<PAGE> 1
As filed with the Securities and Exchange Commission on January 17, 1997
File No. 333-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUBSTANCE ABUSE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its Charter)
Delaware 22-2806310
(State or other jurisdic- (I.R.S. Employer
tion of incorporation Identification No.)
or organization)
4517 NW 31st Avenue
Ft. Lauderdale, FL 33309
(954) 739-9600
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Mr. Robert Stutman
Substance Abuse Technologies, Inc.
4517 NW 31st Avenue
Ft. Lauderdale, Florida 33309
(954) 739-9600
(Name, address and telephone number of agent for service)
Copy to
Robert W. Berend, Esq.
Gold & Wachtel, LLP
110 East 59th Street
New York, New York 10022
(212) 909-9500
<PAGE> 2
Approximate date of commencement of the proposed sale to the public: As soon as
practicable following the date on which this Registration Statement becomes
effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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, check the following box and list the
Securities Act registration statement number of 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 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>
Proposed Proposed
Title of each Maximum Maximum
Class of Offering Aggregate Amount of
Securities Amount to be Price Offering Registration
to be Registered Registered Per Unit(1) Price(1) Fee(2)
- ---------------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par 3,180,000 $2.007(3) $6,382,260(3) $1,934
value, issuable upon shares
exercise of warrants
Common Stock. $.01 par 2,500,000 $2.00(4) $5,000,000(4) $1,515
value, issuable upon shares
conversion of notes
Common Stock, $.01 par 450,000 $2.125(5) $ 956,250(5) $ 290
value shares
Total $3,739
</TABLE>
<PAGE> 3
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Rounded to the nearest dollar.
(3) Pursuant to Rule 457(g) under the Securities Act, the weighted average of
the exercise prices of the outstanding warrants was used for the purpose
of calculating the registration fee.
(4) Pursuant to Rule 457(h) under the Securities Act, the conversion price of
the notes was used for the purpose of calculating the registration fee.
(5) Pursuant to Rule 457(c) under the Securities Act, the closing sales price
of the SAT Common Stock as reported on the American Stock Exchange on
January 14, 1997 was taken as the offering price of the shares for the
purpose of calculating the registration fee.
(6) An indeterminate number of securities is being registered pursuant to Rule
416 under the Securities Act to cover any adjustment in the number of
shares issuable as a result of the anti-dilution provisions of the
warrants and the convertible notes.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 4
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Registration Statement
Item Number and Caption Prospectus Caption
----------------------- ------------------
1. Forepart of the Registration Cover Page of Registration
Statement and Outside Front Statement and Outside
Cover Page of Prospectus Front Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus; Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors; Prospectus
Risk Factors and Ratio of Summary and Ratio of Earnings
Earnings to Fixed Charges to Fixed Charges Are Not Applicable
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Dilution
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Cover Page; Plan of Distribution
9. Description of Securities Not Applicable
to be Registered
10. Interests of Named Experts Not Applicable
and Counsel
11. Material Changes Material Changes
12. Incorporation of Certain Incorporation of Certain
Information by Reference Information by Reference
13. Disclosure of Commission Commission Position on
Position on Indemnification Indemnification
for Securities Act Liabilities
<PAGE> 5
PROSPECTUS
SUBSTANCE ABUSE TECHNOLOGIES, INC.
3,180,000 SHARES OF SAT COMMON STOCK ISSUABLE UPON
EXERCISE OF WARRANTS, 2,500,000 SHARES OF SAT COMMON
STOCK ISSUABLE UPON CONVERSION OF CONVERTIBLE NOTES AND
450,000 SHARES OFFERED BY SELLING STOCKHOLDERS
Substance Abuse Technologies, Inc. ("SAT") is offering, by this
Prospectus, an aggregate of 3,180,000 shares of its Common Stock, $.01 par value
(the "SAT Common Stock"), issuable upon the exercise of (1) Common Stock
purchase warrants expiring June 30, 2000 (the "June 30 Warrants") to purchase at
$2.00 per share an aggregate of 2,500,000 shares of the SAT Common Stock, (2)
500,000 shares of the SAT Common Stock issuable upon the exercise at $2.00 per
share of Common Stock purchase warrants expiring three years from the date of
this Prospectus (the "January __Warrants") and (3) 180,000 shares of the SAT
Common Stock issuable upon the exercise at $2.125 per share of Common Stock
purchase warrants granted or to be granted to employees of SAT or subsidiaries
thereof (the "Employee Warrants"). SAT will receive gross proceeds of $6,382,500
if all of the foregoing Warrants (including those to be granted) are exercised.
SAT is also offering, by this Prospectus, an aggregate of 2,500,000 shares
of the SAT Common Stock issuable upon the conversion of Convertible Senior
Promissory Notes due November 8, 1999 (the "Convertible Notes"). If all of the
Convertible Notes are converted, SAT's obligation to repay loans aggregating
$5,000,000 in principal amount will be satisfied.
In addition, the stockholders named in the table under the caption
"Selling Stockholders" (the "Selling Stockholders") are offering, by this
Prospectus, an aggregate of 450,000 shares of the SAT Common Stock consisting of
(1) 100,000 shares of the SAT Common Stock issuable upon the exercise of a
January __ Warrant, (2) 200,000 shares of the SAT Common Stock issuable upon the
exercise at $2.00 per share of a Common Stock purchase warrant expiring December
2, 1999 (the "December 2 Warrant"), (3) an aggregate of 50,000 shares of the SAT
Common Stock issuable upon the exercise at $1.8125 per share of Common Stock
purchase warrants expiring November 15, 1999 (the "Directors Warrants") issued
to the five directors of SAT who are not employees of SAT or a subsidiary
thereof as annual compensation for such services, (4) an aggregate of 10,000
shares of the SAT Common Stock issuable upon the exercise at $1.8125 per share
of Common Stock purchase warrants expiring November 15, 1999 (the "Lenders
Warrants") issued to the two holders of the Convertible Notes and (5) an
aggregate of 90,000 shares issuable upon the exercise of two of the Employee
Warrants because the holders are executive officers of SAT. The Selling
Stockholders have advised SAT that, when and if they exercise any of the
foregoing Warrants, they may, from time to time, offer the 450,000 shares
received upon exercise at the prices then prevailing on the American Stock
Exchange or in isolated transactions, at negotiated prices, with institutional
or other
<PAGE> 6
investors. SAT will not receive any of the proceeds from the sales of the shares
of the SAT Common Stock by the Selling Stockholders. The following directors of
SAT are among the Selling Stockholders: Alan I. Goldman, John C. Lawn, Peter M.
Mark, Michael S. McCord and Lee S. Rosen.
Since January 2, 1992, the SAT Common Stock has been listed on the
American Stock Exchange. During the period January 2, 1992 through October 25,
1996, the SAT Common Stock traded under the symbol "AAA." On October 28, 1996,
SAT changed its name from "U.S. Alcohol Testing of America, Inc." to "Substance
Abuse Technologies, Inc." As a result of such name change, commencing October
28, 1996, the SAT Common Stock has traded under the symbol "SAU." The closing
price of the SAT Common Stock as reported by such Exchange on January 14, 1997
was $2.125.
THE SHARES OFFERED BY THIS PROSPECTUS ARE SPECULATIVE IN THAT THEY INVOLVE
CERTAIN RISKS. SEE "RISK FACTORS" COMMENCING ON PAGE 5 HEREOF FOR A DISCUSSION
OF MATTERS WHICH SHOULD BE CONSIDERED BY PURCHASERS OF THESE SHARES.
<TABLE>
<CAPTION>
Underwriting Proceeds Proceeds
Price to Discounts and to to Other
Public Commissions(4) Issuer Persons
-------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Per share of Common $ 2.125(1) 0 0 $ 2.125(1)
Stock
Per Warrant share $ 2.007(2) 0 $ 2.007(2) 0
Per Note share $ 2.00(3) 0 $ 2.00(3) 0
Total for Common Stock $ 956,250(1) 0 0 $ 956,250(1)
Total for Warrant shares $6,382,500(2) 0 $6,382,500(2) 0
Total for Note shares $5,000,000(3) 0 $5,000,000(3) 0
</TABLE>
<PAGE> 7
- -----------------------
(1) Based on the closing sales price of the SAT Common Stock on January 14,
1997 as reported by the American Stock Exchange.
(2) Based on the weighted average of the exercise prices of the Warrants.
(3) Based on the conversion price of the Convertible Notes.
(4) Excludes expenses estimated at $55,000.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS THE 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
<PAGE> 8
AVAILABLE INFORMATION
SAT 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 and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
and information statements and other information filed with the Commission can
be inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the
following regional offices of the Commission: 7 World Trade Center, Suite 1300,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of this material
relating to SAT can also be obtained at prescribed rates from the Public
Reference Section of the Commission at its principal office at 450 Fifth Street
N.W., Washington, D.C. 20549 The Commission maintains a Web site that contains
reports, proxy and information statements and information regarding registrants
that file electronically with the Commission at the following Web site address:
http://www.sec.gov. Because the SAT Common Stock is traded on the American Stock
Exchange, reports, proxy and information statements and other information
concerning SAT can be inspected by contacting the American Stock Exchange, Inc.,
86 Trinity Place, New York, New York 10006-1881.
SAT has filed with the Commission a Registration Statement on Form S-3,
File No. 333- _____ (the "Registration Statement"), under the Securities Act of
1933, as amended (the "Securities Act"), with respect to (1) the offer by SAT of
an aggregate of 5,680,000 shares of the SAT Common Stock issuable upon (a) the
exercise on and after July 1, 1997 at $2.00 per share of the June 30 Warrants to
purchase an aggregate of 2,500,000 shares of the SAT Common Stock, (b) the
exercise upon the occurrence of certain specified events (see "Plan of
Distribution") at $2.00 per share of January ___ Warrants to purchase an
aggregate of 500,000 shares of the SAT Common Stock, (c) the exercise on
anniversary dates of the respective dates of grant (see "Plan of Distribution")
at $2.125 per share of the Employee Warrants to purchase an aggregate of 180,000
shares of the SAT Common Stock, of which Employee Warrants expiring between
September 11, 2000 and January 1, 2001 to purchase an aggregate of 201,000
shares are currently outstanding and Employee Warrants to purchase an aggregate
of 69,000 shares are still to be granted, and (d) the conversion on and after
July 1, 1997 at $2.00 per share of the Convertible Notes to acquire an aggregate
of 2,500,000 shares of the SAT Common Stock and (2) the offer by the Selling
Stockholders of (a) an aggregate of 450,000 shares of the SAT Common Stock when
and if the holders exercise the following Common Stock purchase warrants, all of
which are currently exercisable: (i) a January ___ Warrant at $2.00 per share to
purchase 100,000 shares of the SAT
2
<PAGE> 9
Common Stock, (ii) the December 2 Warrant at $2.00 per share to purchase 200,000
shares of the SAT Common Stock, (iii) the Directors Warrants at $1.8125 per
share to purchase an aggregate of 50,000 shares of the SAT Common Stock, (iv)
the Lenders Warrants at $1.8125 per share to purchase an aggregate of 10,000
shares of the SAT Common Stock and (v) an aggregate of 90,000 shares of the SAT
Common Stock when and if two of the holders of the Employee Warrants who are
executive officers of SAT exercise their Employee Warrants. The June 30
Warrants, the January ___ Warrants, the Employee Warrants, the December 2
Warrants, the Directors Warrants and the Lenders Warrants are collectively
referred to herein as the "Warrants."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following reports and registration statements of the Company filed pursuant to
Sections 12, 13 and 14 of the Exchange Act:
1. (a) Annual Report on Form 10-K for the fiscal year ended March 31,
1996;
(b) Form 10-K/A amending the foregoing filed on September 23, 1996;
2. (a) Quarterly Report on Form 10-Q for the quarter ended June 30, 1996;
(b) Form 10-Q/A amending the foregoing filed on September 20, 1996;
3. Quarterly Report on Form 10-Q for the quarter ended September 30,
1996.
4. (a) Current Report on Form 8-K filed on June 5, 1996;
(b) Current Report on Form 8-K/A filed on August 5, 1996;
(c) Current Report on Form 8-K/A filed on August 27, 1996;
(d) Current Report on Form 8-K/A filed on September 23, 1996;
5. Notice of Annual Meeting of Stockholders and Proxy Statement dated
September 12, 1996; and
6. Registration Statement on Form 8-A, File No. 0-18938.
All reports and definitive proxy or information statements filed pursuant
to Sections 13(a), 13(c ), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
securities 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 a 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 incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement
3
<PAGE> 10
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without charge,
upon written or oral request of such person, any of the documents incorporated
by reference herein, except for the exhibits to such documents. Requests should
be directed to Robert Stutman, Chairman of Board and Chief Executive Officer,
Substance Abuse Technologies, Inc., at the following address: 4517 North West
31st Avenue, Ft. Lauderdale, Florida 33309 or telephone number: (954) 739-9600.
A reasonable fee for duplicating and mailing will be charged for a copy of any
exhibit if such exhibit is requested.
