As filed with the Securities and Exchange Commission on June 24, 1997
Registration No. 333-25169
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
HEARx LTD.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation or organization)
22-2748248
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(I.R.S. Employer Identification No.)
1250 Northpoint Parkway
West Palm Beach, Florida 33407
(561) 478-8770
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(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.
1250 Northpoint Parkway
West Palm Beach, Florida 33407
(561) 478-8770
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all correspondence to:
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.
<PAGE>
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]
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. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PROSPECTUS
13,246,504 SHARES
HEARX LTD.
COMMON STOCK
This Prospectus relates to the resale of 13,246,504 shares (the "Shares")
of common stock, par value $.10 per share (the "Common Stock"), of HEARx LTD., a
Delaware corporation (the "Company"). All of the Shares offered hereby are being
sold by the Selling Shareholders. The Shares are issuable by the Company upon
the exercise of certain warrants (the "Class A Investor Warrants") initially
issued to purchasers of the Company's 1996 Senior Preferred Stock, par value
$1.00 per share (the "1996 Senior Preferred Stock") and certain warrants
initially issued to Invemed Associates, Inc. and certain persons associated with
it as compensation in connection with the sale of the 1996 Senior Preferred
Stock (the "Invemed Warrants" and, together with the Class A Investor Warrants,
the "Warrants"). See "Selling Shareholders". Additional Shares that may become
issuable as a result of the anti-dilution provisions of the Warrants are offered
for resale hereby pursuant to Rule 416 under the Securities Act of 1933, as
amended (the "Securities Act").
The Company will not receive any proceeds from the sale of Shares by the
Selling Shareholders, but will receive the exercise price payable upon the
exercise of the Warrants if those Warrants are exercised for cash. The Warrants
may be exercised pursuant to a "cashless exercise" provision that provides for
the conversion of the Warrant into a specified number of shares of Common Stock.
The number of shares issuable upon conversion is determined generally by (i)
computing the difference between (a) the aggregate market price, on the date of
the cashless exercise, of the number of shares (the "Warrant Shares") that would
be issuable if the Warrant were exercised for cash and (b) the aggregate
exercise price for the Warrant Shares and (ii) dividing the remainder by the
market price per share of the Warrant Shares. 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 and legal fees
of counsel to the Selling Shareholders in excess of $5,000. There can be no
assurance that the Selling Shareholders will sell any or all of the Shares
offered hereby.
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 of 1933, as amended (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 June 17, 1997 was $1.50 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 4 THROUGH 8.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is June ___, 1997.
<PAGE>
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. Electronic filings of such
documents are publicly available on the Commission's Web Site at
http://www.sec.gov. Copies of such materials can also be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the Common Stock is traded on the
American Stock Exchagne under the symbol "EAR" and 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 or incorporated by reference 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 27, 1996,
filed on March 27, 1997 (File No. 001-11655) pursuant to Section 13(a)
of the Exchange Act, as amended on Form 10-K/A, filed on June 19, 1997
(File No. 001-11655);
(2) Current Report on Form 8-K dated March 26, 1997, filed on March 26,
1997 (File No. 001-11655) pursuant to Section 13(a) of the Exchange
Act; and
(3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 28,
1997, filed on May 12, 1997 (File No. 001-11655) pursuant to
Section 13(a) of the Exchange Act, as amended on Form 10-Q/A, filed on
June 19, 1997 (File No. 001-11655).
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
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<PAGE>
documents. See "Available Information". Any statement contained 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
incorporated or deemed to be incorporated herein by reference modifies or
supersedes such statement. Any statement contained herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in any subsequently filed document incorporated or deemed to
be 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., 1250 NORTHPOINT PARKWAY, WEST PALM BEACH,
FLORIDA 33407, ATTENTION: TOMMY KEE, CORPORATE SECRETARY (TELEPHONE: (561)
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.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Prospectus, as well as information incorporated by reference herein,
contains certain "forward looking" statements. The Company desires to take
advantage of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 and is including this statement for the express purpose of
availing itself of the protections of such safe harbor with respect to all of
such forward-looking statements. Such forward-looking statements include,
without limitation, statements about the Company's future growth and expansion,
the manner in which such expansion will be funded and demands on Company
resources relating to the expansion (see "Risk Factors -- Recent and Future
Expansion; Management of Growth", below, and "Business -- Growth Strategy" in
the Company's annual report on Form 10-K for the fiscal year ended December 27,
1996 (the "Form 10-K")); the Company's ability to obtain comparable products
from other manufacturers in the event of disruption of supply from one or more
of the Company's current suppliers (see "Risk Factors - Reliance on
Manufacturers and Qualified Audiologists"); the adequacy of the Company's
insurance and the ability to have recourse against a manufacturer in the event
of a product liability claim (see "Risk Factors - Product and Professional
Liability"); the Company's ability to continue to establish relationships with
health organizations and physicians that promote HEARx to the hearing impaired
(see "Business -- Products -- Customers and Marketing" in the Form 10-K); the
number of centers expected to be opened in early 1997 (see "Business -- Growth
Strategy -- Company Owned Centers" in the Form 10-K); the ability to meet
capital needs for currently anticipated growth with funds raised in 1996 and
early 1997 (see "Business -- Growth Strategy -- Management of Growth" in the
Form 10-K); the continued competitiveness with the Company's centers of certain
networks of hearing aid stores or distributors (see "Business -- Competition" in
the Form 10-K); the effect of a new federal or state physician referral mandate
on the Company (see "Business - Regulation -- Federal" in the Form 10-K); and
the effect on the Company of the loss of any single managed care contract (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" in the Form 10-K). Actual events or results may differ
materially from those discussed in the forward looking statements as a result of
various factors, including those discussed in "Risk Factors," below and
generally in the Form 10-K and other documents incorporated by reference herein.
