<PAGE i>
As filed with the Securities and Exchange Commission on May 6, 1997
File No. 333-19979
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
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
Fort 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
Fort 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 ii>
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 117,500 $2.125(3) $249,688(3) $76
value, issuable upon shares
exercise of warrants
Common Stock, $.01 par 6,422,500 $1.375(4) $8,830,938(4) $2,676
value shares
Total $2,752
<FN>
______________________
(1) Estimated solely for the purpose of calculating the
registration fee.
(2) Rounded to the nearest dollar.
<PAGE iii>
(3) Pursuant to Rule 457(g) under the Securities Act, the
authorized exercise price of the warrants to be granted to
employees was used for the purpose of calculating the
registration fee.
(4) 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 April 29, 1997 was taken as
the offering price of the shares for the purpose of
calculating the registration fee.
(5) 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.
</TABLE>
----------------------
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
----------------------
<PAGE iv>
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 Liabilitie
<PAGE 1>
Prospectus
SUBSTANCE ABUSE TECHNOLOGIES, INC.
117,500 Shares of SAT Common Stock Issuable upon Exercise of
Warrants and 6,422,500 Shares Offered by Selling Stockholders
Substance Abuse Technologies, Inc. ("SAT") is offering, by
this Prospectus, an aggregate of 117,500 shares of its Common
Stock, $.01 par value (the "SAT Common Stock"), issuable upon the
exercise at $2.125 per share of Common Stock purchase warrants to
be granted to employees of SAT or subsidiaries thereof (the
"Employee Warrants"). SAT will receive gross proceeds of
$249,688 if all of the foregoing Warrants were granted and then
were exercised.
In addition, the stockholders named in the table under the
caption "Selling Stockholders" (the "Selling Stockholders") are
offering, by this Prospectus, an aggregate of 6,422,500 shares of
the SAT Common Stock consisting of (1) an aggregate of 2,500,000
shares of the SAT Common Stock issuable upon the exercise at
$2.00 per share of Common Stock purchase warrants expiring June
30, 2000 (the "June 30 Warrants"), (2) an aggregate of 2,500,000
shares of the SAT Common Stock issuable upon the conversion at
$2.00 per share of Convertible Senior Promissory Notes due
November 8, 1999 (the "Convertible Notes"), (3) 1,000,000 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 "May __ Warrants"), (4) 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"), (5) 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, (6) 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 (7) an
aggregate of 162,500 shares issuable upon the exercise at $2.125
per share of outstanding Employee Warrants. The Selling
Stockholders have advised SAT that, when and if they exercise any
of the foregoing Warrants and convert the Convertible Notes, they
may, from time to time, offer the 6,422,500 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 investors. SAT will not receive any of
the proceeds from the sales of the shares of the SAT Common Stock
by the Selling Stockholders. SAT would, however, receive gross
proceeds of $7,854,063 if all of the Common Stock purchase
warrants described in this paragraph were exercised. 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 and Robert Muccini is the sole executive officer
listed among the Selling Stockholders. Such directors and
officer may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities
<PAGE 1a>
Act of 1933, as amended (the "Securities Act"). Accordingly, SAT
will advise these Selling Stockholders of the requirement under the
Securities Act that each of them, or any broker-dealer acting for
him, must deliver a copy of this Prospectus in connection with
any sale (other than on the American Stock Exchange) by such Selling
Stockholder of shares of the SAT Common Stock registered hereunder,
SAT will also advise each of these Selling Stockholders that, if it is
determined that he is an "underwriter," he may be found liable
for monetary damages to purchasers under Sections 11, 12(2) and
15 of the Securities Act if there are any defects in the
Registration Statement (i.e., material misstatements or
omissions) and also may be found liable under Section 10(b) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 10b-5 thereunder for such material misstatements
or omissions, if any.
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 April 29, 1997 was $1.375.
-----------------------
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 Issuer Persons
-------- ------------- -------- --------
<S> <C> <C> <C> <C>
Per share of Common $1.375(1) 0 0 $1.375(1)
Stock
Per Warrant share $2.125(2) 0 $2.125(2) 0
Total for Common
Stock $8,830,938(1) 0 0 $8,830,938(1)
Total for Warrant
shares $249,688(2) 0 $249,688(2) 0
<FN>
_______________________
<PAGE 1b>
(1) Based on the closing sales price of the SAT Common Stock on
April 29, 1997 as reported by the American Stock Exchange.
