1
As filed with the Securities and Exchange Commission on October 29, 1996
Registration No. 33-88580
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM SB-2 ON
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONTINUCARE CORPORATION
(Exact name of registrant as specified in its charter)
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FLORIDA 59-2716063
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
100 SOUTHEAST SECOND STREET
MIAMI, FLORIDA 33131
(305) 350-7515
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
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CHARLES M. FERNANDEZ
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
CONTINUCARE CORPORATION
100 SOUTHEAST SECOND STREET
MIAMI, FLORIDA 33131
(305) 350-7515
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copies of communications to:
REBECCA R. ORAND, ESQUIRE
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
TELEPHONE: (305) 579-0557
FACSIMILE: (305) 579-0717
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
----------------------
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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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
PROSPECTUS
SUBJECT TO COMPLETION
DATED OCTOBER 29, 1996
920,000 SHARES
[LOGO]
COMMON STOCK
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This Prospectus relates to 920,000 shares (the "Shares") of Common
Stock, par value $.0001 per share (the "Common Stock"), of Continucare
Corporation, a Florida corporation (the "Company" or "Continucare"), issuable
by the Company from time to time upon exercise of the Company's outstanding
Series A Warrants (the "Series A Warrants").
The Company will receive only the proceeds from the sale of Common
Stock to holders of the Series A Warrants upon the exercise of the Series A
Warrants, if any, and not from any subsequent resale of such Common Stock.
The Common Stock is quoted on the AMEX under the symbol "CNU." On
October 25, 1996, the closing price of the Common Stock on the AMEX was $10.50
per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS NOVEMBER __, 1996
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SUMMARY
On August 9, 1996, Zanart Entertainment Incorporated, a Florida
corporation ("Zanart"), signed a definitive Agreement and Plan of Merger (the
"Merger Agreement") with Zanart Subsidiary, Inc. ("ZSI"), a wholly-owned
subsidiary of Zanart, and Continucare Corporation, a Florida corporation.
Pursuant to the Merger Agreement, on September 11, 1996 (the "Closing Date"),
ZSI merged (the "Merger") with and into Continucare Corporation. Upon the
consummation of the Merger, and pursuant to the terms of the Merger Agreement,
(i) each issued and outstanding share of common stock of Continucare
Corporation converted into one share of Zanart common stock, par value $.0001
per share (the "Common Stock"), the separate existence of ZSI terminated and
Continucare Corporation became a wholly-owned subsidiary of Zanart, (ii) Zanart
agreed to sell or otherwise dispose of its assets (other than cash) and
discharge all liabilities relating to Zanart's existing licensing business
prior to December 11, 1996 and (iii) Zanart's Board of Directors and management
became comprised of designees of Continucare Corporation. On October 8, 1996,
Zanart changed its corporate name to "Continucare Corporation." All references
herein to Zanart and the Zanart Business refer to the historical licensing
operations of Zanart before giving effect to the Merger, and all references to
Continucare or the Company and the Continucare or the Company Business refer to
the mental and physical rehabilitation health care business of Continucare and
its subsidiaries prior to and after giving effect to the Merger.
CONTINUCARE BUSINESS
Continucare develops and manages mental and physical rehabilitation
health care programs that offer a continuum of mental and physical
rehabilitation health services ranging from partial hospitalization care to day
treatment and outpatient services. Continucare offers a comprehensive mental
health care product line by providing the following types of services to
general acute care and psychiatric hospitals, community mental health centers
("CMHCs") and comprehensive outpatient rehabilitation facilities ("CORFs"):
clinical development, marketing, financial management, operational oversight,
human resources support, quality assurance and outcome measurement. Through
its ability to organize and provide such services Continucare is able to
develop and manage for its clients the series of mental and physical
rehabilitation health care programs that comprise a continuum of mental and
physical rehabilitation health care services.
At October 11, 1996, Continucare had management contracts with five
general acute care hospitals, one free-standing psychiatric hospital, 16 CMHCs
and one CORF. As of such date, 22 of such contracts were in operation covering
various treatment programs.
Continucare's strategy is to (i) continue to develop all elements of
the continuum of mental health and physical rehabilitation services provided to
existing and new clients, (ii) aggressively pursue new management contracts for
the provision of mental and physical health services, (iii) emphasize its
outcome measurement system ("Outcome Measurement System") as an additional
service and (iv) expand the types of services offered by it to include physical
and medical rehabilitation services, home health services and primary care
services.
ZANART BUSINESS
Zanart designs, publishes, packages and markets wall decor and
collectible art which incorporate popular images from motion pictures,
television and animation. Zanart's products include framed art, matted prints,
lithographs and serigraphs, calendars, posters, blueprints, movie and
television card portfolio sets and animation sericels which are produced
pursuant to licensing or other agreements with entertainment companies. The
images for the printed products are provided to Zanart by the licensor or
designed by Zanart, and the products are printed, manufactured and framed for
Zanart by manufacturers according to Zanart's instructions and specifications.
Zanart's product line consists of over 200 individual products. Zanart's
products are sold through retail chain stores, independent retail stores,
catalogs and a television shopping network. The future of Zanart's licensing
business is subject to the terms of the Merger Agreement as described above.
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Continucare's executive offices are located at 100 Southeast Second
Street, Miami, Florida 33131. Continucare's telephone number is (305)
350-7515.
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RISK FACTORS
An investment in the Common Stock offered hereby involves certain
risks. Prospective purchasers should carefully consider the following factors,
in addition to the other information contained in this Prospectus, when
evaluating the Company and its business before making an investment decision.
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth below,
which could cause actual results to differ materially from those indicated by
such forward-looking statements.
Limited Operating History. Continucare has been involved in its
current business since February 1996, and has had limited operations to date.
The Company's prospects must be considered in light of the risks, delays,
expenses and difficulties frequently encountered in connection with an
early-stage business in a highly-regulated, competitive environment. No
assurance can be given that the Company will successfully implement any of its
plans in a timely or effective manner or whether the Company will be able to
generate significant revenues or continue to operate profitably.
Shares Eligible for Future Sale. Future sales of Common Stock in the
public market could adversely affect the market price of the Common Stock.
Continucare currently has 11,202,983 shares of Common Stock outstanding,
assuming no exercise of currently outstanding options and warrants. Although
there is presently a public market for the Common Stock, there can be no
assurance (and it is not presently likely) that such market will have
sufficient trading activity to permit holders of Common Stock to sell their
shares in desired amounts, or at desired prices, or that such market will be
sustained, and sales of substantial amounts of shares are likely to have a
material adverse effect on the market price for the shares of Common Stock.
Pursuant to the Merger Agreement, in addition to the shares of Common Stock
offered hereby, the Company will register the 8,300,000 shares of Common Stock
issued to the holders of pre-Merger Continucare common stock (plus up to
200,000 additional shares that may be issued pursuant to a post-closing
adjustment under the Merger Agreement) and an aggregate of 542,500 shares of
Common Stock issuable upon exercise of outstanding options and underwriters'
warrants.
