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As filed with the Securities and Exchange Commission on September 25, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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COMPLETE WELLNESS CENTERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1910135
(State of Incorporation) (I.R.S. Employer
Identification No.)
666 Eleventh Street, N.W.
Washington, D.C. 20001
(202) 639-9700
(Address and telephone number of principal executive offices)
C. Thomas McMillen
Chairman of the Board and Chief Executive Officer
Complete Wellness Centers, Inc.
666 Eleventh Street, N.W.
Washington, D.C. 20001
(202) 639-9700
(Name, address and telephone number of agent for service)
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Copies to:
David E. Fleming, Esq.
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
|_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and
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list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================
Title of Each Class Proposed Maximum
of Securities to be Amount to be Offering Proposed Maximum Amount of
Registered Registered Price Per Aggregate Registration
Share (1) Offering Price (1) Fee
<S> <C> <C> <C> <C>
Common Stock, $0.0001665
par value 100,000 3.00(1) $300,000 $90.90
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) based on a per share price of
$3.00, the average of the high and low sale prices per share of the
Company's Common Stock on September 24, 1998.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Cross-Reference Sheet Showing Location in Prospectus
of Information Required by Items of Form S-3
<TABLE>
<CAPTION>
Form S-3 Registration Statement Location in Prospectus
Item and Heading
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<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus Inside Front Cover Page
3. Summary Information, Risk Factors and Not Applicable; Risk
Ratio of Earnings to Fixed Charges Factors; Not Applicable
4. Use of Proceeds Outside Front Cover; Use
of Proceeds
5. Determination of Offering Price Outside Front Cover Page
6. Dilution Not Applicable
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Outside Front Cover Page;
Plan of Distribution
9. Description of Securities to be Registered Information Incorporated
by Reference
10. Interests of Named Experts and Counsel Legal Matters
11. Material Changes Not Applicable
12. Incorporation of Certain Information Information Incorporated
by Reference by Reference
13. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
</TABLE>
COMPLETE WELLNESS CENTERS, INC.
100,000 Shares Common Stock
$0.0001665 par value per share)
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This Prospectus relates to the public offering, which is not being underwritten,
of up to 100,000 shares (the "Resale Shares") of Common Stock, $0.0001665 par
value per share, of Complete Wellness Centers, Inc. (referred to herein,
together with its majority-owned and wholly-owned subsidiaries, as "CWC," the
"Company" or the "Registrant"). The Resale Shares may be offered by certain
stockholders of the Company or by pledgees, donees, transferees or other
successors in interest that receive such shares as a gift, partnership
distribution or other non-sale related transfer (the "Selling Stockholders").
The Resale Shares were received by certain Selling Stockholders pursuant to
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an Investment Agreement dated December 19, 1997, as supplemented on January 12,
1998 and July 6, 1998 with Imprimis Investors LLC and Wexford Spectrum Investors
LLC (collectively, "Wexford"). All of the Resale Shares were issued pursuant to
an exemption from the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act"), provided by Section 4(2) thereof. The Resale
Shares are being registered by the Company pursuant to registration rights
agreements with the various Selling Stockholders. See the "Plan of Distribution"
section herein.
The Resale Shares may be offered by the Selling Stockholders from time to time
in transactions on the Nasdaq SmallCap Market,in privately negotiated
transactions, or by a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Resale Shares to or
through broker-dealers and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders or
the purchasers of the Resale Shares for whom such broker-dealers may act as
agent or to whom they sell as principal or both (which compensation to a
particular broker-dealer might be in excess of customary commissions). See "Plan
of Distribution" section herein.
The Company will not receive any of the proceeds from the sale of the Resale
Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Resale Shares being
offered by the Selling Stockholders.
The Company intends that this registration statement will remain effective until
no later than September 25, 1999. On September 2, 1998 the last reported sale
price for the Common Stock, as reported on The Nasdaq SmallCap Market, was $3.00
per share. The Company's Common Stock is currently quoted on Nasdaq under the
symbol "CMWL."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 18.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------
The date of this Prospectus is September 25, 1998
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or by any other person. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities covered by this Prospectus, nor does
it constitute an offer to or
<PAGE> 5
solicitation of any person in any jurisdiction in which such offer or
solicitation may not lawfully be made.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith,
files reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy and
information statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of prescribed rates. In addition, the Commission maintains a Web site at
http://www.sec.gov that contains the Company's reports, proxy and information
statements and other information that have been filed since the Company began to
file electronically with the Commission in February 1997 August 1996. The Common
Stock of the Company is quoted on the Nasdaq SmallCap Market, and such material
may also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (the "Registration Statement") of which this
Prospectus is a part, including exhibits set forth therein or incorporated by
reference thereto, which has been filed electronically with the Commission under
the Securities Act of 1933, as amended (the "Act"). Statements made in this
Prospectus as to the contents of any referenced contract, agreement or other
document are not necessarily complete, and each such statement shall be deemed
qualified in its entirety by reference thereto. Copies of the Registration
Statement and the exhibits and schedules thereto may be obtained, upon payment
of the fee prescribed by the Commission, or may be examined without charge at
the office of the Commission or at the Commission's Web site.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission (File No.
000-22115) pursuant to the 1934 Act are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997;
2. The Company's Quarterly Reports on Form 10-QSB for the quarter ended
March 31, 1998 and for the quarter ended June 30, 1998 as amended
October 1, 1998;
3. The Company's Current Report on Form 8-K filed on January 16, 1998;
4. The Company's Current Report on Form 8-K filed on February 9, 1998;
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5. The Company's Current Report on Form 8-K/A filed on March 12, 1998
6. The Company's Current Report on Form 8-K filed on June 3, 1998;
7. The Company's Current Report on Form 8-K filed on July 10, 1998;
8. The Company's Current Report on Form 8-K filed on August 21, 1998;
10. The Company's Current Report on Form 8-K filed on September 21,
1998;
11. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form SB-2 filed with the
Commission on February 19, 1997;
12. The Company's Proxy Statement and Notice of Annual Meeting filed on
May 4, 1998;
13. The Company's Proxy Statement and Notice of Special Meeting of
Stockholders filed on July 22, 1998; and
14. All other documents filed by the Company pursuant to Sections
13(a), 13(c), 13 (d), 14 or 15(d) of the 1934 Act subsequent to the
date of this Prospectus but prior to the termination of the
offering of the Shares.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document that also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement.
Upon written or oral request, the Company will provide without charge to
each person to whom a copy of the Prospectus is delivered a copy of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference
therein). Requests should be submitted in writing or by telephone at (202)
639-9700 to C. Thomas McMillen, Chairman of the Board and Chief Executive
Officer, Complete Wellness Centers, Inc., at the principal executive offices of
the Company, 666 Eleventh Street, N.W., Suite 200 Washington, DC 20001.
THE COMPANY
The following section contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere in
this Prospectus.
Complete Wellness Centers, Inc. was incorporated under the laws of the
State of Delaware in November 1994. The Company completed an initial public
offering of Common Stock and Redeemable Common Stock Warrants in February 1997.
The Company controls, either through 100% or majority ownership, four separate
<PAGE> 7
independent operating subsidiaries and is the managing member of a limited
liability corporation. The Company provides administrative support services to
all its subsidiaries including: (1) management services; (2) legal services; (3)
accounting services; (4) purchasing services; and (5) support services. All of
the subsidiaries are focused in the health care industry and each delivers a
unique product or service sold to consumers directly or through their sister
companies. The Company's presence on the Internet is of increasing importance.
For over the past year, the Company's Internet web site, completewellness.com,
has been on line. Completewellness.com presents Complete Wellness University, a
state-of-the-art web page offering consumers valuable health care information
and links to many information sources.
Complete Wellness Medical Centers, Inc. ("CWMC") was incorporated under the laws
of the State of Delaware in August 1997. The Company is a 100% owner of CWMC.
CWMC develops multi-disciplinary medical centers ("Integrated Medical Centers")
and furnishes certain support services to such facilities. The Integrated
Medical Centers combine, in one practice, at the same location, traditional
health care providers, such as physicians and physical therapists and
alternative health care providers, such as chiropractors, acupuncturists and
massage therapists. The Company believes that its name-brand product offers the
consumer a highly desirable one-stop medical facility. At June 30, 1998 CWMC was
managing 84 Integrated Medical Centers in 19 States and had 18 additional
agreements with chiropractors to develop and manage 21 Integrated Medical
Centers in existing states and expansion into 2 additional states.