(2) Based on the exercise price of the Warrants to be granted to
employees.
(3) Excludes expenses estimated at $55,000.
</TABLE>
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 May 6, 1997
<PAGE 2>
AVAILABLE INFORMATION
SAT is subject to the informational requirements of 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. 333-19979 (the "Registration Statement"),
under the Securities Act with respect to (1) the offer by SAT of
an aggregate of 117,500 shares of the SAT Common Stock issuable
upon the exercises on anniversary dates of the respective dates
of grant (see "Plan of Distribution") at $2.125 per share of the
Employee Warrants still to be granted to employees of SAT and its
subsidiaries and (2) the offer by the Selling Stockholders of an
aggregate of 6,422,500 shares of the SAT Common Stock consisting
of (a) an aggregate of 1,260,000, 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)
May ___ Warrants at $2.00 per share to purchase 1,000,000 shares
of the SAT 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 and (iv) the
Lenders Warrants at $1.8125 per share to purchase an aggregate of
10,000 shares of the SAT Common Stock; (b) an aggregate of
162,500, shares of the SAT Common Stock when and if the holders
of the Employee Warrants exercise at $2.125 per share their
Employee Warrants; (c) an aggregate of 2,500,000 shares of the
SAT Common Stock issuable at $2.00 per share upon the exercise,
on and after July 1, 1997, of the June 30 Warrants; and (d) an
aggregate of 2,500,000 shares of the SAT Common Stock issuable
upon the conversion, on and after July 1, 1997, at $2.00 per
share of the Convertible Notes. The June 30 Warrants, the May
___ Warrants, the Employee Warrants, the December 2 Warrants, the
Directors Warrants and the Lenders Warrants are collectively
referred to herein as the "Warrants."
<PAGE 3>
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. Quarterly Report on From 10-Q for the quarter ended December 31, 1996.
5.(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;
6. Notice of Annual Meeting of Stockholders and Proxy Statement dated
September 12, 1996; and
7. 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 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, Fort Lauderdale, Florida 33309 or
telephone number: (954) 739-9600. A
<PAGE 4>
reasonable fee for duplicating and mailing will be charged for a copy
of any exhibit if such exhibit is requested. There will no be charge
for any requested exhibit which is incorporated by reference into this
Prospectus.
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, Fort
Lauderdale, Florida 33309, and its telephone number is (954) 739-
9600.
SAT's subsidiaries or divisions 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 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, designed, marketed
and distributed a variety of traditional toy products
for children of various ages. Good Ideas currently
conducts no operations. The Good Ideas common stock
was delisted from the Pacific Stock Exchange effective
January 1, 1997 and is currently traded in the over-
the-counter market. SAT is currently seeking to
acquire the minority stock 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 for its stock
is made, to liquidate Good Ideas as soon as the results
of the consent solicitation for the Good Ideas Merger
are known.
<PAGE 5>
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.
6. 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.
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
$48,476,903 from inception through December 31, 1996. Management
initiated cost reduction actions to reduce 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
<PAGE 6>
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 prior to its acquisition 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"). Without the expenses of the consent
solicitation, management had hoped that the general and
administrative expenses could be reduced in the fiscal year
ending March 31, 1997 ("fiscal 1997"). During the nine months
ended December 31, 1996, such expenses increased by $350,000 to
$4,120,000 from the $3,770,000 in the comparable period in fiscal
1996. The increase was due primarily to the issuance of shares
of the SAT Common Stock valued at $575,000 for financial public
relations services. The Company also incurred 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 cost reductions will be realized
in the fiscal year ending March 31, 1998 ("fiscal 1998") 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; however, selling and
marketing expenses increased to $859,000 in the nine months ended
December 31, 1996 as compared to $772,000 for the same period of
the prior year reflecting such increased marketing efforts. In
addition, management caused SAT to acquire 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 a more acceptable offer for
Good Ideas than a current offer of $225,000 (less amounts
previously paid) for its remaining inventory. The Good Ideas
Board will attempt to close on such offer as soon as possible
(Good Ideas is seeking a closing in April 1997) and, whether or
not such sale is consummated, will liquidate Good Ideas as soon
as possible after the date on which the results of the consent
solicitation for the Good Ideas Merger are known. In addition,
the decision to develop a 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 the first quarter of 1999 at the
earliest, 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 March 1998 at the
earliest, management could 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. In addition, because the bulk of the research and
development expenses will have been incurred at that stage of the
program, seeking a development partner may not be a desirable
action to take at that time. Management believes, therefore,
that it is currently too speculative to project any revenues from
this source. See the section "Lack of Funding
<PAGE 7>
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 nine
months of fiscal 1997, that, despite these management programs,
the Company will not turn profitable in fiscal 1997. There can
be no assurance as to when the Company, without giving effect to
the results of operations of U.S. Drug, will turn profitable, if
at all, or when U.S. Drug will turn profitable.
