As filed with the Securities and Exchange Commission on July 14, 1997
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SANDATA, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
11-2841799
(I.R.S. Employer Identification No.)
26 Harbor Park Drive, Port Washington, New York 11050
(Address of Principal Executive Offices)
EMPLOYEES' INCENTIVE STOCK OPTION PLAN
1986 NON-QUALIFIED STOCK OPTION PLAN
1995 STOCK OPTION PLAN
(Full Title of Plan)
Bert E. Brodsky
President
SANDATA, INC.
26 Harbor Park Drive
Port Washington, New York 11050
(516) 484-9060
(Name, Address, and Telephone Number, of Agent for Service)
Copies of all communications and notices to:
Steven J. Kuperschmid, Esq.
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
(516) 296-7000
(Cover continued on following page)
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CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Maximum Maximum
of Securities Amount Offering Aggregate Amount of
To Be To Be Price Offering Registration
Registered Registered(1) Per Share (2) Price(2) Fee
Common Stock,
(par value
$.001 per
share) 416,667(3)(4) $10.125 $4,218,753 $1,279
============== ================ =========== ============ ============
Common Stock,
(par value
$.001 per
share) 227,778(5)(6) $10.125 $2,306,252 $699
============== ================= ============ ============= ============
Common Stock,
(par value
$.001 per
share) 1,000,000(7)(8) $10.125 $10,125,000 $3,069
============= =================== ============ ============= ===========
Common Stock,
(par value
$.001 per
share) 416,667(9) $10.125 $4,218,753 $1,279
============= ================== ============= ============= ============
Common Stock,
(par value
$.001 per
share) 227,778(10) $10.125 $2,306,252 $699
============= ================== ============== ============= ============
Common Stock,
(par value
$.001 per
share) 1,000,000(11) $10.125 $10,125,000 $3,069
============= =================== =============== ============ ===========
Total $10,094
================================================================================
(1) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, an additional undeterminable number of shares of Common Stock is
being registered to cover any adjustments in the number of shares of Common
Stock pursuant to the anti-dilution provisions of Sandata, Inc.'s (the
"Registrant's") Employees' Incentive Stock Option Plan, as amended (the
"Incentive Plan"), 1986 Non-Qualified Stock Option Plan, as amended (the
"1986 Plan") and 1995 Stock Option Plan (the "1995 Plan").
2
<PAGE>
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c).
(3) The Incentive Plan authorizes the granting of incentive stock options to
purchase a maximum of 416,667 shares of Common Stock.
(4) Represents the issuance of shares of Common Stock issuable upon the
exercise of options granted, and which may be granted, under the Incentive
Plan.
(5) The 1986 Plan authorizes the granting of non-qualified stock options to
purchase a maximum of 227,778 shares of Common Stock.
(6) Represents the issuance of shares of Common Stock issuable upon the
exercise of options granted, and which may be granted, under the 1986 Plan.
(7) The 1995 Plan authorize the granting of incentive and non-qualified stock
options to purchase an aggregate of 1,000,000 shares of Common Stock.
(8) Represents the issuance of shares of Common Stock issuable upon the
exercise of options granted, and which may be granted, under the 1995 Plan.
(9) Represents the resale of shares of Common Stock acquired upon the exercise
of stock options granted, and which may be granted, under the Incentive
Plan.
(10) Represents the resale of shares of Common Stock acquired upon the exercise
of stock options granted, and which may be granted, under the 1986 Plan.
(11) Represents the resale of shares of Common Stock acquired upon the exercise
of stock options granted, and which may be granted, under the 1995 Plan.
EXPLANATORY NOTE
Pursuant to General Instruction C of Form S-8, this Registration Statement
contains a prospectus meeting the requirements of Part I of Form S-3 relating to
reofferings of shares of common stock, $.001 par value (the "Common Stock"), of
the Registrant acquired, or which may be acquired, pursuant to its Incentive
Plan, 1986 Plan and 1995 Plan, respectively, by persons who may be deemed to be
affiliates of the Company.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Incorporated herein by reference are the following documents filed by the
Registrant with the Securities and Exchange Commission (the "Commission") under
the Securities Exchange Act of 1934, as amended (the "1934 Act"):
(a) The Registrant's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1996, as amended.
(b) The Registrant's Quarterly Report on Form 10-QSB for the period
ended August 31, 1996, as amended.
(c) The Registrant's Quarterly Report on Form 10-QSB for the period
ended November 30, 1996, as amended.
(d) The Registrant's Quarterly Report on Form 10-QSB for the period
ended February 28, 1997, as amended.
(e) The Registrant's Current Report on Form 8-K dated September 30,
1996.
(f) The Registrant's Current Report on Form 8-K dated June 19, 1997.
(g) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8(a), as amended.
All documents filed by the Registrant pursuant to Sections 13, 14 and 15(d)
of the 1934 Act prior to the filing of a post-effective amendment to this
Registration Statement which indicate that all securities offered hereby have
been sold or which registers all such securities then remaining unsold, shall be
deemed to be incorporated herein by reference and to be a part hereof from their
respective dates of filing.
Item 4. Description of Securities
Not applicable.
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<PAGE>
Item 5. Interests of Named Experts and Counsel
Certain legal matters in connection with the offering of the securities
registered hereunder are being passed upon for the Registrant by Certilman Balin
Adler & Hyman, LLP, 90 Merrick Avenue, East Meadow, New York 11554.
Item 6. Indemnification of Directors and Officers
Pursuant to Section 145 of the Delaware General Corporation Law, the
Registrant has the power, under certain circumstances, to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director, officer, employee or agent of the Registrant, or is or was
serving at the request of the Registrant as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
Article Seventh of the Registrant's Certificate of Incorporation provides
that the Registrant shall, to the fullest extent permitted by said Section 145,
indemnify all persons whom it may indemnify pursuant thereto.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended ("1933 Act"), may be permitted to directors, officers or
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 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
Item 7. Exemption from Registration Claimed
Not applicable.
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<PAGE>
Item 8. Exhibits
4.1 Employees' Incentive Stock Option Plan, as amended(1)
4.2 1986 Non-Qualified Stock Option Plan, as amended(1)
4.3 1995 Stock Option Plan(1)
5 Opinion of Certilman Balin Adler & Hyman, LLP as to
the legality of the shares of Common Stock registered
hereunder
23.1 Consent of Marcum & Kliegman, LLP
23.2 Consent of Certilman Balin Adler & Hyman, LLP
(included in its opinion filed as Exhibit 5)
24 Powers of Attorney (included in signature page
forming a part hereof)
Item 9. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
- --------------------
(1) Denotes document filed as an exhibit to the Company's Annual Report on
Form 10- KSB for the fiscal year ended May 31, 1995 and incorporated herein by
reference.