THE COMPANY
SAT was incorporated on April 15, 1987 under the laws of Delaware to
design, manufacture and market instruments which measure blood alcohol
concentration by breath sample and analyzation. These operations are conducted
by the Alcohol Testing Products Division of SAT. Effective October 28, 1996, the
name of SAT was changed from U.S. Alcohol Testing of America, Inc. to Substance
Abuse Technologies, Inc. SAT maintains its principal executive offices at 4517
N.W. 31st Avenue, Ft. Lauderdale, Florida 33309, and its telephone number is
(954) 739-9600.
SAT's subsidiaries conduct or conducted the following operations:
1. U.S. Drug Testing, Inc. ("U.S. Drug"), which is 67.0% owned by SAT
and whose common stock trades on the Pacific Coast Stock Exchange,
is developing proprietary systems that will test for drug use. SAT
is currently seeking to acquire the minority stock interests in U.S.
Drug by an offer of shares of the SAT Common Stock to the minority
stockholders of U.S. Drug as consideration for their consent to a
merger (the "U.S. Drug Merger") of U.S. Drug with and into Drug
Testing Acquisition Corp., a wholly-owned subsidiary of SAT. There
can be no assurance that the U.S. Drug Merger will be successfully
consummated. If the U.S. Drug Merger is consummated, Drug Testing
Acquisition Corp. will be merged into SAT and thereafter these
operations will be conducted as the Drug Testing Products Division
of SAT.
2. Good Ideas Enterprises, Inc. ("Good Ideas"), which is approximately
60.8% owned by SAT and whose common stock trades in the
over-the-counter market, designed, marketed and distributed a
variety of traditional toy products for children of various ages.
The Good Ideas common stock was delisted from the Pacific Stock
Exchange effective January 1, 1997. SAT is currently seeking to
acquire the minority stock
4
<PAGE> 11
interests in Good Ideas by an offer of shares of the SAT Common
Stock to the minority stockholders of Good Ideas as consideration
for their consent to a merger (the "Good Ideas Merger") of Good
Ideas Acquisition Corp., a wholly-owned subsidiary of SAT, with and
into Good Ideas. Good Ideas was treated as a discontinued operation
in SAT's financial statements as of March 31, 1996. There can be no
assurance that the Good Ideas Merger will be consummated. SAT
intends to sell Good Ideas or its assets whether or not the Good
Ideas Merger is consummated and, if no acceptable offer is made, to
liquidate Good Ideas as soon as the results of the consent
solicitation for the Good Ideas Merger are known.
3. ProActive Synergies, Inc. ("ProActive"), which is a wholly-owned
subsidiary of SAT incorporated in June 1995, provided single source
services to assist corporations in their hiring practices ranging
from substance abuse testing and background screening to total
program management. ProActive was merged into SAT on December 31,
1996 and its operations are now conducted as the Employer Services
Division of SAT.
4. On May 21, 1996, SAT completed its acquisition of Robert Stutman &
Associates, Inc. ("RSA"), a provider of corporate drug-free work
place programs. Since January 1996, RSA had been designing policies
and programs on substance abuse prevention for customers of the
ProActive subsidiary. RSA was merged into SAT on December 31, 1996
and its operations are now conducted as the Robert Stutman &
Associates Consulting Division of SAT.
5. Alconet, Inc. ("Alconet"), which is a wholly-owned subsidiary
acquired by SAT in March 1995, has developed an alcohol testing
network to upload test results and information from various alcohol
breath testing devices. Alconet was merged into SAT on December 31,
1996 and its operations are now conducted as part of the Alcohol
Testing Products Division of SAT.
SAT currently operates a division called Biochemical Toxicology
Laboratories ("BioTox") which serves as a clinical laboratory performing drug
and alcohol testing.
U.S. Rubber Recycling, Inc. ("USRR"), which was a wholly-owned subsidiary
of SAT, manufactured and marketed floor covering products for office and
industrial use from used truck and bus tires. On April 30, 1996, USRR sold its
assets to an unaffiliated third party and discontinued operations. On December
31, 1996, USRR was dissolved.
5
<PAGE> 12
SAT, its subsidiaries and its divisions will be collectively referred to
herein as "the Company."
RISK FACTORS
The shares offered hereby are speculative, involve a high degree of risk
and should not be purchased by anyone unable to afford a loss of his entire
investment. In analyzing this offering, prospective investors should consider
all of the matters set forth below.
1. Operating Losses. The Company has sustained losses of $45,871,667 from
inception through September 30, 1996. Management initiated cost reduction
actions to reduce selling, general and administrative expenses in the fiscal
year ended March 31, 1996 ("fiscal 1996"), which prospective savings were offset
by the $903,000 in combined legal and other expenses paid or reimbursed by SAT
and incurred by both SAT and the dissident stockholder group in the May to
September 1995 consent solicitation contest, $250,000 in settlement of a claim
by two then Alconet officers relating to their then employment and $397,000 of
expenses incurred by Alconet, a then subsidiary acquired in March 1995 and
not included in the Company's operating results for the fiscal year ended
March 31, 1995 ("fiscal 1995") prior to its acquisition. Without the expenses
of the consent solicitation, management believes that the selling, general and
administrative expenses can be reduced in the fiscal year ending March 31, 1997
("fiscal 1997"). During the six months ended September 30, 1996, selling,
general and administrative expenses decreased by $196,000 to $2,991,000 from the
$3,187,000 in the comparable period in fiscal 1996. The decrease of $196,000
would have been larger except for approximately $353,000 of legal expenses
related to the taking private transactions and a registration statement under
the Securities Act primarily relating to the shares underlying warrants,
relocation and plant closure costs of approximately $100,000 and costs
associated with the transition of management of approximately $253,600. However,
there can be no assurance that management's expectations as to continuing cost
reductions will continue to be realized in fiscal 1997 or thereafter. In
addition, management has initiated an effort through SAT's Employer Services
Division (formerly ProActive, a subsidiary) to tap the human resource provider
market which it believes can result in substantial revenues; acquired RSA on May
21, 1996, which company had been designing drug-free workplace policies and
programs for ProActive clients since January 1996; will continue to attempt to
sell its toy operations; and has sold on April 30, 1996 the assets of its rubber
recycling operations, so that the Company can concentrate on alcohol and drug
testing and the related operations of the Robert Stutman & Associates Consulting
Division and the Employer Services Division as its core businesses. However,
there can be no assurance that management will receive what it considers to be
an acceptable offer for Good Ideas. In addition, the Board will liquidate Good
Ideas if no acceptable offer is received by the date on which the results of the
consent solicitation for the Good Ideas Merger are known. In addition, the
decision to develop a
6
<PAGE> 13
saliva based drug testing product, rather than complete first the urine based
drug testing product for marketing, will, in the opinion of management, enhance
the Company's future growth, but has delayed the receipt of any revenues from
U.S. Drug until late in the fiscal year ending March 31, 1998 ("fiscal 1998") at
the earliest and probably not until the following fiscal year, assuming
successful consummation of the research and development program, as to which
there can be no assurance. If the saliva based product reaches a certain stage
of development, which currently is not anticipated until the summer of 1997 at
the earliest, management will consider the feasibility of obtaining a marketing
partner, which partner could fund the later stages of product development, but
also would decrease future marketing revenues. Management believes, therefore,
that it is currently too speculative to project any revenues from this source.
See the section "Lack of Funding May End Possible Drug Testing Products" under
this caption "Risk Factors." Accordingly, it is management's belief, especially
in view of the significant losses in the fiscal year ended March 31, 1994
("fiscal 1994"), fiscal 1995, fiscal 1996 and the first six months of fiscal
1997, that, despite these management programs, the Company will not turn
profitable in fiscal 1997. Management believes that, as a result of the
operations of its Employer Services Division and its Robert Stutman & Associates
Consulting Division, the Company, without giving effect to the results of
operations of U.S. Drug, will begin to operate at a profit during fiscal 1998
and that it is too speculative at the current time to project in which quarter.
There can be no assurance that this objective will be achieved when management
anticipates, if at all. Management is also of the opinion that it is currently
too speculative to project as to when, if ever, the Company, after giving effect
to the results of operations of U.S. Drug will become profitable.
2. Need for Financing. Management believes that, as a result of (1) its
recently consummated sale of the Convertible Notes in the principal amount of
$5,000,000, (2) the exercise of Common Stock purchase warrants and a stock
option during the period January 1996 through September 30, 1996 resulting in
gross proceeds to SAT of $4,770,621, (3) the closing of a private placement
pursuant to Regulation D under the Securities Act in December 1995 through
February 1996 resulting in gross proceeds of $3,750,000, (4) the contemplated
future exercise of Common Stock purchase warrants and (5) management's belief
that, except for the cash requirements of U.S. Drug, the Company will begin to
have a positive cash flow from operations during fiscal 1998, the Company will
be able to meet its cash requirements other than those for U.S. Drug (which will
require additional financing) during the next 12 months. However, there can be
no assurance that this objective will be achieved and the Company in such event
would have to seek new financing, which financing may not be available or, if
available, may not be on acceptable terms. In addition, depending on market and
other conditions relating to the individual holder, there can be no assurance
that the outstanding Common Stock purchase warrants will be exercised and, if
exercised, when.
In the event that the Company is unable to generate sufficient cash flow
from operations or from sources other than operations as described in the
preceding paragraph (which event, in
7
<PAGE> 14
management's opinion, is not likely to occur based upon the Company's past
experience; however, there can be no assurance that management will be
successful in its financing efforts), then the Company may have to reduce
operations in order to survive, thereby not only resulting in less cash from
operations currently, but also delaying future revenue growth. In such event the
market price of the SAT Common Stock is likely to drop, not only discouraging
the future exercises of SAT's warrants and possibly discouraging potential new
investors, but also increasing the risk that a current investor in SAT may lose
the value of his, her or its investment.
3. Lack of Funding May End Possible Drug Testing Products. U.S. Drug will
require up to $10,000,000 in addition to the approximately $8,500,000 already
expended as of October 31, 1996 to complete the development of a saliva based
testing product. Although SAT's management believes that SAT can raise the
necessary funds to complete this project, failure to raise the funds will result
in no drug testing operations by the Company based on use of its own products.
U.S. Drug would, as a result, have to cease operations because it has no other
product to market or service to furnish. In addition, the Employer Services
Division would, in such circumstances, have to continue to use external drug
testing sources for its services, thereby risking increased costs when and if
the laboratories currently performing such services increase their charges.
Prior management had considered the alternative to financing of seeking a
development partner which would share the costs. However, current management is
of the opinion that use of one of the major pharmaceutical companies to assist
in the product development at this stage of development risks giving
confidential data to potential competitors. Management also believes that such
use may result in marketing rights demands that would later reduce the revenues
to the Company assuming successful consummation of the development program.
Current management also believes that a potential marketing partner cannot be
obtained until there is a working prototype for the instrument and the
disposables and certain preliminary clinical data is obtained. Current
management does not believe that the prototype will be produced until the summer
of 1997 at the earliest and that, at that stage of development, the greater part
of the estimated $10,000,000 in development expenses will already have been
incurred, making it less beneficial to obtain a development partner at that
time. There can be no assurance that a development/marketing partner can be
obtained upon acceptable terms, whether at that later date or at all.
4. Competition. The Company has a variety of competitors depending on the
particular aspect of its business, many of which have far greater financial
resources and marketing staffs than the Company. There can be no assurance that
the Company will be able to compete successfully with these companies.
Alcohol Testing
8
<PAGE> 15
The alcohol detection equipment industry is highly competitive. SAT
competes with other small companies such as CMI Inc., Intoximeters, Inc. and
Lifeloc, Inc., which also offer alcohol testing equipment. Although all of these
competitors are believed currently to have greater revenues than SAT from sales
of alcohol testing devices, management is of the opinion that only CMI, Inc.,
which is a subsidiary of MPD, Inc., may have greater financial resources than
SAT. In addition, several companies, including Hoffman-LaRoche, Inc. ("Roche")
and STC Technologies, Inc., offer an on-site screening saliva based alcohol
test. Roche has, and several of these other companies may have, greater revenues
and financial resources than the Company.
Drug Testing
The Company has not received any revenues from U.S. Drug because its
products are still in the developmental stage. Currently U.S. Drug is developing
two products which will screen for the presence of drugs of abuse, one which
will utilize flow immunosensor technology with urine samples as a medium of
testing and another which will utilize flow immunosensor technology with saliva
samples as a medium of testing. If the products are developed, U.S. Drug will
compete with many companies which currently utilize urine samples as a medium of
testing, such as Syva (a division of Behring Diagnostics), Roche, Marion
Laboratories, Inc., Abbott Laboratories, Inc., Editek, Inc., Hycor Biomedical,
Inc., Princeton Biomedical, Inc. and BioSite, Inc., major pharmaceutical
companies which also provide substance abuse screening methods. To management's
knowledge, no competitor is currently offering a saliva based testing product on
an "on site" basis for drugs of abuse. However, management has been advised that
at least one and possibly more companies may have such product under development
and, accordingly, there can be no assurance that a competitor will not offer
such a product in the future. Even if no such product is offered, U.S. Drug
anticipates competition from other substance abuse detection methods provided by
the major companies mentioned in this paragraph. If U.S. Drug successfully
completes development of first its saliva sample testing method and second its
urine sample testing method, as to which there can be no assurance, it is not
certain whether U.S. Drug will have the financial resources to compete
successfully with other companies which have greater resources available to them
without the assistance of a major pharmaceutical or other company possessing
such resources. There can be no assurance that the assistance of such a company
can be obtained, especially because none is currently being sought or will be
sought until at least the summer of 1997. In addition, U.S. Drug's delay in
bringing a drug testing product to market may adversely affect its future
marketing efforts because of the name recognition gained by competitors actively
marketing a product during this interim period.
