his wife
of the corporate general partner of this selling stockholder. As such, he
has shared voting and investment powers with respect to the shares of our
common stock reported in the table for this selling stockholder.
Accordingly, he may be deemed a beneficial owner of these shares as a result
of possessing such powers. The shares of our common stock reported in the
table as being beneficially owned, as of January 31, 2002, by this selling
stockholder include (a) 2,500 shares acquired by Mr. Way in our fourth
private placement in February 2000, (b) 12,500 shares issued to him upon the
exercise of a common stock purchase warrant expiring February 28, 2005
acquired in the same private placement and (c) 131,978 shares acquired by
Mr. Way in our third private placement in January. This selling stockholder
is also offering the shares described in (a) and (b) pursuant to another
registration statement of our company.
(17)Michael S. McCord is the trustee of this selling stockholder. As such, he
has sole voting and investment powers with respect to the shares of our
common stock reported in the table for this selling stockholder.
Accordingly, he may be deemed a beneficial owner of these shares as a result
of possessing such powers. The shares of our common stock reported in the
table as beneficially owned, as of January 31, 2002, by this selling
stockholder include (a) 12,500 shares acquired by Mr. McCord in our fourth
private placement in February 2000, (b) 12,500 shares issuable to Mr. McCord
upon the exercise of a common stock purchase warrant expiring February 28,
2005 also acquired in that private placement and (c) 101,003 shares acquired
by Mr. McCord in our third private placement in January 1999. Mr. McCord is
offering the shares described in (a) and (b) pursuant to another
registration statement of our company.
(18)OTA Grand Cayman, Inc., a Delaware corporation ("OTAGC"), is the general
partner of this selling stockholder, a Grand Cayman limited partnership. By
reason of such relationship, OTAGC may be deemed to share voting and
dispositive power over the shares of our common stock beneficially owned by
this selling stockholder. OTAGC disclaims beneficial ownership of such
shares of our common stock. This selling stockholder and OTAGC are not
"affiliates," as that term is used for purposes of the Securities Exchange
Act of 1934, or of any other person named in this prospectus as a selling
stockholder. No other person or "group" (as that term is used in Section
13(d) of the Securities Exchange Act of 1934 or Regulation 13D-G promulgated
thereunder) controls this selling stockholder or OTAGC.
(19) Herman T. Wilson, Jr. is the general partner of this selling stockholder.
As such, he has sole voting and investment powers with respect to the
shares of our common stock reported in the table for this selling
stockholder. Accordingly, he may be deemed a beneficial owner of these
shares as a result of possessing these powers. The shares of our common
stock reported in the table as being beneficially owned, as of January 31,
2002, by this selling stockholder include 60,602 shares beneficially owned
by Mr. Wilson and acquired by him in our third private placement in January
1999.
41
(20)This selling stockholder is an affiliate of APS Financial Corporation, a
broker-dealer registered under the Securities Exchange Act of 1934. He
purchased his shares of our Series C Preferred Stock and investor warrants
in the ordinary course of his business and not that of this broker-dealer.
At the time of his purchase of these securities, he had no agreements or
understandings, directly or indirectly, with any person to distribute the
shares reported in the table other than his registration rights under an
agreement dated as of June 20, 2001 which he and all of the other investors
executed with us. With respect to the shares underlying the finder's
warrant, the broker-dealer-transferor had a commitment by us to register the
underlying shares of our common stock in the same registration statement as
used for the investors. The shares of our common stock reported in the table
as being beneficially owned, as of January 31, 2002, by this selling
stockholder include (a) 20,000 shares acquired in our fourth private
placement in March 2000, (b) 20,000 shares issuable upon the exercise of a
common stock purchase warrant expiring March 13, 2005 acquired in the same
private placement, (c) 8,485 shares issuable upon the exercise of a common
stock purchase warrant expiring March 13, 2005 issued in partial payment of
a finder's fee in connection with such private placement and (d) 1,021
shares issuable upon the exercise of a finder's warrant expiring September
27, 2006 transferred to him by APS Financial Corporation, a finder in our
sixth private placement in September 2001. This selling stockholder is also
offering the shares described in (a), (b) and (c) pursuant to another
registration statement of our company.