Risks Relating to Acquisition Strategy. The Company has expanded and
intends to continue to expand its operations through acquisitions of health
related companies. The Company continually engages in evaluations of potential
acquisitions; however, there are currently no definitive agreements, letters of
intent or agreements in principle with respect to any material acquisition. In
implementing this acquisition strategy, the Company will compete with other
potential acquirors, some of which may have greater financial or operational
resources than the Company. Competition for acquisitions may intensify due to
the ongoing consolidation in the health care industry, which may increase the
costs of capitalizing on such opportunities. Consummation of acquisitions
could result in the incurrence or assumption by the Company of additional
indebtedness and the issuance of additional equity. The issuance of shares of
Common Stock for an acquisition may result in dilution to shareholders. The
financial performance of the Company is and will continue to be subject to
various risks associated with the acquisition of businesses, including the
expenses associated with the integration of the acquired businesses,
difficulties in assimilating the operations of the acquired businesses and
diversion of management resources. Also, as the Company enters into new
geographic markets, the Company will be required to comply with laws and
regulations of states that differ from those in which the Company's operations
are currently conducted. There can be no assurance that the Company will be
able to effectively establish a presence in these new markets. While many of
the expenses arising from the Company's efforts in these areas may have a
negative effect on operating results until such time, if at all, as these
expenses are offset by increased revenues, there can be no assurance that the
Company will be able to implement its acquisition strategy, or that this
strategy will ultimately be successful.
Potential Volatility. There has been significant volatility in the
market price of securities of health care companies that often has been
unrelated to the operating performance of such companies. The Company believes
that certain factors, such as legislative and regulatory developments,
quarterly fluctuations in the actual or anticipated results of operations of
the Company, lower revenues or earnings in the financial results of the Company
than those
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5
anticipated by securities analysts, the overall economy and the financial
markets, could cause the price of the Common Stock to fluctuate substantially.
Reimbursement Considerations. The Company receives fees for its
services directly from its client hospitals and CMHCs. The Company's clients
receive reimbursement under either the Medicare or Medicaid programs or
payments from insurers, self-funded benefit plans or other third-party payors
for mental health and physical rehabilitation services provided by programs
managed by the Company. As a result, the availability of such reimbursement or
payment could have a significant impact on the decisions of the Company's
existing and prospective clients to offer mental and physical rehabilitation
health services.
The Medicare and Medicaid programs are subject to statutory and
regulatory changes, retroactive and prospective rate adjustments,
administrative rulings and funding restrictions, any of which could have the
effect of limiting or reducing reimbursement levels to hospitals or CMHCs for
mental health and physical rehabilitation services provided by programs managed
by the Company. Because a substantial portion of the patients of the programs
managed by the Company are covered by Medicare, any changes which limit or
reduce Medicare reimbursement levels could have a material adverse effect on
the Company's clients and, in turn, on the Company. The Company cannot predict
whether any changes to such governmental programs will be adopted or, if
adopted, the effect, if any, that such changes will have on the Company. In
addition, a limited number of the Company's management contracts require the
Company to refund a portion of its fee if either Medicare denies reimbursement
for an individual patient treatment or if the fee paid to the Company is
disallowed as a reimbursable cost. Also, Medicare retrospectively audits cost
reports of client hospitals, CMHCs and CORF upon which Medicare reimbursement
for services rendered in the programs managed by the Company is based.
Accordingly, at any time, the Company could be subject to refund obligations to
such clients for prior period cost reports that have not been audited and
settled at the date hereof. Any significant decrease in Medicare reimbursement
levels, the imposition of significant restrictions on participation in the
Medicare program, or the disallowance by Medicare of any significant portion of
the client hospitals', CMHCs' and CORF's costs, including the fees paid or
payable to the Company, where the Company has a reimbursement denial repayment
obligation, could adversely affect the Company. There can be no assurance that
hospitals, CMHCs and CORFs, which offer health programs now or hereafter
managed by the Company will satisfy the requirements for participation in the
Medicare or Medicaid programs.
Payors, including Medicare and Medicaid, are attempting to manage
costs, resulting in declining amounts paid or reimbursed to hospitals for the
services provided. As a result, the Company anticipates that the number of
patients served by hospitals on a per diem, episodic or capitated basis will
increase in the future. There can be no assurance that if amounts paid or
reimbursed to hospitals, CMHCs and CORFs decline, it will not adversely affect
the Company.
At October 11, 1996, the Company managed 16 full-service mental health
programs. The Company's clients are reimbursed by Medicare for a substantial
majority of the partial hospitalization services provided by such programs.
The Health Care Financing Administration ("HCFA") has recently advised fiscal
intermediaries who process Medicare reimbursements to review more closely
partial hospitalization mental health programs. As a result, some fiscal
intermediaries have initiated focused medical reviews of partial
hospitalization mental health programs. There can be no assurance as to the
effects on the Company of any focused medical review that hereafter may be
conducted of programs managed by the Company.
Reliance on Key Customers; Related Party Issues. At October 11, 1996,
the Company had management contracts with five general acute care hospitals
directly or indirectly owned by ORNDA Healthcorp ("ORNDA"). Although these
hospitals collectively accounted for less than 10% of the combined net revenues
of the Company through June 30, 1996, this percentage is expected to increase.
The termination or non-renewal of all or a substantial part of the management
contracts with hospitals owned by ORNDA could adversely affect the Company's
business, financial condition or results of operations.
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Medicare regulations limit reimbursement for mental health and other
health care charges paid to related parties. A party is considered "related"
to a provider if it is deemed to be controlled by the provider. One test for
determining control for this purpose is whether the percentage of the total
revenues of the party received from services rendered to the provider is so
high that it effectively constitutes control. It is possible that such
regulations could limit the number of management contracts that the Company
could have with a particular client.
Increased Scrutiny of Health Care Industry. The health care industry
has in general been the subject of increased government and public scrutiny in
recent years, which has focused on the appropriateness of the care provided,
referral and marketing practices and other matters. Increased media and public
attention has recently been focused on the mental health services industry in
particular as a result of allegations of fraudulent practices related to the
nature and duration of patient treatments, illegal remuneration and certain
marketing, admission and billing practices by certain mental health providers.
The alleged practices have been the subject of federal and state
investigations, as well as other legal proceedings. The Company is unable to
predict the effect that publicity in general about the mental health services
industry might have on the Company. There can be no assurance that the acute
care hospitals, CMHCs and CORFs, which offer health care programs now or
hereafter managed by the Company, will not be subject to federal and state
review or investigations from time to time.
Contract Terms and Renewals. The revenues of the Company are derived
from management contracts with general acute care and psychiatric hospitals,
CMHCs and a CORF. These contracts have initial terms of 3 to 15 years and many
have automatic renewal terms subject to termination by either party.
Substantially all of the Company's management contracts may be terminated by
either party without cause upon advance notice of between 30 and 180 days
depending on the particular contract. In addition, such contracts generally
provide for early termination either by the client hospital, CMHC or CORF for
"cause." The continued success of the Company is subject to its ability to
renew or extend existing management contracts and obtain new management
contracts. Contract renewals and extensions are likely to be subject to
competing proposals from other contract management companies as well as
consideration by certain hospitals to convert their mental health programs from
independently managed programs to programs operated internally or to terminate
their mental health programs in order to reassign patient beds for other health
care purposes. There can be no assurance that any hospital, CMHC or CORF will
continue to do business with the Company following expiration of its management
contract or earlier if the related management contract is terminated either
with or without cause. In addition, any changes in the Medicare program which
have the effect of limiting or reducing reimbursement levels for health
services provided by programs managed by the Company could result in the early
termination of existing management contracts and would adversely affect the
ability of the Company to renew or extend existing management contracts and to
obtain new management contracts. The termination or non-renewal of a material
number of management contracts could result in a significant decrease in the
Company's revenues and could have a material adverse effect on the Company's
business, financial condition or results of operations.
Government Regulation. The federal government and all states in which
the Company operates regulate certain aspects of the mental health and physical
rehabilitation services provided by programs managed by the Company. In
particular, the development and operation of hospital facilities is subject to
federal, state and local licensure and certification laws. Hospital facilities
are subject to periodic inspection by governmental and other authorities to
assure compliance with the standards established for continued licensure under
state law and certification under the Medicare and Medicaid programs. Many
states have adopted certificate of need or similar health planning laws that
generally require state agency approval of certain new health care services or
capital expenditures. A client's failure to obtain or renew any required
regulatory approvals or licenses could prevent such hospital, CMHC or CORF from
offering mental and physical rehabilitation health services or receiving
Medicare and Medicaid payments.