Human Resource Provider Operations
9
<PAGE> 16
The Employer Services Division (formerly the ProActive Subsidiary) is a
single source service provider, meaning that it is a provider of both substance
abuse testing services and background screening services. A single source
service provider is a relatively new concept. Additionally, the Company, through
the acquisition in May 1996 of RSA, can also provide customized loss prevention
services specifically designed to reduce the negative effect of workplace
substance abuse. The competition from single source providers which the Employer
Services Division currently encounters is primarily from smaller local and
regional companies. To management's knowledge, currently there is no single
source provider on a national level, which is what the Employer Services
Division provides, and there are no providers of customized programs and
policies other than the Robert Stutman & Associates Consulting Division.
However, Laboratory Corporation of America, through Med-Express, is currently
offering background screening services to corporations on a limited basis.
Although, the Employer Services Division has experienced personnel in both the
drug testing and investigative arena, there can be no assurance that the
Employer Services Division will become successful in marketing its services as a
single source provider on a national level. In addition, the Employer Services
Division will face competition from other companies which provide each of these
services separately such as the companies mentioned in the preceding subsections
of this section "Competition" under this caption "Risk Factors" as it relates to
substance abuse testing providers (including the laboratories which are vendors
to the Employer Services Division), and local or regional investigative firms or
private investigators (including vendors to the Employer Services Division) as
it relates to background investigative services. Assuming that the combined
operations of the Robert Stutman & Associates Consulting Division and the
Employer Service Division achieve national status as a single source provider,
there can be no assurance that existing or new companies will not enter the
national marketplace to compete with these SAT operations.
5. No Common Stock Dividends. SAT has not paid any cash dividends on the
SAT Common Stock and, based on the Company's cash requirements and continuing
losses, does not anticipate paying cash dividends on the SAT Common Stock in the
foreseeable future.
6. Depressive Effect on Market of Warrant or Option Exercises, Potential
144 Sales and Untimely Sales by Selling Stockholders. Any exercise of the
outstanding SAT Common Stock purchase warrants of SAT will increase the shares
available for public trading, which may depress the public market price for the
SAT Common Stock. Pursuant to a Prospectus dated October 4, 1996 (the "October 4
Prospectus") SAT is offering an aggregate of 2,000,000 shares of the SAT Common
Stock issuable upon the exercise at $2.00 per share of Common Stock purchase
warrants expiring December 17, 1999 (the "December 17 Warrants"), all of which
shares could be reoffered by the holders thereof. Because none of the holders is
an "affiliate" of SAT (as such term is defined in Rule 405 under the Securities
Act), Gold & Wachtel, LLP, general counsel to SAT, is of the opinion that such
holders will not require for resale of the underlying shares a prospectus naming
them as
10
<PAGE> 17
selling stockholders and otherwise complying with Section 10(a)(3) of the
Securities Act. In addition, as of December 31, 1996, selling stockholders named
in the October 4 Prospectus were offering an aggregate of 4,048,621 shares of
the SAT Common Stock when and if Common Stock purchase warrants expiring between
May 17, 1997 and July 18, 2003 are exercised. The October 4 Prospectus also
relates to the resale by selling stockholders named therein (including the
Chairman of the Board and Chief Executive Officer of SAT) of an aggregate of
500,000 shares of the SAT Common Stock issued upon the acquisition of RSA and
certain other shares previously issued upon the exercise of Common Stock
purchase warrants and a stock option. This Prospectus relates to the issuance by
SAT of (a) up to an aggregate of 3,180,000 shares of the SAT Common Stock
issuable upon the exercise of the June 30 Warrants, most of the January __
Warrants and most of the Employee Warrants and (b) up to an aggregate of
2,500,000 shares issuable upon the conversion of the Convertible Notes, all of
which 5,680,000 shares could be reoffered by the holders thereof. Because all
but two of the holders are not "affiliates" of SAT (as such term is defined in
Rule 405 under the Securities Act), Gold & Wachtel, LLP, general counsel to
SAT, is of the opinion that such holders will not require for resale of the
underlying shares a prospectus naming them as selling stockholders and
otherwise complying with Section 10(a)(3) of the Securities Act. This
Prospectus also relates to the offer by the Selling Stockholders of (x) an
aggregate of 345,000 shares when and if one of the January ___ Warrants, the
December 2 Warrants, the Directors Warrants and the Lenders Warrants are
exercised and (y) an aggregate of 90,000 shares when and if the two holders of
Employee Warrants who are affiliates of SAT exercise such Employee Warrants and
offer to resell the underlying shares. Accordingly, because the last of the SAT
warrants described in this paragraph do not expire until July 18, 2003, the
potential exercises and conversions and the subsequent sales of the underlying
shares may act as an overhang on the market for the SAT Common Stock for a long
period.
As of December 31, 1996, there were also reserved for issuance: (a)
175,495 shares of SAT Common Stock issuable upon the exercise at exercise prices
ranging between $1.87 and $4.00 per share of Common Stock purchase warrants
expiring between September 16, 1997 and December 17, 1997; (b) 61,250 shares
issuable upon the exercise at exercise prices ranging between $1.0625 and $4.00
per share of Common Stock purchase warrants expiring between May 17, 1997 and
September 1, 1998; (c) 77,500 shares issuable upon the exercise at exercise
prices ranging between $2.00 and $2.50 per share of Common Stock purchase
warrants expiring between September 1, 1998 and December 31, 2001; (d) 185,207
shares issuable upon the conversion of the shares of the Class A Preferred
Stock, $.01 par value (the "Class A Preferred Stock"); (e) 60,000 shares
issuable upon the exercise at $1.9375 per share of Common Stock purchase
warrants expiring November 15, 1998 issued to non-employee directors of SAT and
a consultant; (f) 500,000 shares issuable upon the exercise of three Common
Stock purchase warrants expiring November 15, 1998 (as to 200,000 shares at
$1.9375 per share), November 15, 2000 (as to 150,000 shares at $3.00 per share)
and November 15, 2000 (as to 150,000 shares at $2.00 per share) issued to a
director in connection with
11
<PAGE> 18
his services in a capacity other than as a director, including those related to
the then pending private placement pursuant to Regulation D under the Securities
Act; (g) 300,000 shares issuable upon the exercise at $3.125 per share of a
Common Stock purchase warrant expiring April 17, 1999 issued to the same
director for other services not in his capacity as a director; (h) 235,000
shares issuable upon the exercise at exercise prices ranging between $1.875 and
$2.8125 per share of Common Stock purchase warrants expiring between August 27,
1998 and July 18, 2003 issued to employees of the Company; (i) 189,376 shares
issuable upon the exercise at $2.00 per share of a Common Stock purchase warrant
expiring March 31, 1999 issued to RSA as a consultant to ProActive in
consideration of its services rendered to ProActive operations (the warrant
being divided among the RSA shareholders after the acquisition of RSA by SAT);
(j) 792,000 shares issuable upon the exercise at $2.125 per share and 108,000
shares issuable upon the exercise at $3.125 per share of Common Stock purchase
warrants expiring May 20, 1999 issued to the RSA shareholders as part of the RSA
purchase price; (k) 200,000 shares issuable upon the exercise at $2.125 per
share and 400,000 shares issuable upon the exercise at $3.125 per share of a
Common Stock purchase warrant expiring May 12, 2003 issued to the President of
SAT; (l) 700,000 shares issuable upon the exercise at $2.4375 per share of a
Common Stock purchase warrant expiring February 26, 1999 issued to a consultant
to SAT for financial public relations services; (m) 100,000 shares issuable upon
the exercise at $2.17 per share of Common Stock purchase warrants expiring
October 19, 2000 issued to the placement agents for a private placement pursuant
to Regulation S under the Securities Act; and (n) 150,000 shares issuable upon
the exercise at $2.25 per share of a Common Stock purchase warrant expiring
January 29, 2000 issued to an individual in connection with settlement of a
litigation against SAT. The 4,048,621 shares of the SAT Common Stock issuable
upon the exercise of the warrants described in this paragraph have all been
registered under the Securities Act for resale by the holders thereof and, as
indicated in the preceding paragraph, are being offered pursuant to the October
4 Prospectus. All of the foregoing Common Stock purchase warrants were granted
at or above the fair market value of the SAT Common Stock on the respective date
of grant. If all of the 4,048,621 shares issuable upon the exercises of the
foregoing Common Stock purchase warrants, the 185,207 shares issuable upon the
conversion of the Class A Preferred Stock, the aggregate of 500,000 and other
outstanding shares and the aggregate of 3,130,000 shares issuable upon the
exercise of the December 17 Warrants, the January __ Warrants, the Employee
Warrants, the December 2 Warrant, the Directors Warrants and the Lenders
Warrants as described in the preceding paragraph and, after July 1, 1997, the
aggregate of 5,000,000 shares that could be issued upon the conversions of the
Convertible Notes and the exercises of the June 30 Warrants, or a substantial
number of the foregoing shares, were publicly sold over a short time period, the
market price of the SAT Common Stock could decline significantly because the
market might lack the capacity to absorb a large number of shares during a brief
period. Such a decline in market price may make the terms of any future
financing more difficult for SAT to consummate on a favorable basis.
12
<PAGE> 19
To the extent that the Good Ideas Merger is consummated, shares of the SAT
Common Stock will be issued to the minority stockholders of Good Ideas. To the
extent that the U.S. Drug Merger is consummated, shares of the SAT Common Stock
will be issued to the minority stockholders of U.S. Drug. The aggregate of these
shares of the Common Stock issued on such transactions will, with limited
exceptions, be freely tradable and, if a substantial number of these shares were
offered for sale at the same time, such offerings could have the same adverse
impact as described in the preceding paragraph.
7. Technological Changes. The substance abuse testing industry is a
technological sensitive industry in that companies are constantly developing new
methods and making changes to current methods for substance abuse detection in
order to remain competitive. SAT competes, and, when its development stage for a
saliva based test and a urine based test are completed, U.S. Drug will compete,
with larger companies such as those named under the section "Competition" under
this caption "Risk Factors," many of which have substantially greater financial
resources available to them to invest in the research and development of their
products than SAT and U.S. Drug. These competitors may develop products in the
future which may render SAT's and U.S. Drug's products obsolete or
non-competitive from a pricing point of view. To remain competitive, SAT and
U.S. Drug may require substantial financial resources for personnel and other
costs to conduct research and update current products to reflect the
technological advances; however, such financial resources may not be available.
See the section "Need for Financing" under this caption "Risk Factors."
8. Market Limitation for Alcohol Testing Products. The potential markets
for SAT's alcohol testing products may be substantially limited to the ones in
which it currently sells - law enforcement, correctional facilities, medical and
clinical facilities, alcohol treatment centers and emergency rooms. This market
insofar as alcohol testing is concerned may be saturated and the opportunity for
growth limited; however, management of SAT believes that the demand for alcohol
testing could grow in the industrial market, in which SAT does some current
selling, on a broader basis as did the demand for drug testing at an earlier
date. There can be no assurance that such growth will occur or that, if the
growth occurs, SAT will successfully penetrate the industrial market.
9. Possible Market Making Restrictions. Unless granted an exemption by the
Commission from Rule 10b-6 under the Exchange Act, any soliciting broker-dealers
will be prohibited from engaging in any market making activities regarding SAT's
securities for two business days prior to any solicitation activity on behalf of
the Selling Stockholders or the termination of any right that soliciting
broker-dealers may have to receive a fee for the exercise of the Warrants
following such solicitation. As a result, soliciting broker-dealers may be
unable to continue to provide a market for SAT's securities during certain
periods while the Warrants or the Options are exercisable.
13
<PAGE> 20
DILUTION
As of September 30, 1996, there were 35,603,092 shares of the SAT Common
Stock outstanding and the net tangible book value of SAT was $1,119,735 or $.03
per share of the SAT Common Stock. Subsequent to September 30, 1996, Common
Stock purchase warrants for 427,499 shares were exercised for gross proceeds of
$441,598. The effect of these exercises increases the net tangible book value
per share to $.04. Net tangible book value per share of the SAT Common Stock is
the tangible assets of SAT less all liabilities, minority interests in
subsidiaries and the Class A Preferred Stock liquidation preference divided by
the number of shares of the SAT Common Stock outstanding. If all shares of the
Class A Preferred Stock are converted into shares of the SAT Common Stock, SAT
would have 36,215,798 shares of the SAT Common Stock outstanding with a net
tangible book value of $1,767,118 or $.05 per share of the SAT Common Stock. If
all of the outstanding Common Stock purchase warrants were exercised, including
the June 30 Warrants for 2,500,000 shares, and a maximum of 3,636,364 shares
were issued on the conversion of the Convertible Notes and the exercise of the
other warrants issued between October 1, 1996 and December 20, 1996, SAT would
have 49,533,908 shares of the SAT Common Stock outstanding with a net tangible
book value of $27,616,484 or $.56 per share of the SAT Common Stock.