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<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
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 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.
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<PAGE>
RE-OFFER PROSPECTUS
COMMON STOCK
SANDATA, INC.
This Prospectus relates to 1,644,445 shares of Common Stock, $.001 par
value (the "Shares"), of Sandata, Inc., a Delaware corporation (the "Company").
See "Risk Factors" and "Description of Securities".
This Prospectus relates to the sale or offer for sale on the NASDAQ
SmallCap Market or otherwise of an aggregate of 1,644,445 shares of Common
Stock, par value $.001 per share ("the Shares"), of the Company, which may be
acquired by certain persons who may be deemed affiliates of the Company pursuant
to the exercise by them of options granted (or which may have been granted)
pursuant to the terms of the Company's Employees' Incentive Stock Option Plan,
as amended (the "Incentive Plan"), the Company's 1986 Non-Qualified Stock Option
Plan, as amended (the "1986 Plan"), the Company's 1995 Stock Option Plan (the
"1995 Plan") and such additional shares as may become subject to issuance on the
exercise of options under such plans (collectively, the "Plans") as a result of
anti-dilution adjustment provisions thereunder.
The various persons and entities referred to herein, are hereinafter
referred to individually as a "Selling Stockholder" and collectively as the
"Selling Stockholders". There are no commitments pursuant to which the Company
will receive any proceeds from the resale of the Shares by the Selling
Stockholders. See "Selling Stockholders."
A PURCHASE OF THESE SECURITIES INVOLVES A CERTAIN DEGREE OF RISK. SEE "RISK
FACTORS." THE "RISK FACTORS" SECTION BEGINS ON PAGE A-7 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
To the Company' s knowledge, the Selling Stockholders, directly through
agents designated by them from time to time or through broker-dealers or
underwriters also to be designated, may sell the Shares from time to time, in or
through privately negotiated transactions, or in one or more transactions,
including block transactions, on the NASDAQ SmallCap Market, or on any other
market or stock exchange on which the Shares may be listed in the future
pursuant to
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and in accordance with the applicable rules of such market or exchange or
otherwise. The selling price of the Shares may be at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. See "Selling Stockholders" and "Plan of Distribution".
The Company has agreed to indemnify certain of the Selling Stockholders
against certain civil liabilities, including liabilities under the Securities
Act. See "Selling Stockholders" and "Plan of Distribution".
The Selling Stockholders and any agents, broker-dealers, or underwriters
that participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commissions received by them, and any profit on the resale of the
Shares purchased by them, may be deemed to be underwriting commissions or
discounts under the Securities Act. The Company is not aware of any underwriting
arrangements with respect to the resale of the Shares by the Selling
Stockholders. See "Selling Stockholders" and "Plan of Distribution".
The Company's Common Stock is traded on the NASDAQ SmallCap market
("NASDAQ") under the symbol "SAND". On July 10, 1997, the closing bid price for
the Company's Common Stock, as reported by NASDAQ, was $9.75.
July 14, 1997
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<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT ANY INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices of the Commission:
7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Furthermore, the Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding the
Company. The address of such Web site is http://www.sec.gov.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act") and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1996, as amended (the "Form 10-KSB").
(b) The Company's Quarterly Report on Form 10-QSB for the period ended
August 31, 1996, as amended.
(c) The Company's Quarterly Report on Form 10-QSB for the period ended
November 30, 1996, as amended.
(d) The Company's Quarterly Report on Form 10-QSB for the period ended
February 28, 1997, as amended (the "February 10-QSB").
(e) The Company's Current Report on Form 8-K dated September 30, 1996.
(f) The Company's Current Report on Form 8-K dated June 19, 1997 (the
"1997 Form 8-K").
(g) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8(a), as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering of the Shares offered hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
their respective dates of filing.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
incorporated into this Prospectus by reference (other than exhibits to such
documents). Requests for such copies should be directed to the Secretary,
Sandata, Inc., 26 Harbor Park Drive, Port Washington, New York 11050 (telephone
number: (516) 484-9060).
Any statement contained in a document incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
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<PAGE>
THE COMPANY
The Company, through its wholly-owned subsidiaries, is engaged in the
business of providing computerized data processing services and custom software
and programming services, by utilizing Company-developed software, and software
acquired or licensed by the Company, principally to the health care industry,
but also to the general commercial market. In addition, the Company provides
hardware maintenance of personal computers ("PCs"), printers and networks and
training on PC software packages.
Applications of the Company's software include: a home health care system,
computerized preparation of management reports, payroll processing and
electronic time card with voice recognition systems. Principal products and
services provided by the Company include the Sandsport Home Attendant Reporting
Program, data entry services and specialized system development, among others.
In addition, the Company provides administration and processing services for an
affiliate engaged in the pharmacy prescription reimbursement business See "Risk
Factors--Unascertainable Risks Related to Possible Acquisitions".
Generally, in providing data processing services, the Company first
receives data from its customers, then processes it and generates reports based
on such data. Services are provided to customers by processing on the Company's
equipment at its premises. The Company also has available software which permits
information retrieval from customers' facilities which communicate with the
Company's computers at its data center. This allows the Company's customers to
have access to processing hardware and software without a substantial investment
on their part. The Company also offers its services on a turnkey basis. Turnkey
computer systems offer the customer total in-house capabilities through the
licensing of the Company's software for use on a customer's computer. The
Company's software is written in a variety of software languages including
COBOL, C and FoxPro.
Over the past several years, the Company has developed its Santrax product,
a computerized time and attendance management system. The Santrax system
utilizes voice recognition and telecommunications technology to verify that a
person is at a particular telephone number at a particular time. Presently, the
system is being utilized by several of the Company's home health care clients,
with the Company receiving approximately an aggregate of 400,000 calls per week.
Although no assurances can be given, it is anticipated that the Santrax product
can be utilized by other industry applications.
On April 10, 1997, the Company received notice that MCI Telecommunications
Corp. ("MCI") had commenced an action against it in the United States District
Court for the Eastern District of New York alleging that the Company's Santrax
time and attendance system infringes on certain patent rights allegedly owned by
plaintiff. The complaint seeks compensatory and treble damages with interest and
injunctive relief. The Company intends to vigorously defend this action. On May
13, 1997, the Company filed an Answer and Counterclaim against MCI (the
"Answer"). Among other things, pursuant to the Answer, the Company denies that
its product infringes MCI's
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<PAGE>
patent rights and asserts certain affirmative defenses. In addition, the Answer
contains a counterclaim challenging the validity of MCI's alleged patent rights.