The Company is subject to federal and state laws that prohibit certain
direct and indirect payments intended to induce or encourage the referral of
patients to, or the recommendation of, a particular provider of items or
services. In addition, certain federal and state laws have recently been
enacted to prohibit physician referrals for certain "designated health
services" rendered to patients by a physician who has certain financial
relationships with the provider. Although the Company believes that its
contractual arrangements with its client hospitals, CMHCs, CORF and medical
directors comply with such laws, there can be no assurance that its activities
will not be challenged by regulatory authorities.
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Dependence on Key Personnel. The Company's success is materially
dependent upon its executive officers and members of its management team, the
loss of one or more of whom could adversely affect the Company. The Company is
in the process of procuring $2 million of "key-man" life insurance on Charles
M. Fernandez, the Company's Chairman, President and Chief Executive Officer.
The Company's success and growth strategy also depend on its ability to attract
and retain qualified clinical, management, marketing and other personnel. The
Company competes with general acute care hospitals and other health care
providers for the services of psychiatrists, psychologists, social workers,
therapists and other clinical personnel. Demand for such clinical personnel is
high and they are often subject to competing offers. There can be no assurance
that the Company will continue to be able to attract and retain the qualified
personnel necessary for its business.
Health Care Reform. Federal and state governments have recently
focused significant attention on health care reform intended to control health
care costs and to improve access to medical services for uninsured individuals.
These proposals include cutbacks to the Medicare and Medicaid programs and
steps to permit greater flexibility in the administration of Medicaid. It is
uncertain at this time what legislation on health care reform may ultimately be
enacted or whether other changes in the administration or interpretation of
governmental health care programs will occur. There can be no assurance that
future health care legislation or other changes in the administration or
interpretation of governmental health care programs will not have a material
adverse effect on the Company's business, prospects, financial condition or
results of operations.
Competition. The mental and physical rehabilitation health contract
management services industry is highly competitive. The Company's competitors
include several national companies as well as many regional and local
companies, some of which have, or may obtain, greater financial and other
resources than the Company. In addition, the Company's current and prospective
clients may choose to operate mental health and physical rehabilitation
programs themselves rather than contract with the Company. Furthermore,
general acute care hospitals, the primary market for the Company's services,
compete for patients with other providers of mental and physical rehabilitation
health services, including freestanding psychiatric hospitals. The inability
of the Company or its client hospitals, CMHCs and CORF to compete effectively
could have a material adverse effect on the Company's business, financial
condition or results of operations.
Insurance. Continucare carries general liability, comprehensive
property damage, malpractice, workers' compensation and other insurance
coverages that management considers adequate for the protection of
Continucare's assets and operations. There can be no assurance, however, that
the coverage limits of such policies will be adequate. A successful claim
against Continucare in excess of its insurance coverage could have a material
adverse effect on Continucare.
Zanart Business. On May 18, 1995, Zanart consummated an initial
public offering of 920,000 units (each comprised of one share of Common Stock
and one warrant exercisable for one share of Common Stock at a price of $6.00)
offered at a price of $6.00 per unit. In connection with the Merger and prior
to December 11, 1996, Zanart has agreed to sell or otherwise dispose of its
assets (other than cash) and discharge all of its liabilities relating to
Zanart's existing licensing business. Following the Merger, the Company will
continue to be subject to certain business, financial and legal risks relating
to Zanart's activities prior to the Merger.
RECENT DEVELOPMENTS
Pursuant to the Merger, on September 11, 1996, ZSI merged with and
into Continucare Corporation. Each share of pre-Merger Continucare common
stock issued and outstanding immediately prior to the Closing Date was
converted on the Closing Date into one share of Common Stock. Under the terms
of the Merger Agreement, Zanart agreed to sell or otherwise dispose of its
assets (other than cash) and discharge all liabilities relating to Zanart's
existing licensing business prior to December 11, 1996. In addition, upon the
consummation of the Merger (i) Zanart's existing Board of Directors and
management resigned and (ii) Zanart's new Board of Directors and management
became comprised of Continucare designees.
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The Merger Agreement contains various customary representations and
warranties of the parties thereto, and includes a post closing adjustment
provision requiring the issuance of a certain number of additional shares (the
"Additional Shares") of Common Stock to the holders of pre-Merger Continucare
common stock immediately prior to the Closing Date in the event that the
Closing Cash Balance (as such term is defined in the Merger Agreement) of
Zanart is less than $2,000,000 on December 12, 1996.
Prior to the Merger, Continucare Corporation effectuated the private
sale of an aggregate of 3,300,000 shares of pre-Merger Continucare common stock
which was completed on August 29, 1996. Further, Zanart agreed to register on
Form S-3 (i) an aggregate of 1,462,500 shares of Common Stock to be issued upon
exercise of outstanding warrants and options, (ii) the 8,300,000 shares of
Common Stock issued in connection with the Merger, and (iii) the Additional
Shares.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of shares
through the exercise, from time to time, of the Series A Warrants, will be a
minimum of $0 if no Warrants are exercised, and a maximum of $5,520,000 if all
are exercised. The Company will not receive any proceeds from the subsequent
resale of Common Stock acquired pursuant to the Series A Warrants.
Expenses expected to be incurred by the Company in connection with
this offering are estimated to be approximately $85,000.
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PLAN OF DISTRIBUTION
The Company is offering for issuance from time to time to holders of
its Series A Warrants, up to 920,000 shares of its Common Stock. If all of the
Series A Warrants are exercised, the Company's aggregate proceeds will be
$5,520,000. Each of the outstanding Series A Warrants are currently exercisable.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
On August 9, 1996, Zanart signed a Merger Agreement with ZSI, a
wholly-owned subsidiary of Zanart, and Continucare Corporation. Pursuant to
the Merger Agreement, on September 11, 1996, ZSI merged with and into
Continucare Corporation. Upon consummation of the Merger, and pursuant to the
terms of the Merger Agreement, (i) each issued and outstanding share of common
stock of Continucare Corporation converted into one share of Zanart Common
Stock, the separate existence of ZSI terminated and Continucare Corporation
became a wholly-owned subsidiary of Zanart, (ii) Zanart agreed to sell or
otherwise dispose of its assets (other than cash) and discharge all liabilities
relating to Zanart's existing licensing business prior to December 11, 1996 and
(iii) Zanart's Board of Directors and management became comprised of designees
of Continucare Corporation.
The discussion in this section relates to the operations of
Continucare for the period from February 12, 1996 (inception) to June 30, 1996,
and should be read in conjunction with the audited consolidated financial
statements of Continucare Corporation and notes thereto and the unaudited pro
forma financial statements and notes thereto appearing elsewhere in this
Prospectus.
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RESULTS OF OPERATION
Overview
Continucare Corporation was incorporated on February 12, 1996 in the
State of Florida. Continucare develops and manages mental and physical
rehabilitation health care programs that offer a continuum of mental and
physical rehabilitation health services ranging from partial hospitalization
care to day treatment and outpatient services. Continucare offers a
comprehensive mental health care product line by providing the following types
of services to general acute care and psychiatric hospitals, CMHCs and CORFs:
clinical development, marketing, financial management, operational oversight,
human resources support, quality assurance and outcome measurement.
Effective May 1, 1996, Continucare, through a subsidiary, acquired
certain assets, contracts and liabilities of a company that provided billing
and collection services and of a company that provided permanent, long-term and
short- term employee leasing to physicians, community hospitals, community
mental health centers and partial hospitalization programs, in return for 25%
ownership in the subsidiary to the common owner of the two acquired companies.