The following table reflects the maximum potential dilution that may be
incurred by the various holders of the Warrants after the exercise of their
respective Warrants and assuming the conversion of the Class A Preferred Stock
as described in the preceding paragraph:
Net tangible book value per share before Warrant Exercise $ .05
Dilution per share to $1.375 Convertible Note Holders $1.325
Dilution per share to $1.8125 Warrantholders $1.7625
Dilution per share to $2.00 Warrantholders $1.95
Dilution per share to $2.125 Warrantholders $2.075
Shares of the SAT Common Stock issuable upon the exercise of the Warrants
and the Convertible Notes are at the following exercise prices per share:
3,363,364 at $1.375; 50,000 at $1.8125, 3,300,000 at $2.00 and 185,000 at
$2.125.
The actual dilution will be determined based on the actual shares
issued and the proceeds received therefrom.
Those investors purchasing shares of the SAT Common Stock from the Selling
Stockholders would have a dilution of $1.575 per share based upon a market price
of $1.625 on December 26, 1996.
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<PAGE> 21
USE OF PROCEEDS
The amount of the net proceeds arising from the exercises of the Warrants
is not ascertainable because there can be no assurance of any such exercises.
SAT will use these proceeds, if any, for general corporate purposes including
salaries and working capital in no allocable order of priority. If all of the
Warrants as to which the underlying shares are being offered pursuant to this
Prospectus, whether by SAT or by the Selling Stockholders, were exercised, SAT
would realize gross proceeds of $7,282,500. If less than all of the Warrants are
exercised, the amount available for working capital would be reduced. SAT will
receive no proceeds from the sales by the Selling Stockholders of the shares of
the SAT Common Stock to be offered by them. SAT will receive no proceeds upon
the conversion of the Convertible Notes; however, SAT's obligation to pay loans
aggregating $5,000,000 in principal amount will be cancelled.
SELLING STOCKHOLDERS
The table below sets forth (1) the number of shares of the SAT Common
Stock (an aggregate of 345,000) registered under the Securities Act pursuant to
the Registration Statement and to be offered by the Selling Stockholders named
in the following table pursuant to this Prospectus; (2) the number of shares of
the SAT Common Stock owned beneficially by each such Selling Stockholder as of
December 31, 1996 before and after such offering; and (3) the percentage of
beneficial ownership before and after the offering. Because a January Warrant
to purchase 500,000 shares of the SAT Common Stock is not currently exercisable
as to such shares (see the paragraph succeeding the table), Gold & Wachtel,
LLP, general counsel to SAT is of the opinion that these shares may be
registered under the Securities Act pursuant to the Registration Statement
for issuance by SAT. Because the holder is not, nor are any persons associated
with such holder, an affiliate of SAT as such term is defined in Rule 405
under the Securities Act, in the opinion of Gold and Wachtel, LLP, general
counsel to SAT, the holder is not required, upon resale after exercise, to
deliver a prospectus naming such holder as a Selling Stockholder and
otherwise complying with Section 10(a)(3) under the Securities Act.
15
<PAGE> 22
<TABLE>
<CAPTION>
Number of Shares Percentage (1)
----------------------------------------- -----------------
Name Before Offered After Before After
- ---- ------ ------- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Alan I. Goldman(2) 20,000(3) 10,000 10,000 nil nil
Capital Strategists, Inc 600,000(4) 100,000 500,000 1.6% 1.4%
John C. Lawn(2) 20,000(3) 10,000 10,000 nil nil
Peter M. Mark(2) 587,600(3) 10,000 577,600 1.6% 1.6%
Michael S. McCord(2) 214,441(5) 10,000 204,441 nil nil
Lee S. Rosen(2) 1,478,648(6) 10,000 1,468,648 4.0% 4.0%
Steven A. Cohen 1,748,100(7) 5,000 1,743,100 4.9% 4.9%
S.A.C. Capital
Associates, LLC 604,100(8) 5,000 599,100 1.7% 1.7%
Robert Muccini(9) 40,000(10) 40,000 -0- nil -0-
Dennis Wittman(9) 50,000(10) 50,000 -0- nil -0-
</TABLE>
- ---------------------
(1) The percentages computed in this column of the table are based upon
35,830,591 shares of the SAT Common Stock outstanding on December 31, 1996
and effect being given, where appropriate, pursuant to Rule 13d-3(d)(1)(i)
under the Exchange Act, to shares issuable upon the exercise of Warrants
which are currently exercisable or exercisable within 60 days of December
31, 1996.
(2) A director of SAT.
(3) The shares reported in the table as being beneficially owned reflect or
include (a) 10,000 shares of the SAT Common Stock issuable upon the
exercise at $1.9375 per share of a Common Stock purchase warrant expiring
November 15, 1998 (the "November 15 Warrant") and (b) 10,000 shares of the
SAT Common Stock issuable at $1.25 per share upon the exercise of a
Directors Warrant, both issued to the holder as a director of SAT
16
<PAGE> 23
who is not employed by SAT or a subsidiary thereof. The holder is offering
only the shares described in (b) pursuant to this Prospectus and is
offering the shares described in (a) pursuant to the October 4 Prospectus.
(4) The shares reported in the table as being beneficially owned reflect the
shares issuable upon the exercise of the January ___ Warrants. The holder
is only offering pursuant to this Prospectus 100,000 shares of the SAT
Common Stock because the January ___ Warrant is currently exercisable as
to such shares and, accordingly, does not meet all of the standards set
forth in the introductory paragraph to this table.
(5) The shares reported in the table as being beneficially owned include (a)
10,000 shares of the SAT Common Stock issuable upon the exercise at
$1.9375 per share of a Common Stock purchase warrant expiring November 15,
1998 issued to Mr. McCord as a consultant to the Board of Directors of SAT
and (b) 10,000 shares of the SAT Common Stock issuable at $1.8125 per
share upon the exercise of a Directors Warrant issued to Mr. McCord on the
same basis as described in Note (3) to this table. He is offering only the
shares described in (b) pursuant to this Prospectus and is offering the
shares described in (a) pursuant to the October 4 Prospectus.
(6) The shares reported in the table as being beneficially owned include (a)
200,000 shares of the SAT Common Stock issuable at $2.00 per share upon
the exercise of the December 2 Warrant; (b) 10,000 shares of the SAT
Common Stock issuable upon the exercise at $1.9375 per share of a November
15 Warrant issued to Mr. Rosen as a director on the same basis as
described in Note (3) to this table; (c) 10,000 shares of the SAT Common
Stock issuable upon the exercise at $1.8125 per share of a Directors
Warrant issued to him as a director on the same basis as described in Note
(3) to the table; (d) 200,000 shares of the SAT Common Stock issuable upon
the exercise at $1.9375 per share of a Common Stock purchase warrant
expiring November 15, 1998; (e) 150,000 shares of the SAT Common Stock
issuable upon the exercise at $3.00 per share of a Common Stock purchase
warrant expiring November 15, 2000; (f) 150,000 shares of the SAT Common
Stock issuable upon the exercise at $2.00 per share of a Common Stock
purchase warrant expiring November 15, 2000; and (g) 300,000 shares of the
SAT Common Stock issuable upon the exercise at $3.125 per share of a
Common Stock purchase warrant expiring April 17, 1999. Mr. Rosen is
offering only the shares described in (a) and (c ) pursuant to this
Prospectus and is offering all of the other shares pursuant to the October
4 Prospectus.
(7) The shares reported in the table as being beneficially owned reflect (a)
1,743,100 shares of the SAT Common Stock as reported in a Schedule 13D, as
amended, filed by the holder and another and (b) 5,000 shares of the SAT
Common Stock issuable at $1.8125
17
<PAGE> 24
per share upon the exercise of a Lenders Warrant. The shares reported in
the table do not reflect (x) 2,500,000 shares of the SAT Common Stock
issuable upon the conversion of a Convertible Note and (y) 1,250,000
shares of the SAT Common Stock issuable at $2.00 per share upon the
exercise of a June 30 Warrant because neither the Convertible Note is
convertible, nor the June 30 Warrant is exercisable, at December 31, 1996
or within 60 days after December 31, 1996. The holder is offering only the
shares described in (b) pursuant to this Prospectus. Mr. Cohen filed the
Schedule 13D, as amended, with S.A.C Capital Advisors, LLC because their
joint beneficial ownership may constitute ownership by a "group" as such
term is defined in Rule 13d-5(b) under the Exchange Act. Based on the
Schedule 13D, as amended, and the subsequent grants by SAT, the group
beneficially owned an aggregate of 2,352,200 shares of the Common Stock or
6.6% of the outstanding shares at December 31, 1996.
(8) The shares reported in the table as being beneficially owned reflect (a)
599,100 shares of the SAT Common Stock as reported in a Schedule 13D, as
amended, filed by the holder and another and (b) 5,000 shares of the SAT
Common Stock issuable at $1.8125 per share upon the exercise of a Lenders
Warrant. The Schedule 13D, as amended, reported that S.A.C. Capital
Associates, LLC, an Anguillan limited liability company, acquired the
foregoing securities, but, because S.A.C. Capital Advisors, LLC, a
Delaware limited liability company, has voting and dispositive power over
the securities, the latter was deemed to be the beneficial owner thereof.
The shares reported in the table do not reflect (x) 2,500,000 shares of
the SAT Common Stock issuable upon the conversion of a Convertible Note
and (y) 1,250,000 shares of the SAT Common Stock issuable at $2.00 per
share upon the exercise of a June 30 Warrant because neither the
Convertible Note is convertible, nor the June 30 Warrant is exercisable,
at December 31, 1996 or within 60 days after December 31, 1996. The holder
is offering only the shares described in (b) pursuant to this Prospectus.
See Note (7) to this table for information as to group ownership.
(9) An executive officer of SAT.
(10) The shares reported in the table as being beneficially owned and being
offered pursuant to this Prospectus reflect shares of the SAT Common Stock
issuable at $2.125 per share upon the exercise of an Employee Warrant.
PLAN OF DISTRIBUTION
Each of the holders of (1) the Directors Warrants to purchase an aggregate
of 50,000 shares of the SAT Common Stock, (2) the Lenders Warrants to purchase
an aggregate of 10,000 shares of the SAT Common Stock, (3) the December 2
Warrant to purchase 200,000 shares of the SAT
18
<PAGE> 25
Common Stock, (4) a January ___ Warrant to purchase 100,000 shares of the SAT
Common Stock and (5) Employee Warrants to purchase an aggregate of 90,000 shares
of the SAT Common Stock have advised SAT that, when and if he or it exercises
any of the foregoing Warrants, all of which except the Employee Warrants are
currently exercisable, the holder may, from time to time, offer these shares
pursuant to the Prospectus as a Selling Stockholder at the prices then
prevailing on the American Stock Exchange or in isolated transactions, at
negotiated prices, with institutional or other investors and that the holder has
engaged no underwriter to act for him, or it, although sales may be effected for
each of such holders through his or its personal broker-dealer.
In addition, the holders of the June 30 Warrants, the January ___ Warrants
(as to 500,000 shares), the Employee Warrants (as to 95,000 shares) and the
Convertible Notes have advised SAT that, when and if they exercise or convert
their respective securities, they may, from time to time, sell the underlying
shares of the SAT Common Stock in the manner described in the preceding
paragraph. These securities become exercisable or convertible as follows:
(1) The June 30 Warrants do not become exercisable, nor may the holders
convert the Convertible Notes, until July 1, 1997.
(2) The January ___ Warrants were granted to Capital Strategists, Inc.
as compensation for financial public relations services. A January
___ Warrant to purchase 100,000 shares of the SAT Common Stock is
exercisable immediately and the underlying shares are being offered
by the holder as a Selling Stockholder pursuant to this Prospectus
as described in the preceding paragraph. The other January ___
Warrants become exercisable pursuant to one of these alternative
formulas: (1)(a) a January ___ Warrant becomes exercisable as to its
125,000 shares of the SAT Common Stock only if the closing bid price
of the SAT Common Stock is $2.125 per share or higher, (b) a January
__ Warrant becomes exercisable as to its 125,000 shares of the SAT
Common Stock only if the closing bid price of the SAT Common Stock
is $2.625 per share or higher, (c) a January ___ Warrant becomes
exercisable as to its 125,000 shares of the SAT Common Stock only if
the closing bid price of the SAT Common Stock is $3.25 per share or
higher and (d) a January ___ Warrant becomes exercisable as to its
125,000 shares of the SAT Common Stock only if the closing bid price
of the SAT Common Stock is $3.75 per share or higher, the closing
bid price in each instance to be the average of the closing bid
prices of the SAT Common Stock during the five prior trading days,
or (2) the January ___ Warrants described in subparagraphs 1(a),
(b), (c) and (d) become exercisable as to 60,000 shares of the SAT
Common Stock for each $500,000 in value of the SAT Common Stock
purchased by one or more of the holder's contacts up to a maximum of
500,000 shares of the SAT Common Stock.