Notwithstanding the foregoing, because of the uncertainties of litigation,
no assurances can be given as to the outcome of the MCI litigation. In the event
that the Company were not to prevail in this litigation, the Company could be
required to pay significant damages to MCI and could be enjoined from further
use of the Santrax system as it presently exists. Although a negative outcome in
the MCI litigation would have a material adverse affect on the Company,
including, but not limited to, its operations and financial condition, the
Company believes that, if it is held that the Company's system infringes MCI's
patent rights, the Company would attempt to design a system to replace Santrax
or would attempt to negotiate with MCI to utilize its system, although no
assurances can be given that the Company would be successful in these attempts.
At the present time, the Company can not assess the possible cost of
implementing a new system or obtaining rights from MCI.
Since late 1993, the Company has been engaged from time to time in
negotiations relating to the use of MCI's telephone services in connection with
the Santrax system. In late 1996, MCI and the Company discussed, among other
things, that the Company would pay a lesser per call charge for such services if
the Company and MCI agreed that the Company's technology did not violate U.S.
Patent 5,255,183 (the "Katz Patent"), which is the subject of the MCI
litigation. No such agreement was ever reached.
For the fiscal year ended May 31, 1996 and nine months ended February 28,
1997, approximately 19.8% and 33.4% of the Company's revenues, respectively,
were derived from fees associated with the Santrax product.
MCI has advised that it owns two pending patent applications that are
related to the Katz Patent. Since those patent applications have not issued to
patent and are confidential at the U.S. Patent Office, the Company is unable to
determine the scope of any patent applications. In addition, one or both of such
applications could be amended by MCI. There can be no assurances that these
patent applications, either as originally filed or as amended, will not issue as
patents with claims that cover the Santrax system. See "Risk Factors--Pending
Litigation by MCI Telecommunications Corp".
The Company was incorporated in the State of New York in June 1978 and
reincorporated in the State of Delaware in December 1986, at which time it also
assumed its present name.
The Company maintains its executive offices at 26 Harbor Park Drive, Port
Washington, New York 11050; telephone number (516) 484-9060.
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FORWARD-LOOKING STATEMENTS
The Company cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements which may be deemed to have been made in this
Prospectus or which are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in this Prospectus that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may", "will", "expect",
"believe", "anticipate", "intend", "could", "estimate", or "continue" or the
negative variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors which may effect the Company's results
include, but are not limited to, the risks and uncertainties associated with
data processing and system sales. The Company is also subject to other risks
detailed herein or detailed from time to time in the Company's Commission
filings. Factors that could cause or contribute to such difference include, but
are not limited to, those discussed in "Risk Factors" below, as well as those
discussed elsewhere in this Prospectus and in the Company's filings with the
Commission.
RISK FACTORS
An investment in the securities offered hereby is speculative and involves
a high degree of risk and should only be purchased by investors who can afford
to lose their entire investment. Prospective purchasers, prior to making an
investment, should carefully consider the following risks and speculative
factors, as well as other information set forth elsewhere in this Prospectus. As
discussed above, this Prospectus contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially. Factors that could cause
or contribute to such difference include, but are not limited to, those
discussed below, as well as those discussed elsewhere in this Prospectus.
1. Dependence on Governmental Program.
For its fiscal years ended May 31, 1996 and 1995, and the fiscal nine month
periods ended February 28, 1997 and 1996, approximately 51%, 61%, 76% and 67%,
respectively, of the Company's revenues were derived from data processing and
other related services rendered to vendor agencies under contract with the Human
Resources Agency of the City of New York ("HRA"). Such vendor agencies receive a
substantial portion of their operating funds from the federal government through
its Medicaid program; the balance of their funding is provided by the State and
City of New York. Management believes that operations will, for the foreseeable
future, continue to be dependent upon revenues generated from such vendor
agencies. Elimination of the home attendant services program by HRA or a
substantial cut-back in the level of funding of this program by the federal,
state or city governments would have, through the impact of such cut-backs on
the vendor agencies, a material adverse effect on the Company. See "Item
1--Description of Business--Principal Products and Services" in the Form 10-KSB.
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2. Technological Obsolescence.
The data processing and computer software fields are characterized by rapid
technological developments and advances, often resulting in partial or total
obsolescence of systems. There is no assurance that the Company's research and
development activities will permit it to keep abreast of new developments. See
"Item 1--Description of Business--Research and Development" in the Form 10-KSB.
3. Competition.
Some of the Company's competitors are larger and have greater financial
resources than the Company. Furthermore, the Company's customers may find it
desirable to perform for themselves the services being rendered by the Company.
The Company also competes with larger and better established companies for the
hiring of qualified technical and marketing personnel. See "Item 1--Description
of Business--Competition" in the Form 10-KSB.
4. Pending Litigation by MCI Telecommunications Corp.
On April 10, 1997, the Company received notice that MCI had commenced an
action against it in the United States District Court for the Eastern District
of New York alleging that the Company's Santrax time and attendance system
infringes on certain patent rights allegedly owned by plaintiff. The complaint
seeks compensatory and treble damages with interest and injunctive relief. The
Company intends to vigorously defend this action. On May 13, 1997, the Company
filed its Answer. Among other things, pursuant to the Answer, the Company denies
that its product infringes MCI's patent rights and asserts certain affirmative
defenses. In addition, the Answer contains a counterclaim challenging the
validity of MCI's alleged patent rights.
Notwithstanding the foregoing, because of the uncertainties of litigation,
no assurances can be given as to the outcome of the MCI litigation. In the event
that the Company were not to prevail in this litigation the Company could be
required to pay significant damages to MCI and could be enjoined from further
use of the Santrax system as it presently exists. Although a negative outcome in
the MCI litigation would have a material adverse affect on the Company,
including, but not limited to, its operations and financial condition, the
Company believes that, if it is held that the Company's system infringes MCI's
patent rights, the Company would attempt to design a system to replace Santrax
or would attempt to negotiate with MCI to utilize its system, although no
assurances can be given that the Company would be successful in these attempts.
At the present time, the Company can not assess the possible cost of
implementing a new system or obtaining rights from MCI.
Since late 1993, the Company has been engaged from time to time in
negotiations relating to the use of MCI's telephone services in connection with
the Santrax system. In late 1996, MCI and the Company discussed, among other
things, that the Company could pay a lesser per call charge for such services if
the Company and MCI agreed that the Company's technology did not
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<PAGE>
violate U.S. Patent 5,255,183 (the "Katz Patent"), which is the subject of the
MCI litigation. No such agreement was ever reached.
For the fiscal year ended May 31, 1996 and nine months ended February 28,
1997, approximately 19.8% and 33.4% of the Company's revenues, respectively,
were derived from fees associated with the Santrax product.