CWMC develops Integrated Medical Centers generally through affiliations with
chiropractors (the "Affiliated Chiropractors") and their existing chiropractic
practices. Management endeavors to enter into an agreement with a chiropractor
who has an existing chiropractic practice in a convenient location and who is an
individual who has demonstrated the entrepreneurial skills to build a practice.
The existing practice is used as a base for the development of an Integrated
Medical Center. Typically, CWMC establishes a new Integrated Medical Center by
forming a medical corporation, which is a general business corporation
wholly-owned by the company or a professional corporation that is owned by a
nominee physician, depending upon the applicable state law. The Affiliated
Chiropractor establishes a management company which contracts with CWMC to
provide day-to-day management of the Integrated Medical Center.
CWMC's development strategy is to develop additional Integrated Medical Centers
in local or regional groups or clusters. CWMC plans to continue to develop
Integrated Medical Centers through affiliations with chiropractors and their
existing practices and health clubs and intends to begin development of
Integrated Medical Centers in connection with corporations, government offices,
or other organizations, in which cases the Integrated Medical Centers would be
developed in places such as office buildings.
CWC believes that its affiliation structure as opposed to an acquisition
structure and its unit minimum capital investment and therefore minimum risk is
responsible for its early acceptance by both the investment community and
healthcare practitioners. Unlike traditional medical management companies, the
CWC structure of integrative medicine wherein the combination of traditional
and complimentary medicine in one location incorporates:
1. Minimal debt.
2. No goodwill.
<PAGE> 8
3. Maximum incentive for participating doctors.
4. Expanded set of services to the prior chiropractor patient base.
CWC believes that this corporate structure accounts for the Company's revenue
growth and potential profitability, which is expected in early 1999.
While it is still too early to determine quantitatively the effectiveness of the
CWC business model, certain patterns can be seen. The average CWMC, in the first
12 months of operation after the traditional chiropractic clinic became an
Integrated Medical Center, realized a growth in revenues of approximately 40%.
The number of patients in the same time period has increased an average of
approximately 10%.
The Company's operating strategy is to develop brand name recognition by (i)
providing consumers the opportunity to obtain, and the convenience of obtaining,
under the supervision of a medical doctor, complementary traditional and
alternative medical treatments in one location, (ii) facilitating the efficient
provision of high quality patient care through the use of credentialing
standards and standardized protocols, (iii) establishing Integrated Medical
Centers in local and regional clusters for purposes of obtaining managed care
contracts, (iv) assisting in marketing the Integrated Medical Centers regionally
and nationally, on a coordinated basis, and furnishing management, marketing,
financing and other advice and support, and (v) achieving operating efficiencies
and economies of scale through the implementation of its integrated management
information system, the rotation of health care providers among geographically
close Integrated Medical Centers, increased purchasing power with suppliers, and
standardized protocols, administrative systems, and procedures.
The Company has begun preliminary discussions to acquire certain businesses
which are complimentary to its Integrated Medical Centers and which in some
cases may provide a further service to the Integrated Medical Center's patients.
While the Company intends to pursue the consummation of an agreement to acquire
such businesses; there can be no assurance that any or all of these contemplated
transactions will be consummated. See "Risk Factors--Risks Related to Expansion
Strategy".
The Company itself is not authorized or qualified to engage in any activity
which may be construed or be deemed to constitute the practice of medicine but
is an independent supplier of non-medical services only. The physicians and
chiropractors are responsible for all aspects of the practice of medicine and
chiropractic and the delivery of medical and chiropractic services (subject to
certain business guidelines determined in conjunction with the Company),
including but not limited to diagnosis, treatment, referrals and therapy. In
connection with any managed care contracts it may arrange on behalf of the
Integrated Medical Centers, the Company will need to manage the Integrated
Medical Centers' utilization of medical services to patients. If under such
contracts, the Integrated Medical Centers accept responsibility for the
treatment of their patients by specialists or at hospitals, the Company will
also need to manage the practitioners' referral patterns with respect to
specialty physician and hospital services. However, the Company would only
provide management for payment purposes and would not, through such process,
interfere with the professional judgment of a medical practitioner or prohibit a
practitioner from providing any medical services.
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The objective of the Company's operating strategy is to facilitate the provision
of a high level of traditional and alternative medical care to patients in a
convenient, cost-effective manner. Key elements of the Company's operating
strategy are:
One Location. The Company seeks to provide consumers the opportunity to obtain,
and the convenience of obtaining, under the supervision of a medical doctor,
complementary traditional and alternative medical treatments in one location.
The Company believes that alternative medicine is growing in popularity, and
that supervision of treatment by a medical doctor may alleviate some patient and
third party payor concerns.
Facilitate the Efficient Provision of High Quality Care. All health care
services at an Integrated Medical Center are provided by health care
practitioners under the supervision of a licensed medical doctor. The Company
seeks qualified and reputable medical doctors. The Company further seeks to
facilitate the efficient provision of high quality care through the use of
credentialing and standardized protocols. Additionally, in many states, only
medical doctors are permitted to order certain laboratory and radiological
tests. The Company believes that supervision by a medical doctor and a medical
doctor's access to more sophisticated diagnostic testing services will enhance
the quality of patient care.
Establish Networks of Integrated Medical Centers to Obtain Managed Care
Contracts. A key component of the Company's operating strategy is to attract
both health care practitioners and managed care payors. The Company seeks to
attract health care practitioners by, among other things, providing them greater
access to managed care contracts than they could attain independently and
relieving them of certain administrative responsibilities. The Company intends
for its local and regional clusters of Integrated Medical Centers to attract
managed care contractors by providing single, integrated points of market entry,
thereby enabling managed care payors to more efficiently contract for the
provision of health care services for patient populations. The Company within
its OHS subsidiary credentials its licensed health care practitioners through a
credentialing function accredited by the National Committee for Quality
Assurance. OHS has drafted new and improved standardized credentialing protocols
and will develop and implement a utilization management program, for the purpose
of attracting and managing its managed care contracts. The Company has signed
nine (9) such contracts and will be implementing them in 1998. The Company has
entered into an agreement with OHS whereby the companies will continue to
provide services to each other, consistent with past practices on a "most
favored vendor/customer" status subsequent to the completion of the Company's
divestiture plan.
Provide Advice and Assistance. The Company intends to develop and implement
advertising and marketing programs for the Integrated Medical Centers primarily
at the regional and national levels, utilizing television, radio, and print
advertising as well as internal marketing promotions. The name of each
Integrated Medical Center includes the words "Complete Wellness Medical
Center(SM)." Each Integrated Medical Center displays signage bearing such words,
or the words "Complete Wellness Center(SM)." The Company's goal is to achieve
"brand name" awareness of the Integrated Medical Centers. There is no assurance,
however, that the Company will be able to realize this goal. An individual
Integrated Medical Center may also advertise its services locally, and the
Company provides advice in that regard upon request. The Company also agrees to
furnish the Integrated Medical Centers management services, financing services
<PAGE> 10
as requested and other advice and support. By doing so, the Company seeks to
relieve providers, to a limited extent, from certain burdens of administering
and managing a medical practice.
Achieve Operating Efficiencies and Economies of Scale. The Company has organized
its Integrated Medical Centers into regional groups or clusters to utilize
employees and serve patients more effectively, to leverage management and other
resources, to increase purchasing power with suppliers, and to facilitate the
development of networks of affiliated physicians, chiropractors, and other
health care practitioners.
The Company plans to continue to develop Integrated Medical Centers primarily by
affiliating with chiropractors and their existing chiropractic practices.
Management endeavors to enter into agreements with chiropractors who are located
in convenient locations, and who have demonstrated the entrepreneurial skills to
build a practice. The Company believes that such chiropractors will consider
affiliation with Integrated Medical Centers to be attractive because they may
have greater access to managed care contracts in the future through the Company
and its network of Integrated Medical Centers, will be relieved of certain
administrative burdens, and may have the opportunity to increase their practice
income. An Integrated Medical Center is usually established at the same location
as the existing chiropractic practice, although it could be established at a new
or separate location. In August, 1998 the Company awarded three Complete
Wellness Medical Centers its Award of Excellence. This program was instituted to
recognize exceptional performance.