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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 intends to fund this expansion
with existing capital, the proceeds from the recent offering of the Company's
1997 Convertible Preferred Stock, earnings and, to the extent necessary and
available on favorable terms to the Company (of which there can be no
assurance), commercial lines of credit. 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.
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 the exercise price payable
upon exercise of the Warrants, if the Warrants are exercised for cash. 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 or that they will be exercised for cash.
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
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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 Company's larger competitors 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 1,000 "authorized" distributors. A number of these
franchises and distributors 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 expand and change
their operations to 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, or that associations of independent audiologists
will not form and compete successfully for the Company's targeted market.
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
most of these agreements may be terminated by either party on 90-days notice at
any time. The early termination or failure to renew the agreements could
materially adversely affect the operation of the hearing care centers located in
the related market areas. In addition, the early termination or 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 a material adverse effect on the
Company's results of operations. As previously disclosed, effective May 31,
1996, Humana Health Care Plans of Florida ("Humana") declined to renew its
contract with the Company to provide coverage to Humana medicare members living
on the east coast of Florida (the contract to service Humana medicare members on
the west coast of Florida was unaffected). Total revenues from Humana east coast
members were approximately $2 million in 1995, or 18% of the Company's total
revenues. While the Company has obtained new contracts in other markets which
should more than offset the loss of revenues represented by the Humana east
coast contract non-renewal, there can be no assurance that other contracts will
not be the subject of a non-renewal or early termination. The Company is not
aware of any current intention on the part of any health insurance or managed
care organization to terminate any current contracts with the Company.
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<PAGE>
RELIANCE ON MANUFACTURERS AND QUALIFIED AUDIOLOGISTS
Through its hearing care centers, the Company makes available to customers
hearing aids supplied by approximately five major manufacturers, as well as
hearing enhancement devices manufactured by other companies. The Company relies
on these manufacturers to supply such products, and a significant disruption in
supply from any or all of these manufacturers could materially adversely affect
the Company's business. There are currently approximately 40 manufacturers of
hearing aids and related hearing enhancement devices worldwide however, so that
in the event of disruption of supply from one or more of the Company's current
suppliers, the Company believes it could obtain comparable products from other
manufacturers. There can be no assurance, however, that such products could be
obtained at prices favorable to the Company or on a timely basis. The Company
has not experienced any significant disruptions in supply in the past. In
addition, the Company's centers employ audiologists, and the Company believes
that it distinguishes itself in the industry by having qualified audiologists
available in all of the Company's centers to provide on-site patient diagnosis
and related service. The inability of the Company to attract and retain
qualified audiologists may reduce the Company's ability to distinguish itself
from competing networks of hearing aid retailers and thus adversely affect its
business. Management believes that it will be able to attract and retain
qualified audiologists sufficient to staff its centers for the forseeable
future.
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 materially 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. Such regulations 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
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proposed regulations in the jurisdictions in which it operates 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. The highest bid and the lowest offer on the Nasdaq Bulletin Board
from October 2, 1995 until the Company's Common Stock was listed on the American
Stock Exchange on March 15, 1996 was $5.8125 and $.82 per share, respectively.
Since the stock began trading on the American Stock Exchange and through June
17, 1997, the stock has traded as high as $7.375 and as low as $1.50 per share.
Future changes in the market price of the Common Stock may bear no relation to
the Company's results of operations. Quarterly operating results, changes in the
condition of the economy generally or in the healthcare industry, or
developments affecting the Company or its competitors could cause the market
price of the Common Stock to fluctuate substantially.
