As filed with the Securities and Exchange Commission on July 23, 2002
File No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
LIFEPOINT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 33-0539168
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1205 South Dupont Street, Ontario, California 91761
(Address of Principal Executive Offices (Zip Code)
Ms. Linda H. Masterson
LifePoint, Inc.
1205 South Dupont Street
Ontario, CA 91761
(909) 418-3023
(Name, Address and Telephone Number of Agent for Service)
Copy to:
Robert W. Berend, Esq.
Wachtel & Masyr, LLP
110 East 59th Street
New York, N.Y. 10022
(212) 909-9602
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or reinvestment plans, check the following box.[x]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of earlier
effective registration statement for the same offering. [ ]_________________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]_________________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]_________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]_________________
CALCULATION OF REGISTRATION FEE
- ---------------------------------- --------------- --------------------- ---------------------- ---------------------
Title of Each Class of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be Registered to be Offering Price Aggregate Registration Fee (2)
Registered (4) Per Unit (1) (3) Offering Price
- ---------------------------------- --------------- --------------------- ---------------------- ---------------------
- ---------------------------------- --------------- --------------------- ---------------------- ---------------------
Common Stock $.001 par value, 5,939,644 $2.22 $13,186,010 $ 1,215
shares to be offered by selling
stockholders......................
- ---------------------------------- --------------- --------------------- ---------------------- ---------------------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Rounded to the nearest dollar.
(3) The closing sales price of the Common Stock as reported on the American Stock Exchange on July 17, 2002 was taken as the
offering price of the shares and is used solely for the purpose of calculating the registration fee in accordance with Rule
457(c) under the Securities Act of 1933.
(4) An indeterminate number of shares of the Common Stock are being registered pursuant to Rule 416 under the Securities Act to
cover any adjustment in the number of shares issuable upon the conversion of the Series C convertible preferred stock or the
exercise of the warrants as a result of any dilution resulting from stock splits, stock dividends or similar transactions.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may determine.
- ------------------------------------------------------------------------------------------------------------------------------------
5,939,644 Shares
LIFEPOINT, INC.
Common Stock
We, LifePoint, Inc., are not offering for sale any securities pursuant
to this prospectus. Instead, 8 of the 44 selling stockholders named in the list
beginning on page 31 of this prospectus will be selling shares of our common
stock as follows:
o 2,720,000 shares which we sold as part of units in a private
placement closed by us in April 2002,
o 544,000 shares which we shall issue upon the exercises of warrants
which we sold as part of the units, and
o 326,400 shares which we shall issue upon the exercises of warrants
which we issued as compensation for our failure to accomplish a
registration objective.
In addition, 11 of the 44 selling stockholders named in the list will
be selling 210,500 shares of common stock which we shall issue upon the
exercises of warrants originally issued in partial payment of a placement
agent's fee in connection with the April 2002 private placement.
In addition, 34 of the 44 selling stockholders named in the list will
be selling 2,138,744 shares of our common stock which we issued (27,960 shares),
or which we shall issue (2,110,784 shares), upon the exercises of other warrants
which we had issued for various purposes during the past five years.
The selling stockholders, or their pledgees, donees, transferees or
other successors-in-interest, may offer the shares of our common stock for
resale on the American Stock Exchange, in the third market, in isolated
transactions, or in a combination of such methods of sale. Their shares may be
sold at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to prevailing market prices, or at negotiated
prices with institutional or other investors.
Our common stock is currently listed on the American Stock Exchange
under the symbol: LFP. On July 17, 2002, the closing sales price as so reported
was $2.22 per share.
______________________
This Investment Involves a High Degree of Risk. You Should Purchase Shares Only
If You Can Afford a Complete Loss. See "Risk Factors" Beginning on Page 7.
______________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
______________________
This prospectus is dated _______ __, 2002
Table of Contents
Page
Summary....................................................................3
Risk Factors...............................................................7
Use of Proceeds...........................................................22
Material Changes..........................................................22
Plan of Distribution......................................................24
Selling Stockholders......................................................30
Security Ownership of Certain Beneficial Owners and Management............41
Interests of Named Experts and Counsel....................................44
Incorporation of Certain Information by Reference.........................44
Summary
Beause the following is a summary, it does not contain all of the
information that may be important to you as a prospective purchaser of shares of
our common stock from a selling stockholder. You should read this entire
prospectus carefully, including the risk factors beginning on page 7 of this
prospectus, and the periodic reports filed by us pursuant to the Securities
Exchange Act of 1934 before you decide to purchase a share of our common stock.
You may find a list of our current periodic reports under the caption
"Incorporation of Certain Information by Reference" in this prospectus.
Key Questions and Answers.
1. Who are we?
We, LifePoint, Inc., are a Delaware corporation, with our corporate
office and manufacturing plant at 1205 South Dupont Street, Ontario, California
91761. Our research and development facility is located at 10400 Trademark
Street, Rancho Cucamonga, California 91730. Our telephone number is (909)
418-3000. You should make inquiries relating to this prospectus to Michele A.
Clark, our Chief Accounting Officer, by writing to her at our Ontario,
California address or by calling her at (909) 418-3000.
2. What business are we in?
We have developed, are manufacturing and, since February 26, 2002, have
been marketing a saliva-based, on-site diagnostic test system that initially
tests simultaneously for drugs of abuse and alcohol. We have identified 11
markets for our initial products. However, our initial focus is:
o law enforcement/criminal justice for testing of drivers and suspects
and for use in drug courts and in probation and parole hearings,
o the industrial workplace for pre-employment and employee testing and
o for emergency medical diagnostic applications.
Our first product uses technology licensed to us from the United States
Navy and our own patented technologies. Our initial product, the LifePoint "R"
IMPACT "R" Test System, uses a person's saliva to test on-site for the presence
of alcohol and drugs of abuse, such as cocaine, heroin and marijuana. Our
proprietary system consists of a small instrument with integrated software to
automatically collect and process the sample, test the sample and generate
hardcopy test results. It requires a fully contained disposable saliva test
module that consists of a mouthpiece for collecting the sample, connected to a
test cassette that serves as an automatic sample collection device, sample
processing and reaction/read chamber for up to ten different test analyses. Our
initial target market was first law enforcement and our subsequent initial
target markets are, or will be, the medical emergency room and the industrial
workplace.
On February 26, 2002, we formally launched marketing of our first product
in the United States to the law enforcement market. We subsequently commenced
marketing, through distributors, to the law enforcement and medical markets in
certain Western European countries and certain Asian countries. Our marketing
launch to the industrial market in these countries and to all three markets in
other countries will follow as we engage distributors for such purpose. We
intend to begin marketing to the medical market in the United States no soon
than the fourth quarter of 2002 assuming that we have obtained FDA 510(k)
approval. The timing for our marketing launch to the industrial market in the
United States, as indicated elsewhere in this prospectus, will be dependent on
whether FDA approval is required. As indicated elsewhere in this prospectus, we
cannot assure you that we will meet any and all of these deadlines to launch
marketing of our initial product in other markets.
In later years, we plan that, as our research and development efforts
continue, we will make our non-invasive on-site diagnostic device available for
other uses. Potential uses include long-term therapeutic drug monitoring, rapid
diagnostic testing, disease-state testing and wellness/health screening.
3. What is our record of revenues and earnings?
We had our first revenues of $22,910 in December 2001 and revenues of
$113,070 in the quarter ended March 31, 2002. We had no revenues prior to
December 2001 because we had not offered for sale any product or services.
Through March 31, 2002, we incurred net losses of $38,079,589. We anticipate
that our operational losses will continue for at least five additional quarters,
if not longer, after March 31, 2002.
4. Do we need any governmental approvals to begin marketing?
For us to market our testing device to hospitals and other medical
facilities in the United States, we must first obtain clearance from the United
States Food and Drug Administration (the "FDA"). We have begun the submission
process with the FDA. We will ultimately apply for at least nine separate FDA
clearances within the next 90 days. Our submissions will include an additional
drugs test we have developed. Based on the current average experiences of other
companies as tracked by an industry group, we expect to get such clearance
approximately 100 days later. However, we could be delayed in completing our
submissions. In addition, the FDA may not clear the product when submitted. In
addition, even if this agency clears our product, we may receive this clearance
later than we anticipate.
Based on the FDA's regulations proposed in November 2000, we may also
require FDA approval to sell to the industrial market in the United States.
Several industry groups are currently attempting to dissuade the FDA from
finalizing this policy. However, we are simultaneously collecting clinical data
in the event that we have to make an application to the FDA for clearance at the
same time as we make our application for medical use as described in the
preceding paragraph.
We did not require any governmental approvals to market the IMPACT Test
System to law enforcement agencies in the United States.
For our entry into the three initial target markets in Canada, the
Western European countries and certain Asian and Pacific Rim countries, we did
not require any pre-entry approval from a governmental agency similar to that
which we must obtain from the FDA in the United States as described above. There
are, however, certain certifications which we must obtain to market successfully
in these countries outside the United States. We have initiated our applications
to obtain CSA (Canada) and CE Mark (Europe) certifications for these countries,
as we have for U.L. certification in the United States. We have also implemented
actions at our manufacturing plant to follow Quality System Regulation as
prescribed by the FDA (for the United States medical markets only) and ISO
certification for European sales. We are of the opinion that the obtaining of
the certifications described in this paragraph will not delay our marketing in
our initial target markets in these countries outside the United States.
5. What securities are we offering pursuant to this prospectus?
We are not offering any securities pursuant to this prospectus. Various
holders of shares of our common stock and/or warrants to purchase shares of our
common stock will offer, pursuant to this prospectus, these outstanding shares
and, if they exercise their respective warrants, the underlying shares of our
common stock. All of these persons or entities (including certain transferees)
will be referred to in this prospectus as the "selling stockholders". They are
named in the list beginning on page 31 of this prospectus. The selling
stockholders using this prospectus also will include pledgees, donees,
transferees or other successors-in-interest of the persons or entities named in
that list.
The selling stockholders will offer, as of the date of this prospectus:
o 2,720,000 shares of our common stock which we sold in April 2002 to
investors as part of units in our seventh private placement pursuant
to Regulation D under the Securities Act of 1933.
o 544,000 shares when and if the warrants we sold to the investors as
part of the units are exercised.
o 326,400 shares when and if the warrants we issued to the investors as
compensatory warrants are exercised.
o 210,500 shares when and if the warrants we issued in partial payment
of a placement agent's fee for the April 2002 private placement are
exercised by the placement agent, its transferees and another entity.
o 2,110,784 shares when and if the other warrants we had issued during
the past five years not in connection with the April 2002 private
placement are exercised and 27,960 shares which we issued upon four
exercises, and a partial exercise of a fifth, of these warrants.
The selling stockholders may, as an alternative to their offering
pursuant to this prospectus, seek to sell the aggregate of 5,939,644 shares of
our common stock, when permissible, pursuant to the exemption of Rule 144 under
the Securities Act of 1933. As the notes to the table beginning on page 36 of
this prospectus indicate, certain of the selling stockholders beneficially own
other shares of our common stock which are not being offered pursuant to this
prospectus.
6. What is the offering price pursuant to this prospectus?
The selling stockholders have advised us that they will sell, from time
to time, the shares of our common stock at the prices quoted for our common
stock on the American Stock Exchange, in the third market, in isolated
transactions, or in a combination of such methods of sale. They may sell their
shares at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to prevailing market prices, or at negotiated
prices with institutional or other investors. Our common stock is currently
listed on the American Stock Exchange under the symbol: LFP. On July 17, 2002,
the closing sales price as so reported was $2.22 per share. The selling
stockholders have also advised us that they may sell their shares, when
permissible, pursuant to the exemption of Rule 144 under the Securities Act of
1933. There will be no underwriter's discounts or commissions, except for the
charges to selling stockholder if he, she or it sells through his, her or its
broker-dealer.
7. Will we receive any proceeds as a result of sales of shares pursuant to
this prospectus?
We will not receive any proceeds from the sales of shares of our common
stock by the selling stockholders pursuant to this prospectus. We may, however,
receive $9,621,315 if all of the outstanding warrants we issued to the selling
stockholders are exercised. These warrants enable the holders to purchase an
aggregate of 3,191,684 shares of our common stock. We cannot be certain as to
when and if all of these warrants will be exercised. Nor can we be certain as to
the amount of proceeds we will actually receive from exercises. Estimates are
especially difficult because of provisions in warrants to purchase an aggregate
of 210,500 shares of our common stock which permit the holders to exercise on a
"cashless basis". In a cashless exercise the holder is entitled to receive
shares of our common stock having a market value equal to the net exercise value
of the portion of the warrant being exercised. The holder makes no cash payment
to exercise the warrant. The warrants specify the manner of calculating the
number of shares of our common stock issuable in a "cashless" exercise.
Risk Factors
Before you invest in our common stock by purchasing shares from a selling
stockholder named in this prospectus, you should be aware that there are various
risks. We have described below all of the risks which we deem material to your
investment decision. A list of the named selling stockholders may be found in
this prospectus in the table beginning on page 31. You should consider carefully
these risk factors, together with all of the other information included in this
prospectus and in the periodic reports we have filed under the Securities
Exchange Act of 1934, before you decide to purchase any shares of our common
stock. For information as to how you may receive copies of our periodic reports,
we direct your attention to the section captioned "Incorporation of Certain
Information by Reference" in this prospectus.