Complete Wellness Smoking Cessation, Inc. ("Smokenders") was incorporated under
the laws of the State of Delaware in July 1997. The Company holds an 88.23%
interest in Smokenders, with 11.77% ownership held by the management of
Smokenders. Smokenders was formerly owned by Oxford Health Plans and was
purchased from that company on July 31, 1997. Smokenders markets a patented
"Learn to Quit" kit to end users through a national network of trained
facilitators. Smokenders customers include government agencies, corporations,
CWMC, OHS and individuals. Smokenders is an adult education program which has as
its goal, the cessation of smoking for its clients as well as the opportunity
for its clients to be comfortable as a non-smoker. The company Smokenders was
created in 1969. Since it was founded, more than a million people have
successfully quit smoking using the Smokenders' patented techniques. The company
is trademarked in more than 20 countries around the world. The Smokenders system
is currently marketed to hospitals, health clinics, weight-loss centers, private
corporations, the military services, and other federal and state governmental
organizations. The marketing effort has been recently redesigned away from the
traditional multi-seminar format to a self-taught audio tape format as well as
access through the Smokenders web site. The Company believes that the forecasted
state and federal government tobacco settlements affords Smokenders a real
opportunity to place its programs into almost every facet of the private as well
as the public sector through contracts with such state and federal governments.
Complete Wellness Weight Management, Inc. ("CWWM") was incorporated under the
laws of the State of Delaware in December 1997. The Company owns 100% of CWWM.
CWWM is made up of 56 weight loss centers formerly owned by Nutri/System, L.P.
CWWM agreed to purchase the assets of these 56 centers, subject to certain
objectives to be accomplished by January 31, 1998 which date constituted the
final closing of the purchased assets, that operate in 8 states. CWWM markets,
in a retail setting, food, medically supervised weight loss programs and
<PAGE> 11
nutritional supplements. Included in the asset purchase is the perpetual
license to use the Nutri/System name and logo. The Nutri/System program has
both a traditional (non-medical) and medical weight loss program.
The Nutri/System Program is designed to assist in the treatment of obesity and
weight loss and management. Nutri/System clients receive a comprehensive
approach to weight loss involving nutritionally balanced menu plans, wellness
and exercise information and one-to-one counseling sessions with a trained
medical and non-medical staff. The Nutri/System menu plan is designed to provide
a nutritionally balanced, low-fat approach to calorie reduction. Health and
wellness information is offered through the program participant manual that has
been designed to provide clients with information about lifestyle changes that
can benefit their overall health. The Participant Manual also contains
information on exercise and activity, to encourage clients to include this
component as part of their Nutri/System Program.
The traditional Nutri/System Program offers a maintenance program that monitors
the clients' continued progress after they have reached their goal weight.
Providing support with health and wellness information in this component of the
program completes the inclusive Nutri/System. The Nutri/System medical program
was designed to assist in the treatment of obesity using a comprehensive
approach to weight loss involving prescription medications, nutritionally
balanced menu plans, and wellness and exercise information. In addition, the
medical program offers professional supervision consisting of scheduled visits
with both a nurse and a medical doctor. Weight loss authorities currently
believe that prescription medications for the treatment of obesity should be
used in combination with caloric restriction, behavior modification and
exercise. Therefore the medical program was developed using the traditional
Nutri/System program as its foundation. In this approach, the staff physician
will prescribe drug combinations to eligible clients following an initial
screening process and a medical assessment. Since the staff physician only
monitors the client's health as it is affected by the medical program, the
client's personal physician or health care provider will continue to manage the
client's other medical needs.
As with the traditional Nutri/System Program, clients participating in the
medical program can utilize the individualized Nutri/System menu plan designed
to provide a nutritionally balanced, low fat approach to calorie reduction. The
medical program also provides a maintenance program that incorporates the
traditional Nutri/System maintenance program with the medical component, thus
rounding out the comprehensive medical program.
CWWM recently embarked on a national ad campaign to run spot ads on network
television in its market areas. The results of that ad campaign are now being
assessed; however, ad campaigns have historically generated clients and revenues
therefrom. CWWM plans continued use of television advertising to market its
products and services to reach the broadest potential client base.
Optimum Health Services, Inc. ("OHS"), formerly known as Complete Wellness
Independent Physicians Association ("CWIPA") was incorporated under the laws of
the State of Delaware in May 1997. The Company holds an 86.67% interest in OHS,
with 13.33% ownership held by OHS management . OHS is a health care Management
Services Organization (MSO) currently providing services to Health Maintenance
Organizations. The OHS management team joined Complete Wellness with their goal
of providing a comprehensive wellness model of care in a PPO/HMO platform.
<PAGE> 12
In addition to developing provider networks, OHS delivers support services
which include accepting delegated claims, credentialing health care
professionals, utilization management, quality assurance, marketing, and
provider relations functions.
On May 13, 1998, the Company's Board of Directors adopted a plan to divest of
the Company's 86.67% owned subsidiary, OHS. Under the divestiture plan, the
Company will issue a dividend to the Company's shareholders of record on May 13,
1998 in the form of common stock of OHS. Each of the Company's shareholders on
the record date will receive shares of OHS common stock based on their pro rata
ownership of the Company's stock. The impact on the Company's financial position
and results of operations as a result of this disposition will not be
significant. OHS filed a registration statement with the Commisssion on July 16,
1998 related to the offering of 2,000,000 shares of its common stock to its
shareholders and anticipates raising a maximum of $2,000,000 of additional
capital. As of August 27, 1998, the Commisssion has not declared OHS's
registration statement effective. The divestiture is expected to be completed in
October 1998 concurrent with the effective date of OHS's registration statement.
The Company and OHS have entered into a ten (10) year intercompany operating
agreement wherein each company provides services to the other. Additionally, CWC
is to receive 100,000 warrants to acquire OHS stock and a $200,000 note
receivable, payable December, 1999 or on the date on which OHS closes a
financing arrangement exclusive of the contemplated Registration Statement.
As of August 15, 1998, the Company had 145 employees and the 84 operating
Medcorps had approximately 372 employees. The Company's 145 employees consisted
of 42 in finance and administration and 103 in sales and marketing, mostly in
its weight management subsidiary.
<PAGE> 13
RISK FACTORS
An investment in the Securities offered hereby involves a high degree of risk
and should be made only by investors who can afford the loss of their entire
investment. Prospective investors should carefully review and consider the
following risks as well as the other information set forth in this Prospectus.
This discussion also identifies important cautionary factors that could cause
the Company's actual results to differ materially from those described in
forward-looking statements made by, or on behalf of, the Company.
Limited Operating History; History of Losses; No Assurance of Profitability. The
Company commenced operations in January 1995 and began managing its first
Integrated Medical Center in September 1995. The Company has a limited operating
history upon which prospective investors can judge the Company's performance.
The Company has experienced net losses, negative cash flow, a deficit in working
capital, and an accumulated deficit each month since its inception. At December
31, 1997 the Company had an accumulated deficit of $5,364,415 and a working
capital deficit of $291,723. There can be no assurance that the Company will
ever be profitable. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Risks Related to Expansion Strategy. The Company has expanded from managing one
Integrated Medical Center at December 31, 1995 to 84 Integrated Medical Centers
at June 30, 1998. In addition, the Company intends to develop approximately 20
additional Integrated Medical Centers by December 31, 1998. The Company's growth
will depend upon a number of factors, including: (i) the Company's ability to
develop Integrated Medical Centers with respect to which it had agreements with
chiropractors as of June 30, 1998; (ii) the Company's ability to identify and
affiliate with a sufficient number of suitable, well-located chiropractors and
their existing chiropractic practices; (iii) whether new Integrated Medical
Centers will be opened in accordance with the Company's plans, including the
anticipated average costs to the Company; (iv) the Company's ability to
adequately train Affiliated Chiropractors and their office staff on the
operation and administration of Integrated Medical Centers and the Company's
management information system; (v) the Company's continued ability to attract
and retain medical doctors and other traditional health care providers for
employment at the Integrated Medical Centers; (vi) the ability of the Company to
support and manage Integrated Medical Centers effectively; (vii) whether
anticipated performance levels at Integrated Medical Centers will be achieved;
and (viii) regulatory constraints. There can be no assurance that the Company's
expansion strategy will be successful or that modifications to the Company's
expansion strategy will not be required. Any significant delay in the opening of
new Integrated Medical
<PAGE> 14
Centers or the failure of Integrated Medical Centers to achieve anticipated
performance levels could adversely affect the Company. In pursuing its
expansion strategy, the Company intends to expand its presence into new
geographic markets. In entering a new geographic market, the Company will be
required to comply with laws and regulations of jurisdictions that differ from
those applicable to the Company's current operations, deal with different
payors as well as face competitors with greater knowledge of such markets than
the Company. There can be no assurance that the Company will be able to
effectively establish a presence in any new market. The Company's strategy also
involves growth through acquisitions of complementary businesses in order to
enhance the services offered by its Integrated Medical Centers. The Company
will be subject to various risks associated with an acquisition growth
strategy, including the risk that the Company will be unable to identify and
recruit suitable acquisition candidates in the future or to absorb and manage
the acquisitions.
