1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1997 ----------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ----------------------------- Commission File Number: 0-18938 -------------------------------------------------------- SUBSTANCE ABUSE TECHNOLOGIES, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE #22-2806310 - ------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 4713 NW 31st Avenue, Ft. Lauderdale, FL 33309 - ------------------------------------------------------------------------------- Address of Principal Executive Offices) (Zip Code) (954) 739-9600 - ------------------------------------------------------------------------------- Registrant's Telephone Number, Including Area Code - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. As of August 11, 1997 - Common Stock, $.01 Par Value, - 36,045,591 shares 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. SUBSTANCE ABUSE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, March 31, 1997 1997 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 24,693 $ 634,429 Accounts receivable (net of allowance for bad debts of $649,935at June 30, 1997 and $650,000 at March 31, 1997) 609,589 473,115 Inventories 45,074 16,675 Prepaid expenses and other current assets 163,254 224,634 Current portion of note receivable 50,000 50,000 ------------ ------------ Total current assets 892,610 1,398,853 Property and equipment, net 1,419,826 1,246,374 Costs in excess of net assets acquired, net 4,703,978 4,774,099 Other assets 636,420 484,394 Note receivable 250,000 250,000 ------------ ------------ Total assets $ 7,902,834 $ 8,153,720 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 1,997,925 $ 1,305,484 Accrued expenses 1,271,531 1,389,339 Current liabilities of discontinued operations, net 7,396 7,396 Current portion of capital lease obligations 63,214 71,324 Preferred stock dividends payable 19,655 7,202 ------------ ------------ Total current liabilities 3,366,923 2,780,745 ------------ ------------ Convertible debentures, net of unamortized discount 4,691,781 3,848,839 Long-term portion of capital lease obligations 285,460 295,271 Long-term portion of royalties payable 980,000 980,000 Commitments and contingencies Minority interest 845,349 845,349 Stockholders' deficit Class "A" preferred stock, $.01 par value; 500,000 shares authorized, 41,157 shares issued and outstanding 412 412 Class "B" preferred stock, $.01 par value; 1,500,000 shares authorized, and 137,500 shares issued and outstanding at June 30,1997 1,375 -- Common stock, $.01 par value; 50,000,000 shares authorized, 36,045,591 and 36,030,591 shares issued and outstanding at June 30, 1997 and March 31, 1997, respectively 360,456 360,306 Additional paid-in capital 56,672,073 55,956,113 Accumulated deficit (59,300,995) (56,913,315) ------------ ------------ Total stockholders' deficit (2,266,679) (596,484) ------------ ------------ Stockholders' total liabilities and stockholders' deficit $ 7,902,834 $ 8,153,720 ============ ============ The accompanying notes are an integral part of the financial statements. 2 3 SUBSTANCE ABUSE TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTH'S ENDED JUNE 30 1997 1996 ----------------------------- Sales - Net $ 898,467 $ 603,716 Costs and expenses: Cost of sales 766,883 219,650 Selling, general and administrative expenses 1,284,819 2,081,150 Research and development 963,253 208,714 Depreciation and amortization 115,511 245,677 ------------ ------------ Loss from operations (2,231,999) (2,151,475) Other income (expense): Interest expense (188,404) -- Interest income 1,162 -- Other 31,561 -- ------------ ------------ Total other (expense) income (155,681) -- ------------ ------------ Loss before minority interest in net loss of subsidiaries (2,387,680) (2,151,475) Minority interest in net loss of subsidiaries -- 117,470 ------------ ------------ Net loss $ (2,387,680) $ (2,034,005) ============ ============ Loss applicable to common stock: Net loss $ (2,285,680) $ (2,034,005) Class "A" preferred stock dividend (7,203) (7,202) Class "B" preferred stock dividend (5,250) -- ------------ ------------ Loss applicable to common stock $ (2,400,133) $ (2,041,207) ============ ============ Net loss per common share $ (0.07) $ (0.064) ------------ ------------ Weighted average common shares outstanding 36,045,490 33,991,269 The accompanying notes are an integral part of the financial statements. 