Some of the information in this prospectus may contain forward-looking
statements. These statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward looking" information. When considering these forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. These forward-looking statements could involve
known and unknown risks, uncertainties and other factors that might materially
alter the actual results suggested by the statements. In other words, our
performance might be quite different from what the forward-looking statements
imply.
The following risk factors relate to our operations:
We expect our operational losses to continue for probably at least another five
quarters after March 31, 2002.
From the date we incorporated on October 8, 1992 through March 31, 2002,
we have incurred net losses of $38,079,589. These losses were due to the fact we
had no product or service to offer for sale or rental.
On February 26, 2002, we formally launched marketing of our IMPACT Test
System, our first product, to law enforcement agencies that was one of our three
initial worldwide target markets. There was no governmental approval required as
a prerequisite for us to market to these potential users of our product.
However, as we subsequently indicate in the twelfth section under this caption
"Risk Factors," there are certain legal challenges that we must overcome to make
our product fully acceptable in this market.
For us to market our product in the United States to hospitals and other
medical facilities (especially to medical emergency rooms which are another of
our three initial worldwide target markets), we must first obtain clearance from
the Food and Drug Administration for our product. We have begun the submission
process with the FDA. We will ultimately have applied for at least nine separate
FDA clearances within the next 90 days. Our submissions will include one
additional drugs test over the six we have initially developed. We currently
expect to obtain FDA clearance approximately 100 days after completion of our
each submission.
Our other initial target market will be industrial companies that
currently test employees for drugs and alcohol. In November 2000, the FDA
announced its intention to regulate drugs of abuse screening tests used in the
home, work place, insurance and sports settings. Should the FDA adopt such
regulations, despite our efforts and those of others to dissuade the FDA from
doing so, such regulations would delay the start of our marketing to the
industrial market in the United States until we comply. However, in anticipation
of such adoption, we have been collecting the field data which we believe, from
our discussions with the FDA, this agency would require to approve our entry
into the industrial market in the United States. We would seek this clearance
from the FDA simultaneously with our seeking its approval of use of our product
for medical purposes. In addition, we have commenced efforts to market our
product to law enforcement agencies and medical users in Europe prior to
obtaining FDA approval for use in the United States. This program could offset
any loss in early revenues due to the delay, if it occurs, in our marketing to
the industrial market in the United States.
We may not meet the schedule described in the preceding two paragraphs,
both as to our additional market launches and making our submissions to the FDA.
In addition, the FDA or a foreign government may not grant clearance for the
sale of our product for routine screening and/or diagnostic operations.
Furthermore, the clearance process may take longer than we project. Even if we
do meet our schedule and although we have begun to generate revenues, we
anticipate that we shall turn profitable not sooner than five quarters after
March 31, 2002. We can estimate, but we cannot assure you, as to when our
expected revenues will exceed expenses.
Our transition to an operational company may strain our managerial, operational
and financial resources.
We expect to encounter the risks and difficulties frequently encountered
by companies that have recently made a transition from research and development
activities to commercial production and marketing. We have set forth below
certain of these risks and difficulties under this caption "Risk Factors." As an
example, our transition from a development stage company to a commercial company
may strain our managerial, operational and financial resources. If our product
achieves market acceptance, then we will need to increase the number of our
employees, significantly increase our manufacturing capability and enhance our
operating systems and practices. We cannot assure you that we will be able to
effectively do so or otherwise manage our future growth.
We may have a need for additional financing to continue or expand our business.
We believe that, with
o the net proceeds from our private placement in June and September 2001
of $12,528,105,
o the marketing fees and sales proceeds forecasted to be paid as
described in the succeeding paragraph,
o the proceeds from standard commercial banking lines of credit and/or
commercial equipment leasing lines which we are currently negotiating,
and
o the $9,554,062 in net proceeds received from the sale in April 2002 of
272 units, each unit consisting of 10,000 shares of our common stock
and a common stock purchase warrant to purchase 2,000 shares of our
common stock,
we shall have sufficient funds to complete our field trials and pilot studies
necessary for our submission to the FDA, manufacture and market our product and
reach profitability. We expect to achieve profitability not sooner than five
quarters after March 31, 2002. There can be no assurance that our estimate as to
costs and timing will be correct. In addition, we may not be able to consummate
standard commercial banking lines of credit and/or commercial equipment leasing
lines on an acceptable and timely basis. Furthermore, if there are any delays in
our obtaining FDA approval, or if there is a reduced rate of growth in our
revenues from those we anticipate, we may require additional funding. In
addition, if orders for our product come in faster than we anticipated, we could
require additional financing to expand our manufacturing, sales and other
capabilities. Our inability to meet any such increased demand could result in
the cancellation of orders and thus delay the attainment of profitability.
We have entered into a strategic partnering agreement with CMI, Inc. to
distribute our products exclusively to the law enforcement market in the United
States and Canada. We can give you no assurance, however, that CMI will produce
payments to us initially forecasted by CMI of $5,000,000 during the first two
and one-half years of the agreement.
In addition, competitive conditions in our industry may make us less
attractive to potential investors. For additional information on our potential
competition, we recommend that you read the third succeeding section under this
caption "Risk Factors."
Because of all the uncertainties described in the preceding paragraphs of
this section, we may have to seek additional financing as an alternative against
the possibility that one or more of the anticipated sources of funds is or are
not obtained or that we obtain orders slower or faster than anticipated.
We recognize that, unless we obtain all of the funds described above or,
in the alternative, secure additional financing, we cannot bridge the gap
between the commencement of marketing and when, if ever, we begin to operate on
a profitable basis. Unless we obtain such funds and, to the extent required, the
additional financing and achieve profitability, your investment in our company
may become a complete loss. We can give you no assurance as to our obtaining the
anticipated funds, achieving additional financing or attaining profitability.
Potential additional financings will further dilute our existing stockholders.
Since October 1997 when we obtained our independence from our former
parent, we have consummated seven private placements to finance our operations.
As a result, we have issued, or will issue (when and if shares of our preferred
stock are converted and warrants are exercised), an aggregate of 40,337,263
shares of our common stock related to these private placements. Such issuances
do not give effect to any shares we may issue in the future in redemption of
premium with respect to our outstanding shares of our Series C preferred stock
or as compensatory payments. The 40,337,263 shares may represent a 553% increase
from the 7,297,206 shares of our common stock outstanding since our initial
public offering in October 1993. Any further issuances due to additional equity
financings will further dilute our existing stockholders.
Unexpected problems as to how our product functions can delay our receipt of
revenues and ultimately our attaining profitability.
We experienced delays in launching our product because of unanticipated
performance problems that had arisen first in our own testing in our research
and development facility and later at beta sites. We had made a commitment to
ourselves and to our stockholders and prospective customers not to release our
product for sale until we were confident that our product met or exceeded our
customer's expectations. In many markets, we shall get only one chance with a
customer. If a customer's initial experience with a product is not good, it is
very difficult to go back a second time. Accordingly, when a product performance
problem surfaced, we had no choice except to delay the release. We also had to
delay completion of the field testing necessary to furnish us with the data for
our FDA submission. Accordingly, we had to delay our FDA submission.
By delaying the time of our product launch, these product problems
delayed our receipt of revenues. They also increased our need for additional
financing. We direct your attention to the second preceding section under this
caption "Risk Factors" for our discussion of how a further delay in our
obtaining revenues will increase our need for additional financing. And with the
delay in our receiving revenues, our opportunity to achieve profitability was
delayed even longer.
Some examples of our past problems and the delays which they caused us
are as follows:
o In February of 2001 we ascertained that certain materials in our
plastic molded parts were not compatible. As a result of the
cooperation of our mold design contractor and our dedicated
engineering group, we redesigned these combinations. However, to do so
caused a six-week slip in our timeline. We reported this problem and
the expected delay to our stockholders by letter in March 2001.
o In April of 2001 we ascertained, during field tests, a problem with
how the mouthpiece collected saliva. We had to halt these field
evaluations until we could ascertain the cause. We quickly found that
our supplier had made, without our knowledge, a change in the
materials used in the production of the mouthpiece tips. We developed
three alternative approaches. One of these required some re-design of
the mouthpiece molds. This work took several weeks to implement and
then we first had to validate the results. As we anticipated to our
stockholders by letter in May of 2001, this caused a delay of six
weeks before we could then start field evaluations again. However,
thanks to the significant efforts of our development team, the
cooperation of our outside vendors and the help of our clinical
investigators, we quickly diagnosed the problem and implemented a
solution.
o In September of 2001, we had collected enough final test data to
indicate that we had to make additional engineering modifications to
the final product design. These modifications forced us to delay our
intended product launch from the end of September to the end of the
year. We reported this to our stockholders by letter in October of
2001. If the resolution was to be limited to only a simple engineering
redesign, then we would have been delayed for only a few weeks to a
month at most. Unfortunately, the engineering redesign did not
completely resolve the problem. We had to add several changes to our
plastic molds. Keep in mind that even a minor mold change can take
several months to design, implement, test and validate. We then tested
products made from these modified molds. We reported this to our
stockholders by letter in January 2002. Our efforts were successful
and we formally launched marketing of our product on February 26,
2002.
In early July 2001, after receiving almost $11,000,000 of the $13,000,000
we ultimately received from our sixth private placement, we reported our belief
that, as a result of these proceeds, together with the forecasted product
revenues from CMI, we would have sufficient funds to enable us to reach
profitability. However, at the time we made that projection, we still expected
to launch our product at the end of September 2001. As we indicate in the
reporting of the last delay above, the actual launch was delayed until the end
of February 2002. As a result, we "lost" five months of sales we initially
anticipated. In addition, at the end of February 2002, instead of having had
five months of operations as we initially anticipated, so that we could
reasonably project that our sales would be accelerating after five months of
marketing, we were just beginning to market.
In mid-February 2002, after receiving in September 2001 the additional
$2,000,000 from the sixth private placement and expecting to receive proceeds
from commercial bank lines or equipment lease financing, we reiterated our
belief that we had sufficient funds to enable us to reach profitability.
Both in July 2001 and February 2002, we stated that any additional delays
in our obtaining revenues may require us to seek additional financing. In April
2002, rather than take a chance on the uncertainties described in the second
preceding risk factor and above, we obtained an additional $9,554,062 in net
proceeds from our seventh private placement.
Should any problem with respect to the performance of our product develop
in the future, we could be delayed, not only from receiving revenues from the
markets in which we were then marketing, but in our schedule to market our
product into additional markets. This could also require us to seek additional
financing.
Your attention is also directed to the possible delays at the FDA
described in the fourth preceding section under this caption "Risk Factors."
We face competition from new and existing diagnostic test systems.
We have begun to compete with many companies of varying size that already
exist or may be founded in the future. Substantially all of their current tests
available either use urine or
blood samples as a specimen to test for drugs of abuse or use breath,
saliva, or blood samples to test for alcohol.
We face competition from Avitar, Inc., OraSure Technologies, Inc.,
AnsSys, Inc. and Cozart Bioscience, Ltd. Each of these companies is marketing,
or will soon be marketing, an on-site drug screening, qualitative (yes/no) test
using saliva as the specimen. Each uses a lateral flow membrane system to test
for drugs of abuse. Such systems, which are similar to home pregnancy tests,
allow a specimen to flow across a treated test strip (membrane) and produce a
test result on a portion of the test strip. This type of test gives results in
under 30 minutes. We believe that the limitations of the technologies used by
these four companies will negatively impact their ability to sell into our
target markets. We believe that none of their products, as currently available,
will be evidentiary in the law enforcement and industrial markets because each
such product is not quantitative and some are non-instrumented. Non-instrumented
test results are subject to user interpretation. In addition, the results cannot
be stored for later use in court. Accordingly, several of these tests lack the
hard, objective data required for defense in court. In medical emergency
markets, we believe that their products will not provide the needed quantitative
results. Additionally, we believe that the type of on-site technology used by
these four companies is less sensitive than the instrumented flow immunosensor
technology we have developed and not sensitive enough to detect certain drugs at
levels that are found in saliva. (Flow immunosensor technology is a process by
which a specimen flows through a micro-column device containing the test
reagent, a reaction occurs and, as a result of the immunoassay reaction, the
molecules to be tested in the sample solution cause a signal which is read by a
sensor.) Lastly, none of these products can simultaneously test for drugs of
abuse and alcohol. We, accordingly, believe that our product is superior to the
products these four companies are currently marketing, or will soon be
marketing. However, we could be incorrect in our assessment of their products.
In addition, even if we are correct in our assessment, one or more of these
companies could attempt to modify its product to meet our criticisms. In either
of these events, one or more of these products could significantly impact our
ability to sell our product.
In addition, we recognize that other products performing on-site testing
for drugs in blood or saliva may be developed and introduced into the market in
the future.
We also face as competitors BioSite Diagnostics Inc., Syva Company (a
division of Dade International Inc.), Roche Diagnostics (a division of Hoffman
La Roche, Inc.) and at least five other major pharmaceutical companies. All of
these competitors currently use urine as the specimen for on-site drug testing.
Almost all of these prospective competitors have substantially greater financial
resources than we have to develop and market their products.
With respect to breath testing for the presence of alcohol, we will
compete with CMI, Inc., Intoximeters, Inc., Draeger Safety, Inc., and other
small manufacturers.
