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As filed with the Securities and Exchange Commission on December 18, 1998
Registration No. 333-66679
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NETMED, INC.
(Exact name of Registrant as specified in its charter)
Ohio 5047 31-1282391
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification No.)
or organization) Code Number)
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6189 Memorial Drive
Dublin, Ohio 43107
(614) 793-9356
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
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David J. Richards, President
NetMed, Inc.
6189 Memorial Drive
Dublin, Ohio 43017
(614) 793-9356
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of Correspondence to:
William J. Kelly, Jr., Esq.
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
(614) 227-2136
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Approximate date of commencement of proposed sale of the securities to the
public:___________________ From time to time after the Effective Date of this
Registration Statement, as determined by market conditions.
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 securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or 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, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
========================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Offering Registration
Securities to be Registered Registered Per Share* Price* Fee*
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Common stock, without par value.....................8,000,000 $ .375 $3,000,000 $834
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* Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on the average high and low prices of the
Common Stock as reported on the American Stock Exchange on October 27,
1998.
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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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION - DECEMBER 18, 1998
PROSPECTUS
8,000,000 SHARES
NETMED, INC.
6189 Memorial Drive
Dublin, Ohio 43017
(614) 793-9356
COMMON STOCK
(without par value)
This prospectus relates to the sale of up to 8,000,000 shares of our common
stock which we may issue to holders of Series A, 6% Convertible Preferred Stock
who convert that preferred stock into shares of common stock. The issuance of
common stock upon conversion of the preferred stock is not covered by this
prospectus, but rather only the resale of such common stock. The shares of
common stock which are the subject of this prospectus also include 511,653
shares of common stock that were issued upon conversion of certain debentures
previously sold by us.
Our common stock is currently listed on the American Stock Exchange under the
symbol "NMD." On December 17, 1998, the last reported sale price of our common
stock on the American Stock Exchange was $0.25 per share.
THERE ARE CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BEFORE PURCHASING
SHARES IN THIS OFFERING. SEE "RISK FACTORS" BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December __, 1998.
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TABLE OF CONTENTS
PAGE
Prospectus Summary .................................................... 3
Risk Factors........................................................... 3
Available Information.................................................. 7
Information Incorporated By Reference.................................. 8
Forward Looking Statements............................................. 9
The Company............................................................ 9
Recent Developments.................................................... 10
Use of Proceeds........................................................ 10
Selling Shareholder.................................................... 10
Plan of Distribution................................................... 12
Description of Capital Stock........................................... 12
Certain Provisions Of Articles and Regulations......................... 13
Experts................................................................ 15
Legal Matters.......................................................... 16
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PROSPECTUS SUMMARY
The shares offered by this prospectus consist of up to 8,000,000 common
shares (the "Shares"), without par value (the "Common Stock") of NetMed, Inc.,
an Ohio corporation. We may issue the Common Stock to investors who convert
their Series A, 6% Convertible Preferred Stock ("Preferred Stock"). The
Preferred Stock will be issued on or about the date of this prospectus. As of
the date of this prospectus, 100,000 shares of the Preferred Stock are
outstanding. Pursuant to an exchange agreement between us and the holders of the
Preferred Stock, the Preferred Stock was issued in exchange for certain
debentures issued by us in August, 1997. The number of shares registered for
sale by the registration statement equals 150% of the number of shares into
which the Preferred Stock was convertible as of October 27, 1998, assuming the
Preferred Stock was fully converted on that date plus shares of Common Stock
previously issued to the holders on conversion of the debentures. We have
registered 150% of the number of shares which may be converted at this time
since the number of shares of Common Stock which can be obtained from the
conversion of the Preferred Stock increases as the price of the Common Stock
decreases. For a further description of the terms of the Preferred Stock, see
"Selling Shareholders."
This prospectus covers the sale of the Shares by the selling
shareholders. The Shares may be offered from time to time by the selling
shareholders. We will pay all expenses of the registration. However, any
brokers' or underwriters' fees or commissions will be paid by the selling
shareholders. We will not receive any proceeds from the sale of the Shares by
the selling shareholders.
The selling shareholders have not advised us of any specific plans for
the distribution of the Shares covered by this prospectus. However, we
anticipate that the Shares will be sold from time to time primarily in
transactions on the American Stock Exchange at the then current market price,
although sales may also be made in negotiated transactions or otherwise. The
selling shareholders and the brokers and dealers through whom sale of the Shares
may be made may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and their commissions
or discounts and other compensation may be regarded as underwriters'
compensation. See "Plan of Distribution."
RISK FACTORS
Investment in the securities being sold involves a high degree of risk,
including, but not limited to, the risk factors described below. Prospective
investors should carefully consider the following risk factors, in addition to
the other information in this prospectus, in evaluating an investment in the
securities sold.
RISKS RELATING TO NEW OPERATIONS
We are in the early stage of our operations. Therefore we are subject
to risks incident to any new business, including the absence of earnings. We
have to date had limited income from operations, and as of September 31, 1998
have a retained deficit of $6,380,911. While we intend to complete development
and begin selling the OxyNet(R) oxygen concentration system, we have to date
focused our efforts primarily on the marketing of the PAPNET(R) Testing System.
Until a successful commercial launch of the oxygen product (which is not
assured) we will be dependent upon the successful marketing of the PAPNET System
for revenues.
RISKS RELATING TO FUTURE CAPITAL NEEDS
We cannot accurately predict the extent of our future capital needs.
However, we will likely incur substantial expenditures during 1998 and 1999 to
complete development and commercialization of the OxyNet oxygen concentrator. We
do not currently have adequate funds to accomplish this objective, and
anticipate that we may need to raise additional capital in 1999. We are unsure
whether capital will be available at that time.
RISKS RELATING TO SHAREHOLDER DILUTION, PREFERENCES
If we issue equity securities to raise funds, each current shareholder's
interest may be reduced.
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Further, such equity securities may have rights, preferences or privileges
senior to the Common Stock.
RISKS RELATING TO DIVIDENDS
We have not paid and do not anticipate paying any cash dividends in the
foreseeable future. We intend to retain future earnings for the development and
expansion of our business. We have accumulated substantial losses since our
inception. There can be no assurance that our operations will result in
sufficient revenues to enable us to operate at profitable levels or to generate
positive cash flow.
RISKS RELATING TO KEY EMPLOYEES
The success of our operations is highly dependent upon David J.
Richards, our founder and President, as well as its other key executive
officers. The loss of any of these persons could have a materially adverse
effect on us.
