As filed with the Securities and Exchange Commission on April 1, 1997
File No. 333-19979
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
SUBSTANCE ABUSE TECHNOLOGIES, INC.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Delaware 22-2806310
- -------------------------- -------------------
(State or other jurisdic- (I.R.S.Employer
tion of incorporation Identification No.)
or organization)
4517 NW 31st Avenue
Fort Lauderdale, FL 33309
- ----------------------------------------------------------------------------
(954) 739-9600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Mr. Robert Stutman
Substance Abuse Technologies, Inc.
4517 NW 31st Avenue
Fort Lauderdale, Florida 33309
(954) 739-9600
- ----------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
Copy to
Robert W. Berend, Esq.
Gold & Wachtel, LLP
110 East 59th Street
New York, New York 10022
(212) 909-9500
Approximate date of commencement of the proposed sale to the
public: As soon as practicable following the date on which this
Registration Statement becomes effective.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, 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 number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each Maximum Maximum
Class of Offering Aggregate Amount of
Securities Amount to be Price Offering Registration
to be Registered Registered Per Unit(1) Price(1) Fee(2)
- ---------------- ---------- ----------- -------- ------------
Common Stock, $.01 par 3,402,500 $2.008(3) $6,833,220(3) $2,070
value, issuable upon shares
exercise of warrants
Common Stock. $.01 par 2,500,000 $2.00(4) $5,000,000(4) $1,515
value, issuable upon shares
conversion of notes
Common Stock, $.01 par 637,500 $1.4375(5) $916,406(5) $ 278
value shares
Total $3,863
______________________
(1) Estimated solely for the purpose of calculating the
registration fee.
(2) Rounded to the nearest dollar.
(3) Pursuant to Rule 457(g) under the Securities Act, the
weighted average of the exercise prices of the outstanding
warrants was used for the purpose of calculating the
registration fee.
(4) Pursuant to Rule 457(h) under the Securities Act, the
conversion price of the notes was used for the purpose of
calculating the registration fee.
(5) Pursuant to Rule 457(c) under the Securities Act, the
closing sales price of the SAT Common Stock as reported on
the American Stock Exchange on March 26, 1997 was taken as
the offering price of the shares for the purpose of
calculating the registration fee.
(6) An indeterminate number of securities is being registered
pursuant to Rule 416 under the Securities Act to cover any
adjustment in the number of shares issuable as a result of the
anti-dilution provisions of the warrants and the convertible
notes.
--------------------
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.
---------------------
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Registration Statement
Item Number and Caption Prospectus Caption
- ----------------------- ------------------
1. Forepart of the Registration Cover Page of Registration
Statement and Outside Front Statement and Outside
Cover Page of Prospectus Front Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus; Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors; Prospectus
Risk Factors and Ratio of Summary and Ratio of Earnings
Earnings to Fixed Charges to Fixed Charges Are Not Applicable
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Dilution
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Cover Page; Plan of Distribution
9. Description of Securities Not Applicable
to be Registered
10. Interests of Named Experts Not Applicable
and Counsel
11. Material Changes Material Changes
12. Incorporation of Certain Incorporation of Certain
Information by Reference Information by Reference
13. Disclosure of Commission Commission Position on
Position on Indemnification Indemnification
for Securities Act Liabilities
Prospectus
SUBSTANCE ABUSE TECHNOLOGIES, INC.
3,402,500 Shares of SAT Common Stock Issuable upon
Exercise of Warrants, 2,500,000 Shares of SAT Common
Stock Issuable upon Conversion of Convertible Notes and
637,500 Shares Offered by Selling Stockholders
Substance Abuse Technologies, Inc. ("SAT") is offering, by
this Prospectus, an aggregate of 3,402,500 shares of its Common
Stock, $.01 par value (the "SAT Common Stock"), issuable upon the
exercise of (1) Common Stock purchase warrants expiring June 30,
2000 (the "June 30 Warrants") to purchase at $2.00 per share an
aggregate of 2,500,000 shares of the SAT Common Stock, (2)
675,000 shares of the SAT Common Stock issuable upon the exercise
at $2.00 per share of Common Stock purchase warrants expiring
three years from the date of this Prospectus (the "April
__Warrants") and (3) 227,500 shares of the SAT Common Stock
issuable upon the exercise at $2.125 per share of Common Stock
purchase warrants granted or to be granted to employees of SAT or
subsidiaries thereof (the "Employee Warrants"). SAT will receive
gross proceeds of $6,573,125 if all of the foregoing Warrants
(excluding those to be granted) are exercised.
SAT is also offering, by this Prospectus, an aggregate of
2,500,000 shares of the SAT Common Stock issuable upon the
conversion of Convertible Senior Promissory Notes due November 8,
1999 (the "Convertible Notes"). If all of the Convertible Notes
are converted, SAT's obligation to repay loans aggregating
$5,000,000 in principal amount will be satisfied.
In addition, the stockholders named in the table under the
caption "Selling Stockholders" (the "Selling Stockholders") are
offering, by this Prospectus, an aggregate of 637,500 shares of
the SAT Common Stock consisting of (1) 325,000 shares of the SAT
Common Stock issuable upon the exercise at $2.00 per share of
April __ Warrants, (2) 200,000 shares of the SAT Common Stock
issuable upon the exercise at $2.00 per share of a Common Stock
purchase warrant expiring December 2, 1999 (the "December 2
Warrant"), (3) an aggregate of 50,000 shares of the SAT Common
Stock issuable upon the exercise at $1.8125 per share of Common
Stock purchase warrants expiring November 15, 1999 (the
"Directors Warrants") issued to the five directors of SAT who are
not employees of SAT or a subsidiary thereof as annual
compensation for such services, (4) an aggregate of 10,000 shares
of the SAT Common Stock issuable upon the exercise at $1.8125 per
share of Common Stock purchase warrants expiring November 15,
1999 (the "Lenders Warrants") issued to the two holders of the
Convertible Notes and (5) an aggregate of 52,500 shares issuable
upon the exercise at $2.125 per share of two of the Employee
Warrants because the holders are or were executive officers of
SAT. The Selling Stockholders have advised SAT that, when and if
they exercise any of the foregoing Warrants, they may, from time
to time, offer the 637,500 shares received upon exercise at the
prices then prevailing on the American Stock Exchange or in
isolated
transactions, at negotiated prices, with institutional or other
investors. SAT will not receive any of the proceeds from the
sales of the shares of the SAT Common Stock by the Selling
Stockholders. The following directors of SAT are among the
Selling Stockholders: Alan I. Goldman, John C. Lawn, Peter M.
Mark, Michael S. McCord and Lee S. Rosen.
Since January 2, 1992, the SAT Common Stock has been listed
on the American Stock Exchange. During the period January 2,
1992 through October 25, 1996, the SAT Common Stock traded under
the symbol "AAA." On October 28, 1996, SAT changed its name from
"U.S. Alcohol Testing of America, Inc." to "Substance Abuse
Technologies, Inc." As a result of such name change, commencing
October 28, 1996, the SAT Common Stock has traded under the
symbol "SAU." The closing price of the SAT Common Stock as
reported by such Exchange on March 26, 1997 was $1.4375.
---------------------
THE SHARES OFFERED BY THIS PROSPECTUS ARE SPECULATIVE IN THAT
THEY INVOLVE CERTAIN RISKS. SEE "RISK FACTORS" COMMENCING ON
PAGE 6 HEREOF FOR A DISCUSSION OF MATTERS WHICH SHOULD BE
CONSIDERED BY PURCHASERS OF THESE SHARES.
---------------------
Underwriting Proceeds Proceeds
Price to Discounts and to to Other
Public Commissions(4) Issuer Persons
-------- -------------- -------- -------
Per share of Common $1.4375 (1) 0 0 $1.4375(1)
Stock
Per Warrant share $2.008(2) 0 $2.008(2) 0
Per Note share $2.00(3) 0 $2.00(3) 0
Total for Common Stock $916,406(1) 0 0 $916,406(1)
Total for Warrant shares $6,833,438(2) 0 $6,833,438(2) 0
Total for Note shares $5,000,000(3) 0 $5,000,000(3) 0
<PAGE 1>
<FN>
_______________________
(1) Based on the closing sales price of the SAT Common Stock on
March 26, 1997 as reported by the American Stock Exchange.
(2) Based on the weighted average of the exercise prices of the
Warrants.
(3) Based on the conversion price of the Convertible Notes.
(4) Excludes expenses estimated at $55,000.
<TABLE/>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is April ___, 1997
<PAGE 2>
AVAILABLE INFORMATION
SAT is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, in accordance therewith, files reports, proxy and
information statements and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed with the
Commission can be inspected and copied at the public reference
facilities of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the following
regional offices of the Commission: 7 World Trade Center, Suite
1300, New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of this material relating to SAT can also be
obtained at prescribed rates from the Public Reference Section of
the Commission at its principal office at 450 Fifth Street N.W.,
Washington, D.C. 20549 The Commission maintains a Web site that
contains reports, proxy and information statements and
information regarding registrants that file electronically with
the Commission at the following Web site address:
http://www.sec.gov. Because the SAT Common Stock is traded on
the American Stock Exchange, reports, proxy and information
statements and other information concerning SAT can be inspected
by contacting the American Stock Exchange, Inc., 86 Trinity
Place, New York, New York 10006-1881.