3 4 SUBSTANCE ABUSE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED June 30, 1997 June 30, 1996 ------------- ------------- Cash Flow From Operating Activities: Net Loss $(2,387,680) $(1,389,005) Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities: Provision for Bad Debts - 3,511 Loss on Disposition of Fixed Assets - 6,110 Depreciation and Amortization 115,511 195,677 Amortization of Debt Discount 92,942 - Minority Interest in Net Loss of Subsidiaries, Net of Preferred Stock Dividends Paid - (117,470) Value of Warrants Issued for Consulting Services 164,000 571,000 Changes in Operating Assets and Liabilities: Increase in Accounts Receivable (136,474) (205,354) (Increase)/Decrease in Inventories (28,399) (141,824) Increase in Prepaid Expenses and Other Assets (24,539) (43,402) Increase in Other Receivables - (300,000) Increase/(Decrease) in Accounts Payable 699,643 (55,173) (Decrease)Increase in Accrued Expenses (117,808) (22,772) --------------------------- Net Cash Used by Operating Activities (1,622,804) (2,006,898) Cash Flow From Investing Activities: Purchases of Property and Equipment (222,949) (71,644) Purchase of Robert Stutman & Associates, Inc., net of cash acquired of $111,825 - (2,100,000) Proceeds from Sale of Assets of Discontinued Operations - 426,771 Other-Net - (5,111) --------------------------- Net Cash Used by Investing Activities (222,949) (1,749,984) Cash Flow From Financing Activities: Sale and Issuance of Common Stock 15,938 4,286,204 Proceeds from Sale of Convertible Debentures (Net of Issuance Costs) 688,000 - Sale and Issuance of Class "B" Preferred Stock 550,000 - Payments of Capital Lease Obligations (17,921) - Expenses of Common Stock Issuance - (400,000) Payment of Dividend on Class "A" Preferred Stock - (3,829) --------------------------- Net Cash Provided by Financing Activities 1,236,017 3,882,375 (Decrease)/Increase in Cash and Cash Equivalents $ (609,736) $ 237,318 Cash and Cash Equivalents - Beginning $ 634,429 $ 1,204,646 --------------------------- Cash and Cash Equivalents - Ending $ 24,693 $ 1,330,139 =========================== Non-Cash Financing Activities: Preferred Stock Dividends Accrued $ 12,453 $ 7,203 =========================== Issuance of Common Stock for Business Acquired $ - $ 2,762,500 =========================== Issuance of Note Payable for Business Acquired $ - $ 400,000 =========================== Value of Warrants Issued for Consulting Services Deferred $ - $ 667,000 =========================== The accompanying notes are an integral part of the financial statements. 4 5 SUBSTANCE ABUSE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) NOTE 1 - Basis of Presentation The consolidated financial statements include the accounts of Substance Abuse Technologies, Inc. ("SAT") and its wholly and majority owned subsidiaries (SAT and the subsidiaries are collectively referred to as the "Company"). All significant intercompany accounts and transactions are eliminated in consolidation. In the opinion of the Company, the accompanying unaudited consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year due to external factors which are beyond the control of the Company. NOTE 2 - Continuing Operations The Company has incurred recurring operating losses and at June 30, 1997 has a deficiency in working capital of approximately $2,474,000 and a deficiency in stockholders' equity of approximately $2,267,006. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects, if any, on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this situation. The Company anticipates raising additional capital through the sale of Common Stock or issuance of additional long-term debt. In addition, management believes the focus on the human resource provider business, elimination of the losses associated with a substantial portion of its breath alcohol and cost per test services as well as identification of a strategic partner to fund the future costs to develop U.S. Drug's saliva and urine based testing systems will substantially enhance future operating results. In management's opinion, these actions will