2. Need for Financing. The Company incurred losses from
operations of $9,006,000 in fiscal 1996, $6,977,000 in fiscal
1995, $9,687,000 in fiscal 1994 and $7,457,000 in the nine months
ended December 31, 1996. As a result of these losses, the
Company has not generated a positive cash flow from operations in
those periods. Management believes that, as a result of (1) its
sale consummated in November 1996 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 exercises 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 the second half
of 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,
particularly as to the estimate as to the Company achieving a
positive cash flow from its operations other than U.S. Drug.
Such estimate is based primarily on SAT continuing to develop new
customers for its Employer Services Division taking into account
that it generally takes 90 to 120 days from contract signing to
implement procedures and begin to receive revenues. Such
estimate also assumes that SAT will not incur significant non-
recurring costs as it has in recent years, that SAT has
eliminated its significant losses in the Alcohol Products
Division and continues to derive from its Robert Stutman &
Associates Consulting Division increasing revenues and sources of
potential business for the Company's other operations. In the
event exercises are not achieved at the levels expected and the
Company's cash flow from operations (other than U.S. Drug) does
not turn positive, the Company in such event would have to seek
new financing even for its non-U.S. Drug operations, 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 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
<PAGE 8>
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 approximately $12,000,000 during the
period April 1, 1997 to December 31, 1998 to complete the
development of a saliva based testing product. Such estimate
reflects both product development and manufacturing build-out
costs, as well as general and administrative expenses. U.S. Drug
will attempt to reduce such estimated costs to approximately
$10,500,000 by leasing rather than purchasing certain items, but
there can be no assurance as to the extent, if any, that leasing
will be a viable option. 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 U.S. Drug seeking a development partner which would share the
costs. However, current management is of the opinion that use of
one of the major pharmaceutical or medical diagnostic companies
to assist in the product development at this stage of development
risks giving confidential data to potential competitors that will
not be fully protected by confidentiality agreements and also 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 on an acceptable
basis 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 March 1998 at the earliest and that, at
that stage of development, the greater part of the estimated
$10,500,000 in development and manufacturing build-out 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. Insufficient Authorized Shares. As of March 31, 1997,
there were 50,000,000 shares of the SAT Common Stock authorized,
of which 36,030,591 shares were outstanding and the SAT Board of
Directors had authorized for issuance up to an additional
17,788,712 shares, including an aggregate of 3,347,002 shares to
be issued in its proposed transactions to take two publicly-
traded subsidiaries private. Were all of such shares to be
issued, there would be 53,819,303 shares outstanding or 3,819,303
shares in excess of the authorized number. However, as of March
31, 1997, Common Stock purchase warrants to purchase an aggregate
of 4,417,000 shares and the Convertible Notes as to 2,500,000
shares were not currently exercisable or convertible. All of the
foregoing amounts as to the shares authorized to be issued do not
give effect to anti-dilution or other adjustment provisions in
certain of the Common Stock purchase warrants and in the
Convertible
<PAGE 9>
Notes. SAT has authorized the calling of a Special
Meeting of Stockholders for the purpose of increasing the
authorized number of shares of the SAT Common Stock from
50,000,000 to 65,000,000. There can be no assurance that the SAT
stockholders will approve this increase, in which event, if
50,000,000 shares of the SAT Common Stock are outstanding at the
date on which a holder of a Warrant seeks to exercise, or a
holder of the Convertible Notes seeks to convert, such holder
will not be able to receive any shares of the SAT Common Stock.
In addition, SAT will not have shares for any additional
financing.
5. 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
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 or medical diagnostic 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 two 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
<PAGE 10>
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 and management does not believe
that it could pursue successfully such a partner until the first quarter
of 1998 at the earliest. 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
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 (now the Robert Stutman &
Associates Consulting Division), 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.
6. 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.
