<PAGE> 1
As Filed with the Securities and Exchange Commission on May 22, 1996
Registration No. 33-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------------
HEARx LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2748248
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
471 Spencer Drive
West Palm Beach, Florida 33409
(407) 478-8770
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Paul A. Brown, M.D.
Chairman and Chief Executive Officer
HEARx LTD.
471 Spencer Drive
West Palm Beach, Florida 33409
(407) 478-8770
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies of all correspondence to:
William F. Bavinger, Esq.
LaDawn Naegle, Esq.
Bryan Cave, LLP
700 13th Street, N.W., Suite 700
Washington, D.C. 20005-3960
(202) 508-6000
Approximate date of commencement of proposed sale to public: From time to time
after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, 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]
<PAGE> 2
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. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
============================================================================================================
<CAPTION>
Proposed maximum Proposed maximum
Title of each class of securities Amount offering price aggregate offering Amount of
to be registered to be registered per unit<F1> offering price<F1> registration fee
- --------------------------------- ---------------- ---------------- ------------------ -----------------
<C> <C> <C> <C> <C>
Common Stock, $.10 par value
per share 9,152,536 shares $5.94 $54,366,063.84 $18,746.92
============================================================================================================
<FN>
<F1> Estimated solely for purposes of determining the registration fee pursuant to Rule 457(c), based
upon the average of the high and low sales prices for the Common Stock as reported on the American
Stock Exchange on May 15, 1996.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE> 3
- -------------------------------------------------------------------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
- -------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED MAY 22, 1996
PRELIMINARY PROSPECTUS
9,152,536 Shares
HEARx LTD.
Common Stock
This Prospectus relates to up to 9,152,536 shares (the "Shares") of common
stock, par value $.10 per share (the "Common Stock"), of HEARx LTD., a Delaware
corporation (the "Company"). The Shares are issuable upon conversion of 15,000
shares of the Company's 1996 Series B-1 Convertible Preferred Stock (the
"Series B-1 Preferred Stock") and exercise of the warrants (the "Warrants") to
be issued upon such conversion, and upon conversion of 9,900 shares of the 1996
Series B-2 Convertible Preferred Stock (the "Series B-2 Preferred Stock" and,
together with the Series B-1 Preferred Stock, the "Preferred Stock").
Additional Shares that may become issuable as a result of the anti-dilution
provisions of the Preferred Stock and Warrants are offered hereby pursuant to
Rule 416 under the Securities Act of 1933, as amended (the "Securities Act").
The Company has issued, or agreed to issue, the Preferred Stock in certain
private placement transactions.
The Company will not receive any proceeds from the sale of Shares by the
Selling Shareholders, but will receive the exercise prices payable upon the
exercise of the Warrants. There can be no assurance that all or any part of
the Warrants will be exercised or that they will be exercised for cash. All
expenses incurred in connection with this offering are being borne by the
Company, other than any commissions or discounts paid or allowed by the Selling
Shareholders to underwriters, dealers, brokers or agents.
The Selling Shareholders have not advised the Company of any specific plans
for the distribution of the Shares, but it is anticipated that the Shares may
be sold from time to time in transactions (which may include block
transactions) on the American Stock Exchange (the "AMEX") at the market prices
then prevailing. Sales of the Shares may also be made through negotiated
transactions or otherwise. The Selling Shareholders and the brokers and
dealers through which the sales of the Shares may be made may be deemed to be
"underwriters" within the meaning set forth in the Securities Act, and their
commissions and discounts and other compensation may be regarded as
underwriters' compensation. See "Plan of Distribution."
The Common Stock is traded on the AMEX under the symbol "EAR." The closing
price of the Common Stock as reported on the AMEX on May 15, 1996, was $5.9375
per share.
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE DISCUSSION UNDER "RISK
FACTORS" ON PAGES 6-10.
<PAGE> 4
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is May ____, 1996.
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at
Seven World Trade Center, Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
also can be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
copies are available for inspection at the American Stock Exchange, 86 Trinity
Place, New York, New York 10006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act with respect
to the shares of Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement or the exhibits
thereto. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information contained or incorporated by reference in
the Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document filed or incorporated by reference
as an exhibit to the Registration Statement are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement. For further
information, reference is hereby made to the Registration Statement and
exhibits thereto, copies of which may be inspected at the offices of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or obtained from
the Commission at the same address at prescribed rates.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
(1) Annual Report on Form 10-K for the fiscal year ended December 29,
1995, filed pursuant to Section 13(a) of the Exchange Act, as amended
on Form 10-K/A (the "1995 Form 10-K"),
(2) Quarterly Report on Form 10-Q for the quarter ended March 29, 1996,
filed pursuant to Section 13(a) of the Exchange Act.
