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As filed with the Securities and Exchange Commission on April 28, 1998
Registration No. 333-35663
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
ON
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NETMED, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Ohio 5047 31-1282391
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number Identification Number)
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6189 Memorial Drive
Dublin, OH 43017
(614) 793-9356
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
David J. Richards, President
NetMed, Inc.
6189 Memorial Drive
Dublin, OH 43017
(614) 793-9356
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
William J. Kelly, Jr.
Vice President and General Counsel
NetMed, Inc.
6189 Memorial Drive
Dublin, OH 43017
(614) 793-9356
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THIS POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(c) OF THE
SECURITIES ACT OF 1933 MAY DETERMINE.
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PROSPECTUS
1,500,000 SHARES
NETMED, INC.
COMMON SHARES
(without par value)
The shares offered hereby (the "Shares") consist of up to 1,500,000 common
shares, without par value (the "Common Stock") of NetMed, Inc., an Ohio
corporation ("NetMed" or the "Company") which are issuable by the Company to
certain persons ("Selling Shareholders") upon conversion of $3 million in
principal amount of 6% Secured Convertible Subordinated Debentures of the
Company ("Debentures"), and upon exercise by the Selling Shareholders of certain
warrants to purchase Common Stock ("Warrants"). The Debentures and Warrants were
issued to the Selling Shareholders in August, 1997, and as of the date of this
Prospectus, $1,500,000 in principal amount of the Debentures remain outstanding,
as well as all of the Warrants. For further information regarding the Selling
Shareholders, see "Selling Shareholders." The number of shares registered for
sale by the registration statement of which this Prospectus forms a part
includes approximately 534,598 shares issued upon conversion of Debentures prior
to the date hereof, plus approximately 65% of the number of shares into which
the principal amount of Debentures which remain outstanding on the date hereof
are convertible, assuming such Debentures were fully converted on such date. For
a further description of the terms of the Debentures and the Warrants, see
"Selling Shareholders."
This Prospectus covers the sale of the Shares from time to time by the Selling
Shareholders. The issuance of Shares upon conversion of the Debentures and
exercise of the Warrants is not covered by this Prospectus, but rather only the
resale of such Shares. The Shares may be offered from time to time by the
Selling Shareholders. All expenses of the registration incurred in connection
herewith are being borne by the Company, but any brokers' or underwriters' fees
or commissions will be borne by the Selling Shareholders. The Company will not
receive any proceeds from the sale of the Shares by the Selling Shareholders.
The Selling Shareholders have not advised the Company of any specific plans for
the distribution of the Shares covered by this Prospectus, but it is anticipated
that the Shares will be sold from time to time primarily in transactions (which
may include block transactions) on the American Stock Exchange at the market
price then prevailing, although sales may also be made in negotiated
transactions or otherwise. The Selling Shareholders and the brokers and dealers
through whom sale of the Shares may be made may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and their commissions or discounts and other compensation may be regarded
as underwriters' compensation. See "Plan of Distribution."
The Common Stock (including the Shares) is currently listed on the American
Stock Exchange under the symbol "NMD." On April 24, 1998, the last reported sale
price of the Common Stock on the American Stock Exchange was $1.125 per share.
THERE ARE CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BEFORE PURCHASING
SHARES IN THIS OFFERING. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR 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 April 27, 1998.
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AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement
on Form S-3 (the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act,
omits certain of the information set forth in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the securities
offered hereby. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the prescribed fee or may be examined without charge at the public reference
facilities of the Commission described below.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Section of the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
regional offices of the Commission: Midwest Regional Office, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661-2511, and Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, NY 10048. Copies of
such material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Such reports and other information filed with the Commission may also be
available at the Commission's site on the World Wide Web at http://www.sec.gov.
The Company's Common Stock is listed on the American Stock Exchange,
and copies of its reports, proxy statements and other information filed with the
Commission under the Exchange Act, and other information concerning the Company,
can be inspected at the American Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, which has been filed with the Commission pursuant to the
Exchange Act (File No. 1-12529), is hereby incorporated by reference into this
Prospectus. The information under the heading "Recent Developments" should be
read in conjunction with the Company's financial statements contained in the
Company's annual report on Form 10-K for the fiscal year ended December 31,
1997.
In addition, all documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to termination of the offering of the Shares offered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the respective date of fling of such documents with the
Commission.
Any statement contained herein, or any document, all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of the Registration Statement or this Prospectus. All
information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference. This Prospectus incorporates
documents by reference which are not presented herein or delivered herewith.
These documents (other than exhibits thereto, unless such exhibits are
specifically incorporated by reference in such documents) are available without
charge, upon written or oral request by any person to whom this Prospectus has
been delivered, by directing such request to NetMed, Inc., 6189 Memorial Drive,
Dublin, Ohio 43017, Attention: General Counsel, telephone: (614) 793-9356.
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FORWARD LOOKING STATEMENTS
Statements in this Prospectus which relate to other than strictly
historical facts, including statements about the Company's plans and strategies,
as well as management's expectations about new and existing products,
technologies and opportunities, market growth, demand for and acceptance of new
and existing products (including the Papnet(R) Testing System and the OxyNet(R)
oxygen concentration device), are forward looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. The
words "believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements that speak only as of the date
hereof. Investors are cautioned that such statements involve risks and
uncertainties that could cause actual results to differ materially from
historical or anticipated results due to many factors including, but are not
limited to, the Company's current reliance on a single product marketed under
license from Neuromedical Systems, Inc. ("NSI"), the corresponding dependence on
NSI's patents and proprietary technology, government regulation, continuing
losses from operations and negative cash flow, limited marketing and sales
history, the impact of third party reimbursement decisions, the challenges of
research and development of new products, and other risks detailed herein under
the caption "Risk Factors." The Company undertakes no obligation to publicly
update or revise any forward-looking statements.
THE COMPANY
The Company is an Ohio corporation engaged in the business of
acquiring, developing and marketing medical and health-related technologies. The
principal business activity of the Company is the marketing of the PAPNET(R)
Testing System, which is a proprietary product of NSI. The PAPNET Testing System
is a semi-automated cancer detection system for the review of cell, tissue or
body fluid specimens, including cervical cytology specimens. Slides containing
cytology specimens are processed using the PAPNET Testing System (either by the
laboratory at its own facilities or at one of NSI's central facilities) which
produces processed images for evaluation by the laboratory's NSI-trained
cytotechnologists.