SAT has filed with the Commission a Registration Statement
on Form S-3, File No. 333-19979 (the "Registration Statement"),
under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to (1) the offer by SAT of an aggregate of
5,902,500 shares of the SAT Common Stock issuable upon (a) the
exercise on and after July 1, 1997 at $2.00 per share of the June
30 Warrants to purchase an aggregate of 2,500,000 shares of the
SAT Common Stock, (b) the exercise on a quarterly basis at $2.00
per share of April ___ Warrants to purchase an aggregate of
675,000 shares of the SAT Common Stock, (c) the exercise on
anniversary dates of the respective dates of grant (see "Plan of
Distribution") at $2.125 per share of the Employee Warrants to
purchase an aggregate of 227,500 shares of the SAT Common Stock,
of which Employee Warrants expiring between September 11, 2000
and January 1, 2004 to purchase an aggregate of 105,000 shares
are currently outstanding and Employee Warrants to purchase an
aggregate of 122,500 shares are still to be granted, and (d) the
conversion on and after July 1, 1997 at $2.00 per share of the
Convertible Notes to acquire an aggregate of 2,500,000 shares of
the SAT Common Stock and (2) the offer by the Selling
Stockholders of (a) an aggregate of 637,500 shares of the SAT
Common Stock when and if the holders exercise the following
Common Stock purchase warrants, all of which are currently
exercisable: (i) April ___ Warrants at $2.00 per share to
purchase 325,000 shares of the SAT Common Stock, (ii) the
December 2 Warrant at $2.00 per share to purchase 200,000 shares
of the SAT Common Stock, (iii) the Directors Warrants at $1.8125
per share to purchase an aggregate of 50,000 shares of the SAT
Common Stock, (iv) the Lenders Warrants at $1.8125 per share to
purchase an aggregate of 10,000 shares of the SAT Common Stock
and (v) an aggregate of 52,500 shares of the SAT Common Stock
when and if two of the holders of the Employee Warrants who are
or were executive officers of SAT exercise at $2.125 per share
their Employee Warrants. The June
<PAGE 3>
30 Warrants, the April __ Warrants, the Employee Warrants, the December 2
Warrants, the Directors Warrants and the Lenders Warrants are collectively
referred to herein as the "Warrants."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this
Prospectus the following reports and registration statements of
the Company filed pursuant to Sections 12, 13 and 14 of the
Exchange Act:
1.(a) Annual Report on Form 10-K for the fiscal year ended March 31, 1996;
(b) Form 10-K/A amending the foregoing filed on September 23, 1996;
2.(a) Quarterly Report on Form 10-Q for the quarter ended June 30, 1996;
(b) Form 10-Q/A amending the foregoing filed on September 20, 1996;
3. Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
4. Quarterly Report on From 10-Q for the quarter ended December 31, 1996.
5.(a) Current Report on Form 8-K filed on June 5, 1996;
(b) Current Report on Form 8-K/A filed on August 5, 1996;
(c) Current Report on Form 8-K/A filed on August 27, 1996;
(d) Current Report on Form 8-K/A filed on September 23, 1996;
6. Notice of Annual Meeting of Stockholders and Proxy Statement dated
September 12, 1996; and
7. Registration Statement on Form 8-A, File No. 0-18938.
All reports and definitive proxy or information statements
filed pursuant to Sections 13(a), 13(c ), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the securities shall be
deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
<PAGE 4>
Any person receiving a copy of this Prospectus may obtain
without charge, upon written or oral request of such person, any
of the documents incorporated by reference herein, except for the
exhibits to such documents. Requests should be directed to
Robert Stutman, Chairman of Board and Chief Executive Officer,
Substance Abuse Technologies, Inc., at the following address:
4517 North West 31st Avenue, Ft. Lauderdale, Florida 33309 or
telephone number: (954) 739-9600. A reasonable fee for
duplicating and mailing will be charged for a copy of any exhibit
if such exhibit is requested. There will no be charge for any
requested exhibit which is incorporated by reference into this
Prospectus.
THE COMPANY
SAT was incorporated on April 15, 1987 under the laws of
Delaware to design, manufacture and market instruments which
measure blood alcohol concentration by breath sample and
analyzation. These operations are conducted by the Alcohol
Testing Products Division of SAT. Effective October 28, 1996,
the name of SAT was changed from U.S. Alcohol Testing of America,
Inc. to Substance Abuse Technologies, Inc. SAT maintains its
principal executive offices at 4517 N.W. 31st Avenue, Fort
Lauderdale, Florida 33309, and its telephone number is (954) 739-
9600.
SAT's subsidiaries or divisions conduct or conducted the following operations:
1. U.S. Drug Testing, Inc. ("U.S. Drug"), which is 67.0%
owned by SAT and whose common stock trades on the
Pacific Stock Exchange, is developing proprietary
systems that will test for drug use. SAT is currently
seeking to acquire the minority stock interests in U.S.
Drug by an offer of shares of the SAT Common Stock to
the minority stockholders of U.S. Drug as consideration
for their consent to a merger (the "U.S. Drug Merger")
of U.S. Drug with and into Drug Testing Acquisition
Corp., a wholly-owned subsidiary of SAT. There can be
no assurance that the U.S. Drug Merger will be
successfully consummated. If the U.S. Drug Merger is
consummated, Drug Testing Acquisition Corp. will be
merged into SAT and thereafter these operations will be
conducted as the Drug Testing Products Division of SAT.
2. Good Ideas Enterprises, Inc. ("Good Ideas"), which is
approximately 60.8% owned by SAT and whose common stock
trades in the over-the-counter market, designed,
marketed and distributed a variety of traditional toy
products for children of various ages. Good Ideas
currently conducts no operations. The Good Ideas
common stock was delisted from the Pacific Stock
Exchange effective January 1, 1997 and is currently
traded in the over-the-counter market. SAT is
currently seeking to acquire the minority stock
interests in Good Ideas by an offer of shares of the
SAT Common Stock to the minority stockholders of Good
Ideas as consideration for their consent to a merger
(the "Good Ideas Merger") of Good Ideas Acquisition
Corp., a wholly-owned subsidiary of SAT, with and into
Good Ideas. Good Ideas was treated as a
<PAGE 5>
discontinued operation in SAT's financial statements as of March 31,
1996. There can be no assurance that the Good Ideas
Merger will be consummated. SAT intends to sell Good
Ideas or its assets whether or not the Good Ideas
Merger is consummated and, if no acceptable offer for
its stock is made, to liquidate Good Ideas as soon as
the results of the consent solicitation for the Good
Ideas Merger are known.
3. ProActive Synergies, Inc. ("ProActive"), which is a
wholly-owned subsidiary of SAT incorporated in June
1995, provided single source services to assist
corporations in their hiring practices ranging from
substance abuse testing and background screening to
total program management. ProActive was merged into
SAT on December 31, 1996 and its operations are now
conducted as the Employer Services Division of SAT.
4. On May 21, 1996, SAT completed its acquisition of
Robert Stutman & Associates, Inc. ("RSA"), a provider
of corporate drug-free work place programs. Since
January 1996, RSA had been designing policies and
programs on substance abuse prevention for customers of
the ProActive subsidiary. RSA was merged into SAT on
December 31, 1996 and its operations are now conducted
as the Robert Stutman & Associates Consulting Division
of SAT.
5. Alconet, Inc. ("Alconet"), which is a wholly-owned
subsidiary acquired by SAT in March 1995, has developed
an alcohol testing network to upload test results and
information from various alcohol breath testing
devices. Alconet was merged into SAT on December 31,
1996 and its operations are now conducted as part of
the Alcohol Testing Products Division of SAT.
6. SAT currently operates a division called Biochemical
Toxicology Laboratories ("BioTox") which serves as a
clinical laboratory performing drug and alcohol
testing.
U.S. Rubber Recycling, Inc. ("USRR"), which was a wholly-
owned subsidiary of SAT, manufactured and marketed floor covering
products for office and industrial use from used truck and bus
tires. On April 30, 1996, USRR sold its assets to an
unaffiliated third party and discontinued operations. On
December 31, 1996, USRR was dissolved.
SAT, its subsidiaries and its divisions will be collectively
referred to herein as "the Company."
<PAGE 6>
RISK FACTORS
The shares offered hereby are speculative, involve a high
degree of risk and should not be purchased by anyone unable to
afford a loss of his entire investment. In analyzing this
offering, prospective investors should consider all of the
matters set forth below.
1. Operating Losses. The Company has sustained losses of
$48,476,903 from inception through December 31, 1996. Management
initiated cost reduction actions to reduce general and
administrative expenses in the fiscal year ended March 31, 1996
("fiscal 1996"), which prospective savings were offset by the
$903,000 in combined legal and other expenses paid or reimbursed
by SAT and incurred by both SAT and the dissident stockholder
group in the May to September 1995 consent solicitation contest,
$250,000 in settlement of a claim by two then Alconet officers
relating to their then employment and $397,000 of expenses
incurred prior to its acquisition by Alconet, a then subsidiary
acquired in March 1995 and not included in the Company's
operating results for the fiscal year ended March 31, 1995
("fiscal 1995"). Without the expenses of the consent
solicitation, management had hoped that the general and
administrative expenses could be reduced in the fiscal year
ending March 31, 1997 ("fiscal 1997"). During the nine months
ended December 31, 1996, such expenses increased by $350,000 to
$4,120,000 from the $3,770,000 in the comparable period in fiscal
1996. The increase was due primarily to the issuance of shares
of the SAT Common Stock valued at $575,000 for financial public
relations services. The Company also incurred approximately
$353,000 of legal expenses related to the taking private
transactions and a registration statement under the Securities
Act primarily relating to the shares underlying warrants,
relocation and plant closure costs of approximately $100,000 and
costs associated with the transition of management of
approximately $253,600. However, there can be no assurance that
management's expectations as to cost reductions will be realized
in the fiscal year ending March 31, 1998 ("fiscal 1998") or
thereafter. In addition, management has initiated an effort
through SAT's Employer Services Division (formerly ProActive, a
subsidiary) to tap the human resource provider market which it
believes can result in substantial revenues; however, selling and
marketing expenses increased to $859,000 in the nine months ended
December 31, 1996 as compared to $772,000 for the same period of
the prior year reflecting such increased marketing efforts. In
addition, management caused SAT to acquire RSA on May 21, 1996,
which company had been designing drug-free workplace policies and
programs for ProActive clients since January 1996; will continue
to attempt to sell its toy operations; and has sold on April 30,
1996 the assets of its rubber recycling operations, so that the
Company can concentrate on alcohol and drug testing and the
related operations of the Robert Stutman & Associates Consulting
Division and the Employer Services Division as its core
businesses. However, there can be no assurance that management
will receive what it considers to be a more acceptable offer for
Good Ideas than a current offer of $225,000 (less amounts
previously paid) for its remaining inventory. The Good Ideas
Board will attempt to close on such offer if still open as soon
as possible (Good Ideas is seeking a closing in April 1997) and,
whether or not such sale is consummated, will liquidate Good
Ideas as soon as possible after the date on which the results of
the consent solicitation for the Good Ideas Merger are known. In
addition, the decision to develop a saliva based drug testing
product, rather than complete first the urine based drug testing
product for
<PAGE 7>
marketing, will, in the opinion of management, enhance the Company's
future growth, but has delayed the receipt of any revenues from U.S.