Furthermore, because of the time frame it has taken for us to bring our
product to market, our competition may have developed name recognition among
customers that will handicap our future marketing efforts.
Although our first product using saliva has certain advantages over urine
testing, our first product may not be as attractive in the pre-employment
testing portion of the industrial workplace as is urine testing.
Our marketing analysis has indicated a greater market potential for a
saliva sample portable testing instrument for drugs of abuse by law enforcement
agencies, occupational health clinics, hospitals and other medical facilities
than for a urine sample instrument. That is because our initial product is
intended to test whether the person is currently under the influence of drugs of
abuse or alcohol. In addition, saliva collection is observable by the person
administering the test, unlike urine testing. Accordingly, the use of saliva has
been shown to eliminate the recent problems due to alteration and substitution
of urine specimen testing for drugs. Depending on the substance being used,
differences in the individual being tested and dose and time differences,
"currently" in our product indicates drug use from minutes after the drug was
taken to 18 to 24 hours after drug use.
Urine testing, on the other hand, provides information on drug use from
about six to eight hours after the drug was taken to between two to five days
post drug use. For pre-employment testing, employers have historically wanted
the longer window of detection provided by urine testing, or even hair testing.
Accordingly, the current results of the IMPACT System may not be as attractive
to employers for use in pre-employment testing. Our current product may, thus,
have limited appeal for such use.
Our failure to comply with the substantial governmental regulation to which we
are subject may adversely affect our business.
We have already directed your attention to the fact that we cannot market
our saliva based testing device to hospitals and other medical facilities in the
United States unless we have FDA approval. We have also pointed out the proposed
FDA regulations relating to marketing to the industrial market in the United
States. Your attention is directed to the section entitled "We expect our
operational losses to continue for probably at least another five quarters after
March 31, 2002" under this caption "Risk Factors."
In addition, the United States Department of Health and Human Services on
February 28, 1992 issued regulations intended to implement the Clinical
Laboratory Improvement Amendments of 1988. These Amendments are commonly
referred to as CLIA. These regulations were to become effective September 1,
1992. The proposed regulations would require that all test sites performing
workplace drug testing, including on-site testing, follow CLIA guidelines for
operator training and quality control, similar to those used by laboratories. On
August 28, 1992, the Department announced that the application of the statute to
workplace testing would not go into effect on September 1, 1992 because of
comments made on the final regulations. If the regulations are not adopted,
on-site drug testing in the workplace will continue to be exempt from the
statute. Recently, the Department again confirmed its intention not to adopt the
CLIA regulations in the workplace. However, if the regulations are adopted,
workplace testing would then be subject to the same requirements as currently
required for on-site testing in the medical markets. We are in the process of
completing studies that we believe will produce data that demonstrates that our
product provides the same results when used by technical personnel as it does
when used by non-technical personnel. If we demonstrate in our FDA submission
that our product delivers similar accuracy from these two user groups, this
description should exempt the IMPACT Test System from CLIA regulation in the
medical market and, if the statute is ever applied, in the workplace market. If
we cannot obtain a waiver from CLIA, the costs of running the IMPACT Test System
could be higher for our potential customers. We cannot give you any assurance
that the Department of Health and Human Services or the FDA will agree to waive
the IMPACT Test System from CLIA regulation.
We do not believe that federal, state and local provisions which have
been enacted or adopted regulating the discharge of material into the
environment, or otherwise relating to the protection of the environment, will
have any material effect upon our capital expenditures, potential earnings and
our competitive position.
We may not be able to expand our manufacturing operations adequately or as
quickly as required to meet expected orders.
We first began our manufacturing process in January 2001. We have
completed the pilot or initial stage of manufacturing with respect to both the
instrument and the saliva test modules. We have initiated the process scale-up
and the automation phase of saliva test module manufacturing. We anticipate that
it could take up to six months from July 2002 to complete the full automation of
the saliva test modules. However, we have not as yet made any significant
deliveries of our product. Accordingly, we have not as yet demonstrated the
ability to manufacture our product at the capacity necessary to support our
expected commercial sales. In addition, we may not be able to manufacture cost
effectively on a large scale.
We expect to conduct all manufacturing of the disposable cassettes at our
own facility. In addition, we intend to continue to assemble the instrument for
at least another four to six months or more. If our facility or the equipment in
our facility is significantly damaged or destroyed, we may not be able to
quickly restore manufacturing capacity. We have engaged an OEM supplier to final
assemble the instrument in conjunction with our own in-house assembly. Our
current timetable for transfer of some of the final assembly is during the
quarter ending December 31, 2002. We could, accordingly, turn over instrument
assembly to a number of qualified OEM instrument assembly suppliers in the event
of such problems at our facility. We can use another manufacturer for the final
assembly of our instrument because the subassemblies and other components are
furnished by other suppliers. Accordingly, any capable electronics manufacturer
would have the capability to produce this type of equipment. We have identified
several potential electronic manufacturers as potential alternatives to our
initial OEM supplier should we so require. However, the cassette is a
proprietary device developed by us and, accordingly we are not currently aware
of any alternative manufacturer for the cassette.
We devoted a significant portion of our capital budget for the fiscal
year ended March 31, 2002 to reduce our cost of goods for the disposable
cassette and automating our manufacturing facility in an effort to continue to
lower our initial manufacturing costs. We are optimistic as to the results of
these efforts. Nevertheless, we cannot assure you that these efforts will result
in the manufacturing cost savings we anticipate and when these savings, if
obtained, will be reflected in our financial statements.
Our dependence on third-party suppliers for critical supplies may impact our
operational results.
We are initially only performing the final assembly of the instrument.
Many critical sub-assemblies are being manufactured by OEM suppliers. Our
dependence on third parties for the manufacture and supply of instrument and
cassette product components could have a material adverse effect on our profit
margins and our ability to deliver our products on a timely and competitive
basis if these third parties were to terminate production of the components,
fail to comply with FDA regulation or be subject to unforeseen adverse results.
To offset any adverse impact as a result of a default by any such supplier, we
have purchased a one-year supply of all critical materials. In addition, we have
identified one or more second sources for each current supplier. Accordingly, we
do not anticipate that our manufacturing process will be negatively impacted by
the loss of any one supplier. In addition, we rely on standing purchase orders
and master purchase agreements with our vendors. Accordingly, we do not
anticipate losing any time because of protracted contractual negotiations. One
risk, however, is that until the second source begins manufacturing at an
acceptable rate, there could be a short delay in our meeting our delivery
schedule to customers.
Our dependence on CMI, our strategic partner to market to the law enforcement
market, may adversely affect our initial marketing efforts if CMI does not sell
in the quantities anticipated.
As already indicated, our initial target market in the United States was
the law enforcement market. On June 4, 2001, we entered into an exclusive
three-year, renewable, distributorship agreement with CMI, Inc. to distribute
the IMPACT Test System to the law enforcement markets in the United States and
Canada. We selected CMI because, to our knowledge, it is a marketing and
manufacturing leader for evidentiary breath alcohol testing instruments in law
enforcement in this country. Nevertheless, CMI may not be able to sell the
quantities of IMPACT Test Systems of which we believe that CMI is capable. In
such event, we would be required to seek another distributor or increase our own
internal selling staff. We can give you no assurance as to how quickly or
successfully these alternative methods of product distribution will be
implemented. Another risk to us is, of course, that, if MPD Inc., CMI's parent
corporation, became bankrupt or had similar financial problems, this would
prevent CMI from paying fees or making purchases. Otherwise we believe that,
based on its initial forecasts, CMI will pay us approximately $5,000,000 during
the first two and one-half years of the agreement. We can give you no assurance,
however, that CMI will make sales as it initially forecasted and, accordingly,
make significant payments to us. Even if CMI were to pay us the contractual
minimum amounts to maintain its exclusive marketing rights, such payments would
be materially less than the forecasted amount of $5,000,000. For us to realize
such forecasted amount from CMI, CMI would have to sell, on the average, at
least 15 IMPACT Test Systems per month during the two-and-one-half-year period.
As of June 30, 2002, we had received no payments from CMI.
The three-year term did not begin until general marketing of our IMPACT
Test System began on February 26, 2002. We note that CMI will benefit from
volume discounts and, therefore, our margins on products purchased by CMI may
decrease over the term of the contract. In addition, CMI has guaranteed pricing
on the instruments, which may result in much lower margins once we transfer the
instrument production to an outside vendor. Our agreement with CMI is
automatically renewable unless CMI or we give notice to the other 180 days prior
to the end of the initial term.
Another risk is that CMI may terminate the distribution agreement. CMI
has the option to terminate the distribution agreement with us:
o if we fail to supply at least 50% of CMI's orders for our product
continuously over any three-consecutive-month period immediately
preceding CMI's notice of default to us;
o if any information which we furnish to CMI is found to be materially
false or fraudulent;
o if we materially breach the agreement and fail to cure such breach
within ten days after CMI's notice to us; or
o if we file a petition in bankruptcy or a petition is filed against us
and not dismissed in 60 days, we make an assignment for the benefit of
our creditors, or we are insolvent and a receiver is appointed for us.
Legal precedent has not yet been established for upholding the results of
LifePoint's diagnostic test system.
The legal precedents for performing drug and alcohol testing in both law
enforcement and the industrial workplace have been well established. Blood and
urine testing are the currently accepted standard samples for drugs. Blood,
breath and saliva are the currently accepted standard samples for alcohol.
However, several saliva-based drug tests are beginning to be used. We believe
that our product meets the Daubert and Frye standards for admission as
scientific evidence in court. These two standards have been adopted in all 50
states. These standards require acceptance of our product or technology by
members of the scientific community and proven performance equal to currently
used methods. We anticipate that the papers we have presented over this past
year and the papers that we will publish from our field evaluations currently
being completed will enable us to meet this requirement prior to the first legal
challenge to our product. However, we cannot assure you that our technology will
be accepted. Until our product is challenged in court, legal precedence will not
have occurred.
The desire to use saliva for drug testing in the workplace market is very
strong. As an example, SAMHSA, the federal agency that regulates drug testing on
federal safety-sensitive workers, has indicated that it is in the process of
adding saliva to the menu of applicable technologies for drug testing of federal
safety sensitive personnel. There are few state laws limiting the use of saliva
for workplace testing. Currently, saliva or other bodily substances testing of
employees for drugs is permitted in all states but Maryland.
State laws are being revised on an ongoing basis to allow law enforcement
officers to use saliva as a specimen for testing for drivers under the influence
of drugs or alcohol. Currently, saliva and other bodily substance testing for
DUI testing with consent is permitted in all states. However, such testing will
be subject to a variety of factors. Saliva or other bodily substances for DUI
testing for drugs or alcohol is specifically permitted in 24 states. Additional
efforts will be needed to change the laws in states which have not adopted
saliva as a test specimen. We believe this change will occur because law
enforcement officials are anxious to have a non-invasive test method for drug
testing and are willing to support legislation. We are currently working on
draft legislation for this joint effort. Nevertheless, we cannot assure you as
to when and if this legislation will be adopted in the other states.
Lastly, the National Highway and Traffic Safety Administration must
approve alcohol test products for Department of Transportation use, either as a
screening method or an evidentiary method. We believe that our product meets the
requirements of an evidentiary product. Nevertheless, because we have not yet
submitted our product for approval, we cannot guarantee acceptance by this
governmental agency.
We are dependent on use of an exclusive license from the United States Navy
for our product.
Pursuant to a license agreement with the United States Navy, we have the
exclusive right to use the Navy's technology with respect to all possible
diagnostic uses for saliva and for drug testing for urine. We have further
developed the Navy-developed technology for application in our own proprietary
test system. Termination of the license for the Navy patent would end our right
to develop products under the patent. Termination would require us to make
changes in our products that would delay the marketing thereof.
The Navy has the right to terminate the license if we:
o file bankruptcy or are forced into receivership,
o commit a material breach of the agreement,
o willfully misstate or omit material information in our reports to the
Navy or
o fail to market the technology.
We believe that so long as we continue to market our IMPACT Test System
in the manner which we intend, pay to the Navy at least the annual minimum
royalty and are accurate in our reports, we should continue to be able to use
the Navy patent. We believe that the risk of termination while we are still a
"going business" is remote, but the risk is there.
Our efforts to legally protect our product may not be successful.
We will be dependent on our patents and trade secret law to legally
protect the uniqueness of our testing product. However, if we institute legal
action against those companies that we believe may have improperly used our
technology, we may find ourselves in long and costly litigation. This result
would increase our costs of operations and thus adversely affect our results of
operations.
In addition, should it be successfully claimed that we have infringed on
the technology of another company, we may not be able to obtain permission to
use those rights on commercially reasonable terms. In any event, payment of a
royalty or licensing fee to any such company would also add to our costs of
operations and thereby adversely affect our results of operations.
We may be sued for product liability resulting from the use of our diagnostic
product.
We may be held liable if our IMPACT Test System causes injury of any
type. We have obtained product liability insurance to cover this potential
liability. We believe that the amount of our current coverage is adequate for
the potential risks in these areas. However, assuming a judgment is obtained
against us, our insurance may not cover the potential liabilities. Our policy
limits may be exceeded. If we are required at a later date to increase the
coverage, we may obtain the desired coverage, but only at a higher cost.
We may not be able to operate successfully our business if we lose key personnel
or fail to attract skilled personnel.