The Company was originally organized in 1989 for the purpose of
acquiring the exclusive territorial rights to market NSI's proprietary products
in Ohio. In 1990, it acquired from NSI marketing rights for Kentucky and the
Chicago, Illinois metropolitan area. On December 16, 1996, the Company completed
a merger with Cytology Indiana, Inc., Indiana Cytology Review Company, ER Group,
Inc., CCWP Partners, Inc., and Carolina Cytology, Inc. (the "Predecessor
Companies"), which had held the rights to market the PAPNET Testing System in
the states of Missouri, Georgia and North Carolina. The Company was the
surviving corporation in the Merger. Upon completion of the Merger, the Company
changed its name from Papnet of Ohio, Inc. to NetMed, Inc.
In addition to exploiting its rights under the license agreement with
NSI, the corporate mission of NetMed is to become a well diversified health care
technology company founded upon proprietary products that offer a distinct
market advantage. The Company's intention is to follow the example of its
initial investment, the PAPNET technology, in pursuing other opportunities in
healthcare technology. Specifically, it intends to make early investments in
selected healthcare technologies and apply the management and marketing
resources of the Company to develop and implement strategies designed to
significantly increase the value of the investment over a period of two to four
years.
In pursuit of this strategy, in early 1997 the Company entered into an
agreement with CeramPhysics, Inc. of Westerville, Ohio ("Ceram"), pursuant to
which the Company obtained the right to acquire 95% ownership of a Ceram
subsidiary that holds an exclusive world-wide license to Ceram's patented oxygen
generation technology for all applications of the technology except oxygen
sensors and fuel cells. The Company's acquisition of this interest was completed
on April 3, 1998. It is the Company's intention to incorporate the element into
an oxygen generation device (the OxyNet(R) System) that the Company expects to
manufacture and market to the home health care industry. See "Recent
Developments."
The Company's principal offices are located at 6189 Memorial Drive,
Dublin, Ohio 43017, and its telephone number at that address is (614) 793-9356.
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RECENT DEVELOPMENTS
On April 3, 1998, the Company acquired from Ceram Oxygen Technologies,
Inc. ("COTI") 95 common shares, representing 95 percent of COTI's outstanding
common shares immediately following the closing, in exchange for a cash payment
of $50,000 and delivery of a note in the principal amount of $150,000 (the
"Note"). The Note provides for three equal principal payments of $50,000 on each
of June 1, July 1, and August 1, 1998, together with interest at the rate of 8.5
percent per annum. The remaining 5 percent of COTI's outstanding common equity
is owned by CeramPhysics, Inc. ("Ceram") of Westerville, Ohio. COTI holds an
exclusive world-wide license to Ceram's patented oxygen generation technology
for all applications of the technology except oxygen sensors and fuel cells. The
consideration was applied by COTI to payment of a $200,000 license fee owed to
Ceram, with $50,000 being paid in cash, and the balance by assignment of the
Note.
The acquisition was made pursuant to a February, 1997 agreement among
the Company, COTI and Ceram, whereby the Company agreed to make advances to COTI
to complete the fabrication and testing of a ceramic element incorporating the
licensed technology. Pursuant to the agreement, through April 3, 1998, the
Company had advanced $363,470 to COTI for this purpose. The agreement also
provided that upon completion of an acceptance test of the ceramic element
satisfactory to the Company, the Company had the right to acquire 95% of the
equity of COTI for $200,000.
It is the Company's intention to incorporate the ceramic element into
an oxygen generation device (the OxyNet(R) System) that the Company expects to
manufacture and market to the home health care industry. The Company believes
this system will be lighter, quieter, more reliable and less costly to operate
than current systems. The Company expects to demonstrate a 4 liter per minute
commercial prototype of the system this summer and to begin marketing a 5-6
liter per minute device during the second quarter of 1999. The Company also
expects to develop other applications for the technology, including military and
industrial applications.
RISK FACTORS
Investment in the securities being offered hereby involves a high
degree of risk, including, but not limited to, the risk factors described below.
Prospective investors should carefully consider the following risk factors, in
addition to the other information in this Prospectus, in evaluating an
investment in the securities offered hereby.
RISKS RELATING TO OPERATIONS AND PAST PERFORMANCE
The Company is in the early stage of its operations, and is therefore
subject to risks incident to any new business, including the absence of
earnings. The Company has to date had limited income from operations, and as of
December 31, 1997 has an accumulated deficit of $4,085,578. While the Company
intends to complete development and commercialization of the OxyNet(R) oxygen
concentration system, it has to date focused its effort primarily on the
marketing of the PAPNET(R) Testing System, and until a successful commercial
launch of the oxygen product (which is not assured) will be dependent upon the
successful marketing of the PAPNET System to generate revenues.
The Company cannot accurately predict the extent of its future capital
needs, but it will likely incur substantial expenditures during 1998 and 1999 to
complete development and commercialization of the OxyNet oxygen concentrator.
The Company does not currently have adequate funds to accomplish this objective,
and anticipates that it will need to raise additional capital by mid-1998. There
can be no assurance that capital will be available on terms acceptable to the
Company, or at all. If additional funds are raised through the issuance of
equity securities, the percentage ownership of the then current shareholders of
the Company may be reduced and such equity securities may have rights,
preferences or privileges senior to those of the holders of the Company's common
shares.
The Company has not paid and does not anticipate paying any cash
dividends in the foreseeable future and intends to retain future earnings for
the development and expansion of its business. The Company has accumulated
substantial losses since its inception and there can be no assurance that the
Company's operations will result in sufficient revenues to enable the Company to
operate at profitable levels or to generate positive cash flow.
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The success of the Company's operations is highly dependent up David J.
Richards, its founder and President, as well as its other key executive
officers. The loss of any of these persons could have a materially adverse
effect on the Company.
RISKS RELATING TO NSI
The Company obtains all of the information relating to the PAPNET
Testing System and service from NSI, and in most cases cannot independently
verify this information. Therefore, the Company is dependent on NSI to
accurately report the results of clinical studies and other data relating to the
capabilities and performance of the PAPNET Testing System.