RISKS RELATING TO NEUROMEDICAL SYSTEMS, INC.
We obtain all of the information relating to the PAPNET Testing System
and service from Neuromedical Systems, and in most cases cannot independently
verify this information. Therefore, we are dependent on Neuromedical Systems to
accurately report the results of clinical studies and other data relating to the
capabilities and performance of the PAPNET Testing System.
We have no ownership rights in the PAPNET technology. Neuromedical
Systems has granted us exclusive rights with respect to the marketing of the
PAPNET Testing System and service in certain geographic territories. Therefore,
our business is dependent upon a number of factors, many of which are controlled
by Neuromedical Systems. These factors include:
o maintaining the PAPNET Testing System's compliance with FDA and other
regulatory requirements
o maintenance of the technological advantages of the PAPNET Testing
System
o maintenance of product liability insurance
o the ability to manufacture and deliver the equipment required to
operate the PAPNET Testing System
Further, Neuromedical Systems is in a stage of development that may require
additional funding for its operations. In the event that Neuromedical Systems
should fail to perform in any of these areas, or in any others that could affect
its licensees, such failure could have an adverse effect on us and our business.
Additional risks relating to the business of Neuromedical Systems which
may have an impact on us are set forth in Neuromedical Systems's periodic
reports filed with the SEC, including its Annual Report on Form 10-K.
RISKS RELATING TO LICENSE AGREEMENTS
Our marketing rights for the PAPNET Testing System and the revenues
generated by these activities are governed by the terms of our licenses from
Neuromedical Systems (the "Licenses"). The Licenses impose significant
territorial and other restrictions on our marketing rights, and place certain
limitations on the amounts of royalty revenues which we can generate through the
marketing of the PAPNET Testing System and Service.
RISKS RELATING TO PATENTS
The technologies underlying the PAPNET System and the OxyNet oxygen
concentrator are protected by various patents. There can be no assurance that
these patents will afford protection from material infringement by third parties
or that such patents will not be challenged. We and Neuromedical Systems also
rely on trade secrets and proprietary know-how, which we seek to protect, in
part, through confidentiality agreements with employees, consultants and other
parties. All of our employees, with the exception of clerical employees, are
required to sign a confidentiality agreement with us. To date, all employees
required to sign confidentiality agreements have done so. There can be no
assurance that these agreements will not be breached, that there will be
adequate remedies for any breach or that our trade secrets will not otherwise
become known to, or independently developed by, competitors. Litigation is
currently pending between
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Neuromedical Systems and a competitor over alleged infringement of Neuromedical
Systems's patents.
There has been extensive litigation in the medical device industry
regarding patents and other intellectual property rights. Although patent and
intellectual property disputes in the medical device area have often been
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial. There can be no assurance that necessary
licenses would be available to Neuromedical Systems or us on satisfactory terms
or at all. Adverse determinations as to the PAPNET and OxyNet patents could:
o limit or destroy the value of our license rights to these technologies
o subject us to significant liabilities from third parties
o require us to seek licenses from third parties
o prevent us from manufacturing or selling these products
Any of these determinations could have a material adverse effect on our
business, financial condition and results of operations.
RISKS RELATED TO THE COMMON SHARES
Our directors, executive officers and principal shareholders (5% or
greater) collectively beneficially own or have the right to acquire under
currently exercisable options approximately 25% of the outstanding Common Stock.
As a result, these shareholders will be able to exercise significant influence
over matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions. Such concentration of
ownership may have the effect of delaying or preventing a change in control.
We had 11,987,605 common shares outstanding as of December 16, 1998.
Approximately 1,925,000 shares are held by affiliates of NetMed who will be
entitled to resell them only pursuant to a registration statement under the
Securities Act or an applicable exemption from registration. In August 1997, we
sold $3 million in principal amount of Debentures convertible into Common Stock
at a discount to the market price at the time of conversion. These Debentures
will be exchanged for Preferred Stock pursuant to the exchange agreement on or
about the time this Registration Statement becomes effective. If the $1,502,000
in stated value of the Preferred Stock issued in the exchange were converted at
the prevailing market price on that date approximately _________ additional
shares of Common Stock would be issued. This registration statement will cover
all such shares to be resold to the public. Such resales may adversely affect
the pricing and volatility of trading in the Common Stock. See "Selling
Shareholders."
RISKS RELATING TO OUR LISTING ON THE AMERICAN STOCK EXCHANGE
Although the Common Stock is currently listed for trading on the
American Stock Exchange, trading volume has been limited. There can be no
assurance that there will continue to be an active and liquid trading market.
The stock market has experienced extreme price and volume fluctuations and
volatility that has particularly affected the market prices of many technology,
emerging growth and developmental stage companies. Such fluctuations and
volatility have often been unrelated or disproportionate to the operating
performance of such companies. Factors such as announcements of the introduction
of new or enhanced services or related products by us or our competitors may
have a significant impact on the market price of the Common Stock.
In addition, the staff of the American Stock Exchange (the "Exchange")
has recommended that the Common Stock be delisted from trading on the Exchange
because of our failure to meet minimum financial requirements for continued
listing. We have appealed this determination to the Board of Governors of the
Exchange. The Board of Governors has extended our listing on the Exchange until
March 31, 1999. However, there can be no assurance that our Common Stock will
continue to be listed on the Exchange. If the Common Stock is delisted, it is
likely that the Common Stock will be quoted on the National Association of
Securities Dealers, Inc. (Nasdaq) Bulletin Board.
RISKS RELATING TO MEDICAL TECHNOLOGY COMPANIES
Market prices of securities of medical technology companies, including
the Common Stock, have experienced significant volatility from time to
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time. There may be volatility in the market price of the Common Stock due to
factors that may not relate to our performance. Various factors and events, such
as announcements by us or our competitors concerning new product developments,
governmental approvals, regulations or actions, developments or disputes
relating to patent or proprietary rights and public concern over product
liability may have a significant impact on the market price of the Common Stock.
RISKS RELATING TO LOW STOCK PRICE
If the Exchange delisted our Common Stock, it could become subject to
Rule 15g-9 under the Securities Exchange Act of 1934 (the "Exchange Act"). This
rule imposes additional sales practice requirements on broker-dealers who sell
so-called "penny" stocks to persons other than established customers and
"accredited investors." Generally, accredited investors are individuals with a
net worth of more than $1,000,000 or annual incomes exceeding $200,000, or
$300,000 together with their spouses. For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction before
sale. Consequently, the rule may adversely affect the ability of broker-dealers
to sell our shares in the secondary market.