(3) Current Report on Form 8-K dated May 17, 1996, filed pursuant to
Section 13(a) of the Exchange Act.
(4) The description of Common Stock which is contained in the Company's
Registration Statement on Form 8-A filed under the Exchange Act.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof shall hereby be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
See "Available Information." Any statement contained herein or in a document
incorporated or deemed to be 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 or in any other subsequently filed document
<PAGE> 6
incorporated or deemed to be incorporated herein by reference, which statement
is also incorporated herein by reference, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING EXHIBITS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED BY FIRST CLASS MAIL WITHOUT
CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR
ORAL REQUEST BY SUCH PERSON TO HEARX LTD., 471 SPENCER DRIVE, WEST PALM BEACH,
FLORIDA 33409, ATTENTION: DAVID W. FORMAN, SECRETARY (TELEPHONE: (407) 478-
8770).
No person has been authorized in connection with this offering to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company, the Selling Shareholders or any other person. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to purchase, any
securities other than those to which it relates, nor does it constitute an
offer to sell or a solicitation of an offer to purchase by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
RISK FACTORS
The following factors should be carefully considered in evaluating the
Company and its business before purchasing any of the Shares offered hereby.
Recent and Future Expansion; Management of Growth
The Company has expanded its network of hearing care centers recently and
plans to continue such expansion. The Company's operating results will be
adversely affected if revenues do not increase sufficiently to compensate for
the increase in operating expenses resulting from this expansion. In addition,
this expansion will increase the demands on the Company's management,
technical, financial and other resources. If the Company is unable to manage
growth effectively, or to integrate fully its infrastructure systems throughout
its network of hearing care centers, its operating results may be adversely
affected.
History of Operating Losses
The Company has incurred losses in each year since its organization. There
can be no assurance that the Company will achieve profitability in the near or
long term.
<PAGE> 7
Use of Proceeds
The Company will not receive any proceeds from the offer or sale of the
Shares by the Selling Shareholders, but will receive proceeds, if any, from the
exercise of the Warrants. The Company intends to use the proceeds, if any,
from the exercise of the Warrants to fund the operations of the Company. There
can be no assurance that any of the Warrants will be exercised.
No Dividends
The Company has not paid any cash dividends on its Common Stock and does
not anticipate paying any such dividends in the foreseeable future.
Reliance on Senior Management
The operations of the Company are dependent in large part upon the efforts
of Paul A. Brown, M.D., Chairman of the Board and Chief Executive Officer, and
Stephen J. Hansbrough, President and Chief Operating Officer. The loss of the
services of Dr. Brown or Mr. Hansbrough could adversely affect the conduct and
operation of the Company's business. The Company has purchased a "key man"
insurance policy on Dr. Brown's life in the amount of $3,000,000 for the
benefit of the Company.
Competition
The hearing care industry is highly fragmented with approximately 11,000
practitioners providing testing and dispensing products and services. Most
competitors are small retailers generally focusing on the sale of hearing aids
without providing comprehensive audiometric testing and other professional
services. Among the larger distributors of hearing aids are: (i) Bausch &
Lomb Inc., a hearing aid manufacturer whose distribution system is through a
national network of over 1,000 franchised stores (Miracle Ear) including 400
located in Sears Roebuck & Co. stores; and (ii) Beltone Electronics Corp., a
privately-owned hearing aid manufacturer that distributes its products
primarily through its network of approximately 600 franchised dealers. A
number of these stores and dealers are located in the areas the Company serves.
Although the Company believes it offers more comprehensive services and
products, there can be no assurance that these large, established companies,
which have far greater resources than the Company, will not capture the market
targeted by the Company. Nor can there be any assurance that the hearing care
market can be consolidated successfully by the Company or its competitors.
Renewal of Agreements with Health Insurance and Managed Care Organizations
Since 1991, the Company has entered into agreements with certain health
insurance and managed care organizations to provide hearing care products and
services, and has established hearing care centers in the related market areas.
