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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
PMR CORPORATION
(Exact name of Registrant as specified in its charter)
--------------------
Delaware 23-2491707
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3990 Old Town Avenue, Suite 206A
San Diego, California 92110
(619) 295-2227
(Address,including zip code, and telephone number,including area code, of
Registrant's principal executive offices)
--------------------
Allen Tepper
Chief Executive Officer
PMR CORPORATION
3990 Old Town Avenue, Suite 206A
San Diego, California 92110
(619) 295-2227
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies to:
Jeremy D. Glaser, Esq.
COOLEY GODWARD LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
(619) 550-6000
--------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING PRICE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) (1) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 112,924 $22.50 $2,540,790 $769.94
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</TABLE>
(1) Estimated in accordance with Rule 457(c) solely for the purpose of computing
the amount of the registration fee based on the average of the high and low
prices of the Registrant's Common Stock as reported on the Nasdaq National
Market on August 22, 1997.
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 THAT 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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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 AUGUST 27, 1997
PROSPECTUS
112,924 SHARES
PMR CORPORATION
COMMON STOCK
--------------------
This Prospectus relates to 112,924 shares (the "Shares") of Common
Stock, $.01 par value per share (the "Common Stock"), of PMR Corporation ("PMR"
or the "Company"). The Shares may be offered by certain stockholders of the
Company (the "Selling Stockholders") from time to time in transactions on the
Nasdaq National Market, in privately negotiated transactions or a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Selling Stockholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. However, the Company is entitled
to receive as payment of the outstanding principal of a promissory note payable
by Mr. Frerker to the Company, up to approximately $424,000 of the proceeds
received by Mr. Frerker from the sale of his shares which are included in the
Shares. The loan to Mr. Frerker was on account of payment of income tax
withholding obligations by the Company arising from Mr. Frerker's purchase of
shares of Common Stock pursuant to his exercise of a warrant. See "Selling
Stockholders." The Company has agreed to bear certain expenses in connection
with the registration and sale of the Shares being offered by the Selling
Stockholders. See "Plan of Distribution."
The Common Stock of the Company is traded on the Nasdaq National Market
under the Symbol "PMRP." On August 22, 1997, the last sale price for the Common
Stock as reported by the Nasdaq National Market was $22.38 per share.
--------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
--------------------
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 , 1997
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
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"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the Commission's following Regional Offices: Chicago Regional Office, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661; and New York Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Commission also maintains a site on the World Wide
Web that contains reports, proxy and information statements and other
information regarding the Company. The address for such site is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto, which may be inspected without charge at, and
copies thereof may be obtained at prescribed rates from, the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended April
30, 1997, and the Company's Registration Statement on Form 10 filed on July 31,
1992, as amended, which contains descriptions of the Company's Common Stock and
certain rights relating to the Common Stock, including any amendment or reports
filed for the purpose of updating such descriptions, each as filed by the
Company with the Commission, are hereby incorporated by reference in this
Prospectus except as superseded or modified herein. All documents filed with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date
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of this Prospectus and prior to the termination of the offering shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in any
document incorporated or deemed to be incorporated by reference herein 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 which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus. The Company will provide without charge to each
person, including any beneficial owner, to whom this Prospectus is delivered,
upon written or oral request of such person, a copy of any and all of the
documents that have been or may be incorporated by reference herein (other than
exhibits to such documents which are not specifically incorporated by reference
into such documents). Such requests should be directed to the Chief Financial
Officer at the Company's principal executive offices at 3990 Old Town Avenue,
Suite 206A, San Diego, California 92110, (619) 295-2227.
THE COMPANY
Except for the historical information contained or incorporated by
reference herein, this Prospectus (and the information incorporated herein by
reference) contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein or incorporated by reference. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the following section, in the Company's Annual Report on Form 10-K for the
year ended April 30, 1997, as well as those discussed elsewhere in this
Prospectus and any other documents incorporated herein by reference.
PMR Corporation (the "Company") is a leader in the development and
management of programs and services for individuals who have been diagnosed with
a Serious Mental Illness ("SMI"). These diseases, which are often chronic and
life long, are primarily schizophrenia and bi-polar disorder (manic depression)
and, according to studies sponsored by the National Institute of Mental Health
(NIMH), afflict approximately 2.8% of the U.S. population. The Company's
programs have been developed to assist providers of health care services in
delivering care and treatment programs which serve as alternatives to more
costly inpatient behavioral health care for the SMI population. The Company's
clinical philosophy emphasizes early intervention to identify and reduce the
incidence of crises events and thus contain the high costs associated with
catastrophic events. Through its disease management approach, the Company
believes that its programs may achieve a reduction in health care costs and
result in improved clinical outcomes.