19
<PAGE> 26
(3) Each of the Employee Warrants first becomes or, when granted, will
first become exercisable as to a quarter of the shares of the SAT
Common Stock subject thereto on the first anniversary of its date of
grant and thereafter will become exercisable as to a quarter of the
shares on the three successive anniversary dates. Each of the
Employee Warrants expires or, when granted, will expire as to each
installment three years after the date the Employee Warrant becomes
exercisable as to such installment.
The 5,595,000 shares of the SAT Common Stock underlying the June 30
Warrants, the January ___ Warrants (as to 500,000 shares), the Employee
Warrants (as to 95,000 shares) and the Convertible Notes have been registered
under the Securities Act pursuant to this Registration Statement for issuance by
SAT because no such security is currently exercisable or convertible. Because
none of the holders of the foregoing Warrants and Convertible Notes is an
affiliate of SAT as such term is defined in Rule 405 under the Securities Act,
such holders will not, in the opinion of Gold & Wachtel, LLP, general counsel
to SAT, require, after exercise or conversion in order to resell, a prospectus
(a) naming him or it as a Selling Stockholder with respect to the shares of the
SAT Common Stock issuable upon the exercise or conversion and (b) otherwise
complying with Section 10(a)(3) of the Securities Act.
SAT, its officers, directors, affiliates and the Selling Stockholders are
obligated to take such steps as may be necessary to ensure that the offer and
sale by such parties of the 450,000 shares of the SAT Common Stock offered by
this Prospectus (the "Distribution") shall comply with the requirements of the
federal securities laws, including Rule 10b-6 (the "Rule") and other applicable
anti-manipulation provisions of the Exchange Act.
In general, Rule 10b-6 under the Exchange Act prohibits any person
connected with the Distribution from directly or indirectly bidding for, or
purchasing for any account in which he, she or it has a beneficial interest, any
shares of the SAT Common Stock or any right to purchase shares of the SAT Common
Stock, or attempting to induce any person to purchase shares of the SAT Common
Stock or rights to purchase shares of the SAT Common Stock, until after he, she
or it has completed his, her or its participation in the Distribution.
SAT has advised its directors, officers and affiliates not to purchase any
shares of the SAT Common Stock or other securities of the Company convertible
into shares of the SAT Common Stock during the Distribution Period in violation
of the Rules and Regulations promulgated under the Exchange Act, including, but
not limited to, Rule 10b-6. These affiliated security holders are jointly and
severally subject to a nine-business day waiting ("cooling-off") period prior to
their commencement of offers or sales of their securities. They cannot make any
bids or purchases during
20
<PAGE> 27
this period and while the distribution herein continues. This Rule is equally
applicable to non-affiliated Selling Stockholders engaged in the Distribution as
well as the other Rule 10b-6 restrictions applicable to the Selling
Stockholders.
Because the Selling Stockholders will be subject to the anti-manipulation
provisions of Rule 10b-6, SAT will send written notice to all of them by
certified mail at least two business days prior to the effective date of this
Prospectus explaining their obligations under the Rule which begins two days
prior to the commencement of any distribution and continuing throughout the
period until their offers and sales terminate.
Unless granted an exemption by the Commission from Rule 10b-6, any
soliciting broker-dealers will be prohibited from engaging in any market making
activities in SAT's securities for the period from two business days prior to
any solicitation activity or the termination of any right that the underwriter
and soliciting broker-dealers may have to receive a fee for the exercise of
warrants following such solicitation. As a result, soliciting broker-dealers may
be unable to continue to provide a market for SAT's securities during certain
periods while the warrants are exercisable.
SAT is bearing all costs relating to the registration of the shares of the
SAT Common Stock offered by this Prospectus (other than fees and expenses, if
any, of counsel or other advisers to the Selling Stockholders). Any commissions,
discounts or other fees payable to broker-dealers in connection with any sale of
the SAT Common Stock will be borne by the Selling Stockholder selling such
shares.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Gold & Wachtel, LLP, New York, New York.
MATERIAL CHANGES
On November 8, 1996, SAT entered into a Convertible Loan and Warrant
Agreement (the "Loan Agreement") with Steven A. Cohen and S.A.C. Capital
Associates, LLC, an Anguilla limited liability company (collectively the
"Lenders"), pursuant to which SAT borrowed $5,000,000 from the Lenders (the
"Loan"). See Notes (7) and (8) to the table under "Selling Stockholders" for
information as to the prior beneficial ownership by the Lenders of an aggregate
of 2,342,200 shares of the SAT Common Stock. The Loan is evidenced by promissory
notes (previously defined as the "Convertible Notes") which are due and payable
on November 8, 1999 and bear interest at the rate
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<PAGE> 28
of seven percent per annum, payable quarterly. The Convertible Notes may not be
prepaid without the consent of the Lenders and may not be assigned or negotiated
without the consent of SAT. The Convertible Notes are convertible into shares of
the SAT Common Stock at any time after July 1, 1997 at a conversion price (the
"Conversion Price") of $2.00 per share. The Conversion Price is subject to a
downward adjustment (the "Market Price Adjustment") during the period from May
1, 1997 through May 1, 1998 based on the average market price for shares of the
SAT Common Stock over the preceding 65 trading days excluding the date that
either Lender sold shares of the SAT Common Stock in an Open Market Transaction
(as hereinafter defined) and the trading days that are within 21 days of such
date, provided that the Conversion Price will not be reduced below $1.375 as a
result of this adjustment.
In addition, the Conversion Price is subject to reduction pursuant to
certain anti-dilution provisions, if SAT sells shares at less than the
Conversion Price, or issues options or convertible securities which can be
exercised at a price less than the Conversion Price.
Under the Loan Agreement, as long as any portion of the Convertible Notes
are outstanding and thereafter as long as certain conditions are met, the
Lenders may designate one person to be nominated by SAT for election to SAT's
Board of Directors or may exercise observer rights at meetings of the Board of
Directors. The Agreement also imposes certain negative and affirmative covenants
on SAT as long as any balance remains outstanding under the Convertible Notes.
These covenants, among other matters, restrict SAT's ability to engage in
acquisitions (other that the proposed acquisitions of SAT's two majority owned
subsidiaries, Good Ideas and U.S. Drug) of companies that are not engaged
exclusively in, or engaged in a business directly related to, the business of
substance abuse testing, to pay dividends, to incur indebtedness (as defined in
the Loan Agreement) senior to the Convertible Notes, to engage in certain
related party transactions, to assign the rights in certain intellectual
property, to terminate the employment of SAT's chief executive officer, to incur
other indebtedness (as defined in the Loan Agreement) in excess of $1,000,000,
to sell or otherwise dispose of any subsidiary or division of the corporation
(with the exception of Good Ideas), to engage in other transactions with a value
in excess of $1,000,000, and to amend SAT's Certificate of Incorporation or
Bylaws or enter into any agreement that would adversely affect the rights and
priorities of the Lenders. The Lenders also have the right to purchase
additional shares of the Common Stock in any capital raising transaction through
any public or private sale of shares of the SAT Common Stock effected by SAT and
to acquire additional shares under certain other circumstances.
In addition, pursuant to the Loan Agreement, the Lenders purchased for
$1,000 the June 30 Warrants which consists of Warrants to purchase an aggregate
of 2,500,000 shares of the SAT Common Stock at an exercise price of $2.00 per
share. The June 30 Warrants are not exercisable to any extent before July 1,
1997 and thereafter are exercisable only to the extent that, when added
22
<PAGE> 29
together with any other shares beneficially owned by the Lenders, would not
result in the Lenders being deemed to be greater than ten percent stockholders
subject to Section 16 of the Exchange Act . Notwithstanding the foregoing, the
Warrants become fully exercisable on July 1, 1997 and expire on June 30, 2000.
The number of shares of the SAT Common Stock which may be purchased pursuant to
the June 30 Warrants is subject to a downward adjustment, but not less than
2,000,000 shares, in the event that the Conversion Price of the Notes is
reduced, such that the number of shares purchasable pursuant to the June 30
Warrants will be reduced at a rate of one share for each 2.2727 additional
shares of the SAT Common Stock which may be obtained upon conversion of the
Convertible Notes as a result of any Market Price Adjustment. In addition, the
exercise price is subject to reduction and the number of shares that may be
purchased under the June 30 Warrants is subject to increase pursuant to certain
antidilution provisions if SAT sells shares at less than the exercise price. The
June 30 Warrants are transferable subject to compliance with the Securities Act.
Under the Loan Agreement, SAT agreed promptly to register under the
Securities Act of 1933 the shares issuable upon the conversion of the
Convertible Notes and the exercise of the June 30 Warrants. This Registration
Statement was filed to fulfill such commitment. In the event the registration
statement had not been filed and SAT did not use its best efforts to have the
registration statement declared effective by February 6, 1997, SAT would have
had to pay the Lenders a cash penalty equal to ten percent of the outstanding
principal under the Convertible Notes. In addition, during times (if any) when
SAT has not maintained the registration statement in effect for a specified
period or has failed to keep current any prospectus forming a part of such
registration statement, SAT must pay the Lenders a cash penalty equal to ten
percent of the outstanding principal under the Convertible Notes. Furthermore,
the exercise price of the June 30 Warrants may be paid by using shares otherwise
issuable thereunder if SAT does not comply with certain registration
requirements. SAT and the Lenders entered into a Registration Rights Agreement,
pursuant to which the Lenders have "piggyback" rights to include shares in any
registration statement filed by SAT, and on one occasion to demand registration
of shares if the shares issued upon conversion of the Convertible Notes or
exercise of the June 30 Warrants are not freely tradable. The right to demand
registration may be assigned to a transferee of the securities.
The Lenders have, as part of the Loan Agreement, agreed with SAT to
certain volume restrictions on Open Market Transactions (as defined below)
involving sales of the shares of the SAT Common Stock owned by them as of the
date of the Agreement after the first 1,000,000 owned shares sold in Open Market
Transactions. After the sale of 1,000,000 such owned shares in Open Market
Transaction, the Lenders have agreed that, unless waived by SAT, they will not
sell any of the remaining owned shares in Open Market Transactions unless: (i)
the sales price for such shares (before any fees or commissions) is equal to or
greater than the "Limit Price" (defined in the Loan Agreement as $2.00 per share
subject to certain adjustments), (ii) the volume of shares sold by the Lenders
on any trading day at a price below the Limit Price (before any fees or
commissions) does
23
<PAGE> 30
not exceed 25% of the average daily trading volume of the SAT Common Stock
reported for the five trading days immediately preceding the date of such sale,
provided that any sales by the Lenders during the immediately preceding five
trading days at a price below the Limit Price shall be excluded from the
calculation of the average daily trading volume, or (iii) such shares are sold
at the best offer price. For purposes of the Loan Agreement, the term "Open
Market Transactions" means transactions that are reported on the consolidated
quotation system other than block trades (as defined under Exchange Act Rule
10b-18). These volume sales limitations do not extend to any other transactions
in the shares of the SAT Common Stock or to any shares of the SAT Common Stock
that the Lenders may acquire after November 8, 1996.
As a result of the five non-employee directors receiving the Directors
Warrants as part of their annual compensation, the Lenders received the Lenders
Warrants.
Effective as of August 1, 1996, SAT relocated its executive offices from
Rancho Cucamonga, California to Ft. Lauderdale, Florida. On November 14, 1996,
Linda H. Masterson agreed to relinquish the title and duties as SAT's Chief
Operating Officer while retaining the title and duties of President of SAT. Ms.
Masterson will remain based in California with primary responsibility for
bringing U.S. Drug's products to market, restructuring SAT's alcohol testing
business and supervising the day-to-day operations of SAT's BioTox Division. Ms.
Masterson is a member of a newly formed management committee whose other members
are SAT's Chief Executive Officer, its Chief Financial Officer, its Vice
President, Sales and Marketing and two other designated persons.
As a condition precedent to making its loans, the Lenders required that
Robert Stutman, the Chairman of the Board, the Chief Executive Officer and a
director of SAT, and Brian Stutman, Vice President, Sales and Marketing of SAT
since December 3, 1996, surrender their secured position with respect to their
promissory notes due May 21, 1997 (the "Promissory Notes") in the principal
amount of $239,760 and $160,240, respectively, which they had received on May
21, 1996 as partial payment for their share ownership in RSA, and agree that the
notes would not be paid prior to the Convertible Notes except through the
issuance of shares of the SAT Common Stock. In consideration of this sacrifice,
the Board of Directors of SAT authorized on December 3, 1996 that the exercise
price of $3.135 per share be reduced to $2.125 per share on Robert Stutman's
Common Stock purchase warrant expiring May 20, 1999 to purchase 474,750 shares
of the SAT Common Stock and on Brian Stutman's Common Stock purchase warrant
also expiring May 20, 1999 to purchase 317,250 shares of the SAT Common Stock.