The terms of a number of these agreements are to be renegotiated annually, and
the failure to renew the agreements could adversely affect the operation of the
hearing care centers located in the related market areas. In addition, the
failure to renew the agreements which provide for payment to the Company on a
per capita basis would cause the Company to lower its estimates of revenues to
be received over the life of the agreements and could have an adverse effect on
the Company's results of operations.
<PAGE> 8
Reliance on Manufacturers
Through its hearing care centers, the Company makes available to customers
hearing aids supplied by approximately six major manufacturers, as well as
hearing enhancement devices manufactured by other companies. The Company
relies on these manufacturers to supply such products.
Product and Professional Liability
In the ordinary course of its business, the Company may be subject to
product and professional liability claims alleging the failure of, or adverse
effect claimed to have been caused by, products sold or services provided by
the Company. The Company maintains insurance at a level which the Company
believes to be adequate. A successful claim in excess of the policy limits of
the Company's liability insurance could adversely affect the Company. As the
distributor of products manufactured by others, the Company believes it would
properly have recourse against the manufacturer in the event of a product
liability claim; however, there can be no assurance that recourse against a
manufacturer by the Company would be successful, or that any manufacturer will
maintain adequate insurance or otherwise be able to pay such liability.
Regulation
The practice of audiology and the dispensing of hearing aids are not
presently regulated on the Federal level. The sale of hearing aids, however,
is subject to certain limited regulations promulgated by the United States Food
and Drug Administration. Generally, state regulations, where they exist, are
concerned primarily with the formal licensure of audiologists and of those who
dispense hearing aids and with practices and procedures involving the fitting
and dispensing of hearing aids. There can be no assurance that regulations do
not exist in jurisdictions in which the Company plans to open centers or will
not be promulgated in states in which the Company currently operates centers or
at the Federal level which may have a material adverse effect upon the Company.
Such regulations might include stricter licensure requirements for dispensers
of hearing aids, inspection of centers for the dispensing of hearing aids and
the regulation of advertising by dispensers of hearing aids. The Company knows
of no current or proposed regulations with which it, as currently operated,
could not comply.
Possible Volatility of Prices
The market price of the Common Stock has changed significantly since
October 1995. Future changes in the market price of the Common Stock may bear
no relation to the Company's results of operations.
Potential Dilution; Shares Eligible for Future Sale; Possible Effect on
Additional Equity Financing
A substantial number of shares of Common Stock (including the Shares
offered hereby) are issuable by the Company upon the conversion of convertible
preferred stock (including the Preferred Stock) and the exercise of warrants
(including the Warrants) and options which the Company has issued or agreed to
issue, which would result in substantial dilution to a shareholder's percentage
ownership interest in the Company and could adversely affect the market price
<PAGE> 9
of the Common Stock. Under the applicable conversion formulas of the
convertible preferred stock, (i) the number of shares of Common Stock issuable
upon conversion is inversely proportional to the market price of the Common
Stock at the time of conversion (i.e., the number of shares issuable increases
as the market price of the Common Stock decreases); (ii) there is no cap on the
number of shares of Common Stock which may be issuable; and (iii) a minimum
of 10,020,000 shares are issuable (based on a fixed conversion price of $5.00
per share). In addition, the number of shares issuable upon the conversion of
the convertible preferred stock and the exercise of warrants and options is
subject to adjustment upon the occurrence of certain dilutive events.
On May 15, 1996, there were issued and outstanding a total of 68,001,983
shares of Common Stock. If the Preferred Stock and the Warrants were deemed
converted and exercised, as the case may be, as of May 15, 1996 (based on the
fixed conversion price of $5.00 per share) there would be issuable 7,980,000
shares of Common Stock. In addition, if all other convertible preferred stock,
warrants and options which the Company has issued also were deemed converted
and/or exercised on May 15, 1996, there would be issuable approximately
23,974,958 shares of Common Stock. Upon all such issuances, there would be
outstanding 99,956,941 shares of Common Stock (including the Shares offered
hereby). Of these, the Company has registered for resale 9,152,536 shares (the
Shares offered hereby) and has granted demand registration rights in respect of
approximately 33,774,908 additional shares. The sale or availability for sale
of a significant number of shares of Common Stock in the public market could
adversely effect the market price of the Common Stock. In addition, certain
holders of outstanding shares of preferred stock have rights to approve and/or
participate in certain types of future equity financing by the Company. The
availability to the Company of additional equity financing, and the terms of
any such financing, may be adversely affected by the foregoing.