<PAGE 11>
7. Depressive Effect on Market of Warrant or Option
Exercises, Untimely Sales by Selling Stockholders and Sales of
Shares Received upon Mergers. Any exercise of the outstanding
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 selling stockholders and otherwise
complying with Section 10(a)(3) of the Securities Act. In
addition, as of March 31, 1997, selling stockholders named in the
October 4 Prospectus were offering an aggregate of 4,051,756
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 (which were part of 3,000,000 shares of the
SAT Common Stock (the "Acquisition Shares") registered by SAT
under the Securities Act in its Registration Statement on Form S-
1, File No. 33-43337 (the "January 1992 Registration Statement"),
for future acquisitions) 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
up to an aggregate of 117,500 shares of the SAT Common Stock
issuable upon the exercise of the Employee Warrants still to be
granted to employees of the Company, all of which 117,500 shares
could be reoffered by the holders thereof. If any grantee of an
Employee Warrant 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 holder
will require for resale of the underlying shares a prospectus
naming him or her as a selling stockholder and otherwise
complying with Section 10(a)(3) of the Securities Act and that a
grantee who is not an affiliate will not have such prospectus
delivery requirement. This Prospectus also relates to the offer
by the Selling Stockholders of (a) an aggregate of 2,500,000
shares when and if the June 30 Warrants are exercised, (b) an
aggregate of 2,500,000 shares when and if the Convertible Notes
are converted, (c) an aggregate of 1,260,000 shares when and if
the May ___ Warrants, the December 2 Warrants, the Directors
Warrants and the Lenders Warrants are exercised and (d) an
aggregate of 162,500 shares when and if the holders of
outstanding Employee Warrants exercise such Employee Warrants.
Accordingly, because the last of the SAT Warrants described in
this paragraph does 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. With the filing of the
January 1997 Registration Statement, SAT has fulfilled the last
of its registration rights commitments outstanding as of March
31, 1997. Such commitments related to an aggregate of 16,256,920
shares of the SAT Common Stock. In addition, SAT may, under
certain circumstances, be required to amend the January 1992
Registration Statement so that the holders may reoffer an
aggregate of 967,321 shares of the Acquisition Shares already
issued (other than to
<PAGE 12>
the former RSA shareholders) and an aggregate of 1,532,679 shares of
the Acquisition Shares to be issued with respect to future acquisitions
by SAT.
As of March 31, 1997, the 4,051,756 shares described in the
preceding paragraph were reserved for issuance upon the exercise
of the following Common Stock purchase warrants: (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 31, 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) 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; (e) 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 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; (f) 300,000 shares issuable upon the exercise at
$2.125 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; (g) 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; (h) 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 the ProActive
operations (the warrant being divided among the RSA shareholders
after the acquisition of RSA by SAT); (i) 3,125 shares issuable
upon the exercise at $2.00 per share of a Common Stock purchase
warrant expiring December 13, 1999 issued to the Chief Executive
Officer for his prior services as a consultant to SAT and
ProActive; (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 $2.00 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 4,051,746 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
<PAGE 13>
thereof as described in the preceding paragraph. 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. There was also reserved, as of March
31, 1997 185,207 shares issuable upon the conversion of the
shares of the Class A Preferred Stock, $.01 par value (the "Class
A Preferred Stock"). If all of the 4,051,746 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 3,540,000 shares issuable
upon the exercise of the December 17 Warrants, the May __
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.
To the extent that the Good Ideas Merger is consummated,
557,524 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, 2,789,478 shares of the SAT Common
Stock will be issued to the minority stockholders of U.S. Drug.
The aggregate of 3,347,002 shares of the SAT 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 a
similar adverse impact as described in the preceding paragraph.
8. Technological Changes. The substance abuse testing
industry is a technologically 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."
9. 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
<PAGE 14>
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.
10. Possible Market Making Restrictions. Unless granted an
exemption by the Commission from Rule 102 under Regulation M, any
soliciting broker-dealers acting for the Selling Stockholders
will be prohibited from, directly or indirectly, bidding for or
purchasing any shares of the SAT Common Stock or attempting to
induce any person to bid for or purchase shares of the SAT Common
Stock during the restricted period (as defined) which ends when
the Selling Stockholder has completed his or its offering
pursuant to this Prospectus. 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.
DILUTION
As of December 31, 1996, there were 36,030,591 shares of the
SAT Common Stock outstanding and the net tangible book value of
SAT was $795,676 or $.02 per share of the SAT Common Stock. 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 were converted
into shares of the SAT Common Stock and the U.S. Drug Merger and
the Good Ideas Merger were completed, SAT would have 39,562,800
shares of the SAT Common Stock outstanding with a net tangible
book value of $1,855,989 or $.05 per share of the SAT Common
Stock.