The transactions were accounted for under the purchase method.
The financial results discussed below relate to the operations of
Continucare during the period from February 12, 1996 (inception) to June 30,
1996.
PERCENTAGE OF
TOTAL REVENUES
FOR THE PERIOD FOR THE PERIOD
FROM FEBRUARY FROM FEBRUARY
12, 1996 12, 1996
(INCEPTION) TO (INCEPTION) TO
JUNE 30, 1996 JUNE 30, 1996
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Revenues $2,507,063 100.0%
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Expenses
Payroll and employee benefits 973,412 38.8
Provision for bad debt 242,664 9.7
Professional fees 203,625 8.1
General and administrative 54,430 2.2
Depreciation and amortization 362 -
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Total expenses 1,474,493 58.8
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Income from operations 1,032,570 41.2
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Other Expenses
Interest 23,204 0.9
Minority interest 32,686 1.3
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Other expenses 55,890 2.2
-------------- --------------
Income before taxes 976,680 39.0
Provision for income taxes 332,071 13.2
-------------- --------------
Net income $ 644,609 25.7%
============== ==============
Earnings before interest, taxes, depreciation and
amortization (EBITDA) $1,000,245 39.9%
============== ==============
- 9 -
11
Revenues
Continucare derives its revenues primarily from fixed-fee contracts
for the provision of certain management services to client hospitals and
CMHC's. Continucare's revenues for the period from February 12, 1996
(inception) to June 30, 1996 were approximately $2,507,000, of which $1,688,000
were derived from such management agreements.
Continucare also recognizes revenues from its employee leasing
services and its billing services. These operations were obtained by a
subsidiary of Continucare on May 1, 1996 through the acquisition of certain
contracts, assets and liabilities. Revenues received for its employee leasing
services for the period from May 1, 1996 to June 30, 1996 were approximately
$527,000. Revenues from its billing operations for the same period were
approximately $292,000.
Expenses
Payroll and employee benefits for the period from February 12, 1996
(inception) to June 30, 1996 were approximately $973,000, or 38.8% of total
revenues. Of total consolidated payroll and employee benefits, approximately
$542,000 or 56%, was payroll and benefits paid to the employees of the employee
leasing operations.
Continucare's provision for bad debt for the period from February 12,
1996 (inception) to June 30, 1996 was approximately $243,000, or 9.7% of total
revenues.
Professional fees are comprised primarily of legal and audit fees. In
addition, total professional fees for the period from February 12, 1996
(inception) to June 30, 1996 of $204,000 included approximately $70,000 under a
subcontract agreement with a third-party.
General and administrative expenses ("SG&A") were approximately
$54,000, 2.2% of total revenues, for the period from February 12, 1996
(inception) to June 30, 1996 and were comprised primarily of costs such as
rent, public relations and travel.
Interest
Interest expense was approximately $23,000, or less than 1% of total
revenues, for the period from February 12, 1996 (inception) to June 30, 1996
and was comprised primarily of interest on a note payable to a shareholder (the
"Shareholder Note"). The Shareholder Note bears interest at 10% per annum and
is due, in full, on February 12, 1998.
Minority Interest
Minority interest was approximately $33,000, or 1.3% of total revenue.
The minority interest represents a 25% interest held by a third party in the
net income of a subsidiary of Continucare.
Provision for Income Taxes
The provision for income taxes for the period from February 12, 1996
(inception) to June 30, 1996 was approximately $332,000, 13.2% of total
revenues, and was calculated at a rate of approximately 34% which equals the
statutory federal income tax rate.
- 10 -
12
Net Income
Continucare had net income of approximately $645,000 for the period
from February 12, 1996 (inception) to June 30, 1996.
Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA is not presented as an alternative to operating results or cash
flow from operations as determined by Generally Accepted Accounting Principles
("GAAP"), but rather to provide additional information related to the ability
of Continucare to meet current trade obligations and debt service requirements.
EBITDA should not be considered in isolation from, or construed as having
greater importance than, GAAP operating income or cash flows from operations as
a measure of an entity's performance.
EBITDA was approximately $1,000,000 for the period from February 12,
1996 (inception) to June 30, 1996, or approximately 39.9% of total revenues.
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
The following discussion and analysis relates to the unaudited pro
forma condensed consolidated balance sheet of Continucare as of June 30, 1996,
and should be read in conjunction with such statement and the notes thereto
appearing elsewhere in this document.
Overview
The pro forma unaudited condensed consolidated balance sheet was
prepared by adjusting Continucare's historical condensed consolidated balance
sheet as of June 30, 1996 and adjusting such for certain transactions as
discussed in the notes to such statement. The pro forma unaudited condensed
consolidated balance sheet does not purport to be indicative of the actual
financial position of Continucare had the certain transactions actually been
consummated on June 30, 1996, or the future financial position of Continucare
resulting from such certain transactions.
Liquidity and Capital Resources
During the period from February 12, 1996 (inception) to June 30, 1996,
Continucare financed its operations from operating cash flows and the proceeds
received from its initial capitalization of $600,000 in exchange for the
Shareholder Note. During such period Continucare had positive cash flow from
operating activities of approximately $168,000 and total positive cash flow of
approximately $819,000 which includes the initial capitalization.
In July 1996, Continucare repurchased common stock from one of its
founding shareholders for a purchase price of $375,000 pursuant to a stock
purchase and redemption agreement. Such agreement provides for an additional
payment equal to a flat amount not to exceed $600,000 and a variable portion
payable only if the current executives of the Company receive new employment
agreements that provide for "excessive compensation" as such term is defined in
such agreement. The repurchased common stock was accounted for as treasury
stock and is reflected as such in the pro forma unaudited condensed
consolidated balance sheet.
On August 6, 1996, Continucare amended its Articles of Incorporation
to increase its authorized common shares to 10,000,000 par value $.0001. In
connection with this event, Continucare authorized a 66,667 to one stock split
and issued 4,250,000 shares of common stock. This transaction is reflected in
the Shareholders' Equity section of the pro forma unaudited condensed
consolidated balance sheet.
- 11 -
13
During August 1996, Continucare completed the private placement of
3,300,000 shares of common stock at $2.00. The $6,600,000 of proceeds, net of
estimated costs of $100,000, is reflected in Cash and in Stockholders' Equity
in the pro forma unaudited condensed consolidated balance sheet.
On August 9, 1996, Continucare and Zanart signed the Merger Agreement
which was consummated on September 11, 1996. In accordance with the terms of
the Merger Agreement, the net assets of Zanart, estimated to be $2,196,000 of
cash at the end of the wind-down period, are reflected in Cash and in
Stockholders' Equity in the pro forma unaudited consolidated condensed balance
sheet.
On August 29, 1996, the Company entered into a lease agreement for
approximately 13,500 square feet of office space for its corporate offices in
Miami, Florida. The lease, which is for an initial term of five years,
provides for annual lease payments of approximately $172,000 in the first year,
$176,000 in the second year, $180,000 in the third year, $184,000 in the fourth
year, and $189,000 in the final year. The Company moved to its new offices
in October 1996.
Continucare anticipates that the funds raised through the private
placement and the Merger Agreement, together with cash flow generated by
operations, will be used to make strategic acquisitions in order to grow its
operations and pursue its business strategy. Based upon current expectations,
Continucare believes that cash flow from operations will be sufficient to meet
its working capital requirements, although there can be no assurance that it
will be able to do so.