The Company has insufficient funds to implement its expansion strategies. The
Company is in the process of filing a Registration Statement with the
Commission for a preferred stock offering, the proceeds of which, together with
cash from operations, will be sufficient to satisfy its cash requirements for at
least the 12 months after the date of this prospectus (exclusive of applying
any such funds to the acquisition of other businesses). There is no assurance
that additional financing will include the development of a larger number of
Integrated Medical Centers than now anticipated, a higher average cost to
develop additional Integrated Medical Centers than that which has been the case
to date, the acquisition of other businesses all or part of the payment for
which is in cash, payment of minimum royalties to Oxford Health Plan related to
the Company's acquisition of Smokenders, funding requirements for AIIA, and
settlement, if any, of the federal investigation. See "Government Regulation;
Federal Investigation." If the Company requires additional financing, it may
raise capital through the issuance of equity securities and/or the incurrence of
debt. If additional capital is raised through the issuance of equity securities,
dilution to the Company's stockholders may result. If additional capital is
raised through the incurrence of debt, the Company likely would become subject
to restrictions on its operations and finances. There can be no assurance that
the Company will be able to raise additional capital when needed on satisfactory
terms or at all. If the Company is unable to secure additional sources of
financing on terms and conditions acceptable to the Company or at all, the
Company's expansion strategy could be materially adversely affected.
Possibility of Regulatory Challenge to the Affiliation Relationships. Physician
practice management companies ("PPMs") typically bill, collect, disburse funds
to pay expenses (including their own fees) or otherwise manage traditional
physician or dental practices. The Company likewise undertakes to perform these
services, albeit for Integrated Medical Centers. However, whereas PPMs may
subcontract certain of their functions to third parties unaffiliated with the
practices they manage, the Company subcontracts the day-to-day management of the
Integrated Medical Centers to management companies controlled by the Affiliated
Chiropractors. The Affiliated Chiropractors both refer patients to the
Integrated Medical Centers from their existing chiropractic practices and are
employed by the Medcorps at the Integrated Medical Centers. The Company is
unaware of scrutiny by state or
<PAGE> 15
federal health care enforcement officials of the structure of typical
PPM-provider-subcontractor relationships to date, and believes its Affiliated
Chiropractor relationships do not violate applicable federal or state health
care regulatory requirements. There can be no assurance, however, that health
care enforcement officials will not take a contrary view. Investigations or
prosecutions by such enforcement officials could have a material adverse effect
on the Company, even if the Company's Affiliated Chiropractor relationships were
subsequently determined lawful.
Reliance on Affiliated Chiropractors. The Company's revenue and cash flow are
dependent on the generation and collection of revenue by the Integrated Medical
Centers (or "Medcorps") and the efficient management of both the Medcorps and
the Affiliated Chiropractors' Management Company (or "Admincorps") by the
Affiliated Chiropractors. The Admincorps both (i) employ the administrative
staff who perform the day-to-day administrative functions of the Integrated
Medical Centers, including functions related to the collection of revenue and
(ii) are responsible for many expenses required for the operation of the
Integrated Medical Centers, including, for example, office and many medical
supplies. The ability of the Admincorp to meet its financial obligations,
including its financial obligations to the Company, likewise depends on the
collection of revenue by the Medcorp and efficient management of both the
Medcorp and the Admincorp. During start-up, the Admincorp must rely upon the
capital invested in it by, or other financial assistance from, the Affiliated
Chiropractor or his existing chiropractic practice in order to timely meet its
financial obligations. In some cases, due to delays in the submission of bills
and collection of revenue by the Medcorp, the start-up phase has been extended
and, in such cases as well as in some cases where the start-up phase has not
been extended, the Admincorp has had to rely upon financial assistance from the
Affiliated Chiropractor or the Affiliated Chiropractor's existing chiropractic
practice longer than anticipated. The Company has previously obtained financial
information or performed credit checks on Affiliated Chiropractors or, where
organized as separate legal entities, their existing chiropractic practices on a
selective basis. The Company, at its discretion may do so prior to entering into
other agreements with chiropractors to develop new Integrated Medical Centers.
In addition, the revenues flowing to the Affiliated Chiropractor's existing
chiropractic practice, or to the Affiliated Chiropractor through his existing
practice, diminish over time, in some cases, substantially and rapidly. Thus,
the Affiliated Chiropractor's ability to provide additional financial assistance
to the Admincorp, and/or to cover his obligations with respect to the office
space and equipment leased or subleased by him or his existing chiropractic
practice to the Company for use by the Integrated Medical Center, may diminish.
Accordingly, there can be no assurance that any such affiliation with a
chiropractor will result in a successful relationship.
The Company's agreements with Affiliated Chiropractors and entities controlled
by them relating to the operation and management of the Integrated Medical
Centers are generally for initial terms of five years, and can be as long as ten
years. They may be renewed in five year increments, up to four times, by mutual
consent. An Affiliated Chiropractor may terminate such an agreement if the
Company materially breaches it and, if the breach is correctable, the Company
fails to cure the breach within ten days after written notification. The
start-up phase is generally six months following integration, which is the date
on which a medical doctor first sees a patient for the Integrated Medical Center
("Integration Date"). The loss of a substantial number of such agreements, or
<PAGE> 16
the loss of a substantial number of Affiliated Chiropractors, would have a
material adverse effect on the Company.
Dependence On Third Party Reimbursement. Substantially all revenue of the
Medcorps, on which the Company's income is dependent, derives from commercial
health insurance, state workers' compensation programs, and other third party
payors. Following the Company's specific approval, the Medcorps may also treat
patients covered under federal and state funded health care programs. All of
these providers and programs are regulated at the state or federal level. There
are increasing and significant public and private sector pressures to contain
health care costs and to restrict reimbursement rates for health care services.
Several states have taken measures to reduce the reimbursement rates paid to
health care providers in their states. The Company believes that additional
states will implement reductions from time to time. Reductions in Medicare and
Medicaid rates often lead to reductions in the reimbursement rates of other
third party payors as well. Thus, changes in the level of support by federal and
state governments of health care services, the methods by which health care
services may be delivered, and the prices of such services may all have a
material adverse impact on revenue of the Medcorps, which in turn could have a
material adverse effect on the Company.
Third party payors are generally not familiar with reimbursing for traditional
and alternative health care services, such as chiropractic, in the same medical
practice. The third party payors may disagree with the description of or coding
of a bill for medical services, or may contest a description or code under a
lower fee schedule. Such disagreements on description of professional services
or bill coding, particularly where the third party payor is a federal or state
funded health care program, could result in lesser reimbursement, which could
have a material adverse effect on the Medcorps and ultimately on the Company.
Persistent disagreements or alleged "upcoding" could result in allegations of
fraud or false billing, both of which constitute felonies. Such an allegation,
if proven, could result in forfeitures of payment, civil monetary penalties,
civil fines, suspensions, or exclusion from participating in federal or state
funded health care programs, and have a material adverse effect on the Company.
Investigation and prosecutions for fraudulent or false billing could have a
material adverse effect on the Company, even if such allegations were disproven.
No such allegations have been made to date although the Company is currently
under investigation by the U.S. Attorney for the Eastern District of Virginia.
One employee has received a target letter and the investigation appears to be
focused on two clinics in Virginia.
The Company's income may be adversely affected by the uncollectibility of the
Medcorps' medical fees from third party payors or by delay in the submission of
claims, a problem experienced by certain Integrated Medical Centers, and the
long collection cycles for such receivables. Many third party payors,
particularly insurance carriers covering automobile no-fault and workers'
compensation claims refuse, as a matter of business practice, to pay claims
unless submitted to arbitration. Further, third-party payors may reject medical
claims if, in their judgment, the procedures performed were not medically
necessary or if the charges exceed such payor's allowable fee standards. In
addition, some receivables may not be collected because of omissions or errors
in timely completion of the required claim forms. The inability of the Medcorps
to collect their receivables could materially adversely affect the Company.