Subject to some exceptions, the Commission's regulations define a
"penny stock" to be any non-exchange listed equity security that has a market
price of less than $5.00 per share, or with an exercise price of less than $5.00
per share. Unless exempt, the rules require delivery, prior to any transaction
in a penny stock, of a disclosure schedule relating to the penny stock market
and the associated risks. The rules also require disclosure about commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, the rules require that broker-dealers
send monthly statements disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
If our Common Stock became subject to the rules applicable to penny
stocks, the market liquidity for the Common Stock could be adversely affected.
RISKS RELATING TO GOVERNMENT REGULATION
Both our and Neuromedical Systems' services, products and manufacturing
activities are subject to extensive and rigorous government regulation,
including the provisions of the Medical Device Amendment to the Federal Food,
Drug and Cosmetic Act. Sales to certain foreign countries are also subject to
government regulations. The process of obtaining required regulatory approvals
can be lengthy, expensive and uncertain. Moreover, regulatory approvals, if
granted, may include significant limitations on the indicated uses for which a
product may be marketed. The FDA actively enforces regulations prohibiting
marketing without compliance with the premarket approval provisions of products
and conducts periodic inspections to determine compliance with Good
Manufacturing Practice regulations.
Failure to comply with applicable regulatory requirements can result in
fines, suspensions of approvals, seizures or recalls of products, operating
restrictions and criminal prosecutions. Furthermore, changes in existing
regulations or adoption of new regulations could prevent us or Neuromedical
Systems from obtaining, or affect the timing of, future regulatory approvals.
The effect of governmental regulation may be to delay for a considerable period
of time or to prevent the marketing and/or full commercialization of future
products or services that we or Neuromedical Systems may develop and/or impose
costly requirements on us or Neuromedical Systems. There can be no assurance
that either we or Neuromedical Systems will be able to obtain regulatory
approvals of any products on a timely basis or at all. Delays in receipt of or
failure to receive such approvals or loss of previously received approvals would
adversely affect the marketing of Neuromedical Systems' and our proposed
products. There can also be no assurance that additional regulations will not be
adopted or current regulations amended in such a manner as will materially
adversely effect Neuromedical Systems or NetMed.
RISKS RELATING TO THIRD PARTY REIMBURSEMENT
In the United States, many Pap smears are currently paid for by the
patient. Further, the level of reimbursement by third-party payers that do
provide reimbursement differ considerably. Third-party
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payers (Medicare/Medicaid, private health insurance, health maintenance
organizations, health administration authorities in foreign countries and other
organizations) may affect the pricing or relative attractiveness of our products
and services by regulating the maximum amount of reimbursement for products or
services provided by us or by not providing any reimbursement at all.
Restrictions on reimbursement may limit the price which we can charge for our
products and services or reduce the demand for them. In the case of PAPNET
testing, if the level of such reimbursement is significantly below what
laboratories charge patients to perform the test, the size of the potential
market available to us may be reduced. There can be no assurance of the extent
to which costs of PAPNET testing will become reimbursable or that the level of
reimbursement will be sufficient to permit us to generate substantial revenues
in our PAPNET business.
RISKS RELATING TO MARKETABILITY
Until successful completion and sale of the OxyNet system (if ever),
our performance will depend upon sale of the PAPNET System. The extent of, and
rate at which, market acceptance and penetration are achieved are functions of
many variables including, but not limited to:
o price
o effectiveness
o acceptance by patients, physicians and laboratories
o manufacturing
o slide processing and training capacity
o reimbursement practice
o marketing and sales efforts
There can be no assurance that the PAPNET System will achieve or maintain
acceptance in our target markets.
RISKS RELATING TO COMPETITION
We are aware of several companies that either have developed or are
developing systems that are competitive with the PAPNET System and other
technologies targeted for development by us. The sale of such products could
have a material adverse effect on our business, financial condition and results
of operations. Competitors may have substantially greater financial,
manufacturing, marketing and technical resources, and represent significant
potential long-term competition. Competitors may succeed in developing products
that are more effective or less costly than any that may be developed by
Neuromedical Systems or us. New developments are expected to continue at a rapid
pace in both industry and academia. There can be no assurance that research and
development by others will not render Neuromedical Systems' or our current and
contemplated products obsolete. Competition may increase further as a result of
advances that may be made in the commercial applicability of technologies and
greater availability of capital for investment in these fields.
RISKS RELATING TO PRODUCT LIABILITY
Our business could expose us to the risks inherent in the production
and distribution of medical diagnostic and treatment equipment. Although
Neuromedical Systems has attempted to reduce the exposure to product liability
risk by disclosing the demonstrated range of accuracy of the PAPNET Testing
System, there can be no assurance that we will not be exposed to liability
resulting from the failure or inaccuracy of the PAPNET System. We currently
carry no product liability insurance. However, Neuromedical Systems is required,
under the terms of the Licenses, to name us as an additional insured on its
product liability policies. There can be no assurance that Neuromedical Systems
will have the resources necessary to purchase and maintain the insurance, that
such insurance will be sufficient to cover potential claims, or that
Neuromedical Systems will have adequate resources to indemnify us from any
uninsured loss.
AVAILABLE INFORMATION
This prospectus, which constitutes a part of a Registration Statement
on Form S-3 (the "Registration Statement") filed by us with the Securities and
Exchange Commission (the "Commission") under the Securities Act, omits certain
of the information set forth in the Registration Statement. Reference is hereby
made to the Registration Statement and to the exhibits thereto for further
information with respect to us and the securities offered hereby. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the prescribed fee or may be
examined without charge at the public reference facilities of the Commission
described below.
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Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith file reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Section of the Commission at:
Securities and Exchange Commission
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
and at the following regional offices of the Commission:
Midwest Regional Office
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, IL 60661-2511
Northeast Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Copies of such material can also be obtained at prescribed rates by writing to
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such reports and other information filed with the
Commission may also be available at the Commission's site on the World Wide Web
at http://www.sec.gov.