The Company has no ownership rights in the PAPNET technology. NSI has
granted the Company exclusive rights with respect to the marketing of the PAPNET
Testing System and service in certain geographic territories. Therefore, the
business of the Company is dependent upon a number of factors, many of which are
controlled by NSI. These factors include maintaining the PAPNET Testing System's
compliance with FDA and other regulatory requirements, maintenance of the
technological advantages of the PAPNET Testing System, maintenance of product
liability insurance, and the ability to manufacture and deliver the equipment
required to operate the PAPNET Testing System. Further, NSI is in a stage of
development that may require additional funding for its operations. In the event
that NSI should fail to perform in any of these areas, or in any others that
could affect its licensees, such failure could have an adverse effect on the
Company and its business.
Additional risks relating to the business of NSI which may have an
impact on the Company are set forth in NSI's periodic reports filed with the
SEC, including its Annual Report on Form 10-K.
RISKS RELATING TO LICENSE AGREEMENTS AND PATENTS
The Company's marketing rights and the revenues generated by these
activities are governed by the terms of its licenses from NSI (the "Licenses").
The Licenses impose significant territorial and other restrictions on the
Company's marketing rights, and place certain limitations on the amounts of
royalty revenues which the Company can generate through the marketing of the
PAPNET Testing System and Service. In December 1995, the Company entered into a
Settlement Agreement with NSI which contemplated the execution of an amended and
restated license agreement, but to date no such agreement has been executed by
the parties.
The technologies underlying the PAPNET System and the OxyNet oxygen
concentrator are protected by various patents, which may benefit the Company as
a licensee of these technologies. There can be no assurance that these patents
will afford protection from material infringement by third parties or that such
patents will not be challenged. The Company and NSI also rely on trade secrets
and proprietary know-how, which they seek to protect, in part, through
confidentiality agreements with employees, consultants and other parties. There
can be no assurance that these agreements will not be breached, that there will
be adequate remedies for any breach or that trade secrets of the Company or NSI
will not otherwise become known to, or independently developed by, competitors.
Litigation is currently pending between NSI and a competitor over alleged
infringement of NSI's patents.
The medical device industry has been characterized by extensive
litigation regarding patents and other intellectual property rights. Although
patent and intellectual property disputes in the medical device area have often
been settled through licensing or similar arrangements, costs associated with
such arrangements may be substantial and there can be no assurance that
necessary licenses would be available to NSI or the Company on satisfactory
terms or at all. Adverse determinations as to the PAPNET and OxyNet patents
could limit or destroy the value of the Company's license rights to these
technologies, subject the Company to significant liabilities to third parties,
require the Company to seek licenses from third parties or prevent the Company
from manufacturing or selling these products, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
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RISKS RELATED TO THE COMPANY'S COMMON SHARES
The directors, executive officers and principal shareholders (5% or
greater) of the Company collectively beneficially own or have the right to
acquire under currently exercisable options approximately 25% of the outstanding
Common Stock. As a result, these shareholders will be able to exercise
significant influence over matters requiring shareholder approval, including the
election of directors and approval of significant corporate transactions. Such
concentration of ownership may have the effect of delaying or preventing a
change in control of the Company.
The Company had 11,465,382 common shares outstanding as of April 23,
1998. Approximately 2,300,000 shares are held by affiliates of the Company who
will be entitled to resell them only pursuant to a registration statement under
the Securities Act or an applicable exemption from registration thereunder such
as provided by Rule 144 under the Securities Act. In August 1997, the Company
sold $3 million in principal amount of Debentures convertible into Common Stock
at a discount to the market price at the time of conversion. The discount is
22.5% through June 30, 1998, and increases to 25% thereafter. There remains
$1,500,000 in principal amount of the debentures outstanding as of April 20,
1998, which if converted at the prevailing market price on that date would
result in the issuance of approximately 1,700,000 additional shares of Common
Stock. The Company has filed and there is currently effective a registration
statement under the Securities Act of 1933 under which such shares may be
immediately resold to the public. Such resales may adversely affect the pricing
and volatility of trading in the Common Shares. See "Selling Shareholders."
Although the Common Stock is currently listed for trading on the
American Stock Exchange, trading volume has been limited. There can be no
assurance that there will continue to be an active and liquid trading market.
The stock market has experienced extreme price and volume fluctuations and
volatility that has particularly affected the market prices of many technology,
emerging growth and developmental stage companies. Such fluctuations and
volatility have often been unrelated or disproportionate to the operating
performance of such companies. Factors such as announcements of the introduction
of new or enhanced services or related products by the Company or its
competitors may have a significant impact on the market price of the Common
Stock.
Market prices of securities of medical technology companies, including
the Common Stock, have experienced significant volatility from time to time.
There may be volatility in the market price of the Common Shares due to factors
that may or may not relate to the Company's performance. Various factors and
events, such as announcements by the Company or its competitors concerning new
product developments, governmental approvals, regulations or actions,
developments or disputes relating to patent or proprietary rights and public
concern over product liability may have a significant impact on the market price
of the Common Stock.
RISKS RELATING TO GOVERNMENT REGULATION
The services, products and manufacturing activities of NSI and the
Company are subject to extensive and rigorous government regulation, including
the provisions of the Medical Device Amendment to the Federal Food, Drug and
Cosmetic Act. Commercial distribution in certain foreign countries is also
subject to government regulations. The process of obtaining required regulatory
approvals can be lengthy, expensive and uncertain. Moreover, regulatory
approvals, if granted, may include significant limitations on the indicated uses
for which a product may be marketed. The FDA actively enforces regulations
prohibiting marketing without compliance with the premarket approval provisions
of products and conducts periodic inspections to determine compliance with Good
Manufacturing Practice regulations.
Failure to comply with applicable regulatory requirements can result
in, among other things, fines, suspensions of approvals, seizures or recalls of
products, operating restrictions and criminal prosecutions. Furthermore, changes
in existing regulations or adoption of new regulations could prevent NSI or the
Company from obtaining, or affect the timing of, future regulatory approvals.
The effect of governmental regulation may be to delay for a considerable period
of time or to prevent the marketing and/or full commercialization of future
products or services that NSI or the Company may develop and/or impose costly
requirements on NSI or the Company. There can be no assurance that NSI or the
Company will be able to obtain regulatory approvals of any products on a timely
basis or at all. Delays in receipt of or failure to receive such approvals or
loss of previously received approvals would adversely affect the marketing of
NSI's and the Company's proposed products. There can also be
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no assurance that additional regulations will not be adopted or current
regulations amended in such a manner as will materially adversely effect NSI or
the Company.