Continued AMEX Listing
The Common Stock was listed and began trading on the AMEX on March 15,
1996. The AMEX will consider delisting a company's securities if, among other
things, the company fails to maintain stockholder's equity of at least
$2,000,000 if the company has sustained losses from continuing operations or
net losses in two of its three most recent fiscal years; the company fails to
maintain stockholder's equity of $4,000,000 million if the company has
sustained losses from continuing operations or net losses in three of its four
most recent fiscal years; or the company has sustained losses from continuing
operations or net losses in its five most recent fiscal years. If, for any
reason, the Company were unable to meet such requirements, the Common Stock
could be delisted from the AMEX. In that event, trading, if any, in the
Common Stock would be conducted in the over-the-counter market and the ability
of holders to sell or otherwise dispose of such shares could be adversely
affected. In addition, if such delisting were to occur, transactions in shares
of the Common Stock could become subject to the Commission's "penny stock"
regulations.
"Penny Stock" Regulations
The Commission has adopted regulations that define a "penny stock" to
include any over-the-counter equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. The regulations require
the delivery, prior to any transaction in a penny stock, of a disclosure
schedule prescribed by the Commission relating to the penny stock market,
<PAGE> 10
subject to certain exemptions. A broker-dealer effecting transactions in penny
stocks must disclose the commissions payable to both the broker-dealer and any
registered representative, current quotations for the securities and, if the
broker-dealer is the sole market maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally,
monthly statements must be sent disclosing the recent price information for the
penny stock held in the account and information on the limited market in penny
stocks. If the penny stock regulations were to become applicable to
transactions in shares of the Common Stock, they could adversely affect the
ability of holders to sell or otherwise dispose of such shares.
Potential Change in Voting Control of the Company
As of March 29, 1996, the directors and executive officers of the Company
beneficially owned, as a group, approximately 20.2% of the 65,909,183 shares of
Common Stock then outstanding. If all convertible preferred stock, warrants
and options which the Company has issued or agreed to issue were deemed
converted and/or exercised on May 15, 1996, the directors and executive
officers would beneficially own approximately 13% of the then outstanding
Common Stock. See " -- Potential Dilution; Shares Eligible for Future Sale;
Possible Effect on Additional Equity Financing."
THE COMPANY
The Company operates a network of hearing care centers which provide a wide
range of audiological products and services for the hearing impaired. The
Company's strategy focuses on contracting with managed care and health
insurance companies to provide to their members and beneficiaries high quality
hearing care utilizing state-of-the-art facilities with a wide range of
diagnostic and rehabilitative services, qualified professional staff and
hearing education learning programs. The Company also provides such quality
hearing care to the general population at the Company's centers.
The Company currently operates more than 50 centers primarily located in
Connecticut, Florida, New York, and New Jersey. Over the next several years,
the Company's primary emphasis, depending on the availability of capital, will
be opening (or selectively acquiring) additional Company-owned centers in these
states.
The Company's principal executive offices are located at 471 Spencer Drive,
West Palm Beach, Florida 33409, and its telephone number is (407) 478-8770.
<PAGE> 11
SELLING SHAREHOLDERS
None of the Selling Shareholders is an affiliate of the Company or, unless
otherwise indicated in the footnotes to the following table, has had any
position, office or other material relationship with the Company or any of its
affiliates within the past three years except as a shareholder of the Company.
The following table sets forth information with respect to the Selling
Shareholders, based upon information provided by them.