If all of the outstanding Common Stock purchase warrants to
purchase an aggregate of 9,969,246 shares were exercised; if the
U.S. Drug Merger and the Good Ideas Merger were completed
resulting in the issuance of an aggregate of 3,347,002 shares of
the SAT Common Stock; if the 74,285 and 243,000 shares of the SAT
Common Stock issuable upon the exercise of Common Stock purchase
warrants at $2.115 and $4.629, respectively, per share, issued in
connection with the mergers were exercised; an aggregate of
2,500,000 shares were issued on the conversion of the Convertible
Notes (without giving effect to anti-dilution and market price
adjustments); and the shares of the Class A Preferred Stock were
converted into 185,207 shares of the Common Stock, SAT would have
52,349,332 shares of the SAT Common Stock outstanding with a net
tangible book value of $30,291,103 or $.58 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 and
the Convertible Notes being registered herein after the exercise
of their respective Warrants and the conversion of their
Convertible Notes and assuming the issuance of the shares in
connection with the proposed mergers and the conversion of the
Class A Preferred Stock. Assuming completion of these
transactions, SAT would have outstanding 46,102,800 shares
<PAGE 15>
of Common Stock and have a net book value of $14,459,739 or $.32 per
share of the SAT Common Stock.
Net tangible book value per share after the
transaction described in the preceding paragraph $ .32
Dilution per share to $1.8125 Warrantholders $1.4925
Dilution per share to $2.00 Convertible Noteholders $1.68
Dilution per share to $2.00 Warrantholders $1.68
Dilution per share to $2.125 Warrantholders $1.805
Shares of the SAT Common Stock issuable upon the exercise of
the Warrants at the following exercise prices per share: 60,000
at $1.8125, 3,700,000 at $2.00 and 280,000 at $2.125 and shares
of SAT Common Stock issuable upon conversion of the Convertible
Notes: 2,500,000 at $2.00 per share.
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 $1.1175
per share based upon a market price of $1.4375 on March 26, 1997.
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 which are outstanding 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 $8,103,750. 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 6,422,500) 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
<PAGE 16>
as of March 31, 1997 before and after such offering; and (3) the
percentage of beneficial ownership before and after the offering.
<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
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(54) 10,000 204,441 nil nil
Lee S. Rosen(2) 1,478,648(6) 210,000 1,268,648 4.0% 3.4%
Capital Strategists,
Inc 1,000,000(6) 1,000,000 -0- 2.7% -0-
Steven A. Cohen 4,248,100(7) 2,505,000 1,743,100 11.0% 4.5%
S.A.C. Capital
Associates, LLC 3,008,100(8) 2,505,000 503,100 7.8% 1.3%
Robert Muccini(9) 40,000(10) 40,000 -0- nil -0-
Dennis Wittman(9) 12,500(11) 12,500 -0- nil -0-
Curtis D. Benton, Jr. 5,000(10) 5,000 -0- nil -0-
William Blough 40,000(10) 40,000 -0- nil -0-
Kristina Hogan 5,000(10) 5,000 -0- nil -0-
Melody Harris 5,000(10) 5,000 -0- nil -0-
Lonna Williams 40,000(10) 40,000 -0- nil -0-
Kathy Meyers 10,000(10) 10,000 -0- nil -0-
Keith Roberts 5,000(10) 5,000 -0- nil -0-
<PAGE 17>
<FN>
_____________________
(1) The percentages computed in this column of the table are
based upon 36,030,591 shares of the SAT Common Stock
outstanding on March 31, 1997 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 March 31, 1997.
(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 $1.8125 per share upon
the exercise of a Directors Warrant, both issued to the
holder as a director of SAT 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 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.
(5) 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
$2.125 per share of a Common Stock purchase warrant
expiring April 17, 1999. Mr.
<PAGE 18>
Rosen is offering only the shares described in (a) and
(c ) pursuant to this Prospectus and is offering all of
the other shares described in this Note (5) pursuant to
the October 4 Prospectus.
(6) The shares reported in the table as being beneficially
owned reflect the shares issuable upon the exercise of the
May ___ Warrants.
