As filed with the Securities and Exchange Commission on June 25, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DIALYSIS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
Florida 59-1757642
- ---------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
27 Miller Street STEPHEN W. EVERETT, Executive
Lemoyne, Pennsylvania 17043 Vice President
(717) 730-6164 27 Miller Street
(717) 730-6164 Lemoyne, Pennsylvania 17043
(717) 730-6164
(Address, including zip code and (Name, address, including zip code
telephone number, including area and telephone number, including
code, of registrant's principal area code, of agent for service)
executive offices)
Copies to:
LAWRENCE E. JAFFE, ESQ.
777 Terrace Avenue
Hasbrouck Heights, N.J. 07604
(201) 288-8282
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pur-
suant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Each Class of Amount to Be Price Per Offering Registration
Securities to be Registered Registered Unit(1)(2) Price(1)(2) Fee
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value... 2,300,000 (1)(2) $4.50 $10,350,000 $2,877 *
Common Stock, $.01 par value... 100,000 (1)(3) $4.50 $ 450,000 $ 125 *
Common Stock, $.01 par value... 200,000 (1)(3) $5.40 $ 1,080,000 $ 300 *
- ----------------------------------------------------------------------------------------
Total..................................................................... $3,302 *
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</TABLE>
<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. Represents (i) 2,300,000 shares issuable under
the Company's redeemable common stock purchase warrants ("Warrants")
exercisable through October 16, 1999 at $4.50 per share registered
under the Company's April 17, 1996 security offering registered on
Form SB-2, Registration No. 33-80877-A ("Form SB-2 Registration");
(ii) 100,000 shares of common stock issuable upon exercise at $4.50
per share of the underwriter's purchase warrant registered under the
Company's Form SB-2 Registration; and (iii) 200,000 shares of common
stock issuable upon exercise of Warrants exercisable at $5.40 per share
through April 16, 2001 pursuant to the underwriter's purchase warrant
registered under the Form SB-2 Registration.
(2) Represents 2,300,000 shares of common stock issuable upon exercise of
the Warrants previously registered on the Company's Form SB-2 Registra-
tion. See Notes (1) and (3). This registration statement covers, in
addition, such indeterminate number of shares of common stock as may be
issued upon exercise of the Warrants by reason of adjustment of the
exercise price of the Warrants in certain contingencies as outlined in
the prospectus.
(3) Reserved for issuance upon exercise of the underwriter's purchase warrant
and under the Warrants obtainable upon exercise of the underwriter's
purchase warrant together with such indeterminate number of Warrants
and/or common stock as may be issuable pursuant to the anti-dilution
provision of the underwriter's purchase warrant or the Warrants.
* Filing fees were paid with respect to all the Warrants and underlying
common stock at the time of filing the Company's Form SB-2 Registration.
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
included in the registration statement is a combined prospectus and relates
to Registration No. 33-80877-A previously filed by the registrant on Form
SB-2 and declared effective on April 17, 1996.
---------------
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 regis-
tration 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
<PAGE>
Subject to Completion - June 25, 1999
Dialysis Corporation of America
2,600,000 Shares of Common Stock
We are offering 2,300,000 shares of common stock issuable upon exercise
of our outstanding redeemable common stock purchase warrants, which are
referred to in this prospectus as the "public warrants." Each public
warrant entitles the holder to purchase one share of common stock at an
exercise price of $4.50 per share.
An additional 300,000 shares of common stock are being offered by
seven persons who own options and warrants to buy the common stock they
are offering for resale. See "Selling Security Holders" on page 18. Al-
though we will receive the proceeds from any of the selling security
holders' exercise of their options and warrants, we will not receive any
proceeds from the resale of the common stock by the selling security
holders.
Markets for our securities
o Our common stock trades on the Nasdaq SmallCap Market under the
symbol "DCAI." On June 23, 1999, the closing price for the common
stock was $2.88.
o Our warrants trade on the Nasdaq SmallCap Market under the symbol
"DCAIW." On June 23, 1999, the closing price for the warrants was
$.44.
A 5% commission will be paid to certain of the selling security holders
who acted as or are affiliated with the underwriters of our 1996 public
offering of the common stock and warrants if certain conditions are met with
respect to any exercise of the 2,300,000 public warrants. See "Plan of
Distribution."
Investment in the common stock is speculative and involves substantial
risks. See "Risk Factors" beginning on page 6. See also "Summary Risk
Factors" relating to proposed merger entity beginning on page 15.
---------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
---------------
The date of this Prospectus is , 1999
<PAGE>
About This Prospectus
You should rely on the information incorporated by reference or con-
tained in this prospectus or any supplement. We have not authorized anyone
to provide you with information different from that contained in this
prospectus. We are offering for sale the 2,300,000 shares of common stock
which are obtainable on exercise of the 2,300,000 outstanding public
warrants in those states where offers and sales are permitted. The
selling security holders are offering their 300,000 shares of common stock.
Neither we nor the selling security holders will make an offer of the shares
of common stock in any state where the offer is not permitted. We will not
receive any proceeds from the sale of shares by the selling security
holders. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.
This preliminary prospectus is subject to completion prior to this
offering. Among other things, this preliminary prospectus describes our
company as we currently exist.
See the section of this prospectus entitled "Risk Factors" starting at
page 6 for a description of certain factors that you should consider before
investing in the common stock offered. Also refer to the section of this
prospectus entitled "Recent Developments" for a discussion of a proposed
merger with an internet company, and the section entitled "MainStreet -
Summary Risk Factors" at page 15 for a description of certain risk factors
relating to that company.
Available Information
We file reports, information statements and other information, as does
our parent, Medicore, Inc., with the Securities and Exchange Commission.
Those reports, information and proxy statements and other information may be
obtained:
o At the Public Reference Room of the Securities and Exchange Com-
mission, Room 1024 - Judiciary Plaza, 450 fifth Street, N.W.,
Washington D.C. 20549;
o At the public reference facilities at the Security and Exchange
Commission's regional offices located at Seven World Trade Center,
13th Floor, New York, New York 10048, or Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
o From the Securities and Exchange Commission, Public Reference Room,
Judiciary Plaza, 450 fifth Street, N.W., Washington, D.C. 20549;
o At the offices of The Nasdaq Stock Market, Inc., Reports Section,
1735 K Street, N.W., Washington, D.C. 20006; or
o From the internet site maintained by the Securities and Exchange
Commission at http://www.sec.gov, which contains reports, proxy
and information statements and other information regarding issuers
that file electronically with the Securities and Exchange Commission.
Some locations may charge prescribed rates or modest fees for copies.
For more information on the public reference rooms, call the Securities and
Exchange Commission at 1-800-SEC-0330.
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission. The registration statement contains
more information than this prospectus regarding DCA and our common stock,
including certain exhibits. You can get a copy of the registration state-
ment from the Securities and Exchange Commission at the addresses listed
above or from its internet site.
<PAGE> 2
Incorporation of Certain Documents By Reference
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can
disclose important information to you by referring you to those documents.
The information incorporated by reference is considered to be part of this
prospectus, and later information that we file with the Securities and
Exchange Commission will automatically update and supersede this informa-
tion. We incorporate by reference the documents listed below and any
future filings made with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until the warrants are exercised or expire and the selling security holders
sell all their shares or their options for the shares expire. This
prospectus is part of a registration statement we filed with the Securities
and Exchange Commission (Registration No. 333-________).
o The descriptions of our common stock and warrants contained in our
registration statement filed pursuant to Section 12 of the Exchange
Act on Form 8-A declared effective April 17, 1996, and any amendment
or report filed for the purpose of updating any description.
o Annual Report on Form 10-K for the fiscal year ended December 31,
1998, including those portions of our information statement for the
1999 Annual Meeting of shareholders incorporated in the Form 10-K by
reference.
o Current Report on Form 8-K filed with the Securities and Exchange
Commission on March 9, 1999 re: Item 5, "Other Events," relating to
the extension of the warrant exercise period.
o Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1999.
On request, DCA will provide at no cost to each person, including any
beneficial owner, who receives a copy of this prospectus, a copy of any or
all of the documents incorporated in this prospectus by reference. DCA will
not provide exhibits to any of such documents, however, unless such exhibits
are specifically incorporated by reference into those documents. Requests
should be directed to Lawrence E. Jaffe, the Secretary of Dialysis Corpora-
tion of America, 777 Terrace Avenue, Hasbrouck Heights, New Jersey 07604,
telephone no. (201) 288-8282 (fax no. (201) 288-8208)).
<PAGE> 3
Prospectus Summary
Cautionary Notice Regarding Forward-Looking Statements
This prospectus contains forward-looking statements within the meaning
of the federal securities laws. Certain of the forward-looking statements
include management's expectations, intentions, beliefs and strategies
regarding the future of our growth and operations, the character and devel-
opment of the dialysis industry, anticipated revenues, our needs for and
sources of funding for expansion opportunities and construction, expendi-
tures, costs and income and similar expressions concerning matters that are
not considered historical facts. Such forward-looking statements are
subject to substantial risks and uncertainties that could cause actual
results to materially differ from those expressed in the statements in
this prospectus, including the general economic, market and business
conditions, opportunities pursued or not pursued by management, competition
and changes in federal and state laws or regulations affecting our opera-
tions. Among the factors that could cause actual results to differ
materially are the factors detailed in the risks discussed in "Risk
Factors" and other documents as filed from time to time with the SEC. We
base our forward-looking statements on information currently available to
us, and we assume no obligation to revise these forward-looking statements
to reflect events after the date made. Readers are cautioned not to place
undue reliance on such forward-looking statements.
This summary highlights some information from this prospectus and may
not contain all the information that is important to you.
Our Company
We are a regional provider of dialysis services to patients suffering
from chronic kidney failure known as end stage renal disease, or ESRD. In
addition, we provide acute dialysis services through contractual rela-
tionships with three hospitals. Our services are provided through five
dialysis facilities located in New Jersey and Pennsylvania. As part of
our dialysis treatments, we provide drugs to patients under a physician's
prescription, as well as electrocardiograms and blood transfusions.
Our principal executive offices are located at 27 Miller Street,
Lemoyne, Pennsylvania 17043, and our telephone number is (717) 730-6164.
The Offering
DCA common stock offering 2,300,000 shares issuable upon exercise of
our public warrants
Selling security holders 300,000 shares of common stock
Use of proceeds We intend to use the net proceeds of this
offering for:
1. acquisition or construction of dialysis
centers; and
2. working capital and general corporate
purposes; or
3. develop central web site to provide any
company with ability to sell initial
public offerings or secondary offerings
through auction of its securities; based
on potential merger negotiations with a
private start-up internet company which
would change our business and management.
See "Recent Developments."
<PAGE> 4
Nasdaq SmallCap Market symbol
o common stock DCAI
o warrant DCAIW
Securities outstanding
o common stock 3,546,344
o public warrants 2,300,000
o exercise price $4.50 per share
o expiration date October 16, 1999
Common stock to be outstanding
assuming exercise of all
the warrants 5,846,344 - does not include
o 300,000 shares reserved for issuance
upon exercise of selling security holder
options and warrants
o 819,500 shares reserved for issuance upon
exercise of options granted under our
stock option plans
o 10,000 shares reserved for issuance upon
exercise of non-plan options
o 72,000 shares reserved for issuance upon
the exercise of options available for
future grant under our 1995 Stock Option
Plan
Letter of Intent for Proposed Merger and Sale of Assets
On June 4, 1999, we signed a letter of intent with MainStreet IPO, LLC,
a new start-up company which is in its initial stages of developing a central
web site that will provide companies the ability to perform initial public
offerings and secondary offerings of securities with or without, at their
option, the assistance of an underwriter. Proposed public offerings will be
conducted on the basis of a "Dutch auction" expected to provide a wider base
of investors with an opportunity to participate in public offerings. The
CEO Letter.com will also be affiliated with MainStreet. That subsidiary
provides chief executive officers of public companies a forum to discuss
their companies to a multitude of potential internet investors. The CEO
Letter has an exclusive arrangement with Freeride.com, an unaffiliated
website with extensive membership, to use Freeride's point reward system as
an incentive for potential investors to read The CEO Letter. The letter of
intent, a non-binding indication of intent, provides for MainStreet to
negotiate a merger agreement. The proposed transactions would involve
MainStreet merging into our company, our dialysis operations to be sold to
our parent, Medicore, Inc., and our company's name to change to MainStreet.
The management and operations of our company would change to that of
MainStreet. The proposed merger and acquisition transactions are contingent
on reaching acceptable terms in definitive merger and acquisition agree-
ments, satisfactory due diligence of MainStreet and its proposed business
and operations, our shareholders' approval, and MainStreet's qualification
for listing its common stock on the Nasdaq SmallCap Market. See "Recent
Developments."