We believe that our success in the future will depend on the continued
services of our senior management team and other personnel, as well as our
ability to attract and retain skilled personnel. The loss of any of our senior
management team or other key employees, or our failure to attract and retain the
necessary scientific, manufacturing, sales and marketing personnel could have a
material adverse effect on our business, results of operations and financial
condition.
We may not be able to establish sales and marketing capabilities necessary to
exploit what we believe is a great potential for our product.
We are currently in the process of building up our marketing and sales
capabilities. In addition, we have engaged a strategic partner to sell our
product in the law enforcement market, one of our three initial target markets.
However, we may not be able to add the additional marketing and sales personnel
we require. We also may not obtain the distribution capabilities we require in
foreign markets. Finally, even if we have the personnel and the strategic
partners and distributors, we cannot be certain as to how quickly, if at all,
the different marketplaces will accept our product.
Our increasing efforts to market our product outside the United States may be
affected by regulatory, cultural or other restraints.
Now that we have held our market launch of our IMPACT Test System in the
United States, we have commenced efforts to market our product through
distributors in other countries, starting with certain of the Western European
and Asian countries.
In addition to economic and political issues, we may encounter a number
of factors that can slow or impede our international sales, or substantially
increase the costs of international sales, including the following:
o We do not believe that our compliance with the current regulations for
marketing our product in European countries will be a problem.
However, new regulations (including custom regulations) can be adopted
by these countries which may slow, limit or prevent our marketing our
product. In addition, other countries in which we attempt, through
distributors, to market our product may require compliance with
regulations different from those of the Western European market.
o Cultural and political differences may make it difficult to
effectively obtain market acceptances in particular countries.
o Although our distribution agreements provide for payment in U.S.
dollars, exchange rates, currency fluctuations, tariffs and other
barriers and extended payment terms could effect our distributors'
ability to sell our product and, accordingly, impact our revenues.
o Although we made an effort to satisfy ourselves as to the
credit-worthiness of our distributors, the credit-worthiness of the
foreign entities to which they sell may be less certain and their
accounts receivable collections may be more difficult.
One plaintiff seeks significant damages in litigation against us.
As we previously reported in our Annual Report on Form 10-K for the
fiscal year ended March 31, 2001, Global Consultants, LLC d/b/a Global Capital
instituted an action on June 18, 2001 in a California state court against our
company and Linda H. Masterson, our Chairman, President and Chief Executive
Officer. The plaintiff seeks damages aggregating $4,500,000 for the non-issuance
and termination of common stock purchase warrants for an aggregate of 392,275
shares of our common stock. The plaintiff's computation of damages is based on
the market price of our common stock on one day reaching $8.00 per share and on
an excessive and unsupportable number of shares subject to the warrants. The
plaintiff's second amended complaint does not allege the previously alleged
claims relating to fraud, negligence and accounting and for punitive or
exemplary damages. We believe that the plaintiff's remaining causes of action
for breach of contract, conversion and violation of a California statute are
without merit. Our trial counsel, the law firm of Rosenfeld, Meyer & Susman,
LLP, is of the opinion that the probability of any recovery by the plaintiff of
damages in excess of 10 percent of our current assets (i.e., current assets of
$4,651,057 as of March 31, 2002) is remote. We are of the further opinion that,
even if the plaintiff were able to overcome all of our affirmative defenses and
the allegations of our counterclaims, which we doubt, its maximum provable
damages are less than a third of that amount. However, unanticipated results in
litigation are always possible should this proceeding proceed to trial.
The following risk factors relate to our common stock:
Future sales may adversely affect the market price of our common stock.
Of the 35,626,090 shares of our common stock outstanding on June 30,
2002, the holders could sell all but an aggregate of 3,439,254 shares. Of these
3,439,254 shares, we sold 2,720,000 shares in April 2002 in our seventh private
placement; we issued 527,960 shares in various months in 2002 upon the exercises
of warrants; and we issued 191,294 shares in May 2002 as compensatory shares to
the holders of our Series C Preferred Stock. None of these shares has been held
for the one-year period necessary for resale pursuant to the exemption of Rule
144 under the Securities Act of 1933. We intend to register the 191,294 shares,
as well as an additional 68,937 shares we issued in July as compensatory shares,
under the Securities Act of 1933 in another registration statement. Holders
subsequently became eligible to sell all but 500,000 of the remaining shares
pursuant to this prospectus. Of the shares eligible for sale, as of June 30,
2002, holders selling pursuant to the exemption of Rule 144 under the Securities
Act of 1933 would be limited in the number of shares each sold in each
three-month period by paragraph (e) of such Rule.
As of June 30, 2002, there were 3,148,259 shares reserved for issuance
upon the exercises of stock options granted or to be granted pursuant to either
our 1997 stock option plan or our 2000 stock option plan. Stock options were
exercisable on such date, or will become exercisable within 60 days after that
date, to purchase an aggregate of 991,507 shares. All of the shares issuable
upon the exercises of stock options pursuant to these two plans have been
registered under the Securities Act of 1933 for issuance by us to the respective
optionees. Accordingly, unless the optionee is an "affiliate" of our company as
such term is defined in Rule 405 under the Securities Act of 1933, he or she
may, after exercise of a stock option, resell the shares received upon exercise
without delivering a "reoffer" prospectus. Consistent with the practice of other
public companies, we filed on August 9, 2001 a reoffer prospectus so that
directors, executive officers and significant employees of our company holding
stock options, or who exercised stock options, may resell their shares of our
common stock immediately as other employees may do.
In addition, as of June 30, 2002, we had reserved an aggregate of
9,463,204 shares for the exercises of certain outstanding warrants. The subject
warrants do not include the warrants held by the selling stockholders or those
to purchase an aggregate of 1,700,000 shares held by our two principal operating
officers and a director. The subject warrants expire on various dates ranging
from February 28, 2005 to September 27, 2006. They have an exercise price of
$3.00 per share. They were all exercisable as of June 30, 2002. We have
registered in another registration statement (File No. 333 - 65536) under the
Securities Act of 1933 for resale by the holders 4,391,075 of the 9,463,204
shares issuable upon the exercises of the subject warrants. We have registered
in another registration statement (File No. 333-74172) under the Securities Act
of 1933 for resale by the holders the remaining 5,072,129 shares issuable upon
the exercises of the subject warrants.
We are unable to predict the effect that sales into the market of shares
of our common Stock made under Rule 144 or otherwise and the delayed sales into
the market of shares subject to the outstanding stock options and the warrants
may have on the then prevailing market price of our common stock. It is likely
that market sales of large amounts of these shares of our common stock or of the
5,939,644 shares offered, as of the date of this prospectus, for resale by this
prospectus (or the potential for those sales even if they do not actually occur)
may have the effect of depressing the market price of our common stock.
We do not anticipate paying dividends common stock in the foreseeable future.
We intend to retain future earnings, if any, to fund our operations and
expansion of our business. In addition, our expected continuing operational
losses and our Series C preferred stock will limit legally our ability to pay
dividends on our common stock. Accordingly, we do not anticipate paying cash
dividends on shares of our common stock in the foreseeable future.
Our board's right to authorize additional shares of preferred stock could
adversely impact the rights of holders of our common stock.
Our board of directors currently has the right, with respect to the
2,571,625 shares of our preferred stock not designated as our Series C preferred
stock, to authorize the issuance of one or more additional series of our
preferred stock with such voting, dividend and other rights as our directors
determine. Such action can be taken by our board without the approval of the
holders of our common stock. The sole limitation is that the rights of the
holders of any new series of preferred stock must be junior to those of the
holders of the Series C preferred stock with respect to dividends, upon
redemption and upon liquidation. Accordingly, the holders of any new series of
preferred stock could be granted voting rights that reduce the voting power of
the holders of our common stock. For example, the preferred holders could be
granted the right to vote on a merger as a separate class even if the merger
would not have an adverse effect on their rights. This right, if granted, would
give them a veto with respect to any merger proposal. Or they could be granted
20 votes per share while voting as a single class with the holders of the common
stock, thereby diluting the voting power of the holders of our common stock. In
addition, the holders of any new series of preferred stock could be given the
option to be redeemed in cash in the event of a merger. This would make an
acquisition of our company less attractive to a potential acquirer. Thus, our
board could authorize the issuance of shares of the new series of preferred
stock in order to defeat a proposal for the acquisition of our company which a
majority of our then holders of our common stock otherwise favor.
Our certificate of incorporation also provides for a classified board --
one third of the directors to be elected each year. Accordingly, at least two
successive annual elections will ordinarily be required to replace a majority of
the directors in order to effect a change in management. Thus, the
classification of the directors may frustrate a takeover attempt which a
majority of our then holders of our common stock believe to be in the best
interest of our company.
These are the only two provisions in our certificate of incorporation or
bylaws which could be used by us as an anti-takeover device. In addition, the
obligation to comply with the procedures of Section 203 of the Delaware
corporate statute, which governs our company, may discourage certain potential
acquirors which are unwilling to comply with its provisions. Section 203
prohibits a Delaware corporation such as our company from entering into a
business combination (for example, a merger or consolidation or sale of assets
of the corporation having an aggregate market value equal to 10% or more of all
of its assets) for a period of three years after a stockholder becomes an
"interested stockholder." An interested stockholder is defined as being the
owner of 15% or more of the outstanding voting shares of the corporation. There
are exceptions to its applicability including our board of directors approving
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder. At a minimum we believe such
statutory requirements may require the potential acquirer to negotiate the terms
with our directors. We believe that will be beneficial to our stockholders.
Use of Proceeds
We will not receive any proceeds upon the subsequent sales by the selling
stockholders of the 5,939,644 shares of our common stock offered by this
prospectus. If the common stock purchase warrants outstanding as of the date of
this prospectus to purchase an aggregate of 3,191,684 shares of our common stock
held by the selling stockholders and offered for resale pursuant to this
prospectus are exercised in their entirety, we will receive $9,621,315 upon such
exercises. Because of the uncertainty as to when and if any of these warrants
will be exercised and as to which "cashless" exercises will be made, we intend
to use any proceeds from these exercises for working capital purposes.
Material Changes
April 2002 Private Placement
(1) General
On April 2, 2002, we sold 272 units, at $37,500 per unit, to eight
accredited investors. Each unit consisted of 10,000 shares of our common stock
and a common stock purchase warrant expiring April 1, 2007 to purchase 2,000
shares of our common stock at $4.50 per share. We realized $9,554,062 in net
proceeds from the private placement. We have closed this offering and no further
units will be offered.
(2) Investor Warrants
A copy of the form of warrant sold to investors was filed as an exhibit
to the registration statement of which this prospectus constitutes part I. In
addition to your reading the following description of its material terms and
conditions, you may wish to read this exhibit. To obtain a copy, your attention
is directed to "Incorporation of Certain Information by Reference" in this
prospectus.
These investor warrants expire April 1, 2007 and are initially
exercisable at $4.50 per share. The exercise price and the number of shares of
our common stock are subject to adjustment in the event of a stock dividend, a
stock split, a re-organization, a recapitalization or a combination or
subdivision of our common stock or a similar event.
If all of the investor warrants were exercised, we would issue an
aggregate of 544,000 shares of our common stock.
(3) Compensatory Warrants
We were obligated, pursuant to our Registration Rights Agreement dated as
of April 1, 2002 with the investors in the private placement, to file the
registration statement of which this prospectus constitutes part I by May 3,
2002. In default of such obligation, we were required to issue to each investor
a warrant to purchase 4% of the number of shares of our common stock purchased
by each investor for each 30-day period thereafter. Because we first filed the
registration statement on July 22, 2002, we have issued compensatory warrants to
the investors to purchase an aggregate of 326,400 shares of our common stock.
The delay in filing was due to the fact that current financial statements
required for the filing (i.e., for the fiscal year ended March 31, 2002) did not
become available for filing until July 12, 2002. The exercise price of these
warrants ($4.50 per share), their expiration date (April 1, 2007) and other
terms are the same as for the investor warrants described in (2) above.
(4) Placement Agent's Warrants
A copy of the form of the warrant we initially issued to Gruntal & Co.,
L.L.C. as placement agent was filed as an exhibit to the registration statement
of which this prospectus constitutes part I. In addition to your reading the
following description of its material terms and conditions, you may wish to read
this exhibit. To obtain a copy, you attention is directed to "Incorporation of
Certain Information by Reference" in this prospectus.
In consideration of its services as placement agent in our seventh
private placement closed in April 2002, Gruntal & Co., L.L.C., then a
broker-dealer registered under the Securities Exchange Act of 1934, was to
receive warrants to purchase an aggregate of 185,500 shares of our common stock.
However, it exercised its right to assign warrants to purchase an aggregate of
92,750 shares of our common stock to various of its then affiliates, all of whom
are listed as selling stockholders in the list beginning on page 32 of this
prospectus. We also paid Gruntal & Co., L.L.C. a cash fee of $645,938 for its
services. Subsequently, Gruntal & Co., L.L.C. sold its business assets to Ryan,
Beck & Co., LLC, also a broker-dealer registered under the Securities Exchange
Act of 1934. Gruntal & Co., L.L.C., however, retained its warrant to purchase
92,750 shares. In addition, we issued a similar warrant to purchase 25,000
shares of our common stock to Wells Fargo Van Kasper LLC, also a broker-dealer
registered under the Securities Exchange Act of 1934 which was the placement
agent in our sixth private placement closed in June and September 2001, in
consideration of its waiver of its claim to participate in our seventh private
placement. In addition, we paid such firm a cash fee of $75,000.