provide the Company the capital necessary for the Company to continue operations. NOTE 3 - Property and Equipment Property and equipment is summarized as follows: June 30 March 31, 1997 1997 ---- ---- Furniture and Fixtures $ 209,766 $ 174,507 Office Equipment and Computers 1,590,365 1,425,423 Test Equipment 422,343 400,798 Leasehold Improvements 375,040 373,837 Vehicles 9,109 9,109 ---------- ---------- 2,606,623 2,383,674 Less: Accumulated Depreciation 1,186,797, 1,137,300 ---------- ---------- $1,419,826 $1,246,374 ========== ========== 5 6 SUBSTANCE ABUSE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) (CONTINUED) NOTE 4 - Minority Interest As of March 31, 1997, SAT owned 3,500,000 of the 5,221,900 outstanding shares of the Common Stock of, $.001 par value (the "U.S. Drug Common Stock"), U.S. Drug Testing, Inc. ("U.S. Drug") or 67.0% thereof. At a May 1997 meeting, the SAT Board agreed that SAT should purchase 1,768,202 shares of the U.S. Drug Common Stock in forgiveness of an intercompany loan in the amount of $2,210,254 (including interest at the rate of 8% per annum) as of April 30, 1997. The Board of Directors also authorized the purchase of additional shares of the U.S. Drug Common Stock representing additional inter-company loans incurred through June 30, 1997, the purchase of fixed assets (at fair market value of approximately $344,000), and additional funding of $160,000. As of June 30, 1997, the intercompany loan of $2,594,200 was converted to 2,025,360 shares of the U.S. Drug Common Stock. The additional shares purchased increased SAT's ownership to 76.4% of the outstanding shares. The Company's consolidated financial statements at June 30, 1997 include 100% of the assets, liabilities and losses of U.S. Drug and 100% of the assets, liabilities and losses of Good Ideas Enterprises, Inc., ("Good Ideas"), a 61% owned publicly traded subsidiary. The $845,349 minority interest reported on the balance sheet represents the minority shareholders' interest in the equity of these subsidiaries. NOTE 5 - Convertible Notes and Debt On November 8, 1996, SAT entered into an agreement (the "Note Agreement") to borrow $5,000,000 evidenced by two $2.5 million convertible, unsecured senior notes (the "Notes"). The Notes are due on November 8, 1999, bear interest, payable quarterly commencing December 15, 1996, at the annual rate of 7%, and were initially convertible at $2.00 per share subject to adjustment. The conversion price of $2.00 is subject to downward adjustment during the period from May 1, 1997 through May 1, 1998 based on the market price of SAT's Common Stock, $.01 par value (the "SAT Common Stock"), but will not decrease below a floor of $1.375. In addition, the conversion price contains certain anti-dilution provisions that can reduce the conversion price below the floor. As a result of these anti-dilution provisions, the conversion price as of June 30, 1997 was $1.25 and the noteholders could acquire upon conversion 4,000,000 shares of the SAT Common Stock. As a part of the Note Agreement, SAT issued, for $1,000, warrants to purchase 2,500,000 shares of the SAT Common Stock at $2.00 per share with an adjustment to the exercise price similar to that of the Notes. At June 30, 1997, the warrants are exercisable at $1.25 per share. Of the $5,001,000 proceeds, $1,300,000 was allocated as the fair value of the warrants (resulting in an effective interest rate of 18.4% on the Notes). This amount is being amortized over the three-year life of the Notes. The Note Agreements contains certain restrictive covenants, including a restriction on the payment of dividends, purchase of capital stock, additional borrowings and capital expenditures. In May 1997, SAT entered into a Convertible Debenture and Preferred Stock Purchase Agreement. SAT issued and sold to an investor a convertible debenture in the principal amount of $750,000 and 62,500 shares of Class "B" preferred stock for $4.00 per share. The holder of Class "B" shares is entitled to a 14% dividend per annum based on a stated value of $4.00 per share. The aggregate purchase price for the debentures and the Preferred stock was $1,000,000. Each share of Class "B" Preferred Stock maybe exchanged into shares of the SAT Common Stock. 