Our Common Stock is listed on the American Stock Exchange, and copies
of our reports, proxy statements and other information filed with the Commission
under the Exchange Act, and other information concerning us, can be inspected at
the American Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We hereby incorporate by reference into this prospectus the following
documents previously filed with the Commission pursuant to the Exchange Act:
(1) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1997, filed with the Commission on March 27, 1998, and our Form 10-K/A,
filed with the Commission on April 30, 1998 (the information under the heading
"Recent Developments" should be read in conjunction with our financial
statements contained in our annual report on Form 10-K for the fiscal year ended
December 31, 1997);
(2) Our Definitive Proxy Statement for the Annual Meeting of the
Shareholders, filed with the Commission on April 16, 1998;
(3) Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, filed with the Commission on May 15, 1998, the quarter ended June 30,
1998, filed with the Commission on August 14, 1998, and the quarter ended
September 30, 1998, filed with the Commission on November 13, 1998; and
(4) Our Current Reports on Form 8-K, filed with the Commission on April
14, 1998, July 21, 1998, September 9, 1998, September 10, 1998, and November 5,
1998.
In addition, all documents filed by us pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus
and prior to termination of the offering of the Shares offered hereby shall be
deemed to be incorporated by reference into this prospectus and to be a part
hereof from the respective date of fling of such documents with the Commission.
Any statement contained herein, or any document, all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of the Registration Statement or this prospectus. All
information appearing in this prospectus is qualified
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in its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference. This
prospectus incorporates documents by reference which are not presented herein or
delivered herewith. These documents (other than exhibits thereto, unless such
exhibits are specifically incorporated by reference in such documents) are
available without charge, upon written or oral request by any person to whom
this prospectus has been delivered, by directing such request to NetMed, Inc.,
6189 Memorial Drive, Dublin, Ohio 43017, Attention: President, telephone:
(614) 793-9356.
FORWARD LOOKING STATEMENTS
Statements in this prospectus which relate to other than strictly
historical facts, including statements about our plans and strategies, as well
as management's expectations about new and existing products, technologies and
opportunities, market growth, demand for and acceptance of new and existing
products (including the Papnet(R) Testing System and the OxyNet(R) oxygen
concentration device), are forward looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. The words
"believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward- looking statements that speak only as of the date
hereof. Investors are cautioned that such statements involve risks and
uncertainties that could cause actual results to differ materially from
historical or anticipated results due to many factors including, but are not
limited to, our current reliance on a single product marketed under license from
Neuromedical Systems, the corresponding dependence on Neuromedical Systems'
patents and proprietary technology, government regulation, continuing losses
from operations and negative cash flow, limited marketing and sales history, the
impact of third party reimbursement decisions, the challenges of research and
development of new products, and other risks detailed herein under the caption
"Risk Factors." We undertake no obligation to publicly update or revise any
forward-looking statements.
THE COMPANY
We are an Ohio corporation engaged in the business of acquiring,
developing and marketing medical and health-related technologies. Our principal
business activity is the marketing of the PAPNET(R) Testing System, which is a
proprietary product of Neuromedical Systems. The PAPNET Testing System is a
semi-automated cancer detection system for the review of cell, tissue or body
fluid specimens, including cervical cytology specimens. Slides containing
cytology specimens are processed using the PAPNET Testing System (either by the
laboratory at its own facilities or at one of Neuromedical Systems's central
facilities) which produces processed images for evaluation by the laboratory's
cytotechnologists. Neuromedical Systems provides approximately one week of
training to cytotechnologists from laboratories using the PAPNET System on the
operation of the image review equipment and the interpretation of the images.
We were originally organized in 1989 for the purpose of acquiring the
exclusive territorial rights to market Neuromedical Systems' proprietary
products in Ohio. In 1990, we acquired from Neuromedical Systems marketing
rights for Kentucky and the Chicago, Illinois metropolitan area. On December 16,
1996, we completed a merger with Cytology Indiana, Inc., Indiana Cytology Review
Company, ER Group, Inc., CCWP Partners, Inc., and Carolina Cytology, Inc. (the
"Predecessor Companies"), which had held the rights to market the PAPNET Testing
System in the states of Missouri, Georgia and North Carolina. We were the
surviving corporation in the Merger. Upon completion of the Merger, we changed
our name from Papnet of Ohio, Inc. to NetMed, Inc.
In addition to exploiting our rights under the license agreement with
Neuromedical Systems, our corporate mission is to become a well diversified
health care technology company founded upon proprietary products that offer a
distinct market advantage. Our intention is to follow the example of our initial
investment, the PAPNET technology, in pursuing other opportunities in healthcare
technology. Specifically, we intend to make early investments in selected
healthcare technologies and apply our management and marketing resources to
develop and implement strategies designed to significantly increase the value of
the investment over a period of two to four years.
In pursuit of this strategy, in early 1997 we entered into an agreement
with CeramPhysics, Inc. of Westerville, Ohio ("Ceram"), pursuant to which we
obtained the right to acquire 95% ownership of a
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Ceram subsidiary that holds an exclusive world-wide license to Ceram's patented
oxygen generation technology for all applications of the technology except
oxygen sensors and fuel cells. Our acquisition of this interest was completed on
April 3, 1998. It is our intention to incorporate the element into an oxygen
generation device (the OxyNet(R) System) that we expect to manufacture and
market to the home health care industry. See "Recent Developments."
Our principal offices are located at 6189 Memorial Drive, Dublin, Ohio
43017, and our telephone number at that address is (614) 793-9356.
RECENT DEVELOPMENTS
On April 3, 1998, we acquired from Ceram Oxygen Technologies, Inc.
("COTI") 95 common shares, representing 95 percent of COTI's outstanding common
shares immediately following the closing, in exchange for a cash payment of
$50,000 and delivery of a note in the principal amount of $150,000 (the "Note").
The Note provides for three equal principal payments of $50,000 on each of June
1, July 1, and August 1, 1998, together with interest at the rate of 8.5 percent
per annum. Following this transaction, COTI's name was changed to "OxyNet, Inc."
("OxyNet"). The remaining 5 percent of OxyNet's outstanding common equity is
owned by CeramPhysics, Inc. ("Ceram") of Westerville, Ohio. COTI holds an
exclusive world-wide license to Ceram's patented oxygen generation technology
for all applications of the technology except oxygen sensors and fuel cells. The
consideration was applied by OxyNet to payment of a $200,000 license fee owed to
Ceram, with $50,000 being paid in cash, and the balance by assignment of the
Note.
The acquisition was made pursuant to a February, 1997 agreement among
us, COTI and Ceram, whereby we agreed to make advances to COTI to complete the
fabrication and testing of a ceramic element incorporating the licensed
technology. Pursuant to the agreement, through April 3, 1998, we had advanced
$363,470 to COTI for this purpose. The agreement also provided that upon
completion of an acceptance test of the ceramic element satisfactory to us, we
had the right to acquire 95% of the equity of COTI for $200,000.