(21) The shares of our common stock reported in the table as being beneficially
owned, as of January 31, 2002, by this selling stockholder include 20,000
shares acquired from a purchaser in our fourth private placement in
February and March 2000. He is also offering the 20,000 shares pursuant to
another registration statement of our company. Mr. Nam is affiliated with
Hyosung Corporation which acquired in our fourth private placement in
February 2000 (a) 500,000 shares of our common stock and (b) a common stock
purchase warrant expiring February 28, 2005 to purchase 500,000 shares of
our common stock. This selling stockholder is also offering all of the
shares of the common stock described in (a) and (b) in another registration
statement of our company.
(22)Ben B. McAndrew, III, as the managing partner of this selling stockholder,
has sole voting and investment powers with respect to the shares of our
common stock reported in the table for this selling stockholder.
Accordingly, he may be deemed the beneficial owner of these shares as a
result of possessing these powers. The shares of our common stock reported
in the table as beneficially owned, as of January 31, 2002, by this selling
stockholder include 20,908 shares acquired in our third private placement in
January 1999.
(23)Michael Mrkulic, as the sole shareholder of this selling stockholder, has
sole voting and investment powers with respect to the shares of our common
stock reported in the table for this selling stockholder. Accordingly, he
may be deemed the beneficial owner of these shares. Mr. Mrkulic is an
affiliate of a broker-dealer registered under the Securities Exchange Act of
1934. He caused the selling stockholder to purchase shares of our Series C
Preferred Stock and an investor warrant in the ordinary course of his
business and not that of the broker-dealer. This selling stockholder was
entitled to a finder's fee which we netted, at its request, against the
purchase price for its .625 of a unit. At the time of the purchase of these
securities, neither the selling stockholder nor Mr. Mrkulic had any
agreements or understandings, directly
42
or indirectly, with any person to distribute the shares of our common stock
reported in the table other than the registration rights under an agreement
dated as of June 20, 2001 which he and all of the other investors executed
with us. With respect to the shares underlying the finder's warrant, he had
a commitment by us to register the underlying shares of our common stock in
the same registration statement as used for the investors.
(24)Each of Nuno Brandolini and Kevin McCarthy are directors of this selling
stockholder. As such, they have shared voting and investment powers with
respect to the shares of our common stock reported in the table for this
selling stockholder. Accordingly, they may be deemed the beneficial owners
of these shares as a result of possessing these powers. However, each
disclaims being the sole beneficial owner of these shares.
(25)This selling stockholder is a broker-dealer registered under the Securities
Exchange Act of 1934 and no person or "group" (as such term is used in
Section 13(d) of the Securities Exchange Act of 1934 or Regulation 13D-G
promulgated thereunder) controls this selling stockholder. The shares of our
common stock reported in the table as being beneficially owned and as being
offered by this selling stockholder reflect shares issuable upon the
exercises of three placement agent's warrants which we granted to it in
partial payment of this selling stockholder's services as placement agent
for our sixth private placement in June and September 2001. We granted this
selling stockholder the placement agent's warrants in the ordinary course of
its business. At the time of the acquisition of these warrants, this selling
stockholder had no agreements or understandings, directly or indirectly,
with any person to distribute these underlying shares other than a
commitment by us to register the underlying shares of our common stock in
the same registration statement as used for the investors.
(26)This selling stockholder is a broker-dealer registered under the Securities
Exchange Act of 1934 and no person or "group" (as that term is used in
Section 13(d) of the Securities Exchange Act of 1934 or Regulation 13D-G
promulgated thereunder) controls this selling stockholder. The shares of our
common stock reported in the table as being beneficially owned and as being
offered by this selling stockholder reflect shares issuable upon the
exercise of a finder's warrant which we granted to this selling stockholder
in partial payment of a finder's fee in connection with our sixth private
placement in June 2001. We granted this selling stockholder a finder's
warrant in the ordinary course of its business. At the time of the
acquisition of this warrant, this selling stockholder had no agreements or
understandings, directly or indirectly, with any person to distribute the
underlying shares other than a commitment by us to register the underlying
shares of our common stock in the same registration statement as used for
the investors.