Summary Financial Data
The following summary financial data for each of the three years ended
December 31, 1998 have been derived from our audited consolidated financial
statements. The summary financial data for the three months ended March 31,
1999 and 1998 are derived from our unaudited consolidated financial state-
ments. Our audited and unaudited financial statements have been incorporated
in this prospectus by reference.
<PAGE> 5
Three Months
Year Ended December 31, Ended March 31,
-------------------------- ------------------
1998 1997 1996 1999 1998
---- ---- ---- ---- ----
(unaudited)
Operating Results: (in thousands, except per share data)
Revenues $4,004 $9,221 $4,137 $1,255 $ 945
Net (loss) income (204) 1,993 (23) (147) (77)
(Loss) earnings per share
Basic (.06) .56 (.01) (.04) (.02)
Diluted (.06) .55 (.01) (.04) (.02)
December 31, 1998 March 31, 1999
---------------- -------------------------
Actual As Adjusted
Balance Sheet Data (unaudited)
Working capital $ 5,114,976 $ 4,912,107 $16,175,107
Total assets 9,348,924 8,954,926 20,217,926
Long-term debt 632,664 679,916 679,916
Total liabilities 1,577,434 1,330,608 1,330,608
Shareholder's equity 7,771,490 7,624,318 18,887,318
The "As Adjusted" information presented above reflects the pro forma
effects of the receipt of approximately $11,263,000 of net proceeds from
the sale of the common stock offered by this prospectus upon exercise of
the 2,300,000 public warrants and the exercise of the selling security
holders' options and warrants for 300,000 shares of common stock.
We have not included any summary financial information of MainStreet,
our proposed merger partner, since MainStreet has recently been formed, has
no operations, minimal assets, no financial statements, and the proposed
merger is currently being negotiated. As part of the proposed merger, we
will be selling our assets, exclusive of certain net warrant proceeds in
excess of $1,000,000, to our parent, Medicore, which company will also be
assuming all our liabilities. If the merger is completed, Medicore will
also receive 20% of the net warrant proceeds up to $1,000,000. See "Use
of Proceeds." These proposed transactions have to be finalized and approved
by our shareholders. Therefore, we cannot be sure these proposed transac-
tions will be completed. See "Recent Developments."
Risk Factors
Risk Factors Relating To Our Business
Because we have experienced losses and expect our expenses to increase, we
may not be able to achieve profitability in the near future.
Since 1989, when we sold four of our five dialysis centers, we have
experienced operational losses. We initiated an expansion program in 1995,
opening two new dialysis centers, and one new center in each of 1997, 1998
and 1999, with a new center in the initial construction phase. However, some
of these centers are in the developmental stage and generate losses for at
least 12 months, as has been our experience with newly established dialysis
facilities. This is due to operational costs and time needed to reach full
capacity of dialysis treatments. Even though construction of new dialysis
centers may generate greater revenues, until their patient bases increase
toward a fuller capacity, we may not show profitable operations.
<PAGE> 6
The dialysis operations are subject to extensive government regulation.
Our dialysis operations are subject to extensive federal and state
government regulations which include:
o false claims prohibitions for health care reimbursement
o patient referral prohibitions
o licensing requirements for each dialysis facility
o record keeping requirements
o health, safety and environmental compliance
Many of these laws and regulations are complex and open to different
interpretations. Due to the extensive federal and state regulations and
the absence of court cases or government interpretations of these regula-
tions, certain of our practices in organization and providing of dialysis
services may be challenged. If we are forced to change our method of
operations because of these regulations, our earnings, financial condition
and business might be adversely affected. In addition, any violation of
these governmental regulations could involve substantial civil and criminal
penalties and fines, and exclusion from participating in Medicare and
Medicaid programs. Any loss of federal or state certifications or licenses
would also adversely impact our business.
Neither our arrangements with the medical directors of our facilities
nor the minority ownership interests of referring physicians in certain of
our dialysis facilities meet all of the requirements of published safe
harbors to the illegal remuneration provisions of the Social Security Act
and similar state laws. These laws impose civil and criminal sanctions on
persons who receive or make payments for referring a patient for treatment
that is paid for in whole or in part by Medicare, Medicaid or similar state
programs. Transactions that do not fall within the safe harbor may be
subject to greater scrutiny by enforcement agencies.
Our revenues and financial stability are dependent on fixed reimbursement
rates under Medicare and Medicaid.
Approximately 74% of our patient revenues for the last two years were
derived from Medicare reimbursement. Average net revenue per treatment for
our patients from government and private payors was approximately $205 for
1998 and $206 for 1997. Decreases in the Medicare and Medicaid rates and
programs for our dialysis treatments would adversely affect our revenues
and opportunities for profitability and would increase our operating losses.
Furthermore, operating costs tend to increase over the years without any
comparable increase in the prescribed dialysis treatment rates, which
remain fixed and have decreased over the years.
We also administer an anemia drug, EPO, to most of our dialysis
patients. The reimbursement rate for this drug has been reduced over the
last several years.
Decreases in reimbursement payments from third-party, non-government payors
could adversely affect our earnings.
Any reduction in the rates paid by private insurers, hospitals and other
non-governmental third-party organizations could adversely affect our
business. We estimate approximately 21% of our patient revenues for 1998
and 1997 were obtained from sources other than Medicare or Medicaid. We
generally charge non-governmental organizations for dialysis treatment
rates which exceed the fixed Medicare and Medicaid rates. Any limitation on
our ability to charge these higher rates, which may be affected by expanded
coverage by Medicare under the fixed corporate rate, or expanded coverage of
dialysis treatments by managed care organizations, which commonly have lower
rates than we charge, could adversely affect our business, results of
operations, and financial condition.
<PAGE> 7
Our ability to grow is subject to our resources and available locations.
To date, expansion of our operations has been through construction of
dialysis facilities rather than acquisition. This is due to the substan-
tial costs involved in an acquisition, usually valued on a per-patient
basis. We are a small company with limited resources. Therefore, we look
for areas with qualified and cost-effective nursing and technical
personnel, with a sufficient population to sustain a dialysis facility.
These opportunities are limited and we compete with much larger dialysis
companies for appropriate locations. Construction through commencement
of operations generally takes four to six months and sometimes longer.
Once the facility is operable, it generates revenues, but usually does not
operate at full capacity, thereby generating losses for up to approximately
a 12 month period. Our growth strategy based on construction also provides
the risks of our inability to identify suitable locations to develop
additional facilities. Those we do develop may never achieve profitability,
and additional financing may not be available to finance future development.
Our inability to acquire or develop facilities in a cost-effective
manner could adversely affect our ability to expand our business and our
attempts to generate operating profits, which we have not had over the
last several years.
Growth places significant demands on our financial and management
skills. Inability on our behalf to meet the challenges of expansion and
to manage any such growth could have an adverse effect on our management,
results of operations and financial condition.
Our attempt to expand through development or acquisition of dialysis
facilities which are not currently identified may entail risks which you
will not have a basis to evaluate.
We expand generally through seeking an appropriate location considering
the patient base, availability of a physician nephrologist to be our medical
director, and a skilled work force. Construction and equipment costs for a
new dialysis facility range from $600,000 to $750,000. The cost of acquiring
a center is usually much greater. We cannot assure you we will be successful
in effecting any acquisitions or developing dialysis facilities, or otherwise
successfully expanding our operations. We are negotiating with certain
nephrologists to establish new dialysis centers, but we cannot assure you
these negotiations will result in the development of new centers. Further-
more, even if we continue in such development expansion, there is no basis
for you to evaluate the specific merits or risks of any potential acquisition
or development of dialysis facilities and locations that we may undertake.
Dependence on physician referrals.
Our dialysis facilities and those centers we seek to develop are
dependent upon referrals of ESRD patients for treatment by physicians
specializing in nephrology. Generally, the nephrologist or medical pro-
fessional association of physicians supervising a particular dialysis
center's operations, known as a medical director of that facility, account
for most of the patient base. The loss of these key referring physicians
at a particular center could have a material adverse effect on the operations
of the center and could adversely affect our operations.
Some of the referring physicians own minority interests in certain of
our dialysis facilities. If these interests are deemed to violate
applicable federal or state law, these physicians may be forced to dispose
of their ownership interests. We are unable to predict how this would
affect our relationship with these referring physicians, which could have
an adverse effect on our business.
<PAGE> 8
Industry changes could adversely affect our business.
The healthcare industry is in a period of change and uncertainty.
Healthcare organizations, public and private, continue to change the manner
in which they operate and pay for services. Our business is designed to
function within the current healthcare financing and reimbursement system.
In recent years, the healthcare industry has been subject to increasing
levels of government regulation of reimbursement rates and capital expendi-
tures, among other things. In addition, proposals to reform the healthcare
system have been considered by Congress, and still remain a priority issue.
Any new legislative initiatives, if enacted, may further increase government
regulation of or other involvement in healthcare, lower reimbursement rates
and otherwise change the operating environment for healthcare companies. We
cannot predict the likelihood of those events or what impact they may have
on our earnings, financial condition or business.
Our business is subject to substantial competition.
We are operating in a very competitive environment in terms of both
operations and acquisitions of existing dialysis centers. Our competition
comes from other dialysis centers, many of which are owned by much larger
companies, and from hospitals. The dialysis industry is rapidly consoli-
dating. There are some very large dialysis companies competing for the
acquisition of existing dialysis centers and the development of relation-
ships with referring physicians. Most of our competition have much greater
financial resources and more effective operations, dialysis facilities and
patient base.
Competition also comes from technological advances that provide more
effective dialysis treatments than the services provided by our centers.
We experience competition from physicians who open their own dialysis
facilities. Competition for existing centers has increased the costs of
acquiring such facilities. Competition is also intense for qualified nursing
and technical staff as well as for nephrologists with an adequate patient
base. Management can provide no assurance our company can compete effec-
tively.
Risk Factors Relating to the Securities
Medicore, our parent, which owns 68% of our company, has some common
officers and directors, which presents the potential for conflicts of
interest.
Medicore owns 68% of our company, and is able to elect all of our
directors and otherwise control our management and operations. Even
assuming all the public warrants are exercised, Medicore would have a 41%
interest in our company. That is a large enough percentage, although not
mathematically a majority, to provide Medicore with continued control of
our management and operations. Such control is also complemented with the
fact that Thomas K. Langbein is Chairman of the Board and Chief Executive
Officer of both our company and Medicore, of which company he is also the
President, and Daniel R. Ouzts is Vice President and Treasurer of both
companies. Neither Mr. Langbein nor Mr. Ouzts devotes full time to our
management. In addition, certain other accounting personnel and admin-
istrative facilities of our operations and Medicore are common. The costs
of executive and accounting salaries and other shared corporate overhead
for these companies are charged first on the basis of direct usage when
identifiable, with the remainder allocated on the basis of time spent.
The amount of expenses charged by Medicore to our company amounted to
approximately $240,000 for each of the three years ended December 31,
1998.
Additionally, there have been past and there are current transactions
between our company and Medicore and their directors, including loans and
insurance coverage. We have been advancing funds to Medicore for working
capital requirements. As a net result of cash transfers and corporate
overhead allocations, there was an
<PAGE> 9
intercompany indebtedness due to us from Medicore of approximately $121,000
at December 31, 1998 and $72,000 as of March 31, 1999.
Since Medicore has a majority interest in our company, there exists the
potential for conflicts between Medicore and us, and the responsibilities of
our management to our shareholders may conflict with the responsibilities
owed by management of Medicore to its shareholders. We cannot provide any
assurance that any further conflicts of interest will be resolved in our
favor.
As part of the proposed merger with MainStreet, we will be selling our
assets to Medicore. We will be obtaining appraisals and Medicore will not
vote its 68% interest, leaving the decision to engage in these proposed
transactions to our public shareholders. See "Recent Developments."
There is a possibility of continued volatility in our security price.
Our common stock and public warrants trade on the Nasdaq SmallCap Market.
Over the years the market price of the common stock has been as high as $4.63
in the first quarter of 1997 to as low as $.56 in the fourth quarter of 1998.
Similarly, the high and low market price for our public warrants ranged from
$1.19 in the first quarter of 1997 to $.06 in the fourth quarter of 1998.
On June 23, 1999, the closing price of the common stock was $2.88 and the
closing price of the public warrants was $.44. The market price of our
common stock and public warrants could fluctuate substantially based upon
announcements concerning our company, such as the proposed merger, operating
results, government regulatory changes, technological innovations, or infor-
mation concerning our competitors.
In addition, security prices fluctuate widely for reasons unrelated to
operations, usually general political, and worldwide and domestic economic
conditions, and the stock market's reaction. These fluctuations coupled with
reduced demand for our dialysis services or reimbursement rates could
adversely affect the market price of our common stock and public warrants.
Possible delisting and risks of low priced stocks.