It is our intention to incorporate the ceramic element into an oxygen
generation device (the OxyNet(R) System) that we expect to manufacture and
market to the home health care industry. We believe this system will be lighter,
quieter, more reliable and less costly to operate than current systems. We
expect to demonstrate a prototype of the system before the end of 1998 and to
begin marketing a commercial version of the device in 1999. We also expect to
develop other applications for the technology, including military and industrial
applications. In August, 1998, OxyNet completed the private placement of 500
shares of Series A 8% Convertible Preferred Shares (the "OxyNet Shares") for
gross proceeds of $500,000. These proceeds will be used for further development
of the OxyNet product. The OxyNet Shares are convertible into Common Shares of
OxyNet on a one share for one share basis. If there is not an initial public
offering of the Common Shares of OxyNet within 18 months from the date of
issuance of the OxyNet Shares (the "Issuance Date"), the OxyNet Shares may be
exchanged at their original stated value, plus accrued dividends, for our Common
Stock. This is a one time right to exchange the OxyNet Shares for our Common
Stock and is only available for a period of 30 days following the Issuance Date.
In December, 1998, we entered into a letter of intent with McGeneron, a
member of the Messer Group of Companies, to jointly develop applications of the
OxyNet technology. The letter of intent contemplates that the parties will
execute a definitive agreement within 60 days.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Shares by the
selling shareholders.
SELLING SHAREHOLDERS
The 8,000,000 shares of our Common Stock described in this prospectus
represent approximately 150% of the aggregate number of shares of our Common
Stock which the selling shareholders would be entitled to acquire upon
conversion of the Preferred Stock still outstanding, assuming the entire
remaining principal balance of the outstanding Preferred Stock was converted on
the date of this prospectus, plus 511,653 shares previously issued to the
selling shareholders upon conversion of the Debentures. Except for the ownership
of the
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Preferred Stock (and any Shares on conversion thereof and Shares acquired upon
conversion of the debentures), the selling shareholders have not had any
material relationship within the past three years with us. The Shares are being
registered to permit public secondary trading of the Shares, and the selling
shareholders may offer the Shares for resale from time to time. See "Plan of
Distribution."
The selling shareholders are under the common management and control of
Banque CPR, a French broker-dealer. The selling shareholders are precluded from
converting shares of Preferred Stock which would, at any point in time, allow
the selling shareholders to own more than 4.99% of our Common Stock. However,
the selling shareholders may, over time, convert Preferred Stock into Common
Stock representing, in the aggregate, more than 4.99% of the Common Stock so
long as they do not exceed 4.99% ownership in the Common Stock at any one point
in time. Column two of the following table, entitled "Number of Shares
Beneficially Owned", represents 4.99% of the outstanding Common Stock as divided
proportionately between the selling shareholders. Column three, entitled "Number
of Shares Being Offered Hereby", reflects the aggregate number of shares of
Common Stock that could be issued to the selling shareholders during the
effectiveness of this Registration Statement. The selling shareholders have
confirmed to us in writing that they disclaim beneficial ownership of the
Preferred Stock (and the Common Stock issuable upon conversion) by each other
selling shareholder.
Number of Shares Number of Shares
Number of Shares Being Offered Owned After
Name of Selling Shareholder Beneficially Owned Hereby Offering
- --------------------------- ------------------ ------ --------
CPR (USA), Inc. 436,672 5,840,000 0
LibertyView Fund, LLC 122,627 1,640,000 0
LibertyView Plus Fund 38,882 520,000 0
The Shares being offered by the selling shareholders hereby are
issuable by us to the selling shareholders upon conversion of the Preferred
Stock. The Preferred Stock and any dividends accrued thereon may be converted
into Shares at any time. The Preferred Stock is entitled to cumulative annual
dividends at the rate of 6% of stated value payable in Common Stock at the time
of each conversion, and is convertible into shares of our Common Stock based on
the "Conversion Price" at the time of conversion. The Conversion Price is an
amount equal to 75% of the average closing bid price of the Common Stock on the
American Stock Exchange for the previous three business days ending on the day
before the conversion date. The Conversion Price is subject to equitable
adjustment upon the occurrence of certain events, such as stock splits, stock
dividends, reclassifications or combinations.
A selling shareholder is prohibited from converting any portion of the
Preferred Stock which would result in the Selling Shareholder being deemed the
beneficial owner, in accordance with the provisions of Rule 13d-3 under the
Exchange Act, of 4.99% or more of the then issued and outstanding Common Stock.
As required by the exchange agreement and related Registration Rights
Agreement, in recognition of the fact that selling shareholders may wish to be
legally permitted to sell any Shares acquired upon conversion of the Preferred
Stock when they deem appropriate, we have filed with the Commission under the
Act a Registration Statement on Form S-3, of which this prospectus forms a part,
with respect to the resale of the Shares by the selling shareholders from time
to time on the American Stock Exchange or in privately-negotiated transactions.
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PLAN OF DISTRIBUTION
The Shares being offered by the selling shareholders will be sold in
one or more transactions (which may involve block transactions) on the American
Stock Exchange or in privately-negotiated transactions. The sale price to the
public may be the market price prevailing at the time of sale, a price related
to such prevailing market price or such other price as each selling shareholder
determines from time to time. A selling shareholder shall have the sole and
absolute discretion not to accept any purchase offer or make any sale of Shares
if it deems the purchase price to be unsatisfactory at any particular time.
The selling shareholders may also sell the Shares of Common Stock
directly to market makers acting as principals and/or to broker-dealers acting
as agents for themselves or their customers. Brokers acting as agents for the
selling shareholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that the
selling shareholders will attempt to sell Shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance that all or any of the
Shares offered hereby will be issued to, or sold by, the selling shareholders.
The selling shareholders and any brokers, dealers or agents, upon effecting the
sale of any of the Shares offered hereby, may be deemed "underwriters" as that
term is defined in the Securities Act.
The selling shareholders have agreed that they will not pay more than
the normal brokerage compensation and that they will not enter into arrangements
for special selling efforts without first advising us and cooperating in the
disclosure of the same in a revised or supplemental prospectus.
The selling shareholders, alternatively, may sell all or any part of
the Shares offered hereby through an underwriter. The selling shareholders have
not entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If the selling
shareholders enters into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this prospectus.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 20,000,000 Common Shares,
without par value, 250,000 shares of Voting Preferred Stock, and 250,000 Shares
of Nonvoting Preferred Stock. There are currently outstanding 11,673,422 shares
of Common Stock, and 100,000 shares of Preferred Stock. All outstanding shares
of Common Stock are fully paid and non-assessable.