The Company operates three lines of business devoted to behavioral
health care: acute outpatient psychiatric services ("Outpatient Program"), case
management services ("Case Management Program") and chemical dependency services
("Chemical Dependency Program"). In recent years, the Company's principal focus
has been on the growth of its Outpatient Program and Case Management Program,
which are targeted exclusively to serve the SMI population. Looking forward, the
Company intends to blend these products into a single, integrated
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continuum of outpatient services and may develop new services in the areas of
site management, clinical information, outcomes analysis and residential
services.
The Company's objective is to be a leading developer and provider of a
continuum of programs which deliver cost effective mental health services for
individuals within the SMI population. Since the SMI population receives the
vast majority of its health care funding from state, local and federal agencies,
the Company aims to develop programs which assist these entities in containing
rapidly growing and often uncontrolled health care costs. Through the successful
development and operation of these programs, the Company's mission is to foster
the recovery of individuals from the devastating effects of serious mental
illnesses and chemical dependency, and to ensure the cost-effective treatment
and rehabilitation services which limit hospitalization, afford significant
relief from symptoms, and contribute to better quality health care in the
communities within which the Company and its subsidiaries operate.
The Company was incorporated in Delaware on January 7, 1988. Its
executive offices are located at 3990 Old Town Avenue, Suite 206A, San Diego,
California 92110, and its telephone number is (619) 295-2227.
RISK FACTORS
An investment in the shares being offered hereby involves a high degree
of risk. Prospective investors should carefully consider the following risk
factors, in addition to other information contained in this Prospectus, the
Company's Annual Report on Form 10-K for the year ended April 30, 1997, and in
any other documents incorporated herein by reference in evaluating an investment
in the shares of Common Stock offered hereby.
DEPENDENCE UPON THIRD PARTY REIMBURSEMENT
A significant component of the Company's revenues is derived from
payments made by Providers to the Company relative to the management and
administration by the Company of outpatient programs (the "Programs") managed
for Providers. The Company bills its management fee to the Provider as a
purchased management and administrative support service. Substantially all of
the patients admitted to these Programs are eligible for Medicare coverage,
thus, the Providers rely upon payment from Medicare. The Providers are
reimbursed their costs on an interim basis by Medicare fiscal intermediaries and
the Providers submit annual cost reimbursement reports to the fiscal
intermediaries for audit and payment reconciliation. The Providers seek
reimbursement of the Company's management fees from these fiscal intermediaries
as part of their overall payments from Medicare. As a general matter, payment of
the Company's management fee may be directly affected by the reimbursement
experience of the Provider. In certain instances, Providers are not obligated to
pay the Company's management fee if related claims submitted by the Provider are
denied by the fiscal intermediary. In other instances, the Company may be
obligated to indemnify a Provider to the extent the Company's management fee
charged to the Provider is disallowed by Medicare's fiscal intermediary for
reimbursement of the Provider's cost reimbursement report. The occurrence of
either of these events can have a material adverse impact upon the Company's
business, financial condition and results of operations.
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Applicable Medicare guidelines permit the reimbursement of contracted
for management services provided that, among other things, the associated fees
are "reasonable." As a general rule, Medicare guidelines indicate that contract
management services costs are "deemed" reasonable if the costs incurred are
comparable with marketplace prices for similar services. The U.S. Department of
Health and Human Services has established the Health Care Financing
Administration ("HCFA") to promulgate rules and regulations governing the
Medicare program and the benefits associated therewith. Although management of
the Company believes that the value of the Company's services is comparable with
marketplace prices for similar services, the determination of reasonableness may
be interpreted by HCFA or a fiscal intermediary in a manner inconsistent with
the Company's belief. Notwithstanding the Company's belief, a determination that
the Company's management fees may not be reasonable could have a material
adverse impact upon the Company's business, financial condition and results of
operations.
HCFA has published criteria which partial hospitalization services must
meet in order to qualify for Medicare funding. In transmittal letter number 1303
(effective January 2, 1987) and in subsequent criteria published in Section
230.50 of the Medicare Coverage Manual, HCFA requires partial hospitalization
services to be: (i) incident to a physician's service; (ii) reasonable and
necessary for the diagnosis or treatment of the patient's conditions; and (iii)
provided by a physician with a reasonable expectation of improvement of the
patient from the treatment. Although the Company and its Providers have quality
assurance and utilization review programs to ensure that the partial
hospitalization Programs managed by the Company are operating in compliance with
all Medicare requirements, there can be no assurances that in the future certain
aspects of the Company's Programs will not be found to have failed to satisfy
all applicable criteria for Medicare eligibility.