(27)Edmund Chavez has sole voting and investment powers with respect to the
shares of our common stock reported in the table for this selling
stockholder. Accordingly, he may be deemed the beneficial owner of these
shares. The shares of our common stock reported in the table as being
beneficially owned and as being offered by this selling stockholder reflect
shares issuable upon the exercise of a finder's warrant which we granted in
partial payment of a finder's fee to this selling stockholder in connection
with our sixth private placement in June 2001.
(28)The persons who share voting and/or investment control of the shares of our
common stock reported in the table for this selling stockholder are its four
officers
43
(Kenneth S. Shifrin, Chairman and CEO; William H. Hayes, Senior Vice
President; Maury Magids, Senior Vice President; and Thomas R. Solomine,
Controller) and its four directors (Mr. Shifrin; Robert L. Myer; William A.
Searles and Marc R. Still). Accordingly, no individual or "group" (as that
term is used in Section 13(d) of the Securities Exchange Act of 1934 or
Regulation 13D-G promulgated thereunder) controls this selling stockholder.
This selling stockholder is an affiliate of APS Financial Corporation, a
broker-dealer registered under the Securities Exchange Act of 1934. We
granted this broker-dealer the finder's warrant in the ordinary course of
its business. At the time of its acquisition of this warrant, neither the
broker-dealer nor this selling stockholder as the former's transferee had
any agreements or understandings, directly or indirectly, with any person to
distribute the underlying shares reported in the table other than a
commitment by us to register the underlying shares of our common stock in
the same registration statement as used for the investors. The shares of our
common stock reported in the table as being beneficially owned and as being
offered by this selling stockholder reflect shares issuable upon the
exercise of a finder's warrant which we granted in partial payment of a
finder's fee to its transferor in connection with our sixth private
placement in September 2001.
TABLE AS TO ESCROWED SHARES
The next following table identifies all of the selling stockholders who or
which, as of January 31, 2002, owned securities held in escrow and the number of
shares or our common stock which would be issued to them when and if the
securities were released from escrow and the holders converted the shares of our
Series C preferred stock, and exercised our investor warrants, held in escrow.
None of these shares are being offered pursuant to this prospectus. The
following symbols as used in the next following table shall have the meaning
assigned to it as below:
<Table>
<Caption>
SYMBOL MEANING
- ------ -------
CS Shares of our common stock issuable upon
conversion of our Series C preferred stock.
IW Shares of our common stock issuable upon
exercise of our investor warrants
PS Shares of our common stock issued upon
redemption of premium
LP Shares of our common stock issued in lieu of
redemption of premium
</Table>
<Table>
<Caption>
NAME OF
SELLING STOCKHOLDER CS IW PS LP TOTAL
- ------------------- --------- --------- ------- --- ---------
General Conference of Seventh-day
Adventists....................... 166,706 166,712 9,308 0 342,726
Omicron Partners LP................ 414,285 414,285 23,136 0 851,706
Zanett Lombardier Master Fund II,
LP............................... 333,424 323,426 18,618 0 675,468
Rano Mukhamadieva.................. 0 10,004 0 0 10,004
Dandelion International, Ltd. ..... 210,608 210,614 12,412 0 433,634
Bomoseen Investments, Ltd. ........ 210,608 210,614 12,412 0 433,634
</Table>
44
<Table>
<Caption>
NAME OF
SELLING STOCKHOLDER CS IW PS LP TOTAL
- ------------------- --------- --------- ------- --- ---------
Wallington Investment Holdings
Ltd. ............................ 204,773 204,779 12,412 0 421,964
McCarthy Family Partners 2002,
G.P. ............................ 40,845 40,845 0 0 81,690
Elliott International L.P. ........ 91,691 68,768 5,118 0 165,577
Elliott Associates, L.P. .......... 75,015 56,265 4,189 0 135,467
RAM Capital Resources, LLC......... 0 41,678 0 0 41,678
AWINN Ltd. ........................ 11,670 11,670 315 300 23,955
OTATO Limited Partnership.......... 66,519 66,519 3,714 0 136,752
Michel A. Amsalem.................. 35,010 35,010 946 384 71,350
Dos Cunados........................ 5,835 5,835 158 150 11,980
Scorpion Acquisition LLC........... 10,212 10,212 570 0 20,994
--------- --------- ------- --- ---------
1,877,201 1,877,236 103,308 834 3,858,579
</Table>
INTERESTS OF NAMED EXPERTS AND COUNSEL
The financial statements of our company appearing in our Annual Report
(Form 10-K) at March 31, 2001 and for each of the three years in the period
ended March 31, 2001 have been audited by Ernst & Young LLP, independent
auditors, and, for the period from October 8, 1992 (inception) through March 31,
1995, by Wolinetz, Lafazan and Co., P.C., independent certified public
accountants, as set forth in their respective reports thereon included therein
and incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance on such reports given upon the authority of such
firms as experts in accounting and auditing.