POTENTIAL DILUTION; SHARES ELIGIBLE FOR FUTURE SALES; POSSIBLE EFFECT ON
ADDITIONAL EQUITY FINANCING
A substantial number of shares of Common Stock are or will be issuable by
the Company upon the conversion of convertible preferred stock and the exercise
of warrants and options which the Company has issued, which would result in
substantial dilution to a shareholder's percentage ownership interest in the
Company and could adversely affect the market price of the Common Stock. Under
the applicable conversion formulas of the Company's currently outstanding
convertible preferred stock if the market price of the Company's Common Stock is
less than $5.00 per share, 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 increases as the market price
of the Common Stock decreases); and except with respect to certain redemption
rights of the Company for the Company's 1997 Convertible Preferred Stock, 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 convertible
preferred stock and the exercise of warrants and options is subject to
adjustment upon the occurrence of certain dilutive events.
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<PAGE>
On June 16, 1997, there were issued and outstanding a total of 84,895,719
shares of Common Stock. If all convertible preferred stock, warrants and options
which the Company has issued were deemed converted and exercised, as the case
may be, as of June 16, 1997, there would be issuable 34,396,251 shares of Common
Stock. Upon such conversion and exercise, there would be outstanding 119,291,970
shares of Common Stock. Of these, the Company currently has registered for
resale 39,755,173 shares (including the Shares offered hereby) and has granted
demand registration rights in respect of approximately 2,547,200 additional
shares. The sale or availability for sale of a significant number of shares of
Common Stock in the public market could adversely affect the market price of the
Common Stock. In addition, certain holders of outstanding securities of the
Company 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 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. In the event the Company's Common
Stock was delisted from the AMEX, 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. The Company is
unaware of any intention on the part of the AMEX to delist its Common Stock.
"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, 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 to the customer 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 June 16, 1997, the directors and executive officers of the Company
beneficially owned, as a group, approximately 14.6% of the 84,895,719 shares of
Common Stock. If all convertible preferred stock, warrants and options which the
Company has issued or agreed to issue were deemed converted and/or exercised on
June 16, 1997, the directors and executive officers would beneficially own
approximately 12.5% of the then outstanding Common Stock. See "-- Potential
Dilution; Shares Eligible for Future Sales; Possible Effect on Additional Equity
Financing". In the event of a change in voting control of the Company, the
current directors and officers of the Company could be replaced.
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THE COMPANY
The Company operates a network of hearing care centers which provide a full
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 full 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 73 centers primarily located in Connecticut,
Florida, New York, New Jersey, and Pennsylvania. Over the next several years,
the Company's primary emphasis will be opening (or selectively acquiring)
additional Company-owned centers in these states and others where the Company
has obtained contracts to provide services and products.
The Company's principal executive offices are located at 1250 Northpoint
Parkway, West Palm Beach, Florida 33407, and its telephone number is (561)
478-8770.
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SELLING SHAREHOLDERS
None of the Selling Shareholders is an affiliate of the Company or has had
any position, office or other material relationship with the Company within the
past three years except as a shareholder of the Company or as noted below. The
following table sets forth information with respect to the Selling Shareholders,
based upon information provided to the Company by them.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Being Shares Beneficially Owned
Name of Selling Shareholder Prior to Offering (1) Offered (1) After Offering (2)
- ----------------------------- ------------------------- -------------- -------------------------
<S> <C> <C> <C>
Harris Berenholz ............ 92,254 92,254 0
Arthur M. Blank ............. 276,762 276,762 0
Ronald M. Brill ............. 46,126 46,126 0
Elliott B. Broidy ........... 184,508 184,508 0
Walter Channing ............. 46,126 46,126 0
John A. Ehinger ............. 46,126 46,126 0
and Marianne Ehinger
Gary Erlbaum ................ 276,762 276,762 0
Michael Erlbaum ............. 92,254 92,254 0
Steven Erlbaum .............. 92,254 92,254 0
John M. Hennessy ............ 92,254 92,254 0
Carlisle Jones .............. 142,993(3) 142,993(3) 0
Stephen A. Levin ............ 476,032 476,032 0
Bernard Marcus .............. 714,969(3) 714,969(3) 0
Charles J. Murphy ........... 46,126 46,126 0
SFM Investments LDC ......... 10,574,832(4) 10,574,832(4) 0
Andrew R. Taussig ........... 46,126 46,126 0
and Susan F. Taussig
------------------------- -------------- -------------------------
Total ....................... 13,246,504 13,246,504 0
========================= ============== =========================
- ----------
<FN>
(1) Assumes that all the Warrants held by the Selling Shareholders are
exercised for cash. If such Warrants are exercised pursuant to a "cashless"
exercise, the number of shares listed in the table will be reduced. See the
cover page of this Prospectus for a description of the "cashless" exercise
procedure.