<PAGE> 17
See "Risk Factors -- Third Party Reimbursement."
Risks Associated with Managed Care Contracts. An increasing percentage of
patients are coming under the control of managed care entities. The Company
believes that its success will, in part, depend upon the Company's ability to
negotiate, on behalf of the Medcorps, favorable managed care contracts with
Health Maintenance Organizations ("HMOs") and other private third party payors.
Such contracts often shift much of the financial risk of providing care from the
payor to the provider by requiring the provider to furnish all or a portion of
its services in exchange for a fixed, or "capitated," fee per member patient,
per month, regardless of the level of such patients' utilization rates and,
sometimes in the case of primary care physicians, to accept financial risk for
health care services not normally furnished by such physicians (e.g., specialty
physician or hospital services). Some managed care agreements also offer "shared
risk" provisions under which providers and provider practice management concerns
can earn additional compensation based on the utilization of services by
members, but may be required to bear a portion of any loss in connection with
such "shared-risk" provisions. Any such losses could have a material adverse
effect on the Company. In order for capitated contracts, especially any with
"shared-risk" provisions to be profitable for the Company, the Company must
effectively monitor the utilization of its services delivered to members of the
managed care organization who are patients of the Integrated Medical Centers
and, to the extent the Integrated Medical Centers are responsible for overall
patient care, monitor the utilization of specialist physicians or hospitals,
negotiate favorable rates with such other providers, and obtain, on favorable
terms, stoploss protection limiting its per enrollee exposure above specified
thresholds. The Company does not currently have a utilization management
program, but has commenced preliminary discussions with a software vendor
regarding the potential use of its program for that purpose. Further, certain of
the Company's operating strategies (e.g., having all treatments supervised by a
physician) are intended to attract managed care contracts for the Integrated
Medical Centers. Third party payors are not, however, generally familiar with
traditional and alternative health services being provided within the same
medical practice and may have concerns about contracting with such practices.
For this and other reasons, there can be no assurance that the Company will be
able to negotiate satisfactory managed care contracts for the Integrated Medical
Centers. Nor can there be any assurance that any managed care contracts it
enters into on behalf of the Integrated Medical Centers will not adversely
affect the Integrated Medical Centers or the Company.
Health Care Reform. Although Congress failed to pass comprehensive health care
reform legislation in 1996, the Company anticipates that Congress and state
legislatures will continue to review and assess alternative health care delivery
and payment systems and may in the future propose and adopt legislation
effecting fundamental changes in the health care delivery system. Also, Congress
is expected to consider major reductions in the rate of increase of Medicare and
Medicaid spending as part of efforts to balance the federal budget. The Company
can not predict the ultimate timing, scope or effect of any legislation
concerning health care reform, including legislation affecting the Medicare and
Medicaid programs. Any proposed federal legislation, if adopted, could result in
significant changes in the availability, delivery, pricing and payment for
health care services and products. Various states also have undertaken or are
considering significant health care reform initiatives. Although it is not
possible to predict whether any health care reform legislation will be adopted
<PAGE> 18
or, if adopted, the exact manner and the extent to which the Company will be
affected, it is likely that the Company will be affected in some fashion, and
there can be no assurance that any health care reform legislation, if and when
adopted, will not have a material adverse effect on the Company.
Dependence Upon Key Personnel. The Company is dependent upon the active
participation of its executive officers, particularly the Company's founder,
Chairman and Chief Executive Officer, C. Thomas McMillen, and Dr. Eric S.
Kaplan, its President and Chief Operating Officer. The loss to the Company of
the services of Mr. McMillen or Dr. Kaplan could have a material adverse effect
upon the Company. The Company has an employment contract with each of these
executive officers extending through August 31, 2001. The loss of either
person, or the inability to attract other qualified employees, could have a
material adverse effect on the Company.
Professional Liability. The Medcorps employ health care practitioners at the
Integrated Medical Centers for the delivery of health care services to the
public. They are thus exposed to the risk of professional liability claims. The
Company does not itself provide such services or control the provision of health
care services by the Integrated Medical Centers' practitioners or their
compliance with regulatory and other requirements in that regard. The Company
might nevertheless be held liable for medical negligence on their part.
The Company has obtained an insurance policy that, subject to certain
conditions, provides both it and its subsidiaries medical malpractice insurance
and managed care errors and omissions insurance retroactive to the Integration
Dates of the Company's current Integrated Medical Centers and one former
Integrated Medical Center. The policy provides coverage for $1,000,000 per claim
per Integrated Medical Center, subject to an aggregate limit of $3,000,000 per
Integrated Medical Center per year. The policy will also cover the Company with
respect to Integrated Medical Centers as they are opened. There is no deductible
under the policy.
The foregoing policy is a "claims made" policy. Thus, it provides coverage for
covered claims made during the policy's term but not for losses occurring during
the policy's term for which a claim is made subsequent to the expiration of the
term. As to future Integrated Medical Centers, the Medcorp must submit an
application and pay the premium with respect thereto within two weeks and 30
days of the desired effective date of coverage, respectively. The policy is also
subject to bi-annual audits of patient visits.
There can be no assurance, however, that the Company, its employees, or the
licensed health care practitioners employed at or associated with the Integrated
Medical Centers will not be subject to claims in amounts that exceed the
coverage limits under the policy or that such coverage will be available when
needed. Further, there can be no assurance that professional liability insurance
will continue to be available to the Company or the Medcorps in the future at
adequate levels or at an acceptable cost to either. A successful claim against
the Company in excess of the Company's insurance coverage could have a material
adverse effect upon the Company's business. Claims against the Company,
regardless of their merits or eventual outcome, also may have an adverse effect
upon the Company.
<PAGE> 19
Government Regulation; Pending Federal Investigation. Federal and state laws
extensively regulate the relationships among providers of health care services,
physicians and other clinicians. These laws include federal fraud and abuse
provisions. Such provisions prohibit the solicitation, receipt, payment, or
offering of any direct or indirect remuneration for the referral of patients for
which reimbursement is made under any federal or state funded health care
program or for the recommending, leasing, arranging, ordering or providing of
services covered by such programs. States have similar laws that apply to
patients covered by private and government programs. Federal fraud and abuse
laws also impose restrictions on physicians' referrals for designated health
services covered under Medicare or Medicaid to entities with which they have
financial relationships. Many states, have adopted similar laws that cover
patients in private programs as well as government programs. There can be no
assurance that the federal and state governments will not consider additional
prohibitions on physician ownership, directly or indirectly, of facilities to
which they refer patients, which could adversely affect the Company. Violations
of these laws may result in substantial civil or criminal penalties for
individuals or entities, including large civil money penalties and exclusion
from participation in federal or state health care programs. Such exclusion, if
applied to the Company's Integrated Medical Centers, could result in significant
loss of reimbursement and could have a material adverse effect on the Company.
In November 1997, various facilities of the Company's operations were searched
by federal authorities pursuant to search warrants, and the government removed
various computer equipment, records and documents. During the first half of
1998, various employees of the Company and certain subsidiaries were served
with subpoenas requesting records and documents related to billing and claims
coding, clinical relationships and corporate records. The Company believes it
may be a target in this investigation. One employee has received a target
letter stating that the employee was a subject of the investigation. The
investigation appears to be focused on two clinics in Virginia. While it is too
early to predict the outcome of any of the ongoing investigations of the
Company or the initiation of any additional investigations, were CWC to be
found in violation of federal or state laws relating to Medicare, Medicaid,
CHAMPUS or similar programs, the Company could be subject to substantial
monetary fines, civil and criminal penalties and exclusion from participation
in the Medicare, Medicaid or CHAMPUS programs and similar other reimbursement
programs (although these programs are a small portion of the Company's
revenue). Any such sanctions could have a material adverse effect on the
Company's financial position and results of operations.