On the same day, the Messrs. Stutman surrendered their Promissory Notes, the
principal amount and interest thereon being used to allow Robert Stutman to
exercise his Common Stock purchase warrant expiring December 13, 1998 for
127,500 shares as to 124,375 shares and Brian Stutman to exercise his Common
Stock purchase warrant also expiring December 13, 1998 as to all 72,500 shares
subject thereto and his Common
24
<PAGE> 31
Stock purchase warrant expiring March 31, 1999 for 70,500 shares as 10,624
shares, thereby permitting SAT to cancel an aggregate of $415,000 in
indebtedness to them ($400,000 in principal and $15,000 in interest).
On June 20, 1996, the SAT Board authorized SAT to engage a consultant for
whom the consideration was to be 200,000 shares of the SAT Common Stock. Mr.
Rosen fulfilled SAT's obligation to such consultant by delivery of his own
shares. In consideration thereof, on December 3, 1996, the SAT Board authorized
(1) Mr. Rosen's exercise of a Common Stock purchase warrant expiring November
15, 1998 as to 200,000 shares of the 400,000 shares of the SAT Common Stock
subject thereto, the consideration therefor being the value of the consultant's
services (i.e., the product of 200,000 shares and the closing sales price of
$2.875 per share on June 20, 1996 or $575,000); (2) the issuance to Mr. Rosen of
the December 2 Warrant to purchase 200,000 shares of the SAT Common Stock at
$2.00 per share; and (3) a reduction in the exercise price of his Common Stock
purchase warrant expiring November 15, 2000 to purchase 150,000 shares of the
SAT Common Stock from $4.00 to $2.00 per share.
COMMISSION POSITION ON INDEMNIFICATION
The SAT Board of Directors has authorized indemnification of directors and
officers of SAT to the fullest extent permitted by Delaware law.
Section 145(a) of the GCL permits 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 or she 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 in connection with such action, suit
or proceeding if he or she acted in good faith and in a manner he or she
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 or her conduct was unlawful.
Under Section 145(b) of the GCL, a corporation also may 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 he or
she 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,
25
<PAGE> 32
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to the best interests of the corporation. However, in such an action
by or on behalf of a corporation, no indemnification may be in respect of any
claim, issue or matter as to which the person is adjudged liable to the
corporation unless and only to the extent that the court determines that,
despite the adjudication of liability but in view of all the circumstances, the
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
In addition, under Section 145(f) of the GCL, the indemnification provided
by Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of SAT
pursuant to the foregoing provisions, or otherwise, SAT has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by SAT of expenses incurred or paid by a director, officer or
controlling person of SAT 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, SAT 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 Securities Act and will be
governed by the final adjudication of such issue.
26
<PAGE> 33
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus and, if given or made, such
information or representations 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 the securities offered hereby to any person in
any state or other jurisdiction in which such offer or solicitation would be
unlawful. Neither the delivery of this CONVERTIBLE NOTES AND 450,000 SHARES
Prospectus nor any sale made hereunder shall, under OFFERED BY SELLING
STOCKHOLDERS any circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Available Information ................................................... 2
Incorporation of Certain Information
By Reference ......................................................... 3
The Company ............................................................. 4
Risk Factors ............................................................ 6
Dilution ................................................................ 14
Use of Proceeds ......................................................... 15
Selling Stockholders .................................................... 15
Plan of Distribution .................................................... 18
Legal Matters ........................................................... 21
Material Changes ........................................................ 21
Commission Position on
Indemnification ...................................................... 25
Until ________________, 1997 (40 days after the date of the Prospectus), all
dealers effecting transaction in securities offered hereby, whether or not
participating in this distribution, may be required to deliver a prospectus.
SUBSTANCE ABUSE
TECHNOLOGIES, INC.
3,180,000 SHARES OF SAT COMMON STOCK
ISSUABLE UPON EXERCISE OF WARRANTS,
2,500,000 SHARES OF SAT COMMON STOCK
ISSUABLE UPON CONVERSION OF
__________________________
PROSPECTUS
__________________________
_____________ ___, 1997
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an estimate of expenses, except for the registration fee,
to be incurred by Substance Abuse Technologies, Inc. (the "Registrant" or "SAT")
for the issuance and distribution of the securities being registered hereby.
Registration Fee.................................... $ 3,739
Accountants' Fees and Expenses...................... 15,000
Legal Fees and Expenses............................. 20,000
Printing, Transfer Agent and
Other Miscellaneous Expenses..................... 16,261
-------
Total $55,000
Item 15. Indemnification of Directors and Officers.
The Board of Directors of the Registrant has authorized indemnification of
directors and officers of the Registrant to the fullest extent permitted by
Delaware law.
Section 145(a) of the General Corporation Law of Delaware (the "GCL")
permits 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 or she 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
in connection with such action, suit or proceeding if he or she acted in good
faith and in a manner he or she 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 or her conduct was
unlawful.
Under Section 145(b) of the GCL, a corporation also may 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 he or
she 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,
II-1
<PAGE> 35
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the corporation. However, in such an
action by or on behalf of a corporation, no indemnification may be in respect of
any claim, issue or matter as to which the person is adjudged liable to the
corporation unless and only to the extent that the court determines that,
despite the adjudication of liability but in view of all the circumstances, the
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
In addition, under Section 145(f) of the GCL, the indemnification provided
by Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
The Registrant has obtained insurance to cover certain of the
above-described indemnifications.
For information as to a limitation on indemnification of directors,
officers and controlling persons of the Registrant, see Item 17 to this
Registration Statement.
Item 16. Exhibits to Form S-3.
All of the following exhibits designated with a footnote reference are
incorporated herein by reference to a prior registration statement filed under
the Securities Act of 1933, as amended (the "Securities Act"), or a periodic
report filed by SAT pursuant to Section 13 of the Securities Exchange Act of
1934, as amended. An exhibit marked with an asterisk is filed with this
Registration Statement.
Number Exhibits
- ------ --------
2(a) Copy of Agreement and Plan of Merger dated as of April 12, 1996 by and
among SAT, Good Ideas Acquisition Corp. and Good Ideas Enterprises, Inc.,
a Delaware corporation ("Good Ideas"). (1)
2(b) Copy of Agreement and Plan of Merger dated as of April 23, 1996 by and
among SAT, U.S. Drug Acquisition Corp. and U.S. Drug Testing, Inc. ("U.S.
Drug"). (2)
4(a) Specimen of Common Stock certificate of SAT.
II-2
<PAGE> 36
Number Exhibits
- ------ --------
4(b) Specimen of Class "A" Cumulative and Convertible Preferred Stock
certificate of SAT. (3)
4(c) Specimen of Class "B" Non-Voting Preferred Stock certificate of SAT. (4)
4(d) Copy of Convertible Loan and Warrant Agreement dated November 8, 1996 by
and between SAT, S.A.C. Capital Associates, LLC and Steven A. Cohen. (5)
4(d)(1) Form of Registration Rights Agreement is Exhibit A to Exhibit 4(d)
hereto.
4(d)(2) Form of Convertible Senior Promissory Note due November 8, 1999 is
Exhibit B to Exhibit 4(d) hereto. (5)
4(d)(3) Form of Common Stock Purchase Warrant expiring June 30, 2000 is Exhibit
C to Exhibit 4(d) hereto.
4(e)* Form of Common Stock purchase warrant expiring November 15, 1999.
SAT's Common Stock purchase warrants expiring November 15, 1999,
December 2, 1999 and three years from the effective date of this
Registration Statement are substantially identical to the form of Common
Stock purchase warrant filed as Exhibit 4(e) hereto except as to the
name of the holder, the expiration date and the exercise price and,
accordingly, pursuant to Instruction 2 to Item 601 of Regulation S-K
under the Securities Act are not individually filed.
4(f)* Form of Common Stock purchase warrant with deferred exercise.
SAT's Common Stock purchase warrants expiring three years from the
effective date of this Registration Statement and those issued or to be
issued to employees, of which the currently outstanding warrants expire
between September 11, 2000 and January 1, 2001, are substantially
identical to the form of Common Stock purchase warrant filed as Exhibit
4(f) hereto except as to the name of the holder, the expiration date and
the exercise price and, accordingly, pursuant to Instruction 2 to Item
601 of Regulation S-K under the Securities Act are not individually
filed.
5(a)* Opinion of Gold & Wachtel, LLP.
II-3
<PAGE> 37
Number Exhibits
- ------ --------
23(a)* Consent of Ernst & Young LLP.
23(b)* Consent of Ernst & Young LLP.
23(c)* Consent of Wolinetz, Gottlieb & Lafazan, P.C.
23(d) Consent of Gold & Wachtel, LLP is included in their opinion filed
as Exhibit 5 hereto.
1. Filed as an Exhibit to Good Ideas Annual Report on Form 10-K for the
fiscal year ended March 31, 1996 and incorporated herein by this
reference.
2. Filed as an exhibit to U.S. Drug's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996 and incorporated herein by this
reference.
3. Filed as an exhibit to SAT's Registration Statement on Form S-18, File No.
33-29718, and incorporated herein by this reference.
4. Filed as an exhibit to SAT's Registration Statement on Form S-1, File No.
33-47855, and incorporated herein by this reference.
5. Filed as an exhibit to Amendment 2 to Schedule 13D filed by Steven A.
Cohen on November 12, 1996, and incorporated herein by this reference.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
II-4
<PAGE> 38
(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. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(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.
2. That, for the purpose of determining any liability under the Securities
Act, each 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.
Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to belief 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 New York, State of New York, on January , 1997.
SUBSTANCE ABUSE TECHNOLOGIES, INC.
(Registrant)
By:___________________________________________
Robert Stutman, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to a registration statement has been signed by the following persons in the
capacities indicated on January , 1997.
Signature Title
- --------- -----
_______________________________ Principal Executive Officer
Robert Stutman and Director
_______________________________ Chief Financial and
Dennis Wittman Accounting Officer
_______________________________ Director
Alan I. Goldman
_______________________________ Director
John C. Lawn
_______________________________ Director
Peter M. Mark
_______________________________ Director
Linda H. Masterson
_______________________________ Director
Lee S. Rosen
II-6
<PAGE> 40
EXHIBIT INDEX
SUBSTANCE ABUSE TECHNOLOGIES, INC.
REGISTRATION STATEMENT ON FORM S-3
EXHIBITS FILED
TO FORM S-3 REGISTRATION STATEMENT
Page
Number Exhibits Number
- ------ -------- ------
4(e) Form of Common Stock purchase warrant expiring November 15, 1999. E-2
4(f) Form of Common Stock purchase warrant with deferred exercise. E-11
5(a) Opinion of Gold & Wachtel, LLP. E-19
23(a) Consent of Ernst & Young LLP relating to financial statements
in Annual Report on Form 10-K. E-21
23(b) Consent of Ernst & Young LLP relating to financial
statements in Current Report on Form 8-K/A. E-22
23(c) Consent of Wolinetz, Gottlieb & Lafazan, P.C. E-23
E-1
<PAGE> 1
Exhibit 4(e)
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT OR LAWS, THE RULES AND
REGULATIONS THEREUNDER AND THE PROVISIONS
OF THIS WARRANT.
WARRANT TO PURCHASE ____________ SHARES
OF COMMON STOCK OF
SUBSTANCE ABUSE TECHNOLOGIES, INC.
ISSUED TO
_____________________
DATED: ______________
WARRANT NO. ____
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
THIS CERTIFIES THAT _______________ (the "Warrant Holder") is the owner of
a Warrant, subject to adjustment as provided in Section 3 hereof, which entitles
the owner thereof to purchase, in whole or in part at any time, and from time to
time, during the period commencing on ______________ (the "Commencement Date")
and terminating at 5:00 P.M., New York Time, on ______________ (the "Expiration
Date"), _____________ fully paid and nonassessable shares of the Common Stock,
no par value (the "Common Stock"), of Substance Abuse Technologies, Inc., a
Delaware corporation (hereinafter called the "Company"), at the purchase price
per share of $________ (the "Purchase Price"), subject to adjustment as provided
in Section 3 hereof, payable in lawful money of the United States of America
upon surrender of this Warrant and payment of the Purchase Price in lawful money
of the United States of America at the principal office of the Company
(currently 4517 NW 31st Avenue, Ft. Lauderdale, Florida 33309) or at such other
place as the Company may designate by written notice to the Warrant Holder.
E-2
<PAGE> 2
1. Exercise
The Warrant evidenced hereby may be exercised from time to time, in whole
or in part, from the Commencement Date until the Expiration Date, provided that
in no event may any fractional share of the Common Stock be issued. In the event
that a fractional share would otherwise be issued as a result of any adjustment
made pursuant to Section 3 hereof or otherwise, payment for such fractional
share shall be made on the basis of the Market Price on the date of exercise.
For the purpose of this Section 1, the term "Market Price" shall mean (a) if the
Common Stock is traded on a national securities exchange or on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System, the
closing sales price (or, if no sales on that day, the high bid price) or (b) if
the Common Stock is not traded as provided in subsection (a), the closing bid
price as reported in the OTC Bulletin Board of the National Association of
Securities Dealers, Inc. (the "NASD") or in the pink sheets by the National
Quotation Bureau, Inc.