During the fourth quarter of Fiscal Year 1994, fiscal intermediaries for
Providers began a Focused Medical Review of claims for partial hospitalization
services throughout the country. A Focused Medical Review consists of an
intensive review by HCFA fiscal intermediaries on an industry-wide basis of
certain targeted claims which HCFA has identified as being at risk of
inappropriate program payment. This often occurs when HCFA identifies
significant industry-wide increases in payments of certain types of services, as
had been the case with the partial hospitalization benefit. The Company's
initial experience with the Focused Medical Review was that there were numerous
denials of Providers' claims and the denials had an adverse impact on the
Company's business, financial condition and results of operations during Fiscal
1995 because Providers delayed payment of the Company's management fee because
of the substantial number of denials. On behalf of the Providers, the Company
strenuously disputed these denials, particularly the interpretations implemented
by one singular fiscal intermediary.
The Focused Medical Review of claims for partial hospitalization
services conducted by fiscal intermediaries for the Providers has substantially
abated on programs managed by the Company. Although during Fiscal 1997, the
number of denied claims was reduced to a modest rate, the periodic review of
claims by HCFA fiscal intermediaries will likely continue at one or more
programs from time to time, and there can be no assurances that a Focused
Medical Review of claims will not recur at the level previously experienced by
the Company.
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CHANGES IN MEDICARE'S COST BASED REIMBURSEMENT FOR PARTIAL HOSPITALIZATION
SERVICES
The Medicare partial hospitalization benefit has a coinsurance feature,
which means that the amount paid by Medicare is the provider's reasonable cost
less "coinsurance" which is ordinarily to be paid by the patient. The
coinsurance amount is 20 percent of the charges for the services. The
coinsurance must be charged to the patient by the provider unless the patient is
indigent. If the patient is indigent, or if the patient does not pay the
provider the billed coinsurance amounts after reasonable collection efforts, the
Medicare program has historically paid those amounts as "allowable Medicare bad
debts." The allowability of Medicare bad debts to providers for whom the Company
manages partial hospitalization programs is significant since most of the
patients in programs managed by the Company are indigent or have very limited
resources. The pending budget reconciliation bills in Congress would reduce the
amount of Medicare allowable bad debts payable to providers. Since the House and
Senate provisions are identical, the Company expects the following reductions in
Medicare allowable bad debts to occur: 25 percent for provider fiscal years
beginning on or after October 1, 1997; 40 percent for provider fiscal years
beginning on or after October 1, 1998; and 50 percent for provider fiscal years
beginning on or after October 1, 1999. The reduction in "allowable Medicare bad
debts" could have a materially adverse impact on Medicare reimbursement to the
Company's Providers and could further result in the restructuring or loss of
Provider contracts with the Company.
Currently proposed legislation would implement a prospective payment
system ("PPS") for all outpatient hospital services, including partial
hospitalization, for the calendar year beginning January 1, 1999. While the
actual reimbursement rates have not been determined and thus their effect,
positive or negative, is unknown, the Company may need to negotiate
modifications to its contracts with Providers.
SUFFICIENCY OF EXISTING RESERVES TO COVER UNCERTAINTIES RELATIVE TO
REIMBURSEMENT ISSUES
Reimbursement of the Company's management fees to Providers under the
Medicare program provides a substantial source of the Company's revenues.
Accordingly, the Company's Programs must at all times operate in compliance with
applicable Medicare guidelines. Failure to meet such criteria could have a
material adverse impact upon the Company's business, financial condition and
results of operations should a Provider elect to withhold payment of the
Company's management fees or in the alternative seek a refund of such fees
following an event of disallowance.
The Company maintains significant reserves to cover the effect of
primarily two uncertainties: (i) that the Company may have an obligation to
indemnify certain Providers for some portions of its management fee which may be
subject to disallowance upon audit of a Provider's cost report by fiscal
intermediaries; and (ii) that the Company may not receive full payment of the
management fees owed to it by a Provider during the periodic review of the
Provider's claims by the fiscal intermediaries.
The Company has been advised by HCFA that certain program-related costs
are not allowable for reimbursement. The Company may be responsible for
reimbursement of the amounts previously paid to the Company that are disallowed
pursuant to obligations that exist
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with certain Providers. Although the Company believes that its potential
liability to satisfy such requirements has been adequately reserved in its
financial statements, there can be no assurances to that effect. The obligation
to pay the amounts estimated within the Company's financial statements (or such
greater amounts as are due), when and if they become due, could have a material
adverse impact upon the Company's business, financial condition and results of
operations.