Shares Shares
Beneficially Beneficially
Owned Prior Owned
to Offering Shares Being After Offering
Name of Selling Shareholder (1) Offered (2)
- ------------------------------- -------------- -------------- --------------
Capital Ventures International 3,600,000 (3) 3,600,000 0
Nelson Partners 1,400,000 (3) 1,400,000 0
Olympus Securities, Ltd. 1,000,000 (3) 1,000,000 0
Newsun Limited 500,000 (4) 500,000 0
Halifax Fund L.P. 400,000 (4) 400,000 0
Wood Gundy London Limited 300,000 (4) 300,000 0
Zanett Lombardier, Ltd. (5) 200,000 (4) 200,000 0
OTATO Limited Partnership 200,000 (4) 200,000 0
Lake Management LDC 140,000 (4) 140,000 0
KA Investments LDC 60,000 (4) 60,000 0
OVDA Fund, Ltd. 50,000 (4) 50,000 0
M.S.I. Investments Limited 50,000 (4) 50,000 0
A.J. Gesundheit 50,000 (4) 50,000 0
Charles B. Krusen (6) 30,000 (4) 30,000 0
- ---------------
(1) Assumes that all shares of Series B-1 Preferred Stock and Series B-2
Preferred Stock which the Selling Shareholders are committed to
purchase are purchased and that the Preferred Stock is converted at
the fixed conversion price of $5.00 with the Company redeeming the shares
otherwise issuable in respect of the 8% premium. Pursuant to the terms of
the Preferred Stock and the Warrants, the Preferred Stock is convertible
and the Warrants are exercisable by the holders thereof only to the extent
that the number of shares of Common Stock thereby issuable, together with
the number of shares of Common Stock then held by such holder and its
affiliates (not including shares underlying unconverted shares of Preferred
Stock and unexercised Warrants) would not exceed 4.9% of the then
outstanding Common Stock as determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended.
Accordingly, the number of shares of Common Stock set forth below for
each Selling Shareholder may exceed the actual number of shares of
Common Stock that such Selling Shareholder could own beneficially at
any given time through its ownership of the Preferred Stock and
Warrants.
(2) Assumes all Shares offered hereby are sold to persons who are not
affiliates of the Selling Shareholders. The Selling Shareholders may,
but are not required to, sell all Shares offered hereby.
(3) Includes Shares issuable upon conversion of shares of Series B-1 Preferred
Stock and upon exercise of Warrants issuable upon such conversion.
<PAGE> 12
(4) Includes Shares issuable upon conversion of shares of Series B-2 Preferred
Stock.
(5) Zanett Capital, Incorporated received from the Company a finders fee
in the amount of approximately $1,053,000 in connection with the sale
of the Preferred Stock. Zanett Lombardier, Ltd. is an affiliate of
Zanett Capital, Incorporated.
(6) Zanett Capital, Incorporated received from the Company a finders fee
in the amount of approximately $1,053,000 in connection with the sale
of the Preferred Stock. Charles B. Krusen, the Managing Director of
Zanett Securities Corp., an affiliate of Zanett Capital, Incorporated,
will receive a portion of this finders fee as compensation for his
efforts in connection with the sale of the Preferred Stock.
The Shares offered hereby are issuable upon the conversion of 15,000 shares
of the Series B-1 Preferred Stock, the exercise of the Warrants issuable upon
such conversion, and the conversion of 9,900 shares of the Series B-2 Preferred
Stock. Pursuant to the terms of the Securities Purchase Agreement among the
Company and the Selling Shareholders, the Selling Shareholders purchased one
half of the shares of Preferred Stock at a closing held on May 7, 1996. The
remaining one-half of the shares of Preferred Stock are purchasable by each
Selling Shareholder upon a second closing which is conditioned upon, among
other things, the effectiveness of the Registration Statement of which this
Prospectus is a part. No condition to such closing is within the Selling
Shareholders' control.
Upon conversion of the Preferred Stock, holders will be entitled to receive
a number of shares of Common Stock determined by dividing the stated value of
the Preferred Stock ($1,000 per share), plus a premium in the amount of 8% per
annum of the stated value from the date of issuance (unless the Company chooses
to redeem the shares otherwise issuable in respect of that premium), by a
conversion price equal to the lesser of (i) $5.00, and (ii) a percentage
(ranging from 100% on or before July 7, 1996, to 75% after May 7, 1997) of the
average of the closing bid prices for shares of Common Stock for the ten
trading day period immediately prior to conversion, subject to adjustment upon
the occurrence of certain dilutive events. The Preferred Stock may be
converted by holders at any time prior to May 7, 1999, and must be converted on
that date. Upon conversion of the Series B-1 Preferred Stock, holders also
will be entitled to receive Warrants to acquire, at an exercise price of $8.00
per share, additional shares of Common Stock equal to the number of shares of
Common Stock issuable to them upon such conversion, subject to certain
limitations and to adjustment upon the occurrence of certain dilutive events.
The Warrants may be exercised by the holders at any time prior to the fifth
anniversary of their issuance. The foregoing summary is qualified in its
entirety by the terms of the Preferred Stock and Warrants.