MCI has advised that it owns two pending patent applications that are
related to the Katz Patent. Since those patent applications have not issued to
patent and are confidential at the U.S. Patent Office, the Company is unable to
determine the scope of any patent applications. In addition, one or both of such
applications could be amended by MCI. There can be no assurances that these
patent applications, either as originally filed or as amended, will not issue as
patents with claims that cover the Santrax system.
5. Proprietary Rights.
The Company does not own, nor has it applied for, Federal Copyright
registration on its computer software systems now in existence or being
developed. However, the Company believes that its computer software systems are
proprietary trade secrets and that they, together with the documentation,
manuals, training aids, instructions and other materials supplied by the Company
to customers, are subject to the proprietary rights of the Company and protected
by applicable law. However, there can be no assurance that the Company will be
able to protect itself against misappropriation of its proprietary rights and
trade secrets. See "Item 1--Business--Proprietary Rights" in the Form 10-KSB.
6. Control by Current Stockholders.
The Company's Certificate of Incorporation does not provide for cumulative
voting. Therefore, stockholders owning in excess of 50% of the outstanding
shares of the Company's Common Stock are able to elect all the members of the
Board of Directors. As of the date of this Prospectus, present management of the
Company owns approximately 68.1% of the issued and outstanding shares of Common
Stock of the Company and will be able to elect all of the Company's directors
and to control the Company. However, upon the completion of this offering, as to
which no assurances can be made, the present management of the Company will own
13.2% in the aggregate of the issued and outstanding shares of the Company's
Common Stock.
7. Effect of Outstanding Exercisable Securities.
As of the date of this Prospectus, the Company had currently exercisable
outstanding options and warrants to purchase shares of the Company's Common
Stock exercisable at various prices from $1.38 to $7.00, subject to adjustment
per share, pursuant to which an aggregate of 1,575,259 shares of Common Stock
(subject to adjustment) may be issued. This includes warrants
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granted to the Company's Chairman and options granted to various directors,
officers, employees and consultants.
During the respective terms of the Company's outstanding derivative
securities, the holders thereof may be able to purchase shares of Common Stock
at prices substantially below the then-current market price of the Company's
Common Stock with a resultant dilution in the interests of the existing
stockholders. In addition, the exercise of outstanding derivative securities and
the subsequent public sales of Common Stock by holders of such securities
pursuant to this offering, a registration statement effected at their demand,
under Rule 144 or otherwise, could have an adverse effect upon the market for
and price of the Company's securities.
8. Shares Eligible for Future Sale May Adversely Affect
the Market.
870,420 of the Company's outstanding shares of Common Stock (exclusive of
shares of Common Stock issuable upon the exercise of outstanding options and
warrants) are "restricted securities" and, in the future, may be sold upon
compliance with Rule 144 or pursuant to registration (effected by demand or
other rights granted to certain stockholders) under the Securities Act. Rule 144
currently provides, in essence, that a person holding "restricted securities"
for a period of one year may sell an amount every three months up to the greater
of (a) 1% of the Company's issued and outstanding securities of that class of
securities or (b) the average weekly volume of sales of such securities during
the four calendar weeks preceding the sale if there is adequate current public
information available concerning the Company. Additionally, non-affiliates (who
have not been affiliates of the Company for at least three months) may sell
their "restricted securities" in compliance with Rule 144 without volume
limitations after they have held such securities for a period of two years. An
aggregate of 442,754 shares of Common Stock have been owned by Messrs. Brodsky,
Freund and Stoller for more than two years. However, such shares are subject to
an agreement with Barber & Bronson Incorporated ("B&B") imposing certain
restrictions on the public sale thereof until December 22, 1997 without B&B's
consent. B&B has authorized Messrs. Brodsky, Freund and Stoller to register an
aggregate of 1,238,140 Shares, which amount includes outstanding shares of
Common Stock as well as shares of Common Stock underlying presently exercisable
options and warrants, on the condition that sales of such Shares be made through
B&B. See "Plan of Distribution".
The Company is registering hereunder 1,644,445 Shares issuable to certain
stockholders upon the exercise of options granted, and which may be granted,
under the Plans, and the resale of such Shares by such stockholders. In
addition, the Company filed a Registration Statement on Form S-3 (the "Form
S-3") which was declared effective by the Commission on June 3, 1997 registering
for sale 1,988,140 shares of Common Stock held by certain stockholders,
including, without limitation, shares of Common Stock underlying certain options
and warrants. Such Shares being registered hereunder and pursuant to the Form
S-3 may be resold at any time. Prospective investors should be aware that the
possibility of resales by the Selling Stockholders, as well as other
stockholders of the Company, may have a material depressive effect on the market
price of the Company's shares of Common Stock in any market which may develop.
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9. Ability to Renew Present Financing; Significant Outstanding
Indebtedness; Loan Covenants and Security Interests.
From time to time the Company and/or its subsidiaries have entered into
loan arrangements with Marine Midland Bank (the "Bank"), among others. As of
February 28, 1997, the Company owed the Bank $237,486.
On April 18, 1997, the Company's wholly owned subsidiary, Sandsport Data
Services, Inc. ("Sandsport") entered into a Revolving Credit Agreement (the
"Credit Agreement") with the Bank which allows Sandsport to borrow and re-borrow
amounts up to $3,000,000. Interest accrues on amounts outstanding under the
Credit Agreement at a rate equal to the London Interbank Offered Rate plus 2%
and will be paid quarterly in arrears or, at Sandsport's option, interest may
accrue at the Bank's prime rate. The Credit Agreement required Sandsport to pay
a commitment fee in the amount of $30,000 and a fee equal to 1/4% per annum
payable on the unused average daily balance of amounts under the Credit
Agreement. In addition, there are other fees and charges imposed based upon
Sandsport's failure to maintain certain minimum balances. The Credit Agreement
will expire on March 1, 2000. The indebtedness under the Credit Agreement is
guaranteed by the Company and Sandsport's sister subsidiaries (the "Group"). The
collateral for the facility is a first lien on all equipment owned by members of
the Group, as well as a collateral assignment of $2,000,000 of life insurance
payable on the life of Mr. Brodsky. The Group's guaranty to the Bank, relating
to the bonds discussed below, was modified to conform covenants described
therein to comply with those in the Credit Agreement.
All of the Group assets are pledged to the Bank as collateral for the
amounts due under the Credit Agreement. The Group is prohibited from incurring
additional indebtedness except under certain circumstances.
In addition, pursuant to the Credit Agreement, the Group is required to
maintain certain levels of net worth and meet certain financial ratios in
addition to various other affirmative and negative covenants. The Group has, in
the past, under prior agreements with the Bank, failed to meet these net worth
and financial ratios, and the Bank has granted the Group waivers. No assurance
can be given that the Group will be able to meet these net worth and financial
requirements in the future, and/or that the Bank will continue to grant to the
Group waivers. Although in the past the Bank has renewed its loans to the
Company when they matured, there can be no assurance that it will continue to do
so or that the Company, if the Bank does not renew the loan, will be able to
arrange alternative financing on terms satisfactory to it.