CONTINUITY OF MANAGEMENT CONTRACTS
Substantially all of the revenues of the Company are derived from
contracts with Providers, behavioral health organizations, and case management
agencies. These contracts generally have defined terms of duration and many have
automatic renewal terms subject to termination by either party. The contracts
often provide for early termination either by the Provider if specified
performance criteria are not satisfied or by Company under various other
circumstances.
The continued success of the Company is subject to its ability to
maintain, renew or extend existing management contracts and obtain new
management contracts. Contract renewals and extensions are likely to be subject
to competing proposals from other contract management companies as well as
consideration by certain Providers to convert their mental health programs from
independently managed programs to programs operated internally or to terminate
their mental health programs. There can be no assurance that any Provider or
case management agency will continue to do business with the Company following
expiration of its management contract or earlier if such management contract is
terminable prior to expiration. In addition, any changes in the Medicare or
Medicaid program which have the effect of limiting or reducing reimbursement
levels for mental health services provided by Programs managed by the Company
could result in the early termination of existing management contracts and would
adversely affect the ability of the Company to renew or extend existing
management contracts and to obtain new management contracts. The termination or
non-renewal of a material number of management contracts could result in a
significant decrease in the Company's net revenues and could have a material
adverse effect on the Company's business, financial condition or results of
operations.
For the Fiscal Year ended April 30, 1997 ("Fiscal 1997"), there was only
one Provider that accounted for more than ten (10%) percent of the Company's
revenues. Furthermore, although not attributed to a particular "customer," the
Company's case management programs accounted for 24.2% of the Company's revenues
during Fiscal Year 1997. These programs were largely operated under contracts
with two managed care consortiums in the State of Tennessee (see the discussion
of TBH and Premier below) and management agreements with two (2) case management
agencies. A termination or non-renewal of any of these contracts could have a
material adverse effect on the Company's business, financial condition or
results of operation.
POTENTIAL CHANGES IN TENNCARE
The Company, through its Collaborative Care subsidiary, holds contracts
for case management services in Tennessee with two managed care consortiums
(Tennessee Behavioral
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Health ("TBH" and Premier Behavioral Health ("Premier")) operating under the
Tennessee TennCare Partners State Medicaid Managed Care Program ("TennCare"). In
July 1996, both consortiums became the payors for mental health care services
under TennCare for the approximately 1.5 million individuals who qualify for
coverage based on Medicaid eligibility or other indigency standards. The Company
has received information that Premier has notified the State of Tennessee that
it would withdraw from TennCare effective June 30, 1997. However, the Company
understands that the State of Tennessee has contested the termination and
Premier has continued in its role as a managed care consortium. The Company has
been informed that effective July 1, 1997, TBH amended its contract with
TennCare and is attempting to restructure its agreements with its providers.
Significant uncertainty exists as to the future structure of TennCare and the
Company's ability to maintain its Case Management revenues subsequent to a
restructuring. For the year ended April 30, 1997, Case Management contracts in
Tennessee accounted for 23.7% of the Company's revenues. The Company may find it
necessary to significantly restructure its contracts and relationships depending
on the outcome of ongoing discussions among the interested parties in TennCare.
The potential changes, which the Company cannot predict with any degree of
certainty, may have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED OPERATING HISTORY OF CASE MANAGEMENT PROGRAMS
For the fiscal year ended April 30, 1997, the Company's Case Management
Programs accounted for 24.2% of the Company's total revenues. This reflects an
increase from 20.9% of revenues accounted for by these Programs during Fiscal
1996. The operations of the Company's Case Management Programs are subject to
limited operating history. Thus, the success of these Programs will be dependent
upon the Company's ability to manage and expand operations effectively, control
costs and recognize operating efficiencies. By virtue of the lack of operating
history, there can be no assurances that the Company will be able to maintain
these operations at the level realized during Fiscal 1997 or expand these
Programs after Fiscal 1997.
DIFFICULTIES OF MANAGING RAPID GROWTH
The Company expects that its outpatient psychiatric management services
business and the number of its acute outpatient, case management and chemical
dependency programs may increase significantly as it pursues its growth
strategy. If it materializes, this rapid growth will place significant demands
on the Company's management resources. The Company's ability to manage its
growth effectively will require it to continue to expand its operation,
financial and management information systems and to continue to attract, train,
motivate, manage and retain key employees. If the Company is unable to manage
its growth effectively, its business, financial condition and results of
operations could be adversely affected.