Our common stock and public warrants trade on the Nasdaq SmallCap
Market. There are certain criteria for continued listing on the Nasdaq
SmallCap Market, known as maintenance requirements. Failure to satisfy
any one of these maintenance listing requirements could result in our
securities being delisted from the Nasdaq SmallCap Market. These criteria
include two active market makers, maintenance of $2,000,000 of net tangible
assets (or a market capitalization of $35,000,000 or a net income of $500,000
for our most recently completed fiscal year or in two of the last three most
recently completed fiscal years), a minimum bid price for our common stock of
$1.00, and at least 500,000 publicly held shares, among others. Usually, if
a deficiency occurs for a period of 30 consecutive business days, the
particular company is notified by Nasdaq and has 90 days to achieve
compliance. If the company is unable to demonstrate compliance, the security
is subject to delisting. The security might be able to trade on the bulletin
board, a lower level trading market which may not provide the same visibility
for the company or liquidity for its securities, as does the Nasdaq SmallCap
Market. As a consequence, an investor may find it more difficult to dispose
of or obtain prompt quotations as to the price of our securities, and may be
exposed to a risk of decline in the market price of the common stock and
public warrants.
In December, 1998, we received notification from the Nasdaq Listing
Qualification Department of the Nasdaq Stock Market that our common stock
failed to maintain a closing bid price greater than or equal to $1.00.
This situation dealing with the trading market was beyond our control.
Nevertheless, within the 90-day period from Nasdaq's notification, our
securities traded for the required period in excess of $1.00 and we main-
tained our Nasdaq SmallCap Market listing. However, there can be no
assurance that some other listing maintenance criteria will not become
deficient, whether within or beyond our control, and without a timely cure,
could cause our securities to be delisted from the Nasdaq SmallCap Market.
<PAGE> 10
The exercise price of the warrants was established in 1996 arbitrarily
by negotiations with our then underwriters.
The exercise price of the public warrants was determined in 1996 in
negotiations with our then underwriter, two of whom are presently market
makers in our securities. At that time we were making a public offering
of our common stock and warrants. Among factors considered in determining
the initial offering price of the common stock and the exercise price of
the warrants were our then financial condition and prospects, the market
prices of similar securities for comparable publicly traded companies,
and the then general conditions of the securities market. The exercise
price of the warrants did not necessarily have any relationship to our
assets, book value, earnings (of which we had none), or other established
criteria of value. The exercise price of the warrants should not be
considered as their value. You should note that at the date of this
prospectus, the common stock as quoted by Nasdaq is lower than the $4.50
exercise price of the warrants. There is no incentive for any warrantholder
to exercise at a higher price than the investor could obtain by purchasing
our common stock in the open market.
Substantial market overhang from outstanding options and warrants could
adversely affect the market price of our common stock.
We have the following options and warrants outstanding:
o 1995 Options - 9,500 options of which 4,500 options are exercisable
through October 9, 2000 at $1.50 per share, and 5,000 options are
exercisable through June 9, 2003 at $2.25 per share; there are
250,000 shares reserved under the 1995 Plan.
o 1996 Options - 10,000 options exercisable through August 18, 1999,
5,000 at $2.25 per share and 5,000 at $4.75 per share.
o 1999 Options - 800,000 options (incentive and non-qualified) granted
under a 1999 Stock Option Plan exercisable at $1.25 per share, 365,000
options exercisable through April 20, 2000 and 435,000 options
exercisable through April 20, 2004.
o Selling security holder options - 300,000 options and warrants
exercisable through April 17, 2001 of which 100,000 are exercisable
into common stock at $4.50 per share and 200,000 are exercisable
into warrants which the selling security holder may exercise for
common stock at $5.40 per share.
o 2,300,000 publicly traded warrants exercisable through October 16,
1999 (may be extended) at $4.50 per share.
Total shares of common stock issuable upon exercise of outstanding
options and warrants is 3,419,500 shares. The 1995, 1996 and 1999 options
were granted over the years at the then fair market value of the common stock
to officers, directors, employees, consultants and advisors of DCA, with
some to our parent company's officers and directors. The selling security
holders are the underwriters and their transferees of our 1996 public
offering of common stock and the 2,300,000 public warrants.
Our public float is a little in excess of 1,000,000 shares of common
stock. Holders of options and warrants are likely to exercise them at such
time as the market price exceeds the exercise price of the options and
warrants. Accordingly, if the market price of the common stock starts to
rise, the holders may most likely exercise their warrants and options and
the sale of such common stock into the market could have an adverse effect
on the market price of our common stock. In fact, the mere potential of
such sales could have an adverse impact on the current market prices of our
securities.
<PAGE> 11
Shares eligible for future sale by our current shareholders may adversely
affect our stock price.
Our parent company owns 2,410,622 shares of our common stock, or 68%
of our company. Under a letter of intent to merge a private company into
our company, we anticipate issuing 8,100,000 of our shares to the potential
merger company and Medicore will be purchasing all of our assets and
assuming all of our liabilities and returning 2,160,622 shares of our
common stock it owns, leaving Medicore with 250,000 of our shares. We
cannot give you any assurance that the merger will be successfully
negotiated and completed. In addition, officers, directors, former under-
writers and advisors to our company own 125,500 shares of common stock and
1,123,000 options and warrants exercisable and convertible into an
additional 1,123,000 shares of common stock. Most of the shares held by
these officers, directors and advisors are not freely tradable and are
restricted from sale. However, a registration statement to register the
shares held by these officers, directors, advisors and Medicore may be
filed in the near future. As part of the letter of intent and proposed
merger with MainStreet, the private internet website company, which will
become a public company by virtue of the merger with us, is to file a
registration statement that will include all our shares of common stock
held by these individuals and Medicore. After such registration statement
is effective, all their shares, including those issuable upon exercise of
their options and warrants, will be eligible for resale in the public
market without restrictions. If these shareholders sell substantial
amounts of our common stock, including shares issued upon the exercise of
these warrants and options in the public market, then the market price of
our common stock could fall.
Your investment in common stock upon exercise of the public warrants will be
subject to immediate and substantial dilution.
If you exercise your warrants and purchase our common stock you will
experience immediate and substantial dilution of $1.43 per share, or 32%,
between the net tangible book value per share of common stock after this
offering of common stock issuable upon exercise of the public warrants and
the offering price per share, which is the $4.50 exercise price.
Warrantholders in jurisdictions where we are unable to register or other-
wise qualify the common stock for sale will be unable to exercise their
warrants and acquire our common stock.
Our warrants were originally sold in a 1996 underwritten public offering
of common stock and warrants. At that time the warrants and common stock
issuable upon their exercise were registered or otherwise qualified in
approximately 12 states. The warrants presently trade on the Nasdaq
SmallCap Market and are owned by persons located in approximately 35
states, Washington, D.C. and Puerto Rico. We are attempting to register
or qualify the common stock issuable upon exercise of the public warrants in
each jurisdiction where we have warrantholders. However, we cannot give
assurance we will be able to register or qualify the common stock in all
of those jurisdictions. In this event, warrantholders in those juris-
dictions in which we are not able to register or qualify our common stock
will not be able to exercise their warrants and realize any benefits if
the market price of our common stock exceeds the $4.50 warrant exercise
price.
Recent Developments
Letter of intent relating to proposed merger and sale of our assets.
On June 4, 1999, we entered into a letter of intent with our parent,
Medicore, which company owns 68% of our common stock, and MainStreet, a
newly organized company establishing a central web site which is to provide
other entities with the tools and technology to perform registered primary
and secondary security offerings without any underwriters. It will allow
all types of investors, individuals and institutions, to participate in
new and
<PAGE> 12
seasoned public offerings through a Dutch auction for the issuing
company's securities. MainStreet believes this method of providing a
means for entities to raise capital directly with all types of investors
is more democratic than traditional underwriting through brokers, since
usually only favored customers of the underwriters are allocated a portion
of the offered securities. Other investors usually only have the oppor-
tunity to buy the offered securities in the trading market after the price
of the securities has risen many times well in excess of the original
offering price. Furthermore, the Dutch auction for an offering of stock
lowers the cost of the underwriting process, makes the entire process
fairer to the ultimate purchasers, and has the price set by the bidders,
those individuals or institutions who are willing to pay the most for the
offered security. The Dutch auction technology will also enable any
company utilizing MainStreet's website and services to raise more capital
than the offering price fixed by an underwriter if investors bid higher
prices for the registered amount of shares to be sold.
The company offering its securities would establish a minimum price for
its shares which it has registered in the offering, and investors select the
number of shares at each price he, she or it is willing to pay. The clearing
price would be the minimum price that clears all of the offered shares and
results in at least 400 shareholders. This enables the company making the
public offering to maximize the proceeds for the sale of its securities and
allows the investors willing to pay the most to own the shares.
Any company using MainStreet's website will have the option to use the
services of an underwriter. It is anticipated that Todd & Company, Inc., a
small brokerage firm registered with the SEC and a member of the NASD, will
have an arrangement with MainStreet to be one of the underwriters available
to assist companies in their public offerings. The President and sole owner
of Todd, Thomas K. Langbein, is also our Chairman of the Board and Chief
Executive Officer, and holds those positions with, as well as being the
President of, our parent, Medicore. One of the principals of MainStreet is
a registered account executive presently with an unaffiliated brokerage firm,
and plans to join Todd if the merger and acquisition transactions are
completed.
The letter of intent provides for two simultaneous transactions. One is
for MainStreet to merge into our company, which will be the surviving company
and will change its name to MainStreet.com or such name as new management
shall choose. We will issue 8,100,000 shares of our common stock to the
MainStreet shareholders. With our existing shares and assuming all our
warrants and options are exercised, which will become MainStreet shares,
the aggregate outstanding MainStreet shares is anticipated to be approxi-
mately 10,555,000 shares of common stock with a public float of approxi-
mately 3,825,000 shares. Those estimates do not include any exercise of
the 2,300,000 public warrants or selling security holder options or
warrants. The float includes the assumption that all existing 819,500
DCA options are exercised and a registration statement is filed with the
Securities and Exchange Commission, as is required by the letter of intent,
and becomes effective covering MainStreet shares held by Medicore (250,000
shares), Thomas K. Langbein (810,000 shares) and other MainStreet investors
(810,000 shares).
As part of the consideration for the merger, we will issue 1,000,000
additional shares of our common stock to the two principals of MainStreet
for the continuance of the operations of an affiliated company to MainStreet,
CEO Letter, LLC. The CEO Letter.com provides chief executive officers of
public companies a forum to discuss their companies to the millions of
potential internet investors. See "Prospectus Summary - Letter of Intent
for Proposed Merger and Sale of Assets." Of the 1,000,000 shares to be
issued, 750,000 shares shall be held in escrow subject to release based on
a formula relating to sales and pre-tax earnings for the operations of The
CEO Letter.
The second simultaneous transaction is the sale of all our assets to
Medicore in consideration for Medicore's return to us of 2,160,622 shares
of our company owned by Medicore, approximately 90% of Medicore's ownership
of DCA, and Medicore's assumption of all of our long-term debt and
liabilities up to the closing date of the merger.
If any of the public warrants are exercised, the net proceeds will
remain available to MainStreet, the newly merged company, except for 20%
of the net warrant proceeds upon exercise of the public warrants up to a
maximum of $1,000,000, which sums, assuming the public warrants are exercised
to that extent, will go to
<PAGE> 13
Medicore. If the proposed merger is not completed, we will utilize the
proceeds in our dialysis operations. See "Use of Proceeds."
We also have the right to appoint one director to the new management
of MainStreet.
Conditions of proposed transactions and shareholder approval.
Completion of the proposed merger and acquisition transactions are
subject to a variety of contingencies, including due diligence by all
parties, an independent appraisal of our company, the negotiation and
execution of binding merger and acquisition agreements satisfactory to all
parties, MainStreet's qualification for listing on the Nasdaq SmallCap
Market, and one of the more important conditions to completion of the merger
and acquisition transactions is shareholder approval of the proposed merger
and sale of assets. Once the due diligence is satisfactorily completed and
a merger and acquisition agreement is negotiated, finalized and approved by
all parties and their boards of directors, we will hold a special meeting
of our shareholders and solicit proxy votes, or shareholders may vote in
person at the special meeting, to determine whether our shareholders approve,
by majority vote, of the proposed merger and sale of assets. Medicore will
not vote its 68% ownership of our company in order to allow the public
shareholders of DCA to make the determination as to whether the proposed
merger with MainStreet and the sale of our assets to Medicore is to be
accomplished.
Registration.