These warrants expire April 2, 2007 and are initially exercisable at
$4.50 per share. The exercise price and the number of shares of our common stock
are subject to adjustment in the event of a stock dividend, a stock split, a
reorganization, a recapitalization or a combination or subdivision of our common
stock or a similar event.
These warrants may be exercised on a "cashless" basis. In a cashless
exercise the holder is entitled to receive shares of our common stock having a
market value equal to the net exercise value of the portion of the warrant being
exercised. The holder makes no cash payment to exercise the warrant. These
warrants specify the manner of calculating the number of shares of our common
stock issuable in a "cashless" exercise.
If all of these warrants are exercised, we would issue an aggregate of
210,500 shares of our common stock. Plan of Distribution
Eligible Shares
The selling stockholders will re-offer, pursuant to this prospectus,
shares of our common stock which we:
o sold to eight of the selling stockholders in a private placement which
we closed on April 2, 2002,
o shall issue upon the exercises of common stock purchase warrants
expiring April 1, 2007 (These warrants were initially issued to the
eight investors in the private placement as part of units with the
shares of our common stock),
o shall issue upon the exercises of common stock purchase warrants
expiring April 1, 2007 which we issued to the eight investors as
compensation for our failure to accomplish a registration objective,
o shall issue upon the exercises of common stock purchase warrants
expiring April 2, 2007 issued to (1) one of the selling stockholders
as partial payment of a placement agent fee in the private placement
and then partially assigned to other selling stockholders who were, at
the date of assignment, affiliated with it in some capacity and (2)
one of the selling stockholders in consideration of its waiving its
claim to participate in the private placement as the placement agent,
o shall issue upon the exercises of common stock purchase warrants with
expiration dates ranging from January 7, 2003 to January 29, 2007 and
exercise prices ranging from $.50 to $4.77 per share granted by us for
reasons other than the private placement, or
o sold upon the partial exercises of three of the warrants granted by us
for reasons other than the private placement.
The term "selling stockholders" as used by us in this prospectus includes
pledgees, donees, transferees or other successors in interest selling shares of
our common stock received after the date of this prospectus from one or more of
the selling stockholders named in the list commencing on page 32 as a pledge,
gift, partnership distribution or other non-sale related transfer.
Warrant Shares
Certain of the selling stockholders are offering pursuant to this
prospectus an aggregate of 3,191,684 shares of our common stock when and if they
exercise the following warrants:
o warrants which we issued to the investors in our seventh private
placement in April 2002 (an aggregate of 544,000 shares), warrants
which we issued to the investors as compensation (an aggregate of
326,400 shares),
o warrants which we issued to the placement agent, its assignees and a
former placement agent (an aggregate of 210,500 shares), and
o warrants which we issued to others not in connection with our seventh
private placement (an aggregate of 2,110,784 shares).
For certain information as to the investor warrants, we direct your
attention to the section entitled "April 2002 Private Placement - (2) Investor
Warrants" under the caption "Material Changes" in this prospectus.
For certain information as to the placement agent's warrants, we direct
your attention to the section "April 2002 Private Placement - (3) Placement
Agent's Warrants" under the caption "Material Changes" in this prospectus.
Jonathan J. Pallin (306,289 shares), the Estate of Herman Sandler
(150,000 shares), Samuel L. Pallin (200,000 shares) and Daniel Pallin (10,000
shares), as selling stockholders, are offering, pursuant to this prospectus, an
aggregate of 666,289 shares of our common stock when and if they exercise
warrants expiring January 7, 2003 at $.50 per share. These selling stockholders
received these warrants from the original grantee, Meadow Lane Partners, LLC,
upon its liquidation. We granted this warrant in January 1998 to Meadow Lane
Partners, LLC to correct an error made by our former parent, Substance Abuse
Technologies, Inc., as to the amount of loans which it had made to us. We had
paid these loans by issuing 2,075,306 additional shares of our common stock to
our former parent. As of September 30, 1997, our former parent owned 5,575,306
shares, or 76.4% of our then outstanding shares, of our common stock. On October
29, 1997, our former parent, with the approval of its bankruptcy court, sold
this controlling interest to Meadow Lane Partners, LLC. Because our former
parent had previously incorrectly reported to us the amount of our indebtedness
to it, we had not issued an additional 666,289 shares to our former parent in
payment of this indebtedness. Accordingly, its purchaser Meadow Lane Partners,
LLC received, on its purchase from our former parent, less shares than it was
entitled to receive. The warrant granted in January 1998 not only corrected this
deficiency, but gave us the opportunity, if the warrants were exercised, to
realize $333,144 we would not have otherwise received.
General Conference Corporation of Seventh-day Adventists, our largest
stockholder and a selling stockholder, is offering, pursuant to this prospectus,
500,000 shares of our common stock when and if it exercises at $3.25 per share a
warrant expiring January 29, 2007. In January 2002, we granted this warrant to
this selling stockholder as additional consideration for its making a bridge
loan to us of $1,500,000 until certain funds from our sixth private placement in
June and September 2001 were released to us from escrow.
Seven of the selling stockholders are offering, pursuant to this
prospectus, an aggregate of 328,450 shares of our common stock when and if they
exercise warrants expiring January 20, 2004 at $2.41 per share. They or their
transferors received their warrants for their services as finders in our fourth
private placement in January 1999. These selling stockholders are: The Gramercy
Partnership, L.L.C. (144,338 shares), Charles Dargan (56,000 shares), Ira Jay
Mitchell (50,000 shares), Andreas O. Tobler (22,475 shares), Rene Kunz (10,825
shares), Cornerstone Financial Co., L.L.C. (4,812 shares) and Steven A.
Kriegsman d/b/a The Kreigsman Group (40,000 shares). Mr. Tobler, Ms. Kunz and
Cornerstone Financial Co., L.L.C. are assignees of Online Capital GmbH. Mr.
Tobler is also offering 10,000 shares of our common stock received upon the
partial exercise of his warrant. Ambient Capital Group, Inc. also received a
similar warrant as a finder to purchase 10,000 shares. However, Ambient Capital
Group, Inc. subsequently assigned such warrant to Pak Choi (1,000 shares), Ivy
Fredericks (1,000 shares), Arthur Laffer (270 shares), Gary M. Post (6,480
shares) and James Somes (1,250 shares), all of whom are listed as selling
stockholders. Ms. Fredericks subsequently exercised her warrant.
In April 1995, we granted a warrant expiring April 7, 2003 to purchase
20,000 shares at $1.00 per share to Ambient Capital Group, Inc. for investor
relations services to the Company in conjunction with The Kriegsman Group.
Ambient Capital Group, Inc. subsequently assigned part of such warrant to Pak
Choi as to 2,000 shares. Mr. Choi subsequently exercised such warrant and is
listed as a selling stockholder for these 2,000 shares. Ambient Capital Group,
Inc. also assigned part of the warrant as to 12,960 shares to Gary M. Post, who
subsequently exercised and is listed as a selling stockholder for these shares.
In addition, Ambient Capital Group, Inc. assigned part of the warrant as to
2,000 shares to Ivy Fredericks, who subsequently exercised and is listed as a
selling stockholder. Ambient Capital Group, Inc. also assigned the balance of
the warrant as follows: Arthur Laffer (540 shares), Mary McKellar (2,000 shares)
and James Somes (500 shares), all of whom are listed as selling stockholders.
In August 2001, we granted to Gruntal & Co., L.L.C., then a broker-dealer
registered under the Securities Exchange Act of 1934, a warrant expiring August
8, 2006 to purchase 150,000 shares at $3.50 per share for investment banking and
other financial services in 2001. However, it exercised its right to assign
warrants to purchase an aggregate of 75,000 shares to various of its then
affiliates, all of whom are listed as selling stockholders. Subsequently, the
business assets of Gruntal & Co., L.L.C. were sold to Ryan, Beck & Co., LLC.,
also a broker-dealer registered under the Securities Exchange Act of 1934.
Gruntal & Co., L.L.C., however, retained its warrant to purchase 75,000 shares.
Venture Merchant Group, a selling stockholder, is offering, pursuant to
this prospectus, 250,000 shares of our common stock when and if it exercises at
$4.17 per share a warrant expiring September 6, 2006. In September 2001, we
granted this warrant to this selling stockholder as compensation for its
services in helping us secure CMI, Inc. as a strategic partner to market our
product to the law enforcement market in the United States and Canada.
Burrill & Company, a selling stockholder, is offering, pursuant to this
prospectus, 124,980 shares of our common stock when and if it exercises a
warrant expiring November 30, 2003 at $1.15 per share. On December 1998, we
granted this warrant to this selling stockholder as compensation for its
services, prior to our engagement of Venture Merchant Group, in attempting to
secure strategic partners for our product.
Alan Stone & Company, a selling stockholder, is offering, pursuant to
this prospectus, 30,000 shares of our common stock when and if it exercises a
warrant expiring April 15, 2004 at $1.97 per share. In April 1999, we granted
this warrant to this selling stockholder as compensation for its public
relations services on our behalf.
Finova Capital Corporation, a selling stockholder, is offering, pursuant
to this prospectus, 44,025 shares of our common stock when and if it exercises a
warrant expiring August 23, 2005 at $4.77 per share. In August 2000, we granted
this warrant to this selling stockholder as additional compensation pursuant to
its then equipment leasing arrangement with our company.
Lonna Williams, a selling stockholder, is offering, pursuant to this
prospectus, 5,000 shares of our common stock when and if she exercises a warrant
expiring March 19, 2003 at $.50 per share. In March 1998, we granted this
warrant to this selling stockholder as compensation for her services as a
consultant to us on product marketing matters.
Distribution Method
All of the selling stockholders have advised us that they may sell, from
time to time, pursuant to this prospectus, their shares of our common stock (an
aggregate of 5,830,844 shares as of the date of this prospectus) on the American
Stock Exchange, in the third market, in isolated transactions, or in a
combination of such methods of sale. They have also advised us that their sales
may be made at fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to prevailing market prices, or at
negotiated prices with institutional or other investors. In addition, the
selling stockholders may sell, when permissible, pursuant to the exemption of
Rule 144 under the Securities Act of 1933. As of the date of this prospectus,
none of the shares of our common stock being offered pursuant to this prospectus
had met the one-year holding requirement to become eligible for sale pursuant to
Rule 144 under the Securities Act of 1933. On July 17, 2002, the closing sales
price as reported on the American Stock Exchange was $2.22 per share.
The selling stockholders will act independently of each other. They may
sell the shares of our common stock pursuant to this prospectus by one or more
of the following methods, without limitation:
(a) a block trade on which the broker-dealer so engaged will
attempt to sell the shares of our common stock as agent, but
may position and resell a portion of the block as principal
to facilitate the transaction;
(b) purchases by the broker-dealer as principal and resales by
such broker-dealer for its account pursuant to this
prospectus;
(c) ordinary brokerage transactions and transactions in which the
broker solicits, or acts as an intermediary for, purchasers;
or
(d) face-to-face transactions between the selling stockholder and
purchasers without a broker-dealer.
In effecting sales, a broker-dealer engaged by a selling stockholder may
arrange for other brokers or dealers to participate. Such brokers or dealers may
receive commissions or discounts from the selling stockholder in amounts which
will be negotiated immediately prior to sale. This compensation to a particular
broker-dealer might be in excess of customary commissions for routine market
transactions. Brokers or dealers and any participating brokers or dealers acting
as described in this paragraph may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933 in connection with these
sales. Any profits realized by the selling stockholder and the compensation of
such brokers or dealers may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933.
Upon our being notified by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares of
our common stock through a block trade, a purchase by a broker or dealer, or any
special offering other than an underwritten offering, we shall file a
post-effective amendment to this registration statement to amend the prospectus.
In such amendment we shall disclose (a) the name of each broker-dealer, (b) the
number of shares involved, (c) the price at which such shares were sold, (d) the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (e) that such broker-dealer(s) did not conduct any
investigation to verify the information set out in this prospectus, as
supplemented, and (f) other facts material to the transaction.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in, or transfer or assign, some or all
of the shares of our common stock owned by them. The pledgees, secured parties
or persons to whom such securities have been hypothecated shall, upon
foreclosure in the event of a default, and the transferees and assignees shall,
be deemed to be selling stockholders for the purpose of this prospectus. The
number of shares of our common stock beneficially owned by a selling stockholder
who or which so transfers, pledges or assigns will decrease as and when the
selling stockholder takes such actions. The plan of distribution for the selling
stockholder's shares of our common stock sold hereunder will otherwise remain
unchanged by reason of a transfer, pledge or assignment. In addition, a selling
stockholder may, from time to time, sell short our common stock. In such
instances, this prospectus may be delivered in connection with such short sales
and the shares of our common stock offered hereby may be used to cover such
short sales.
A selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of our common
stock in the course of hedging the positions they assume with such selling
stockholder. This may occur in connection with distributions of shares of our
common stock by such broker-dealers. A selling stockholder may also enter into
option or other transactions with a broker-dealer that involve the delivery of
shares of our common stock to the broker-dealer. The broker-dealer may then
resell or otherwise transfer the shares of our common stock. A selling
stockholder may also loan or pledge shares of our common stock to a
broker-dealer. The broker-dealer may then sell the shares of our common stock so
loaned or, upon a default, may sell or otherwise transfer the pledged shares of
our common stock.