Under the applicable conversion formula, the number of shares of Common
Stock issuable upon conversion of the Preferred Stock will be higher if the
market price of the Common Stock at the time of conversion is lower, and there
is no cap on the number of shares of Common Stock which may be issuable. In
addition, the number of shares issuable upon the conversion of the Preferred
Stock and the exercise of the Warrants is subject to adjustment upon the
occurrence of certain dilutive events. The 9,152,536 Shares offered hereby
represent the number of shares which would be issuable if the Preferred Stock
were converted at a conversion price equal to $5.00 per share, the Warrants
were exercised and no limitations or adjustments were applicable, plus an
<PAGE> 13
additional 1,172,536 shares. (Additional Shares that may become issuable as a
result of the anti-dilution provisions of the Preferred Stock and Warrants are
also offered hereby pursuant to Rule 416 under the Securities Act.)
PLAN OF DISTRIBUTION
The Shares offered hereby may be offered and sold from time to time by the
Selling Shareholders, or by pledgees, donees, transferees or other successors
in interest. Such offers and sales may be made from time to time on the AMEX
or otherwise, at prices and on terms then prevailing or at prices related to
the then-current market price, or in negotiated transactions. The methods by
which the Shares may be sold may include, but not be limited to, the following:
(a) a block trade in which the broker or dealer so engaged will attempt to sell
the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account; (c) an exchange
distribution in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers; (e) privately negotiated transactions; (f) short sales; and (g) a
combination of any such methods of sale. In effecting sales, brokers or
dealers engaged by the Selling Shareholders may receive commissions or
discounts from the Selling Shareholders or from the purchasers in amounts to be
negotiated immediately prior to the sale. The Selling Shareholders may also
sell such Shares in accordance with Rule 144 under the Securities Act.
The Company has agreed to use its best efforts to maintain the
effectiveness of the registration of the Shares offered hereby until the
earlier of the date upon which all of the Shares offered hereby have been sold
or the date on which the Shares offered hereby, in the opinion of counsel, may
be immediately sold by the Selling Shareholders without registration.
The Selling Shareholders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of the Securities Act. There can
be no assurance that the Selling Shareholders will sell any or all of the
Shares offered hereby.
The Company is bearing all of the costs relating to the registration of the
Shares. Any commissions, discounts or other fees payable to a broker, dealer,
underwriter, agent or market maker in connection with the sale of any of the
Shares will be borne by the Selling Shareholders. The Company will not receive
any of the proceeds from this offering, but will receive the exercise price
payable upon the exercise of the Warrants if the Warrants are exercised for
cash.
Pursuant to the registration rights granted to the Selling Shareholders in
connection with the sale by the Company of the Preferred Stock, the Company has
agreed to indemnify the Selling Shareholders, any person who controls a Selling
Shareholder, and any underwriters for the Selling Shareholders, against certain
liabilities and expenses arising out of or based upon the information set forth
or incorporated by reference in this Prospectus, and the Registration Statement
of which this Prospectus is a part, including liabilities under the Securities
Act. Any commissions paid or any discounts or concessions allowed to any
broker, dealer, underwriter, agent or market maker and, if any such broker,
dealer, underwriter, agent or market maker purchases any of the Shares as
principal, any profits received on the resale of such Shares, may be deemed to
be underwriting commissions or discounts under the Securities Act.
<PAGE> 14
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby has been passed
upon for the Company by Bryan Cave LLP, Washington, D.C.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 29, 1995, and December 30, 1994, and for the years ended December 29,
1995, December 30, 1994, and September 30, 1993, and the three months ended
December 31, 1993, have been audited by BDO Seidman, LLP, independent certified
public accountants, as indicated in their report with respect thereto, and are
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1995, and are incorporated herein by reference, in reliance upon
the authority of such firm as experts in accounting and auditing in giving said
reports.
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the expenses (other than underwriting
discounts and commissions), which other than the SEC registration fee are
estimates, payable by the Company in connection with the sale and distribution
of the shares registered hereby*:
SEC registration fee . . . . . . . . . . . . . . . . . . . $18,746.92
Accounting fees and expenses . . . . . . . . . . . . . . . 15,000.00
Legal fees and expenses. . . . . . . . . . . . . . . . . . 60,000.00
Miscellaneous expenses . . . . . . . . . . . . . . . . . . 5,000.00
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . $98,746.92
==========
- ---------------
* The Selling Shareholders will pay any sales commissions or underwriting
discounts in connection with their sale of shares registered hereunder.