The letter of intent provides that MainStreet will register Medicore's
250,000 shares, the 815,000 shares to be owned by our present officers,
directors and consultants, 810,000 shares owned by Thomas K. Langbein, and
810,000 shares to be owned by MainStreet's private investors, within 60 days
of the closing of the merger and acquisition. Mr. Langbein is the Chairman
of the Board and Chief Executive Officer of our company, sole owner of Todd,
Chairman, Chief Executive Officer and President of Medicore, our parent,
and Chairman and Chief Executive Officer of Techdyne, Inc., a 61% owned
public subsidiary of Medicore.
Non-binding letter of intent.
The letter of intent merely outlines the proposed transactions and is
not deemed a binding or definitive merger agreement. We cannot give you
any assurance that the proposed merger and acquisition will be successfully
concluded. There are many conditions that must be satisfied, primarily
reaching definitive merger and acquisition agreements, the preparation
and filing of a proxy statement with the Securities and Exchange Commission
and with our shareholders describing the details of the merger, sale of
assets, taxes and other information concerning the parties and the proposed
transactions, and obtaining shareholder approval of the proposed transactions.
Taxes.
If completed, the merger of MainStreet into our company will qualify as
a tax-free reorganization under the Internal Revenue Code. The sale of
assets to our parent will not qualify as a tax-free reorganization under the
Internal Revenue Code. Tax implications of the asset purchase will be
Medicore's responsibility with respect to its 68% ownership interest in our
company, and tax implications upon our sale of the assets to our parent will
be MainStreet's responsibility upon completion of the merger. If the tax
liability to MainStreet exceeds $500,000, MainStreet has the option to
terminate the merger.
<PAGE> 14
Purpose of the proposed merger.
Based upon the recent burgeoning of the internet and the pool of nearly
20,000,000 on-line investors, which is increasing each day, and the present
strong economy and securities market, it appears to the parties involved
that a website company like MainStreet providing new methods of capital
formation for companies and greater opportunities for investors' partici-
pation in initial and secondary financings, that a greater and faster
potential for growth and shareholder value is attainable with MainStreet's
proposed operations than with our dialysis operations. Over the years we
have built new dialysis centers, but based on limited financing we have
not acquired existing dialysis operations. Accordingly, our growth has
been limited and slow. The construction of new dialysis facilities takes
four to six months, and although operations generate revenues, sufficient
capacity to generate profits takes at least one year. Our dialysis centers,
except for the longer established ones, are not operating at full capacity
and are generating losses. Shareholders will ultimately make the decision
whether to shift into the internet area and seek the potential of faster
and more extensive growth and value through MainStreet, its management and
operations, rather than wait for a slower expansion with more limited
impetus to earnings as reflected over the last years of our dialysis
expansion program.
MainStreet - Summary Risk Factors.
At this point in time we are unable to advise anyone of the probability
of these proposed merger and acquisition transactions being successfully
concluded. However, we believe it appropriate to provide you with a brief
summary of risk factors associated with MainStreet and its operations so
you can better appreciate the nature of that company and the proposed merger.
Should we reach a definitive merger agreement in the near future, all
shareholders will then be provided with details of the merger and acquisi-
tion, more extensive disclosure of MainStreet, the surviving company, and
the risks involved, including, as an attachment to the proxy statement
seeking shareholder approval, the full and final merger and acquisition
agreements.
No operating history.
o MainStreet formed on April 12, 1999
o no commercialized services
o no operating history
o no revenues
o risks, uncertainties and expenses of new business, particularly in
rapidly developing internet commerce industry
o no reputation or exposure in industry
o activities limited to
- development of services and technology
- formation and legal issues
- raising initial capital
Systems and website not established or generated.
o web site and system operations not completed
o no test runs; no assurance system functional
o technical capacity and necessary interfaces unknown
Rapid technological change; dependence on technology and risk of system
disruptions.
o internet and electronic commerce markets characterized by rapid
technological change
- in user and customer requirements
- frequent new services and product introductions including new
technologies
<PAGE> 15
o MainStreet performance conditioned, in part, on
- ability to continue and enhance services
- develop new technology addressing increasingly sophisticated and
varied needs of prospective customers
- license technologies
- respond to technological advances and emerging industry standards
and practices on timely and cost-effective basis
o development of website and other proprietary technology entails
technical and business risks
o if MainStreet is unable to adapt to changing market conditions or
customer requirements, or website and technology do not achieve
sufficient acceptance, business, results of operations, and financial
condition would be adversely affected.
o system disruptions could adversely affect MainStreet's business,
results of operations and financial condition
Dependence on growth of internet commerce; uncertain acceptance of
MainStreet services.
o market for internet-based services new and rapidly evolving
o demand and market acceptance for MainStreet's services subject to high
degree of uncertainty
o success of services dependent on adoption of internet by issuers of
securities and investors as a mainstream medium for initial public
offerings and secondary offerings of securities.
o issuers and investors historically relied on traditional means of
securities offerings; MainStreet success assumes issuers and investors
will accept alternative methods of raising capital
o commercial use of internet (ease of access, security, reliability,
cost and quality of service) unresolved and could adversely impact
growth of internet use
Risk of security break-ins and break downs.
o infrastructure vulnerable to physical or electronic break-in, viruses
and similar disruptive occurrences
o security breaches expose MainStreet to financial loss, litigation and
other liabilities
o interruption of operations
Dependence on internet; capacity constraints.
o efficient processing of securities offerings through MainStreet
internet-based services depends on good communications and
infrastructure for providing internet access
o internet may not be viable commercial medium due to inadequate
infrastructure
o even with growth of internet industry, no assurance internet
infrastructure will be able to support demands
o large increase in volume or pace of traffic on MainStreet's website -
MainStreet forced to expand and upgrade technology, transaction
processing systems and network infrastructure
Future capital needs; uncertainty of additional financing.
o MainStreet raising initial private financing; relying on potential
net proceeds from public warrant exercises and completion of merger
with DCA
<PAGE> 16
o development of website and proposed internet services, website
infrastructure, marketing and organizational operations, particularly
in developmental stages, are capital intensive
o MainStreet has no credit facility or other committed source of capital
o additional funds necessary in immediate future for
- rapid expansion
- response to competitive pressures, enhance existing services
o lack of adequate funds may require limitations on operations or
obtaining funds on unattractive terms; adverse impact on MainStreet
Periods of declining security prices, inactivity or uncertainty in the
equity markets may adversely affect revenues.
o revenues likely to be lower during periods of declining security
prices or market inactivity
o volatility in public markets in the number and size of security
offerings
o may lose investor confidence by those persons or entities having
incurred losses by investing in volatile securities
o market activity declines generally in periods of market uncertainty
due to inflation increases, threat of or actual interest rate in-
creases
Inability to protect intellectual property rights, may result in
significant costs.
o business dependent on intellectual property rights and proprietary
technology
o currently, MainStreet has no patents or patent applications to protect
concepts and technology necessary to our programs and services and
processes
o difficulty in policing unauthorized use of any protected concepts and
proprietary technology
o litigation to protect any intellectual property rights is extensive,
costly and diverts time and resources away from operations
Management has limited experience in MainStreet's operations.
o limited, if not extremely minimal, experience in
- establishing and operating web site for public offerings of
securities
- operating and managing public company
o may not have ability to manage growing enterprise
Significant competition from traditional underwriting and recently
established internet investment bankers.
o traditional investment banking firms compete for new and secondary
offerings; some offer securities on the internet
o issuers self-underwritten on their own website
o recently formed and substantially better financed on-line investment
bankers with relationships with other broker-dealers; more experienced
in internet offerings
o entities providing similar services with a broader base of services
to attract issuers and customers
<PAGE> 17
Use of Proceeds
Assuming exercise of all of the 2,300,000 public warrants, we would
realize net proceeds of approximately $9,733,000, which includes a 5%
exercise fee to the original underwriters of our 1996 public offering of
common stock and warrants. The 5% fee is subject to certain conditions
being satisfied. Among those conditions are that the market price of our
common stock on the date of exercise is greater than the warrant exercise
price, the exercise of the warrant is solicited by a member of the NASD,
disclosure of the 5% fee is made at the time of the exercise, and any of
the underwriters is designated as the soliciting broker. These fees could
aggregate up to $517,500 if all such conditions are met and assuming all
the public warrants are exercised. It might be noted that except for a
brief period of time in the first quarter of 1997, our shares of common
stock have traded on the Nasdaq SmallCap Market at prices below, and
during 1998, substantially below, the exercise price of the public
warrants. Accordingly, there is little likelihood of the public warrants
being exercised under the present market prices at which our common stock
is trading.
The selling security holders, one of whom is one of the former under-
writers and the others who are or were affiliated with the former under-
writers of our 1996 public offering, have options and warrants for 300,000
shares of DCA common stock. Assuming all of these options and warrants are
exercised, we would obtain an additional $1,530,000.
We will not receive any proceeds from any sales of shares of common
stock that may be made from time to time by the selling security holders
who obtain their shares upon exercise of their options and warrants. We
are bearing the registration expenses for the selling security holders.
However, the selling security holders are responsible for any selling
expenses such as brokerage commissions and expenses of their own counsel.
If the proposed merger with MainStreet and sale of our assets to our
parent is not completed (see "Recent Developments"), then we intend to use
any net proceeds we may receive upon exercise of the warrants primarily to
acquire or develop free standing outpatient dialysis treatment centers.
Depending upon the area of the country and the size of the dialysis
facility to be developed, it has been our experience that a 12-station
dialysis center costs in the range of $600,000 to $750,000. We may use
portions, even significant portions, of any net proceeds realized from
the public warrant exercises in such a manner as we deem appropriate.
Such change in use of proceeds may become necessary or desirable based
upon unforeseen future events, including expenses, complications and
delays frequently encountered by businesses, as well as changes in
economic conditions or in governmental regulation.
If the proposed merger and sale of assets transactions are completed,
then 20% of the net warrant proceeds up to $1,000,000 will be for Medicore,
and the balance of the net proceeds will become the assets of MainStreet,
which company may use them for its operations as its management determines
to be in its best interests.
Selling Security Holders
The following table sets forth certain information with respect to the
selling security holders. DCA will not receive any of the proceeds from
the sale of the selling security holder's common stock. The notes to the
table describe the relationship of the selling security holders to DCA.
The selling security holders currently hold options and warrants to obtain
an aggregate of 300,000 shares of DCA common stock; 100,000 options exer-
cisable at $4.50 per share, and 200,000 warrants exercisable at $5.40 per
share, all exercisable through April 17, 2001.
<PAGE> 18
Beneficial Amount of Beneficial
ownership common ownership
before stock to after the
Name the offering be offered offering(1) %(1)
- ---- ------------ ---------- ----------- ----
Joseph Dillon &
Company, Inc.(2) 100,002(3) 100,002 0 ---
Lynne Guccione(4) 33,333 33,333 0 ---
Richard Hunt(5) 25,002(3) 25,002 0 ---
William Hunt (6) 25,002(3) 25,002 0 ---
Pamela Luthy(7) 33,333(3) 33,333 0 ---
Cynthia Margiotta(7) 33,333(3) 33,333 0 ---
Damon Testaverde(8) 49,995(3) 49,995 0 ---
(1) Assumes selling security holders sell all of their DCA common stock.
(2) Lead underwriter of the DCA 1996 public offering of common stock and
warrants; market maker of DCA common stock and warrants trading on
the Nasdaq SmallCap Market; underwriter of Techdyne, Inc. 1995
public offering of common stock and warrants (Techdyne is a 61% public
subsidiary of Medicore); market maker of Medicore and Techdyne common
stock; Medicore and Techdyne shares trade on the Nasdaq National
Market. Previously was financial consultant to DCA and Techdyne
through October, 1997 for aggregate fees of $108,000.
(3) Does not include common stock or warrants of DCA held in trading
accounts based on market making activities or otherwise held in
customer accounts.
(4) Wife of former account executive with Greenway Capital Corporation, a
securities brokerage firm no longer in existence, and formerly co-
underwriter of the DCA 1996 public offering of common stock and warrants.
(5) Chief Executive Officer and director of Network 1 Financial Securities,
Inc., co-underwriter of the DCA 1996 public offering of common stock
and warrants. Network 1 is also a market maker of DCA common stock and
warrants.
(6) President and director of Network 1 Financial Securities, Inc. See note
(5).
(7) Wife of account executive affiliated with Joseph Dillon & Company Inc.;
formerly affiliated with Greenway Capital Corporation. See note (4).
(8) President of Network 1 Financial Services, Inc. See note (5)
Plan of Distribution
The 2,300,000 shares of DCA common stock are being offered for sale to
the present and any subsequent holders of the public warrants.
In addition, our company is registering the selling security holders'
300,000 shares of common stock obtainable upon exercise of the options and
warrants held by the selling security holders. The shares may be sold by
the selling security holders, or by their pledgees, donees, transferees or
other successors in interest. Such sales may be made from time to time:
o in transactions (which may include block sales) on the Nasdaq
SmallCap Market or such other national securities exchange or
automated interdealer quotation system on which shares of DCA
common stock are then listed,
o in negotiated transactions, or
o through 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.