Drug until the first quarter of 1999 the at the earliest, assuming
successful consummation of the research and development program, as
to which there can be no assurance. If the saliva based product
reaches a certain stage of development, which currently is not
anticipated until March 1998 at the earliest, management could consider
the feasibility of obtaining a marketing partner, which partner could
fund the later stages of product development, but also would decrease
future marketing revenues. In addition, because the bulk of the
research and development expenses will have been incurred at that
stage of the program, seeking a development partner may not be a
desirable action to take at that time. Management believes,
therefore, that it is currently too speculative to project any
revenues from this source. See the section "Lack of Funding May
End Possible Drug Testing Products" under this caption "Risk
Factors." Accordingly, it is management's belief, especially in
view of the significant losses in the fiscal year ended March 31,
1994 ("fiscal 1994"), fiscal 1995, fiscal 1996 and the first nine
months of fiscal 1997, that, despite these management programs,
the Company will not turn profitable in fiscal 1997. There can
be no assurance as to when the Company, without giving effect to
the results of operations of U.S. Drug, will turn profitable, if
at all, or when U.S. Drug will turn profitable.
2. Need for Financing. Management believes that, as a
result of (1) its recently consummated sale of the Convertible
Notes in the principal amount of $5,000,000, (2) the exercise of
Common Stock purchase warrants and a stock option during the
period January 1996 through September 30, 1996 resulting in gross
proceeds to SAT of $4,770,621, (3) the closing of a private
placement pursuant to Regulation D under the Securities Act in
December 1995 through February 1996 resulting in gross proceeds
of $3,750,000, (4) the contemplated future exercises of Common
Stock purchase warrants and (5) management's belief that, except
for the cash requirements of U.S. Drug, the Company will begin to
have a positive cash flow from operations during fiscal 1998, the
Company will be able to meet its cash requirements other than
those for U.S. Drug (which will require additional financing)
during the next 12 months. However, there can be no assurance
that this objective will be achieved, particularly as to the
estimate as to the Company achieving a positive cash flow from
its operations other than U.S. Drug. Such estimate is based
primarily on SAT continuing to develop new customers for its
Employer Services Division taking into account that it generally
takes 90 to 120 days from contract signing to implement
procedures and begin to receive revenues. Such estimate also
assumes that SAT will not incur significant non-recurring costs
as it has in recent years, that SAT has eliminated its
significant losses in the Alcohol Products Division and continues
to derive from its Robert Stutman & Associates Division
increasing revenues and sources of potential business for the
Company's other operations. In the event exercises are not
achieved at the levels expected and the Company's cash flow from
operations (other than U.S. Drug) does not turn positive, the
Company in such event would have to seek new financing even for
its non-U.S. Drug operations, which financing may not be
available or, if available, may not be on acceptable terms. In
addition, depending on market and other conditions relating to
the individual holder, there can be no assurance that the
outstanding Common Stock purchase warrants will be exercised and,
if exercised, when.
<PAGE 8>
In the event that the Company is unable to generate
sufficient cash flow from operations or from sources other than
operations as described in the preceding paragraph (which event,
in management's opinion, is not likely to occur based upon the
Company's past experience; however, there can be no assurance
that management will be successful in its financing efforts),
then the Company may have to reduce operations in order to
survive, thereby not only resulting in less cash from operations
currently, but also delaying future revenue growth. In such
event the market price of the SAT Common Stock is likely to drop,
not only discouraging the future exercises of SAT's warrants and
possibly discouraging potential new investors, but also
increasing the risk that a current investor in SAT may lose the
value of his, her or its investment.
3. Lack of Funding May End Possible Drug Testing Products.
U.S. Drug will require approximately $12,000,000 during the
period April 1, 1997 to December 31, 1998 to complete the
development of a saliva based testing product. Such estimate
reflects both product development and manufacturing build-out
costs, as well as general and administrative expenses. U.S. Drug
will attempt to reduce such estimated costs to approximately
$10,500,000 by leasing rather than purchasing certain items, but
there can be no assurance as to the extent, if any, that leasing
will be a viable option. Although SAT's management believes that
SAT can raise the necessary funds to complete this project,
failure to raise the funds will result in no drug testing
operations by the Company based on use of its own products. U.S.
Drug would, as a result, have to cease operations because it has
no other product to market or service to furnish. In addition,
the Employer Services Division would, in such circumstances, have
to continue to use external drug testing sources for its
services, thereby risking increased costs when and if the
laboratories currently performing such services increase their
charges.
Prior management had considered the alternative to financing
of U.S. Drug seeking a development partner which would share the
costs. However, current management is of the opinion that use of
one of the major pharmaceutical or medical diagnostic companies
to assist in the product development at this stage of development
risks giving confidential data to potential competitors that will
not be fully protected by confidentiality agreements and also may
result in marketing rights demands that would later reduce the
revenues to the Company assuming successful consummation of the
development program. Current management also believes that a
potential marketing partner cannot be obtained on an acceptable
basis until there is a working prototype for the instrument and
the disposables and certain preliminary clinical data is
obtained. Current management does not believe that the prototype
will be produced until March 1998 at the earliest and that, at
that stage of development, the greater part of the estimated
$10,500,000 in development and manufacturing build-out expenses
will already have been incurred, making it less beneficial to
obtain a development partner at that time. There can be no
assurance that a development/marketing partner can be obtained
upon acceptable terms, whether at that later date or at all.
4. Insufficient Authorized Shares. As of February 28,
1997, there were 50,000,000 shares of the SAT Common Stock
authorized, of which 36,030,591 shares were outstanding and the
SAT Board of Directors had authorized for issuance up to an
additional 17,788,712 shares, including
<PAGE 9>
an aggregate of 3,347,002 shares to be issued in its proposed
transactions to take two publicly-traded subsidiaries private.
Were all of such shares to be issued, there would be 53,819,303 shares
outstanding or 3,819,303 shares in excess of the authorized number.
However, as of February 28, 1997, Common Stock purchase warrants to
purchase an aggregate of 4,417,000 shares and the Convertible Notes
as to 2,500,000 shares are not currently exercisable or convertible.
All of the foregoing amounts as to the shares authorized to be
issued do not give effect to anti-dilution or other adjustment
provisions in certain of the Common Stock purchase warrants and
in the Convertible Notes. SAT has authorized the calling of a
Special Meeting of Stockholders (currently scheduled for May 5,
1997) for the purpose of increasing the authorized number of
shares of the SAT Common Stock from 50,000,000 to 65,000,000.
There can be no assurance that the SAT stockholders will approve
this increase, in which event, if 50,000,000 shares of the SAT
Common Stock are outstanding at the date on which a holder of a
Warrant seeks to exercise, or a holder of the Convertible Notes
seeks to convert, such holder will not be able to receive any
shares of the SAT Common Stock and SAT will not have shares for
any additional financing.
5. Competition. The Company has a variety of competitors
depending on the particular aspect of its business, many of which
have far greater financial resources and marketing staffs than
the Company. There can be no assurance that the Company will be
able to compete successfully with these companies.
Alcohol Testing
The alcohol detection equipment industry is highly
competitive. SAT competes with other small companies such as CMI
Inc., Intoximeters, Inc. and Lifeloc, Inc., which also offer
alcohol testing equipment. Although all of these competitors are
believed currently to have greater revenues than SAT from sales
of alcohol testing devices, management is of the opinion that
only CMI, Inc., which is a subsidiary of MPD, Inc., may have
greater financial resources than SAT. In addition, several
companies, including Hoffman-LaRoche, Inc. ("Roche") and STC
Technologies, Inc., offer an on-site screening saliva based
alcohol test. Roche has, and several of these other companies
may have, greater revenues and financial resources than the
Company.
Drug Testing
The Company has not received any revenues from U.S. Drug
because its products are still in the developmental stage.
Currently U.S. Drug is developing two products which will screen
for the presence of drugs of abuse, one which will utilize flow
immunosensor technology with urine samples as a medium of testing
and another which will utilize flow immunosensor technology with
saliva samples as a medium of testing. If the products are
developed, U.S. Drug will compete with many companies which
currently utilize urine samples as a medium of testing, such as
Syva (a division of Behring Diagnostics), Roche, Marion
Laboratories, Inc., Abbott Laboratories, Inc., Editek, Inc.,
Hycor Biomedical, Inc., Princeton Biomedical, Inc. and BioSite,
Inc., major pharmaceutical or medical diagnostic companies which
also provide substance abuse screening
<PAGE 10>
methods. To management's knowledge, no competitor is currently
offering a saliva based testing product on an "on site" basis for
drugs of abuse. However, management has been advised that at least
two and possibly more companies may have such product under development
and, accordingly, there can be no assurance that a competitor
will not offer such a product in the future. Even if no such
product is offered, U.S. Drug anticipates competition from other
substance abuse detection methods provided by the major companies
mentioned in this paragraph. If U.S. Drug successfully completes
development of first its saliva sample testing method and second
its urine sample testing method, as to which there can be no
assurance, it is not certain whether U.S. Drug will have the
financial resources to compete successfully with other companies
which have greater resources available to them without the
assistance of a major pharmaceutical or other company possessing
such resources. There can be no assurance that the assistance of
such a company can be obtained, especially because none is
currently being sought and management does not believe that it
could pursue successfully such a partner until the first quarter
of 1998 at the earliest. In addition, U.S. Drug's delay in
bringing a drug testing product to market may adversely affect
its future marketing efforts because of the name recognition
gained by competitors actively marketing a product during this
interim period.
Human Resource Provider Operations
The Employer Services Division (formerly the ProActive
Subsidiary) is a single source service provider, meaning that it
is a provider of both substance abuse testing services and
background screening services. A single source service provider
is a relatively new concept. Additionally, the Company, through
the acquisition in May 1996 of RSA (now the Robert Stutman &
Associates Consulting Division), can also provide customized loss
prevention services specifically designed to reduce the negative
effect of workplace substance abuse. The competition from single
source providers which the Employer Services Division currently
encounters is primarily from smaller local and regional
companies. To management's knowledge, currently there is no
single source provider on a national level, which is what the
Employer Services Division provides, and there are no providers
of customized programs and policies other than the Robert Stutman
& Associates Consulting Division. However, Laboratory
Corporation of America, through Med-Express, is currently
offering background screening services to corporations on a
limited basis. Although, the Employer Services Division has
experienced personnel in both the drug testing and investigative
arena, there can be no assurance that the Employer Services
Division will become successful in marketing its services as a
single source provider on a national level. In addition, the
Employer Services Division will face competition from other
companies which provide each of these services separately such as
the companies mentioned in the preceding subsections of this
section "Competition" under this caption "Risk Factors" as it
relates to substance abuse testing providers (including the
laboratories which are vendors to the Employer Services
Division), and local or regional investigative firms or private
investigators (including vendors to the Employer Services
Division) as it relates to background investigative services.