(7) The shares reported in the table as being beneficially
owned reflect (a) 1,743,100 shares of the SAT Common
Stock, (b) 5,000 shares of the SAT Common Stock issuable
at $1.8125 per share upon the exercise of a Lenders
Warrant, (c) 1,250,000 shares of the SAT Common Stock
issuable upon the conversion at $2.00 per share of a
Convertible Note and (d) 1,250,000 shares of the SAT
Common Stock issuable at $2.00 per share upon the exercise
of a June 30 Warrant. The Convertible Note is not
convertible, and the June 30 Warrant is not exercisable,
at March 31, 1997 or within 60 days after March 31, 1997.
The holder is offering all of the shares except those
described in (a) pursuant to this Prospectus. Mr. Cohen
filed a 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
holders' advice to SAT and the subsequent grants by SAT,
the group beneficially owned, pursuant to Rule 13a-
3(d)(1)(i) under the Exchange Act, an aggregate of
2,256,200 shares of the Common Stock or 6.3% of the
outstanding shares at March 31, 1997. If effect is given
to the shares issuable upon conversion of the Convertible
Notes and exercise of the June 30 Warrants, the group
would beneficially own an aggregate of 7,256,200 shares or
17.7% of the outstanding shares as of March 31, 1996.
(8) The shares reported in the table as being beneficially
owned reflect (a) 503,100 shares of the SAT Common Stock,
(b) 5,000 shares of the SAT Common Stock issuable at
$1.8125 per share upon the exercise of a Lenders Warrant,
(c) 1,250,000 shares of the SAT Common Stock issuable upon
the conversion of a Convertible Note and (d) 1,250,000
shares of the SAT Common Stock issuable at $2.00 per share
upon the exercise of a June 30 Warrant. The Convertible
Note is not convertible, and the June 30 Warrant is not
exercisable, at March 31, 1997 or within 60 days after
March 31, 1997. The holder is offering all of the shares
except those described in (a) pursuant to this Prospectus.
See Note (7) to this table for information as to group
ownership. A 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.
(9) Mr. Wittman was, from September 5, 1996 to February 25,
1997, the Vice President, Finance, Treasurer, Chief
Financial Officer and Chief Accounting Officer of SAT.
Effective February 25, 1997, Mr. Muccini was elected or
designated to all of Mr. Wittman's officerships or officer
designations. Mr. Wittman resigned as a result of the
relocation of the Finance and Accounting Department from
the former corporate
<PAGE 19>
headquarters in Rancho Cucamonga, California to the new
corporate headquarters in Fort Lauderdale, Florida.
See "Material Changes."
(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. As of
March 31, 1997, all persons holding outstanding Employee
Warrants were employees of SAT except as indicated in Note
(9) to this table. In addition, Lonna Williams served as
Vice President, Marketing of U.S. Drug.
(11) 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. The
number of shares was reduced from 50,000 to 12,500 and the
Employee Warrant made immediately exercisable when Mr.
Wittman resigned as described in Note (9) to this table.
</TABLE>
PLAN OF DISTRIBUTION
Each of the holders of (1) the June 30 Warrants to purchase
an aggregate of 2,500,000 shares of the SAT Common Stock, (2) the
Convertible Notes to acquire an aggregate of 2,500,000 shares of
the Common Stock, (3) the Directors Warrants to purchase an
aggregate of 50,000 shares of the SAT Common Stock, (4) the
Lenders Warrants to purchase an aggregate of 10,000 shares of the
SAT Common Stock, (5) the December 2 Warrant to purchase 200,000
shares of the SAT Common Stock, (6) the May ___ Warrants to
purchase an aggregate of 1,000,000 shares of the SAT Common Stock
and (7) Employee Warrants to purchase an aggregate of 162,500
shares of the SAT Common Stock has advised SAT that, when and if
he or it exercises any of the foregoing Warrants or converts the
Convertible Notes, the June 30 Warrants and the Convertible Notes
not being exercisable or convertible on or before July 1, 1997
and all of the other outstanding Warrants, except the May ___
Warrants (as to 675,000 shares) and the Employee Warrants (as to
150,000 shares), being 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.
The Warrants which are not currently exercisable become
exercisable as follows:
(1) The May ___ Warrants were granted to Capital
Strategists, Inc. as compensation for financial public
relations services. May ___ Warrants to purchase
325,000 shares of the SAT Common Stock are currently
exercisable and the other May ___ Warrants become
exercisable as to 225,000 shares of the SAT Common
Stock as of each quarter commencing June 1, 1997.
<PAGE 20>
(2) All but one 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. See but one 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. Although the
Employee Warrant when granted to Dennis Wittman had the
same terms as that of the other Employee Warrants, his
Employee Warrant became exercisable immediately and
expires three years from the date of its grant as part
of his severance arrangement. See Note (11) to the
table under "Selling Stockholders."