RISKS RELATING TO THIRD PARTY REIMBURSEMENT
In the United States, many Pap smears are currently paid for by the
patient, and the level of reimbursement by third-party payers that do provide
reimbursement differ considerably. Third-party payers (Medicare/Medicaid,
private health insurance, health maintenance organizations, health
administration authorities in foreign countries and other organizations) may
affect the pricing or relative attractiveness of the Company's products and
services by regulating the maximum amount of reimbursement for products or
services provided by the Company or by not providing any reimbursement at all.
Restrictions on reimbursement may limit the price which the Company can charge
for its products and services or reduce the demand for them, or, in the case of
PAPNET testing, if the level of such reimbursement is significantly below what
laboratories charge patients to perform the test, the size of the potential
market available to the Company may be reduced. There can be no assurance of the
extent to which costs of PAPNET testing will become reimbursable or that the
level of reimbursement will be sufficient to permit the Company to generate
substantial revenues in its PAPNET business.
RISKS RELATING TO MARKETABILITY AND COMPETITION
Until successful commercialization of the OxyNet system (if ever), the
Company's performance will depend upon market acceptance of the PAPNET System.
The extent of, and rate at which, market acceptance and penetration are achieved
are functions of many variables including, but not limited to, price,
effectiveness, acceptance by patients, physicians and laboratories,
manufacturing, slide processing and training capacity, reimbursement practice
and marketing and sales efforts. There can be no assurance that the PAPNET
System will achieve or maintain acceptance in its target markets.
The Company is aware of several companies that either have developed or
are developing systems that are competitive with the PAPNET System and other
technologies targeted for development by the Company. Commercial availability of
such products could have a material adverse effect on the Company's business,
financial condition and results of operations. Competitors may have
substantially greater financial, manufacturing, marketing and technical
resources, and represent significant potential long-term competition.
Competitors may succeed in developing products that are more effective or less
costly than any that may be developed by NSI or the Company. New developments
are expected to continue at a rapid pace in both industry and academia. There
can be no assurance that research and development by others will not render
NSI's or the Company's current and contemplated products obsolete. Competition
may increase further as a result of advances that may be made in the commercial
applicability of technologies and greater availability of capital for investment
in these fields.
RISKS RELATING TO PRODUCT LIABILITY
The business of the Company could expose it to the risks inherent in
the production and distribution of medical diagnostic and treatment equipment.
Although NSI has attempted to reduce the exposure to product liability risk by
disclosing the demonstrated range of accuracy of the PAPNET Testing System,
there can be no assurance that the Company will not be exposed to liability
resulting from the failure or inaccuracy of the Papnet System. The Company
currently carries no product liability insurance. However, NSI is required,
under the terms of the Licenses, to name the Company as an additional insured on
its product liability policies. There can be no assurance that NSI will have the
resources necessary to purchase and maintain the insurance, that such insurance
will be sufficient to cover potential claims, or that NSI will have adequate
resources to indemnify the Company from any uninsured loss.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Shareholders.
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SELLING SHAREHOLDERS
The 1,500,000 shares of the Company's Common Stock described in this
Prospectus include 534,598 Shares issued to the Selling Shareholders to date
upon conversion of Debentures prior to the date hereof, plus approximately 65%
of the number of Shares which may in the future be issuable upon conversion of
the Debentures, assuming that entire remaining principal amount of the
Debentures ($1,500,000) were to be converted as of the date of this Prospectus.
Except for the ownership of the Debentures and Warrants (and any Shares on
conversion or exercise thereof), the Selling Shareholders have not had any
material relationship within the past three years with the Company. The Shares
are being registered to permit public secondary trading of the Shares, and the
Selling Shareholders may offer the Shares for resale from time to time. See
"Plan of Distribution."
The Shares being offered by the Selling Shareholders hereby are
issuable by the Company to the Selling Shareholders upon conversion of the
Debentures and exercise of the Warrants. The Debentures and Warrants were issued
by the Company on August 13, 1997 to the Selling Shareholders pursuant the
Purchase Agreements. The Debentures and any interest accrued thereon may be
converted into Shares at any time. However, through May 10, 1998 (the 270th day
after the closing) the maximum aggregate number of Shares which can be sold is
500,000. After May 10, 1998, 100% of the Shares may be sold. As of the date of
this Prospectus, the Company has issued to the Selling Shareholders an aggregate
of 534,598 Shares. The Debentures bear interest at 6% per annum, payable in
Common Stock of the Company at the time of each conversion, and are convertible
into shares of the Company's Common Stock based on the "Conversion Price" at the
time of conversion. The "Conversion Price" varies based on the date when the
Debentures are converted. For the period through June 30, 1998, the Conversion
Price is an amount equal to 77.5% of the average closing bid price of the Common
Stock on the American Stock Exchange for the previous three business days ending
on the day before the conversion date. After July 1, 1998, the Conversion Price
is an amount equal to 75% of the average closing bid price of the Common Stock
on the American Stock Exchange for the previous three business days ending on
the day before the conversion date. The Conversion Price is subject to equitable
adjustment upon the occurrence of certain events, such as stock splits, stock
dividends, reclassifications or combinations.
If not previously converted, the entire outstanding principal and
interest on the Debentures will be automatically converted to Common Stock on
August 13, 2000 (the third anniversary of the closing). Notwithstanding the
foregoing, a Selling Shareholder is prohibited from converting any portion of
the Debentures which would result in the Selling Shareholder being deemed the
beneficial owner, in accordance with the provisions of Rule 13d-3 under the
Exchange Act, of 4.99% or more of the then issued and outstanding Common Stock
of the Company.
The Warrants are exercisable at exercise prices of $7.79 per Share (for
up to 150,000 Shares) and $9.35 per Share (for up to 65,000 Shares). Warrants
for 100,000 Shares expire on August 13, 2000, and the balance of the Warrants
expire on August 13, 2002.
The Debentures were initially secured by the pledge of 475,000 shares
of common stock of Neuromedical Systems, Inc. (Nasdaq: NSIX) owned by the
Company (the "NSI Shares"). If at any time prior to June 30, 1998, the
conversion price is $3.00 or less, the holders of the Debentures may elect to
exercise their conversion rights for NSI Shares, rather than Common Stock of the
Company, at a discount from the market price which would produce a 25% return on
an annualized basis. The NSI Shares may be released from the pledge ratably as
the outstanding principal amount of Debentures is reduced. As of the date of
this Prospectus, the Selling Shareholders have exercised these conversion rights
with respect to 330,813 NSI Shares, leaving a balance of 144,187 NSI Shares
pledged as security for the Debentures.