GOVERNMENT REGULATION
Mental health care is an area of extensive and frequent regulatory
change. Changes in the laws or new interpretations of existing laws can have a
significant effect on methods of doing business, costs of doing business and
amounts of reimbursement from governmental and other payers. The Company is and
will continue to be subject to varying degrees of regulation and
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licensing by health or social service agencies and other regulatory authorities
in the various states and localities in which it operates or intends to operate.
The Company must operate in compliance with applicable Medicare and Medicaid
guidelines. The Company is also subject to fraud and abuse and other laws,
violations of which may result in civil and criminal penalties and exclusions
from participation in such programs. The Company at all times attempts to comply
with all such applicable laws; however, there can be no assurance that
administrative or judicial interpretation of existing laws or regulations will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
The success of the Company will be dependent, in part, upon its ability
to satisfy the applicable regulations and requirements imposed upon its
operations. The Company's business, financial condition and results of
operations could also be adversely affected by, among other things, regulatory
developments such as mandatory increases in the scope and quality of care and
implementation of certain licensing and certification standards. There can be no
assurance that federal, state or local laws or regulatory procedures which might
adversely affect the Company's business, financial condition, results of
operations or prospects will not be expanded or imposed. There can be no
assurances that the regulations applicable to the Company's operations and its
arrangements with Providers will not change in the future or that future
interpretations of existing laws or new laws will not result in the Company's
services under its management contracts being deemed not in compliance with
federal Medicare/Medicaid laws.
DEPENDENCE ON KEY PERSONNEL
The Company depends, and will continue to depend, upon the services of
its senior management and skilled personnel. The Company presently has no
employment agreements with any of its senior executive officers. The Company is
also dependent upon its ability to attract and retain management personnel who
will be responsible for the day-to-day operations of the Company. The loss of
the services of any or all such officers or the Company's inability to attract
additional management personnel in the future could have a material adverse
effect on the Company's business, financial condition or results of operations.
The Company's success and growth strategy also depend on its ability to
attract and retain qualified clinical, marketing and other personnel. The
Company competes with general acute care hospitals and other health care
providers for the services of psychiatrists, psychologists, social workers,
therapists and other clinical personnel. Demand for such clinical personnel is
high and they are often subject to competing offers. There can be no assurance
that the Company will be able to attract and retain the qualified personnel
necessary for its business in the future.
POTENTIAL MARKET IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
Future sales by existing stockholders could adversely affect the
prevailing market price of the Common Stock. As of August 15, 1997, the Company
had 5,059,848 shares of Common Stock outstanding. Of these shares, 4,944,874 are
freely tradeable without restriction in the public market, however, 2,730,557 of
these shares are held by "affiliates" of the Company, as
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such term is defined in Rule 144 under the Securities Act, and may only be sold
in accordance with such Rule.
NEED FOR ADDITIONAL FINANCING TO FUND FUTURE GROWTH
The Company has financed its operations through cash provided by
operations, the sale of equity and through debt. The Company may deem it
necessary to raise additional funds in the future through public or private
financing, including equity financing, in order to fund potential acquisitions
of complementary businesses or to fund its capital and operating requirements.
Any additional equity financing may be dilutive to stockholders, and debt
financing, if available, will require payment of interest and may involve
restrictive covenants that could impose limitations on the operating flexibility
of the Company. Adequate funds for the Company's plans or operations may not be
available when needed and, if available, may not be on terms attractive to the
Company. The failure to obtain funding on a timely basis could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company is currently considering the need for additional
financing, which may include equity, debt or convertible debt financing.
COMPETITION
The mental health services industry is highly competitive. There are
many other companies engaged in the management of outpatient psychiatric
Programs, and some of these companies are substantially more established and
have greater financial and other business resources than those presently
possessed by the Company. In addition, the Company's current and potential
Providers may choose to operate mental health programs themselves rather than
contract with the Company. The inability of the Company or its Providers to
compete effectively could have a material adverse effect on the Company's
business, financial condition or results of operations.
POSSIBLE VOLATILITY OF STOCK PRICES
The market price of the Common Stock could be subject to significant
fluctuations in response to various factors and events, including the liquidity
of the market for the Common Stock, variations in the Company's operating
results, new statutes or regulations or changes in the interpretation of
existing statutes or regulations affecting the health care industry generally or
mental health services in particular. In addition, the stock market in recent
years has experienced broad price and volume fluctuations that often have been
unrelated to the operating performance of particular companies. These market
fluctuations also may adversely affect the market price of the Common Stock. The
Company's Common Stock is traded on the Nasdaq National Market. There can be no
assurances as to the future trading prices of the Common Stock. Trading of a
Company's securities depends upon a number of variables most of which are beyond
the control of the Company.