In addition, the Company is indebted to companies affiliated with the
Company's Chairman in the amount, as of February 28, 1997, of $1,297,000. Of
this amount, as of February 28, 1997, an aggregate of $462,000 of indebtedness
was evidenced by notes due in December 1997 and May 1998.
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On June 1, 1994, BFS Sibling Realty Inc., formerly known as Brodsky Sibling
Realty, Inc. ("BFS") borrowed $3,350,000 in the form of Industrial Development
Revenue Bonds ("Bonds") to finance costs incurred in connection with the
acquisition, renovation and equipping of the Company's office space located at
26 Harbor Park Drive, Port Washington, New York (the "Facility" or the
"Building") from the Nassau County Industrial Development Agency (the "NCIDA").
These Bonds were subsequently purchased by the Bank. The aggregate cost incurred
by BFS in conjunction with such acquisition, renovation and equipping was
approximately $4,377,000. In addition, the Company incurred approximately
$500,000 of indebtedness to affiliates of Mr. Brodsky in connection with
additional capital improvements. The Bonds bore interest at prime plus 3/4 of 1%
until August 11, 1995, at which time the interest rate became fixed at 9% for a
five-year term through September 1, 2000. At that time, the interest rate will
be adjusted to a rate of either prime plus 3/4 of 1%, or the applicable fixed
rate if offered by the Bank. As a condition to the issuance of the Bonds, the
NCIDA obtained title to the Facility which it then leased to BFS. On June 21,
1994 (as of June 1, 1994), the Company and its Chairman guaranteed the full and
prompt payment of principal and interest of the Bonds and the Company granted
the Bank a security interest and lien on all the assets of the Company. In
connection with the issuance and sale of the Bonds, the Company entered into a
lease agreement (the "Sublease") with BFS, whereby the Company leased the
Facility for the conduct of its business and, in consideration therefor, was
obligated to make lease payments that at least equal amounts due to satisfy the
underlying Bond obligations.
On July 31, 1995, by an Assignment and Assumption and First Amendment to
Lease between the Company and BFS, the Company assumed the obligations of BFS
under the lease and became the direct tenant and the beneficial owner of the
Facility (collectively the "Assignment Transaction"). In connection with the
Assignment Transaction, the Sublease was terminated. During the period
commencing July 1, 1995 and ending October 31, 1996 the Company paid rent for
the Facility to the NCIDA in the amount of $48,600 per month, subject to
adjustment based upon the then effective interest rate of the Bonds, among other
things. In connection with the Assignment Transaction, the Company obtained the
right to acquire the Facility upon expiration of the lease with the NCIDA (the
"Lease") and became directly liable to the NCIDA for amounts due thereunder. In
connection with the Assignment Transaction, the Company assumed certain
indebtedness owed to affiliates of the Company's Chairman as follows: (i) the
$364,570 remaining balance of a 48-month term loan bearing interest at 8.7% per
annum, and (ii) the $428,570 remaining balance of a 42-month term loan bearing
interest at 8.91%. Each of the foregoing loans were incurred in connection with
the construction of improvements to the Building, are collateralized by the
assets of the primary obligor and are guaranteed by the Company's Chairman.
On August 11, 1995, the Company entered into a $750,000 loan agreement with
the Long Island Development Corporation ("LIDC"), under a guarantee by the U.S.
Small Business Administration ("SBA") (the "SBA Loan"). The entire $750,000
proceeds have been used to repay a portion of the Bonds. The Company entered
into the Assignment Transaction primarily to satisfy certain requirements of the
SBA. The SBA Loan is payable in 240 monthly installments of $6,255, which
includes principal and interest at a rate of 7.015%.
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As of November 1, 1996, the Company entered into an Assignment and
Assumption of and Second Amendment to Lease Agreement among BFS Realty, LLC, an
affiliate of the Company's Directors (the "Assignee"), the Bank and the Company
(the "Second Amendment"). In connection with the Second Amendment, (i) the
Assignee assumed all of the Company's obligations under the Lease with the NCIDA
and entered into a sublease with the Company for the Facility; and (ii) the
Company conveyed to the Assignee the right to become the owner of the Facility
upon expiration of the Lease. In addition, pursuant to the sublease, the Company
has assumed certain obligations owed by the Assignee to the NCIDA under the
Lease. The Assignee has indemnified the Company with respect to certain
obligations relative to the Lease and the Second Amendment.
The documentation with regard to each of the foregoing contain various
covenants requiring and/or restricting the Company from taking various action.
Among other things, the documentation relating to the SBA Loan contains certain
covenants which require certain principal stockholders of the Company to
maintain certain levels of equity in the Company. Such restriction could impact
the Company's ability to engage in equity financings and a violation of such
covenant could result in a default under the SBA Loan. In the past, the Company
has been able to obtain a waiver of such provision, however, no assurances can
be made that it will continue to be able to do so. Messrs. Brodsky, Freund and
Stoller have advised the Company that, if as a result of action taken by any of
them, a default occurs under the SBA Loan, such individuals shall either cure
such default, if possible, or satisfy the obligation.
10. Limited Marketing Capability.
The Company has limited marketing capabilities and resources. To date,
substantially all of the Company's commercial marketing activities have been
conducted by sales representatives directly employed by the Company and
independent sales agents. Such activities have consisted primarily of personal
contact with potential customers. Because of the nature of the Company's
business, management will continue to devote a substantial amount of time
developing and maintaining continuing personal relationships with the Company's
customers. See "Item 1-- Description of Business--Marketing and Distribution" in
the Form 10-KSB.
11. Dependence on Key Personnel.
The Company is dependent upon the expertise and abilities of three key
executive personnel: Bert E. Brodsky, Chairman of the Board, President and
Treasurer, Hugh Freund, Executive Vice President and Secretary, and Gary
Stoller, Executive Vice President. Messrs. Stoller and Freund are not parties to
any employment agreements with the Company; Effective February 1, 1997 the
Company and Mr. Brodsky entered into an employment agreement for a five year
term (the "Brodsky Employment Agreement"). Among other things, the Brodsky
Employment Agreement provides for compensation at the annual rate of $500,000.
See--"Subsequent Events". The Company's agreement with the Bank requires that
Mr. Brodsky at all times be active on a substantially full-time basis in the
affairs of the Company. The Company or its subsidiaries is the
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beneficiary under certain key-man life insurance policies on the life of each of
Messrs. Brodsky and Freund in the amounts of $4,500,000 and $1,400,000,
respectively, the benefits of which are payable to the Company. Of such
insurance benefits, an aggregate of $2,000,000 on the life of Mr. Brodsky has
been pledged to the Bank. However, if the Company were to lose the services of
any of these key personnel as a result of disability, death or otherwise the
Company could be in default under its agreement with the Bank and its business
could be adversely affected.