As required by the Purchase Agreements and related Registration Rights
Agreements, in recognition of the fact that Selling Shareholders may wish to be
legally permitted to sell any Shares acquired upon conversion of the Debentures
and exercise of the Warrants when they deem appropriate, the Company has filed
with the Commission under the Act a Registration Statement on Form S-3, of which
this Prospectus forms a part, with respect to the resale of the Shares by the
Selling Shareholders from time to time on the American Stock Exchange or in
privately-negotiated transactions.
7
<PAGE> 10
<TABLE>
<CAPTION>
NAME OF SELLING SHAREHOLDER NUMBER OF SHARES NUMBER OF SHARES BEING NUMBER OF SHARES BENEFICIALLY
BENEFICIALLY OWNED(1) OFFERED HEREBY (2),(3) OWNED AFTER OFFERING(3)
<S> <C> <C> <C>
CPR (USA), Inc. 1,325,865 870,000 455,865
LibertyView Fund, LLC 375,961 241,000 134,961
LibertyView Plus Fund 117,673 73,900 43,773
Goodbody International, Inc. 100,000 0 100,000
Clarco Holdings, Inc. 15,000 0 15,000
</TABLE>
(1) Represents the number of shares of the Company's Common Stock owned by the
Selling Shareholders as of the date of this Prospectus, plus approximately the
aggregate number of shares of the Company's Common Stock which the Selling
Shareholders would be entitled to acquire upon conversion of the Debentures
assuming the entire remaining principal balance of the Debentures was converted
into shares on the date of this Prospectus, plus the number of shares issuable
assuming the Warrants are fully exercised. The Selling Shareholders currently
hold approximately 219,499 shares in the aggregate, but the actual number of
shares which may be beneficially owned by them on any future date will depend on
the aggregate principal amount of Debentures then outstanding, the conversion
price(s) on the date(s) Debentures have been converted, the extent to which the
Selling Shareholders may have elected to convert into NSI Shares, and the number
of shares of the Company's Common Stock which have previously been sold by them
pursuant to this Registration Statement.
(2) Represents the number of shares of the Company's Common Stock owned by the
Selling Shareholders as of the date of this Prospectus, plus approximately 65%
of the aggregate number of shares of the Company's Common Stock which the
Selling Shareholders would be entitled to acquire upon conversion of the
Debentures still outstanding, assuming the entire remaining principal balance of
the outstanding Debentures was converted on the date of this Prospectus. To the
extent that the number of shares ultimately issued to the Selling Shareholders
upon conversion of the Debentures exceeds the number of shares registered under
the Registration Statement, the Selling Shareholders may require the Company to
file another registration statement to permit the resale of such excess amount.
(3) Does not include any shares of Common Stock issuable on exercise of the
Warrants, based upon the assumption that, given the current market price for the
Company's Common Stock, the Warrants will never be exercised. However, in the
event that the market price of the Company's Common Stock would ever equal or
exceed the exercise price of the Warrants before their expiration dates, it is
likely that the Selling Shareholders would exercise the Warrants, and if such
issuance would result in the aggregate number of shares issued to the Selling
Shareholders exceeding the number of shares registered to this Registration
Statement, the Selling Shareholders may require the Company to file another
registration statement to permit the resale of such amount.
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Shareholders will be sold in
one or more transactions (which may involve block transactions) on the American
Stock Exchange or in privately-negotiated transactions. The sale price to the
public may be the market price prevailing at the time of sale, a price related
to such prevailing market price or such other price as each Selling Shareholder
determines from time to time. A Selling Shareholder shall have the sole and
absolute discretion not to accept any purchase offer or make any sale of Shares
if it deems the purchase price to be unsatisfactory at any particular time.
The Selling Shareholders may also sell the Shares of Common Stock
directly to market makers acting as principals and/or to broker-dealers acting
as agents for themselves or their customers. Brokers acting as agents for the
Selling Shareholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that the
Selling Shareholders will attempt to sell Shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance that all or any of the
Shares offered hereby will be issued to, or sold by, the Selling Shareholders.
The Selling Shareholders and any brokers, dealers or agents, upon effecting the
sale of any of the Shares offered hereby, may be deemed "underwriters" as that
term is defined in the Securities Act.
The Selling Shareholders have agreed that they will not pay more than
the normal brokerage compensation and that they will not enter into arrangements
for special selling efforts without first advising the Company and cooperating
in the disclosure of the same in a revised or supplemental prospectus.
The Selling Shareholders, alternatively, may sell all or any part of
the Shares offered hereby through an underwriter. The Selling Shareholders have
not entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If the Selling
Shareholders enters into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this Prospectus.
8
<PAGE> 11
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000
Common Shares, without par value, 250,000 shares of Voting Preferred Stock, and
250,000 Shares of Nonvoting Preferred Stock. There are currently outstanding
11,465,382 shares of Common Stock, and no shares of preferred stock. All
outstanding shares of Common Stock are fully paid and non-assessable.
COMMON STOCK
Holders of validly issued and outstanding shares of Common Stock are
entitled to one vote per share of record on all matters to be voted upon by
shareholders. At a meeting of shareholders at which a quorum is present, a
majority of the votes cast decides all questions, unless the matter is one upon
which a different vote is required by express provision of law or the Company's
Articles of Incorporation ("Articles") or Code of Regulations ("Regulations").
The Company's Articles eliminate the right of shareholders to cumulate their
votes in the election of directors. Shareholders have no preemptive or other
rights to subscribe for additional shares nor any other rights to convert their
Company common stock into any other securities.
Subject to the preferences that may be applicable to the holders of any
outstanding shares of Preferred Stock, holders of common stock are entitled to
such dividends as may be declared by the Board of Directors out of funds legally
available therefor. The payment by the Company of dividends, if any, rests
within the discretion of its Board of Directors and will depend upon the
Company's operating results, financial condition and capital expenditure plans,
as well as other factors considered relevant by the Board of Directors. The
Company may enter into bank credit agreements which include financial covenants
restricting the payment of dividends. See "Dividend Policy."