(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 for Messrs. Jones and Marcus, 50,739 and 253,698, respectively,
shares which are issuable upon the exercise of Invemed Warrants issued by
the Company to Mr. Jones and Invemed Associates, Inc. (and subsequently
transferred by Invemed to Mr. Marcus).
(4) Includes a total of 1,978,841 shares which are issuable upon the exercise
of Invemed Warrants originally issued by the Company to Kenneth G. Langone,
G. Allen Mebane, Thomas L. Teague and Cristina H. Kepner. Each of Messrs.
Langone, Mebane and Teague and Ms. Kepner transferred such Invemed Warrants
to SFM Investments LDC ("SFM"). SFM also owns Class A Investor Warrants
covering an aggregate of 8,595,991 shares, which Warrants were originally
issued to certain persons associated with Soros Fund Management LLC and to
Mr. Langone and Ms. Kepner.
</TABLE>
Of the Shares offered hereby, 10,963,226 are issuable upon the exercise of
the Class A Investor Warrants, and 2,283,278 are issuable upon exercise of the
Invemed Warrants. The Invemed Warrants were issued as compensation in connection
with the sale of the 1996 Senior Preferred Stock. The Class A Investor Warrants
may be exercised at any time prior to 5:00 P.M., New York time, on January 26,
2001 at an exercise price of $0.55 per share. The
10
<PAGE>
Invemed Warrants may be exercised at any time prior to 5:00 P.M., New York time,
on January 26, 2001 at an exercise price of $0.63 per share. (Additional shares
that may become issuable as a result of the anti-dilution provisions of the
Warrants are also offered hereby pursuant to Rule 416 under the Securities Act.)
The foregoing summary is qualified in its entirety by the terms of the
Warrants, which are filed as exhibits to the Registration Statement of which
this Prospectus is a part.
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 at negotiated prices. The methods by which the
shares may be sold may include, but are not 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) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(d) privately negotiated transactions; (e) short sales; and (f) 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 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 until
the date on which the Shares may be sold without registration, whichever is
shorter.
The Selling Shareholders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of 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.
The Company is bearing all of the costs relating to the registration of the
Shares, except 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 and legal fees of the Selling Shareholders in excess of $5,000 all of
which will be borne by the Selling Shareholders. The Company will not receive
any of the proceeds from this offering. There can be no assurance that the
Selling Shareholders will sell any or all of the Shares offered hereby.
11
<PAGE>
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 27, 1996, and December 29, 1995, and for the years ended December 27,
1996, December 29, 1995, and December 30, 1994, 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 27, 1996, and are incorporated
herein by reference, in reliance upon the authority of such firm as experts in
accounting and auditing in giving said reports.
12
<PAGE>
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........................................ $ 8,094.00
Accounting fees and expenses................................ 2,000.00
Legal fees and expenses..................................... 10,000.00
Miscellaneous expenses...................................... 0.00
-------------
Total....................................................... $ 20,094.00
=============
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.
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
13
<PAGE>
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;
14
<PAGE>
(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.
15
<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-3 and has duly caused this Form S-3
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 June 24,
1997.
HEARx LTD.
By: /s/ Paul A. Brown
------------------------------------
Name: Paul A. Brown, M.D.
Title: Chairman and Chief Executive
Officer
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 Chairman of the Board; Chief Executive June 24, 1997
- --------------------- Officer and Director
Paul A. Brown, M.D.
/s/ Paul A. Brown* President and Chief Operating Officer and June 24, 1997
- --------------------- Director
Stephen J. Hansbrough
/s/ Paul A. Brown* Vice President and Principal Financial June 24, 1997
- --------------------- and Accounting Officer
James W. Peklenk
/s/ Paul A. Brown* Director June 24, 1997
- ---------------------
Fred N. Gerard
/s/ Paul A. Brown* Director June 24, 1997
- ---------------------
David J. McLachlan
/s/ Paul A. Brown* Director June 24, 1997
- ---------------------
Thomas W. Archibald
- ---------------
* Executed by Paul A. Brown as attorney in fact for the person indicated.
16
<PAGE>
HEARX LTD.
EXHIBIT INDEX
Exhibit Number Description
- -------------- ----------------------------------------------------------------
4.1 Specimen of Certificate representing Common Stock*
4.2 Form of Class A Investor Warrant**
4.3 Form of Invemed Warrant**
5.1 Opinion of Bryan Cave LLP**
23.1 Consent of BDO Seidman, LLP**
23.2 Consent of Bryan Cave LLP (included in Exhibit 5.1)
24.1 Power of Attorney**
- ---------------
* Filed as an Exhibit to the Company's Registration Statement on Form S-18
(Registration No. 33-17041-NY).
** Previously filed.
17