11
<PAGE> 12
HEALTH CARE REFORM
The Clinton Administration and various federal legislators have
considered health care reform proposals intended to control health care costs
and to improve access to medical services for uninsured individuals. These
proposals have included cutbacks to the Medicare and Medicaid programs and steps
to permit greater flexibility in the administration of Medicaid. In addition,
some states in which the Company operates are considering various health care
reform proposals. It is uncertain at this time what legislation on health care
reform may ultimately be proposed or enacted or whether other changes in the
administration or interpretation of governmental health care programs will
occur. There can be no assurance that future health care legislation or other
changes in the administration or interpretation of governmental health care
programs will not have a material adverse effect on the Company's business,
financial condition or results of operations.
CONCENTRATION OF OWNERSHIP; ANTI-TAKEOVER PROVISIONS
The officers and directors of the Company and their affiliates own over
fifty (50%) percent of the Company's issued and outstanding Common Stock.
Consequently, such persons will be able to elect a majority of the Company's
Board of Directors and control the Company's policies and day to day management.
The Company's Board of Directors has the authority, without action by the
stockholders, to issue additional shares of Preferred Stock and to fix the
rights and preferences of such shares. The ability to issue additional shares of
Preferred Stock, together with certain provisions of the Company's Certificate
of Incorporation, such as staggered terms for directors, limitations on the
Stockholders' ability to call a meeting or remove directors, and the requirement
of a two-thirds vote of stockholders for amendment of certain provisions of the
Certificate of Incorporation or approval of certain business combinations, may
delay, deter or prevent a change in control of the Company, may discourage bids
for the Common Stock at a premium over the market price of the Common Stock and
may adversely affect the market price of, and the voting and other rights of the
holders of, the Common Stock.
AVAILABILITY AND ADEQUACY OF INSURANCE
The provision of mental health care services entails an inherent risk of
liability. In recent years, participants in the industry have become subject to
an increasing number of lawsuits alleging malpractice or related legal theories,
many of which involve large claims and significant defense costs. The Company
currently maintains liability insurance intended to cover such claims and the
Company believes that its insurance is in conformity with industry standards.
There can be no assurance, however, that claims in excess of the Company's
insurance coverage or claims not covered by the Company's insurance coverage
(e.g., claims for punitive damages) will not arise. A successful claim against
the Company not covered by, or in excess of, the Company's insurance coverage
could have a material adverse effect upon the Company's business, financial
condition and results of operations. Claims against the Company, regardless of
their merit or eventual outcome, may also have a material adverse effect upon
the Company's ability to expand its business and would require management to
devote time to matters unrelated to the operation of the Company's business. In
addition, the Company's insurance policies must
12
<PAGE> 13
be renewed annually. There can be no assurance that the Company will be able to
obtain liability insurance coverage in the future or that, if such coverage is
available, it will be available on acceptable terms.
SELLING STOCKHOLDERS
The following table sets forth the name of the Selling Stockholders, the
number of shares of Common Stock owned beneficially by such Selling Stockholders
as of August 15, 1997 and the number of shares of Common Stock which may be
offered pursuant to this Prospectus. This information is based upon information
provided by the Selling Stockholders. Because the Selling Stockholders may offer
all, some or none of their Common Stock, no definitive estimate as to the number
of shares thereof that will be held by the Selling Stockholders after such
offering can be provided.
In connection with the purchase of their Shares, the Selling
Stockholders represented that they were acquiring the Shares for investment and
with no present intention of distributing the Shares. In recognition of the fact
that the Selling Stockholders, even though purchasing the Shares without a view
to distribute, may wish to be legally permitted to sell the Shares when each
deems appropriate, the Company has filed with the Commission a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to,
among other things, the resale of the Shares from time to time at prevailing
prices on the Nasdaq National Market or in privately-negotiated transactions and
have agreed to prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep the Registration Statement
effective until all Shares offered hereby have been sold pursuant thereto or
until such Shares are no longer, by reason of Rule 144 under the Securities Act
or any other rule of similar effect, required to be registered for the sale
thereof by the Selling Stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY
PRIOR TO OFFERING (1) SHARES BEING OWNED AFTER OFFERING (1)(2)
------------------------- ------------ ---------------------------
SELLING STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Daved Frerker(3) 73,400 1.45% 73,400 0 0%
Proactive Investment
Managers, L.P.(4) 1,735,919 33.53% 19,761 1,716,158 33.15%
Proactive Partners, 796,670 15.66% 19,763 776,907 15.27%
L.P.(5)
</TABLE>
- ----------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to the securities. Except as indicated by
footnote and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned
by them. Percentage of beneficial ownership is based on 5,059,848 shares
of Common Stock outstanding on August 15, 1997, adjusted as required by
rules promulgated by the Commission.