Federal law also prohibits conduct that may be or result in price-fixing or
other anti-competitive conduct. Moreover, the Company may in the future contract
with licensed insurance companies and/or HMO's. Certain of such contracts may
require the Medcorps on behalf of which the Company contracts to assume risk in
connection with providing health care services under capitation arrangements. To
the extent that the Company or the Medcorps may be deemed to be in the business
of insurance as a result of entering into such arrangements, they may be subject
to a variety of regulatory and licensing requirements applicable to insurance
companies or HMOs. There can be no assurance that the Company or the Medcorps
will not be adversely affected by such regulatory determinations.
Moreover, the laws of the federal government and of many states prohibit
physicians from sharing professional fees, or "splitting fees," with anyone
<PAGE> 20
other than a member of the same profession or with a member of the same
profession outside group practice. These laws and their interpretations vary
from state to state and are enforced by the courts and by regulatory authorities
with broad discretion. Expansion of the operations of the Company to certain
jurisdictions may require structural and organizational modifications of the
Company's form of relationship with Integrated Medical Centers, which could have
an adverse effect on the Company. Although the Company believes its operations,
as currently conducted are in material compliance with existing applicable laws,
there can be no assurance that review of the Company's business by courts or
regulatory authorities will not result in a determination that could adversely
affect the operations of the Company or that the health care regulatory
environment will not change so as to restrict the Company's existing operations
or its expansion.
Federal law and the laws of many states regulate the sale of franchises.
Franchise laws require, among other things, that a disclosure document be
prepared and given to prospective franchisees. The Company believes that
Medcorps formed as business corporations wholly owned by the Company are not
subject to such laws. Medcorps formed as physician-owned professional
corporations may be subject to them. If such laws are deemed to apply, the
Company would be required to prepare and deliver a disclosure document to the
physician that owns the professional corporation, who might be an employee of
the Company. Federal law and the laws of certain states also regulate the sale
of so-called business opportunities. Franchise laws and business opportunity
laws and their interpretation vary from state to state and are enforced by the
courts and regulatory authorities with broad discretion. Failure to comply with
these laws could give rise to a private right of action for damages or
rescission, civil fines and penalties, and, in some cases, criminal sanctions.
Although the Company believes that its form of relationship with Medcorps and
Admincorps is not the type intended to be covered by such laws, the Company has
had counsel to advise it in this regard. There can be no assurance that review
of the Company's business by regulatory authorities will not result in a
determination that could adversely affect the operations of the Company or
require structural and organizational modifications of the Company's form of
relationship with Integrated Medical Centers that could have an adverse effect
on the Company.
State Laws Prohibiting the Corporate Practice of Medicine. The Medcorps are
formed as general business corporations wholly-owned by the Company in states in
which the Company believes general business corporations are permitted to own
medical practices. In other states, the Medcorps are formed as professional
corporations owned by one or more medical doctors licensed to practice medicine
under applicable state law. Corporations, such as the Company, are not permitted
under certain state laws to practice medicine or exercise control over the
medical judgments or decisions of practitioners. Corporate practice of medicine
laws and their interpretations vary from state to state and are enforced by the
courts and by regulatory authorities with broad discretion. The Company believes
that it performs only non-medical administrative services, does not represent to
the public or its clients that it offers medical services and does not exercise
influence or control over the practice of medicine by the practitioners with
whom it contracts. Expansion of the operations of the Company to certain
jurisdictions may require structural and organizational modifications of the
Company's form of relationship with practitioners in order to comply with
corporate practice of medicine laws, which could have an adverse effect on the
Company. Although the Company believes its operations as currently conducted are
in material
<PAGE> 21
compliance with existing applicable laws, there can be no assurance that the
Company's structure will not be challenged as constituting the unlicensed
practice of medicine or that the enforceability of the agreements underlying
this structure will not be limited. If such a challenge were made successfully
in any state, the Company could be subject to civil and criminal penalties under
such state's law and could be required to restructure its contractual
arrangements in that state. Such results, or the inability to successfully
restructure its contractual arrangements, could have a material adverse effect
upon the Company.
Professional Liability. The Medcorps employ health care practitioners at the
Integrated Medical Centers for the delivery of health care services to the
public. They are thus exposed to the risk of professional liability claims. The
Company does not itself provide such services or control the provision of health
care services by the Integrated Medical Centers' practitioners or their
compliance with regulatory and other requirements in that regard. The Company
might nevertheless be held liable for medical negligence on their part.
The Company has obtained an insurance policy that, subject to certain
conditions, provides both it and its subsidiaries medical malpractice insurance
and managed care errors and omissions insurance retroactive to the Integration
Dates of the Company's current Integrated Medical Centers and one former
Integrated Medical Center. The policy provides coverage for $1,000,000 per claim
per Integrated Medical Center, subject to an aggregate limit of $3,000,000 per
Integrated Medical Center per year. The policy will also cover the Company with
respect to Integrated Medical Centers as they are opened. There is no deductible
under the policy.
The foregoing policy is a "claims made" policy. Thus, it provides coverage for
covered claims made during the policy's term but not for losses occurring during
the policy's term for which a claim is made subsequent to the expiration of the
term. As to future Integrated Medical Centers, the Medcorp must submit an
application and pay the premium with respect thereto within two weeks and 30
days of the desired effective date of coverage, respectively. The policy is also
subject to bi-annual audits of patient visits.
There can be no assurance, however, that the Company, its employees, or the
licensed health care practitioners employed at or associated with the Integrated
Medical Centers will not be subject to claims in amounts that exceed the
coverage limits under the policy or that such coverage will be available when
needed. Further, there can be no assurance that professional liability insurance
will continue to be available to the Company or the Medcorps in the future at
adequate levels or at an acceptable cost to either. A successful claim against
the Company in excess of the Company's insurance coverage could have a material
adverse effect upon the Company's business. Claims against the Company,
regardless of their merits or eventual outcome, also may have an adverse effect
upon the Company.
Competition. The managed health care industry, including the provider practice
management industry, is highly competitive. The Company competes with other
companies for physicians and other practitioners of health care services as well
as for patients. The Company competes not only with national and regional
provider practice management companies, but also with local providers, many of
which are trying to combine their own services with those of other providers
into delivery networks. Certain of the companies are
<PAGE> 22
significantly larger, provide a wider variety of services, have greater
financial and other resources, have greater experience furnishing provider
practice management services, and have longer established relationships with
buyers of these services, than the Company, and provide at least some of the
services provided by the Company. In addition, companies with greater resources
than the Company that are not presently engaged in the provision of integrated
provider practice management services could decide to enter the business and
engage in activities similar to those in which the Company engages. There can be
no assurance that the Company will be able to compete effectively. See "Risk
Factors -- Competition."
Loans to Integrated Medical Centers. The Company was required under the terms of
several of its early management agreements to make loans to certain of the
Medcorps in amounts up to $40,000 each. The Company ceased this practice in 1997
and has removed this provision out from its management agreements. However, the
loans currently outstanding to the early Medcorps are being collected. The
failure of a substantial number of the early Medcorps to repay such loans, to
the extent taken, could have a material adverse effect on the Company's
financial condition.
Control by Existing Stockholders. The Company's executive officers and directors
control or own approximately 695,877 shares or 37.4% of the outstanding shares
of Common Stock. As a result, such persons may be able to influence the election
of all of the Company's directors and the outcome of certain issues submitted to
the Company's stockholders. Furthermore, such concentration of ownership could
limit the price that certain investors might be willing to pay in the future for
shares of Common Stock, and could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of the Company.
Limitation of Directors' Liability. The Company's Certificate of Incorporation
and By-laws provide that a director of the Company will not be personally liable
to the Company or its stockholders for monetary damages for breach of the
fiduciary duty of care as a director, subject to certain limitations imposed by
the Delaware General Corporation Law. Thus, under certain circumstances, neither
the Company nor its stockholders will be able to recover damages in the event
that a director(s) takes actions which harm
<PAGE> 23
the Company.
Absence of Dividends. The Company has paid no cash dividends on its Common Stock
since its inception and does not plan to pay cash dividends on the Common Stock
in the foreseeable future. The Company anticipates that future earnings will be
retained to finance future operations and expansion.
Possible Volatility of Common Stock Market Prices. From time to time after this
Offering, there may be significant volatility in the market price of the Common
Stock. Quarterly operating results of the Company, changes in general conditions
in the economy or the health care industry, or other developments affecting the
Company, could cause the market price of the Common Stock to fluctuate
substantially. The equity markets have, on occasion, experienced significant
price and volume fluctuations that have affected the market prices for many
companies' securities and have often been unrelated to the operating performance
of these companies. Concern about the potential effects of health care reform
measures has contributed to the volatility of stock prices of companies in
health care and related industries and may similarly affect the price of the
Common Stock following this Offering.