In order to comply with the securities laws of some states, the shares of
our common stock will have to be sold for a selling stockholder in those
jurisdictions only through registered or licensed brokers or dealers.
We have advised the selling stockholders of the requirement under the
Securities Act of 1933 that each of them, or any broker-dealer acting for him,
she or it, must deliver a copy of this prospectus in connection with any resale
by such selling stockholder of shares of our common stock under this prospectus.
We have furnished copies of this prospectus to the American Stock Exchange so
that, only with respect to a sale made on the American Stock Exchange, the
selling stockholder or its broker-dealer will not have to deliver a copy of this
prospectus to the purchaser.
We have also undertaken, if, in the future in our opinion, this
prospectus no longer complies with Section 10(a)(3) of the Securities Act of
1933, to advise the selling stockholders of this opinion, to request that the
selling stockholders cease use of this prospectus and to confirm our then
intention to amend this registration statement in order to effect such
compliance.
Any investor who or which purchased at least 200 units in the April 2002
private placement has the right to select an underwriter (reasonably acceptable
to us) to sell for whichever selling stockholders so desire. In the event of
such a request, we shall file a post-effective amendment to the registration
statement so that a new amended prospectus will become available describing the
underwritten offering, whether on a firm commitment or best efforts basis. As of
the date of this prospectus, we have received no such request.
Miscellaneous
We have also advised each of the selling stockholders that a court may
determine at a later date that he, she or it is an "underwriter" within the
meaning of Section 2(11) of the Securities Act of 1933. In such event the
selling stockholder may be found liable for monetary damages to purchasers under
Sections 11, 12(2) and 15 of the Securities Act of 1933 if there are any defects
in this registration statement (i.e., material misstatements or omissions). We
have also advised them that they may be found liable under Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 for such material misstatements
or omissions, if any.
We and the selling stockholders are obligated to take such steps as may
be necessary to ensure that the offer and sale by the selling stockholders of an
aggregate, as of the date of this prospectus, of 5,939,644 shares of our common
stock offered by this prospectus will comply with the requirements of the
federal securities laws, including Regulation M.
In general, Rule 102 under Regulation M prohibits any selling stockholder
or a broker-dealer acting for such selling stockholder from, directly or
indirectly, bidding for, or purchasing, any shares of our common stock, or
attempting to induce any person to bid for, or to purchase, shares of our common
stock during a restricted period (as such term is defined in Rule 100) which
ends when he, she or it has completed his, her or its participation in a
distribution of shares in an offering made pursuant to this prospectus. Rule 102
sets forth certain exceptions for the selling stockholder, including exercising
a stock option or warrant. For purposes of the Rule, exercise of an investor
warrant, a placement agent's warrant or a finder's warrant would be excepted.
We are bearing all costs relating to the registration of the shares of
our common stock offered by this prospectus. Any commissions, discounts or other
fees payable to broker-dealer in connection with any sale of shares of our
common stock will be borne by the selling stockholder selling such shares.
Selling Stockholders
The next following table for each selling stockholder indicates as of the
date of this prospectus:
o the name of the selling stockholder,
o the number of shares of our common stock beneficially owned as of June
30, 2002,
o the number of shares of our common stock to be offered pursuant to
this prospectus, and
o the number of shares of our common stock to be beneficially owned if
all of the shares to be offered pursuant to this prospectus are sold.
The table also indicates the percentage of beneficial ownership before and
after the proposed sales. During the past three years, none of the selling
stockholders had any position, office or other material relationship with us,
except as a stockholder and except that Jonathan J. Pallin served as a director
of the Company until March 3, 2000.
The selling stockholders are offering, by this prospectus, as of the date
of this prospectus, as indicated in the next following table, an aggregate of
5,939,644 shares of our common stock, as follows:
(1) an aggregate of 2,720,000 shares we sold as part of units in
the private placement we closed in April 2002 and an
aggregate of 27,960 shares we issued upon the exercises of
five warrants.
(2) an aggregate of 3,191,684 shares we shall issue upon the
exercises of
o our investor warrants to purchase an aggregate of 544,000
shares,
o our compensatory warrants to purchase an aggregate of
326,400 shares,
o our placement agent's warrants to purchase an aggregate of
210,500 shares and
o other warrants to purchase an aggregate of 2,110,784
shares.
The percentages of beneficial ownership reported in the next following
table are based upon 35,626,090 shares of our common stock which were
outstanding on June 30, 2002. Effect is given, where applicable, pursuant to
Rule 13d-3(1)(i) under the Securities Exchange Act of 1934, to shares issuable
upon the conversion of shares of our Series C preferred stock and exercises of
warrants which were exercisable as of June 30, 2002 or within 60 days of such
date.
Each of the following symbols as used in the following table shall have
the meaning assigned to it as below:
Symbol Meaning
US Shares of our common stock purchased as part of units in our
private placement.
IW Shares of our common stock issuable upon exercise of our investor
warrants purchased as part of units in our private placement.
CW Shares of our common stock issuable upon exercise of warrants
which we issued to the investors as compensation.
PW Shares of our common stock issuable upon exercise of warrants
initially issued for placement agent services in connection with
our private placement.
OW Shares of our common stock issuable upon exercise of other
warrants.
OS Shares of our common stock beneficially owned by the selling
stockholders acquired other than in connection with our private
placement in April 2002.
TS The total of all of the foregoing shares of our common stock.
Where a particular symbol is not shown for the selling stockholder, he, she
or it does not own shares falling in that category.
Table of Selling Stockholders
Beneficial
Number of Shares Ownership
Name of Before After Before After
Selling Stockholder Sale Offered Sale Sale Sale
SAFECO Common Stock Trust US 1,300,000 1,300,000 0
SAFECO Growth Opportunities Fund IW 260,000 260,000 0
(1) CW 156,000 156,000 0
TS 1,716,000 1,716,000 0 4.8% 0
SAFECO Resource US 700,000 700,000 0
Series Trust IW 140,000 140,000 0
SAFECO Growth CW 84,000 84,000 0
Opportunities Portfolio (2) TS 924,000 924,000 0 2.6% 0
AIM Small Cap Equity US 400,000 400,000 0
Fund (3) IW 80,000 80,000 0
CW 48,000 48,000 0
TS 528,000 528,000 0 1.5% 0
Vertical Ventures US 140,000 140,000 0
Investments, LLC (4) IW 28,000 28,000 0
CW 16,800 16,800 0
TS 184,800 184,800 0 nil 0
Belmont Park Investments, Inc. (5) US 70,000 70,000 0
IW 14,000 14,000 0
CW 8,400 8,400 0
TS 92,400 92,400 0 nil 0
Russ Silvestri IRA US 60,000 60,000 0
IW 12,000 12,000 0
CW 7,200 7,200 0
TS 79,200 79,200 0 nil 0
Russ Silvestri US 40,000 40,000 0
IW 8,000 8,000 0
CW 4,800 4,800 0
TS 52,800 52,800 0 nil 0
Focus Fund, LP (6) US 10,000 10,000 0
IW 2,000 2,000 0
CW 1,200 1,200 0
TS 13,200 13,200 0 nil 0
Gruntal & Co., L.L.C. (7) PW 92,750 92,750 0
OW 75,000 75,000 0
TS 167,750 167,750 0 nil 0
Andrew Sadowsky (8) PW 27,000 27,000 0
OW 16,000 16,000 0
TS 43,000 43,000 0 nil 0
Joseph Russo (8) PW 19,300 19,300 0
OW 11,500 11,500 0
TS 30,800 30,800 0 nil 0
Howard Bochner (8) PW 5,500 5,500 0
OW 4,000 4,000 0
TS 9,500 9,500 0 nil 0
David Bonomo (8) PW 4,500 4,500 0
OW 3,000 3,000 0
TS 7,500 7,500 0 nil 0
Jack Schwartz (8) PW 2,000 2,000 0
OW 1,500 1,500 0
TS 3,500 3,500 0 nil 0
Ryan Lane (8) PW 2,000 2,000 0
OW 1,500 1,500 0
TS 3,500 3,500 0 nil 0
Jeffrey Kraws (8) PW 22,450 22,450 0
OW 13,750 13,750 0
TS 36,200 36,200 0 nil 0
Karen Feinberg (8) PW 5,000 5,000 0
OW 4,000 4,000 0
TS 9,000 9,000 0 nil 0
Gary Parton (8) PW 5,000 5,000 0
TS 5,000 5,000 0 nil 0
John Putman (8) OW 13,750 13,750 0
TS 13,750 13,750 0 nil 0
Daniel Owczarski (8) OW 6,000 6,000 0
TS 6,000 6,000 0 nil 0
Wells Fargo Van Kasper LLC (9) PW 25,000 25,000 0
OW 444,792 0 444,792
TS 469,792 25,000 444,792 1.3% 1.2%
General Conference Corporation of OW 1,073,424 500,000 573,424
Seventh-day Adventists (10) OS 6,474,080 0 6,474,080
TS 7,547,504 500,000 7,047,504 20.3% 19.0%
Estate of Herman Sandler (11) OW 255,030 150,000 105,030
OS 445,958 0 445,958
TS 700,988 150,000 550,988 1.9% 1.5%
Jonathan J. Pallin OW 306,289 306,289 0
OS 2,434,100 0 2,434,100
TS 2,740,389 306,289 2,434,100 7.6% 6.8%
Samuel L. Pallin OW 200,000 200,000 0
TS 200,000 200,000 0 nil 0
Daniel Pallin OW 10,000 10,000 0
TS 10,000 10,000 0 nil 0
The Gramercy Partnership, L.L.C. OW 240,500 144,338 96,162
(12) TS 240,500 l44,338 96,162 nil nil
Charles Dargan OW 56,000 56,000 0
TS 56,000 56,000 0 nil 0
Ira Jay Mitchell OW 50,000 50,000 0
OS 501,000 0 501,000
TS 551,000 50,000 501,000 1.5% 1.4%
Andreas O. Tobler (13) OW 22,475 22,475 0
OS 10,000 10,000 0
TS 32,475 32,475 0 nil 0
Rene Kunz OW 10,825 10,825 0
TS 10,825 10,825 0 nil 0
Cornerstone Financial Co. OW 4,812 4,812 0
L.L.C. (14) TS 4,812 4,812 0 nil 0
Steven A. Kriegsman, d/b/a OW 40,000 40,000 0
The Kriegsman Group (15) TS 40,000 40,000 0 0 0
Pak Choi OW 1,000 1,000 0
OS 2,000 2,000 0
TS 3,000 3,000 0 nil 0
Ivy Fredericks OS 3,000 3,000 0
TS 3,000 3,000 0 nil 0
Arthur Laffer (16) OW 810 810 0
TS 810 810 0 nil 0
Mary McKellar OW 2,000 2,000 0
TS 2,000 2,000 0 nil 0
Gary M. Post OW 6,480 6,480 0
OS 12,960 12,960 0
TS 19,440 19,440 0 nil 0
James Somes OW 1,750 1,750 0
TS 1,750 1,750 0 nil 0
Venture Merchant Group (17) OW 312,500 250,000 62,500
OS 62,500 0 62,500
TS 375,000 250,000 125,000 1.0% Nil
Burrill & Company (18) OW 124,980 124,980 0
TS 124,980 124,980 0 nil 0
Alan Stone & Company, LLC (19) OW 30,000 30,000 0
TS 30,000 30,000 0 nil 0
Finova Capital Corp. (20) OW 44,025 44,025 0
TS 44,025 44,025 0 nil 0
Lonna Williams OW 5,000 5,000 0
TS 5,000 5,000 0 nil 0
- ---------------------------------
(1) This selling stockholder is a publicly-owned open-end mutual fund. No
person or "group" (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934 or Regulation 13D-G) controls this
selling stockholder. SAFECO Asset Management Company ("SAFECO") is
the registered investment advisor for this mutual fund. Thomas
Maguire, SAFECO's Vice President, is the individual who currently
makes the day-to-day investment decisions for this selling
stockholder with respect to, and votes, any shares which this selling
stockholder owns in our company, subject to overall authority of the
board of directors of this selling stockholder. SAFECO and Mr.
Maguire each disclaim any beneficial ownership of the shares of our
common stock reported in the table for this selling stockholder.
SAFECO has two affiliates which are broker-dealers registered under
the Securities Exchange Act of 1934. However, neither participated in
our private placement in which this selling securityholder acquired
our securities.
(2) This selling stockholder is a publicly-owned open-end mutual fund. No
person or "group" (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934 or Regulation 13D-G) controls this
selling stockholder. SAFECO Asset Management Company ("SAFECO") is
the registered investment advisor for this mutual fund. Thomas
Maguire, SAFECO's Vice President, is the individual who currently
makes the day-to-day investment decisions for this selling
stockholder with respect to, and votes, any shares which this selling
stockholder owns in our company, subject to overall authority of the
board of directors of this selling stockholder. SAFECO and Mr.
Maguire each disclaim any beneficial ownership of the shares of our
common stock reported in the table for this selling stockholder.
SAFECO has two affiliates which are broker-dealers registered under
the Securities Exchange Act of 1934. However, neither participated in
our private placement in which this selling securityholder acquired
our securities.