Upon any exercise of the Warrant evidenced hereby, the form of election to
purchase set forth as Exhibit A hereto shall be properly completed, executed and
delivered to the Company, together with full payment to the Company of the
Purchase Price for the shares as to which the Warrant is exercised by certified
check or bank draft. In the event that there is only a partial exercise of the
Warrant evidenced hereby, there shall be issued to the Warrant Holder a new
Warrant Certificate, in all respects similar to this Warrant Certificate,
evidencing the number of shares of the Common Stock still available for
exercise.
Upon receipt of full payment and properly completed documentation, the
Company shall then cause the Transfer Agent for the Common Stock to issue fully
paid and nonassessable shares of the Common Stock as are represented by the
exercise.
If this Warrant shall be surrendered upon exercise within any period
during which the transfer books for the Common Stock are closed for any purpose,
the Company shall not be required to make delivery of certificates for shares of
the Common Stock until the date of the reopening of said transfer books.
2. Expiration Date
The Warrant evidenced hereby may not be exercised before the Commencement
Date or after the Expiration Date with respect to the shares of the Common Stock
as to which the Warrant may be exercised and, to the extent not exercised by the
Expiration Date, the Warrant evidenced hereby shall become void.
E-3
<PAGE> 3
3. Adjustments
Subject to the provisions of this Section 3, the Purchase Price and the
shares of the Common Stock as to which the Warrant may be exercised shall be
subject to adjustment from time to time as hereinafter set forth:
(a) If at any time, or from time to time, the Company shall, by
subdivision, consolidation, or reclassification of shares, or otherwise, change
as a whole the outstanding shares of the Common Stock into a different number or
class of shares, the number and class of shares so changed shall replace the
shares outstanding immediately prior to such change and the Purchase Price and
the number of shares purchasable under the Warrant immediately prior to the date
on which such change shall become effective shall be proportionately adjusted.
(b) Irrespective of any adjustments or change in the Purchase Price
or the number of securities actually purchasable under the Warrant, the Warrant
theretofore and thereafter issued may continue to express the exercise price and
the number of securities purchasable thereunder as the Purchase Price and the
number of securities purchasable were expressed in the Warrant when initially
issued.
(c) If at any time while the Warrant is outstanding, the Company
shall consolidate with, or merge into, another corporation, firm or entity, or
otherwise enter into a form of business combination, the holder of the Warrant
shall thereafter be entitled upon exercise thereof to purchase, with respect to
each security purchasable thereunder immediately prior to the date on which such
consolidation or merger or other form of business combination shall become
effective, the securities or property to which a holder of one such security
would have been entitled upon such consolidation or merger or other form of
business combination, without any change in, or payment in addition to, the
Purchase Price in effect immediately prior to such consolidation or merger or
other form of business combination, and the Company shall take such steps in
connection with such consolidation or merger or other form of business
combination as may be necessary to assure that all the provisions of the Warrant
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or property thereafter deliverable upon the exercise of the
Warrant.
(d) The Board of Directors of the Company, in its discretion, may,
at any time during the exercise period of the Warrant, extend the exercise
period or reduce the Purchase Price for all warrants then outstanding.
(e) Upon the happening of any event requiring the adjustment of the
exercise price hereunder, the Company shall forthwith give written notice
thereof to the registered holder of the Warrant stating the adjusted Purchase
Price and the adjusted number of securities purchasable
E-4
<PAGE> 4
upon the exercise thereof resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent public
accountants shall be conclusive evidence of the correctness of any computation
made hereunder.
4. Notice to Warrant Holder
Nothing contained herein shall be construed as conferring upon the Warrant
Holder the right to vote or to consent or to receive notice as a shareholder in
respect of the meetings of shareholders for the election of directors of the
Company or any other matter, or any other rights whatsoever as a shareholder of
the Company; provided, however, that in the event that:
(a) the Company shall take action to make any distribution (other
than cash dividends payable out of earnings or earned surplus) on the Common
Stock;
(b) the Company shall take action to offer for subscription pro rata
to the holders of the Common Stock any additional shares of stock of any class
or other rights or securities convertible into the Common Stock;
(c) the Company shall take action to accomplish any capital
reorganization, or reclassification of the capital stock of the Company (other
than a change in par value, or a change from par value to no par value, or a
change from no par value to par value, or a subdivision or combination of the
Common Stock), or a consolidation or merger of the Company into, or a sale of
all or substantially all of its assets to, another corporation; or
(d) the Company shall take action looking to a voluntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall, (x) at least 10 days
prior to the date on which the books of the Company shall close or a record date
shall be taken for such distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, cause
notice thereof to be sent to the Warrant Holder at the address appearing on the
Warrant register of the Company and, (y) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, cause at least 10 days' prior written notice of the date when the
same shall take place to be given to the Warrant Holder in the same manner. Such
notice in accordance with the foregoing clause (x) shall also specify, in the
case of any such distribution or subscription rights, the date on which the
holders of the Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (y) shall also specify the date on which
the holders of the Common Stock shall be entitled to exchange their shares of
the Common Stock for
E-5
<PAGE> 5
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Failure to give such notice or any defect
therein shall not affect the legality or validity of any of the matters set
forth in this Section 5 inclusive.
5. Investment Representation
The Warrant Holder, by his, her or its acceptance of this Warrant,
acknowledges that neither the Warrant nor the shares of the Common Stock
issuable upon exercise thereof have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, represents and
warrants to the Company that he, she or it is acquiring the Warrant for
investment and not with a view to, or in connection with, any distribution
thereof. The holder further represents and warrants that, if a registration
statement under the Securities Act is not effective with respect to the
underlying shares at the time of exercise, the Warrant Holder will acquire the
shares of the Common Stock for investment and not with a view to, or in
connection with, any distribution thereof.
6. Transfers and Exchanges
The Company shall transfer, from time to time, any outstanding Warrant
upon the books to be maintained by the Company for that purpose, upon surrender
thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant shall be issued
to the transferee and the surrendered Warrant shall be canceled by the Company.
The Warrant so canceled shall be delivered to the Company from time to time upon
request. Warrants may be exchanged at the option of the holder thereof, when
surrendered at the office of the Company, for another Warrant, or other Warrants
of different denominations, of like tenor and representing in the aggregate the
rights to purchase a like number of shares. Anything in this Section 6 to the
contrary notwithstanding, no transfer shall be made if such transfer would
violate Section 5 of the Securities Act.
7. Payment of Taxes
The Company will pay any documentary stamp taxes attributable to the
initial issuance of the Common Stock issuable upon the exercise of the Warrant;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for the Common Stock in a name other than that of
the registered holder of the Warrant in respect of which such shares are issued,
and in such case the Company shall not be required to issue or deliver any
certificates for the Common Stock or any Warrant for remaining shares until the
person requesting the same has paid to the
E-6
<PAGE> 6
Company the amount of such tax or has established to the Company's satisfaction
that such tax has been paid.
8. Mutilated or Missing Warrant
In case the Warrant shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and deliver in exchange and substitution
for, and upon cancellation of, the mutilated Warrant, or in lieu of, and in
substitution for, the Warrant lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant. Applicants for such substitute Warrant shall also comply with such
other reasonable regulations and pay such reasonable charges as the Company may
prescribe.
9. Reserve
The Company covenants and agrees that, from time to time, there will be
authorized and available for delivery a sufficient number of its shares of the
Common Stock or other securities into which the Warrant is then exercisable to
permit the exercise of the Warrant at the time outstanding as and when the
certificates shall, from time to time, be deliverable in accordance with Section
1 hereof. In the event that there are insufficient shares or other securities
for such purpose, the Company shall use its best efforts to seek shareholder
approval for an Amendment to the Company's Certificate of Incorporation and/or
to take such other action as is necessary or appropriate to cause such shares or
other securities to be authorized.
10. Governing Law
The Warrant evidenced hereby shall be construed and enforced in accordance
with the laws of the State of New York applicable to contracts made and to be
performed in that State, without giving effect to any principles of conflicts of
laws.
E-7
<PAGE> 7
IN WITNESS WHEREOF, Substance Abuse Technologies, Inc. has caused this
Warrant to be signed manually by a duly authorized officer.
Dated: SUBSTANCE ABUSE TECHNOLOGIES, INC.
By_______________________________________
E-8
<PAGE> 8
EXHIBIT A
ELECTION TO PURCHASE
To Substance Technologies, Inc.
c/o___________________________________
___________________________________
___________________________________
The undersigned hereby irrevocably elects to exercise the Warrant
represented by the within Warrant Certificate to purchase shares of the Common
Stock issuable upon the exercise of the Warrant and requests that certificates
for such shares shall be issued in the name of
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Taxpayer number)
and be delivered to_____________________________________________________________
(Name)
at______________________________________________________________________________
(Address)
and, if said number of shares of the Common Stock shall not be all the shares of
the Common Stock evidenced by the within Warrant Certificate, that a new Warrant
Certificate for the balance remaining of such said shares be registered in the
name of
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Taxpayer number)
E-9
<PAGE> 9
and delivered to the undersigned at the address below stated.
Dated:________________, 19__
Name of holder of Warrant Certificate:
________________________________________________________________________________
(please print)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Signature)
Note: The above signature must correspond with the
name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
E-10
<PAGE> 1
EXHIBIT 4(f)
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT OR LAWS, THE RULES AND
REGULATIONS THEREUNDER AND THE PROVISIONS
OF THIS WARRANT.
WARRANT TO PURCHASE ____________ SHARES
OF COMMON STOCK OF
SUBSTANCE ABUSE TECHNOLOGIES, INC.
ISSUED TO
_____________________
DATED: ______________
WARRANT NO. ____
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
THIS CERTIFIES THAT _______________ (the "Warrant Holder") is the owner of
a Warrant, subject to adjustment as provided in Section 3 hereof, which entitles
the owner thereof to purchase, in whole or in part, and from time to time, as
provided in Section 1 hereof, _____________ fully paid and nonassessable shares
of the Common Stock, no par value (the "Common Stock"), of Substance Abuse
Technologies, Inc., a Delaware corporation (hereinafter called the "Company"),
at the purchase price per share of $________ (the "Purchase Price"), subject to
adjustment as provided in Section 3 hereof, payable in lawful money of the
United States of America upon surrender of this Warrant and payment of the
Purchase Price in lawful money of the United States of America at the principal
office of the Company (currently 4517 NW 31st Avenue, Ft. Lauderdale, Florida
33309) or at such other place as the Company may designate by written notice to
the Warrant Holder.
1. Exercise
The Warrant evidenced hereby shall become exercisable in installments as
follows: (1) as to ____________ shares of Common Stock on_______________________
and shall terminate at
E-11
<PAGE> 2
5:00 P.M., New York Time, on ______________ , and (2) as to an additional
____________ shares of Common Stock on each ____________ thereafter, and each
such additional shares shall terminate at 5:00 P.M., New York Time, three years
from their respective dates of exercise; provided, that however, in no event may
any fractional share of the Common Stock be issued. In the event that a
fractional share would otherwise be issued as a result of any adjustment made
pursuant to Section 3 hereof or otherwise, payment for such fractional share
shall be made on the basis of the Market Price on the date of exercise. For the
purpose of this Section 1, the term "Market Price" shall mean (a) if the Common
Stock is traded on a national securities exchange or on the National Association
of Securities Dealers Automated Quotation ("NASDAQ") System, the closing sales
price (or, if no sales on that day, the high bid price) or (b) if the Common
Stock is not traded as provided in subsection (a), the closing bid price as
reported in the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. (the "NASD") or in the pink sheets by the National Quotation
Bureau, Inc.
Upon any exercise of the Warrant evidenced hereby, the form of election to
purchase set forth as Exhibit A hereto shall be properly completed, executed and
delivered to the Company, together with full payment to the Company of the
Purchase Price for the shares as to which the Warrant is exercised by certified
check or bank draft. In the event that there is only a partial exercise of the
Warrant evidenced hereby, there shall be issued to the Warrant Holder a new
Warrant Certificate, in all respects similar to this Warrant Certificate,
evidencing the number of shares of the Common Stock still available for
exercise.
Upon receipt of full payment and properly completed documentation, the
Company shall then cause the Transfer Agent for the Common Stock to issue fully
paid and nonassessable shares of the Common Stock as are represented by the
exercise.
If this Warrant shall be surrendered upon exercise within any period
during which the transfer books for the Common Stock are closed for any purpose,
the Company shall not be required to make delivery of certificates for shares of
the Common Stock until the date of the reopening of said transfer books.
2. Expiration Date
The Warrant evidenced hereby may not be exercised after the expiration
dates set forth in Section 1 hereof, with respect to the shares of the Common
Stock as to which the Warrant may be exercised and, to the extent any such
shares are not exercised by such expiration dates, the Warrant evidenced hereby
shall become void.