COMMON STOCK
Holders of validly issued and outstanding shares of Common Stock are
entitled to one vote per share of record on all matters to be voted upon by
shareholders. At a meeting of shareholders at which a quorum is present, a
majority of the votes cast decides all questions, unless the matter is one upon
which a different vote is required by express provision of law or our Articles
of Incorporation ("Articles") or Code of Regulations ("Regulations"). Our
Articles eliminate the right of shareholders to cumulate their votes in the
election of directors. Shareholders have no preemptive or other rights to
subscribe for additional shares nor any other rights to convert their Common
Stock into any other securities.
Subject to the preferences that may be applicable to the holders of any
outstanding shares of Preferred Stock, holders of Common Stock are entitled to
such dividends as may be declared by the Board of Directors out of funds legally
available therefor. The payment by us of dividends, if any, rests within the
discretion of its Board of Directors and will depend upon our operating results,
financial condition and capital expenditure plans, as well as other factors
considered relevant by the Board of Directors. We may enter into bank credit
agreements which include financial covenants restricting the payment of
dividends. See "Dividend Policy."
Upon our liquidation, dissolution or winding-up, the assets legally
available for distribution to shareholders are distributable ratably among the
holders of Common Stock at that time outstanding, subject to prior distribution
rights of our creditors and preferential rights of any outstanding shares of
Preferred Stock.
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PREFERRED STOCK
The Articles authorize the Board of Directors to issue up to 250,000
shares of Voting Preferred Stock and up to 250,000 shares of Nonvoting Preferred
Stock in one or more series and to establish such relative dividend, redemption,
liquidation, conversion and other powers, preferences, rights, qualifications,
limitations and restrictions as the Board of Directors may determine without
further approval of our shareholders. The issuance of Preferred Stock by the
Board of Directors could be used, under certain circumstances, as a method of
delaying or preventing a change in control and could permit the Board of
Directors, without any action by holders of Common Stock, to issue Preferred
Stock which could have a detrimental effect on the rights of holders of Common
Stock, including loss of voting control. In certain circumstances, this could
have the effect of decreasing the market price of the Common Stock.
The issuance of any series of Preferred Stock, and the relative powers,
preferences, rights, qualifications, limitations and restrictions of such
series, if and when established, will depend upon, among other things, our
future capital needs, the then-existing market conditions and other factors
that, in the judgment of the Board of Directors, might warrant the issuance of
Preferred Stock.
On October 27, 1998, the directors authorized the creation of 100,000
shares of Voting Preferred Stock to be known as the "Series A, 6% Convertible
Preferred Stock." These shares were used pursuant to the exchange agreement
whereby holders of the Debentures received an equal number of Preferred Stock
for their interests in the Debentures.
CERTAIN PROVISIONS OF ARTICLES AND REGULATIONS
The following brief description of certain provisions of our Articles
and Regulations does not purport to be complete and is subject in all respects
to the provisions of the Articles and Regulations, copies of which have been
filed as exhibits to the Registration Statement of which this prospectus is a
part.
CLASSIFIED BOARD OF DIRECTORS
Our Regulations provide for the Board of Directors to be divided into
three classes (unless there are fewer than 9 directors in which case there will
be two classes) of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected each year.
Classification of the Board of Directors expands the time required to change the
composition of a majority of directors and may tend to discourage a proxy
contest or other takeover bid for us.
DIRECTORS' RESPONSE TO ACQUISITION PROPOSALS
Our Articles provide that the Board of Directors must base our response
to any "Acquisition Proposal" on the Board of Directors' evaluation of what is
in our best interest. In evaluating what is in our best interest, the Board of
Directors must consider all relevant factors including, without limitation, the
best interest of the shareholders which, for this purpose, requires the Board of
Directors to consider, among other factors, not only the consideration offered
in the Acquisition Proposal in relation to the then current market price of our
stock, but also in relation to our current value in a freely negotiated
transaction and in relation to the Board of Directors' then estimate of our
future value as an independent entity or as the subject of a future Acquisition
Proposal; and such other factors as the Board of Directors determines to be
relevant, including, among other factors, our long-term and short-term interests
and our subsidiaries and their businesses and properties and the social, legal
and economic effects upon the employees, suppliers, customers, creditors and
other affected persons, firms and corporations and on the communities and
geographical areas in which we and our subsidiaries operate or are located.
"Acquisition Proposal" is defined in the Articles as any proposal for our
consolidation or merger with another corporation, any share exchange involving
our outstanding capital stock, any liquidation or dissolution of us, any
transfer of all or a material portion of our assets and any tender offer or
exchange offer for any of our outstanding stock.
DIRECTOR AND OFFICER INDEMNIFICATION
The Articles provide that we may indemnify any director, officer, or
any former director or officer, and any person who is or has served at our
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request as a director, officer or trustee of another corporation, partnership,
joint venture, trust or other enterprise (and his or hers heirs, executors and
administrators) against expenses, including attorney fees, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by him by reason of
the fact that he is or was such director, officer, incorporator or trustee in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, to the full extent
and according to the procedures and requirements set forth in the Ohio General
Corporation Law as the same may be in effect from time to time. The
indemnification provided shall not be deemed to restrict our right to (i)
indemnify employees, agents and others as permitted by law, (ii) purchase and
maintain insurance or provide similar protection on behalf of the directors,
officers or such other persons against liabilities asserted against them or
expenses incurred by them arising out of their service to us, and (iii) enter
into agreements with such directors, officers, employees, agents or others
indemnifying them against any and all liabilities asserted against them or
incurred by them arising out of their service to us as contemplated herein.
REMOVAL OF DIRECTORS
Our Regulations provide that any director or the entire Board of
Directors may be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 80% of all of our outstanding
shares of capital stock entitled to vote on the election of directors at a
meeting of shareholders called for that purpose, except that if the Board of
Directors, by an affirmative vote of at least 66-2/3% of the entire Board,
recommends removal of a director to the shareholders, such removal may be
effected by the affirmative vote of the holders of at least a majority of the
outstanding shares of our capital stock present in person or represented by
proxy and entitled to vote on the election of directors at a meeting of
shareholders called for that purpose. These provisions, when coupled with
provisions of the Regulations authorizing only the Board of Directors to fill
vacant directorships, will preclude our shareholders from removing incumbent
directors without cause, and simultaneously gaining control of the Board of
Directors by filling the vacancies with their own nominees.