Anti-Takeover Provisions; Common and Preferred Stock Authorized. The Company's
Board of Directors has the authority to issue up to 50,000,000 shares of Common
Stock and up to 2,000,000 shares of Preferred Stock in one or more series and to
determine the number of shares in each series, as well as the designations,
preferences, rights and qualifications or restrictions of those shares without
any further vote or action by the stockholders. The rights of the holders of the
Company's existing Common and Preferred Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. The issuance of Preferred Stock could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. The Company is currently seeking to
raise capital which may include the sale of up to 2,000,000 shares of Preferred
Stock. In addition, the Company is subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law. In general, this statute
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
No Assurance of Nasdaq Small Cap Market Listing; Risk of Low-Priced
Securities; Risk of Application of Penny Stock Rules. The Board of Governors of
the National Association of Securities Dealers, Inc. has established certain
standards for the initial listing and continued listing of a security on Nasdaq
SCM. The standards for initial listing require, among other things, that an
issuer have total assets of $4,000,000 and capital and surplus of at least
$2,000,000; that the minimum bid price for the listed securities be $3.00 per
share; that the minimum market value of the public float (the shares held by
non-insiders) be at least $2,000,000, and that there be at least two market
makers for the issuer's securities. The maintenance standards require, among
other things, that an issuer have total assets of at least $2,000,000 and
capital and surplus of at least $1,000,000; that the minimum bid price for the
listed securities be $1.00 per share; that the minimum market value of the
"public float" be at least $1,000,000 and that there be at least two market
makers for the issuer's securities. A deficiency in either the market
<PAGE> 24
value of the public float or the bid price maintenance standard will be deemed
to exist if the issuer fails the individual stated requirement for ten
consecutive trading days. If an issuer falls below the bid price maintenance
standard, it may remain on Nasdaq SCM if the market value of the public float is
at least $1,000,000 and the issuer has $2,000,000 in equity. Nasdaq SCM has
recently implemented new maintenance criteria which eliminates the exception to
the $1.00 per share minimum bid price and require, among other things,
$2,000,000 in net tangible assets, $1,000,000 market value of the public float
and adherence to certain corporate governance provisions. There can be no
assurance that the Company will continue to satisfy the requirements for
maintaining a Nasdaq SCM listing. If the Company's securities were to be
excluded from Nasdaq SCM, it would adversely affect the prices of such
securities and the ability of holders to sell them, and the Company would be
required to comply with the initial listing requirements to be relisted on
Nasdaq SCM.
If the Company is unable to satisfy Nasdaq SCM's maintenance requirements and
the price per share were to drop below $5.00, then unless the Company satisfied
certain net asset tests, the Company's securities would become subject to
certain penny stock rules promulgated by the Commission. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document
prepared by the Commission that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from such rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. If the Common Stock becomes
subject to the penny stock rules, investors in the Offering may find it more
difficult to sell their shares.
Risks Associated with Forward-Looking Statements Included in this Prospectus.
This Prospectus contains certain forward-looking statements regarding the plans
and objectives of management for future operations, including plans and
objectives relating to the development of Integrated Medical Centers. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. The Company's plans and
objectives are based on a successful execution of the Company's expansion
strategy and assumptions that the Integrated Medical Centers will be profitable,
that the health care industry will not change materially or adversely, and that
there will be no unanticipated material adverse change in the Company's
operations or business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Prospectus
<PAGE> 25
will prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, particularly in view of the
Company's early stage operations, the inclusion of such information should not
be regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Resale Shares by the Selling Stockholders.
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock owned
by each of the Selling Stockholders. None of the Selling Stockholders has had
any other material relationship with the Company within the past three years
other than as a result of the ownership of the Resale Shares or other securities
of the Company. Because the Selling Stockholders may offer all or some of the
Resale Shares which they hold pursuant to the offering contemplated by this
Prospectus and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Resale Shares, no estimate
can be given as to the amount of Resale Shares that will be held by the Selling
Stockholders after completion of this offering. The Resale Shares offered by
this Prospectus may be offered from time to time by the Selling Stockholders
named below:
<TABLE>
<CAPTION>
Ownership
After Offering
--------------
Number
Number of Shares of Shares
Name and Address of Owned Prior to Being Number of
Selling Stockholders Offering Offered Shares (1) Percent (2)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Imprimis Investors LLC 80,000(1) 80,000 0 0
411 West Putnam Avenue
Greenwich, CT 06830
Wexford Spectrum 20,000(1) 20,000 0 0
Investors, LLC
411 West Putnam Avenue
Greenwich, CT 06830
- ---------------------------------------------------------------------------------------
Total: 100,000 100,000 0 0
</TABLE>
<PAGE> 26
(1) Excludes shares of Common Stock that may be issued upon conversion of
$5,000,000 of Senior Convertible Preferred Stock that may be converted into
Common Stock at the rate equal to the lesser of $1.75 per share of Common Stock
or 75% of the average closing "bid" price of the Company's publicly traded
Common Stock for the five trading days immediately preceding the conversion
date. If the $5,000,000 shares of Preferred Stock are converted at $1.75 per
share of Common Stock, the number of shares of Common Stock owned would be
2,857,142 shares.
(2) Based upon 2,416,635 shares of Common Stock outstanding on September 2,
1998. This Registration Statement shall also cover any additional shares of
Common Stock which become issuable in connection with the shares registered for
sale hereby by reason of any stock dividend, stock split, recapitalization or
other similar transaction effected without the receipt of consideration which
results in an increase in the number of the Registrant's outstanding shares of
Common Stock.
RECENT DEVELOPMENTS
Robert Mrazek, a Director of the Company, resigned his position as CEO of the
Smokenders subsidiary effective September 15, 1998. Also effective
September 10, 1998, Mr. Frederick Simon resigned from the Company's Board.
Mr. Simon is a Sr. Vice President of Wexford Management, L.L.C.
On May 13, 1998, the Company's Board of Directors adopted a plan to divest the
operations of the Company's 86.67% owned subsidiary, OHS. Under the divestiture
plan, the Company will issue a dividend to the Company's shareholders of record
on May 13, 1998 in the form of common stock in OHS. Each of the Company's
shareholders on the record date will receive shares of OHS common stock based on
their pro rata ownership of the Company's stock. OHS filed a registration
statement with the Commission on July 16, 1998 related to the offering of
2,000,000 shares of its common stock to its shareholders and anticipates raising
a maximum of $2,000,000 of additional capital. As of the date of this filing,
the Commission has not declared OHS's registration statement effective. The
divestiture is expected to be completed in October, 1998 concurrent with the
effective date of OHS's registration statement. The Company and OHS have entered
into a ten (10) year intercompany operating agreement wherein each company
provides services to the other. Additionally, CWC is to receive 100,000 warrants
to acquire OHS stock and a $200,000 receivable note payable December, 1999 or on
the date on which OHS closes a financing arrangement exclusive of the
contemplated Registration. It is possible that in the future, the Company may
create other public vehicles to benefit existing shareholders.
<PAGE> 27
PLAN OF DISTRIBUTION
The Company will not receive proceeds from the sale of Resale Shares in
this offering. The Resale Shares offered hereby may be sold by the Selling
Stockholders from time to time in transactions in the Nasdaq market, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Resale Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Resale Shares for whom such broker-dealers may act
as agents or to whom they sell as principals, or both (which compensation as to
a particular broker-dealer might be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Resale Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Resale Shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Resale Shares may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them and any profit on the resale of the Resale Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Company has advised the Selling Stockholders that, during such time as
they may be engaged in a distribution of the shares of Common Stock included
herein, they must comply with the applicable provisions under Regulation M under
the Securities Exchange Act of 1934, as amended ("Regulation M") and, in
connection therewith, the Selling Stockholders may not engage in any
stabilization activity in connection with any securities of the Company, that
they must furnish copies of this Prospectus to each broker-dealer through which
the shares of Common Stock included herein may be offered, and that they may not
bid for or purchase any securities of the Company or attempt to induce any
person to purchase any securities of the Company except as permitted under
Regulation M. The Selling Stockholders have also agreed to inform the Company
and broker-dealers through whom sales may be made hereunder when the
distribution of the shares is completed.