The validity of the shares offered hereby will be passed upon for our
company by Wachtel & Masyr, LLP, 110 East 59th Street, New York, New York 10022.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We have filed the following documents with the Securities and Exchange
Commission (the "Commission"). We incorporate them in this prospectus by this
reference:
(a) our Annual Report on Form 10-K for the fiscal year ended March 31,
2001;
(a)(1) our Form 10-K/A filed on July 30, 2001;
(a)(2) our Form 10-K/A filed on December 17, 2001;
(a)(3) our Form 10-K/A filed on February 8, 2002;
(b) our Current Report filed on May 30, 2001;
(c) our Current Report on Form 8-K filed on June 25, 2001;
(d) our Quarterly Report on Form 10-Q for the quarter ended June 30,
2001.;
(d)(1) our Form 10-Q/A filed on February 22, 2002;
(e) our Current Report on Form 8-K filed on October 1, 2001;
(f) our Quarterly Report on Form 10-Q for the quarter ended September
30, 2001;
45
(f)(1) our Form 10-Q/A filed on February 22, 2002;
(g) our Current Report on Form 8-K filed on December 26, 2001;
(h) our Current Report on Form 8-K filed on January 16, 2001;
(i) our Current Report on Form 8-K filed on January 23, 2002;
(j) our Quarterly Report on Form 10-Q for the quarter ended December
31, 2001; and
(k) the description of our common stock as contained in our
Registration Statement on Form 8-A filed on April 18, 2000 under the
Securities Exchange Act.
All documents subsequently filed by us pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act prior to termination of the offering
pursuant to this prospectus shall be deemed to be incorporated in this
prospectus by reference. They shall be a part of this prospectus from the
respective dates of filing of such documents.
Any statement contained in an incorporated document or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained in this
prospectus or in any other subsequently filed incorporated document modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, a copy of any incorporated
documents if not delivered with this prospectus. Requests for such copies should
be directed to LifePoint, Inc., Attention: Michele A. Clark, Controller and
Chief Accounting Officer, 1205 South Dupont Street, Ontario, CA 91761,
telephone: (909) 418-3000.
We are subject to the informational requirements of the Securities Exchange
Act of 1934. In accordance with such statute and the related regulations, we
file reports, proxy and information statements and other information with the
Commission. You may read and copy such reports, proxy and information statements
and other information filed with the Commission (including this registration
statement and all of its exhibits) at the following public reference facilities
of the Commission:
450 Fifth Street, N.W.
Judiciary Plaza
Room 1024
Washington, D.C. 20549
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, IL 60661
You may obtain information on the operation of the Public Reference Room by
calling the Commission at 1-800-SEC-0330. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants, including our company (since May 17, 1996), that file
electronically with the Commission at the following Web site address:
http://www.sec.gov. Since April 19, 2000, our common stock has been listed on
the American Stock Exchange LLC (the "AMEX"). Accordingly, you may read and
obtain copies of our reports, proxy and information statements and other
information filed after that date may be inspected and copied at the AMEX
Library, 86 Trinity Place, New York, NY 10006.
Certain information with respect to our company may also be obtained on our
web site: www.LifePointInc.com. Information contained in our web site is not
part of this prospectus.
46
- ------------------------------------------------
- ------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS. IF ANY SUCH INFORMATION OR REPRESENTATIONS IS
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
-------------------------
- ------------------------------------------------
- ------------------------------------------------
- ------------------------------------------------
- ------------------------------------------------
LIFEPOINT, INC.