(3) This selling stockholder is a publicly-owned open-end mutual fund. No
person or "group" (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934 or Regulation 13D-G) controls this
selling stockholder. AIM Funds Group ("AIM") is the registered
investment advisor for this mutual fund. AIM's proxy voting
committee, of which Lisa A. Moss is currently the chairperson, will
vote the shares of our common stock reported in the table. Paul J.
Rasplica and Ronald S. Sloan, each a portfolio manager, share
investment power with respect to such shares. Such voting and
investment powers are subject to the overall authority of the board
of directors of this selling stockholder. AIM, the named individuals
and the other members of the proxy voting committee each disclaims
any beneficial ownership of the shares of our common stock reported
in the table for this selling stockholder.
(4) Josh Silverman, as a manager/member of this selling stockholder, has
voting and investment powers with respect to the shares of our common
stock reported in the table as being beneficially owned and as being
offered by this selling stockholder. Accordingly, he may be deemed
the beneficial owner of these shares as a result of possessing these
powers. However, he disclaims being the sole beneficial owner of
these shares.
(5) David Sims and Lamberto Banchetti, each a director of this selling
stockholder, share voting and investment powers with respect to the
shares of our common stock reported in the table as being
beneficially owned and offered by this selling stockholder.
Accordingly, each may be deemed a beneficial owner of these shares as
a result of possessing these powers. However, each disclaims being a
beneficial owner of the shares.
(6) Stefan Cobb, as the Managing Member of this selling stockholder, has
voting and investment powers with respect to the shares of our common
stock reported in the table as being beneficially owned and as being
offered by this selling stockholder. Accordingly, he may be deemed
the beneficial owner of these shares as a result of possessing these
powers. However, he disclaims being the sole beneficial owner of
these shares.
(7) This selling stockholder was, at the date of its acquisition of the
two warrants described in this note, a broker-dealer registered under
the Securities Exchange Act of 1934 and no person or "group" (as such
term is used in Section 13(d) of the Securities Exchange Act of 1934
or Regulation 13D-G) controls this selling stockholder. The shares of
our common stock reported in the table as being beneficially owned
and as being offered by this selling stockholder reflect (a) shares
issuable upon the exercise of a placement agent's warrant which we
granted to this selling stockholder in partial payment of a finder's
fee in connection with our seventh private placement in April 2002
and (b) shares issuable upon the exercise of a warrant expiring
August 8, 2006 granted to this selling stockholder for other
investment banking and financial services. We granted this selling
stockholder the placement agent's warrant and the other warrant in
the ordinary course of its business. At the time of the acquisition
of these warrants, this selling stockholder had no agreements or
understandings, directly or indirectly, with any person to distribute
the underlying shares reported in the table as being offered pursuant
to this prospectus.
(8) This selling stockholder was, at the date of assignment of the
warrant to him or her, an affiliate of Gruntal & Co., L.L.C., which,
as indicated in Note (7), was a registered broker-dealer. Each is an
assignee from such former broker-dealer of one or both of the
warrants described in Note (7). At the time of assignment of the
relevant warrant or warrants to this selling stockholder, this
selling stockholder had no agreements or
understandings, directly or indirectly, with any person to distribute
the shares reported in the table as being offered pursuant to this
prospectus.
(9) This selling stockholder is a broker-dealer registered under the
Securities Exchange Act of 1934 and no person or "group" (as such
term is used in Section 13(d) of the Securities Exchange Act of 1934
or Regulation 13D-G) controls this selling stockholder. The shares of
our common stock reported in the table as being beneficially owned by
this selling stockholder reflect (a) shares issuable upon the
exercise of warrants expiring June 19, 2007 and September 27, 2007
which we issued to this selling stockholder as partial payment for
its services as placement agent in our sixth private placement in
June and September 2001 and (b) shares issuable upon the exercise of
a placement agent's warrant which we granted to this selling
stockholder in connection with our seventh private placement in April
2002. This selling stockholder is offering pursuant to this
prospectus only the shares issuable upon the exercise of the warrant
described in (b). At the time of acquisition of this warrant, this
selling stockholder had no agreements or understandings, directly or
indirectly, with any person to distribute the underlying shares
reported in the table as being offered pursuant to this prospectus.
This selling stockholder is also offering the shares described in (a)
pursuant to another registration statement of our company.
(10) No person or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934 or Regulation 13D-G) controls this
selling stockholder. The governing board of this selling stockholder
delegates investment authority over owned and trustee funds through
various committees to the General Conference Investment Office, which
is led by an Associate Treasurer of this selling stockholder
(currently Gary DeBoer is assigned with respect to us). Day-to-day
responsibility with respect to each issuer in which this selling
stockholder makes an investment (including us) is delegated to one or
more portfolio managers (currently Kenneth Rasmussen is assigned with
respect to us). They may vote our shares or execute investment
decisions with respect to our securities, but only within the
guidelines or policies authorized by the governing board or one of
the governing committees. The shares of our common stock reported in
the table as being beneficially owned, as of June 30, 2002, by this
selling stockholder and not being offered pursuant to this prospectus
reflect (a) an aggregate of 6,023,129 shares acquired by this selling
stockholder and its affiliate in prior private placements of our
company, through a gift and in open market purchases; (b) 240,000
shares issuable upon the exercise of two warrants expiring February
28, 2005 also acquired by this selling stockholder and its affiliate
in our fourth private placement in February 2000; and (c) securities
acquired as a result of our sixth private placement in June 2001, as
follows: (i) 333,424 shares issuable upon the conversion of 28,571
shares of our Series C preferred stock, (ii) 333,424 shares issuable
upon the exercise of a common stock purchase warrant expiring June
19, 2006, (iii) an aggregate of 33,617 shares issued, and an
aggregate of 66,410 shares estimated to be issuable, to this selling
stockholder upon the redemption of premium with respect to the shares
of our Series C preferred stock and (iv) 12,500 shares which we
issued in May 2002, and 5,000 shares which we estimated to be issued,
as compensatory payments pursuant to our registration rights
agreement with the investors in this private placement through May
15, 2002. This selling stockholder is also offering (x) 240,000 of
the shares described in (a) and 240,000 of the shares described in
(b) pursuant to another registration statement of our company and (y)
all of the shares described in (c) (except those described in clause
(iv)) pursuant to a third registration statement of our company.
(11) The late Mr. Sandler was an affiliate of a broker-dealer registered
under the Securities Exchange Act of 1934. He acquired the common
stock purchase warrant expiring January 7, 2003 in the ordinary
course of his personal business and not that of the broker-dealer. At
the time of the acquisition of this security, he had no agreements or
understandings, directly or indirectly, with any person to distribute
the shares reported in the table as being offered pursuant to this
prospectus. The shares of our common stock reported in the table as
being beneficially owned, as of May 31, 2002, by this selling
stockholder and not being offered pursuant to this prospectus reflect
(a) 300,000 shares acquired by the late Mr. Sandler upon the exercise
of a common stock purchase warrant and (b) securities acquired as a
result of our sixth private placement in September 2001, as follows:
(i) 105,030 shares issuable upon the conversion of 9,000 shares of
our Series C preferred stock, (ii) 105,050 shares issuable upon the
exercise of a common stock purchase warrant expiring September 27,
2006, (iii) an aggregate of 31,509 shares issued or estimated to be
issuable to this selling stockholder upon the redemption of premium
with respect to the shares of our Series C preferred stock, (iv)
1,544 shares issued as compensation for the delay in closing his
tranche of the private placement and (v) 7,875 shares which we issued
in May 2002, or estimated to be issued, as compensatory payments
pursuant to our registration rights agreement with the investors in
this private placement through May 15, 2002. This selling stockholder
is offering the shares described in (b) (except for those described
in clause (v)) pursuant to another registration statement of our
company. The late Mr. Sandler was a brother of Paul Sandler, a
director of our company.
(12) Sam Pai holds the largest membership interest in the limited
liability company which is this selling stockholder. As manager, he
has sole voting and investment powers with respect to the shares
reported in the table as beneficially owned by this selling
stockholder. Accordingly, he may be deemed the beneficial owner of
these shares as the result of possessing these powers. However, he
disclaims being the sole beneficial owner of these shares. Other
members would have an interest in the proceeds of any sale of the
shares of our common stock offered pursuant to this prospectus when
and if the warrant expiring January 20, 2004 is exercised. This
selling stockholder is offering the remaining 96,162 shares reported
in the table as being beneficially owned and not being offered
pursuant to this prospectus in another registration statement of our
company. These 96,162 shares are issuable upon the exercise of a
warrant expiring March 13, 2005.
(13) This selling stockholder is an affiliate of a broker-dealer
registered under the Securities Exchange Act of 1934. He acquired
from Online Capital GmbH our warrant expiring January 20, 2004 for
32,475 shares of our common stock, which he partially exercised as to
10,000 shares, in the ordinary course of his business and not that of
the broker-dealer. At the times of exercise and acquisition of the
warrant, he had no agreements or understandings, directly or
indirectly, with any person to distribute the shares reported in the
table as being offered pursuant to this prospectus.
(14) Each of Rose-Marie Fox and Renato Strauss share voting and investment
powers with respect to the shares of our common stock reported in the
table as being beneficially owned and as being offered by this
selling stockholder. Accordingly, they may be deemed the beneficial
owners of these shares as a result of possessing these powers.
However, they disclaim being the beneficial owners of these shares.
(15) The shares of our common stock being offered by this selling
stockholder pursuant to the prospectus are issuable upon the exercise
of a warrant expiring January 19, 2004 which we granted to him in
partial payment of a finder's fee in January 1999. Mr. Kriegsman is
affiliated with a broker-dealer registered under the Securities
Exchange Act of 1934. We granted the finder's warrant to this selling
stockholder in the ordinary course of his business and not that of
the broker-dealer with which he is affiliated. At the time of
acquisition of this finder's warrant, this selling stockholder did
not have any agreements or understandings, directly or indirectly,
with any person to distribute the underlying shares.
(16) This selling stockholder is an affiliate of a broker-dealer
registered under the Securities Exchange Act of 1934. He acquired
from Ambient Capital Group, Inc. a warrant expiring April 7, 2003 to
purchase 540 shares of our common stock and a warrant expiring
January 20, 2004 to purchase 270 shares of our common stock. He
acquired the two warrants in the ordinary course of his business and
not that of the broker-dealer. At the times of acquisition of the
warrants, he had no agreements or understandings, directly or
indirectly, with any person to distribute the shares reported in the
table as being offered pursuant to this prospectus.
(17) Todd Morrill, as the Managing Director of this selling stockholder,
has sole voting and investment powers with respect to the shares of
our common stock reported in the table as being beneficially owned by
this selling stockholder. Accordingly, he may be deemed the
beneficial owner of these shares as a result of possessing these
powers. However, he disclaims being the sole beneficial owner of
these shares. Of the shares reported in the table as being
beneficially owned by this selling stockholder, this selling
stockholder is offering 62,500 outstanding shares and 62,500 shares
issuable upon the exercise of a warrant expiring June 30, 2004 in
another registration statement of our company.
(18) G. Steven Burrill, as the Chief Executive Officer of this selling
stockholder which is a private merchant bank, has sole voting and
investment powers with respect to the shares of our common stock
reported in the table as being beneficially owned and as being
offered by this selling stockholder. Accordingly, he may be deemed
the beneficial owner of these shares as a result of possessing these
powers.
(19) Alan Stone, as the Managing Director of this selling stockholder, has
sole voting power with respect to the shares of our common stock
reported in the table as being beneficially owned and as being
offered by this selling stockholder. Accordingly, he may be deemed
the beneficial owner of these shares as a result of possessing this
power.
(20) Lawrence S. Herschfield, as the President and Chief Executive Officer
of this selling stockholder, has sole voting and investment powers
with respect to the shares of our common stock reported in the table
as being beneficially owned and as being offered by this selling
stockholder. Accordingly, he may be deemed the beneficial owner of
these shares as a result of possessing these powers. However, he
disclaims being the beneficial owner of these shares.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of June 30, 2002, certain information
with respect to (1) any person known to us who or which beneficially owned more
than 5% of our common stock, (2) each director of our company, (3) our Chief
Executive Officer and (3) all directors and executive officers as a group. Each
beneficial owner who is a natural person has advised us that he or she has sole
voting and investment power as to the shares of our common stock, except that,
until a common stock purchase warrant or a stock option is exercised, there is
no voting right.
Number of Shares of Percentage of
Common Stock Beneficially Common Stock Beneficially
Name and Address of Beneficial Owner Owned Owned (1)
General Conference Corporation of Seventh-day Adventists......... 7,547,504 (2) 20.3%
12501 Old Columbia Pike
Silver Spring, MD 20804-6600
Jonathan J. Pallin............................................... 2,740,389 (3) 7.6%
722 Starlight Heights Drive
La Canada, CA 91011
Linda H. Masterson (4)........................................... 2,001,658 (5) 5.6%
1205 South Dupont Street
Ontario, CA 91761
Peter S. Gold (6)................................................ 921,646 (7) 2.6%
1205 South Dupont Street
Ontario, CA 91761
Paul Sandler (6)................................................. 478,255 (8) 1.3%
1205 South Dupont Street
Ontario, CA 91761
Charles J. Casamento (6)......................................... 11,034 (9) nil
1205 South Dupont Street
Ontario, CA 91761
Stan Yakatan (6)................................................. 11,034 (9) nil
1205 South Dupont Street
Ontario, CA 91761
All directors and executive...................................... 3,856,433 (10) 10.5%
Officers as a group (8 persons)
___________________
(1) The percentages computed in this column of the table are based upon
35,626,090 shares of our common stock which were outstanding on June
30, 2002. Effect is given, pursuant to Rule 13d-3(1)(i) under the
Securities Exchange Act of 1934, to shares issuable upon the exercise
of common stock purchase warrants and stock options currently
exercisable or exercisable within 60 days of June 30, 2002 and to the
shares issuable upon the conversion of shares of our Series C
preferred stock, all of which shares are currently convertible.