Assuming that the combined operations of the Robert Stutman &
Associates Consulting Division and the Employer Service
<PAGE 11>
Division achieve national status as a single source provider, there
can be no assurance that existing or new companies will not enter the
national marketplace to compete with these SAT operations.
6. No Common Stock Dividends. SAT has not paid any cash
dividends on the SAT Common Stock and, based on the Company's
cash requirements and continuing losses, does not anticipate
paying cash dividends on the SAT Common Stock in the foreseeable
future.
7. Depressive Effect on Market of Warrant or Option
Exercises, Untimely Sales by Selling Stockholders and Sales of
Shares Received upon Mergers. Any exercise of the outstanding
SAT Common Stock purchase warrants of SAT will increase the
shares available for public trading, which may depress the public
market price for the SAT Common Stock. Pursuant to a Prospectus
dated October 4, 1996 (the "October 4 Prospectus") SAT is
offering an aggregate of 2,000,000 shares of the SAT Common Stock
issuable upon the exercise at $2.00 per share of Common Stock
purchase warrants expiring December 17, 1999 (the "December 17
Warrants"), all of which shares could be reoffered by the holders
thereof. Because none of the holders is an "affiliate" of SAT
(as such term is defined in Rule 405 under the Securities Act),
Gold & Wachtel, LLP, general counsel to SAT, is of the opinion
that such holders will not require for resale of the underlying
shares a prospectus naming them as selling stockholders and
otherwise complying with Section 10(a)(3) of the Securities Act.
In addition, as of February 28, selling stockholders named in the
October 4 Prospectus were offering an aggregate of 4,051,756
shares of the SAT Common Stock when and if Common Stock purchase
warrants expiring between May 17, 1997 and July 18, 2003 are
exercised. The October 4 Prospectus also relates to the resale
by selling stockholders named therein (including the Chairman of
the Board and Chief Executive Officer of SAT) of an aggregate of
500,000 shares of the SAT Common Stock issued upon the
acquisition of RSA (which were part of 3,000,000 shares of the
SAT Common Stock (the "Acquisition Shares") registered by SAT
under the Securities Act in its Registration Statement o Form S-
1, File No. 33-43337 (the "January 1992 Registration Statement"),
for future acquisitions) and certain other shares previously
issued upon the exercise of Common Stock purchase warrants and a
stock option. This Prospectus relates to the issuance by SAT of
(a) up to an aggregate of 3,402,500 shares of the SAT Common
Stock issuable upon the exercise of the June 30 Warrants, most of
the April __ Warrants and most of the Employee Warrants and (b)
up to an aggregate of 2,500,000 shares issuable upon the
conversion of the Convertible Notes, all of which 5,902,500
shares could be reoffered by the holders thereof. Because none
of the holders of the Common Stock purchase warrants to purchase
an aggregate of 3,402,500 shares and neither of the holders of
the Convertible Notes is an "affiliate" of SAT (as such term is
defined in Rule 405 under the Securities Act), Gold & Wachtel,
LLP, general counsel to SAT, is of the opinion that such holders
will not require for resale of the underlying shares a prospectus
naming them as selling stockholders and otherwise complying with
Section 10(a)(3) of the Securities Act. This Prospectus also
relates to the offer by the Selling Stockholders of (x) an
aggregate of 637,500 shares when and if two of the April ___
Warrants, the December 2 Warrants, the Directors Warrants and the
Lenders Warrants are exercised and (y) an aggregate of 52,500
shares when and if the two holders of Employee Warrants who are
or were affiliates of SAT exercise such Employee Warrants and
offer to resell the underlying shares. Accordingly, because the
last of the SAT warrants
<PAGE 12>
described in this paragraph do not expire until July 18, 2003, the
potential exercises and conversions and the subsequent sales of the
underlying shares may act as an overhang on the market for the SAT
Common Stock for a long period. With the filing of the January 1997
Registration Statements, SAT has fulfilled the last of its registration
rights commitments. Such commitments relate to an aggregate of
16,256,920 shares of the SAT Common Stock. In addition, SAT may,
under certain circumstances, be required to amend the January
1992 Registration Statement so that the holders may reoffer an
aggregate of 967,321 shares of the Acquisition Shares already
issued (other than to the former RSA shareholders) and an
aggregate of 1,532,679 shares of the Acquisition Shares to be
issued with respect to future acquisitions by SAT.
As of February 28, 1997, the 4,051,756 shares described in
the preceding paragraph were reserved for issuance upon the
exercise of the following Common Stock purchase warrants: (a)
175,495 shares of SAT Common Stock issuable upon the exercise at
exercise prices ranging between $1.87 and $4.00 per share of
Common Stock purchase warrants expiring between September 16,
1997 and December 31, 1997; (b) 61,250 shares issuable upon the
exercise at exercise prices ranging between $1.0625 and $4.00 per
share of Common Stock purchase warrants expiring between May 17,
1997 and September 1, 1998; (c) 77,500 shares issuable upon the
exercise at exercise prices ranging between $2.00 and $2.50 per
share of Common Stock purchase warrants expiring between
September 1, 1998 and December 31, 2001; (d) 60,000 shares
issuable upon the exercise at $1.9375 per share of Common Stock
purchase warrants expiring November 15, 1998 issued to non-
employee directors of SAT and a consultant; (e) 500,000 shares
issuable upon the exercise of three Common Stock purchase
warrants expiring November 15, 1998 (as to 200,000 shares at
$1.9375 per share), November 15, 2000 (as to 150,000 shares at
$3.00 per share) and November 15, 2000 (as to 150,000 shares at
$2.00 per share) issued to a director in connection with his
services in a capacity other than as a director, including those
related to the then pending private placement pursuant to
Regulation D under the Securities Act; (f) 300,000 shares
issuable upon the exercise at $2.125 per share of a Common Stock
purchase warrant expiring April 17, 1999 issued to the same
director for other services not in his capacity as a director;
(g) 235,000 shares issuable upon the exercise at exercise prices
ranging between $1.875 and $2.8125 per share of Common Stock
purchase warrants expiring between August 27, 1998 and July 18,
2003 issued to employees of the Company; (h) 189,376 shares
issuable upon the exercise at $2.00 per share of a Common Stock
purchase warrant expiring March 31, 1999 issued to RSA as a
consultant to ProActive in consideration of its services rendered
to ProActive operations (the warrant being divided among the RSA
shareholders after the acquisition of RSA by SAT); (i) 3,125
shares issuable upon the exercise at $2.00 per share of a Common
Stock purchase warrant expiring December 13, 1999 issued to the
Chief Executive Officer for his prior services as a consultant to
SAT and ProActive; (j) 792,000 shares issuable upon the exercise
at $2.125 per share and 108,000 shares issuable upon the exercise
at $3.125 per share of Common Stock purchase warrants expiring
May 20, 1999 issued to the RSA shareholders as part of the RSA
purchase price; (k) 200,000 shares issuable upon the exercise at
$2.125 per share and 400,000 shares issuable upon the exercise at
$3.125 per share of a Common Stock purchase warrant expiring May
12, 2003 issued to the President of SAT; (l) 700,000 shares
issuable upon the exercise at $2.00 per share of a Common Stock
purchase warrant expiring February 26, 1999 issued to a
consultant to
<PAGE 13>
SAT for financial public relations services; (m) 100,000 shares
issuable upon the exercise at $2.17 per share of Common Stock
purchase warrants expiring October 19, 2000 issued to the placement
agents for a private placement pursuant to Regulation S under the
Securities Act; and (n) 150,000 shares issuable upon the exercise
at $2.25 per share of a Common Stock purchase warrant expiring
January 29, 2000 issued to an individual in connection with
settlement of a litigation against SAT. The 4,051,746 shares of
the SAT Common Stock issuable upon the exercise of the warrants
described in this paragraph have all been registered under the
Securities Act for resale by the holders thereof as described in
the preceding paragraph. All of the foregoing Common Stock purchase
warrants were granted at or above the fair market value of the SAT
Common Stock on the respective date of grant. There was also
reserved, as of February 28, 1997, 185,207 shares issuable upon the
conversion of the shares of the Class A Preferred Stock, $.01 par
value (the "Class A Preferred Stock"). If all of the 4,051,746 shares
issuable upon the exercises of the foregoing Common Stock purchase
warrants, the 185,207 shares issuable upon the conversion of the
Class A Preferred Stock, the aggregate of 500,000 and other outstanding
shares and the aggregate of 3,540,000 shares issuable upon the exercise
of the December 17 Warrants, the April __ Warrants, the Employee
Warrants, the December 2 Warrant, the Directors Warrants and the Lenders
Warrants as described in the preceding paragraph and, after July
1, 1997, the aggregate of 5,000,000 shares that could be issued
upon the conversions of the Convertible Notes and the exercises
of the June 30 Warrants, or a substantial number of the foregoing
shares, were publicly sold over a short time period, the market
price of the SAT Common Stock could decline significantly because
the market might lack the capacity to absorb a large number of
shares during a brief period. Such a decline in market price may
make the terms of any future financing more difficult for SAT to
consummate on a favorable basis.
To the extent that the Good Ideas Merger is consummated,
557,524 shares of the SAT Common Stock will be issued to the
minority stockholders of Good Ideas. To the extent that the U.S.
Drug Merger is consummated, 2,789,478 shares of the SAT Common
Stock will be issued to the minority stockholders of U.S. Drug.
The aggregate of 3,347,002 shares of the SAT Common Stock issued
on such transactions will, with limited exceptions, be freely
tradable and, if a substantial number of these shares were
offered for sale at the same time, such offerings could have a
similar adverse impact as described in the preceding paragraph.
8. Technological Changes. The substance abuse testing
industry is a technologically sensitive industry in that
companies are constantly developing new methods and making
changes to current methods for substance abuse detection in order
to remain competitive. SAT competes, and, when its development
stage for a saliva based test and a urine based test are
completed, U.S. Drug will compete, with larger companies such as
those named under the section "Competition" under this caption
"Risk Factors," many of which have substantially greater
financial resources available to them to invest in the research
and development of their products than SAT and U.S. Drug. These
competitors may develop products in the future which may render
SAT's and U.S. Drug's products obsolete or non-competitive from a
pricing point of view. To remain competitive, SAT and U.S. Drug
may require substantial financial resources for personnel and
other costs to conduct research
<PAGE 14>
and update current products to reflect the technological advances;
however, such financial resources may not be available. See the
section "Need for Financing" under this caption "Risk Factors."