Item 15. Indemnification of Directors and Officers
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware (the "DGCL") empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding 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, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit 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, except that no indemnification may be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
<PAGE> 16
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; that indemnification provided
for by Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such persons' heirs,
executors and administrators; and empowers the corporation to purchase and
maintain insurance on behalf of a director or officer of the corporation
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under Section 145.
Article VII of the Company's By-laws provides that the Company shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by the DGCL.
Section 102(b)(7) of DGCL provides that a certificate of incorporation may
contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit.
Article 7 of the Company's Certificate of Incorporation provides that the
directors of the Company shall have no personal liability to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent provided by Section 102(b)(7).
Item 16. Exhibits
See Exhibit Index.
Item 17. Undertakings
(a) 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 this registration statement
(or the most recent post-effective amendment hereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this registration statement;
<PAGE> 17
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
registration statement or any material change to such information
in this registration statement;
provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 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 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.
(b) 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 this
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) 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 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 adjudication of such issue.
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of West Palm Beach, State of Florida, on May 22, 1996.
HEARx LTD.
By: /S/ PAUL A. BROWN, M.D.
--------------------------------------------
Name: Paul A. Brown, M.D.
Title: Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Paul A. Brown, M.D. and Stephen J. Hansbrough, and each of them (with full
power to each of them to act alone), his or her true and lawful attorneys in
fact and agents for him or her and on his or her behalf and in his or her 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 exhibits and any and all other documents filed with respect
thereto, with the Securities and Exchange Commission (or any other governmental
or regulatory authority), granting unto said attorneys, and each of them, full
power and authority to do and to perform each and every act and thing requisite
and necessary to be done in and about the premises in order to effectuate the
same as fully to all intents and purposes as he or she might or could do if
personally present, hereby ratifying and confirming all that said attorneys in
fact and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
- ------------------------------ --------------------------------- ------------
/S/ PAUL A. BROWN, M.D. Chairman of the Board; Chief May 22, 1996
- ------------------------------ Executive Officer and Director
Paul A. Brown, M.D.
/S/ TOMMY E. KEE Vice President and Principal May 22, 1996
- ------------------------------ Financial and Accounting Officer
Tommy E. Kee
/S/ FRED N. GERARD Director May 22, 1996
- ------------------------------
Fred N. Gerard
/S/ DAVID J. MCLACHLAN Director May 22, 1996
- ------------------------------
David J. McLachlan
/S/ THOMAS W. ARCHIBALD Director May 22, 1996
- ------------------------------
Thomas W. Archibald
<PAGE> 19
HEARx LTD.
EXHIBIT INDEX
Exhibit Number Description
- -------------- --------------------------------------------------------------
4.1 Specimen of Certificate representing Common Stock *
5.1 Opinion of Bryan Cave LLP **
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Bryan Cave (included in Exhibit 5.1)
24.1 Power of Attorney (included in Signature Page)
99.1 Restated Certificate of Incorporation of the Company,
including certificates of designations, preferences and rights
of the preferred stock of the Company [3]***
99.2 Securities Purchase Agreement, dated May 3, 1996 among the
Company and the purchasers set forth on the signature pages
thereto, including Exhibit A thereto (form of Warrant)
[4.1]***
99.3 Registration Rights Agreement, dated May 3, 1996 among the
Company and the purchasers set forth on the signature pages
thereto [4.2]***
- ---------------
* Filed as an Exhibit to the Company's Registration Statement on Form S-18
(Registration No. 33-17041-NY), incorporated herein by this reference.
** To be filed by amendment.
*** Filed as an Exhibit to the Company's Current Report on Form 8-K, filed with
the Securities and Exchange Commission on May 17, 1996, bearing the Exhibit
number in brackets, and incorporated herein by this reference.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 relating to the
registration of 9,152,536 shares of Common Stock, par value $.10 per share, of
HEARx LTD. ("Registrant") of our report dated April 5, 1996, relating to the
consolidated financial statements and schedule of the Registrant and its
subsidiaries appearing in the Registrant's Annual Report on Form 10-K for the
year ended December 29, 1995.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/S/ BDO SEIDMAN, LLP
West Palm Beach, Florida
May 22, 1996