Rules 102 and 103 under the Exchange Act prohibits participants in a
distribution from bidding for or purchasing for an account in which the
participant has a beneficial interest, any of the securities that are the
subject of the distribution. Rule 104 under the Regulation M governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
The Resale Shares were originally issued under the Investment Agreement
pursuant to exemptions from the registration requirements of the Securities Act
provided by Section 4(2) thereof. The Company agreed to register the Resale
Shares under the Securities Act. The Company has agreed to pay all fees and
expenses incident to the filing of this Registration Statement other than
underwriting discounts, commissions and fees and disbursements of counsel for
the Selling Stockholders.
<PAGE> 28
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Epstein Becker & Green, P.C., New York, New York.
EXPERTS
The consolidated financial statements of Complete Wellness Centers, Inc.
appearing in Complete Wellness Centers, Inc. Annual Report (Form 10-KSB) for the
year ended December 31, 1997 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such financial statements have been incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an itemized statement of all estimated
expenses in connection with the issuance and distribution of the securities
being registered:
<TABLE>
<S> <C>
SEC Registration fee .................................... $ 91.00
Legal expenses .......................................... 15,000.00
Accounting fees and expenses ............................ 10,000.00
Total ........................................... $ 25,091.00
</TABLE>
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). Article VII of the Registrant's Bylaws provides for
mandatory indemnification of its
<PAGE> 29
directors and permissible indemnification of its officers, employees and other
agents to the maximum extent permitted by the Delaware General Corporation Law.
The Registrant has entered into Indemnification Agreements with its officers and
directors which are intended to provide the Registrant's officers and directors
with further indemnification to the maximum extent permitted by the Delaware
General Corporation Law. Reference is also made to Section XII B of the Investor
Rights Agreement contained in Exhibit 4.3 incorporated by reference herein,
which contains provisions indemnifying officers and directors of the Registrant
against certain liabilities. Reference is also made to the Underwriting
Agreements entered into in connection with the Company's initial public offering
indemnifying officers and directors of the Company and other persons against
certain liabilities, including those arising under the Act.
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Number Description
------- -------------
<S> <C>
4.1 (1) Form of Common Stock Certificate
4.11(2) Registration Rights Agreement dated as of December 19, 1997
by and among the Company and the parties thereto.
4.12 (2) Investment Agreement dated December 19, 1997 between the
Company and the parties thereto.
4.13 (2) First Supplement to the Investment Agreement dated January 12,
1998.
4.14 (3)(4) Second Supplement to the Investment Agreement dated July 2,
1998.
4.15 (3) (4) Certificate of Designation, Preferences and Rights of the
Senior Convertible Preferred Stock dated July 2, 1998;
5.1 Opinion of Epstein Becker & Green, P.C..
23.1 Consent of Ernst & Young, LLP, Independent Accountants.
23.2 Consent of Epstein Becker & Green, P.C.(included in
Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
</TABLE>
- ----------------------
(1) Incorporated by reference to identically numbered exhibits included in the
Company's Registration Statement on Form SB-2 (File No. 333-18291)
declared effective with the Securities and Exchange Commission on February
19, 1997.
(2) Incorporated by reference to the items filed on the Form 13D filed on
January 23, 1998 (File No. 000-22115)
(3) Incorporated by reference to the Company's Current Report on Form 8-K
filed on July 10, 1998 (File No. 000-22115).
<PAGE> 30
(4) Incorporated by reference to the Company's Current Report on Form 8-K
notice of Special Meeting to Shareholders and Proxy Statement filed on
July 21, 1998 (File No. 000-22115).
Item 17. Undertaking
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of the Registrant, Indemnification Agreements
entered into between the Registrant and its officers and directors, 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 hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The 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 of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high and 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 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
<PAGE> 31
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Washington, District of Columbia on this 25th day of
September, 1998.
COMPLETE WELLNESS CENTERS, INC.
By: /s/ C. Thomas McMillen
----------------------------
(C. Thomas McMillen)
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. Thomas McMillen and E. Eugene
Sharer, and each of them singly, as true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign the Registration
Statement filed herewith and any or all amendments to said Registration
Statement (including post-effective amendments and registration statements
filed pursuant to Rule 462 and otherwise), and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission granting unto said attorneys.
<PAGE> 32
in-fact and agents the full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the foregoing, as
full to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or his substitute, may lawfully do or cause to be done by virtue
hereof.
Witness our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C. Thomas McMillen Chairman of the Board and September 29, 1998
- ---------------------------- Chief Executive Officer
(C. Thomas McMillen) (Principal Executive Officer)
/s/ E. Eugene Sharer Director and Vice Chairman September 29, 1998
- ---------------------------- of the Board
(E. Eugene Sharer)
/s/ Eric Kaplan President and Director September 29, 1998
- ----------------------------
(Eric Kaplan)
/s/ Michael Brigante Chief Financial Officer September 29, 1998
- ---------------------------- (Principal Accounting and
(Michael Brigante) Financial Officer)
/s/ Joseph J. Raymond Director September 29, 1998
- ----------------------------
(Joseph J. Raymond)
/s/ Jay McMillen Director September 29, 1998
- ----------------------------
(Jay McMillen, M.D.)
/s/ Robert Mrazek Director September 29, 1998
- ----------------------------
(Robert Mrazek)
/s/ Sergio Vallejo Director September 29, 1998
- ----------------------------
(Sergio Vallejo)
</TABLE>
<PAGE> 33
COMPLETE WELLNESS CENTERS, INC.
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
4.1 (1) Form of Common Stock Certificate
4.11(2) Registration Rights Agreement dated as of December 19, 1997 by
and among the Company and the parties thereto.
4.12 (2) Investment Agreement dated December 19, 1997 between the
Company and the parties thereto.
4.13 (2) First Supplement to the Investment Agreement dated January 12,
1998.
4.14 (3)(4) Second Supplement to the Investment Agreement dated July 2,
1998.
4.15 (3)(4) Certificate of Designation, Preferences and Rights of the
Senior Convertible Preferred Stock dated July 2, 1998;
5.1 Opinion of Epstein Becker & Green, P.C..
23.1 Consent of Ernst & Young, LLP, Independent Accountants.
23.2 Consent of Epstein Becker & Green, P.C.(included in Exhibit
5.1).
24.1 Power of Attorney (see page II-4).
</TABLE>
- ---------------------
(1) Incorporated by reference to identically numbered exhibits included in the
Company's Registration Statement on Form SB-2 (File No. 333-18291)
declared effective with the Securities and Exchange Commission on February
19, 1997.
(2) Incorporated by reference to the items filed on the Form 13D filed on
January 23, 1998 (File No. 000-22115)
(3) Incorporated by reference to the Company's Current Report on Form 8-K
filed on July 10, 1998 (File No. 000-22115).
(4) Incorporated by reference to the Company's Current Report on Form 8-K
notice of Special Meeting to Shareholders and Proxy Statement filed on
July 21, 1998(File No. 000-22115).
<PAGE> 1
EXHIBIT 5.1
October 1, 1998
Complete Wellness Centers, Inc.
666 Eleventh Street, N.W.
Washington, D.C. 20001
Ladies and Gentlemen:
We have acted as counsel to Complete Wellness Centers, Inc.(the
"Company"), a Delaware corporation, in connection with its registration of
100,000 shares of Common Stock (the "Common Stock") as described in the
Company's Registration Statement on Form S-3, filed with the Securities and
Exchange Commission under the Securities Act of 1933. The Common Stock consists
of shares that may be offered by certain stockholders of the Company or by
pledgees, donees, transferees or other successors in interest that receive such
shares as a gift, partnership distribution or other non-sale related transfer
(the "Resale Shares").
We are familiar with the corporate proceedings taken by the Company in
connection with the issuance and sale of the Resale Shares. It is our opinion
that the Resale Shares have been duly authorized and are validly issued, fully
paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus which is part of the registration Statement.
Very truly yours,
/s/
EPSTEIN BECKER & GREEN, P.C.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Complete Wellness
Centers, Inc. for the registration of 100,000 shares of its common stock and to
the incorporation by reference therein of our report dated March 31, 1998, with
respect to the consolidated financial statements of Complete Wellness Centers,
Inc. included in its Annual Report (Form 10-KSB) for the year ended December 31,
1997 filed with the Securities and Exchange Commission.
ERNST & YOUNG, LLP
Washington, DC
October 1, 1998