9. Market Limitation for Alcohol Testing Products. The
potential markets for SAT's alcohol testing products may be
substantially limited to the ones in which it currently sells -
law enforcement, correctional facilities, medical and clinical
facilities, alcohol treatment centers and emergency rooms. This
market insofar as alcohol testing is concerned may be saturated
and the opportunity for growth limited; however, management of
SAT believes that the demand for alcohol testing could grow in
the industrial market, in which SAT does some current selling, on
a broader basis as did the demand for drug testing at an earlier
date. There can be no assurance that such growth will occur or
that, if the growth occurs, SAT will successfully penetrate the
industrial market.
10. Possible Market Making Restrictions. Unless granted an
exemption by the Commission from Rule 10b-6 under the Exchange
Act, any soliciting broker-dealers will be prohibited from
engaging in any market making activities regarding SAT's
securities for two business days prior to any solicitation
activity on behalf of the Selling Stockholders or the termination
of any right that soliciting broker-dealers may have to receive a
fee for the exercise of the Warrants following such solicitation.
As a result, soliciting broker-dealers may be unable to continue
to provide a market for SAT's securities during certain periods
while the Warrants or the Options are exercisable.
DILUTION
As of December 31, 1996, there were 36,030,591 shares of the
SAT Common Stock outstanding and the net tangible book value of
SAT was $795,676 or $.02 per share of the SAT Common Stock. Net
tangible book value per share of the SAT Common Stock is the
tangible assets of SAT less all liabilities, minority interests
in subsidiaries and the Class A Preferred Stock liquidation
preference divided by the number of shares of the SAT Common
Stock outstanding.
If all shares of the Class A Preferred Stock were converted
into shares of the SAT Common Stock and the U.S. Drug Merger and
the Good Ideas Merger were completed, SAT would have 39,562,800
shares of the SAT Common Stock outstanding with a net tangible
book value of $1,855,989 or $.05 per share of the SAT Common
Stock.
If all of the outstanding Common Stock purchase warrants to
purchase an aggregate of 9,969,246 shares were exercised; if the
U.S. Drug Merger and the Good Ideas Merger were completed
resulting in the issuance of an aggregate of 3,347,002 shares of
the SAT Common Stock; if the 74,285 and 243,000 shares of the SAT
Common Stock issuable upon the exercise of Common Stock purchase
warrants at $2.115 and $4.629, respectively, per share, issued in
connection with the mergers were exercised; and an aggregate of
2,500,000 shares were issued on the conversion of the Convertible
Notes (without giving effect to anti-dilution and market price
adjustments), SAT would
<PAGE 15>
have 52,349,332 shares of the SAT Common Stock outstanding with
a net tangible book value of $30,291,103 or $.58 per share of
the SAT Common Stock.
The following table reflects the maximum potential dilution
that may be incurred by the various holders of the Warrants and
the Convertible Notes being registered herein after the exercise
of their respective Warrants and the conversion of their
Convertible Notes and assuming the issuance of the shares in
connection with the proposed mergers and the conversion of the
Class A Preferred Stock. Assuming completion of these
transactions, SAT would have outstanding 46,102,800 shares of
Common Stock and have a net book value of $14,459,739 or $.32 per
share of the SAT Common Stock.
Net tangible book value per share after the
transaction described in the preceeding paragraph $ .32
Dilution per share to $1.8125 Warrantholders $1.4925
Dilution per share to $2.00 Convertible Noteholders $1.68
Dilution per share to $2.00 Warrantholders $1.68
Dilution per share to $2.125 Warrantholders $1.905
Shares of the SAT Common Stock issuable upon the exercise of
the Warrants at the following exercise prices per share:
60,000 at $1.8125, 3,700,000 at $2.00 and 280,000 at $2.125 and shares of
SAT Common Stock issuable upon conversion of the Convertible Notes,
2,500,000 at $2.00 per share.
The actual dilution will be determined based on the actual
shares issued and the proceeds received therefrom.
Those investors purchasing shares of the SAT Common Stock
from the Selling Stockholders would have a dilution of $1.1175
per share based upon a market price of $1.4375 on March 26, 1997.
USE OF PROCEEDS
The amount of the net proceeds arising from the exercises of
the Warrants is not ascertainable because there can be no
assurance of any such exercises. SAT will use these proceeds, if
any, for general corporate purposes including salaries and
working capital in no allocable order of priority. If all of the
Warrants which are outstanding as to which the underlying shares
are being offered pursuant to this Prospectus, whether by SAT or
by the Selling Stockholders, were exercised, SAT would realize
gross proceeds of $8,103,750. If less than all of the Warrants
are exercised, the amount available for working capital would be
reduced. SAT will receive no proceeds from the sales by the
Selling Stockholders of the shares of the SAT Common Stock to be
offered by them. SAT will receive no proceeds upon the
conversion of the Convertible Notes; however, SAT's obligation to
pay loans aggregating $5,000,000 in principal amount will be
cancelled.
<PAGE 16>
SELLING STOCKHOLDERS
The table below sets forth (1) the number of shares of the
SAT Common Stock (an aggregate of 637,500) registered under the
Securities Act pursuant to the Registration Statement and to be
offered by the Selling Stockholders named in the following table
pursuant to this Prospectus; (2) the number of shares of the SAT
Common Stock owned beneficially by each such Selling Stockholder
as of February 28, 1997 before and after such offering; and (3)
the percentage of beneficial ownership before and after the
offering. Because April ___ Warrants to purchase 675,000 shares
of the SAT Common Stock is not currently exercisable as to such
shares (see the paragraph succeeding the table), Gold & Wachtel,
LLP, general counsel to SAT, is of the opinion that these shares
may be registered under the Securities Act pursuant to the
Registration Statement for issuance by SAT. Because the holder
is not, nor are any persons associated with such holder, an
affiliate of SAT as such term is defined in Rule 405 under the
Securities Act, in the opinion of Gold and Wachtel, LLP, general
counsel to SAT, the holder is not required, upon resale after
exercise, to deliver a prospectus naming such holder as a Selling
Stockholder and otherwise complying with Section 10(a)(3) under
the Securities Act.
Number of Shares Percentage (1)
---------------- --------------
Name Before Offered After Before After
- ---- ------ ------- ----- ------ ----
Alan I. Goldman(2) 20,000(3) 10,000 10,000 nil nil
John C. Lawn(2) 20,000(3) 10,000 10,000 nil nil
Peter M. Mark(2) 587,600(3) 10,000 577,600 1.6% 1.6%
Michael S. McCord(2) 214,441(4) 10,000 204,441 nil nil
Lee S. Rosen(2) 1,478,648(5) 210,000 1,268,648 4.0% 3.4%
Capital Strategists, 1,000,000(6) 325,000 675,000 2.7% 1.8%
Inc
Steven A. Cohen 1,748,100(7) 5,000 1,743,100 4.9% 4.8%
S.A.C. Capital
Associates, LLC 508,100(8) 5,000 503,100 1.4% 1.4%
Robert Muccini(9) 40,000(10) 40,000 -0- nil -0-
Dennis Wittman(9) 12,500(11) 12,500 -0- nil -0-
<PAGE 17>
_____________________
(1) The percentages computed in this column of the table are
based upon 36,030,591 shares of the SAT Common Stock
outstanding on February 28, 1997 and effect being given,
where appropriate, pursuant to Rule 13d-3(d)(1)(i) under
the Exchange Act, to shares issuable upon the exercise of
Warrants which are currently exercisable or exercisable
within 60 days of February 28, 1997.
(2) A director of SAT.
(3) The shares reported in the table as being beneficially
owned reflect or include (a) 10,000 shares of the SAT
Common Stock issuable upon the exercise at $1.9375 per
share of a Common Stock purchase warrant expiring November
15, 1998 (the "November 15 Warrant") and (b) 10,000 shares
of the SAT Common Stock issuable at $1.8125 per share upon
the exercise of a Directors Warrant, both issued to the
holder as a director of SAT who is not employed by SAT or
a subsidiary thereof. The holder is offering only the
shares described in (b) pursuant to this Prospectus and is
offering the shares described in (a) pursuant to the
October 4 Prospectus.
(4) The shares reported in the table as being beneficially
owned include (a) 10,000 shares of the SAT Common Stock
issuable upon the exercise at $1.9375 per share of a
Common Stock purchase warrant expiring November 15, 1998
issued to Mr. McCord as a consultant to the Board of
Directors of SAT and (b) 10,000 shares of the SAT Common
Stock issuable at $1.8125 per share upon the exercise of a
Directors Warrant issued to Mr. McCord on the same basis
as described in Note (3) to this table. He is offering
only the shares described in (b) pursuant to this
Prospectus and is offering the shares described in (a)
pursuant to the October 4 Prospectus.
(5) The shares reported in the table as being beneficially
owned include (a) 200,000 shares of the SAT Common Stock
issuable at $2.00 per share upon the exercise of the
December 2 Warrant; (b) 10,000 shares of the SAT Common
Stock issuable upon the exercise at $1.9375 per share of a
November 15 Warrant issued to Mr. Rosen as a director on
the same basis as described in Note (3) to this table; (c)
10,000 shares of the SAT Common Stock issuable upon the
exercise at $1.8125 per share of a Directors Warrant
issued to him as a director on the same basis as described
in Note (3) to the table; (d) 200,000 shares of the SAT
Common Stock issuable upon the exercise at $1.9375 per
share of a Common Stock purchase warrant expiring November
15, 1998; (e) 150,000 shares of the SAT Common Stock
issuable upon the exercise at $3.00 per share of a Common
Stock purchase warrant expiring November 15, 2000; (f)
150,000 shares of the SAT Common Stock issuable upon the
exercise at $2.00 per share of a Common Stock purchase
warrant expiring November 15, 2000; and (g) 300,000 shares
of the SAT Common Stock issuable upon the exercise at
$3.125 per share of a Common Stock purchase warrant
expiring April 17, 1999. Mr.
<PAGE 18>
Rosen is offering only the shares described in (a) and
(c) pursuant to this Prospectus and is offering all of the
other shares pursuant to the October 4 Prospectus.