6 7 SUBSTANCE ABUSE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) (CONTINUED) On July 3 and July 7, 1997, SAT issued notes totaling $625,000 to a director of SAT. The terms of the notes provided that, in addition to the principal, SAT would pay to the director an additional $175,000 plus issue shares of the SAT Common Stock with a market value of $50,000. On July 1, 1997, SAT secured a promissory note for $200,000 due on October 1, 1997. Interest on the note is calculated at 1% over prime rate as published in the Wall Street Journal, which was 8.5% at the time the note was initiated. The interest on the note cannot exceed 18% per annum. In July 1997, SAT secured a short term note from two directors totaling $265,000 at an annual interest rate of ten percent. The loan is to be repaid upon the company securing funding from outside investors. NOTE 6 - Class "B" Preferred Stock On June 17, 1997, SAT issued and sold 75,000 shares of Class "B" preferred stock for $4.00 per share. The holder of class "B" shares is entitled to a 14% dividend per annum based on a stated value of $4.00 per share. Each share of class "B" may be exchanged into shares of the SAT Common Stock and SAT may redeem the preferred shares for an amount equal to 120% of the purchase price of the preferred shares. NOTE 7 - Acquisition of Robert Stutman & Associates, Inc. On May 21, 1996, SAT completed the acquisition of Robert Stutman & Associates, Inc. ("RSA"), a provider of corporate "Drug Free Workplace" programs. The purchase price was comprised of $2,100,000 in cash, $400,000 in notes, 500,000 shares of the SAT Common Stock (valued at $1,562,000) and Common Stock purchase warrants to acquire 900,000 shares of the SAT Common Stock at $3.125 per share (valued at $1,200,000), which was the closing sales price of the SAT Common Stock on April 17, 1996. Since December 31, 1996, the RSA operations have been conducted by the Robert Stutman & Associates Consulting Division of SAT (the "RSA Division"). 7 8 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EFFECT OF MERGER - U.S. DRUG During May 1996, SAT filed a Registration Statement to register shares of the SAT Common Stock to be issued to the minority stockholders of U.S. Drug upon consummation of a proposed merger of U.S. Drug with and into a wholly-owned subsidiary of SAT. If the proposed merger is consummated, SAT will record a non-recurring charge to income of approximately $3,800,000 as Incomplete Research and Development cost representing the excess of the market value of the SAT Common Stock over the recorded value of the minority interest in U.S. Drug. The effects of the merger are discussed in SAT's Annual Report for the fiscal year ended March 31, 1997. There can be no assurance that the merger will be consummated. EFFECTS OF MERGER - GOOD IDEAS During April 1996, SAT filed a Registration Statement to register shares of the SAT Common Stock to be issued to the minority shareholders of Good Ideas upon consummation of a proposed merger of a wholly-owned subsidiary of SAT with and into Good Ideas. If the proposed merger is consummated, SAT will record a charge to Loss On Disposal of Discontinued Operations of approximately $635,000 representing the excess of the market value of the SAT Common Stock over the recorded value of the minority interest in Good Ideas. The effects of the merger are discussed in SAT's Annual Report for the fiscal year ended March 31, 1997. There can be no assurance that the merger will be consummated. LIQUIDITY AND CAPITAL RESOURCES Although the Company has a history of operating losses through June 30, 1997 and has $2,474,313 in negative working capital in the first fiscal quarter of 1997, management believes that the Company will have the cash resources available to it to meet all of its operating requirements for the ensuing twelve months. Management bases its belief on the following: 1) Cash required to fund U.S. Drug's research and development effort has been limited. 2) SAT sold the BioTox Division to the management group currently operating that Division and closed the alcohol testing business. Both transactions have resulted in an approximate 50% reduction in payroll expenses as well as a significant reduction in other operating expenses. The Company intends to continue to reduce operating expenses in other areas. 