<PAGE> 19
The common stock may be sold directly to purchasers or through under-
writers, agents or broker-dealers by one or more of the following means:
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus; and
o a block trade in which the broker or dealer so engaged will attempt
to sell the common stock as agent but may position and resell a
portion of the block as principal to facilitate the transaction.
Any such underwriters, agents or broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the selling
security holders and/or the purchasers of the shares for which such under-
writers, agents or broker-dealers may act as agents or to whom they sell
as principals, or both (which compensation as to an underwriter, agent or
particular broker-dealer will be negotiated prior to the sale and may be
in excess of customary compensation). If required by applicable law at the
time a particular offer of common stock is made, the terms and conditions of
such transaction will be set forth in a supplement to this prospectus.
The selling security holders and any underwriters, agents or broker-
dealers who act in connection with the sale of the shares of common stock
hereunder may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any compensation received by them might be
deemed to be underwriting discounts and commissions under the Securities Act.
The selling security holders will pay all applicable stock transfer
taxes, transfer fees and brokerage commissions or underwriting or other
discounts. We have agreed to bear the expenses in connection with the
registration of the shares being offered by such selling security holders.
We have agreed to indemnify the selling security holders against certain
liabilities, including liabilities under the Securities Act.
Since the selling security holders are securities brokerage firms or
their affiliates, they most likely will be selling their shares of common
stock through their own firms. The selling security holders have advised
our company that they have not entered into any agreements, understandings
or arrangements with any underwriters or other broker-dealers regarding the
sale of their common stock.
Regulation M under the Securities Exchange Act of 1934 prohibits
persons engaged in a distribution of securities from bidding or from
purchasing (including offers to bid or purchase) the common stock being
distributed until their distribution is completed. One of the purposes
of Regulation M is to preclude persons with a financial interest in a
distribution from affecting the integrity of the independent pricing
mechanisms of the market for the securities that are in distribution.
Distribution is defined broadly, distinguishing the concept from
trading transactions, with certain criteria such as the presence of special
selling efforts and selling methods. The definition applies to "shelf
offerings" of securities as is the case with secondary offerings by
selling stockholders from time to time in the open market at current
market prices. Whether sales by the selling security holders are deemed to
be a distribution under Regulation M depends, among other factors, on the
amount of securities registered, the public float, the trading volume and
the presence of any special selling effort. If it is determined that a
distribution exists, the bidding for and the purchasing prohibitions of
Regulation M will apply to those securities being distributed by those
persons participating in the distribution. Since Joseph Dillon and Network
1 are currently market makers in the DCA common stock, five business days
prior to their determination to start selling for themselves or affiliated
persons, they will have to cease their market making activity until their
distribution is completed.
Since there may be extended periods during which there are no selling
efforts under an effective shelf-registered securities offering, the
Commission believes it is unnecessary to subject issuers, broker-dealers,
selling security holders and other person who may be deemed participating,
to the strict prohibitions of bidding for,
<PAGE> 20
purchasing or inducing others to purchase the securities subject to the
distribution throughout the life of the shelf registration.
The selling security holders have been apprised of the restriction
of Regulation M and have agreed to abide by their obligations under the
Exchange Act. Nothing in this prospectus is deemed a determination as to
whether this shelf-registered offering by the selling security holders is a
distribution, whether any selling security holder may be deemed an under-
writer, or at what point the prohibition relating to selling security holders
who are market makers in our securities against bidding for or purchasing the
securities commences or relaxes.
Joseph Dillon and Network 1 Financial Securities, the former under-
writers of our 1996 public offering of common stock and warrants, market
makers of the securities and selling security holders (and their trans-
ferees) (see the section entitled "Selling Security Holders") are entitled
to a fee of 5% of the exercise price of each public warrant exercised
provided the following conditions are met:
o the market price of the common stock on the date of the warrant
exercise is greater than the warrant exercise price on that date;
o the exercise of the warrant was solicited by a member of the NASD;
o the warrant is not held in a discretionary account;
o the fee is disclosed at the time of the warrant exercise;
o the solicitation of the exercise of the warrant is not in violation
of Regulation M of the Exchange Act; and
o either Joseph Dillon or Network 1 is designated in writing as the
soliciting broker.
Description of Securities
Common Stock.
DCA is authorized to issue 20,000,000 shares of common stock, $.01 par
value. As of June 14, 1999, there were 3,546,344 shares of common stock
outstanding held by approximately 430 shareholders.
The holders of the common stock are entitled to one vote per share on
all matters submitted to a vote of the shareholders. Cumulative voting is
not allowed, with the result that Medicore, which parent company presently
owns 68% of DCA, can and does elect all of the directors and has the ability
to determine all matters submitted for shareholder approval, and the
minority shareholders cannot independently elect any directors or cause any
significant impact on voting of any other matters. However, with respect
to the proposed merger of DCA with MainStreet and the purchase of DCA's
assets by Medicore, the parent is not voting its majority 68% ownership of
DCA, thereby allowing the public (minority) shareholders to determine
whether they want to approve the merger and sale of the DCA assets. See
"Recent Developments."
Common stockholders are entitled to share pro rata in any dividends
that may be declared by the board of directors from funds legally available.
Other than in 1995, when our board of directors declared a stock and cash
dividend, no dividends have been declared or paid by our board of directors
and none are anticipated in the foreseeable future.
Upon any dissolution, liquidation or winding-up of DCA, the common
stockholders will be entitled to share pro rata in all distributions made
after payment of or provision for the payment of all debts and prior claims.
The common stockholders have no preemptive or other subscription
rights, and there are no conversion rights, redemption or sinking fund
provisions with respect to the common stock. All outstanding shares of
<PAGE> 21
common stock are, and the shares of common stock offered under the warrants,
upon issuance and sale will be, fully paid and non-assessable.
Warrants.
There are 2,300,000 outstanding public warrants held by approximately
320 warrantholders. Each public warrant entitles the holder to purchase
one share of common stock at an exercise price of $4.50 per share, subject
to adjustment in certain circumstances, at any time until 4:00 p.m. Eastern
Time on October 16, 1999.
The public warrants may be redeemed at any time by DCA at a redemption
price of $.10 per warrant, on not later than 30 days' prior written notice
to the holders of the warrants. However, the public warrants may only be
redeemed if the closing high bid price of the common stock as reported by
Nasdaq is at least 150% (presently $6.75 per share, subject to adjustment)
of the warrant exercise price for a period of 15 consecutive trading days
ending on the fifth day prior to the date the notice of redemption is given.
Warrantholders have the right to exercise their warrants until the close of
the business day preceding the date fixed for redemption. The market price
of the common stock has not exceeded the exercise price except for the first
quarter in 1997, and that price was below the redemption trigger price. DCA
does not anticipate redeeming the public warrants.
The exercise price and the number of shares of common stock purchasable
upon exercise of the warrants are subject to adjustment upon the occurrence
of certain events, including stock dividends, stock options, combinations
or reclassification of the common stock. The warrants do not confer upon
the holders any voting or any other rights as shareholders of DCA.
Outstanding Options and Warrants.
There are currently outstanding an aggregate of 819,500 options exer-
cisable at prices ranging from $1.25 to $4.75 for exercise periods from
August 18, 1999 to April 20, 2004. All but 4,500 options are held by
officers and directors of DCA and its parent, Medicore.
The underwriters of DCA's 1996 public offering and their transferees,
referred to in this prospectus as the selling security holders, acquired
options to purchase 100,000 shares of common stock at $4.50 per share and
200,000 warrants which are exercisable at $5.40 per share through April 17,
2001. These 300,000 shares of common stock are the shares included in this
prospectus for the selling security holders. See "Selling Security Holders"
and "Plan of Distribution."
Transfer Agent and Warrant Agent.
The transfer agent for the common stock and the warrant agent for the
public warrants is Continental Stock Transfer & Trust Company, 2 Broadway,
New York, New York 10004.
Legal Matters
The validity of the common stock offered by this prospectus issuable upon
the exercise of the public warrants will be passed upon by Lawrence E. Jaffe,
Esq., 777 Terrace Avenue, Hasbrouck Heights, New Jersey. Mr. Jaffe is
Secretary and counsel to DCA, its parent, Medicore, and to Medicore's public
subsidiary, Techdyne. Mr. Jaffe has also represented Todd from time to time.
In 1998 Mr. Jaffe's fees from DCA were approximately $82,000 and aggregated
approximately $185,000 for professional services to Medicore and Techdyne.
Mr. Jaffe is trustee of a trust for his wife which trust owns 16,000 shares
of DCA common stock, 2,000 of the public warrants, and 70,075 shares of
Medicore common stock. Mr. Jaffe also owns DCA options to purchase 260,000
shares of
<PAGE> 22
common stock at $1.25 per share through April 20, 2000. He also owns 10,000
shares of Techdyne common stock and has options for an additional 30,000
shares of Techdyne at exercise prices ranging from $1.75 to $3.25 for
exercise periods from April, 2000 to June, 2002. Mr. Jaffe maintains his
office at the New Jersey executive offices of Medicore.
Experts
Ernst & Young LLP, independent certified public accountants, have
audited our consolidated financial statements and schedule included in our
Annual Report on Form 10-K for the year ended December 31, 1998, as set forth
in their report, which is incorporated by reference in this prospectus and
elsewhere in the registration statement. Our consolidated financial
statements and schedule are incorporated by reference in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.
<PAGE> 23
- --------------------------------- ----------------------------------
- --------------------------------- ----------------------------------
We have not authorized any 2,600,000 Shares of Common Stock
dealer, sales person or any
other person to give any in-
formation or to represent
anything not contained in this
prospectus. You must not rely
on any unauthorized information. DIALYSIS CORPORATION
This prospectus does not con- OF AMERICA
stitute an offer to sell or buy
any security in any jurisdic-
tion where it is unlawful.
----------------------------------
PROSPECTUS
TABLE OF CONTENTS ----------------------------------
Page
----
About this Prospectus...... 2
Available Information...... 2
Incorporation of Certain
Documents By Reference.... 3
Prospectus Summary......... 4
Risk Factors............... 6
Recent Developments........ 12 , 1999
Use of Proceeds............ 18
Selling Security Holders... 18
Plan of Distribution....... 19
Description of Securities.. 21
Legal Matters.............. 22
Experts.................... 23
- --------------------------------- ----------------------------------
- --------------------------------- ----------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee $ 0
Accounting fees and expenses 2,000
Legal fees and expenses 65,000
Printing fees 7,500
Blue Sky filing fees and expenses 22,000
Miscellaneous 4,000
--------
Total $100,000
========
The foregoing items, except for the registration fee to the Securities
and Exchange Commission, are estimated. DCA has agreed to bear all expenses
in connection with the registration of the shares of common stock being
offered by it under the public warrants and the common stock offered by the
selling security holders, except the selling security holders will bear any
underwriting discount or selling commissions, transfer taxes, and any of
their counsel fees.
Item 15. Indemnification of Directors and Officers.
The certificate of incorporation and by-laws of DCA provide that the
company shall indemnify to the fullest extent permitted by Florida law any
person whom it may indemnify thereunder, including directors, officers,
employees and agents of the company. Such indemnification (other than as
ordered by a court) shall be made by DCA only upon a determination that
indemnification is proper in the circumstances because the individual met
the applicable standard of conduct. Advances for such indemnification may
be made pending such determination. Such determination shall be made by a
majority vote of a quorum consisting of disinterested directors, or by
independent legal counsel or by the stockholders.
Section 607.0850 of the Florida General Corporation law provides that
a corporation shall have power to indemnify any person who was or is a
party to any proceeding by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, against liability incurred
in connection with such proceeding, including any appeal thereof, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation and, with respect to any criminal
action or proceeding, has no reasonable cause to believe his conduct was
unlawful.
In a derivative action, i.e., one by or in the right of the corporation,
indemnification may be made only for expenses actually and reasonably
incurred by directors, officers, employees or agents in connection with the
defense or settlement of an action or suit, and only with respect to a matter
as to which they shall have acted in good faith and in a manner they reason-
ably believed to be in or not opposed to the best interests of the corpora-
tion, except that no indemnification shall be made if such person shall have
been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
<PAGE> II-1
Item 16. Exhibits.