(2) The shares of our common stock reported in the table include (a)
240,000 shares issuable upon the exercise by this holder and its
affiliate at $3.00 per share of a common stock purchase warrant
expiring February 28, 2005; (b) 333,424 shares issuable upon the
conversion of 28,571 shares of our Series C preferred stock; (c)
333,424 shares issuable upon the exercise as $3.00 per share of a
common stock purchase warrant expiring June 19, 2006; (d) 500,000
shares issuable upon the exercise at $3.25 per share of a common
stock purchase warrant expiring January 29, 2007; (e) 66,410 shares
estimated to be issued upon redemption of premium with respect to the
28,571 shares of our Series C preferred stock; and (f) 12,500 shares
issued, and 5,000 shares estimated to be issued, as compensatory
shares.
(3) The shares of our common stock reported in the table include an
aggregate of 306,289 shares issuable upon the exercise at $.50 per
share of four common stock purchase warrants expiring January 7,
2003.
(4) A director of our company since May 31, 1996; effective August 1,
1996, our President; effective May 23, 1997, our Chief Executive
Officer; and, effective June 16, 2000, our Chairman of the Board.
(5) The shares of our common stock reported in this table as being
beneficially owned by Ms. Masterson are held, or, following exercise,
will be held by Robert P. Masterson and Linda H. Masterson, Trustees
of Masterson Family Trust, dated September 23, 2000 and include (a)
6,992 shares issuable upon the exercise at $.50 per share of an
option expiring June 29, 2008; (b) 22,500 shares issuable upon the
exercise at $1.67 per share of an option expiring October 9, 2009;
(c) 55,000 shares issuable upon the exercise at $6.00 per share of an
option expiring October 19, 2010; and (d) 22,840 shares issuable upon
the exercise at $3.17 per share of an option expiring December 6,
2011.
(6) A director of the Company
(7) The shares of our common stock reported in the table include (a) an
aggregate of 200,000 shares issuable upon the exercise of two common
stock purchase warrants expiring December 7, 2002, one for 100,000
shares exercisable at $.50 per share and the other exercisable at
$1.00 per share; (b) 12,486 shares issuable upon the exercise at
$1.81 per share of an option expiring April 15, 2009; (c) 5,828
shares issuable upon the exercise at $3.22 per share of an option
expiring April 15, 2010; and (d) 3,332 shares issuable upon the
exercise at $4.09 per share of an option expiring April 15, 2011.
(8) The shares of our common stock reported in the table include (a)
12,486 shares issuable upon the exercise at $1.81 per share of an
option expiring April 15, 2009; (b) 5,828 shares issuable upon the
exercise at $3.22 per share of an option expiring April 15, 2010; (c)
3,921 shares issuable upon the exercise at $2.55 per share of an
option expiring January 20, 2010; (d) 3,332 shares issuable upon the
exercise at $4.09 per share of an option expiring April 15, 2011; and
(e) 3,183 shares issuable upon the exercise at $3.77 per share of an
option expiring December 14, 2010. The shares reported in the table
also include (w) 105,030 shares issuable upon the conversion of 9,000
shares of our Series C preferred stock and (x) 105,030 shares
issuable upon the exercise at $3.00 per share of a common stock
purchase warrant expiring September 27, 2006, both of which
securities being held in the name of PMLDSS Ltd., a family
partnership of which Dr. Sandler is the President of the corporate
general partner and, accordingly, may be deemed the beneficial owner
of such securities. The table also reflects as beneficially owned (y)
our estimate as to an aggregate of 22,432 shares to be issued to
PMLDSS Ltd. upon the future redemptions of premium with respect to
the shares of our Series C preferred stock and (z) 6,300 shares
issued, and 1,575 shares estimated to be issued, to PMLDSS Ltd. as
compensatory shares.
(9) The shares of our common stock reported reflected in the table
reflect (a) 8,118 shares issuable upon the exercise at $6.56 per
share of an option expiring June 15, 2010 and (b) 2,916 shares
issuable upon the exercise at $3.48 per share of an option expiring
June 15, 2011.
(10) The shares of our common stock reported in the table include (a)
those issuable upon the exercise of the common stock purchase
warrants and the options described in Notes (5), (7), (8) and (9) to
the table; (b) an aggregate of 145,008 shares issuable to an
executive officer upon his exercise at $.50 per share of two options
expiring March 19, 2008 and one option expiring June 30, 2008; (c)
21,250 shares issuable to the same executive officer upon his
exercise at $1.67 per share of an option expiring October 9, 2009;
(d) 27,500 shares issuable to the same executive officer upon his
exercise at $6.00 per share of an option expiring October 19, 2010;
(e) 17,895 shares issuable to the same executive officer upon his
exercise at $3.17 per share of an option expiring December 6, 2011;
(f) 21,861 shares issuable to another executive officer upon her
exercise at $1.81 per share of an option expiring April 15, 2009; (g)
21,861 shares issuable to the same executive officer upon her
exercise at $1.87 per share of an option expiring November 16, 2009;
(h) 6,253 shares issuable to the same executive officer upon her
exercise at $4.35 per share of an option expiring December 14, 2010;
(i) 11,395 shares issuable to the same executive officer upon her
exercise at $3.17 per share of an option expiring December 6, 2011;
(j) an aggregate of 42,478 shares issuable to a third executive
officer upon his exercise at $4.81 per share of three options
expiring August 24, 2010 and (k) 16,830 shares issuable to the same
executive officer upon his exercise at $3.17 per share of an option
expiring December 6, 2011.
Interests of Named Experts and Counsel
The financial statements of LifePoint, Inc appearing in LifePoint, Inc.'s
Annual Report (Form 10-K) for the year ended March 31, 2002 have been audited by
Ernst & Young LLP, independent auditors, as set forth in its report thereon
included 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.
The validity of the shares offered hereby will be passed upon for our
company by Wachtel & Masyr, LLP, 110 East 59th Street, New York, New York 10022.
Incorporation of Certain Information by Reference
We have filed the following documents with the Securities and Exchange
Commission (the "Commission"). We incorporate them in this prospectus by this
reference:
(a) our Annual Report on Form 10-K for the fiscal year ended March 31,
2002;
(b) our Form 10-Q/A filed on April 11,2002;
(c) our Current Report on Form 8-K filed on April 19, 2002;
(d) our Current Report on Form 8-K filed on July 17, 2002; and
(e) the description of our common stock as contained in our Registration
Statement on Form 8-A filed on April 18, 2000 under the Securities
Exchange Act.
All documents subsequently filed by us pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act prior to termination of the offering
pursuant to this prospectus shall be deemed to be incorporated in this
prospectus by reference. They shall be a part of this prospectus from the
respective dates of filing of such documents.
Any statement contained in an incorporated document or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained in this
prospectus or in any other subsequently filed incorporated document modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, a copy of any incorporated
documents if not delivered with this prospectus. Requests for such copies should
be directed to LifePoint, Inc., Attention: Michele A. Clark, Controller and
Chief Accounting Officer, 1205 South Dupont Street, Ontario, CA 91761,
telephone: (909) 418-3000.
We are subject to the informational requirements of the Securities
Exchange Act of 1934. In accordance with such statute and the related
regulations, we file reports, proxy and information statements and other
information with the Commission. You may read and copy such reports, proxy and
information statements and other information filed with the Commission
(including this registration statement and all of its exhibits) at the following
public reference facilities of the Commission:
450 Fifth Street, N.W. Citicorp Center
Judiciary Plaza 500 West Madison Street
Room 1024 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661
You may obtain information on the operation of the Public Reference Room by
calling the Commission at 1-800-SEC-0330. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants, including our company (since May 17, 1996), that file
electronically with the Commission at the following Web site address:
http://www.sec.gov. Since April 19, 2000, our common stock has been listed on
the American Stock Exchange LLC (the "AMEX"). Accordingly, you may read and
obtain copies of our reports, proxy and information statements and other
information filed after that date may be inspected and copied at the AMEX
Library, 86 Trinity Place, New York, NY 10006.
Certain information with respect to our company may also be obtained on
our web site: www.LifePointInc.com. Information contained in our web site is not
part of this prospectus.
______________________________________
No dealer, salesperson
or other person has been authorized
to give any information or
representations in connection with
this offering other than those
contained in this prospectus.
If any such information or
representations is given or made,
such information or representations
must not be relied upon as having LIFEPOINT, INC.
been authorized by us. This prospectus
does not constitute an offer to sell
or a solicitation of an offer to buy
the securities offered hereby to any
person in any state or other jurisdiction
in which such offer or solicitation
would be unlawful. Neither the delivery
of this prospectus nor any sale made
hereunder shall, under any circumstances,
create any implication that the
information contained herein is correct
as of any time subsequent to the date hereof. 5,939,644
Shares
________________ of Common Stock
($.001 Par Value)
Offered by
Selling Stockholders
PROSPECTUS
__________ __, 2002
Part II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.*
Securities and Exchange Commission fee .............................$ 1,215
Accountants' fees.....................................................15,000
Legal fees and expenses...............................................30,000
Placement agent's and finders' fees..................................720,938
Printing and engraving expenses.......................................10,000
Miscellaneous....................................................... 2,847
Total..........................................................$780,000
* Estimated, except for the Securities and Exchange Commission fee.
..........
Item 16. Exhibits
All of the following exhibits are filed with this Registration Statement
except for Exhibit 4(a) which is incorporated by reference as indicated in the
footnote.
Exhibit
Number Exhibit
4(a) Restated Certificate of Incorporation as filed in Delaware on
January 28, 2002. (1)
4(b) Registration Rights Agreement dated as of April 1, 2001 by and
among the Company and certain Investors.
4(c) Form of common stock purchase warrant expiring April 1, 2007
issued as part of units with shares of common stock.
4(d) Form of common stock purchase warrant expiring April 2, 2007
issued as a placement agent's warrant.
The Registrant's common stock purchase warrants expiring January
7, 2003, March 19, 2003, April 7, 2003, November 30, 2003,
January 20, 2004, April 15, 2004, August 23, 2005, August 8,
2006, September 6, 2006 and January 29, 2007 are substantially
identical to the form of common stock purchase warrant filed as
Exhibit 4(c) hereto except as to the name of the holder, the
expiration date, the number of shares of common stock subject
thereto and the exercise price and, accordingly, pursuant to
Instruction 2 to Item 601 of Regulation S-K under the Securities
Act of 1933 are not individually filed.
5(a) Opinion of Wachtel & Masyr, LLP.
23(a) Consent of Wachtel & Masyr, LLP is included in its opinion filed
as Exhibit 5.
23(b) Consent of Independent Auditors.
23(c) Consent of Rosenfeld, Meyer & Susman, LLP.
(1) Filed as an exhibit to the Company's Registration Statement on Form S-3,
File No. 333-74172 and incorporated by reference herein.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Items 13 and 15 to the
Registration Statement (and Items 510 and 702 of Regulation S-K), or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Ontario, State of California, on July 22, 2002.
LIFEPOINT, INC.
(Registrant)
By: /s/ Linda H. Masterson
----------------------
Linda H. Masterson
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on July 22, 2002.
Signature Title
/s/ Linda H. Masterson Principal Executive Officer and Director
- ------------------------
Linda H. Masterson
/s/ Linda H. Masterson Acting Principal Financial Officer
- ------------------------
Linda H. Masterson
/s/ Michele A. Clark Principal Accounting Officer
- ------------------------
Michele A. Clark
/s/ Charles J. Casamento Director
- ------------------------
Charles J. Casamento
/s/ Peter S. Gold Director
- ------------------------
Peter S. Gold
/s/ Paul Sandler Director
- ------------------------
Paul Sandler
/s/ Stan Yakatan Director
- ------------------------
Stan Yakatan
LIFEPOINT, INC.
EXHIBITS FILED WITH
REGISTRATION STATEMENT ON FORM S-3
E-1
Exhibit Index
Number Exhibit Page
Number
4(b) Registration Rights Agreement dated as
of April 1, 2001 by and among the
Company and certain Investors....................... E-3
4(c) Form of common stock purchase warrant expiring April 2,
2007 issued as part of units with shares of common
stock....................... E-20
4(d) Form of common stock purchase warrant expiring April 1,
2007 issued as a placement agent's
warrant...................................... E-26
5 Opinion of Wachtel & Masyr, LLP................ E-32
23(a) Consent of Wachtel & Masyr, LLP
is included in its opinion filed as Exhibit 5.... E-32
23(b) Consent of Independent Auditors........... E-34
23(c) Consent of Rosenfeld, Meyer & Susman, LLP.... E-35
E-2