(2) Assumes the sale of all shares offered hereby, should the Selling
Stockholder elect to do so.
(3) On April 19, 1997, Mr. Frerker's employment with the Company terminated
and Mr. Frerker and the Company subsequently entered into a separation
agreement. Pursuant to the separation agreement, the
13
<PAGE> 14
Company agreed to register 73,400 shares of Common Stock held by Mr.
Frerker, which were issued upon his exercise of a Common Stock purchase
warrant awarded to Mr. Frerker in connection with his employment. In
addition, Mr. Frerker issued a promissory note to the Company evidencing
Mr. Frerker's obligation to pay the Company the principal amount of
$424,007.88, to be applied to the payment of income tax withholding
obligations arising from Mr. Frerker's warrant exercise. The promissory
note provides that proceeds of any sale of Shares by Mr. Frerker shall
be applied toward payment of the outstanding balance of the promissory
note. In addition, the Promissory note is secured by certain assets held
by Mr. Frerker and his spouse. The sale of Mr. Frerker's shares is
subject to certain restrictions under his separation agreement. See
"PLAN OF DISTRIBUTION."
(4) Charles C. McGettigan, a director of the Company since 1992, Myron A.
Wick, III, J. Patterson McBaine and Jon D. Gruber are general partners
of Proactive Investment Managers, L.P. Proactive Investment Managers,
L.P. is the General Partner of Proactive Partners, L.P. and Fremont
Proactive Partners, L.P. Shares beneficially owned include (i) 46,261
shares held by Proactive Investment Managers, L.P. (which include 26,500
shares issuable upon exercise of an outstanding warrant), (ii) 796,670
shares held by Proactive Partners, L.P. (which include 26,500 shares
issuable upon exercise of an outstanding warrant), (iii) 59,681 shares
held by Fremont Proactive Partners, L.P., (iv) 69,000 shares held by Mr.
McGettigan (which include 64,500 shares issuable upon the exercise of
outstanding options), (v) 664,707 shares held by Messrs. McBaine and
Gruber and entities controlled by both of them, (vi) 37,700 shares held
by Mr. McBaine and (vii) 61,900 shares held by Mr. Gruber. Proactive
Investment Managers, L.P. and Messrs. McGettigan, Wick, McBaine and
Gruber, as general partners of Proactive Investment Managers, L.P., may
be deemed to be beneficial owners of the shares held by Proactive
Partners, L.P. and Fremont Proactive Partners, L.P. Messrs. McGettigan,
Wick, McBaine and Gruber disclaim beneficial ownership of any shares
held by Proactive Investment Managers, L.P., Proactive Partners, L.P.,
Fremont Proactive Partners, L.P. or other entities they control as
described above, except to the extent of their respective interests in
such shares arising from their pecuniary interest in such partnerships.
(5) Includes 26,500 shares issuable upon exercise of an outstanding warrant.
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Stockholders may sell
Shares from time to time in transactions on the Nasdaq National Market, in
privately-negotiated transactions or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Notwithstanding the foregoing, pursuant to his separation agreement, Mr.
Frerker may sell up to 40,000 of his shares beginning upon the effectiveness
hereof, and the sale of his remaining shares shall be subject to a restriction
on sale that will lapse at a monthly rate through the remainder of calendar
1997. The Selling Stockholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation to a particular broker-dealer might be in excess of
customary commission).
The Selling Stockholders and any broker-dealers who act in connection
with the sale of Shares hereunder may be deemed to be "underwriters" as that
term is defined in the Securities Act, and any commissions received by them and
profit on any resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.
14
<PAGE> 15
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
The Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Common Stock offered by
the Selling Stockholders.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Cooley Godward LLP, San Diego, California.
EXPERTS
The consolidated financial statements of PMR Corporation appearing in
the Company's Annual Report on Form 10-K for the year ended April 30, 1997, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
15
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the amounts
shown are estimates except for the registration fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $769.94
Legal fees and expenses.......................................... 5,000.00
Accounting fees and expenses..................................... 5,000.00
----------
Total................................................... $10,769.94
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Registrant's Certificate of Incorporation and Bylaws include
provisions to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL") and
(ii) require the Registrant to indemnify its directors and officers to the
fullest extent permitted by applicable law, including circumstances in which
indemnification is otherwise discretionary. Pursuant to Section 145 of the DGCL,
a corporation generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses incurred by them in
connection with any suit to which they are or are threatened to be made, a party
by reason of their serving in such positions so long as they acted in good faith
and in a manner they reasonably believed to be in or not opposed to, the best
interests of the corporation and with respect to any criminal action, they had
no reasonable cause to believe their conduct was unlawful. The Registrant
believes that these provisions are necessary to attract and retain qualified
persons as directors and officers. These provisions do not eliminate the
directors' or officers' duty of care, and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under the DGCL. In addition, each director will continue to be
subject to liability pursuant to Section 174 of the DGCL, for breach of the
director's duty of loyalty to the Registrant, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omission that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its stockholders, for improper
transactions between the director and the Registrant and for improper loans to
directors and officers. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities law or
state or federal environmental laws.