E-12
<PAGE> 3
3. Adjustments
Subject to the provisions of this Section 3, the Purchase Price and the
shares of the Common Stock as to which the Warrant may be exercised shall be
subject to adjustment from time to time as hereinafter set forth:
(a) If at any time, or from time to time, the Company shall, by
subdivision, consolidation, or reclassification of shares, or otherwise, change
as a whole the outstanding shares of the Common Stock into a different number or
class of shares, the number and class of shares so changed shall replace the
shares outstanding immediately prior to such change and the Purchase Price and
the number of shares purchasable under the Warrant immediately prior to the date
on which such change shall become effective shall be proportionately adjusted.
(b) Irrespective of any adjustments or change in the Purchase Price
or the number of securities actually purchasable under the Warrant, the Warrant
theretofore and thereafter issued may continue to express the exercise price and
the number of securities purchasable thereunder as the Purchase Price and the
number of securities purchasable were expressed in the Warrant when initially
issued.
(c) If at any time while the Warrant is outstanding, the Company
shall consolidate with, or merge into, another corporation, firm or entity, or
otherwise enter into a form of business combination, the holder of the Warrant
shall thereafter be entitled upon exercise thereof to purchase, with respect to
each security purchasable thereunder immediately prior to the date on which such
consolidation or merger or other form of business combination shall become
effective, the securities or property to which a holder of one such security
would have been entitled upon such consolidation or merger or other form of
business combination, without any change in, or payment in addition to, the
Purchase Price in effect immediately prior to such consolidation or merger or
other form of business combination, and the Company shall take such steps in
connection with such consolidation or merger or other form of business
combination as may be necessary to assure that all the provisions of the Warrant
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or property thereafter deliverable upon the exercise of the
Warrant.
(d) The Board of Directors of the Company, in its discretion, may,
at any time during the exercise period of the Warrant, extend the exercise
period or reduce the Purchase Price for all warrants then outstanding.
(e) Upon the happening of any event requiring the adjustment of the
exercise price hereunder, the Company shall forthwith give written notice
thereof to the registered holder of the Warrant stating the adjusted Purchase
Price and the adjusted number of securities purchasable
E-13
<PAGE> 4
upon the exercise thereof resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent public
accountants shall be conclusive evidence of the correctness of any computation
made hereunder.
4. Notice to Warrant Holder
Nothing contained herein shall be construed as conferring upon the Warrant
Holder the right to vote or to consent or to receive notice as a shareholder in
respect of the meetings of shareholders for the election of directors of the
Company or any other matter, or any other rights whatsoever as a shareholder of
the Company; provided, however, that in the event that:
(a) the Company shall take action to make any distribution (other
than cash dividends payable out of earnings or earned surplus) on the Common
Stock;
(b) the Company shall take action to offer for subscription pro rata
to the holders of the Common Stock any additional shares of stock of any class
or other rights or securities convertible into the Common Stock;
(c) the Company shall take action to accomplish any capital
reorganization, or reclassification of the capital stock of the Company (other
than a change in par value, or a change from par value to no par value, or a
change from no par value to par value, or a subdivision or combination of the
Common Stock), or a consolidation or merger of the Company into, or a sale of
all or substantially all of its assets to, another corporation; or
(d) the Company shall take action looking to a voluntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall, (x) at least 10 days
prior to the date on which the books of the Company shall close or a record date
shall be taken for such distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, cause
notice thereof to be sent to the Warrant Holder at the address appearing on the
Warrant register of the Company and, (y) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, cause at least 10 days' prior written notice of the date when the
same shall take place to be given to the Warrant Holder in the same manner. Such
notice in accordance with the foregoing clause (x) shall also specify, in the
case of any such distribution or subscription rights, the date on which the
holders of the Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (y) shall also specify the date on which
the holders of the Common Stock shall be entitled to exchange their shares of
the Common Stock for
E-14
<PAGE> 5
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Failure to give such notice or any defect
therein shall not affect the legality or validity of any of the matters set
forth in this Section 5 inclusive.
5. Investment Representation
The Warrant Holder, by his, her or its acceptance of this Warrant,
acknowledges that neither the Warrant nor the shares of the Common Stock
issuable upon exercise thereof have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, represents and
warrants to the Company that he, she or it is acquiring the Warrant for
investment and not with a view to, or in connection with, any distribution
thereof. The holder further represents and warrants that, if a registration
statement under the Securities Act is not effective with respect to the
underlying shares at the time of exercise, the Warrant Holder will acquire the
shares of the Common Stock for investment and not with a view to, or in
connection with, any distribution thereof.
6. Transfers and Exchanges
The Company shall transfer, from time to time, any outstanding Warrant
upon the books to be maintained by the Company for that purpose, upon surrender
thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant shall be issued
to the transferee and the surrendered Warrant shall be canceled by the Company.
The Warrant so canceled shall be delivered to the Company from time to time upon
request. Warrants may be exchanged at the option of the holder thereof, when
surrendered at the office of the Company, for another Warrant, or other Warrants
of different denominations, of like tenor and representing in the aggregate the
rights to purchase a like number of shares. Anything in this Section 6 to the
contrary notwithstanding, no transfer shall be made if such transfer would
violate Section 5 of the Securities Act.
7. Payment of Taxes
The Company will pay any documentary stamp taxes attributable to the
initial issuance of the Common Stock issuable upon the exercise of the Warrant;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for the Common Stock in a name other than that of
the registered holder of the Warrant in respect of which such shares are issued,
and in such case the Company shall not be required to issue or deliver any
certificates for the Common Stock or any Warrant for remaining shares until the
person requesting the same has paid to the
E-15
<PAGE> 6
Company the amount of such tax or has established to the Company's satisfaction
that such tax has been paid.
8. Mutilated or Missing Warrant
In case the Warrant shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and deliver in exchange and substitution
for, and upon cancellation of, the mutilated Warrant, or in lieu of, and in
substitution for, the Warrant lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant. Applicants for such substitute Warrant shall also comply with such
other reasonable regulations and pay such reasonable charges as the Company may
prescribe.
9. Reserve
The Company covenants and agrees that, from time to time, there will be
authorized and available for delivery a sufficient number of its shares of the
Common Stock or other securities into which the Warrant is then exercisable to
permit the exercise of the Warrant at the time outstanding as and when the
certificates shall, from time to time, be deliverable in accordance with Section
1 hereof. In the event that there are insufficient shares or other securities
for such purpose, the Company shall use its best efforts to seek shareholder
approval for an Amendment to the Company's Certificate of Incorporation and/or
to take such other action as is necessary or appropriate to cause such shares or
other securities to be authorized.
10. Governing Law
The Warrant evidenced hereby shall be construed and enforced in accordance
with the laws of the State of New York applicable to contracts made and to be
performed in that State, without giving effect to any principles of conflicts of
laws.
IN WITNESS WHEREOF, Substance Abuse Technologies, Inc. has caused this
Warrant to be signed manually by a duly authorized officer.
Dated: SUBSTANCE ABUSE TECHNOLOGIES, INC.
By:_______________________________________
E-16
<PAGE> 7
EXHIBIT A
ELECTION TO PURCHASE
To Substance Technologies, Inc.
c/o___________________________________
___________________________________
___________________________________
The undersigned hereby irrevocably elects to exercise the Warrant
represented by the within Warrant Certificate to purchase shares of the Common
Stock issuable upon the exercise of the Warrant and requests that certificates
for such shares shall be issued in the name of
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Taxpayer number)
and be delivered to_____________________________________________________________
(Name)
at______________________________________________________________________________
(Address)
and, if said number of shares of the Common Stock shall not be all the shares of
the Common Stock evidenced by the within Warrant Certificate, that a new Warrant
Certificate for the balance remaining of such said shares be registered in the
name of
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Taxpayer number)
E-17
<PAGE> 8
and delivered to the undersigned at the address below stated.
Dated:________________, 19__
Name of holder of Warrant Certificate:
________________________________________________________________________________
(please print)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Signature)
Note: The above signature must correspond with the
name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
E-18
<PAGE> 1
EXHIBIT 5(a)
January 15, 1997
Substance Abuse Technologies, Inc.
4517 N.W. 31st Avenue
Ft. Lauderdale, Florida 33309
Dear Sirs:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement") to be filed by Substance Abuse Technologies, Inc. ("SAT") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to (1)(a) an
aggregate of 2,500,000 shares of its Common Stock, $.01 par value (the "SAT
Common Stock"), issuable upon the exercise of Common Stock purchase warrants
expiring June 30, 000 (the "June 30 Warrants"), (b) an aggregate of 500,000
shares of the SAT Common Stock issuable upon the exercise of Common Stock
purchase warrants expiring three years from the effective date of the
Registration Statement (the "January Warrants"), (c) 180,000 shares of
the SAT Common Stock issuable upon the exercise at $2.125 per share of Common
Stock purchase warrants granted or to be granted to employees of SAT or
subsidiaries thereof (the "Employee Warrants") and (d) 2,500,000 shares issuable
on the conversion of Convertible Senior Promissory Notes due November 8, 1999
(the "Convertible Notes") and (2) the stockholders named in the table under the
caption "Selling Stockholders" offer of (a) an aggregate of 450,000 shares of
the SAT Common Stock issuable when and if the following Common Stock purchase
warrants are exercised: (a) a January Warrant to purchase 100,000 shares (b) a
warrant expiring December 2, 1999 (the "December 2 Warrant") to purchase 200,000
shares, (c ) warrants expiring November 15, 1999 (the "Directors Warrants") to
purchase an aggregate of 50,000 shares, (d) warrants expiring November 15, 1999
(the "Lenders Warrants") to purchase an aggregate of 10,000 shares and (e)
Employee Warrants to purchase an aggregate of 90,000 shares. The June 30
Warrants, the January Warrants, the Employee Warrants, the December 2 Warrant,
the Directors Warrants and the Lenders Warrants are collectively referred to
herein as the "Warrants."
As counsel to SAT, we have examined the Certificate of Incorporation of
SAT, its By-Laws, its minutes and other corporate proceedings and corporate
records relating to the authorization of the Warrants and the Convertible Notes
and have reviewed the Registration Statement in the form intended to be filed.
In our opinion, we have made such an investigation and examination as we have
deemed necessary for the purposes of expressing an informed opinion on the
matters hereafter discussed.
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Substance Abuse Technologies, Inc.
January 15, 1997
Page Two
Based upon such examination, it is our opinion that:
1. SAT is duly organized and validly existing under the laws of the State
of Delaware; and
2. The shares of the SAT Common Stock issuable upon the exercise of the
Warrants and conversion of the Convertible Notes will be, when issued, validly
issued, fully paid and non-assessable;
3. The Outstanding Shares being offered by the Selling Stockholders are
validly issued, fully paid and non-assessable.
In addition, we hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement and to the references to our firm under the
captions "Risk Factors," "Selling Stockholders," "Plan of Distribution" and
"Legal Matters" included in the Prospectus which constitutes Part I of the
Registration Statement.
Very truly yours,
/s/ Gold & Wachtel, LLP
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<PAGE> 1
Exhibit 23(a)
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated May 20, 1996
with respect to the consolidated financial statements of Substance Abuse
Technologies, Inc. (formerly U.S. Alcohol Testing of America, Inc.) included in
its Annual Report (Form 10-K, as amended) for the year ended March 31, 1996,
filed with the Securities and Exchange Commission, in the Registration
Statement (Form S-3 No. 333-XXXXX) and related Prospectus of Substance Abuse
Technologies, Inc. for the registration of (1) 3,180,000 shares of its common
stock issuable upon exercise of warrants, (2) 2,500,000 shares of its common
stock issuable upon conversion of convertible notes, and (3) 450,000 shares
of its common stock offered by selling stockholders.
/S/ ERNST & YOUNG LLP
Riverside, California
January 15, 1997
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<PAGE> 1
Exhibit 23(b)
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated July 23, 1996
with respect to the financial statements of Robert Stutman & Associates, Inc. as
of December 31, 1994 and 1995 and for the three years in the period ended
December 31, 1995 included in the Form 8-K/A, as amended, filed with the
Securities and Exchange Commission, in the Registration Statement (Form S-3
No. 333-XXXXX) and related Prospectus of Substance Abuse Technologies, Inc.
for the registration of (1) 3,180,000 shares of its common stock issuable upon
exercise of warrants, (2) 2,500,000 shares of its common stock issuable upon
conversion of convertible notes, and (3) 450,000 shares of its common stock
shares offered by selling stockholders.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
January 15, 1997
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<PAGE> 1
Exhibit 23(c)
Consent of Independent Public Accountants
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated May 26, 1995 on the consolidated
financial statements of Substance Abuse Technologies, Inc. and Subsidiaries
(a/k/a U.S. Alcohol Testing of America, Inc.) included in its Annual Report
(Form 10-K) for the year ended March 31, 1996, filed with the Securities and
Exchange Commission, in the Registration Statement (Form S-3 No. 333- )
and related Prospectus of Substance Abuse Technologies, Inc. for the
registration of 3,180,000 shares of its common stock issuable upon exercise of
warrants, 2,500,000 shares of its common stock issuable upon conversion of
convertible notes and 450,000 shares offered by selling stockholders.
/s/ Wolinetz, Gottlieb & Lafazan, P.C.
Rockville Centre, New York
January 15, 1997
E-23