(6) The shares reported in the table as being beneficially
owned reflect the shares issuable upon the exercise of the
April ___ Warrants. The holder is only offering pursuant
to this Prospectus 325,000 shares of the SAT Common Stock
because the two April ___ Warrants as to such shares are
currently exercisable and, accordingly, do not meet all of
the standards set forth in the introductory paragraph to
this table.
(7) The shares reported in the table as being beneficially
owned reflect (a) 1,743,100 shares of the SAT Common Stock
and (b) 5,000 shares of the SAT Common Stock issuable at
$1.8125 per share upon the exercise of a Lenders Warrant.
The shares reported in the table do not reflect (x)
2,500,000 shares of the SAT Common Stock issuable upon the
conversion of a Convertible Note and (y) 1,250,000 shares
of the SAT Common Stock issuable at $2.00 per share upon
the exercise of a June 30 Warrant because neither the
Convertible Note is convertible, nor the June 30 Warrant
is exercisable, at February 28, 1997 or within 60 days
after February 28, 1997. The holder is offering only the
shares described in (b) pursuant to this Prospectus. Mr.
Cohen filed a Schedule 13D, as amended, with S.A.C Capital
Advisors, LLC because their joint beneficial ownership may
constitute ownership by a "group" as such term is defined
in Rule 13d-5(b) under the Exchange Act. Based on
holders' advice to SAT and the subsequent grants by SAT,
the group beneficially owned an aggregate of 2,256,200
shares of the Common Stock or 6.3% of the outstanding
shares at February 28, 1997.
(8) The shares reported in the table as being beneficially
owned reflect (a) 503,100 shares of the SAT Common Stock
and (b) 5,000 shares of the SAT Common Stock issuable at
$1.8125 per share upon the exercise of a Lenders Warrant.
A Schedule 13D, as amended, reported that S.A.C. Capital
Associates, LLC, an Anguillan limited liability company,
acquired the foregoing securities, but, because S.A.C.
Capital Advisors, LLC, a Delaware limited liability
company, has voting and dispositive power over the
securities, the latter was deemed to be the beneficial
owner thereof. The shares reported in the table do not
reflect (x) 2,500,000 shares of the SAT Common Stock
issuable upon the conversion of a Convertible Note and (y)
1,250,000 shares of the SAT Common Stock issuable at $2.00
per share upon the exercise of a June 30 Warrant because
neither the Convertible Note is convertible, nor the June
30 Warrant is exercisable, at February 28, 1997 or within
60 days after January 31, 1997. The holder is offering
only the shares described in (b) pursuant to this
Prospectus. See Note (7) to this table for information as
to group ownership.
(9) Mr. Wittman was, from September 5, 1996 to February 25,
1997 the Vice President, Finance, Treasurer, Chief
Financial Officer and Chief Accounting Officer of SAT.
Effective February 25, 1997, Mr. Muccini was elected or
designated to all of Mr. Wittman's officerships or officer
designations. Mr. Wittman resigned as a result of the
relocation of the Finance and Accounting Department from
the former corporate headquarters in Rancho Cucamonga,
California to the new corporate headquarters in Fort
Lauderdale, Florida. See "Material Changes."
<PAGE 19>
(10) The shares reported in the table as being beneficially
owned and being offered pursuant to this Prospectus
reflect shares of the SAT Common Stock issuable at $2.125
per share upon the exercise of an Employee Warrant.
(11) The shares reported in the table as being beneficially
owned and being offered pursuant to this Prospectus
reflect shares of the SAT Common Stock issuable at $2.125
per share upon the exercise of an Employee Warrant. The
number of shares was reduced from 50,000 to 12,500 and the
Employee Warrant made immediately exercisable when Mr.
Wittman resigned as described in Note (9) to this table.
PLAN OF DISTRIBUTION
Each of the holders of (1) the Directors Warrants to
purchase an aggregate of 50,000 shares of the SAT Common Stock,
(2) the Lenders Warrants to purchase an aggregate of 10,000
shares of the SAT Common Stock, (3) the December 2 Warrant to
purchase 200,000 shares of the SAT Common Stock, (4) April ___
Warrants to purchase an aggregate of 325,000 shares of the SAT
Common Stock and (5) Employee Warrants to purchase an aggregate
of 52,500 shares of the SAT Common Stock has advised SAT that,
when and if he or it exercises any of the foregoing Warrants, all
of which except the Employee Warrants are currently exercisable,
the holder may, from time to time, offer these shares pursuant to
the Prospectus as a Selling Stockholder at the prices then
prevailing on the American Stock Exchange or in isolated
transactions, at negotiated prices, with institutional or other
investors and that the holder has engaged no underwriter to act
for him, or it, although sales may be effected for each of such
holders through his or its personal broker-dealer.
In addition, the holders of the June 30 Warrants, the April
___ Warrants (as to 675,000 shares), the Employee Warrants (as to
105,000 shares) and the Convertible Notes have advised SAT that,
when and if they exercise or convert their respective securities,
they may, from time to time, sell the underlying shares of the
SAT Common Stock in the manner described in the preceding
paragraph. These securities become exercisable or convertible as
follows:
(1) The June 30 Warrants do not become exercisable, nor may
the holders convert the Convertible Notes, until July
1, 1997.
(2) The April ___ Warrants were granted to Capital
Strategists, Inc. as compensation for financial public
relations services. April ___ Warrants to purchase
325,000 shares of the SAT Common Stock is exercisable
immediately and the underlying shares are being offered
by the holder as a Selling Stockholder pursuant to this
Prospectus as described in the preceding paragraph.
The other April ___ Warrants become exercisable as to
225,000 shares of the SAT Common Stock as of each
quarter commencing June 1, 1997.
<PAGE 20>
(3) Each of the Employee Warrants first becomes or, when
granted, will first become exercisable as to a quarter
of the shares of the SAT Common Stock subject thereto
on the first anniversary of its date of grant and
thereafter will become exercisable as to a quarter of
the shares on the three successive anniversary dates.
Each of the Employee Warrants expires or, when granted,
will expire as to each installment three years after
the date the Employee Warrant becomes exercisable as to
such installment.
The 5,780,000 shares of the SAT Common Stock underlying the
June 30 Warrants, the April ___ Warrants (as to 675,000 shares),
the Employee Warrants (as to 105,000 shares) and the Convertible
Notes have been registered under the Securities Act pursuant to
this Registration Statement for issuance by SAT because no such
security is currently exercisable or convertible. Because none
of the holders of the foregoing Warrants and the Convertible
Notes is an affiliate of SAT as such term is defined in Rule 405
under the Securities Act, such holders will not, in the opinion
of Gold & Wachtel, LLP, general counsel to SAT, require, after
exercise or conversion in order to resell, a prospectus (a)
naming him or it as a Selling Stockholder with respect to the
shares of the SAT Common Stock issuable upon the exercise or
conversion and (b) otherwise complying with Section 10(a)(3) of
the Securities Act.
SAT, its officers, directors, affiliates and the Selling
Stockholders are obligated to take such steps as may be necessary
to ensure that the offer and sale by such parties of the 637,500
shares of the SAT Common Stock offered by this Prospectus (the
"Distribution") shall comply with the requirements of the federal
securities laws, including Regulation M under the Securities Act.
In general, Regulation M under the Securities Act prohibits
any person, Selling Stockholder or a broker-dealer acting for
such Selling Stockholder from directly or indirectly bidding for,
or purchasing any shares of the SAT Common Stock or attempting to
induce any person to bid for or to purchase shares of the SAT
Common Stock until after he, she or it has completed his, her or
its participation in the Distribution. Rule 102 sets forth
certain exceptions for the Selling Stockholder including
exercising a Common Stock purchase warrant.
SAT is bearing all costs relating to the registration of the
shares of the SAT Common Stock offered by this Prospectus (other
than fees and expenses, if any, of counsel or other advisers to
the Selling Stockholders). Any commissions, discounts or other
fees payable to broker-dealers in connection with any sale of the
SAT Common Stock will be borne by the Selling Stockholder selling
such shares.
<PAGE 21>
LEGAL MATTERS
The validity of the securities offered hereby will be passed
upon for the Company by Gold & Wachtel, LLP, New York, New York.
MATERIAL CHANGES
On November 8, 1996, SAT entered into a Convertible Loan and
Warrant Agreement (the "Loan Agreement") with Steven A. Cohen and
S.A.C. Capital Associates, LLC, an Anguilla limited liability
company (collectively the "Lenders"), pursuant to which SAT
borrowed $5,000,000 from the Lenders (the "Loan"). See Notes (7)
and (8) to the table under "Selling Stockholders" for information
as to the prior beneficial ownership by the Lenders of an
aggregate of 2,342,200 shares of the SAT Common Stock. The Loan
is evidenced by promissory notes (previously defined as the
"Convertible Notes") which are due and payable on November 8,
1999 and bear interest at the rate of seven percent per annum,
payable quarterly. The Convertible Notes may not be prepaid
without the consent of the Lenders and may not be assigned or
negotiated without the consent of SAT. The Convertible Notes are
convertible into shares of the SAT Common Stock at any time after
July 1, 1997 at a conversion price (the "Conversion Price") of
$2.00 per share. The Conversion Price is subject to a downward
adjustment (the "Market Price Adjustment") during the period from
May 1, 1997 through May 1, 1998 based on the average market price
for shares of the SAT Common Stock over the preceding 65 trading
days excluding the date that either Lender sold shares of the
SAT Common Stock in an Open Market Transaction (as hereinafter
defined) and the trading days that are within 21 days of such
date, provided that the Conversion Price will not be reduced
below $1.375 as a result of this adjustment.
In addition, the Conversion Price is subject to reduction
pursuant to certain anti-dilution provisions, if SAT sells shares
at less than the Conversion Price, or issues options or
convertible securities which can be exercised at a price less
than the Conversion Price.
Under the Loan Agreement, as long as any portion of the
Convertible Notes are outstanding and thereafter as long as
certain conditions are met, the Lenders may designate one person
to be nominated by SAT for election to SAT's Board of Directors
or may exercise observer rights at meetings of the Board of
Directors. The Agreement also imposes certain negative and
affirmative covenants on SAT as long as any balance remains
outstanding under the Convertible Notes. These covenants, among
other matters, restrict SAT's ability to engage in acquisitions
(other that the proposed acquisitions of SAT's two majority owned
subsidiaries, Good Ideas and U.S. Drug) of companies that are not
engaged exclusively in, or engaged in a business directly related
to, the business of substance abuse testing, to pay dividends, to
incur indebtedness (as defined in the Loan Agreement) senior to
the Convertible Notes, to engage in certain related party
transactions, to assign the rights in certain intellectual
property, to terminate the employment of SAT's chief executive
officer, to incur other indebtedness (as defined in the Loan
Agreement) in excess of $1,000,000, to
<PAGE 22>
sell or otherwise dispose of any subsidiary or division of the
corporation (with the exception of Good Ideas), to engage in other
transactions with a value in excess of $1,000,000, and to amend SAT's
Certificate of Incorporation or Bylaws or enter into any agreement
that would adversely affect the rights and priorities of the Lenders.