Upon liquidation, dissolution or winding-up of the Company, the assets
legally available for distribution to shareholders are distributable ratably
among the holders of Company common stock at that time outstanding, subject to
prior distribution rights of creditors of the Company and preferential rights of
any outstanding shares of Preferred Stock.
PREFERRED STOCK
The Articles authorize the Board of Directors to issue up to 250,000
shares of Voting Preferred Stock and up to 250,000 shares of Nonvoting Preferred
Stock in one or more series and to establish such relative dividend, redemption,
liquidation, conversion and other powers, preferences, rights, qualifications,
limitations and restrictions as the Board of Directors may determine without
further approval of the shareholders of the Company. The issuance of Preferred
Stock by the Board of Directors could be used, under certain circumstances, as a
method of delaying or preventing a change in control of the Company and could
permit the Board of Directors, without any action by holders of Common Stock, to
issue Preferred Stock which could have a detrimental effect on the rights of
holders of Common Stock, including loss of voting control. In certain
circumstances, this could have the effect of decreasing the market price of the
Common Stock.
The issuance of any series of Preferred Stock, and the relative powers,
preferences, rights, qualifications, limitations and restrictions of such
series, if and when established, will depend upon, among other things, the
future capital needs of the Company, the then-existing market conditions and
other factors that, in the judgment of the Company Board of Directors, might
warrant the issuance of Preferred Stock. At the date of this Prospectus, there
are no plans, agreements or understandings relative to the issuance of any
shares of Preferred Stock.
CERTAIN PROVISIONS OF ARTICLES AND REGULATIONS
The following brief description of certain provisions of the Company's
Articles and Regulations does not purport to be complete and is subject in all
respects to the provisions of the Articles and Regulations, copies of which have
been filed as exhibits to the Registration Statement of which this Prospectus is
a part.
9
<PAGE> 12
CLASSIFIED BOARD OF DIRECTORS
The Company's Regulations provide for the Board of Directors to be
divided into three classes (unless there are fewer than 9 directors in which
case there will be two classes) of directors serving staggered three-year terms.
As a result, approximately one-third of the Board of Directors will be elected
each year. Classification of the Board of Directors expands the time required to
change the composition of a majority of directors and may tend to discourage a
proxy contest or other takeover bid for the Company.
DIRECTORS' RESPONSE TO ACQUISITION PROPOSALS
The Company's Articles provide that the Company Board of Directors must
base the response of the Company to any "Acquisition Proposal" on the Company
Board of Directors' evaluation of what is in the best interest of the Company.
In evaluating what is in the best interest of the Company, the Board of
Directors must consider all relevant factors including, without limitation, the
best interest of the shareholders which, for this purpose, requires the Board of
Directors to consider, among other factors, not only the consideration offered
in the Acquisition Proposal in relation to the then current market price of the
Company's stock, but also in relation to the current value of the Company in a
freely negotiated transaction and in relation to the Board of Directors' then
estimate of the future value of the Company as an independent entity or as the
subject of a future Acquisition Proposal; and such other factors as the Board of
Directors determines to be relevant, including, among other factors, the
long-term and short-term interests of the Company and its subsidiaries and their
businesses and properties and the social, legal and economic effects upon the
employees, suppliers, customers, creditors and other affected persons, firms and
corporations and on the communities and geographical areas in which the Company
and its subsidiaries operate or are located. "Acquisition Proposal" is defined
in the Articles as any proposal for the consolidation or merger of the Company
with another corporation, any share exchange involving the Company's outstanding
capital stock, any liquidation or dissolution of the Company, any transfer of
all or a material portion of the assets of the Company and any tender offer or
exchange offer for any of the Company's outstanding stock.
DIRECTOR AND OFFICER INDEMNIFICATION
The Articles provide that the Company may indemnify any director,
officer, or any former director or officer, and any person who is or has served
at the request of the Company as a director, officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise (and his or
hers heirs, executors and administrators) against expenses, including attorney
fees, judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him by reason of the fact that he is or was such director, officer,
incorporator or trustee in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative, to the full extent and according to the procedures and
requirements set forth in the Ohio General Corporation Law as the same may be in
effect from time to time. The indemnification provided shall not be deemed to
restrict the right of the Company to (i) indemnify employees, agents and others
as permitted by law, (ii) purchase and maintain insurance or provide similar
protection on behalf of the directors, officers or such other persons against
liabilities asserted against them or expenses incurred by them arising out of
their service to the Company, and (iii) enter into agreements with such
directors, officers, employees, agents or others indemnifying them against any
and all liabilities asserted against them or incurred by them arising out of
their service to the Company as contemplated herein.
REMOVAL OF DIRECTORS
The Company's Regulations provide that any director or the entire Board
of Directors may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 80% of all of the outstanding
shares of capital stock of the Company entitled to vote on the election of
directors at a meeting of shareholders called for that purpose, except that if
the Board of Directors, by an affirmative vote of at least 66-2/3% of the entire
Board, recommends removal of a director to the shareholders, such removal may be
effected by the affirmative vote of the holders of at least a majority of the
outstanding shares of capital stock of the Company present in person or
represented by proxy and entitled to vote on the election of directors at a
meeting of shareholders called for that purpose. These provisions, when coupled
with provisions of the Regulations authorizing only the Board of Directors to
fill vacant directorships, will preclude shareholders of the Company from
removing
10
<PAGE> 13
incumbent directors without cause, and simultaneously gaining control of the
Board of Directors by filling the vacancies with their own nominees.
The term "cause" is not defined in the Articles or the Ohio General
Corporation Law. Consequently, any question concerning the legal standard for
"cause" would have to be judicially determined and such a determination could be
difficult, expensive and time consuming.