The 117,500 shares of the SAT Common Stock underlying the
Employee Warrants still to be granted have been registered under
the Securities Act pursuant to this Registration Statement for
issuance by SAT because none of these Employee Warrants is
currently exercisable. Unless the holder of the foregoing
Warrants is an affiliate of SAT as such term is defined in Rule
405 under the Securities Act, such holder 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 her 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
6,422,500 shares of the SAT Common Stock offered by this
Prospectus shall comply with the requirements of the federal
securities laws, including Regulation M.
In general, Rule 102 under Regulation M prohibits any
Selling Stockholder or a broker-dealer acting for such Selling
Stockholder from, directly or indirectly, bidding for or
purchasing any shares of the SAT Common Stock or attempting to
induce any person to bid for or to purchase shares of the SAT
Common Stock during the restricted period (as defined in Rule
100) which ends when he or it has completed his or its
participation in the offering made pursuant to this Prospectus.
Rule 102 sets forth certain exceptions for the Selling
Stockholder including exercising a Common Stock purchase warrant.
The five directors and one executive officer who are
offering shares of the SAT Common Stock pursuant to this
Prospectus may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act. Accordingly, SAT will
advise these Selling Stockholders of the requirement under the
Securities Act that each of them, or any broker-dealer acting for
him, must deliver a copy of this Prospectus in connection with
any sale (other than on the American Stock Exchange) by such
Selling Stockholder of shares of the SAT Common Stock registered
hereunder, SAT will also advise each of these Selling
Stockholders that, if it is determined that he is an
"underwriter," he may be found liable for monetary damages to
purchasers under Sections 11, 12(2)
<PAGE 21>
and 15 of the Securities Act if there are any defects in the Registration
Statement (i.e., material misstatements or omissions) and also may be
found liable under Section 10(b) of the Exchange Act and Rule
10b-5-thereunder for such material misstatements or omissions, if any.
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 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
<PAGE 22>
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 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
<PAGE 23>
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 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. Pursuant to the Loan
Agreement, so long as the Convertible Notes are outstanding,
whenever the directors receive Common Stock purchase warrants to
purchase shares of the Common Stock as compensation for serving
in such capacity, each of the Lenders is entitled to receive a
Common Stock purchase warrant to purchase one half of the shares
of the SAT Common Stock subject to the director's warrant, the
other terms and conditions of the Lender's Warrant to be similar
to those of the director's warrant.
Effective as of August 1, 1996, SAT relocated its executive
offices from Rancho Cucamonga, California to Fort 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
<PAGE 24>
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 management committee formed in November, 1996
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 M. 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 Promissory 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 $3.125 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
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. Lee S. Rosen, a director of SAT, 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.
As compensation for his services in securing exercises of
outstanding Common Stock purchase warrants, during May and June
1996, Mr. Rosen was paid $400,000 and received a Common Stock
purchase warrant expiring April 17, 1999 (the "April 17
Warrants") to purchase 300,000 shares of the SAT Common Stock at
$3.125 per share. On January 23, 1997, in
<PAGE 25>
consideration of certain services which Mr. Rosen had performed and
certain existing and potential liabilities as to which he had become
subject as a result of the 1995 consent solicitation, the SAT
Board authorized a reduction in the exercise of the April 17
Warrants from $3.125 to $2.125 per share. On December 6, 1996,
the Board had authorized a similar reduction in the exercise
price of Common Stock purchase warrants to purchase an aggregate
of 249,000 shares of the SAT Common Stock held by employees of
SAT (two of whom are executive officers of SAT and one of such
two also being a director of SAT).
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, 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
<PAGE 26>
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.
<PAGE>
- ---------------------------------------- -----------------------
- ---------------------------------------- -----------------------
No dealer, salesperson or other
person has been authorized to give SUBSTANCE ABUSE
any information or to make any TECHNOLOGIES, INC.
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 117,500 Shares of SAT Common
Prospectus does not constitute an offer Stock Issuable upon Exercise
to sell or a solicitation of an offer of Warrants and 6,422,500
to buy the securities offered hereby to by Selling Stockholders
any person in any state or other
jurisdiction in which such offer or
solicitation would be unlawful. Neither
the delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create any implication
that the information contained herein is
correct as of any time subsequent to the
date hereof.