LEGAL MATTERS
The validity of the Shares being offered hereby is being passed upon
for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.,
1221 Brickell Avenue, Miami, Florida 33131.
EXPERTS
Zanart's financial statements incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
The financial statements of the Company included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and are included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied (at prescribed rates) at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the following regional offices of the Commission: Seven World Trade Center,
Suite 1300, New York, New York 10048; 3475 Lenox Road, N.E., Suite 1000,
Atlanta, Georgia 30326-7232; and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Quotations relating to the Company's Common Stock and Series A
Warrants appear on the American Stock Exchange ("AMEX") and reports, proxy
statements and other information concerning the Company can also be inspected
at the offices of the AMEX, 86 Trinity Place, New York, New York 10006.
- 12 -
14
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act with respect
to the Shares offered hereby. This Prospectus, which is a part of the
Registration Statement, does not contain all the information set forth in, or
annexed as exhibits to, such Registration Statement, certain portions of which
have been omitted pursuant to rules and regulations of the Commission. For
further information with respect to the Company and the Shares, reference is
hereby made to such Registration Statement, including the exhibits thereto.
Copies of the Registration Statement, including exhibits, may be obtained from
the aforementioned public reference facilities of the Commission upon payment
of the fees prescribed by the Commission, or may be examined without charge at
such facilities. The Registration Statement may also be obtained through the
Commission's Internet address at "http://www.sec.gov." Statements contained
herein concerning any document filed as an exhibit are not necessarily complete
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement. Each such statement is qualified in
its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No.0-21910) with
the Commission are incorporated herein by reference: (1) the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal years ended June 30, 1995 and
June 30, 1996; (2) the Company's Quarterly Reports on Form 10-QSB for the
quarters ended September 30, 1995, December 31, 1996 and March 31, 1996; the
Company's Schedule 14C dated and filed with the Commission on August 26, 1996,
(3) the Company's Current Report on Form 8-K dated August 9, 1996 and September
11, 1996 and (4) the Company's Registration Statement on Form 8-A filed
September 4, 1996, registering the Company's Common Stock under Section 12(b)
of the Exchange Act. All documents filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent
to the date hereof and prior to the termination of the offering of the Common
Stock registered hereby shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date of filing such documents.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that the statement contained
herein or in any other subsequently filed document which also is, or is deemed
to be, incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. The Company
will provide without charge to each person to whom this Prospectus is
delivered, upon a written or oral request of such person, a copy of any or all
of the foregoing documents incorporated by reference into this Prospectus
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Request for such copies should
be delivered to Maria T. Sosa, Continucare Corporation, 100 Southeast Second
Street, 36th Floor, Miami, Florida 33131.
- 13 -
15
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statement of Income. . . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Shareholders' Equity. . . . . . . . . . . . F-4
Consolidated Statement of Cash Flows. . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . F-6
Unaudited Pro Forma Condensed Consolidated Balance Sheet
for Zanart Entertainment Incorporated . . . . . . . . . . . . . . . F-12
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet . . F-14
16
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Continucare Corporation
and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Continucare
Corporation and subsidiaries (the "Company") as of June 30, 1996 and the related
consolidated statements of income, shareholders' equity and cash flows for the
period February 12, 1996 (inception) to June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of June 30,
1996 and the results of its operations and its cash flows for the period
February 12, 1996 (inception) to June 30, 1996 in conformity with generally
accepted accounting principles.
Deloitte & Touche, LLP
August 9, 1996, except for
paragraphs six through eleven of Note 11,
as to which the date is October 2, 1996.
F-1
17
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
- -------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 819,066
Accounts receivable, net of allowance for doubtful accounts
of $146,692 1,967,978
Prepaid expenses and other current assets 800
-----------
Total current assets 2,787,844
PROPERTY AND EQUIPMENT, net 4,806
INTANGIBLE ASSETS, net 1,499
OTHER ASSETS, net 70,747
-----------
TOTAL ASSETS $ 2,864,896
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 270,374
Accrued expenses 44,210
Accrued interest payable 23,161
Unearned revenue 18,301
Income and other taxes payable 412,686
-----------
Total current liabilities 768,732
NOTES PAYABLE 655,000
-----------
Total liabilities 1,423,732
-----------
MINORITY INTEREST 32,686
-----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock; $1.00 par value; 100 shares
authorized, issued and outstanding 100
Additional paid-in capital 763,769
Retained earnings 644,609
-----------
Total shareholders' equity 1,408,478
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,864,896
===========
See notes to consolidated financial statements.
F-2
18
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD FROM FEBRUARY 12, 1996 (INCEPTION) TO JUNE 30, 1996
- -------------------------------------------------------------------------------
REVENUES $ 2,507,063
-----------
EXPENSES:
Payroll and employee benefits 973,412
Provision for bad debts 242,664
Professional fees 203,625
General and administrative 54,430
Depreciation and amortization 362
-----------
Total expenses 1,474,493
-----------
INCOME FROM OPERATIONS 1,032,570
-----------
OTHER EXPENSES:
Interest 23,204
Minority interest 32,686
-----------
Other expenses 55,890
-----------
INCOME BEFORE INCOME TAXES 976,680
PROVISION FOR INCOME TAXES 332,071
-----------
NET INCOME $ 644,609
===========
See notes to consolidated financial statements.
F-3
19
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 12, 1996 (INCEPTION) TO JUNE 30, 1996
- -------------------------------------------------------------------------------
Additional Total
Common Paid-in Retained Shareholders'
Stock Capital Earnings Equity
Issuance of 100 shares
for initial capitalization of Company $ 100 $ 900 $ 1,000
Issuance of stock in subsidiary
to purchase net assets 762,869 762,869
Net income $ 644,609 644,609
---------- ---------- ---------- -------------
$ 100 $ 763,769 $ 644,609 $ 1,408,478
========== ========== ========== =============
See notes to consolidated financial statements.
F-4
20
CONTINUCARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 12, 1996 (INCEPTION) TO JUNE 30, 1996
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 644,609
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 362
Provision for bad debts 242,664
Income applicable to minority interest 32,686
Changes in assets and liabilities, excluding the effect of acquisitions:
Increase in accounts receivable (1,445,590)
Increase in prepaid expenses and other current assets (800)
Increase in intangible assets (1,579)
Increase in other assets (67,221)
Increase in accounts payable and accrued expenses 314,584
Increase in accrued interest payable 23,161
Increase in unearned revenue 18,301
Increase in income and other taxes payable 406,976
-----------
Net cash provided by operating activities 168,153
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (5,087)
-----------
Net cash used by investing activities (5,087)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of related shareholders notes payable 655,000
Proceeds from issuance of common stock 1,000
-----------
Net cash provided by financing activities 656,000
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS, END OF YEAR $ 819,066
-----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 43
-----------
Cash payments for income taxes $
-----------
NON CASH INVESTING AND FINANCING ACTIVITIES:
Purchase of assets and liabilities in exchange for subsidiary stock $ 762,869
-----------
See notes to consolidated financial statements.
F-5
21
CONTINUCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 12, 1996 (INCEPTION) TO JUNE 30, 1996
- --------------------------------------------------------------------------------
1. GENERAL
DESCRIPTION OF BUSINESS - Continucare Corporation (the "Company") was
incorporated on February 12, 1996 in the State of Florida. Together with
its subsidiaries, the Company is a full-service healthcare management
organization that creates and implements operational, marketing,
administrative, staffing and financial programs for specialized
outpatient institutional and professional providers (collectively, the
"Providers"). The Company, which specializes in mental and physical
rehabilitative programs, offers an expanded healthcare product line,
including setting up and managing partial hospitalization and
full-service community-based outpatient healthcare centers. The Company
manages nineteen partial hospitalization programs in three states and two
day-treatment programs which serve as a step-down alternative to patients
that no longer require partial hospitalization in order to assist the
patients in transitioning back into their communities. Of the nineteen
programs, four are also owned by shareholders of the Company. See Note 4.