3) The positive effect of additional revenue producing contracts signed within the past four months. Third party administration contracts require three to four months of set up time before any revenues can be generated and then a reasonable "ramp" time is usually experienced before the contracts can yield their full potential. Management believes these contracts will contribute a positive cash flow once they are fully operational. 4) Management has negotiated less expensive service contracts with outside providers of laboratory services, medical review services and "out of network" urine collection sites. Additionally, SAT has demonstrated its past ability to successfully generate funds from the exercise of Common Stock purchase warrants and to privately place SAT's equity securities. There can be no assurance that any or all of the above will enable the Company to improve its cash flow. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CHANGES IN FINANCIAL CONDITION Cash used in operations was $1,623,000 for the quarter ended June 30, 1997 as compared to cash used of $2,007,000 in the prior comparative period. The net loss for the quarter ended June 30, 1997 was $2,388,000 as compared to a loss of $2,034,000 in the prior comparative period. Significant components of the cash used in operations in the June 1997 fiscal quarter was an increase in accounts payable of $692,000 whereas the prior comparative fiscal year's major component was an increase of $505,000 in accounts receivables and other receivables. Cash provided from financing activities was $1,236,000 consisting primarily of proceeds from a convertible note and issuance of Class "B" preferred stock. The prior comparative period provided $3,882,000 primarily from the issuance of shares of the SAT Common Stock. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 ("1997") COMPARED WITH THREE MONTHS ENDED JUNE 30, 1996 ("1996): Revenues increased by $295,000 or 49% from $604,000 in 1996 to $898,000 in 1997. The increase was the result of revenue from the service provider business (the RSA Division and the Employer Services Division (the "ESD")) which increased over $500,000 from the prior quarter. The increase was primarily offset by the reduction in the Alcohol Products Division's business. The increase in service provider business resulted from the addition of new third party administration contracts and expanded background checking revenue not included in the prior year revenue. Cost of Sales increased by $547,000 to $767,000 in 1997 from $220,000 in 1996 or an increase of 249%. The increase was the result of direct costs such as lab fees and urine collection charges associated with the service provider business. In the 1997 fiscal quarter these expenses reflected higher priced contracts and services than SAT expects in the future. These expenses had a minimal effect on cost of sales in the comparative prior period. SAT is negotiating less expensive lab fees and, in association with the acquisition of the DataMed third party administration business, SAT has an agreement that will lower the fees to ESD for medical review services. Selling, General and Administrative ("S.G & A") expenses decreased $796,000 or 38% from $2,081,000 in 1997 to $1,285,000 in 1997. S.G & A expenses in 1997 included $164,000 associated with the value of warrants issued for financial consulting services. The value of warrants issued for financial consulting services in 1996 was $571,000. S.G. &A expenses in 1996 also included duplicate salaries during the period of management transition, legal costs associated with the filing of two registrations statements in connection with the proposed purchases of the minority share of Good Ideas and U.S. Drug, and the costs associated with the acquisition of RSA. Research and Development expenses increased $755,000 or 362% from $209,000 in 1996 to $963,000 in 1997. The increase was the result of increased activity, primarily personnel requirements, in the development of the saliva based testing program associated with the subsidiary U.S. Drug. 1997 included interest expense of $188,000 representing interest and amortization of debt discount associated with convertible notes issued in November 1996 There was no such interest expense in the comparative prior period. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Operating losses increased to $2,388,000 in the quarter ending June 30, 1997 as compared with $2,151,000 in the same period of fiscal 1997. The loss included expenses from U.S. Drug which increased from 106,000 during the quarter ended June 30, 1996 to $365,000 in the same quarter of the current year. The prior year results of U.S. Drug included other income of approximately $336,000, primarily from unrealized gain in the value of marketable securities. Additionally the financial consulting services expense of $164,000 contributed to the increased loss. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable. 10 11 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not subject to any pending legal proceedings and is not aware of any proceedings contemplated by governmental authorities. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS FOR A VOTE OF SECURITY HOLDERS There was no matter submitted to a stockholders' vote during the quarter ended June 30, 1997. ITEM 5. OTHER INFORMATION SAT has not paid interest due June 15, 1997 in the amount of $87,500 on its Convertible Senior Notes due November 8, 1999; however, the holders of the Convertible Notes have deferred giving notice with respect to such non-payment, which notice would have given rise to specified remedies under the Convertible Loan and Warrant Agreement dated as of November 8, 1996. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibits are incorporated by reference to an exhibit previously filed under the Securities Exchange Act of 1934, as amended: Number Exhibit 1(a) Copy of Convertible Loan and Warrant Agreement dated November 8, 1996 by and between SAT, S.A.C. Capital Associates, LLC and Steven A. Cohen (1). 1(b) Form of Registration Rights Agreement is Exhibit A to Exhibit 1(a) hereto. 1(c) Form of Convertible Senior Promissory Note due November 8, 1999 is Exhibit B to Exhibit 1(a) hereto. 1(d) Form of Common Stock Purchase Warrant expiring June 30, 2000 is Exhibit C to Exhibit 1(a) hereto. 11 12 Number Exhibit 2(a) Copy of Convertible Debentures and Preferred Stock Purchase Agreement dated as of May 8, 1997 between SAT and Southbrook International Investments, Ltd. ("Southbrook"). (2) 2(b) Registration Rights Agreement dated as of May 8, 1996 between SAT and Southbrook. (2) 2(c) Class B Exchange Agreement dated as of May 8, 1997 between SAT and Southbrook. (3) 2(d) Form of 14% Convertible Debenture of SAT due May 8, 2000. (2) 2(e) Form of Common Stock Purchase Warrant expiring May 8, 2000. (2) 3(a) Copy of Stock Purchase Agreement dated as of May 21, 1996 by and among SAT, Robert Stutman, Brian Stutman, Sandra DeBow, Michael Rochelle and Kimberly Rochelle. (3) 3(b) Form of Secured Promissory Note dated May 21, 1996 is Exhibit A to Exhibit 3(a) hereto. (3) 3(c) Form of Security Agreement dated May 21, 1996 by and among SAT, Robert Stutman and Brian Stutman is Exhibit C to Exhibit 3(a) hereto. (3) 3(d) Form of SAT Warrant expiring May 20, 1999 is Exhibit B to Exhibit 3(d) hereto. (3) 3(e) Form of Registration Rights Agreement dated as of May 21, 1996 by and between SAT, Robert Stutman, Brian Stutman, Michael Rochelle, Kimberly Rochelle and Sandra DeBow is Exhibit D to Exhibit 3(a) hereto. (3) - ----------------------- (1) Filed as an exhibit to Amendment 2 to Schedule 13D filed by Steven A. Cohen on November 12, 1996 and incorporated herein by this reference. (2) Filed as an exhibit to SAT's Annual Report on Form 10-K for the fiscal year ended March 31, 1997 and incorporated herein by this reference. (3) Filed as an exhibit to SAT's Current Report on Form 8-K filed on June 5, 1996 and incorporated herein by this reference. (b) Reports on Form 8-K. There were no reports filed on Form 8-K for the quarter ended June 30, 1997. 12 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. SUBSTANCE ABUSE TECHNOLOGIES, INC. Registrant August 19, 1997 BY: /s/ Robert M. Stutman ------------------------------- Robert M. Stutman Chief Executive Officer august 19, 1997 BY: /s/ Robert Muccini ------------------------------- Robert Muccini Treasurer, Chief Financial Officer and Chief Accounting Officer 13