(4) Instruments defining the rights of security holders, including indentures
(i) Form of common stock certificate*
(ii) Form of redeemable common stock purchase warrant*
(iii) Form of underwriters' option*
(iv) Form of Warrant Agreement between DCA, Continental Stock Transfer
& Trust Company and Joseph Dillon & Company, Inc.*
(v) Amendment No. 1 to Warrant Agreement between DCA, Continental Stock
Transfer & Trust Company and Joseph Dillon & Company, Inc. dated
March 9, 1999 (incorporated by reference to the Company's Current
Report on Form 8-K dated March 9, 1999, Item 7(c)(4)(i))
(vi) 1995 Stock Option Plan*
(vii) Form of stock option certificate under the 1995 Stock Option Plan*
(viii) 1999 Stock Option Plan
(ix) Form of stock option certificate under the 1999 Stock Option Plan
(5) Opinion of Lawrence E. Jaffe, including consent
(23) Consents of experts and counsel
(i) Consent of Ernst & Young LLP (included on page II-5)
(ii) Consent of Lawrence E. Jaffe, Esq. (contained in Exhibit 5)
(24) Power of attorney (included on signature page)
* Incorporated by reference to DCA's registration statement on Form SB-2
dated December 22, 1995, as amended February 9, 1996, April 2, 1996 and
April 15, 1996, registration no. 33-80877-A, Part II, Item 27.
Documents incorporated by reference are not included in the Exhibit Volume.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
A. Rule 415 Offering.
(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
<PAGE> II-2
in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securi-
ties offered (if the total dollar value of securities
offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424
(b) if, in the aggregate the changes in volume and price
represent no more than 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registra-
tion Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the registration statement is on Form S-3, Form S-8
of Form F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(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 this time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amend-
ment any of the securities being registered which remain unsold
at the termination of the offering.
B. Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities 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.
C. Requests for Acceleration of Effective Date or Filing of Registra-
tion Statement on Form S-8.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that
such a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjucation of such issue.
<PAGE> II-3
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 caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Borough of Hasbrouck Heights, State of
New Jersey on the 24th day of June, 1999.
DIALYSIS CORPORATION OF AMERICA
/s/ Thomas K. Langbein
By:----------------------------
Thomas K. Langbein
Chairman of the Board of
Directors and Chief Executive
Officer
Power of Attorney
We, the undersigned officers and directors of Dialysis Corporation
of America, hereby severally constitute and appoint Thomas K. Langbein
and Lawrence E. Jaffe, and each or both of them, as our true and lawful
attorneys-in-fact and agents, with full power of substitution, for us and
in our name, place and stead, in any and all capacities, to sign any and
all amendments or post-effective amendments to this registration statement,
as well as any related registration statement, or amendment or supplement
thereto, filed pursuant to the Securities Act of 1933, and to file the
same, with all exhibits thereto and other documents in connection there-
with, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as we might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this regis-
tration statement has been signed by the following persons in the capacities
and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Thomas K. Langbein Chairman of the Board of Directors June 24, 1999
- ------------------------- and Chief Executive Officer
Thomas K. Langbein
/s/ Bart Pelstring President and Director June 24, 1999
- ------------------------
Bart Pelstring
/s/ Stephen W. Everett Executive Vice-President June 24, 1999
- ------------------------
Stephen W. Everett
Vice-President (Finance),
/s/ Daniel R. Ouzts Treasurer, Chief Financial June 24, 1999
___________________________ Officer and Controller
Daniel R. Ouzts
/s/ Robert W. Trause Director June 24, 1999
- ------------------------
Robert W. Trause
/s/ Dr. Herbert I Soller Director June 24, 1999
- ------------------------
Dr. Herbert I. Soller
<PAGE> II-4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of Dialysis
Corporation of America for the registration of 2,600,000 shares of its
common stock and to the incorporation by reference therein of our report
dated March 22, 1999, with respect to the consolidated financial statements
and schedule of Dialysis Corporation of America included in its Annual Report
on Form 10-K for the year ended December 31, 1998, filed with the Securities
and Exchange Commission.
/s/ Ernst & Young LLP
June 24, 1999
Miami, Florida
<PAGE> II-5
CONSENT OF COUNSEL
The consent of Lawrence E. Jaffe, Esq. is contained in his opinion filed
as Exhibit 5 to this registration statement.
<PAGE>
Registration No. 33-
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
DIALYSIS CORPORATION OF AMERICA
(Exact name of registrant as specified in charter)
-----------------------
EXHIBITS
<PAGE>
EXHIBIT INDEX
(4) Instruments defining the rights of security holders, including indentures
(i) Form of common stock certificate*
(ii) Form of redeemable common stock purchase warrant*
(iii) Form of underwriters' option*
(iv) Form of Warrant Agreement between DCA, Continental Stock Transfer
& Trust Company and Joseph Dillon & Company, Inc.*
(v) Amendment No. 1 to Warrant Agreement between DCA, Continental
Stock Transfer & Trust Company and Joseph Dillon & Company, Inc.
dated March 9, 1999 (incorporated by reference to the Company's
Current Report on Form 8-K dated March 9, 1999, Item 7(c)(4)(i))
(vi) 1995 Stock Option Plan*
(vii) Form of stock option certificate under the 1995 Stock Option Plan*
(viii) 1999 Stock Option Plan
(ix) Form of stock option certificate under the 1999 Stock Option Plan
(5) Opinion of Lawrence E. Jaffe, including consent
(23) Consents of experts and counsel
(i) Consent of Ernst & Young LLP (included on page II-5)
(ii) Consent of Lawrence E. Jaffe, Esq. (contained in Exhibit 5)
(24) Power of attorney (included on signature page)
* Incorporated by reference to DCA's registration statement on Form SB-2
dated December 22, 1995, as amended February 9, 1996, April 2, 1996 and
April 15, 1996, registration no. 33-80877-A, Part II, Item 27.
Documents incorporated by reference are not included in the Exhibit Volume.
EXHIBIT 4(viii)
1999 Stock Option Plan
<PAGE>
1999 STOCK OPTION PLAN
OF
DIALYSIS CORPORATION OF AMERICA
-----
1. Purpose. DIALYSIS CORPORATION OF AMERICA, a Florida corporation,
-------
(the "Company") hereby establishes the 1999 Stock Option Plan (the "Plan").
The purpose of the Plan is to advance the interests of the Company and its
stockholders by providing a means by which the Company and its subsidiaries
("Affiliates") shall be able to attract, retain and reward competent
officers, directors, consultants, key employees (including officers and
directors who are employees), attorneys, advisors and others ("Partici-
pants"), and provide such persons with an opportunity to participate in the
increased value of the Company which their effort, initiative, and skill
have helped and will help to produce. The Plan and granting of options
shall encourage those persons to have a proprietary interest in the Company
and to provide their continued efforts.
This Plan authorizes the "Committee" or the "Board" to grant "Incentive
Options" to "Key Employees" and to grant "Non-Qualified Options" to "Key
Employees" and to "Key Individuals" selected by the Committee or the Board
while considering such criteria as employment position or other relationship
with the Company, duties and responsibilities, ability, productivity, length
of service or association, interests of the Company and other matters.
2. Definitions.
-----------
2.1 The following terms, whenever used in this Plan, shall have the
meanings set forth below.
(a) "Affiliate" means any corporation, a majority of the voting
stock of which is directly or indirectly owned by the Company.
(b) "Affiliation" or "Affiliated" means any person who has a
relationship with or is otherwise then affiliated with the Company as a
Participant; the absence or cessation of the designation as Participant
shall mean that such person no longer has an Affiliation or is Affiliated
with the Company or an Affiliate.
(c) "Award" means a grant made under this Plan in the form of
Incentive Options or Non-Qualified Options.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a committee appointed by the Board.
(g) "Company" means Dialysis Corporation of America and its
Affiliates unless the context otherwise indicates.
<PAGE>
(h) "Exercise Price" shall mean the price per Share of Stock at
which an Option may be exercised.
(i) "Fair Market Value" of a Share as of a specified date shall
mean the closing price of a Share on the Nasdaq National Market or the
principal securities exchange on which such Shares are traded on the day
immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such Shares are traded
if no Shares were traded on such immediately preceding day; or if the
Shares are not traded on the Nasdaq National Market or a securities
exchange, Fair Market Value shall be deemed to be the average of the high
bid and low asked prices of the Shares in the over-the-counter market on
the day immediately preceding the date as of which Fair Market Value is
being determined or on the next preceding date on which such high bid and
low asked prices were recorded. If the Shares are not publicly traded,
Fair Market Value shall be determined by the Committee or the Board, taking
into consideration all factors it deems appropriate, including, without
limitation, recent sale and offer prices of the Stock in private transac-
tions negotiated at arm's length. In no case shall Fair Market Value be
less than the par value of the Stock.
(j) "Incentive Options" means "incentive stock options" as that
term is defined in the Code Section 422, Section 422A, or the successor to
either of them.
(k) "Key Employee" means any person designated by the Committee
who is employed by the Company and whose continued employment is considered
to be in the best interests of the Company.
(l) "Key Individual" means any person, other than an employee of
the Company, who is committed to the interests of the Company or its
Affiliates.
(m) "Non-Qualified Options" mean Options that are not meant to
qualify as "incentive stock options" under Code Section 422, Section 422A,
or the successor of either of them.
(n) "Option" means a right to purchase Stock granted pursuant to
the terms and conditions of a Stock Option Agreement or Stock Option
Certificate.
(o) "Option Shares" means the shares of Stock underlying an
Option granted pursuant to the Plan.
(p) "Participant" means a person designated by the Board or the
Committee to receive an Award under the Plan who has a relationship with or
is otherwise then Affiliated with the Company as either an officer or
director, including Key Employees and Key Individuals.
(q) "Plan" means this 1999 Dialysis Corporation of America Stock
Option Plan, as amended from time to time.
(r) "Share" means a share of Stock adjusted in accordance with
Section 14 of the Plan (if applicable).
(s) "Stock" means the common stock, $.01 par value per share, of
the Company.
<PAGE> 2
(t) "Successor" means the legal representative of the estate of
a deceased Participant or the person or persons who may acquire the right
to exercise an Option or to receive Shares issuable in satisfaction of an
Award, by bequest or inheritance.
(u) "Term" means the period during which an Option may be
exercised.
2.2 Gender and Number. Except when otherwise indicated by context,
-----------------
reference to the masculine gender shall include, when used, the feminine
gender and any term used in the singular shall also include the plural.
3. Administration. The Plan shall be administered by the Board;
--------------
provided, to the extent the Board deems it advisable or the law requires
the same, the Board may appoint a Committee consisting of not less than
three (3) members to administer the Plan. The Board may from time to
time remove members from, or add members to, the Committee. Vacancies on
the Committee, however caused, shall be filled by the Board. Hereinafter
all references in this Plan to the Board with respect to the administra-
tion of the Plan shall mean the Committee upon the formation of such
Committee. Subject to the provisions of the Plan, the Board shall
determine the individuals to whom and the time or times at which Options
shall be granted, the number of Shares to be subject to each Option, and
the Term of any such Option, whether such options shall be "Incentive
Options" or "Non-Qualified Options", and shall determine other terms and
provisions of the respective Options, which may or may not be identical,
including but not limited to restrictions that may be imposed on the Options
and Shares and the nature of such restrictions. The Board shall also
interpret the Plan, prescribe, amend and rescind rules and regulations
relating to the Plan, and make all other determinations necessary or
advisable for the administration of the Plan. The determinations of the
Board shall be made in accordance with its judgment as to the best interests
of the Company and its stockholders and in accordance with the purposes of
the Plan. A majority of members of the Board shall constitute a quorum,
and all determinations of the Board shall be made by a majority of its
members. Any determination of the Board under the Plan may be made, after
the consultation of the entire Board, without notice or meeting of the
Board, by a writing signed by a majority of the Board.
The Board may authorize the modification, extension or renewal of any
Option outstanding under the Plan, or accept the exchange of outstanding
Options (to the extent not theretofore exercised) for the granting of new
Options in substitution therefor, when, and subject to such conditions, as
are deemed to be in the best interests of the Company and in accordance
with the purposes of the Plan, provided notwithstanding the foregoing, no
such modifications of an Option shall, without the consent of the Optionee,
alter or impair any rights or obligations under any Option theretofore
granted under the Plan.
No member of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under it.
4. Shares Available Under the Plan. The number of Shares available
-------------------------------
for distribution under this Plan shall not exceed 800,000 Shares (subject
to adjustment in accordance with Section 14 hereof). These Shares may
consist, in whole or in part, of authorized but unissued Stock or treasury
Stock not reserved for any other purpose. Any Shares subject to the terms
and conditions of an Award under this Plan which are not used because the
terms and conditions of the Award are not met or the Options granted under
the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole
or in part, the unpurchased Shares subject to such Option may again be used
for an Award under the Plan.
<PAGE> 3
5. Participation. Participation in the Plan shall be limited to
-------------
Participants of the Company selected by the Board. Participation is
entirely at the discretion of the Board, and is not automatically continued
after an initial period of Participation or Affiliation.