As of May 1, 1996, the Company, through Continucare Medical Care Network,
Inc. ("CMCN"), a majority-owned subsidiary, provides full-service
financial management including billing and collection services and
various employee leasing options. See further discussion below.
BUSINESS COMBINATIONS - On May 1, 1996, the Company, through CMCN, a then
wholly-owned subsidiary, acquired certain contracts, assets, and
liabilities of Joanne Telmosse Consulting, Inc. ("Consulting"), based in
Coral Springs, Florida, which provides billing and collection services.
Concurrently, the Company acquired certain contracts, assets and
liabilities of ProCare Staffing, Inc. (a related company of Consulting by
common ownership), which offers permanent, long-term and short-term
employee leasing to physicians, community hospitals, community mental
health centers and partial hospitalization programs. In exchange for the
net assets acquired, the Company issued 25 shares of CMCN's common stock
(representing a 25% interest) to the common owner of the acquired
companies. The Company recorded as additional paid-in capital $762,869,
which the Company estimates is the fair value of the net assets acquired.
The transaction was accounted for under the purchase method. The income
generated from the net assets acquired are incorporated in the
Consolidated Income Statement for the period from May 1, 1996, the
effective date of the transaction, to June 30, 1996.
In conjunction with these transactions, the Company entered into a
subcontract agreement with Medical Billing Service Systems, Inc., which
is a related company of Consulting by common ownership (the "Subcontract
Agreement"), whereby Medical Billing Service Systems, Inc. is to provide
the billing and collection services for the contracts acquired by the
Company from Consulting in return for a $35,000 monthly fee. The
Subcontract Agreement is cancelable without cause by either party with
180 days notice.
F-6
22
The following unaudited consolidated pro forma combined condensed
statement of income for the period from February 12, 1996 (inception) to
June 30, 1996 has been prepared to reflect these acquisitions as if they
were consummated as of February 12, 1996 (inception), after giving effect
to certain pro forma adjustments as described below.
Total Revenues $ 4,043,100
-----------
Net income $ 893,700
-----------
Pro forma adjustments reflect minority interest, provision for bad debt,
the recording of the monthly fee under the Subcontract Agreement and an
accrual for income taxes.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned and
majority-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE - The Company derives its revenues based on contracts with
Providers. The contracts have terms ranging from one to fifteen years,
with the majority in the fifteen-year category, and are cancelable
without cause by either party with 180 days notice. Revenue is recognized
in the period earned. The Company also recognizes revenues from its
employee leasing services at the time services are rendered. Revenues for
billing services are recognized upon billing of services to the payors.
The Providers receive reimbursement under either the Medicare or
Medicaid programs or payments from insurers, self-funded benefit plans or
other third-party payors for services provided by programs managed by the
Company. The Medicare and Medicaid programs are subject to statutory and
regulatory changes, retroactive and prospective rate adjustments,
administrative rulings and funding restrictions, any of which could have
the effect of limiting or reducing reimbursement levels to the Company's
clients which in return could affect the Company. A majority of the
patients utilizing the Provider programs managed by the Company are
covered by Medicare.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values of
financial instruments have been determined by the Company using available
market information and appropriate valuation methods. Considerable
judgment is required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methods may have a material effect on the estimated fair value
amounts. The Company has used the following market assumptions and/or
estimation methods:
CASH AND CASH EQUIVALENTS - The carrying amount reported in the
balance sheet is a reasonable estimate of fair value.
NOTES PAYABLE - The carrying value at June 30, 1996 approximates fair
value based on the terms of the note.
CASH AND CASH EQUIVALENTS - The Company defines cash and cash equivalents
as those highly liquid investments purchased with an original maturity of
three months or less.
ACCOUNTS RECEIVABLE - In the normal course of business, the Company
extends credit to its customers. The Company performs ongoing credit
evaluations of its customers, and records allowances for potential losses
based on management's expectations of their ultimate collection.
F-7
23
OTHER ASSETS - Other assets include primarily long-term deposits and the
deferred tax assets.
INCOME TAXES - Deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect for the year in which
the differences are expected to reverse. Current income taxes are based
on the current year's income taxable for federal and state reporting
purposes.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost of
acquisition. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the related
assets, which range from three to five years. Repairs and maintenance
costs are expensed as incurred. Improvements and replacements are
capitalized.
3. INCOME TAXES
The components of the provision for income taxes for the period from
February 12, 1996 (inception) to June 30, 1996 are as follows:
Current income taxes:
Federal $ 337,776
State 49,170
-----------
Total current 386,946
-----------
Deferred income taxes:
Federal (46,855)
State (8,020)
-----------
Total deferred (54,875)
-----------
Total provision for income taxes $ 332,071
===========
The total income tax provision is at a rate of approximately 34% which
equals the statutory federal income tax rate.
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at June 30, 1996 are as follows:
Deferred tax assets:
Bad debt reserve $ 55,170
-----------
Gross deferred tax assets 55,170
-----------
Deferred tax liabilities:
Depreciation and amortization (295)
-----------
Gross deferred tax liabilities (295)
-----------
Net deferred tax asset $ 54,875
===========
F-8
24
4. RELATED PARTY TRANSACTIONS
The Company subleases office space from Community Behavioral Services
("CBS"). As of June 30, 1996, three of the four shareholders of the
Company are one third owners of CBS. The lease is a month-to-month
agreement with monthly lease payments of $3,805.
The Company has contracted with CBS to perform certain managerial and
administrative services on behalf of the Company. The Company reimburses
CBS for the actual cost of expenses incurred by CBS in the direct
performance of such services. For the period ended June 30, 1996, total
expenses incurred by the Company for these services totaled $407,700 and
are recorded in the appropriate expense categories in the Consolidated
Statement of Income. In addition, the Company provides management
services for four facilities owned by CBS in return for a management fee
which is based on the Company's estimated cost of providing such
services. The management fee charged by the Company is calculated based
on the ratio of patient volume represented by CBS to total Company
patient volume at other Provider facilities, applied to certain of the
Company's expenses. This management fee is recorded by the Company as a
reduction of the related expense. For the period, management fees charged
by the Company to CBS were $324,700. As of June 30, 1996, the net payable
by the Company to CBS under these arrangements was $83,000 which is
reflected in accounts payable and accrued expenses in the Consolidated
Balance Sheet.
The Company, as of late May 1996, also provides management services to
Interphase, Inc. ("Interphase"), a related Company which is partially
owned by three of the Company's shareholders at June 30, 1996. The
Company receives a management fee for the services provided based on the
Company's cost of providing such services. The management fee charged by
the Company is calculated based on the ratio of patient volume
represented by Interphase to total Company patient volume at other
Provider facilities, applied to certain of the Company's expenses. The
management fee charged is recorded as a reduction of the Company's
related expenses. As of and for the period from February 12, 1996
(inception) to June 30, 1996, the balance receivable from and the
revenues earned under this arrangement was $19,100.
The Company is obligated to a shareholder (the "Shareholder Note"), for a
note payable in the amount of $599,750 and is reflected in notes payable
in the accompanying Consolidated Financial Statements. The Shareholder
Note, which is collateralized by substantially all of the Company's
assets, bears interest at 10% per annum and is due, in full, on February
12, 1998. Interest is due semiannually commencing on August 12, 1996.
Accrued interest and interest expense related to this note was $21,662 as
of and for the fiscal year ended June 30, 1996.