6,841,491 SHARES
OF COMMON STOCK
($.001 PAR VALUE)
OFFERED BY
SELLING STOCKHOLDERS
-------------------------
PROSPECTUS
-------------------------
---------------- ----, 2002
- ------------------------------------------------
- ------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<Table>
Securities and Exchange Commission fee...................... $ 2,706
Accountants' fees........................................... 20,225
Legal fees and expenses..................................... 250,000
Placement agent's and finders' fees......................... 781,943
Printing and engraving expenses............................. 25,000
Miscellaneous............................................... 27,526
----------
Total.................................................. $1,107,400
==========
</Table>
- -------------------------
* Estimated, except for the Securities and Exchange Commission fee.
ITEM 16. EXHIBITS
Exhibits 4(a) and 4(g) were filed with this Registration Statement as
originally filed and this Amendment, respectively, by incorporation by reference
as indicated in the footnotes. The unmarked exhibits were filed with this
Registration Statement as originally filed. The exhibits marked with asterisks
are filed with this Amendment.
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT
------- -------
4(a) Certificate of Designation of the Series C Convertible
Preferred Stock as filed in Delaware on June 20, 2001.(1)
4(b) Registration Rights Agreement dated as of June 20, 2001 by
and among the Company and certain Investors.
4(c) Amendatory Agreement dated as of August 16, 2001 by and
among the Company and certain Investors.
4(d) Amendatory Agreement dated as of November 21, 2001 by and
among the Company and certain Investors.
4(e) Form of Common Stock purchase warrant expiring June 19, 2006
issued as part of Units with shares of Series C Preferred
Stock.
4(f) Form of Common Stock purchase warrant expiring June 19, 2006
issued as a Placement Agent's Warrant.
4(g) Form of Common Stock purchase warrant expiring June 19, 2006
issued as a Finder's Warrant.
4(h) Letter Agreement dated December 19, 2001 by and among the
Company and certain Investors extending deadline for First
Milestone.(2)
4(i) Letter Agreement dated January 15, 2002 by and among the
Company and certain Investors further extending deadline for
First Milestone.(3)
5(a)* Opinion of Wachtel & Masyr, LLP.
</Table>
II-1
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT
------- -------
23(a)* Consent of Wachtel & Masyr, LLP is included in its opinion
filed as Exhibit 5.
23(b)* Consent of Independent Auditors
23(c)* Consent of Wolinetz, Gottlieb & Lafazan, P.C.
</Table>
- -------------------------
1 Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2001 and incorporated herein by this reference.
2Filed as an exhibit to the Company's Current Report on Form 8-K filed on
December 26, 2001.
3Filed as an exhibit to the Company's Current Report on Form 8-K filed on
January 16, 2002.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that are incorporated by reference
in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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 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.
II-2
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
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 provisions described in Item 6 to the Registration
Statement, or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Ontario,
State of California, on February 21, 2002.
LIFEPOINT, INC.
(Registrant)
By: /s/ LINDA H. MASTERSON
-----------------------------------
Linda H. Masterson
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ LINDA H. MASTERSON Principal Executive Officer and
----------------------------------------- Director
Linda H. Masterson
VACANT Principal Financial Officer
-----------------------------------------
/s/ MICHELE A. CLARK Principal Accounting Officer
-----------------------------------------
Michele A. Clark
/s/ CHARLES J. CASAMENTO Director
-----------------------------------------
Charles J. Casamento
/s/ PETER S. GOLD Director
-----------------------------------------
Peter S. Gold
/s/ PAUL SANDLER Director
-----------------------------------------
Paul Sandler
/s/ STAN YAKATAN Director
-----------------------------------------
Stan Yakatan
</Table>
II-4
LIFEPOINT, INC.
EXHIBITS FILED WITH
AMENDMENT TO
REGISTRATION STATEMENT ON FORM S-3
E-1
EXHIBIT INDEX
<Table>
<Caption>
PAGE
NUMBER EXHIBIT NUMBER
- ------ ------- ------
5 Opinion of Wachtel & Masyr, LLP............................. E-3
23(a) Consent of Wachtel & Masyr, LLP is included in its opinion E-3
filed as Exhibit 5..........................................
23(b) Consent of Independent Auditors............................. E-6
23(c) Consent of Wolinetz, Lafazan and Co., P.C. ................. E-7
</Table>
E-2