The term "cause" is not defined in the Articles or the Ohio General
Corporation Law. Consequently, any question concerning the legal standard for
"cause" would have to be judicially determined and such a determination could be
difficult, expensive and time consuming.
MEETINGS OF SHAREHOLDERS
The Regulations provide that annual meetings of shareholders shall be
held at such time and on such business day as the Board of Directors may
determine. Except as otherwise provided by law or by the Articles, a quorum for
any meeting of the shareholders is a majority of the capital stock issued and
outstanding and entitled to vote at the meeting. Special meetings of
shareholders may be called by the Chairman of the Board, President or Chief
Executive Officer or by the Board of Directors by action at a meeting or a
majority of the directors without a meeting or by shareholders holding 50% or
more of the voting power entitled to elect directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The Regulations provide that shareholders seeking to bring business
before a meeting of shareholders, or to nominate candidates for election as
directors at a meeting of shareholders, must provide timely notice thereof in
writing. To be timely, a shareholder's notice must be delivered to, or mailed
and received at, our principal executive office, not less than 30 days nor more
than 60 days prior to the scheduled meeting (or, if less than 40 days' notice of
the meeting is given to shareholders not later than the close of business on the
tenth day following the earlier of (i) the day on which such notice of the date
of the meeting was mailed, or (ii) the day on which public disclosure of the
date of the special meeting was made). The Regulations also specify certain
requirements pertaining to the form and substance of a shareholder's notice.
These provisions may preclude some shareholders from making nominations for
directors at an annual or special meeting or from bringing other matters before
the shareholders at a meeting.
VOTING REQUIREMENTS
The Regulations provide that certain provisions in the Regulations may
not be altered, amended or repealed in any respect, and new
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provisions inconsistent therewith may not be adopted unless such action is
approved by the affirmative vote of the holders of at least 80% of all of our
outstanding shares of capital stock entitled to vote on such matter at a meeting
of shareholders called for that purpose.
SHAREHOLDER NOMINATIONS AND PROPOSALS
The Regulations also specify certain requirements pertaining to the
form and substance of a shareholder's notice. These provisions may preclude some
shareholders from making nominations for directors at an annual or special
meeting or from bringing other matters before the shareholders at a meeting.
Although the Articles and Regulations do not give the Board of
Directors any power to approve or disapprove shareholder nominations for the
election of directors or proposals for action, the foregoing provisions may have
the effect of precluding a contest for the election of directors or the
consideration of shareholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect our own slate of directors or to approve our
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to us and our shareholders. On the
other hand, by requiring advance notice of nominations by shareholders, these
shareholder notice procedures afford the Board an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform shareholders about such qualifications. By
requiring advance notice of other proposed business, the shareholder notice
procedures provide a more orderly procedure for conducting annual meetings of
shareholders and, to the extent deemed necessary or desirable by the Board,
provide the Board with an opportunity to inform shareholders, prior to such
meeting, of any business proposed to be conducted at the meeting, together with
any recommendations by the Board or statements as to the Board's position
regarding action to be taken with respect to such business, so that shareholders
can better decide whether to attend the meeting or to grant a proxy regarding
the disposition of any such business.
OHIO GENERAL CORPORATION LAW
Certain provisions of the General Corporation Law of Ohio and of our
Articles and Regulations, summarized in the following paragraphs, may be
considered to have an anti-takeover effect and may delay, deter or prevent a
tender offer, proxy contest or other takeover attempt that a shareholder might
consider to be in such shareholder's best interest, including such an attempt as
might result in payment of a premium over the market price for shares held by
shareholders.
Section 1701.59 of the Ohio General Corporation Law provides that a
director shall not be found to have violated his duties under the Ohio General
Corporation Law unless it is proved by clear and convincing evidence that the
director has not acted in good faith, in a manner he reasonably believes to be
in or not opposed to the best interests of the corporation, or with the care
that an ordinary prudent person in a like position would use under similar
circumstances. Further, such section provides that a director shall be liable in
damages for any action he takes or fails to take as a director only if it is
proved by clear and convincing evidence that his action or failure to act
involved an act or omission undertaken with deliberate intent to cause injury to
the corporation or with reckless disregard for the best interests of the
corporation.
Chapter 1704 of the Ohio General Corporation Law prohibits certain
transactions between a Ohio corporation and an "interested shareholder." Chapter
1704 allows for a corporation to exclude itself from Chapter 1704 by exempting
itself in its articles of incorporation. We have not included such an exemptive
provision in the Articles.
EXPERTS
Our financial statements as of December 31, 1996 and 1997, and for each
of the three years in the period ended December 31, 1997, appearing in our 1997
Annual Report on Form 10-K have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
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LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for us
by Porter, Wright, Morris & Arthur, 41 South High Street, Columbus, Ohio 43215.
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===============================================================================
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON, OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
REGARDS TO THE OFFER MADE IN THIS PROSPECTUS. ANY SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US, THE
SELLING SHAREHOLDERS OR ANY UNDERWRITER, DEALER, OR AGENT. THIS PROSPECTUS ONLY
OFFERS THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS IS NOT AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
---------------------------
8,000,000 SHARES
NETMED, INC.
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
December __, 1998
===============================================================================
19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses relating to the registration of the Shares of Common Stock
being offered hereby, other than underwriting discounts and commissions, will be
borne by the Registrant. The following table shows the amount of such expenses
in connection with the sale and distribution of the Shares:
Item Amount
---- ------
Securities and Exchange Commission
Registration Fee $834.00
Legal Fees and Expenses 10,000.00
Accounting Fees and Expenses 2,500.00
Miscellaneous Expenses 1,500.00
Total $14,834.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Ohio General Corporation Law, Article NINTH of the
Registrant's Amended and Restated Articles of Incorporation ("Articles")
provides that a director, officer, incorporator, or any former officer or
director of the Registrant shall be indemnified by the Registrant to the fullest
extent permitted by the Ohio General Corporation Law.
Indemnification of directors, officers, employees and agents is
required under Section 1701.13 of the Ohio General Corporation Law in those
cases where the person to be indemnified has been successful on the merits or
otherwise in defense of a lawsuit. Indemnification is permitted in third party
actions where the indemnified person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and in criminal actions where he had no reasonable cause to believe
his conduct was unlawful. Indemnification is also permitted in lawsuits brought
by or on behalf of the corporation if the standards of conduct described above
are met, except that no indemnification is permitted in respect to any matter in
which the person is adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless a court shall determine that
indemnification is fair and reasonable in view of all the circumstances of the
case. In cases where indemnification is permissive, a determination as to
whether the person met the applicable standard of conduct must be made either by
the court, disinterested directors, by independent legal counsel, or by the
shareholders. Such indemnification rights are specifically not deemed to be
exclusive of other rights of indemnification by agreement or otherwise and the
corporation is authorized to advance expenses incurred prior to the final
disposition of a matter upon receipt of an undertaking to repay such amounts on
a determination that indemnification was not permitted in the circumstances of
the case.