The Company is obligated to Health Care Management Partners, Inc., a
company which is owned jointly by three of the four shareholders of the
Company, for a note payable in the amount of $55,250 as of June 30, 1996
(the "HCMP Note") and is reflected in notes payable in the accompanying
Consolidated Financial Statements. The HCMP Note, which is subordinate to
the Shareholder Note, bears interest at 10% and is due, in full, on
February 12, 1998. Interest expense related to this note was $1,500 for
the fiscal year ended June 30, 1996.
5. LONG-TERM DEBT
Long-term debt is comprised entirely of the Shareholder Note and the HCMP
Note as described in Note 4.
F-9
25
6. COMMITMENTS AND CONTINGENCIES
The Company has employment contracts with its four executives. These
contracts have indefinite terms and are cancelable at the option of the
Company or employee. The contracts provide for increases in annual base
salary, a flat bonus and an additional bonus at the discretion of the
Company's Board of Directors based upon the Company's operating results,
financial condition, prospects and intended utilization of earnings, if
any. Subsequent to year-end, one of the executives resigned. See
discussion at Note 7.
As provided for in the management contracts with the Providers, the
Company maintains annual claims made policies for general and
professional liability insurance jointly with each of the Providers.
Coverage under the policies are $1,000,000 per incident and $3,000,000
aggregate. It is the Company's intention to renew such coverage on an
on-going basis.
7. SUBSEQUENT EVENTS AND OTHER MATTERS
On July 3, 1996, the Company entered into a Letter of Intent with a
large, national hospital chain (the "Chain") to develop, staff and manage
outpatient psychiatric treatment and physical rehabilitation programs
(the "Programs") for hospitals affiliated with the Chain. The Programs
are to be initiated in seventeen treatment facilities and may be expanded
to cover additional facilities upon the mutual agreement of the parties.
The scope and duration of the services to be provided by the Company, as
well as the management fee to be paid to the Company, will be determined
upon the mutual agreement of the parties depending upon the specific
requirements of each Program. The Company estimates that such management
fees shall range from $25,000 to $35,000 per month, per Program.
Management also anticipates additional operating costs will be incurred
in providing such services.
On July 8, 1996, the Company entered into a management contract with an
ORNDA Healthcorp. subsidiary to perform certain management services for
certain partial hospitalization programs. The contract, which is for an
initial term of five years, is expected to generate a total of
approximately $4,080,000 ($816,000 annually) in revenue over the initial
term. The contract may be renewed for additional periods of one year each
upon the mutual consent of the parties and may be terminated upon certain
conditions as defined in the agreement. Management also anticipates
additional operating costs will be incurred in providing such services.
On July 15, 1996, the Company entered into a Stock Purchase and
Redemption Agreement with Beechwood Partners, Ltd., a limited partnership
("Beechwood"), to repurchase Beechwood's 25% investment in the Company's
common stock for $375,000 which will be accounted for as treasury stock.
In connection with this transaction, one of the executives resigned from
his position with the Company. Certain provisions of the Stock Purchase
and Redemption Agreement require the Company to make an additional
payment to Beechwood upon the occurrence of certain events. The
additional payment is comprised of a flat amount not to exceed $600,000
and a variable portion payable only if the remaining executives receive
new employment agreements providing for "excessive compensation" as
defined in the Stock Purchase and Redemption Agreement.
On August 9, 1996, the Company has entered into contracts to provide
certain staffing services with a not-for-profit corporation which
operates a community mental health center and a partial hospitalization
program from its facilities. The contracts have an initial term of one
year and is automatically renewable unless terminated in accordance with
the provisions in the contract, such contracts are expected to
F-10
26
generate approximately $600,000 of revenue over the initial term. Management
also anticipates additional costs will be incurred in providing such services.
Effective August 6, 1996, the Company amended its Articles of Incorporation to
increase its authorized common shares to 10,000,000, par value $1.
Concurrently, the Company authorized each issued and outstanding share be
converted to 66,666.666 shares reflecting a 66,666.666 for one stock split.
The stock split has not been reflected in the accompanying financial
statements. The par value was subsequently amended to $.0001.
On August 9, 1996, the Company signed a merger agreement (the "Merger
Agreement") with Zanart Entertainment, Inc. ("Zanart") and Zanart Subsidiary,
Inc. ("ZSI"). Pursuant to the Merger Agreement, on September 11, 1996 (the
"Closing Date") ZSI merged with and into the Company (the "Merger"). Each
share of pre-Merger Company common stock issued and outstanding prior to the
Closing Date was converted on the Closing Date into one share of Zanart common
stock. Under the terms of the Merger Agreement, Zanart agreed to sell or
otherwise dispose of its assets (other than cash) and discharge all liabilities
relating to Zanart's existing business, which is to design, publish, package
and market wall decor and collectible art which incorporates popular images
from motion pictures, television and animation, prior to December 11, 1996. In
addition, upon the consummation of the Merger (i) Zanart's existing Board of
Directors and management resigned and (ii) Zanart's new Board of Directors and
management became comprised of Continucare designees.
The Merger Agreement contains various customary representations and warrantees
of the parties thereto, and includes a post closing adjustment provision
requiring the issuance of a certain number of additional shares (the
"Additional Shares") of Zanart common stock to the holders of pre-Merger
Company common stock immediately prior to the Closing Date in the event that
the Closing Cash Balance (as such term is defined in the Merger Agreement) of
Zanart is less than $2,000,000 on December 12, 1996.
Prior to the Merger, the Company effectuated the private sale of an aggregate
of 3,300,000 shares of pre-Merger Company common stock at $2.00 a share which
was completed on August 29, 1996.
On August 29, 1996, the Company entered into a lease agreement for
approximately 13,500 square feet of space for its corporate offices in Miami,
Florida. The lease, which is for an initial term of five years, provides for
annual lease payments of approximately $172,000 in the first year, $176,000 in
the second year, $180,000 in the third year, $184,000 in the fourth year, and
$189,000 in the fifth year. The Company's previous sub-lease for office space
with CBS as discussed in Note 4 was terminated as of October 2, 1996.
The Company has entered into new employment agreements with two executives of
the Company effective in September 1996. The agreements are for terms of three
years and one provides for additional years based on each year of service. The
agreements have provisions for bonuses, vesting and stock options.
The Company intends to enter into consulting agreements with a company
controlled by Mr. Douglas Miller and a company controlled by Mr. Barry
Goldstein (collectively, the "Consulting Agreements"). Messrs. Miller and
Goldstein served as executive officers of Continucare Corporation prior to the
Merger.
* * * * * *
F-11
27
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
On August 9, 1996, Zanart Entertainment Incorporated ("Zanart") entered into
an Agreement and Plan of Merger (the "Agreement") with Continucare Corporation
("Continucare"). Pursuant to the Agreement, Zanart Subsidiary, Inc., a
wholly-owned subsidiary of Zanart, will merge with and into Continucare (the
"Merger") and each issued and outstanding share of Continucare common stock
will be converted into the right to receive one share of Zanart common stock.
For accounting purposes the Merger will be treated as a recapitalization of
Continucare with Continucare as the acquiror (i.e., a "reverse acquisition").
The operations of Zanart will be permanently discontinued at the effective date
of the Merger, and Zanart will dispose of all its assets and liabilities.
Therefore, the historical balance sheet presented in the accompanying unaudited
financial statements is that of Continucare.
The following unaudited pro forma condensed consolidated balance sheet as of
June 30, 1996 has been prepared by adjusting Continucare's historical condensed
consolidated balance sheet as of June 30, 1996. As Zanart's operations will be
discontinued, no pro forma statement of income is presented as the Merger would
have no effect on the historical operations of Continucare had the Merger
occurred on February 12, 1996 (inception). The historical balance sheet has
been adjusted to give effect to the Merger as if the Merger had occurred as of
June 30, 1996. Such pro forma adjustments are described in the accompanying
notes to the pro forma unaudited condensed consolidated balance sheet which
should be read in conjunction with the pro forma unaudited condensed
consolidated balance sheet.