Incentive Options may be granted only to Key Employees. Non-Qualified
Options may be granted to both Key Employees and Key Individuals. Key
Employees and Key Individuals may hold more than one Option under the Plan
and may hold Options under the Plan as well as options granted pursuant to
other plans or otherwise.
6. Stock Options.
-------------
6.1 Agreements. An Award of an Option shall be evidenced by a Stock
----------
Option Certificate in such form and not inconsistent with the Plan as the
Board shall approve from time to time, which shall include the following
terms and conditions:
(a) Type of Option; Number of Shares. A statement identifying
--------------------------------
the Option represented thereby as an Incentive Option or a Non-Qualified
Stock Option and the number of Shares to which the Option applies and
shall provide for adjustment in accordance with the provisions of Section
14 hereof.
(b) Option Price. A statement of the Exercise Price for the
------------
Stock subject to the Option.
(c) Exercise Term. A statement of the Term of each Option
-------------
granted as established by the Board, subject to earlier termination as
provided in Sections 6.2 and 6.3 of the Plan, and provided that no Option
shall be exercisable after five years from the date of grant.
(d) Payment for Shares. A statement that the Exercise Price
------------------
shall be payable in cash in full at the time of exercise.
(e) Nontransferability. Each Stock Option Certificate shall
------------------
state that the Option is not transferable other than by will or the laws
of descent and distribution or a Change in Control of the Company as
provided in Section 8 hereof, and during the lifetime of the Participant
is exercisable only by him or by his guardian or legal representative; or
to the extent approved by the Board, pursuant to a qualified domestic
relations order as defined by the Code, or the rules thereunder. No Option
granted hereunder may be pledged or hypothecated, nor shall any such Option
be subject to execution, attachment or similar process.
(f) Rights as a Shareholder. An Optionee shall have no rights
-----------------------
as a shareholder with respect to any Shares covered by his Option until the
date of the issuance of a stock certificate for such Shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued,
except as provided in Section 14.
6.2 Termination of Affiliation Due to Death, Disability, or Retirement.
------------------------------------------------------------------
If a Participant ceases Affiliation with the Company or an Affiliate by
reason of his death, permanent disability or retirement at or after age 65
all Options outstanding shall remain exercisable for a period of nine (9)
months from such death, disability or retirement, but not beyond the expira-
tion date of said Options. If
<PAGE> 4
the termination of Affiliation is due to retirement, then any vesting period
as provided in the Stock Option Certificate, if not then completed, shall
continue during such nine (9) month period commencing from the retirement
date. If termination of Affiliation is due to death or permanent disability
of the Participant, all such Participant's Options shall become fully
exercisable. For this purpose, Affiliation will be treated as continuing
intact while the Participant is on sick leave or other bona fide leave of
absence, to be determined in the sole discretion of the Board.
6.3 Termination of Affiliation for Reasons Other Than Death, Disability
-------------------------------------------------------------------
or Retirement. Except as otherwise determined by the Board:
- -------------
(a) In the event a Participant ceases Affiliation with the Company
voluntarily or involuntarily, except for the involuntary termination for
cause, death, retirement or permanent disability, if there is a vesting
period, then any Shares not vested to the date of such termination shall
be forfeited; and, in any event, the Participant shall have thirty (30)
days from such termination to exercise the Option, to the extent of Shares
then vested, at the Exercise Price.
(b) In the event a Participant ceases Affiliation with the Company
by involuntary termination for cause, the Option shall immediately be null
and void, notwithstanding the extent of Shares then vested.
"Voluntary termination" means cessation of Affiliation with the
Company based upon free choice or free will for whatever reason. Free
choice and free will remain free choice and free will and shall not be
affected or deemed involuntary due to the nature of working conditions,
salary, personal relationships, the outlook for the Company or its business
or similar reasons. "Involuntary termination for cause" includes (i) con-
viction of a felony, (ii) willful failure to carry out the policies and
directives of management and/or the Board of Directors, (iii) breach of
any agreement, representation or covenant with the Company, (iv) engaging,
alone or with others, in felonious or other dishonest acts or practices, or
(v) non-performance of the Optionee's obligations and responsibilities to
the Company or not acting in the best interests of the Company.
(c) If the Option is an Incentive Option, no Stock Incentive
Option or Stock Option Certificate shall:
(i) permit any Optionee to exercise any Incentive Option
more than three (3) months after the date the Optionee ceased to be employed
by the Company if the reason for the Optionee's cessation of employment was
other than his death or his disability (as such term is defined by Section
105(d) (4) of the Code); or
(ii) permit any Optionee to exercise any Incentive Option
more than nine (9) months after the date the Optionee ceased to be employed
by the Company if the reason for the Optionee's cessation of employment was
the Optionee's disability (as such term is defined by Section 105(d) (4) of
the Code); or
(iii) permit any person to exercise any Incentive Option more
than nine (9) months after the date the Optionee ceased to be employed by
the Company if either (A) the reason for the Optionee's cessation of employ-
ment was his death or (B) the Optionee died within three (3) months after
ceasing to be employed by the Company; or
<PAGE> 5
(iv) permit the Exercise Price of an Incentive Option,
which shall be determined by the Board at the time of grant, to be less than
one hundred percent (100%) of the Fair Market Value of a share of Stock on
the date the Option is granted; provided, however, that if a Key Employee
to whom an Incentive Option is granted owns more than 10% of the total
combined voting power of all classes of shares of the Company at the time
of the grant, the Exercise Price per share of Stock shall be determined by
the Board but shall not be less than one hundred ten percent (110%) of the
Fair Market Value of a share of Stock on the date the Option is granted.
The Exercise Price per share of Stock under each Option granted pursuant to
the Plan which is not an Incentive Option shall be determined by the Board
at the time of grant but shall not be less than one hundred percent (100%)
of the Fair Market Value of a share of Stock on the date the Option is
granted, unless the Board shall have approved a lower percentage with respect
to such Option. The day on which the Board approves the granting of an
Option shall be deemed for all purposes hereunder the date on which the
Option is granted.
6.4 Acceleration of Vesting and Exercise Due to Change in Control or
----------------------------------------------------------------
Registration of the Shares.
- ---------------------------
If there is any vesting period, then:
(a) Should the Company file a Form S-8 registration to cover the
Options or Shares, for which registration there is no present intent, on
the effective date of such registration the Shares shall immediately fully
vest and the Options shall become fully exercisable.
(b) Change in Control, as provided in Section 8 hereof, shall
also provide for full exercisability of the Option.
7. Termination of Affiliation. Transfers of employment or director-
--------------------------
ships, or as consultant, advisor or attorney between the Company and an
Affiliate, or between Affiliates, will not constitute termination of
Affiliation for purposes of any Award.
8. Change in Control. Upon the occurrence of any Change in Control
-----------------
through an Acquiring Person, Reorganization or Board Change as set forth
herein, all Options granted under the Plan shall be fully exercisable and
the Company or surviving entity shall immediately redeem all outstanding
Options for cash in an amount equal to the excess of the greater of (i) the
price per Share paid in such acquisition by Acquiring Person or in such
Reorganization, or (ii) the highest Fair Market Value of the Stock during
ten (10) days following a public announcement that an Acquiring Person has
acquired the requisite beneficial ownership of the outstanding Stock or ten
(10) days following the commencement of or announcement of an intention to
make a tender offer or exchange offer the consummation of which would
result in the requisite beneficial ownership by an Acquiring Person, or
(iii) the Fair Market Value upon a Change in the Board, over the Exercise
Price.
8.1 Acquiring Person. Any person or group of Affiliated or
----------------
associated persons, other than present management, its parent, or Optionees,
who have acquired beneficial ownership of twenty-five (25%) percent or more
of the outstanding Shares, or who commence, or announce an intention to make
a tender offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of twenty-five (25%) percent
or more of such outstanding Shares, and such acquisition is completed.
<PAGE> 6
8.2 Reorganization. A reorganization shall mean that substantially
--------------
all of the assets of the Company are acquired by another person or entity
other than the existing Board (see Section 8.3) or a reorganization
involving the acquisition of the Company by another or its merger or
consolidation with another. The Reorganization shall be deemed to have
occurred upon consummation or the reorganization transaction.
8.3 Board Change. Board Change shall be the date that a majority of
------------
the Board shall be persons other than persons (a) for whose election
proxies shall have been solicited by the Board, or (b) who are then serving
as directors appointed by the Board to fill vacancies on the Board caused
by death or resignation (but not by removal) or to fill newly created
directorships.
Within ten (10) days of such Change in Control, the Company, Acquiring
Person or successor, as the case may be, shall give written notification to
the Participant of such redemption of the Options. The Participant shall
have the right to elect to keep the Options by written notification to the
Company, Acquiring Person, or successor, as the case may be, within five (5)
days of the redemption notification by virtue of any Change in Control.
Notwithstanding anything herein to the contrary, the Options shall continue
in full force and effect upon such Change in Control if elected to be kept
by the Participant even if subsequent to but by virtue of such Change in
Control the Participant no longer has an Affiliation. Such Options shall
thereafter terminate as otherwise provided in the Plan.
9. Exercise of Option. Subject to the provisions of Section 6 to 8,
------------------
each Award under the Plan shall be exercisable as follows:
9.1 Vesting. The Option shall be either fully exercisable on the date
-------
of grant or shall become exercisable thereafter in such installments as the
Board may specify.
9.2 Full Vesting of Installments. Once an installment becomes
----------------------------
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Board.
9.3 Partial Exercise. Each Option may be exercised at any time or from
----------------
time to time, in whole or in part, in accordance with its terms, for up to
the total number of Shares with respect to which it is then exercisable.
9.4 Acceleration of Vesting. The Board shall have the right to
-----------------------
accelerate the date of exercise of any Award.
10. Effective Date of the Plan. The Plan was adopted by the Board and
--------------------------
stockholders as of April 21, 1999. The Plan shall expire at the end of the
day on April 20, 1999 (except as to Options outstanding on that date).
11. Right to Terminate Affiliation. Nothing in the Plan shall confer
------------------------------
upon any Participant the right to continue Affiliation with the Company or
affect any right which the Company may have to terminate such Affiliation
of the Participant.
12. Withholding Taxes. The Company shall have the right to deduct from
-----------------
all payments under this Plan, whether in cash or in Stock, an amount
necessary to satisfy any federal, state or local withholding tax require-
ments.
<PAGE> 7
13. Amendment, Modification and Termination of the Plan. The Board may
---------------------------------------------------
at any time terminate, suspend, amend or modify the Plan in any respect at
any time, except that the Board will not, without authorization of the
stockholders of the Company obtained within 12 months before or after the
Board adopts a resolution authorizing the effectuation of any change (other
than through adjustment for changes in capitalization as provided in Section
14) which will:
(a) Materially increase the total amount of Stock which may be
awarded under the plan.
(b) Materially decrease the benefits accruing to Participants under
the Plan;
(c) Change the class of Participants eligible to participate in the
Plan.
(d) Extend the duration of the Plan.
No termination, suspension, amendment or modification of the Plan will
adversely affect any right acquired by any Participant or any Successor under
an Award granted before the date of termination, suspension, amendment or
modification, unless otherwise agreed to by the Participant; but it will be
conclusively presumed that any adjustment for changes in capitalization
provided for in Section 14 does not adversely affect any right.
14. Adjustment for Changes in Capitalization. Upon the occurrence of
----------------------------------------
any of the following events, an Optionee's rights with respect to Options
granted to him hereunder shall be adjusted as hereinafter provided, unless
otherwise specifically provided in the Stock Option Certificate as per
Section 6.1:
14.1 Stock Dividends and Stock Splits. Any change in the number of
--------------------------------
outstanding Shares occurring through Stock splits, reverse Stock splits,
or Stock dividends after the grant of an Award will be reflected propor-
tionately in the aggregate number of Shares then available for Awards and
in the number of Shares subject to Awards then outstanding; and a propor-
tionate change will be made in the Exercise Price as to any outstanding
Options.
14.2 Consolidations or Mergers. If the Company shall be the surviving
-------------------------
corporation in any merger or consolidation, each outstanding Option shall
pertain and apply to the securities to which a holder of the number of
Shares subject to the Option would have been entitled.
14.3 Recapitalization or Reorganization. In the event of a recapital-
----------------------------------
ization or reorganization of the Company (other than a transaction described
in Section 14.2 above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of
Common Stock, an Optionee upon exercising an Option shall be entitled to
receive for the Exercise Price the securities he would have received if he
had exercised his Option prior to such recapitalization or reorganization.
14.4 Dissolution or Liquidation. In the event of the proposed dissolu-
--------------------------
tion or liquidation of the Company, each Option will terminate immediately
prior to the consummation of such proposed action or at such other time and
subject to such other conditions as shall be determined by the Board.