TABLE OF CONTENTS
-----------------
Page
----
Available Information.................. 2
Incorporation of Certain Information
By Reference........................ 3
The Company............................ 4
Risk Factors........................... 5 -------------------
Dilution............................... 14
Use of Proceeds........................ 15 PROSPECTUS
Selling Stockholders................... 15
Plan of Distribution................... 19 -------------------
___________________________
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 May __, 1997
required to deliver a prospectus.
- -------------------------------------------- ------------------------
- -------------------------------------------- ------------------------
<PAGE II-1>
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......................... $ 3,863
Accountants' Fees and Expenses........... 15,000
Legal Fees and Expenses.................. 20,000
Printing, Transfer Agent and
Other Miscellaneous Expenses............ 16,137
--------
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, partnership,
joint venture, trust or other enterprise against expenses
(including attorneys' fees)
<PAGE II-2>
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 (the "Exchange Act"). An exhibit marked with an asterisk
is filed with this Amendment No. 2 to this Registration
Statement. If no footnote reference is made and no asterisk is
marked, the exhibit was previously filed with this Registration
Statement or Amendment No. 1 thereto.
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.
<PAGE II-3>
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.
<PAGE II-4>
Number Exhibits
- ------ --------
23(a )* Consent of Ernst & Young LLP relating to financial
statements in Annual Report on Form 10-K.
23(b)* Consent of Ernst & Young LLP relating to financial
statements in Current Report on Form 8-K/A.
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) 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
<PAGE II-5>
(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.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
<PAGE II-6>
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 amendment to the 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 May , 1997.
SUBSTANCE ABUSE TECHNOLOGIES, INC.
(Registrant)
By: /s/ Robert M. Stutman
-------------------------------
Robert M. 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 May , 1997.
Signature Title
- --------- -----
/s/ Robert M. Stutman Principal Executive Officer
- ------------------------------ and Director
Robert M. Stutman
/s/ Robert Muccini Chief Financial and
- ------------------------------ Accounting Officer
Robert Muccini
/s/ Alan I. Goldman Director
- ------------------------------
Alan I. Goldman
/s/ John C. Lawn Director
- ------------------------------
John C. Lawn
/s/ Peter M. Mark Director
- ------------------------------
Peter M. Mark
/s/ Linda H. Masterson Director
- ------------------------------
Linda H. Masterson
/s/ Michael S. McCord Director
- ------------------------------
Michael S. McCord
/s/ Lee S. Rosen Director
- ------------------------------
Lee S. Rosen
<PAGE E-1>
EXHIBIT INDEX
SUBSTANCE ABUSE TECHNOLOGIES, INC.
REGISTRATION STATEMENT ON FORM S-3
EXHIBITS FILED
TO FORM S-3 REGISTRATION STATEMENT
Page
Number Exhibits Number
- ------ -------- ------
23(a) Consent of Ernst & Young LLP relating to financial E-2
statements in Annual Report on Form 10-K.
23(b) Consent of Ernst & Young LLP relating to financial E-3
statements in Current Report on Form 8-K/A
23(c) Consent of Wolinetz, Gottlieb & Lafazan, P.C. E-4
<PAGE E-2>
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 (Amendment No. 2 to Form S-3 No. 333-19979) and related
Prospectus of Substance Abuse Technologies, Inc. for the
registration (1) 117,500 shares of its common stock issuable upon
exercise of warrants to be granted and (2) 6,422,500 shares of
its common stock offered by selling stockholders.
/S/ ERNST & YOUNG LLP
Riverside, California
May 2, 1997
<PAGE E-3>
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 (Amendment
No. 2 to Form S-3 No. 333-19979 and related Prospectus of
Substance Abuse Technologies, Inc. for the registration (1)
117,500 shares of its common stock issuable upon exercise of
warrants to be granted and (2) 6,422,500 shares of its common
stock offered by selling stockholders.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
May 2, 1997
<PAGE E-4>
Exhibit 23(c)
Consent of Independent Auditors
We hereby consent to the incorporation by reference in this
Registration Statement of Form S-3 of our report dated May 26,
1995 with respect to 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
(Amendment No. 2 to Form S-3 No. 333-19979) and related
Prospectus of Substance Abuse Technologies, Inc. for the
registration (1) 117,500 shares of its common stock issuable upon
exercise of warrants to be granted and 6,422,500 shares of common
stock offered by selling stockholders.
/s/ Wolinetz, Gottlieb & Lafazan, P.C.
Rockville Centre, New York
May 2, 1997