The pro forma unaudited condensed consolidated balance sheet presented herein
does not purport to be indicative of the actual financial position of the
Continucare had the Merger actually been consummated on June 30, 1996, or of
the future financial position of the Continucare which will result from the
consummation of the Merger.
F-12
28
ZANART ENTERTAINMENT INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
HISTORICAL PRO FORMA
CONTINUCARE ADJUSTMENTS PRO FORMA
----------- ------------ -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 819,000 $ (375,000)(1) $ 9,140,000
6,500,000 (3)
2,196,000 (4)
Accounts receivable 1,968,000 1,968,000
Prepaid expenses and other current assets 1,000 1,000
Net assets held for sale 500,000 (4) 500,000
---------- ---------- -----------
Total current assets 2,788,000 8,821,000 11,609,000
---------- ---------- -----------
PROPERTY AND EQUIPMENT 5,000 5,000
OTHER ASSETS 72,000 72,000
---------- ---------- -----------
TOTAL ASSETS $2,865,000 $8,821,000 $11,686,000
========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 356,000 $ 356,000
Income and other taxes payable 413,000 413,000
---------- ---------- -----------
Total current liabilities 769,000 769,000
NOTES PAYABLE 655,000 655,000
---------- ---------- -----------
Total liabilities 1,424,000 1,424,000
---------- ---------- -----------
MINORITY INTEREST 33,000 33,000
---------- ---------- -----------
SHAREHOLDERS' EQUITY:
Common stock 100 (25)(1) 1,120
425 (2)
330 (3)
290 (4)
Additional paid-in-capital 764,000 (374,975)(1) 9,583,980
(425)(2)
6,499,670 (3)
5,805,676 (4)
(3,109,966)(4)
Retained earnings 644,000 644,000
---------- ---------- -----------
Total shareholders' equity 1,408,000 8,821,000 10,229,000
---------- ---------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,865,000 $8,821,000 $11,686,000
========== ========== ===========
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
F-13
29
Zanart Entertainment Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(1) To record the repurchase of the common stock of a 25% (25 shares)
shareholder of Continucare during August 1996 for $375,000.
(2) To record the issuance of 4,250,000 shares, par value $.0001 of Continucare
common stock in connection with a 66,667 to one stock split effected during
August 1996. Prior to the stock split, Continucare amended its Articles of
Incorporation to increase its authorized common shares to 10,000,000, par
value $.0001.
(3) To record the proceeds from a private placement of 3,300,000 shares of
Continucare common stock at $2.00 a share completed during August 1996, net
of estimated costs of $100,000.
(4) To record Zanart's net assets acquired in the Merger consisting of
$2,196,000 in cash and an estimated $500,000 in net assets held for sale.
The fair value assigned to Zanart's assets and liabilities are based on
Continucare's management best estimates of the realizable values. Fair
values assigned to Zanart's assets and liabilities may differ from the
actual amounts realized or paid.
(5) To record (i) the cancellation 8,300,000 shares of Continucare common stock
issued and outstanding; (ii) the issuance of 8,300,000 shares of Zanart
common stock to Continucare shareholders, representing the conversion of
each share of Continucare into one share of Zanart common stock, based on
the Merger Agreement; and (iii) 2,902,983 shares of Zanart common stock
issued and outstanding as of the date of the Merger Agreement.
As Zanart has no significant assets other than cash, the excess amount
resulting from this exchange by Continucare is considered a Merger premium
($3,109,966) paid in order to obtain the public corporate shell of Zanart.
Accordingly, such merger premium is considered a cost associated with the
issuance of its common stock with no goodwill recorded as a result of the
Merger.
(6) Historical and pro forma earnings per share are calculated as follows:
Historical Pro Forma
June 30, 1996 June 30, 1996
------------- -------------
Net Income $644,609 $644,609
============= ============
Number of shares outstanding:
Continucare (after considering
repurchase, stock split and
private placement) 8,300,000 8,300,000
Zanart 2,902,983
------------- ------------
8,300,000 11,202,983
============= ============
Earnings per share $0.08 $0.06
============= ============
F-14
30
=================================================== ===================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN 920,000 SHARES
CONNECTION WITH THE OFFERING MADE HEREBY, AND ANY
INFORMATION OR REPRESENTATION NOT CONTAINED OR CONTINUCARE CORPORATION
INCORPORATED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS COMMON STOCK
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES DESCRIBED IN THE COVER PAGE
HEREOF, OR AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SHARES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT [LOGO]
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
_________________________ __________________________
PROSPECTUS
__________________________
November __, 1996
=================================================== ===================================================
- 14 -
31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that its expenses in connection with the
offering described in this registration statement will be as follows:
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 85,000
======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided for in such statute. The Registrant's Amended and Restated Articles
of Incorporation provide that the Registrant shall indemnify and may insure its
officers and directors to the fullest extent permitted by law.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for (a) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (b)
deriving an improper personal benefit from a transaction, (c) voting for or
assenting to an unlawful distribution and (d) willful misconduct or conscious
disregard for the best interests of the Registrant in a proceeding by or in the
right of the Registrant to procure a judgment in its favor or in a proceeding
by or in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the federal securities laws. The
effect of the foregoing is to require the Registrant to indemnify the officers
and directors of the Registrant for any claim arising against such persons in
their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
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 suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered hereunder, 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-1
32
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 The Registrant's Articles of Incorporation
3.2 The Registrant's Bylaws (incorporated by reference from the
Registrant's Registration Statement on Form SB-2, Securities Act File
No. 33-88580, filed with the Commission on January 17, 1995)
4.1 Form of certificate evidencing shares of Common Stock
4.2 Form of Series A Warrant
5 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
(included in its opinion in Exhibit 5)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP
24 Reference is made to the Signatures section of this Registration
Statement for the Power of Attorney contained therein
ITEM 17. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which it offers or
sells securities, a post-effective amendment to this registration statement to
include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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 counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-2
33
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Miami, State of Florida on this 28th day of October,
1996.
ZANART ENTERTAINMENT INCORPORATED
By: /s/ Charles M. Fernandez
---------------------------------
Charles M. Fernandez,
Chairman, Chief Executive Officer
and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Charles M. Fernandez his true and
lawful attorney-in-fact, who acting alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments, including any post-effective
amendments, to this Registration Statement, and to file the same, with exhibits
thereto, and other documents to be filed in connection therewith, including any
registration statement pursuant to Rule 462 under the Securities Act, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute, acting alone, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Charles M. Fernandez Chairman, Chief Executive October 28, 1996
------------------------------------- Officer and President (Principal
Charles M. Fernandez Executive Officer)
/s/ Phillip Frost, M.D. Vice Chairman October 28, 1996
-------------------------------------
Phillip Frost, M.D.
/s/ Susan Tarbe Executive Vice President and October 28, 1996
------------------------------------- General Counsel
Susan Tarbe
/s/ Maria T. Sosa Chief Accounting Officer October 28, 1996
------------------------------------- (Principal Accounting Officer)
Maria T. Sosa
/s/ Arthur M. Goldberg Director October 28, 1996
-------------------------------------
Arthur M. Goldberg
/s/ Richard Frost Director October 28, 1996
-------------------------------------
Richard Frost
/s/ Mark Hanna Director October 28, 1996
-------------------------------------
Mark Hanna
/s/ Michael Piercey, M.D. Director October 28, 1996
-------------------------------------
Michael Piercey, M.D.
II-3