Under Section 1701.13 of the Ohio General Corporation Law, a
corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the corporation, or who, while
serving in such capacity, is or was at the request of the corporation, a
director, officer, employee or agent of another corporation or legal entity or
of an employee benefit plan, against liability asserted against or incurred by
such person in any such capacity whether or not the corporation would have the
power to provide indemnity under Section 1701.13 of the Ohio General Corporation
Law.
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The above discussion of the Registrant's Articles and of Section
1701.13 of the Ohio General Corporation Law is not intended to be exhaustive and
is respectively qualified in our entirety by such Articles of Incorporation and
statute.
ITEM 16. EXHIBITS.
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Articles FOURTH, SIXTH, SEVENTH, EIGHTH, TENTH, and
ELEVENTH, of the Registrant's Amended and Restated
Articles of Incorporation and Articles I, V and VII
of the Registrant's Amended and Restated Regulations.
(Previously filed as Exhibit 4(b) to the Registration
Statement on Form S-4, Registration No. 333-8199, and
incorporated herein by reference.)
4.2 Certificate of Amendment to Registrant's Amended and
Restated Articles of Incorporation. (Previously filed
as Exhibit 4.2 to the Registration Statement on Form
S-3, Registration No. 333-66679, and incorporated
herein by reference.)
5 Opinion of Porter, Wright, Morris & Arthur.
(Previously filed as Exhibit 5 to the Registration
Statement on Form S-3, Registration No. 333-66679,
and incorporated herein by reference.)
23 Consent of Ernst & Young LLP.*
24 Powers of Attorney. (Previously filed as Exhibit 24
to the Registration Statement on Form S-3,
Registration No. 333-66679, and incorporated herein
by reference.)
99.1 Convertible Debenture Exchange Agreement, dated
October 27, 1998, among the Registrant, CPR (USA)
Inc., LibertyView Fund, LLC, and LibertyView Plus
Fund. (Previously filed as Exhibit 99.1 to the
Registration Statement on Form S-3, Registration No.
333-66679, and incorporated herein by reference.)
99.2 Registration Rights Agreement, dated October 27,
1998, among the Registrant, CPR (USA) Inc.,
LibertyView Fund, LLC, and LibertyView Plus Fund.
(Previously filed as Exhibit 99.2 to the Registration
Statement on Form S-3, Registration No. 333-66679,
and incorporated herein by reference.)
99.3 Amended and Restated Agreement, dated November 23,
1998, between Neuromedical Systems, Inc. and the
Registrant.*
* Filed with this Amendment.
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ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 our 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 Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) It will file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered)and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
PROVIDED, HOWEVER, that the undertakings set forth in
paragraphs 3(i) and (ii) above do not apply if information required to
be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this Registration Statement.
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22
(4) It will remove from registration by means of a
post-effective amendment any of the securities being registered that
remain unsold at the termination of the offering.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Act Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 to be
signed on our behalf by the undersigned, thereunto duly authorized, in the City
of Dublin, State of Ohio, on December 18, 1998.
NETMED, INC.
By: /s/ Kenneth B. Leachman
-----------------------------------
Kenneth B. Leachman, Vice
President - Finance and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
*David J. Richards President, Director ) December 18, 1998
- ----------------------------------------- (Principal Executive Officer) )
David J. Richards )
)
)
/s/ Kenneth B. Leachman Vice President-Finance, Treasurer ) December 18, 1998
- ----------------------------------------- (Principal Financial and Accounting )
Kenneth B. Leachman Officer) )
)
)
)
*S. Trevor Ferger Director ) December 18, 1998
- ----------------------------------------- )
S. Trevor Ferger )
)
)
*Cecil J. Petitti Director ) December 18, 1998
- ----------------------------------------- )
Cecil J. Petitti )
)
)
*Michael S. Blue Director ) December 18, 1998
- ----------------------------------------- )
Michael S. Blue )
)
)
*Robert J. Massey Director ) December 18, 1998
- ----------------------------------------- )
Robert J. Massey )
)
)
*James F. Zid Director ) December 18, 1998
- ----------------------------------------- )
James F. Zid )
)
*By: /s/ Kenneth B. Leachman
---------------------------------------------------
Kenneth B. Leachman
Attorney-in-fact for each of the persons indicated
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24
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Articles FOURTH, SIXTH, SEVENTH, EIGHTH, TENTH, and
ELEVENTH, of the Registrant's Amended and Restated
Articles of Incorporation and Articles I, V and VII
of the Registrant's Amended and Restated Regulations.
(Previously filed as Exhibit 4(b) to the Registration
Statement on Form S-4, Registration No. 333-8199, and
incorporated herein by reference.)
4.2 Certificate of Amendment to Registrant's Amended and
Restated Articles of Incorporation. (Previously filed
as Exhibit 4.2 to the Registration Statement on Form
S-3, Registration No. 333-66679, and incorporated
herein by reference.)
5 Opinion of Porter, Wright, Morris & Arthur.
(Previously filed as Exhibit 5 to the Registration
Statement on Form S-3, Registration No. 333-66679,
and incorporated herein by reference.)
23 Consent of Ernst & Young LLP.*
24 Powers of Attorney. (Previously filed as Exhibit 24
to the Registration Statement on Form S-3,
Registration No. 333-66679, and incorporated herein
by reference.)
99.1 Convertible Debenture Exchange Agreement, dated
October 27, 1998, among the Registrant, CPR (USA)
Inc., LibertyView Fund, LLC, and LibertyView Plus
Fund. (Previously filed as Exhibit 99.1 to the
Registration Statement on Form S-3, Registration No.
333-66679, and incorporated herein by reference.)
99.2 Registration Rights Agreement, dated October 27,
1998, among the Registrant, CPR (USA) Inc.,
LibertyView Fund, LLC, and LibertyView Plus Fund.
(Previously filed as Exhibit 99.2 to the Registration
Statement on Form S-3, Registration No. 333-66679,
and incorporated herein by reference.)
99.3 Amended and Restated Agreement, dated November 23,
1998, between Neuromedical Systems, Inc. and the
Registrant.*
* Filed with this Amendment.
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