MEETINGS OF SHAREHOLDERS
The Regulations provide that annual meetings of shareholders shall be
held at such time and on such business day as the Board of Directors may
determine. Except as otherwise provided by law or by the Articles, a quorum for
any meeting of the shareholders is a majority of the capital stock issued and
outstanding and entitled to vote at the meeting. Special meetings of
shareholders may be called by the Chairman of the Board, President or Chief
Executive Officer or by the Board of Directors by action at a meeting or a
majority of the directors without a meeting or by shareholders holding 50% or
more of the voting power entitled to elect directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The Regulations provide that shareholders seeking to bring business
before a meeting of shareholders, or to nominate candidates for election as
directors at a meeting of shareholders, must provide timely notice thereof in
writing. To be timely, a shareholder's notice must be delivered to, or mailed
and received at, the principal executive office of the Company, not less than 30
days nor more than 60 days prior to the scheduled meeting (or, if less than 40
days' notice of the meeting is given to shareholders not later than the close of
business on the tenth day following the earlier of (i) the day on which such
notice of the date of the meeting was mailed, or (ii) the day on which public
disclosure of the date of the special meeting was made). The Regulations also
specify certain requirements pertaining to the form and substance of a
shareholder's notice. These provisions may preclude some shareholders from
making nominations for directors at an annual or special meeting or from
bringing other matters before the shareholders at a meeting.
VOTING REQUIREMENTS
The Regulations provide that certain provisions in the Regulations may
not be altered, amended or repealed in any respect, and new provisions
inconsistent therewith may not be adopted unless such action is approved by the
affirmative vote of the holders of at least 80% of all of the outstanding shares
of capital stock of the Company entitled to vote on such matter at a meeting of
shareholders called for that purpose.
SHAREHOLDER NOMINATIONS AND PROPOSALS
The Regulations also specify certain requirements pertaining to the
form and substance of a shareholder's notice. These provisions may preclude some
shareholders from making nominations for directors at an annual or special
meeting or from bringing other matters before the shareholders at a meeting.
Although the Articles and Regulations do not give the Board of
Directors any power to approve or disapprove shareholder nominations for the
election of directors or proposals for action, the foregoing provisions may have
the effect of precluding a contest for the election of directors or the
consideration of shareholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its shareholders. On
the other hand, by requiring advance notice of nominations by shareholders,
these shareholder notice procedures afford the Board an opportunity to consider
the qualifications of the proposed nominees and, to the extent deemed necessary
or desirable by the Board, to inform shareholders about such qualifications. By
requiring advance notice of other proposed business, the shareholder notice
procedures provide a more orderly procedure for conducting annual meetings of
shareholders and, to the extent deemed necessary or desirable by the Board,
provide the Board with an opportunity to inform shareholders, prior to such
meeting, of any business proposed to be conducted at the meeting, together with
any recommendations by the Board or statements as to the Board's position
regarding action
11
<PAGE> 14
to be taken with respect to such business, so that shareholders can better
decide whether to attend the meeting or to grant a proxy regarding the
disposition of any such business.
OHIO GENERAL CORPORATION LAW
Certain provisions of the General Corporation Law of Ohio and of the
Company's Articles and Regulations, summarized in the following paragraphs, may
be considered to have an anti-takeover effect and may delay, deter or prevent a
tender offer, proxy contest or other takeover attempt that a shareholder might
consider to be in such shareholder's best interest, including such an attempt as
might result in payment of a premium over the market price for shares held by
shareholders.
Section 1701.59 of the Ohio General Corporation Law provides that a
director shall not be found to have violated his duties under the Ohio General
Corporation Law unless it is proved by clear and convincing evidence that the
director has not acted in good faith, in a manner he reasonably believes to be
in or not opposed to the best interests of the corporation, or with the care
that an ordinary prudent person in a like position would use under similar
circumstances. Further, such section provides that a director shall be liable in
damages for any action he takes or fails to take as a director only if it is
proved by clear and convincing evidence that his action or failure to act
involved an act or omission undertaken with deliberate intent to cause injury to
the corporation or with reckless disregard for the best interests of the
corporation.
Chapter 1704 of the Ohio General Corporation Law prohibits certain
transactions between a Ohio corporation and an "interested shareholder." Chapter
1704 allows for a corporation to exclude itself from Chapter 1704 by exempting
itself in its articles of incorporation. The Company has not included such an
exemptive provision in the Articles.
EXPERTS
The financial statements of the Company as of December 31, 1996 and
1997, and for each of the three years in the period ended December 31, 1997,
appearing in the Company's 1997 Annual Report on Form 10-K have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by Porter, Wright, Morris & Arthur, 41 South High Street, Columbus, Ohio
43215.
12
<PAGE> 15
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING SHAREHOLDER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
Page
----
Available Information....................... 1
Incorporation of Certain Documents
By Reference.......................... 1
Forward Looking Statements.................. 2
The Company................................. 2
Recent Developments......................... 3
Risk Factors................................ 3
Use of Proceeds............................. 6
Selling Shareholders........................ 7
Plan of Distribution........................ 8
Description of Capital Stock................ 9
Certain Provisions of Articles
and Regulations....................... 9
Experts..................................... 12
Legal Matters............................... 12
================================================================================
================================================================================
1,500,000 Shares
NETMED, INC.
COMMON SHARES
(without par value)
April 27, 1998
================================================================================
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses relating to the registration of the Shares of Common Stock
being offered hereby, other than underwriting discounts and commissions, will be
borne by the Company. The following table shows the amount of such expenses in
connection with the sale and distribution of the Shares registered on October 2,
1997:
Item Amount
---- ------
Securities and Exchange Commission
Registration Fee $ 1,988.64
Legal Fees and Expenses 3,145.00
Accounting Fees and Expenses 9,200.00
Miscellaneous Expenses 9,145.00
--------
Total $23,478.64
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Ohio General Corporation Law, Article NINTH of the
Registrant's Amended and Restated Articles of Incorporation ("Articles")
provides that a director, officer, incorporator, or any former officer or
director of the Registrant shall be indemnified by the Registrant to the fullest
extent permitted by the Ohio General Corporation Law.
Indemnification of directors, officers, employees and agents is
required under Section 1701.13 of the Ohio General Corporation Law in those
cases where the person to be indemnified has been successful on the merits or
otherwise in defense of a lawsuit. Indemnification is permitted in third party
actions where the indemnified person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and in criminal actions where he had no reasonable cause to believe
his conduct was unlawful. Indemnification is also permitted in lawsuits brought
by or on behalf of the corporation if the standards of conduct described above
are met, except that no indemnification is permitted in respect to any matter in
which the person is adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless a court shall determine that
indemnification is fair and reasonable in view of all the circumstances of the
case. In cases where indemnification is permissive, a determination as to
whether the person met the applicable standard of conduct must be made either by
the court, disinterested directors, by independent legal counsel, or by the
shareholders. Such indemnification rights are specifically not deemed to be
exclusive of other rights of indemnification by agreement or otherwise and the
corporation is authorized to advance expenses incurred prior to the final
disposition of a matter upon receipt of an undertaking to repay such amounts on
a determination that indemnification was not permitted in the circumstances of
the case.