12. No Dividends.
To date, the Company has not paid any cash dividends on its Common Stock
and does not expect to declare or pay any cash or other dividends in the
foreseeable future. Dividends are restricted pursuant to the terms of the Credit
Agreement between the Company and the Bank. See "Item 5 - Market for Common
Equity and Related Stockholder Matters--Dividend Policy" in the Form 10-KSB.
13. Unascertainable Risks Related to Possible Acquisitions.
The Company intends to explore opportunities to add, through acquisition or
licensing, technology or products to enhance or add to its current product line,
or to acquire a customer base or sales organization to augment the Company's
infrastructure. In exploring potential acquisitions or licenses, the Company
will consider, among other criteria: the comparative cost to the Company in
capital, resources and personnel to create the identified technology or product,
or to establish the targeted customer base or sales organization; restrictions
to the Company developing similar technology or products arising from patent or
other intellectual property protection; and the synergy of the identified
technology or products, or customer base or sales organization, with the
Company's products and organization. Although the Company anticipates it will
follow the foregoing general criteria in determining whether or not to make any
acquisitions, management will have sole discretion over whether or not to engage
in an acquisition. There can be no assurance that the Company will identify any
acquisition or licensing candidates or, if it does, that it will be able to
reach any agreements to acquire or license technology or products, or acquire
assets, on terms acceptable to the Company. To the extent that the Company
effects an acquisition of technology or products in the early stage of
development or growth (including technology or products which have not been
fully tested or marketed), the Company will be subject to numerous risks
inherent in developmental technology and other high level of risk associated
with high technology industries based on innovative technologies or processes.
Furthermore, future acquisition transactions may require the Company to obtain
additional financing from banks or financial institutions or to undertake debt
or equity financing. No assurance can be given that the Company would be able to
obtain financing upon commercially reasonable terms, or at all. Furthermore,
equity financing will result in a dilution of existing Stockholders of the
Company, which may be significant. To the extent that debt financing ultimately
proves to be available, any borrowings may subject the Company to various risks
traditionally associated with the incurring of indebtedness, including the risks
of interest rate fluctuations and insufficiency of cash flow to pay principal
and interest.
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Although the Company will endeavor to evaluate the risks inherent in a
particular acquisition, there can be no assurance that the Company will properly
ascertain or assess such significant risk factors.
The Company provides data processing services to National Medical Health
Card Systems, Inc. ("Health Card"), a company of which affiliates of Mr. Brodsky
are principal stockholders, and which is engaged in the administration of
pharmacy prescription reimbursement programs for unions and other benefit
providers. The Company is, and has been, considering entering into the pharmacy
prescription reimbursement administration business directly or through one or
more acquisitions of existing companies, including, without limitation, Health
Card.
In a June 19, 1997 press release, which press release is filed as an
exhibit to the 1997 Form 8-K, the Company announced that it has commenced
negotiations for a business combination with Health Card. Health Card has over
42,000 pharmacies throughout the United States participating in its network.
During its fiscal year ended June 30, 1996, Health Card added 120,000 covered
lives, and since 1995, it has expanded its client base by eighteen (18%)
percent. During its fiscal year ended June 30, 1996, Health Card's pre-tax
earnings were $1,039,000 on $57,000,000 in revenues, of which it derived $38,000
in revenues in connection with pharmacy prescription reimbursement services
rendered to the Company. During its fiscal year ended May 31, 1996, the Company
derived $1,970,000 in revenues from data processing and programming services
provided to Health Card and from the rental of office space to Health Card.
The Company is also considering several other possible acquisition
candidates in such industry; however, other than the formal negotiations with
Health Card, the Company is only in the preliminary stages of such consideration
with any other such company. Accordingly, no assurances can be made as to
whether (i) the Company will enter into the business directly, (ii) any of the
acquisitions presently being considered will be consummated, (iii) if
consummated, the terms upon which any such acquisitions may occur, and (iv) if
consummated, whether such acquisitions, including, without limitation, the
business combination with Health Card, will be successful. Except as set forth
above, as of the date of this Prospectus, the Company has no other specific
plans with respect to material acquisitions. In addition to the foregoing, the
Company may, from time to time, enter into agreements with related parties. In
such case, the Company anticipates that the terms of such agreements will be
commercially reasonable and no less favorable to the Company than the Company
could obtain from unrelated third parties. Additionally, the Company intends
that such agreements will be approved by a majority of disinterested directors.
14. Securities Market Factors.
In recent years, the securities markets have experienced a high level of
volume volatility and market prices for many companies, particularly small and
emerging growth companies, have been subject to wide fluctuations in response to
quarterly variations in operating results. The securities of many of theses
companies which trade in the over-the-counter market, have experienced wide
price fluctuations, which in many cases were unrelated to the operating
performance of, or announcements concerning, the issuers of the affected stock.
Factors such as announcements by the
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Company or its competitors concerning technological innovations, new products or
procedures, government regulations and developments or disputes relating to
proprietary rights may have a significant impact on the market for the Company's
securities. General market price declines or market volatility in the future
could adversely affect the future price of the Company's securities.
15. Prior Public Announcements.
In a January 20, 1997 Newsday article, Mr. Brodsky was referred to as
saying that the Company could have revenues "in excess of 12 million" for the
fiscal year ended May 31, 1997. As of the date of this Prospectus, the Company
anticipates that revenue for the fiscal year ended May 31, 1997 will likely be
between $11 million and $12 million. The foregoing constitutes a forward-
looking statement as to which no assurances can be given with respect to the
outcome thereof. Factors making it problematic to determine the outcome of the
foregoing statements include, among other things, general market and economic
factors affecting the Company's sales in the fourth quarter of the fiscal year
ended May 31, 1997.
SUBSEQUENT EVENTS
Effective February 1, 1997, the Company and Mr. Brodsky entered into the
Brodsky Employment Agreement providing for, among other things, compensation at
the annual rate of $500,000 plus such bonuses or additional compensation that
the Board of Directors of the Company may, on the basis of improvements in the
Company's performance or other reasonable criteria, deem appropriate. During the
5 year term of the Brodsky Employment Agreement, the employee shall also be
provided with a full-time use of a Company automobile, six (6) weeks paid
vacation annually and group medical insurance and other benefits or programs
which the Company establishes or is made available to its employees.