14.5 Issuances of Securities. Except as expressly provided herein, no
-----------------------
issuance by the Company of shares of Stock or any class, or securities
convertible into shares of Stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of Shares
<PAGE> 8
subject to the Options. No adjustments shall be made for dividends paid in
cash or in property other than securities of the Company.
14.6 Fractional Shares. No fractional shares shall be issued under the
-----------------
Plan and any fractional Shares resulting from adjustments as provided herein
will be rounded to the nearest whole Share.
14.7 Adjustments. Upon the happening of any of the events described in
-----------
Sections 14.1, 14.2 or 14.3 above, the class and aggregate number of Shares
set forth in Section 4 hereof that are subject to Options which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Board or the successor Board shall determine the specific adjustments to
be made under this Section 14 and, subject to Section 3, its determination
shall be conclusive.
14.8 Company's Right to Make Adjustments and Reorganizations. The grant
-------------------------------------------------------
of an Award pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge or consolidate
or to dissolve, liquidate, sell or transfer all or any part of its business
or assets.
15. Securities Law Requirements. No Shares shall be issued upon the
---------------------------
exercise of any Option unless and until the Company has determined that (i)
it and the Participant have taken all actions required to register the
Shares under the Securities Act of 1933 or perfect an exemption from the
registration requirements thereof; (ii) any applicable listing requirement
of any stock exchange or Nasdaq National Market on which the Common Stock is
listed has been satisfied; and (iii) any other applicable provision of state
or federal law has been satisfied. The Company shall not be required to
issue or deliver any certificates for shares of Stock purchased upon the
exercise of an Option prior to (i) if requested by the Company, the filing
with the Company by the Participant of a representation in writing that it
is the Participant's then present intention to acquire the Stock being
purchased for investment and not for resale, and/or (ii) the completion of
any registration or other qualification of such shares under any government
or self-regulatory body, which the Company shall determine to be necessary
or advisable. Nothing herein is deemed nor shall be construed to confer
any registration rights upon the Participant for an Option or the Shares,
and no such registration right with respect to any Option or Share is
provided to any Participant by the Company.
16. Miscellaneous.
-------------
16.1 Proceeds. The proceeds received by the Company from the sale of
--------
the Shares pursuant to the exercise of the Option will be used for general
corporate purposes.
16.2 No Obligation to Exercise. The granting of an Award shall impose
-------------------------
no obligation upon the Participant to exercise the Option.
16.3 Means of Exercising Options. An Option (or any part thereof) shall
---------------------------
be exercised by giving written notice to the Company at its principal office
address. The notice shall identify the Option being exercised and specify
the number of Shares as to which such Option is being exercised, accompanied
by full payment of the Exercise Price therefor either (a) in United States
dollars in cash or by check, or (b) at the discretion of the Board, through
delivery of Shares having a Fair Market Value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of
the Board, by delivery of the Optionee's personal recourse note bearing
interest payable not less than annually at not less than 100% of the lowest
applicable Federal rate, as defined in Section 1274 (d) of the
<PAGE> 9
Code, (d) at the discretion of the Board and consistent with applicable law,
through the delivery of an assignment to the Company of a sufficient amount
of the proceeds from the sale of the Stock acquired upon exercise of the
Option and an authorization to the broker or selling agent to pay that amount
to the Company, which sale shall be at the Optionee's direction at the time
of exercise, or (e) at the discretion of the Board, by any combination of
(a), (b), (c) and (d) above.
16.4 Governing Law, Construction. The validity and construction of the
---------------------------
Plan and the agreement evidencing Options shall be governed by the laws of
the State of Florida, or the laws of any jurisdiction in which the Company
or its successors in interest may be organized.
16.5 Incentive Options; Disqualifying Disposition. Notwithstanding
--------------------------------------------
that Stock issued upon exercise of an Incentive Option is sold within one
year following the exercise of such Incentive Option or within two years
of grant of the Incentive Option so that the sale constitutes a disquali-
fying disposition for Incentive Option treatment under the Code, no provision
of this Plan shall be construed as prohibiting such a sale.
16.6 Compliance with Code. The aspects of this Plan with respect to
--------------------
Incentive Options are intended to comply in every respect with Section 422
and Section 422A of the Code and the regulations promulgated thereunder. In
the event any future statute or regulation shall modify the existing
statute, the aspects of this Plan with respect to Incentive Options shall
be deemed to incorporate by reference such modification. Any Stock Option
Certificate relating to any Option granted pursuant to this Plan outstanding
and unexercised at the time any modifying statute or regulation becomes
effective shall also be deemed to incorporate by reference such modification
and no notice of such modification need be given to Optionee.
If any provision of the aspects of this Plan with respect to Incentive
Options is determined to disqualify the shares of Stock purchasable pursuant
to the Options granted under this Plan from the special tax treatment
provided by Code Section 422 or Section 422A, such provision shall be deemed
null and void and to incorporate by reference the modification required to
qualify the shares of Stock for said tax treatment.
EXHIBIT 4(ix)
Form of Stock Option Certificate under the 1999
Stock Option Plan
<PAGE>
STOCK OPTION CERTIFICATE
(Non-Qualified Stock Option)
This stock option is granted by
DIALYSIS CORPORATION OF AMERICA
to:
CERTIFICATE SHARES:
No.
Address:
in accordance with and pursuant to the terms of the 1999 Stock Option Plan
(the "Plan") of Dialysis Corporation of America, a Florida corporation (the
"Company").
The terms of the Plan are incorporated by reference and shall be
considered to be a part of this Stock Option Certificate. A copy of the Plan
is attached hereto.
The terms of the Stock Option granted to you include the following:
1. On April 21, 1999 the Board of Directors of the Company granted to
the Optionee an Option (the "Option") to purchase all or any part of an
aggregate of shares (the "Shares") of the Common Stock, $.01 par value
(the "Common Stock"), of the Company, at the price of $1.25 per share
("Exercise Price"), subject to adjustment in accordance with the terms and
conditions set forth in the Plan, and subject to shareholder which was
obtained on May 21, 1999.
2. This Option shall expire at 5:00 p.m., Florida time, on April 20,
2000, subject to earlier termination as provided in the Plan.
Should your affiliation with the Company terminate for any reason,
voluntary or involuntary, for cause or otherwise, or due to death, retirement
or disability, the exercisability of the Option and the extent of the
availability of the Shares shall be governed by Sections 6.2, 6.3, and 6.4
of the Plan.
Upon the occurrence of any Change in Control as defined in Section 8 of
the Plan, the Option shall continue to be fully exercisable, and the Company
or surviving entity shall redeem the Option for cash in an amount as
delineated in Section 8; provided, you have the right to keep the Option by
written notification to the Company, Acquiring Person or Successor, as the
case may be, within five (5) days of the redemption notification as provided
in Section 8 of the Plan. If you elect to keep the Option, it shall continue
in effect, even if your affiliation with the Company ceases by virtue of such
Change in Control.
3. This Option may be exercised by giving written notice to the Company
in the form attached hereto as Exhibit A stating the number of Shares to be
purchased and by concurrently tendering payment by check equal to the
Exercise Price for the Shares being purchased upon such exercise. Upon
exercise and payment, the certificate for the purchased Shares shall be
issued as soon as possible as fully-paid and non-assessable Shares.
4. This Certificate and the Options granted herein and the Shares
issubable upon exercise are not transferable by the Optionee otherwise than
by will or the laws of descent and distribution, and
<PAGE>
shall be exercised only by the Optionee, subject to certain rights of the
Optionee's legal representative, as provided in the Plan.
The Optionee acknowledges that he has no contractual right to require
the registration of the Option or the Shares; and the Optionee understands
that the Shares issued upon exercise of the Option shall have a legend on
the face thereof indicating the restrictions on transfer; and that such
Shares and the Option shall have stop transfer instructions issued against
the same.
At the time of any exercise of the within Option, the Optionee shall
represent to and agree with the Company in writing that he is acquiring
the Shares in respect of which the Option is being exercised for the purpose
of investment and not with a view to distribution.
The Company shall not be obligated to take any other affirmative action
in order to cause or facilitate the exercise of the Option or the issuance of
Shares pursuant thereto to comply with any state or federal law, rule or
regulation.
Any transfer in violation of this Section may cause termination of the
Option.
5. This Option shall be subject to exercise as provided herein and as
provided by the terms of the Plan and shall, in accordance with such terms, be
binding upon the Company and the Optionee.
6. This Certificate shall be governed by and construed in accordance with
the laws of the State of Florida.
IN WITNESS WHEREOF, Dialysis Corporation of America has hereunto set its
hand as of the 21st day of May, 1999.
DIALYSIS CORPORATION OF AMERICA
By:--------------------------------
BART PELSTRING, President
EXHIBIT 5
Opinion of the Firm of Lawrence E. Jaffe, Including Consent
<PAGE>
LAWRENCE E. JAFFE, ESQ.
777 Terrace Avenue
Hasbrouck Heights, NJ 07604
Telephone (201) 288-8282
Telecopier (201) 288-8208
June 24, 1999
Dialysis Corporation of America
27 Miller Street
Lemoyne, Pennsylvania 17043
Re: Registration Statement-Form S-3
2,600,000 Shares of Common Stock:
2,300,000 shares underlying public warrants
300,000 shares by selling security holders
Gentlemen:
We have acted as counsel for Dialysis Corporation of America, a Florida
corporation (the "Company") in connection with the preparation and filing by
the Company of a registration statement on Form S-3 (the "Registration
Statement") relating to the updating of the Company's registration statement
on Form SB-2, Registration No. 33-80877-A ("Form SB-2 Registration") declared
effective by the Securities and Exchange Commission ("Commission") on April
17, 1996, relating to the offer and sale of 2,300,000 shares of common stock,
$.01 par value (the "common stock") issuable under the Company's redeemable
common stock purchase warrants (the "warrants"), and 300,000 shares of
common stock which are being offered for the account of certain selling
security holders, the underwriters of the securities in the Form SB-2
Registration, and their transferees, specified in the Registration Statement.
The warrants are exercisable into common stock through October 16, 1999 at
an exercise price of $4.50 per share. The Form SB-2 Registration also
included the underwriters' purchase warrants which are exercisable through
April 17, 2001 into 100,000 shares of common stock at an exercise price of
$4.50 per share and into warrants which are exercisable through April 17,
2001 at $5.40 per share of common stock. The Company will not receive any
proceeds from the sale of the common stock by the selling security holders.
The opinion provided in this letter is given to the Commission at the request
of the Company pursuant to Item 16 of Form S-3 and Item 601(b)(5) of Regula-
tion S-K, adopted under the Securities Act of 1933.
In rendering this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, as being true copies
of the Registration Statement, the certificate of incorporation, as amended,
of the Company, its by-laws, minutes of meetings of the board of directors of
the Company, and such other documents as we have deemed relevant and
necessary as a basis for this opinion. In our examination, we have assumed
the genuineness of all signatures, the authenticity of all documents
submitted to us, the conformity to original documents submitted to us as
certified or photostatic copies, and the authenticity of the originals of
such documents. Capitalized terms used in the context of this opinion shall
have the same meaning ascribed thereto within the Registration Statement.
<PAGE>
The opinion set forth herein is limited to the laws of the State of
Florida, and we express no opinion as to the laws of any other jurisdiction
except with respect to the federal securities laws typically applicable to
transactions of the type contemplated by the Registration Statement. We
assume no obligation to supplement this opinion if any applicable laws
change after the date hereof, or if we become aware of any facts that may
change the opinions expressed herein after the date hereof.
The opinion expressed in this letter is provided to you for your
benefit and for the benefit of the Commission solely with regard to the
Registration Statement, may be relied upon by you and the Commission only
in connection with the Registration Statement, and may not be relied upon
by any other person or for any other reason without our prior written
consent, and no other opinion should be inferred beyond the matters
expressly stated in this letter.
On the basis of the foregoing, we are of the opinion that the common
stock issuable upon the exercise of the warrants and upon exercise of the
underwriters' purchase warrant have been duly and validly authorized, and
when issued, delivered and paid for in the manner set forth in the Registra-
tion Statement, will be fully paid and non-assessable and conform to the
description as contained in the Registration Statement.
We consent to the filing of this opinion as an exhibit to the Regis-
tration Statement and further consent to the reference to our name under
the heading "Legal Matters" in the prospectus which is part of the Regis-
tration Statement.
Very truly yours,
THE FIRM OF LAWRENCE E. JAFFE
/s/ Lawrence E. Jaffe
By:--------------------------
Lawrence E. Jaffe
LEJ:nac
EXHIBIT (23)
Consents of Experts and Counsel
(i) Consent of Ernst & Young LLP (included on page II-5)
(ii) Consent of Lawrence E. Jaffe, Esq. (contained in Exhibit 5)
EXHIBIT (24)
Power of Attorney (included on Signature Page)