The Lenders also have the right to purchase additional shares of the
Common Stock in any capital raising transaction through any
public or private sale of shares of the SAT Common Stock effected
by SAT and to acquire additional shares under certain other
circumstances.
In addition, pursuant to the Loan Agreement, the Lenders
purchased for $1,000 the June 30 Warrants which consists of
Warrants to purchase an aggregate of 2,500,000 shares of the SAT
Common Stock at an exercise price of $2.00 per share. The June
30 Warrants are not exercisable to any extent before July 1, 1997
and thereafter are exercisable only to the extent that, when
added together with any other shares beneficially owned by the
Lenders, would not result in the Lenders being deemed to be
greater than ten percent stockholders subject to Section 16 of
the Exchange Act . Notwithstanding the foregoing, the Warrants
become fully exercisable on July 1, 1997 and expire on June 30,
2000. The number of shares of the SAT Common Stock which may be
purchased pursuant to the June 30 Warrants is subject to a
downward adjustment, but not less than 2,000,000 shares, in the
event that the Conversion Price of the Notes is reduced, such
that the number of shares purchasable pursuant to the June 30
Warrants will be reduced at a rate of one share for each 2.2727
additional shares of the SAT Common Stock which may be obtained
upon conversion of the Convertible Notes as a result of any
Market Price Adjustment. In addition, the exercise price is
subject to reduction and the number of shares that may be
purchased under the June 30 Warrants is subject to increase
pursuant to certain antidilution provisions if SAT sells shares
at less than the exercise price. The June 30 Warrants are
transferable subject to compliance with the Securities Act.
Under the Loan Agreement, SAT agreed promptly to register
under the Securities Act of 1933 the shares issuable upon the
conversion of the Convertible Notes and the exercise of the June
30 Warrants. This Registration Statement was filed to fulfill
such commitment. In the event the registration statement had not
been filed and SAT did not use its best efforts to have the
registration statement declared effective by February 6, 1997,
SAT would have had to pay the Lenders a cash penalty equal to ten
percent of the outstanding principal under the Convertible Notes.
In addition, during times (if any) when SAT has not maintained
the registration statement in effect for a specified period or
has failed to keep current any prospectus forming a part of such
registration statement, SAT must pay the Lenders a cash penalty
equal to ten percent of the outstanding principal under the
Convertible Notes. Furthermore, the exercise price of the June
30 Warrants may be paid by using shares otherwise issuable
thereunder if SAT does not comply with certain registration
requirements. SAT and the Lenders entered into a Registration
Rights Agreement, pursuant to which the Lenders have "piggyback"
rights to include shares in any registration statement filed by
SAT, and on one occasion to demand registration of shares if the
shares issued upon conversion of the Convertible Notes or
exercise of the June 30 Warrants are not freely tradable. The
right to demand registration may be assigned to a transferee of
the securities.
<PAGE 23>
The Lenders have, as part of the Loan Agreement, agreed with
SAT to certain volume restrictions on Open Market Transactions
(as defined below) involving sales of the shares of the SAT
Common Stock owned by them as of the date of the Agreement after
the first 1,000,000 owned shares sold in Open Market
Transactions. After the sale of 1,000,000 such owned shares in
Open Market Transaction, the Lenders have agreed that, unless
waived by SAT, they will not sell any of the remaining owned
shares in Open Market Transactions unless: (i) the sales price
for such shares (before any fees or commissions) is equal to or
greater than the "Limit Price" (defined in the Loan Agreement as
$2.00 per share subject to certain adjustments), (ii) the volume
of shares sold by the Lenders on any trading day at a price below
the Limit Price (before any fees or commissions) does not exceed
25% of the average daily trading volume of the SAT Common Stock
reported for the five trading days immediately preceding the date
of such sale, provided that any sales by the Lenders during the
immediately preceding five trading days at a price below the
Limit Price shall be excluded from the calculation of the average
daily trading volume, or (iii) such shares are sold at the best
offer price. For purposes of the Loan Agreement, the term "Open
Market Transactions" means transactions that are reported on the
consolidated quotation system other than block trades (as defined
under Exchange Act Rule 10b-18). These volume sales limitations
do not extend to any other transactions in the shares of the SAT
Common Stock or to any shares of the SAT Common Stock that the
Lenders may acquire after November 8, 1996.
As a result of the five non-employee directors receiving the
Directors Warrants as part of their annual compensation, the
Lenders received the Lenders Warrants. Pursuant to the Loan
Agreement, so long as the Convertible Notes are outstanding,
whenever the directors receive Common Stock purchase warrants to
purchase shares of the Common Stock as compensation for serving
in such capacity, each of the Lenders is entitled to receive a
Common Stock purchase warrant to purchase one half of the shares
of the SAT Common Stock subject to the director's warrant, the
other terms and conditions of the Lender's Warrant to be similar
to those of the director's warrant.
Effective as of August 1, 1996, SAT relocated its executive
offices from Rancho Cucamonga, California to Ft. Lauderdale,
Florida. On November 14, 1996, Linda H. Masterson agreed to
relinquish the title and duties as SAT's Chief Operating Officer
while retaining the title and duties of President of SAT. Ms.
Masterson will remain based in California with primary
responsibility for bringing U.S. Drug's products to market,
restructuring SAT's alcohol testing business and supervising the
day-to-day operations of SAT's BioTox Division. Ms. Masterson
is a member of a management committee formed in November, 1996
whose other members are SAT's Chief Executive Officer, its Chief
Financial Officer, its Vice President, Sales and Marketing and
two other designated persons.
As a condition precedent to making its loans, the Lenders
required that Robert M. Stutman, the Chairman of the Board, the
Chief Executive Officer and a director of SAT, and Brian Stutman,
Vice President, Sales and Marketing of SAT since December 3,
1996, surrender their secured position with respect to their
promissory notes due May 21, 1997 (the "Promissory Notes") in the
<PAGE 24>
principal amount of $239,760 and $160,240, respectively, which
they had received on May 21, 1996 as partial payment for their
share ownership in RSA, and agree that the Promissory Notes would
not be paid prior to the Convertible Notes except through the
issuance of shares of the SAT Common Stock. In consideration of
this sacrifice, the Board of Directors of SAT authorized on
December 3, 1996 that the exercise price of $3.135 per share be
reduced to $2.125 per share on Robert Stutman's Common Stock
purchase warrant expiring May 20, 1999 to purchase 474,750 shares
of the SAT Common Stock and on Brian Stutman's Common Stock
purchase warrant also expiring May 20, 1999 to purchase 317,250
shares of the SAT Common Stock. On the same day, the Messrs.
Stutman surrendered their Promissory Notes, the principal amount
and interest thereon being used to allow Robert Stutman to
exercise his Common Stock purchase warrant expiring December 13,
1998 for 127,500 shares as to 124,375 shares and Brian Stutman to
exercise his Common Stock purchase warrant also expiring December
13, 1998 as to all 72,500 shares subject thereto and his Common
Stock purchase warrant expiring March 31, 1999 for 70,500 shares
as 10,624 shares, thereby permitting SAT to cancel an aggregate
of $415,000 in indebtedness to them ($400,000 in principal and
$15,000 in interest).
On June 20, 1996, the SAT Board authorized SAT to engage a
consultant for whom the consideration was to be 200,000 shares of
the SAT Common Stock. Mr. Rosen fulfilled SAT's obligation to
such consultant by delivery of his own shares. In consideration
thereof, on December 3, 1996, the SAT Board authorized (1) Mr.
Rosen's exercise of a Common Stock purchase warrant expiring
November 15, 1998 as to 200,000 shares of the 400,000 shares of
the SAT Common Stock subject thereto, the consideration therefor
being the value of the consultant's services (i.e., the product
of 200,000 shares and the closing sales price of $2.875 per share
on June 20, 1996 or $575,000); (2) the issuance to Mr. Rosen of
the December 2 Warrant to purchase 200,000 shares of the SAT
Common Stock at $2.00 per share; and (3) a reduction in the
exercise price of his Common Stock purchase warrant expiring
November 15, 2000 to purchase 150,000 shares of the SAT Common
Stock from $4.00 to $2.00 per share.
COMMISSION POSITION ON INDEMNIFICATION
The SAT Board of Directors has authorized indemnification of
directors and officers of SAT to the fullest extent permitted by
Delaware law.
Section 145(a) of the GCL permits a corporation to indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation), by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with
such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful.
Under Section 145(b) of the GCL, a corporation also may
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by
him or her in connection with the defense or settlement of such
action or suit if he or she acted in good
<PAGE 25>
faith and in a manner he or she reasonably believed to be in, or not
opposed to the best interests of the corporation. However, in
such an action by or on behalf of a corporation, no indemnification
may be in respect of any claim, issue or matter as to which the
person is adjudged liable to the corporation unless and only to the
extent that the court determines that, despite the adjudication of
liability but in view of all the circumstances, the person is
fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
In addition, under Section 145(f) of the GCL, the
indemnification provided by Section 145 shall not be deemed
exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in
another capacity while holding such office.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of SAT pursuant to the foregoing provisions,
or otherwise, SAT 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 SAT of expenses incurred
or paid by a director, officer or controlling person of SAT 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, SAT 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.
- ---------------------------------- ----------------------
- ---------------------------------- ----------------------
No dealer, salesperson or other
person has been authorized to give SUBSTANCE ABUSE
any information or to make any TECHNOLOGIES, INC.
representations in connection with
this offering other than those
contained in this Prospectus and, if 3,402,500 Shares of SAT
given or made, such information or Common Stock Issuable upon
representations must not be relied upon Exercise of Warrants,
as having been authorized by the 2,500,000 shares of SAT Common
Company. This Prospectus does not Stock Issuable upon Conversion
constitute an offer to sell or a of Convertible Notes and
solicitation of an offer to buy the 637,500 Shares Offered by
securities offered hereby to any person Selling Stockholders
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.