In March 1997, Sandsport entered into a sale/lease-back transaction with
General Electric Capital Corporation ("GEC") whereby certain fixed assets,
including, without limitation, a certain program licensing agreement (the
"License") (the "Assets"), were sold to GEC for $981,000 and concurrently leased
back to Sandsport. The License was originally paid for by Sandsport and
inadvertently registered in the name of an affiliate of Mr. Brodsky for which
the Company provides services, but was assigned to Sandsport in connection with
the above-mentioned lease. The lease requires monthly rental payments of
$25,465.98 commencing on May 1, 1997 for a term of 38 months, and provides
Sandsport the option to purchase the Assets for $200,000 upon expiration of the
lease. Sandsport contemporaneously assigned such purchase option to P.W. Capital
Corp., an affiliate of the Company's Chairman ("PW"), which agreed to purchase
the Assets from GEC subject to the terms of the lease. PW acquired the right to
purchase the Assets in consideration of its posting a letter of credit in
connection with such lease. As of May 28, 1997, PW transferred its right to
purchase the Assets to a third party which is not affiliated with the Company,
subject to GEC's consent.
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SELLING STOCKHOLDERS
The following table sets forth, as of July 11, 1997, to the Company's
knowledge, certain securities ownership information with respect to the Selling
Stockholders:
Common Shares to
Common Shares Number of Common be Beneficially
Beneficially Shares Offered Owned After
Name Owned(1) for Sale Offering
Percent of
Number Outstanding
Bert E. Brodsky 955,809(2) 332,667 623,142 32.8%
Hugh Freund 323,493(3) 205,000 118,493 8.6%
Gary Stoller 257,786(4) 156,667 101,119 7.6%
Carol Freund 83,000(5) 79,000 4,000 (6)
(1) Unless otherwise noted, the Company believes that all persons named above
have sole voting and investment power with respect to all Common Stock
beneficially owned by them, subject to community property laws, where
applicable. A person is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days from the date hereof
upon the exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days from the date hereof have been
exercised.
(2) Includes 50,000 shares of Common Stock owned by Mr. Brodsky's wife.
Includes presently exercisable options to purchase 74,000 shares of Common
Stock at $1.79 per share under the Incentive Plan; includes presently
exercisable options to purchase 44,000 shares of Common Stock at $1.51 per
share under the 1995 Plan; includes presently exercisable options to
purchase 44,000 shares of Common Stock at $2.34 per share under the 1995
Plan; includes presently exercisable options to purchase 60,667 shares of
Common Stock at $1.38 per share under the Non-Qualified Plan; includes
presently exercisable options to purchase 110,000 shares of Common Stock at
$2.61 per share under the 1995 Plan; includes presently exercisable
warrants to purchase 400,000 shares of Common Stock at $1.38 per share
under a Warrant Agreement which expires in August, 2001; includes 68,352
shares of the Company's Common Stock owned by the trusts established for
the benefit of Mr. Brodsky's four children, of which Mr. Brodsky is a
trustee.
(3) Excludes 8,000 shares of Common Stock owned by Mr. Freund's adult children.
Excludes 4,000 shares of Common Stock and presently exercisable options to
purchase (i) 43,000 shares of Common Stock at $1.79 per share under the
Incentive Plan, (ii) 18,000 shares of Common Stock at $1.38 per share under
the 1995 Plan and (iii) 18,000 shares of Common Stock at $1.38 per share
under the Non-Qualified Plan owned by Mr. Freund's wife. As set forth in
Mr. Freund's Schedule 13G, filed with the SEC on February 9, 1996, Mr.
Freund disclaims any beneficial interest in, or voting or dispositive
control over, such shares.
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Includes presently exercisable options to purchase 43,000 shares of Common
Stock at $1.79 per share under the Incentive Plan; includes presently
exercisable options to purchase 18,000 shares of Common Stock at $1.51 per
share under the 1995 Plan; includes presently exercisable options to
purchase 36,000 shares of Common Stock at $2.34 per share under the 1995
Plan; includes presently exercisable options to purchase 18,000 shares of
Common Stock at $1.38 per share under the Non-Qualified Plan; includes
presently exercisable options to purchase 90,000 shares of Common Stock at
$2.61 per share under the 1995 Plan.
(4) Includes presently exercisable options to purchase 46,667 shares of Common
Stock at $1.79 per share under the Incentive Plan; includes presently
exercisable options to purchase 20,000 shares of Common Stock at $1.51 per
share under the 1995 Plan; includes presently exercisable options to
purchase 20,000 shares of Common Stock at $2.34 per share under the 1995
Plan; includes presently exercisable options to purchase 20,000 shares of
Common Stock at $1.38 per share under the Non-Qualified Plan; includes
presently exercisable options to purchase 50,000 shares of Common Stock at
$2.61 per share under the 1995 Plan. Includes 13,000 shares of Common Stock
owned by trusts established for the benefit of Mr. Stoller's children of
which Mr. Stoller is the trustee.
(5) Includes 4,000 shares of Common Stock and presently exercisable options to
purchase 43,000 shares of Common Stock at $1.79 per share under the
Incentive Plan; includes presently exercisable options to purchase 18,000
shares of Common Stock at $1.38 per share under the 1995 Plan; and includes
presently exercisable options to purchase 18,000 shares of Common Stock at
$1.38 per share under the Non-Qualified Plan.
(6) Represents less than 1% of the outstanding shares of Common Stock.
There are no commitments pursuant to which the Company will receive any
proceeds from the sale of the Shares by the Selling Stockholders.
To the Company's knowledge, no Selling Stockholder has had any position,
office or other material relationship with the Company or any of its affiliates
during the past three years (other than as a holder of the Company's
securities), except that (i) Bert E. Brodsky has served as Chairman of the
Board, and Treasurer of the Company since 1983 and President since 1989; (ii)
Hugh Freund has served as a director of the Company since 1978, Executive Vice
President of the Company since 1986 and Secretary since 1995; (iii) Gary Stoller
has served as a director and Executive Vice President of the Company since 1983;
and (iv) Carol Freund has served as an employee of the Company since 1978.
PLAN OF DISTRIBUTION
The Shares set forth in the "Selling Stockholders" table may be sold by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest, either pursuant to
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the Registration Statement of which this Prospectus forms a part or, if
available, under Section 4(1) of the Securities Act or Rule 144 promulgated
thereunder.
To the Company's knowledge, this offering is not being underwritten. The
Company believes that the Selling Stockholders, directly through agents
designated from time to time, or through broker-dealers or underwriters also to
be designated (who may purchase as principal and resell for their own account),
may sell the Shares from time to time, in or through privately negotiated
transactions, or in one or more transactions, including block transactions, on
the NASDAQ SmallCap Market or on any other market or stock exchange on which the
Shares may be listed in the future pursuant to and in accordance with the
applicable rules of such market or exchange or otherwise. The selling price of
the Shares may be at market prices prevailing at the time of sale, at prices
relating to such prevailing market prices or at negotiated prices. From time to
time the Selling Stockholders may engage in short sales against the box, puts
and calls and other transactions in securities of the Company or derivatives
thereof, and may sell and deliver the shares in connection therewith. Further,
except as set forth herein, the Selling Stockholders are not restricted as to
the number of shares which may be sold at any one time, and it is possible that
a significant number of shares could be sold at the same time, which may have a
depressive effect on the market price of the Company's shares of Common Stock.