II-1
<PAGE> 17
Delaware corporations are also authorized to obtain insurance to protect
directors and officers from certain liabilities, including liabilities against
which corporations cannot indemnify their directors and officers. The Company
maintains directors and officers liability insurance providing aggregate
coverage of $10 million.
At present, there is no pending litigation or proceeding involving a
Director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or Director.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<S> <C>
3.1 Registrant's Restated Certificate of Incorporation.(1)
3.2 Registrant's Amended and Restated Bylaws.(1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP.
23.3 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- ------------------
(1) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
year ended April 30, 1997 or amendments thereto and incorporated herein
by reference.
ITEM 17. UNDERTAKINGS.
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 provisions described in Item 15 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.
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:
II-2
<PAGE> 18
(i) to include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however, that clauses (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by these clauses is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant undertakes that:
(1) for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
the registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of the
registration statement as of the time it was declared effective; and
(2) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
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.
II-3
<PAGE> 19
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 San Diego, State of California, on the 22nd day of
August, 1997.
PMR CORPORATION
By: /s/ ALLEN TEPPER
-------------------------------------
Allen Tepper
Chief Executive Officer and
Chairman of the Board
By: /s/ FRED FURMAN
-------------------------------------
Fred Furman
President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Allen Tepper and Fred Furman, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to the Registration Statement and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each acting
alone, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
II-4
<PAGE> 20
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ ALLEN TEPPER Chief Executive Officer, August 22, 1997
- ---------------------------- Chairman of the Board and
Allen Tepper Director
/s/ FRED FURMAN President August 22, 1997
- ----------------------------
Fred Furman
/s/ SUSAN ERSKINE Executive Vice President, August 22, 1997
- ---------------------------- Secretary and Director
Susan Erskine
/s/ MARK P. CLEIN Executive Vice President, August 22, 1997
- ---------------------------- Chief Financial Officer
Mark P. Clein
/s/ CHARLES C. McGETTIGAN
- ----------------------------
Charles C. McGettigan Director August 22, 1997
/s/ RICHARD A. NIGLIO Director August 22, 1997
- ----------------------------
Richard A. Niglio
/s/ DANIEL L. FRANK Director August 22, 1997
- ----------------------------
Daniel L. Frank
II-5
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Sequential Page No.
- --------------------- ------------------------------------------------ -------------------------
<S> <C> <C>
3.1 Registrant's Restated Certificate of
Incorporation (incorporated by reference from
Registrant's Annual Report on Form 10-K for
the year ended April 30, 1997).
3.2 Registrant's Amended and Restated Bylaws
(incorporated by reference from Registrant's
Annual Report on Form 10-K for the year ended
April 30, 1997).
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP.
23.3 Consent of Cooley Godward LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (reference is made to page
II-4).
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
August 27, 1997
PMR Corporation
3990 Old Town Avenue, Suite 206A
San Diego, CA 92110
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by PMR CORPORATION (the "Company") of a Registration Statement
on Form S-3 (the "Registration Statement") with the Securities and Exchange
Commission covering the offering of up to 112,924 shares of the Company's Common
Stock, $.01 par value (the "Shares").
In connection with this opinion, we have examined the Registration Statement,
your Restated Certificate of Incorporation and Bylaws, as amended, and such
other documents, records, certificates, memoranda and other instruments as we
deemed necessary as a basis for this opinion. We have assumed the genuineness
and authenticity of all documents submitted to us as originals, the conformity
to originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares included in the Registration Statement are validly issued, fully
paid, and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ JEREMY D. GLASER
-------------------------------
Jeremy D. Glaser
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) of PMR Corporation for the registration of
112,924 shares of its common stock and to the incorporation by reference therein
of our report dated June 13, 1997, with respect to the consolidated financial
statements and schedule of PMR Corporation included in its Annual Report (Form
10-K) for the year ended April 30, 1997, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
San Diego, California
August 25, 1997