Under Section 1701.13 of the Ohio General Corporation Law, a
corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the corporation, or who, while
serving in such capacity, is or was at the request of the corporation, a
director, officer, employee or agent of another corporation or legal entity or
of an employee benefit plan, against liability asserted against or incurred by
such person in any such capacity whether or not the corporation would have the
power to provide indemnity under Section 1701.13 of the Ohio General Corporation
Law. The Registrant has not applied for directors' and officers' liability
insurance.
<PAGE> 17
The above discussion of the Registrant's Articles and of Section
1701.13 of the Ohio General Corporation Law is not intended to be exhaustive and
is respectively qualified in its entirety by such Articles of Incorporation and
statute.
ITEM 16. EXHIBITS.
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Articles FOURTH, SIXTH, SEVENTH, EIGHTH, TENTH, and
ELEVENTH, of the Registrant's Amended and Restated
Articles of Incorporation and Articles I, V and VII
of the Registrant's Amended and Restated
Regulations.*
5 Opinion of Porter, Wright, Morris & Arthur *
23 Consent of Ernst & Young, LLP. **
24 Powers of Attorney.*
99.1 6% Secured Convertible Subordinated Debenture
Purchase Agreement, dated August 12, 1997, between
the Registrant and CPR (USA), Inc. *
99.2 Pledge Agreement, dated August 12, 1997, among the
Registrant, CPR (USA), Inc., LibertyView Fund LLC,
LibertyView Plus Fund, and National City Bank. *
99.3 Convertible Debenture Escrow Agreement, dated August
12, 1997, among the Registrant, CPR (USA), Inc., and
Sheldon E. Goldstein, P.C. *
99.4 Registration Rights Agreement, dated August 12, 1997,
between the Registrant and CPR (USA), Inc. *
99.5 Debenture, dated August 13, 1997, issued by the
Registrant to CPR (USA), Inc. *
99.6 Warrant to Purchase 73,334 Shares of Common Stock,
dated August 13, 1997, issued by the Registrant to
CPR (USA), Inc. *
99.7 Amendment to Convertible Debenture Purchase
Agreement. *
99.8 Amendment 2 to Convertible Debenture Purchase
Agreement, dated February 27, 1998. (Filed as Exhibit
99.8 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, and incorporated
herein by reference.)
* Previously filed.
** Filed with this Amendment.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is
2
<PAGE> 18
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) It will file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered)and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
PROVIDED, HOWEVER, that the undertakings set forth in
paragraphs 3(i) and (ii) above do not apply if information required to
be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this Registration Statement.
(4) It will remove from registration by means of a
post-effective amendment any of the securities being registered that
remain unsold at the termination of the offering.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Act Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dublin,
State of Ohio, on April 27, 1998.
NETMED, INC.
By: /s/ DAVID J. RICHARDS
-----------------------------
David J. Richards, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAVID J. RICHARDS President, Director ) April 27, 1998
- ----------------------------------------- (Principal Executive Officer) )
David J. Richards )
)
)
)
*KENNETH B. LEACHMAN Executive Vice President-Finance, ) April 27, 1998
- ----------------------------------- Treasurer (Principal Financial and )
Kenneth B. Leachman Accounting Officer) )
)
)
)
*S. TREVOR FERGER Director ) April 27, 1998
- ------------------------------------------ )
S. Trevor Ferger )
)
)
*CECIL J. PETITTI Director ) April 27, 1998
- ------------------------------------------ )
Cecil J. Petitti )
)
)
*MICHAEL S. BLUE Director ) April 27, 1998
- ------------------------------------------ )
Michael S. Blue )
)
)
*ROBERT J. MASSEY Director ) April 27, 1998
- ------------------------------------------- )
Robert J. Massey )
)
)
*JAMES F. ZID Director ) April 27, 1998
- ------------------------------------------- )
James F. Zid )
)
</TABLE>
*By: /s/ DAVID J. RICHARDS
---------------------------------------
Attorney-in-fact for each of the persons indicated
4
<PAGE> 20
EXHIBIT INDEX
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Articles FOURTH, SIXTH, SEVENTH, EIGHTH, TENTH, and
ELEVENTH, of the Registrant's Amended and Restated
Articles of Incorporation and Articles I, V and VII
of the Registrant's Amended and Restated
Regulations.*
5 Opinion of Porter, Wright, Morris & Arthur *
23 Consent of Ernst & Young, LLP. **
24 Powers of Attorney.*
99.1 6% Secured Convertible Subordinated Debenture
Purchase Agreement, dated August 12, 1997, between
the Registrant and CPR (USA), Inc. *
99.2 Pledge Agreement, dated August 12, 1997, among the
Registrant, CPR (USA), Inc., LibertyView Fund LLC,
LibertyView Plus Fund, and National City Bank. *
99.3 Convertible Debenture Escrow Agreement, dated August
12, 1997, among the Registrant, CPR (USA), Inc., and
Sheldon E. Goldstein, P.C. *
99.4 Registration Rights Agreement, dated August 12, 1997,
between the Registrant and CPR (USA), Inc. *
99.5 Debenture, dated August 13, 1997, issued by the
Registrant to CPR (USA), Inc. *
99.6 Warrant to Purchase 73,334 Shares of Common Stock,
dated August 13, 1997, issued by the Registrant to
CPR (USA), Inc. *
99.7 Amendment to Convertible Debenture Purchase
Agreement. *
99.8 Amendment 2 to Convertible Debenture Purchase
Agreement, dated February 27, 1998. (Filed as Exhibit
99.8 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, and incorporated
herein by reference.)
* Previously filed.
** Filed with this Amendment.
<PAGE> 1
================================================================================
Exhibit 23
================================================================================
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Post-Effective Amendment No. 1 to Form S-1 on Form
S-3) and related Prospectus of NetMed, Inc. for the registration of 1,500,000
shares of its common stock and to the incorporation by reference therein of our
report dated February 16, 1998 with respect to the financial statements included
in its Annual Report (Form 10-K) for the year ended December 31, 1997, filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Columbus, Ohio
April 27, 1998