The Selling Stockholders may also pledge shares as collateral for margin
accounts, and such shares could be resold pursuant to the terms of such
accounts. Resales or reoffers of the Shares by the Selling Stockholders must be
accompanied by a copy of this Prospectus.
The Selling Stockholders and any agents, broker-dealers or underwriters
that participate in the distribution of the Shares may be deemed to be
underwriters, and any profit on the sale of the Shares by them, and any
discounts, commissions or concessions received by them, may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Shares offered for resale herein for the accounts of Messrs. Brodsky,
Freund and Stoller are subject, among other things, to an agreement with B&B
imposing certain restrictions on public sale thereof until December 22, 1997
without B&B's consent. B&B has authorized Messrs. Brodsky, Freund and Stoller to
register an aggregate of 1,238,140 shares, which amount includes outstanding
shares of Common Stock as well as shares of Common Stock underlying presently
exercisable options and warrants, on the condition that sales of such Shares be
made though B&B.
LEGAL MATTERS
Matters relating to the legality of the securities being offered hereby are
being passed upon for the Company by Certilman Balin Adler & Hyman, LLP, 90
Merrick Avenue, East Meadow, New York 11554.
A-19
<PAGE>
EXPERTS
The consolidated financial statements of the Company appearing in the Form
10-KSB have been audited by Marcum & Kliegman, LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form S-8 (together with
all amendments thereto, the "Registration Statement") with the Commission under
the Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the securities offered hereby, reference is made to the Registration Statement
and to the exhibits filed therewith, copies of which may be obtained upon
payment of a fee prescribed by the Commission, or may be examined free of charge
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Each statement made in
this Prospectus referring to a document filed as an exhibit to the Registration
Statement is qualified by reference to the exhibit for a complete statement of
its terms and conditions.
A-20
<PAGE>
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-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Port Washington, State of New York, on the 14th day
of July, 1997.
SANDATA, INC.
By: /s/Bert E. Brodsky
-------------------
Bert E. Brodsky
President
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears below
constitutes and appoints Bert E. Brodsky with full power to act as his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
A-21
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
President, Treasurer and
Chairman of the Board
(Principal Executive
Officer and Principal
/s/Bert E. Brodsky Financial Officer) July 14, 1997
- -------------------
Bert E. Brodsky
Executive Vice
President, Secretary
/s/Hugh Freund and Director July 14, 1997
- ----------------
Hugh Freund
Executive Vice
/s/Gary Stoller President and Director July 14, 1997
- ------------------------
Gary Stoller
A-22
<PAGE>
INDEX TO EXHIBITS
Page Number in
Sequential Numbering
Exhibit Description System Where Exhibit
Number of Exhibit Can Be Found
4.1 Employees' Incentive Stock Option Plan, as amended(1) --
4.2 1986 Non-Qualified Stock Option Plan, as amended(1) --
4.3 1995 Stock Option Plan(1) --
5 Opinion of Certilman Balin Adler & Hyman, LLP
as to the legality of the Shares registered hereunder
23.1 Consent of Marcum & Kliegman, LLP
23.2 Consent of Certilman Balin Adler & Hyman, LLP Included in Exhibit 5
24 Powers of Attorney Included in Signature
Page forming a part of
Registration Statement
- ------------------
(1) Denotes document filed as an exhibit to the Company's Annual Report
on Form 10- KSB for the fiscal year ended May 31, 1995 and incorporated herein
by reference.
A-23
<PAGE>
EXHIBIT 5
July 9, 1997
Sandata, Inc,
26 Harbor Park Drive
Port Washington, New York 11050
Re: Registration of 1,644,445 Common Shares,
par value $.001 per share, under the
Securities Act of 1933, as amended
Gentlemen:
In our capacity as counsel to Sandata, Inc., a Delaware corporation (the
"Company"), we have been asked to render this opinion in connection with a
Registration Statement on Form S-8 being filed contemporaneously herewith by the
Company with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Registration Statement"), covering an aggregate of
1,644,445 Common Shares, par value $.001 per share, of the Company (the
"Shares") to be issued upon the exercise of options to acquire Common Shares
granted under the Company's Employees' Incentive Stock Option Plan, 1986
Non-Qualified Stock Option Plan and 1995 Stock Option Plan (the "Plans").
In that connection, we have examined the Certificate of Incorporation and
the ByLaws of the Company, each as amended, the Registration Statement and the
Plans and are familiar with corporate proceedings of the Company relating to the
adoption of each of the Plans. We have also examined such other instruments and
documents as we deemed relevant under the cir cumstances.
For purposes of the opinions expressed below, we have assumed (i) the
authenticity of all documents submitted to us as original, (ii) the conformity
to the originals of all documents submitted as certified, photostatic or
facsimile copies and the authenticity of the originals, (iii) the legal capacity
of natural persons, (iv) the due authorization, execution and delivery of all
documents by all parties and the validity and binding effect thereof and (v) the
conformity to the proceedings of the Board of Directors of all minutes of such
proceedings. We have also assumed that the corporate records furnished to us by
the Company include all corporate proceedings taken by the Company to date.
<PAGE>
Sandata, Inc.
July 9, 1997
Page 2
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly and validly authorized and, when issued and paid for as
described in each of the Plans, will be duly and validly issued, fully paid and
nonassessable.
We hereby consent to the use of our opinion as herein set forth as an
exhibit to the Registration Statement.
This opinion is as of the date hereof, and we do not undertake, and hereby
disclaim, any obligation to advise you of any changes in any of the matters set
forth herein.
We are rendering this opinion only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters.
This opinion is for your exclusive use only and is to be utilized and
relied upon only in connection with the matters expressly set forth herein.
Very truly yours,
/s/ Certilman Balin Adler & Hyman, LLP
CERTILMAN BALIN ADLER & HYMAN, LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Sandata, Inc.
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8) and related prospectus of Sandata, Inc. and to
the incorporation by reference therein of our report dated August 16, 1996 with
respect to the consolidated financial statements included in its Annual Report
on Form 10-KSB for the year ended May 31, 1996, as amended, filed with the
Securities and Exchange Commission.
/s/ MARCUM & KLIEGMAN, LLP
MARCUM & KLIEGMAN, LLP
Woodbury, New York
July 14, 1997
<PAGE>