TABLE OF CONTENTS
-----------------
Page
----
Available Information............................. 2
Incorporation of Certain Information
By Reference.................................. 3
The Company....................................... 4
Risk Factors...................................... 6 _______________
Dilution.......................................... 14
Use of Proceeds................................... 15 PROSPECTUS
Selling Stockholders.............................. 16
Plan of Distribution.............................. 19 _______________
Legal Matters..................................... 21
Material Changes.................................. 21
Commission Position on
Indemnification................................ 24
Until ________________, 1997 (40 days after the date
of the Prospectus), all dealers effecting transaction in
securities offered hereby, whether or not participating April ___, 1997
in this distribution, may be required to deliver a
prospectus.
- ------------------------------------- ------------------
- ------------------------------------- ------------------
<PAGE II-1>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an estimate of expenses, except for the
registration fee, to be incurred by Substance Abuse Technologies,
Inc. (the "Registrant" or "SAT") for the issuance and
distribution of the securities being registered hereby.
Registration Fee.......................... $ 3,863
Accountants' Fees and Expenses............ 15,000
Legal Fees and Expenses................... 20,000
Printing, Transfer Agent and
Other Miscellaneous Expenses............. 16,137
Total $55,000
Item 15. Indemnification of Directors and Officers.
The Board of Directors of the Registrant has authorized
indemnification of directors and officers of the Registrant to
the fullest extent permitted by Delaware law.
Section 145(a) of the General Corporation Law of Delaware
(the "GCL") permits a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), by reason
of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful.
Under Section 145(b) of the GCL, a corporation also may
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses
(including attorneys' fees)
<PAGE II-2>
actually and reasonably incurred by him or her in connection with
the defense or settlement of such action or suit if he or she acted
in good faith and in a manner he or she reasonably believed to be in,
or not opposed to, the best interests of the corporation. However,
in such an action by or on behalf of a corporation, no indemnification
may be in respect of any claim, issue or matter as to which the person is
adjudged liable to the corporation unless and only to the extent
that the court determines that, despite the adjudication of
liability but in view of all the circumstances, the person is
fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
In addition, under Section 145(f) of the GCL, the
indemnification provided by Section 145 shall not be deemed
exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding such office.
The Registrant has obtained insurance to cover certain of
the above-described indemnifications.
For information as to a limitation on indemnification of
directors, officers and controlling persons of the Registrant,
see Item 17 to this Registration Statement.
Item 16. Exhibits to Form S-3.
All of the following exhibits designated with a footnote
reference are incorporated herein by reference to a prior
registration statement filed under the Securities Act of 1933, as
amended (the "Securities Act"), or a periodic report filed by SAT
pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). An exhibit marked with an asterisk
is filed with this Registration Statement.
Number Exhibits
- ------ --------
2(a) Copy of Agreement and Plan of Merger dated as of April
12, 1996 by and among SAT, Good Ideas Acquisition Corp.
and Good Ideas Enterprises, Inc., a Delaware corporation
("Good Ideas"). (1)
2(b ) Copy of Agreement and Plan of Merger dated as of April
23, 1996 by and among SAT, U.S. Drug Acquisition Corp.
and U.S. Drug Testing, Inc. ("U.S. Drug"). (2)
4(a) Specimen of Common Stock certificate of SAT.
<PAGE II-3>
Number Exhibits
- ------ --------
4(b) Specimen of Class "A" Cumulative and Convertible
Preferred Stock certificate of SAT. (3)
4(c) Specimen of Class "B" Non-Voting Preferred Stock
certificate of SAT. (4)
4(d) Copy of Convertible Loan and Warrant Agreement dated
November 8, 1996 by and between SAT, S.A.C. Capital
Associates, LLC and Steven A. Cohen. (5)
4(d)(1) Form of Registration Rights Agreement is Exhibit A to
Exhibit 4(d) hereto.
4(d)(2) Form of Convertible Senior Promissory Note due November
8, 1999 is Exhibit B to Exhibit 4(d) hereto. (5)
4(d)(3) Form of Common Stock Purchase Warrant expiring June 30,
2000 is Exhibit C to Exhibit 4(d) hereto.
4(e)* Form of Common Stock purchase warrant expiring November
15, 1999.
SAT's Common Stock purchase warrants expiring November
15, 1999, December 2, 1999 and three years from the
effective date of this Registration Statement are
substantially identical to the form of Common Stock
purchase warrant filed as Exhibit 4(e) hereto except as
to the name of the holder, the expiration date and the
exercise price and, accordingly, pursuant to Instruction
2 to Item 601 of Regulation S-K under the Securities Act
are not individually filed.
4(f)* Form of Common Stock purchase warrant with deferred exercise.
SAT's Common Stock purchase warrants expiring three
years from the effective date of this Registration
Statement and those issued or to be issued to employees,
of which the currently outstanding warrants expire
between September 11, 2000 and January 1, 2001, are
substantially identical to the form of Common Stock
purchase warrant filed as Exhibit 4(f) hereto except as
to the name of the holder, the expiration date and the
exercise price and, accordingly, pursuant to Instruction
2 to Item 601 of Regulation S-K under the Securities Act
are not individually filed.
5(a)* Opinion of Gold & Wachtel, LLP.
<PAGE II-4>
Number Exhibits
- ------ --------
23(a)* Consent of Ernst & Young LLP relating to financial
statements in Annual Report on Form 10-K.
23(b)* Consent of Ernst & Young LLP relating to financial
statements in Current Report on Form 8-K/A.
23(c)* Consent of Wolinetz, Gottlieb & Lafazan, P.C.
23(d) Consent of Gold & Wachtel, LLP is included in their
opinion filed as Exhibit 5 hereto.
- --------------------------
1. Filed as an Exhibit to Good Ideas Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 and incorporated herein by
this reference.
2. Filed as an exhibit to U.S. Drug's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996 and incorporated herein by this
reference.
3. Filed as an exhibit to SAT's Registration Statement on Form S-18,
File No. 33-29718, and incorporated herein by this reference.
4. Filed as an exhibit to SAT's Registration Statement on Form S-1,
File No. 33-47855, and incorporated herein by this reference.
5. Filed as an exhibit to Amendment 2 to Schedule 13D filed by
Steven A. Cohen on November 12, 1996, and incorporated herein by
this reference.
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.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered
<PAGE II-5>
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective 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.
2. That, for the purpose of determining any liability
under the Securities Act, each 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.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of 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.
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 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 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.
<PAGE II-6>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to belief that it
meets all of the requirements for filing on Form S-3 and has duly
caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on March 31, 1997.
SUBSTANCE ABUSE TECHNOLOGIES, INC.
(Registrant)
By: /s/ Robert M. Stutman
---------------------
Robert M. Stutman, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to a registration statement has been signed by the following
persons in the capacities indicated on March 31, 1997.
Signature Title
- --------- -----
/s/ Robert M. Stutman Principal Executive Officer
- --------------------- and Director
Robert M. Stutman
/s/ Robert Muccini Chief Financial and
- --------------------- Accounting Officer
Robert Muccini
/s/ Alan I. Goldman Director
- ---------------------
Alan I. Goldman
/s/ John C. Lawn Director
- ----------------------
John C. Lawn
/s/ Peter M. Mark Director
- ----------------------
Peter M. Mark
/s/ Linda H. Masterson Director
- ----------------------
Linda H. Masterson
/s/ Michael S. McCord Director
- ----------------------
Michael S. McCord
/s/ Lee S. Rosen Director
- ----------------------
Lee S. Rose
<PAGE E-1>
EXHIBIT INDEX
SUBSTANCE ABUSE TECHNOLOGIES, INC.
REGISTRATION STATEMENT ON FORM S-3
EXHIBITS FILED
TO FORM S-3 REGISTRATION STATEMENT
Page
Number Exhibits Number
- ------ -------- ------
23(a) Consent of Ernst & Young LLP relating to financial E-2
statements in Annual Report on Form 10-K.
23(b) Consent of Ernst & Young LLP relating to financial E-3
statements in Current Report on Form 8-K/A.
23(c) Consent of Wolinetz, Gottlieb & Lafazan, P.C. E-4
<PAGE E-2>
Exhibit 23(a)
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated
May 20, 1996 with respect to the consolidated financial
statements of Substance Abuse Technologies, Inc. (formerly U.S.
Alcohol Testing of America, Inc.) included in its Annual Report
(Form 10-K, as amended) for the year ended March 31, 1996, filed
with the Securities and Exchange Commission, in the Registration
Statement (Amendment No. 1 to Form S-3 No. 333-19979) and related
Prospectus of Substance Abuse Technologies, Inc. for the
registration of (1) 3,402,500 shares of its common stock issuable
upon exercise of warrants, (2) 2,500,000 shares of its common
stock issuable upon conversion of convertible notes, and (3)
637,500 shares of its common stock offered by selling
stockholders.
/S/ ERNST & YOUNG LLP
Riverside, California
March 31, 1997
<PAGE E-3>
Exhibit 23(b)
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated
July 23, 1996 with respect to the financial statements of Robert
Stutman & Associates, Inc. as of December 31, 1994 and 1995 and
for the three years in the period ended December 31, 1995
included in the Form 8-K/A, as amended, filed with the Securities
and Exchange Commission, in the Registration Statement (Amendment
No. 1 to Form S-3 No. 333-19979) and related Prospectus of
Substance Abuse Technologies, Inc. for the registration of (1)
3,402,500 shares of its common stock issuable upon exercise of
warrants, (2) 2,500,000 shares of the common stock issuable upon
conversion of convertible notes, and (3) 637,500 shares of its
common stock offered by selling stockholders.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
March 31, 1997
<PAGE E-4>
Exhibit 23(c)
Consent of Independent Public Accountants
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report dated May 26,
1995 on the consolidated financial statements of Substance Abuse
Technologies, Inc. and Subsidiaries (a/k/a U.S. Alcohol Testing
of America, Inc.) included in its Annual Report (Form 10-K) for
the year ended March 31, 1996, filed with the Securities and
Exchange Commission, in the Registration Statement (Amendment No.
1 to Form S-3 No. 333-19979) and related Prospectus of Substance
Abuse Technologies, Inc. for the registration of 3,402,500 shares
of its common stock issuable upon exercise of warrants, 2,500,000
shares of its common stock issuable upon conversion of
convertible notes and 637,500 shares of common stock offered by
selling stockholders.
/s/ Wolinetz, Gottlieb & Lafazan, P.C.
Rockville Centre, New York
March 31, 1997